Liability Of Swimmingpool Co Ltd And Partnership Law

Liability of Swimmingpool Co Ltd for Actions of Sales Manager

Issue: In this case, it has to be seen if Swimmingpool Co Ltd can be held liable for the actions of their sales manager Martin. In order to deal with this question, the principles concerning the law of agency need to be applied.

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Rule: The law provides that when the agent is acting within the scope of agency, it is considered bad that principal is bound by agent’s actions. It needs to be mentioned that in such a case, it has to be seen if the agent has been authorized by the principal for a particular act or if it appears that the agent was authorized for this purpose or if the agent has the authority that is the result of agency relationship (Baxt, 1991). Hence, it is clearly provided by law of agency that the principal can be held legally responsible for agent’s actions if the actions fall under the scope of authority provided the agent. Similarly, the responsibility of the principle arises regarding any loss caused to the third party due to the actions of the agent (Fishman, 1987).

Application: In view of the legal position mentioned above, it can be stated in this case that Martin had been acting as agents of the company. Authority has been provided to Martin expressly for entering into contracts on behalf of the corporation. As a result, been Martin gave advice to the customers regarding the location of the pools. It can be said that Martin was acting under the scope of authority provided to him.

Conclusion: In view of this reason, it is clear that Swimmingpool Co Ltd is liable for the actions of Martin. Moreover, it can also be said that the company is liable for the loss suffered by the customers due to the actions of Martin.

Issue: In this question, it has to be seen if the company may deny its liability for Martin’s actions as Martin failed to follow the instructions of the company.

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Rule: According to the rules of the law of agency, it doesn’t worry the generally the principle is held liable for the acts of its agent. But in such cases it is required that either the act falls under the scope of authority of the agent or the act should be ratified by the principal. At the same time, the principal can be held liable for the actions of agent if under the circumstances, it is reasonable to conclude that it may be believed by a third party that the agent enjoys the power to act. In such cases the law does not allow the principle to deny its liability for the acts of the agent if that acts fall under the apparent authority of the agent. Therefore, a principal can be considered to be bound by a false representation of the agent even if principal is personally not guilty.

Partnership Law: Elements of Partnership and Joint Liability

Application: Due to the agent’s apparent authority, it is possible for a third party to reasonably assume that the agent had the power to make representations that are generally made during the negotiations regarding such contracts. In view of the legal position that has been discussed above, it can be concluded that the company has appointed Martina as its agent.

Conclusion: As a result, Swimmingpool Co Ltd cannot be allowed to claim afterwards that it is not liable for Martin’s actions view that the reason that he did not follow the instructions of the company.

Issue: The issue that is present in this question is if Martin can be held liable for the loss suffered by the company. Due to the wrong advice given by Martine, a number of swimming pools started to sink. Several consumers also made the complaint that their swimming pools had not been constructed in accordance with the contract.

Rule: According to common law, if the agent acts beyond its authority, the liability of the principal is still present. However in such cases, it is possible to hold the agent liable for the loss that has been suffered by the principal on account of the actions of the agent did these actions were beyond the scope of authority or if the agent did not follow the instructions of the principal. It is also worth mentioning that the common law as described certain duties for the agents. Under these duties, it is necessary that the agents should act, keeping in view, the best interests of the principal (Fridman, 1996).

Application: Therefore, when the agent has been given the responsibility to negotiate a contract, it is necessary that the agent protects the interests of the principal. Martin had also collected money from the customers of the company but he did not deposit all the money with the company. In this regard, it is the duty of the agents that they should not make a secret profit. Therefore in this case, it can be stated that Martin had breached his duties as the agent of the company.

Conclusion: As a result, Martin can be held liable to the company for the laws that has been suffered by the company due to the actions of Martin.

Issue: In this question, it needs to be seen if any law will be breached by Martine if he sets his own business that competes with the business of SwimmingPool Co Ltd. according to the law.

Breaches of Partnership Duties and Legal Action

Rule: It is the responsibility of the agent, including Martin, to make sure that any business established by the agent a setup only after informing the principal company. Similarly, Martin is also required by the law to make sure that there is no conflict of interest between the new business established by him and the business of the company.

Application: As an agent of the company, it is the obligation of Martin to avoid conflicts of interest with the principal. For this purpose a restraint of trade clause can also be used by the parties. The purpose of such laws is to prevent the agent from establishing a business that is in competition with the business of the principal.

Conclusion: Therefore, if Martin decides to set up his own business, it will be considered as a breach of his fiduciary duties as the agent of the company.

Issue: Are Lucy, Seamus and Koo carrying on a partnership?

Rule: In order to decide if they’re legitimately the parties can be described as a partnership, it has been provided by Partnership Act that there are three elements that need to be satisfied for the purpose of establishing the presence of a partnership between the parties. These ailments can be described as follows:

  • The carrying on of a business;
  • In common;
  • With a view to profit.

It has been stated in Smith v Anderson (1880) that it is implied by the expression ‘carrying on’ that there should be a repetition of work. Similarly, the association that has been formed merely for doing one act that was not going to be repetitive has to be excluded. It is the series of actions, which amount to a business.

