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LAW OF PARTNERSHIP

EXTERNAL RELATIONS. LAW OF PARTNERSHIP. 1. CONTRACTUAL LIABILITY. Requirement 1: Agreement must be valid Requirement 2: Representative must be authorised Requirement 3: Agreement concluded in name or on behalf of the partnership. 1.1 Requirements for a valid contract .

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LAW OF PARTNERSHIP

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  1. EXTERNAL RELATIONS LAW OF PARTNERSHIP

  2. 1. CONTRACTUAL LIABILITY • Requirement 1: Agreement must be valid • Requirement 2: Representative must be authorised • Requirement 3: • Agreement concluded in name or on behalf of the partnership

  3. 1.1 Requirements for a valid contract • Usual requirements for valid contract Contractual capacity Consensus Lawfulness Performance possible Formalities

  4. 1.2 REPRESENTATION • Partnership cannot conclude contract on its own • Should be represented by another party (even third party) • Representative must have the necessary authority

  5. 1.2 REPRESENTATION • Partnership will be bound : • Representative had necessary authority • Transaction within scope of mutual mandate • Operation of estoppel • Ratification

  6. Authority (partner has power) • Authority = power to perform binding legal acts on behalf of another • Orally / in writing / tacitly e.g. through conduct • Partners can confer authority on partners, non-partners and employees

  7. Transaction within scope of mutual mandate • Naturalia of p/s • Mutua praepositio = every partnerhas the power to bind p/s within the scope of the p/s business • Partners can alter it eg limiting powerof representation • Scope of p/s business = factual question nature and purpose of p/s business + general commercial usuage (property development , racehorses ) • Bona fide third must proof contract fell within the ordinary scope of the p/s business = need NOT proof partner had necessary power (authority) • Explicit authority for contracts outside authority

  8. Doctrine of estoppel • Remedy or defence to person injured by deceit • Deceived stops the deceiver from relying on true state of affairs • Deception is deemed to be true state of affair • Eg. partner without authority within scope of p/s business + partners falsely act as if p/s has authority = p/s bound by act and cannot rely on lack of authority • Requirements: Unlawful representation Culpable representation by deceiver Deceived relied on it To deceived’s deteriment /loss

  9. Ratification • Partner without authority conclude contract on behalf of p/s = co-partners accept, can ratify agreement • Ratification = retroactive effect • Contract valid as if partner had authority at time when contract was concluded

  10. 1.3 IN THE NAME OR ON BEHALF OF P/S • Common law: Partner must have authority + conclude contract in the name or on behalf of p/s • Contract concluded with person in personal capacity May be breach of good faith Whose rights and duties? • Look at intention of parties even if partnership’s name is not mentioned in agreement • What if representative does not disclose representation?

  11. Doctrine of undisclosed principal • Intention not conclusive if representative did NOT disclose that he is acting on behalf of principal (p/s) • General rule of law of agency p/s  bound because third party contracted with representative in personal capacity • Cullinan-saak • Eng law doctrine • If representative contracted in own name + did not disclose he is representative of principal • contract between third party and principal • contract between third party and representative • Only of there is only ONE principal • Third party choice to hold either principal or representative liable

  12. DELICTUAL LIABILITY • Other partners vicarious liable for delict committed by other partner if i) within scope of p/s business; or ii) within scope of authority • Vicarious liability = by virtue of special legal relationship

  13. CRIMINAL LIABILITY • P/s not legal person = cannot commit crime, be prosecuted or punished • Partners can commit crime . • S 332(7) of the Criminal Procedure Act: partner commits crime in carrying on of the p/s business or in furthering the interest of the ps/ = ALL other partners deemed guilty of the crime /offence as well • Except if can proof that • i) did not take part commission of offence and • ii) could not have prevented it • Constitutional? Right to be preseumed innocent

  14. LITIGATION • Common law • Rule 14 of the Supreme Court Rules + Rule 54 of the Magistrate’s Court Rules = p/s sue or be sued in own name • If a partner’s name is not mentioned: not a defense for partnership claim only against partnership estate • Ask for names of partners + residential addresses

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