Partnership

4. Alfred and Beatrice operated a bookshop together, sharing profits equally. They decided to expand. Their friend Coco offered them $50,000 to help finance the expansion. Accordingly she agreed with Alfred and Beatrice that she would lend the money in return for $5,000 a year payable from sales less outgoings. However, she was concerned that she might lose her money. Hence Alfred and Beatrice also agreed that they would consult her on any major decisions and that she could inspect the books whenever she wanted to. What is the relationship between Alfred, Beatrice and Coco? Would your answer be different if the $5,000 per annum was to be paid out of profits?

5. Adrian and Brian intend to start a business selling second hand cars. Adrian and Brian decided to use a partnership, as a business structure to operate their second hand car business. Consider the following scenarios.

Scenario

There is no agreement between Adrian and Brian as to their respective authority to contractually bind the partnership with regards to third parties:

a. Brian tells Colin that he is contracting on behalf of the partnership and purchases a second hand car from Colin for $10 000;

b. Brian tells Colin that he is contracting on behalf of the partnership and purchases a leather jacket from Colin for $1 000;