Company Law Essay Help : The Nature of the Partnership
Company Law cases referred to in this section
Dickinson v Valpy (1829) 10 B & C 128
Sadler v Whiteman [1910] 1 KB 868
Skinner v Stocks (1821) 4 B & Ald 437
Longman v Pole (1828) Mood & M 223
Cf Jeffrey v Bamford [1921] 2 KB 351
Green v Beesley (1835) 2 Bing NC 108
Smith v Anderson (1880) 15 ChD 247
Britton v Customs and Excise Comrs [1986] VATTR 209
"I have always understood the definition of partnership to be a mutual participation in profit and loss" (Green v Beesley (1835) 2 Bing NC 108 at 112 per Tindal CJ)"
This cannot now be regarded as an exhaustive definition of a Partnership - 'community or participation in loss' is not the essential to the legal notion of partnership. (Cf Jeffrey v Bamford [1921] 2 KB 351 at 358, 359 per McCardie J). The statutory definition of a partnership can be found at Section 1(1) of the Partnership Act 1890: as a relationship that subsists between persons carrying on business in common with a view to profit. Statute is however descriptive in this area and common law rules still apply. A better description can be found in Smith v Anderson (1880) 15 ChD 247 at 273, CA per James LJ, as follows:
"An ordinary partnership is a partnership composed of definite individuals, bound together by contract between themselves to continue combined for some joint object either during pleasure or during a limited time, and is essentially composed of the persons originally entering into the contract with one another".
Where persons intend to become partners together, they do not become such unless and until they commence trading as such - before they actually commence trading, no partnership exists (Dickinson v Valpy (1829) 10 B & C 128 at 140 per Parke J).
The word 'firm' is used to refer to the persons who constitute the partners. In English law a partnership or firm is not a 'person' or legal entity (Sadler v Whiteman [1910] 1 KB 868 at 889, CA per Farwell J ("In English law a firm as such has no existence")), although all the members of a firm may sue (or be sued) on a contract made in the firm name, or on a contract made by one of them as agent for the firm (Skinner v Stocks (1821) 4 B & Ald 437), and, when there is joint damage, all may sue in an action of tort, founded upon such damage (Longman v Pole (1828) Mood & M 223).
The relation between promoters associated only to form a company is not a partnership; nor is the relation between executors carrying on under the powers of the will and in the same firm name a business owned solely by their testator in itself a partnership. It is also unlikely that a purely domestic arrangement will constitute a partnership (see Britton v Customs and Excise Comrs [1986] VATTR 209 (re a husband and wife)).
Partnership involves a contract between partners to engage in a business with a view to profit. As a general rule, each partner contributes either property, skill or labour, but this is not essential. A person who contributes property without labour, and has the rights of a partner, is usually termed a "sleeping" or "dormant" partner. A sleeping partner may, however, contribute nothing. The question whether or not there is a partnership is one of mixed law and fact.
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