Sole trader, ULP, LLP practial applications

1
Sole trader, ULP, LLP practial applications

• Dr. Mitja Kovac, LL.M.
• 30.10.2009

2
Keith v Spencer Ltd (1970)

• Court ruled that the taking of preliminary steps
  such as ordering goods and setting up a bank
  account for a restaurant business did not create
  a partnership because the restaurant never traded
  as a partnership.

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Can any agreement amount for partnership?

• Three persons (A,B,C) agreed to set up an Indian
  restaurant. The finance was provided almost
  entirely by one of them (C). Before the
  restaurant opened furniture and equipment were
  purchased and a laundry contract was entered
  into. Advertisements were placed to and the
  freehold of premises was acquired by the person
  who supplied the money. The parties then fell out
  and the business did not proceed as planned.
• Were parties partners also during the preliminary
  stages? Who owned the assets acquired with one
  personss money?
• Were they partnership property, bearing in mind
  that in the absence of a contrary agreement
  firms assets is owned equally by the partners
  regardless of capital put in?

4
Khan v Miah (2001)

• House of Lords ruled that five individuals who
  were planning to set up a business running a
  restaurant and who took preliminary steps were
  acting as a partnership although trading has not
  yet commenced. Parties who agree on a joint
  venture to find, acquire and fit out premises for
  business puposes which they intend to run as
  partners in the business from the time when they
  embark on those agreed activities and it is
  irrelevant whether trade has commenced. There
  must be evidence that the joint venture has
  commenced not necessarily traded.

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Sharing of gross returns as evidence of
partnership?

• Mr. Coulson had a lease of a theatre. A Mr. Mill
  was the manager/employer of a theatre company.
  Mr. Coulson and Mr. Mill agreed to present a play
  called In time of war. Mr. Couson was to
  provide the theatre and pay for the lighting and
  advertiseing and get 60 of the money which came
  in at the ticket office gross takings. Mr. Mill
  paid those taking part in the play and provided
  the scenery and the play itself and got 40 of
  the gross takings. Mrs. Cox paid to see the play.
  As part of the performance an actor had to fire a
  revolver with a blank round in it. Because of
  alleged negligence a defective cartridge was put
  in the revolver and when the actor fired it Mr.
  Cox was shot and injured. He wanted to suceed in
  a claim for damages against Mr. Coulson. He had
  more money then Mill. Yet, actor was employed by
  Mill and Mill alone was liable. Unless Cox proves
  that they are partners? Are they?

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Cox v Coulson (1916)

• The court decided that they were not they were
  merely sharing the gross revenues. Only the actor
  and Mr. Mill were liable.
• The sharing of profits suggests a partnerlike
  concern with the expenses of the business and its
  general welfare. Sharing gross returns does not
  produce an implied agreement of a partnership.
• If there is an express agreement, oral or
  written, and in it the partners agree to share
  gross returns, then there would be a partnership.

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Choice of name Croft v Day (1843)

• A firm called Day Martin were well-known
  makers of boot polish. The original Mr Day and Mr
  Martin had been dead for some time but Mr Croft
  had bought the business and carried it on in the
  Day Martin name. A real mr. Day and Martin
  went into manufacture of boot polish and adopted
  the Day Martin name representing to the public
  that they were the old and widely known firm of
  that name. Is this fine?

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Answer

• Court ordered an injuction to stop the real Mr
  Day and Mr Martin from trading in their own names
  in the circumstances of this case.

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Authority to bind Mercantile Credit v Garrod
(1962)

• Parkin and his sleeping partner, Garrod, formed a
  partnership for the purpose of letting garages
  and carrying out motor repairs, but expressly
  excluding in their agreement the buying and
  selling of cars. P, without Gs knowledge
  purported to sell a car to which he had no title
  to Merchnaitile Credit, a finance house, for
  700. But the owner of a car had not consented to
  the sale. The finance company did not therefore
  become the owner of a car and wanted his money
  back! Is Mr. Garrod liable?

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Answer

• The court held that Mr Garrod was liable as a
  partner to repay what the firm owned to
  Merchantile. Judge dissmissed the argument that
  the transaction did not bind him because the
  agreement excluded the buying and selling of
  cars He looked at what is apparent to the
  ouside world in general. Parkin was doing an act
  of a like kind the business carried on by persons
  trading as a garage.

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Gilford Motor Co. Ltd. v Home

• A company must not be established to commit some
  fraud or to attempt to circumvent contractual
  agreements or the veil will be lifted to
  indentify the true nature of the undertaking.
• The veil of incorporation protects the members of
  the company. The veil can be lifted in the
  interest of justice and when it has been deemed
  relevant!

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Duty of disclosure Law v Law (1905)

• Borthers William and James Law were partners in a
  wollen manufactures business in Halifax. William
  lived in London and did not take a very active
  part in the business and James offered to buy
  Williams share for 10.000. After the sale
  William discovered that certain amount of money
  that was lent on a morgage, had not been
  disclosed to him by James. William brought an
  action against his brother James for
  misrepresentation. Does he has any right?

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Answer

• Court decided that there was a duty of disclosure
  in this sort of case and the action was settled
  by the payment of 3.500 to William, which he
  accepted in discharge of all claims between him
  and his brother.