LAW OF PARTNERSHIP

1. LECTURE 1 LAW OF PARTNERSHIP

2. THE TERM PARTNERSHIP • Different meanings: • Agreement giving rise distinctive legal relationship • Specific legal relationship arising from agreement • Associationof persons created by agreement

3. THE TERM PARTNERSHIP • Agreement / contract • 2-20 (influence of new Companies Act) • Contribution • Joint benefit of parties • Profit

4. CHARACTERISTICS • Number of partners: • 2-20 partners • Not only one member • Object of the partnership: • Material or patrimonial benefit • See Ally v Dinath: “gemeenbaattrekken”

5. 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

6. HISTORY • Oldest • Traced back to Greek, Roman and Roman Dutch law • Influenced development of other business forms/law

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. Ally v Dinath

14. 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

15. 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