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LECTURE 1. LAW OF PARTNERSHIP. THE TERM PARTNERSHIP. Different meanings: Agreement giving rise distinctive legal relationship Specific legal relationship arising from agreement Association of persons created by agreement. THE TERM PARTNERSHIP. Agreement / contract

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Presentation Transcript
the term partnership
THE TERM PARTNERSHIP
  • Different meanings:
    • Agreement giving rise distinctive legal relationship
    • Specific legal relationship arising from agreement
    • Associationof persons created by agreement
the term partnership1
THE TERM PARTNERSHIP
  • Agreement / contract
  • 2-20 (influence of new Companies Act)
  • Contribution
  • Joint benefit of parties
  • Profit
characteristics
CHARACTERISTICS
  • Number of partners:
    • 2-20 partners
    • Not only one member
  • Object of the partnership:
    • Material or patrimonial benefit
    • See Ally v Dinath: “gemeenbaattrekken”
characteristics1
CHARACTERISTICS
  • Associative element:
    • affectio societatis = working together as equals to make profit
  • No legal personality:
    • Contractual association of persons
  • Informal formation:
    • No formalities
    • No registration
    • Oral, written agreement
    • Tacitly through conduct
history
HISTORY
  • Oldest
  • Traced back to Greek, Roman and Roman Dutch law
  • Influenced development of other business forms/law
sources of law
SOURCES OF LAW
  • Legislation
    • No Act
    • Other legislation e.g. Attorneys Act etc
    • At the moment no project to codify law of partnerships
  • Common law
    • Based on Roman Dutch Law
    • Jurists like Grotius, Van der Linden, Van Leeuwen and Voet
    • Appeal Court in Robson v Theron = Potier
legal nature
LEGAL NATURE
  • Internationally: Entity theory and aggregate theory
  • Entity theory
    • USA, Netherlands, Scotland
    • Partnership independent from members
    • Own rights and obligations; assets and liabilities
    • Party to litigation (sue and be sued in own name)
    • Partners still responsible for debt
  • Aggregate theory
    • South Africa
    • Partnership merely a contractual association of persons
    • Rights and obligations; assets and liabilities those of partners
    • No party to litigation
    • Partners responsible for debt
    • Dissolves when members change
legal nature1
LEGAL NATURE
  • Theories not followed dogmatically, exceptions to aggregate theory
  • Litigation
    • Individual partner not sued for partnership debt during subsistance
    • Individual partner cannot enforce partnership claim
    • In principle partners sued jointly in own names during subsistance
    • However Rules of Court: may be sued in business name; first assets of partnerships, then assets of partners
  • Sequestration
    • Insolvency Act treats partnership as seperate entity
    • Partnership sequestrated – ordinary partners’ estates + partnerships are sequestrated
    • Process
types
TYPES
  • Type 1: Universal partnership
    • Societas universorum bonorum

Partnership of all property

Partnership of all property owned as well as future property (business and other)

Usually a cohabitive relationship

Schrepfer v Ponelat

    • Societas universorum quae ex quastu veniut

Partnership of all profit

Contribute all profits from business

More accurate: general trading partnership

types1
TYPES
  • Type 2: Extraordinary partnerships

 Liability limited in some or other way

Should have ordinary partner

Limited liability can be lifted

Silent partnerships

Partnerships en commandite

types2
TYPES
  • Silent partnership:
    • Partnership in name of some partners
    • Not liable whole debt to creditors
    • Pro rata liable towards partners for losses
  • Partnership en commandite
    • Same as silent partnership
    • Fixed profit share
    • Only liable for losses to a fixed amount
ally v dinath1
Ally v Dinath
  • Lived together in an Islamic relationship

Plaintiff claimed assets, labour, income pooled

  • Q1: Was a universal partnership tacitly created?
  • Q2: Not intened to make profit
  • Q3: Tacidly terminated
ally v dinath2
Ally v Dinath
  • Q1: Was a universal partnership tacitly created?
  • Q2: Not intened to make profit
  • Q3: Tacidly terminated
  • Yes
  • Dismissed – savings costs
  • Yes – relationship irretrievably broken down