TUTORIAL 5

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW2513)

TUTORIAL 5 – Dissolution of Partnership

SECTION A

1.            Daffy is one of the partners in the Razlan’s legal firm. He was entrusted with a client’s money and has used the money for his own personal needs. Daffy’s bad behavior will affect the credibility of the firm.

            

With regard to the above situation, the court may order the firm to be dissolved based on the ground of:

A.      persistent breaches

B.       just and equitable

                        C.       permanent incapacity

 m                    D.       prejudicial conduct to the business

2.       Afifah and Nabila agree to set up a partnership business for selling flowers during KPM’s Convocation Fair in September 2010. The partnership between them is dissolved when

          A.       the convocation is over

          B.       a partner continues after the expiry of period

          C.       any one of them give notice to the other partner

          D.       the period that they have agreed upon has expired

3.

Kaktum Partners carried on a food and beverage (drink) business. One of the drinks produced by Kaktum Partners is a drink made from “Daun Ketum”. Suddenly, government come out with a new law that “Daun Ketum” is considered as illegal drugs and those who were involved in selling, buying and producing any products made from “Daun Ketum” can be charged with crime according to Dangerous Drugs Act 1952.

What is the legal implication as regards to the above situation?

A.    Kaktum Partners was dissolved as soon as the new law with regards to “Daun Ketum” was come out.

B.    Kaktum Partners may continue the selling, buying and producing products made from “Daun Ketum”.

C.    Kaktum Partners was not liable for the selling, buying and producing products made from “Daun Ketum”.

D.   Kaktum Partners was dissolved as the business of the partnership can only be carried on at a loss.

4.       The partnership business was carried out between Malaysia and Singapore. Malaysian’s firm always exports goods to Singapore’s firm. But, suddenly, Singapore declares war on Malaysia. The partnership relationship between the two countries must be dissolved by _____________.

                       A.            notice

                       B.            supervening illegality

                       C.            expiration or automatic dissolution

                       D.           bankruptcy or charge on partner’s share

5.       Which of the following are the grounds of dissolution of partnership without the order of court?

                        A.            When a partner is found to be permanently unsound mind.

                        B.            When a partner becomes permanently incapable of performing his part of the                                partnership contract.

                        C.            By the death or bankruptcy of any partner.

                        D.           When the business of the partnership can only be carried on at a loss.

6.       The relationship of the partners had come to standstill. They only communicate through the secretary of the firm.

The above statement may allow partners to apply to the court for dissolution of partnership on the ground of _______.

A.           mental disorder.

B.           just and equitable.

C.           conduct prejudicial to business.

D.           being carried on at a loss.

7.            What are the circumstances where a partnership can be automatically dissolved?

I.             By notice.

II.           By order of court.

III.         By expiration of term agreed for the partnership.

IV.          On completion of the business if it is for a single adventure.

A.            I and II.

B.            I and III.

C.            III and IV.

D.            II, III and IV.

8.       The following are the modes of dissolution of partnership without court intervention except

A.            Upon the completion of a single project

B.            By giving notice to dissolve the partnership to the other partners

C.            Upon the happening of an event that is just an equitable to dissolve the partnership

D.           Upon the happening of an event that may cause the partnership to become illegal

9.       The following are the reasons for the court to grant an order of dissolution of the partnership except

                              

                       A.            Expiration of a fixed term

                       B.            Willful and persistent breach of the partnership agreement by a partner

                       C.            No opportunity of making profit

                       D.           A partner becomes permanently of unsound mind 

SECTION B

Question 1

Loh and Samy are partners in car workshop known as Speed Engineering. They agree to run the business together for 5 years. They employs 2 other mechanics and Loh is acting as the head of mechanics.

3 months after the business operates, Loh met with an accident at the workshop. Two of his left fingers stuck in an air-conditioner fan and was cut off. The doctor at the hospital manage to attached the fingers but after 3 months, Loh still unable to use his left hand.

Samy, as partners wish to dissolve the partnership business. It is because in his opinion, the business is going to fail without Loh. Samy was thinking of making an application to court for dissolution order.

Advise Samy as to the ground that he may use in his application to court.                                                                                                                                             

[15 marks]

Question 2

Firm P-Vires Enterprise consists of three partners namely villa, Torres and Puyol. Being an accounting firm, the three partners have yet to execute a partnership agreement. Clause 31 of their partnership agreement provides:

Clause 31:    “Bankruptcy of any partner shall not affect this partnership. This partnership shall continue even on bankruptcy of any partner.”

