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<p>9 Clare, Dan and Eve formed a partnership 10 years ago, although Clare was a sleeping partner and never had anything<br/>to do with running the business. Last year Dan retired from the partnership. Eve has subsequently entered into two<br/>large contracts. The first one was with a longstanding customer Greg, who had dealt with the partnership for some<br/>five years. The second contract was with a new customer Hugh. Both believed that Dan was still a partner in the<br/>business. Both contracts have gone badly wrong leaving the partnership owing £50,000 to both Greg and Hugh.<br/>Unfortunately the business assets will only cover the first £50,000 of the debt.<br/>Required:<br/>Explain the potential liabilities of Clare, Dan, and Eve for the partnership debts.<br/>(10 marks)</p><p>9 This question requires candidates to consider the inter-related rules governing partnership and agency law.<br/>Clare<br/>The first thing to establish is the status of Clare. Although the question states that she is a sleeping partner, it has to be stated that<br/>the law does not recognise any such category. A dormant or sleeping partner is a person who merely invests money in a partnership<br/>enterprise but, apart from receiving a return on capital invested, takes no active part in the day-to-day running of the business.</p><p>Although a limited partner in a limited partnership formed under the Limited Partnerships Act 1907 may be seen as a dormant<br/>partner, the term is used more generally to refer to people who simply put money into partnership enterprises without taking an<br/>active part in the business and yet do not comply with the formalities required for establishing a limited partnership (as this<br/>partnership was formed 10 years ago the requirements, and benefits of the Limited Liability Partnerships Act 2000 do not apply<br/>to it). The essential point that has to be emphasised with regard to Clare is that she has placed herself at great risk. The law<br/>considers her in the same way as it does a general partner in the enterprise and consequently she will be held personally and fully<br/>liable for the debts of the partnership to the extent of her ability to pay. By remaining outside the day-to-day operation of the<br/>business, Clare has merely surrendered her personal unlimited liability into the control of the active parties in the partnership.<br/>Dan<br/>The rules relating to the residual responsibility of retired partners for partnership debts depend on when the debts were contracted<br/>and the action taken by the former partner to announce their retirement from the business.<br/>A retired partner remains liable for any debts or obligations incurred by the partnership prior to retirement. Thus the date of any<br/>contract determines responsibility: if the person was a partner when the contract was entered into, then they are responsible, even<br/>if the contract is completed after their retirement. It is possible for the retiring partner to be discharged from existing liability as a<br/>consequence of a contract of novation. Novation is essentially a tripartite contract involving the retiring partner, the remaining<br/>members of the continuing partnership and the existing creditors. Under such an agreement any liability of the retiring partner is<br/>passed to the remaining partners. As creditors effectively give up rights against the retiring partner, their approval is required. Such<br/>approval may be express, or it may be implied from the course of dealing between the creditor and the firm.<br/>Where someone deals with a partnership after a change in membership, they are entitled to treat all the apparent members of the<br/>old firm as still being members until they receive notice of any change in the membership. In order to avoid liability for future<br/>contracts, a retiring partner must ensure that individual notice is given to existing customers of the partnership; and advertise the<br/>retirement in the London Gazette. This serves as general notice to people who were not customers of the firm prior to the partner’s<br/>retirement, but knew that that person had been a partner in the business. Such an advert is effective whether or not it comes to<br/>the attention of third parties.<br/>As regards new customers a retired partner owes no responsibility to someone who had no previous dealings with the partnership<br/>nor previous knowledge of their membership (Tower Cabinet Co Ltd v Ingram (1949)).<br/>It follows from this that Dan could be liable for any debts towards the longstanding customer Greg, unless he has taken steps to<br/>notify Greg of his retirement from the partnership, which does appear likely. However, Dan’s liability as regards any partnership<br/>debts to Hugh who had never dealt with the partnership when Dan was a member depends on whether the appropriate notice<br/>was issued in the London Gazette. If it was, then Dan is not liable to Hugh. If it was not, he will be liable.<br/>Eve<br/>She is the last remaining active partner in the business and has full responsibility for any partnerships debts.<br/>Under s.9 of the Partnership Act 1890 (PA), the liability of partners as regards debts or contracts is joint. The effect of joint liability<br/>used to be that, although the partners were collectively responsible, a person who took action against one of the partners could<br/>take no further action against the other partners, even if they had not recovered all that was owing to them. That situation was<br/>remedied by the Civil Liability (Contributions) Act 1978, which effectively provided that a judgment against one partner does not<br/>bar a subsequent action against the other partners. This means that as regards Greg’s debt, Clare, Dan, and Eve are all personally<br/>responsible for any shortfall and he may take action against any one of them. The one against whom the action is taken will be<br/>able to claim a proportionate indemnity from the others. In the case of Hugh’s debt if the appropriate notice had been issued in<br/>the London Gazette Dan would not be liable and hence the loss would be borne by Clare and Eve proportionally.</p> 谢谢~~~ tks [em50] [em50] 3x123
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