1. Problems in Canadian Business Law Pol/Soc Sci 3165 6.0A Tuesdays, 2:30-5:30 pm Simon Archer sarcher@torys.com

2. Administration Papers: hand back 27 th January, in class, end of class, excepting those handed in late. Last term’s test: Charles Smith will hold an office hour 3:00-4:00 pm Wednesday 22nd. Pol. Sci. Dep’t, S608, which is his office.

3. In the news… Higher monkey climb, more he expose

4. Last class Overview Law of agency

5. Mini problem Acme usually sold goods through Black Co. Acme terminates Black Co. as agent after suspecting Black Co. of taking improper non-competition payments secretly on the side, but does not have proof. Acme fails to pick up goods at Black Co.’s warehouse. Black Co. sells these goods to the late Izzy Asper. Before the goods are delivered, Acme demands the goods back from Black Co. What are the rights of Acme, Black Co. and Izzy’s estate?

6. Some ideas Izzy’s estate can still demand delivery of the goods because Acme failed to warn of the terminated agency Black Co. can be sued for breach of warrant of authority Black Co. MAY have breached their duty of utmost faith to Acme

7. Today: partnerships 1. Historical development 2. Nature of a partnership 3. Liability of a partnership for the acts of a partner 4. Rights and duties of partners to one another 5. Dissolution of a partnership 6. Limited Partnership 7. Limited Liability Partnership (LLP)

8. Historically Forms of business association to pool capital of investors being developed as a result of expansion of trade, especially colonial ventures Partnerships essentially joint stock unlimited liability firms Codification in late 1800s England in Partnership Act, adopted widely

9. Nature of a Partnership Contractual form But some rules imposed by statute Law of agency plays a role Partners are very like agents Ownership in share of asset pool, not property Personalty (a right attaches to the person, not alienable) not realty (a right of the thing in itself, alienable) Governed by specific legislation, Partnerships Act (Ontario)

10. Indicia of partners More than one person (must have) Sharing profit and risk (must have) What about e/es paid in stock options? Contributed capital (most have) Active in business (many have) Agency-type inter se relations

11. If not a partner… Joint owners of property -- in rem rights to property, not in personam rights to going concern Agent Debtor-creditor relationship Employee, contractor, etc.

12. Major features of most partnerships Any partner can bind the firm and thus make the whole partnership liable. Each partner is responsible to pay the debts and obligations of the business and his/her personal assets are at risk (liability to third parties is what almost all cases are about). Taxed on accrual basis or, in limited situations, a billed basis, not on a cash receipt basis. Creates a fiduciary relationship between the partners which puts a high responsibility for fair dealing on each of them towards each other.

13. Partnership Act Nature of partnership - when are persons partners? Provided by statutory definition, Cannot contract out of this. Relations of partners to outsiders - joint and several liability. Cannot contract out. Relation of partners inter se. (Can vary by contract - otherwise the Act applies). Dissolution (Can vary by contract). LLP (see also s. 10(2) and 10(3)).

14. Liability of a partnership During course of partnership business Firm (all partners) liable in contract Firm liable in tort No liability for new partners in existing partnership debts, unless express agreement Retiring partner remains liable for debts incurred during his/her membership Apparent authority permitted by partners binds partnership

15. LIABILITY OF PARTNERSHIP TO THIRD PARTIES PARTNERSHIP OF A, B, C, IN CONTRACT THIRD PARTY A Partner ‘A’ Negotiates Contract with Third Party in Course of Partnership Business All Partners Bound by Contract Right of Action Against All Partners PARTNERSHIP OF A, B, C, IN TORT THIRD PARTY A Partner ‘A’ Commits Tort Against Third Party During Course of Partnership Business All Partners Liable for Tort of Partner ‘A’

16. Rights and duties To one another, unless agreed to contrary Equal shares in capital, profits and losses All may take part in management Ordinary matters require majority consent, extraordinary changes require consent of all Books and records available for inspection by all Anything within scope of partnership belongs to partnership… Cf. problem of defining scope of business for partners with multiple dealings…sitting on boards of directors, earning from advice given outside scope of business, etc.

17. Terminating partnerships On notice After completion of specific task or term Death, insolvency, incapacity of a partner Court intervention Debts to be settled with third parties before return of capital, balance pro-rated in relation to contribution of capital by each partner

18. Variations Limited Partnership Partners liability capped at contributed capital One general, unlimited liability partner required (usually a corp.) Limited Liability Partnership Partners not liable for professional negligence of each other, but liable for general debts