Business Law Essay

633 Words3 Pages
5. Issue: whether the relationship between Alfred, Beatrice and Coco is a partnership Rule: in Section 6 of the Act Application: It is no doubt that Alfred and Beatrice are partners according to Section 6 of the Act. Because they carry on the same business with a view to profit, have some mutuality of rights, interests and obligations. When they decided to expand, their friend Coco offered them $50,000 to help finance the expansion. Accordingly, she made an agreement with Alfred and Beatrice that she would get $5,000 a year payable from sales less outgoings. In Rule3-s.6 (3), it provides that the sharing of profits is a strong indication of a partnership. However, this is not categorical. Because in this case, Coco agreed with Alfred and Beatrice that she would lend the money to them. From this point of view, Coco is a creditor, and her “sharing of profits” is, in fact, remuneration or a wage. If there were no more agreements between Alfred, Beatrice and Coco, it is certain that the relationship between them is not a partnership. But in this case, Alfred and Beatrice also agreed that they would consult Coco on any major decisions and that she could inspect the books whenever she wanted to. From Section 28, a non-exhaustive list of partner’s rights, we can see that if a person exercises those rights that would typically be exercised by a true partner, he can be recognized as a partner in the law. In this case, Coco can help the bookshop make major decisions and she can inspect the books whenever she wanted to. Actually, these are the most common partners rights (s.28 (5)), which suggest that her relationship with Alfred, Beatrice in the bookshop are partnership. Conclusion: Hence, Coco is a partner for Alfred and Beatrice. Although she is a creditor, and her “sharing of profits” is simply remuneration, she does have the rights to participate in the bookshop’s

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