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INTERNAL RELATIONS.  Highest good faith = uberimae fidei  Relationship between brothers  Good faith arise at outset when negotiating partnership.

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Presentation on theme: "INTERNAL RELATIONS.  Highest good faith = uberimae fidei  Relationship between brothers  Good faith arise at outset when negotiating partnership."— Presentation transcript:

1 INTERNAL RELATIONS

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3  Highest good faith = uberimae fidei  Relationship between brothers  Good faith arise at outset when negotiating partnership agreement and continues after dissolution until final liquidation  Ground for dissolution of partnership  From relationship of good faith arise rights and duties of partners

4  Purdon v Muller “A partnership is very much like a marriage; there must be give and take; the partners must bear with one another” One partner should not try to outsmart the other

5  Set out in p/s agreement  No agremeent = common law  Right to share in profit  Right to participate in management  Right to compensation  Right to distribution of assets on dissolution  Right to inspect partnership books

6 RIGHT TO SHARE IN PROFIT  Essentalia and objective - to make profit to divide  Agreement  Proportion of contribution  Equal  If a partner is excluded = societas leonine Not allowed Is whole p/s agreement void or only the section?  Sharing of losses

7 PARTICIPATE IN MANAGEMENT  With in scope = each partner may represent the partnership – partners bound by it  Naturalia  Can be limited or excluded

8 RIGHT TO COMPENSATION  Unless otherwise agreed, NO right to compensation  May receive a salary under certain circumstances  May be compensated for services rendered (Bell v Estate Douglas):  Reasonable compensation;  Indemnified for all expenses in service of the p/s; and  Damages personally suffered in fulfilling his p/s duties

9  RIGHT TO INSPECT PARTNERSHIP BOOKS  Every partner has this right  Access to financial information required for sound management decisions  Reasonable time  Can approach third party - may not lead to the breach of confidentiality between partners  May make extracts from and copies of records  Record must be kept at partnership’s principal place of business

10 RIGHT TO DISTRIBUTION OF ASSETS ON DISSOLUTION  Undivided share in the partnership assets until dissolution and liquidation of partnership estate  Debt of partnership paid = partner has right to a share in the surplus assets  P/ship assets during liquidation made into cash = share in surplus paid out to partners

11  Duties:  Contribution  Sharing in losses  Duty of care  Duty of full disclosure  Rendering of accounts

12 CONTRIBUTION  Every partner must contibute as promised  Money, labour, rights etc  If not only the use is contributed, the fruit (interest) obtained from contribution will fall to the partnership  Subject to the risks of a partnership

13 SHARING IN LOSSES  Naturalia  Agreed  Same as profits  Exclusion of partner

14 DUTY OF CARE  Every partner must act with the necessary care and skill for the benefit of the partners  Damages suffered due to the negligence of a partner = partner liable  Reasonable person-test / Reasonable partner?  Roman Law = Paterfamilias?  Act as he would in his own affairs?  Test partly objective, partly subjective  Correct approach  can only expect the partner to act with care according to own knowledge and capabilities

15 FULL DISCLOSURE  Uberimae fidei  Partner may not gain advantages within scope of p/s business  De Jager v Olifants Tin “B” Syndicate 2 rules:  Partner must give account of secret profit made  Not place himself in position where his own interests are in conflict with that of the partship

16  RENDERING OF ACCOUNTS  Partner or person may be appointed  Assets, liabilities, expenses and income  Periodical  Agreement to non-rendering usually void – agreement not to expose fraud

17  General partnership action  Instituted against a partner  Can be used for multiple purposes  Eg:  to enforce specific performance i.t.o. the contract;  to ask for an interdict against a specific partner  to request a declaratory order;  to demand the dissolvement of the partnership;  after dissolvement, to enforce the rights of the partners  to liquidate the estate of the partnership

18  Action for co-owners to enforce the physical division of things hold in joint ownership  Partners can, eg. after the dissolvement of the p/ship, use this action for the division of the common p/ship assets  Use extended to things such as copyright, patents and goodwill (utilis actio communi dividundo)

19  Facts (Vet practices/goodwill)  Decision  Which of the two actions  R instead of R12 000

20  Facts (pineapple farmers)  Decision Essentialia Can a salary be paid to a partner ? Contract silent about losses Rendering of accounts/Right to inspection Bona fide(10 marks)


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