Application: Therefore the association should be formed for the purpose of carrying on a series of acts. In order to form to a partnership, the business should be carried on by on our behalf of all the partners. However, it is not necessary that all partnership also take an active part (Re Ruddock, 1879). For example, in Lang v James (1912), action was initiated by an English corporation against the defendants. The company alleged that the three defendants are carrying on business in Melbourne as partners. The high court stated that as distinct bank accounts were maintained, it was apparent that there was no partnership.

Conclusion: However in the present case, it is clear that the parties are performing business in common and for making profit, it can be concluded that there is a partnership between Lucy, Seamus and Koo.  

Discovering the Individuals behind a Business Name

Issue: Assuming that Lucy, Seamus and Koo are in partnership, would Lucy and Koo be liable to contribute to the purchase of the ride on mower?

Rule: According to section 9 of the Partnership Act, it has been mentioned that each partner of the form is considered as being jointly liable regarding firm’s debts and obligations that has been incurred at a time when such person was a partner, and after his death, the estate of such partner is also severally liable for such debts and obligations.

Application: In this way, the meaning of joint liability of the partners is that even if the liability has been incurred by two or more persons, there is only one right of action against such persons. Therefore if judgment has been obtained against a partner or partners, it is possible to bring further legal action only against the partners, who could have been jointly liable if they would have been a part of the action.

Conclusion: In view of the legal position mentioned above, it can be stated that in the present case also, Lucy and Koo will be bound to pay for the purchase of ride-on mower.

Issue: Is Lucy, in breach of any partnership duties as a result of carrying out the weekend work?

Rule: According to the partnership law, the partners stand in a fiduciary relationship. In Birtchnell v Equity Trustees (1929) the court stated that indeed the relationships that exist between the partners is fiduciary (Cameron v Murdoch, 1986). It is presumed by the law that a partnership is based on mutual trust between the partners and also on the confidence that the partners have in the integrity of each other.

Application: The fiduciary duties that are imposed on the partners towards each other are as follows (Fraser v AGT (Qld) 1988):

  • To act honestly and in good faith (Cameron v Murdoch, 1986);
  • To provide full accounts of all information and assets in the possession and control of the partner;
  • To avoid any conflicts of interest;
  • To account for benefits that have been received from the partnership; and
  • To avoid making a personal profit from the opportunities and information available to the partner business.

Conclusion: In this case, Lucy has breached the duty imposed by the partnership.

Issue: If FactCut wishes to commence a legal action against LuSeKo to recover the purchase price of the ride-on mower, how could fastCut discover who the individuals are behind that business name?

Rule: The names and details of the members can easily tell a person regarding the individuals who are behind the business. However, member information cannot be obtained in case of a public company. The reason is that these companies are not under an obligation to give information regarding the members.

Application: On the other hand, a registered business name is a trading name under which a person or persons are carrying on business or trade.

Conclusion: Therefore it in the present case, FastCut wants to start legal action against LuSeKo for the purpose of determining the purchase price of the ride-on mower, it is possible for FAst Cut to know regarding the individuals who are behind the business name.

Issue: What effect will Seamus’s death have on the partnership?

Rule: The law provides that in the event of the death of a partner, the general partnership automatically comes to an end, unless there is an agreement between the parties to the contrary. As a result, unless the partners have made an agreement according to which the partnership is going to continue even after the death of a partner, the general partnership will be dissolved in the event of the death of a partner.

Application: On the other end, if the remaining partners are willing to carry on the partnership business after its dissolution, or the partners should agree (Everingham v Everingham, 1911). The resulting partnership business will be considered by the law as a new partnership.

Conclusion: Therefore, in case of Seamus’ death, the partnership will come to an end if there is no agreement to the contrary.

Issue: How could Lucy and Koo determine what is partnership property? How would the partnership’s property be used to meet the LuSeko’s losses?

Rule: Generally, all the assets that have been brought into the partnership or that have been required afterwards on account of the partnership are considered as partnership property. Application: Therefore the property that has been brought into partnership stock or acquired, whether by purchase or otherwise, on account of the firm and the course of partnership business, needs to be treated as partnership property (Cameron v Murdoch, 1986).

Conclusion: Such property should be applied by the partners only for the purposes of partnership and according to the partnership agreement (Kelly v Kelly, 1990).


Baxt R, (1991) ‘Ultra Vires – Has it Been Revived?’ 1 Company and Securities Law Journal 101

Fishman, S. (1987) “Inherent Agency Power – Should Enterprise Liability Apply to Agents’ Unauthorized Contracts?” Rutgers Law Journal 19

Fitzpatrick J, Symes C, Veljanovski A & Parker D, (2017) Business and Corporations Law 3 rd ed., LexisNexis Butterworths Australia

Fridman, G H L., 1996, The Law of Agency Butterworths, 7th ed., 304

Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384

Cameron v Murdoch (1986) 63 ALR 575

Cameron v Murdoch (1986) 63 ALR 575

Everingham v Everingham (1911) 12 SR (NSW) 5

Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1

Kelly v Kelly (1990) 92 ALR 74

Lang v James Morrison & Co Ltd (1912) 13 CLR 1

Re Ruddock (1879) 5 VLR (IP & M) 51

Smith v Anderson (1880) 15 Ch D 247