Lately villa has been coming in late for work as his private life is drawing a lot of negative attention from the press. He has been charged with drunk driving and was seen slapping his girlfriend. Torres has been declared bankrupt last week. Puyol, in the meantime has been undergoing treatment for mental problems. Discuss the possibility of a dissolution of the partnership of P-Vires Enterprise.

 [15 marks]

TUTORIAL 4

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW2513)

TUTORIAL 4 – Relationship Between Partners to One Another

1.       Who must indemnify a partner who has made payments or incurred personal liabilities for anything done to preserve the business or property of the firm?

 A.      the partner

 B.      the firm

 C.      the third party

 D.      the court

2.       Which of the following is NOT the three ways to determine the partnership’s  property ?

A.           The property which is belonged  to a partner personally, it is a partnership’s property

B.           The property which is originally brought into a partnership’s stock is a partnership’s property

C.        the property which is bought with partnership’s money, it is a partnership’s property

 D.       the property which is obtained for purpose and in the course of partnership’s business is partnership’s property

3.       Suzana, without knowledge of the other partners, had used one of the printing machines of the firm to print wedding invitation cards ordered by some members of the public.  She earned substantial profits from this venture which she kept in her personal account.

         

From the situation above, Suzana had breached the duty of a partner which is ...

A.            Duty of partner to render accounts and full information

B.            Duty of partner to be accountable for private profits that she makes

C.            Duty of partner to be accountable for profits from competing business

D.                   Duty of a partner to use a partnership property

4.       Advances made by a partner to the firm have the following effects except:

A.            It is considered as a loan

B.            Interest ought to be paid to the partner who had made the advances

C.            The partner who had made advances cannot continue to become a partner

D.           It is an increase of the partner’s contribution to the capital

  

5.     What is the legal implication if one partner provides the money and the other provides the skill or knowledge only as a contribution to the capital in the partnership ?

          A.       The skill is similar to the firm’s losses that must be shared equally by all partners

          B.       The skill would be considered as different with the money contributed

          C.       The skill or knowledge such partnered would be considered as equal to the money provided by the other

          D.       The partner who provides the skill will not be considered as a partner.

6.       According to s.26(b), in what circumstances the firm must indemnify a partner?

          A.       When a partner has incurred cost or liability on behalf of the firm

          B.       When a partner has not received any payment from the firm

          C.       When a partner has acted not necessary for partnership business

          D.       When a partner has done wrong to the partnership.

7.       S.26 (a) states:” all partners are entitled to share equally in the capital and profits  of the business ……….”

           The above provision means_________

          A.       all partners are in equal standing ,even if among them there are those who contributed to capital and there are those who have not

          B.       every partner has a right to contribute equally to the capital

          C.       each partner given right to participate in the management of the business

          D.       profits are divided equally between the partners but the firm’s losses must not be shared equally.

8.       Afiah and Budin were partners in a firm which carried on food and beverage business. Budin without the consent of Afiah make a secret profit for himself by entering into a contract with Ariff Bhd. What is the effect of the above situation?

          A.       Budin may enable to keep his profits.

          B.       Budin has to render all the profits that he gained to the firm.

          C.       Budin may share all the profits with Afiah.

         D.       Budin is not responsible to disclose the secret profits that he obtained to Afiah.

9.        9.  Maisura and Faiz operate a bakery business as partnership, where Faiz provides                        RM100,000 and Maisura provides her skills. If on dissolution, the business suffers a loss of        RM50,000 then _________.

A.         Maisura has to contribute RM50, 000.

B.         Faiz has to contribute RM50, 000.

C.         Maisura and Faiz will each have to contribute RM25, 000.

D.           Maisura has to contribute RM10, 000 and Faiz RM40,000.

10.                         According to the principle of “uberrimae fidae”, every partner has _____.

I.             to display utmost good faith in all dealing.

II.           to exercise mutual trust and confidence.

III.         to disclose on all matters relating to partnership matters.

IV.          to disclose on all matters relating to partnership and personal matters.

A.            I, II and III.

B.            I, II and IV.

C.            II, III, and IV.

D.           I, II, III and IV.

11.     A partnership may not expel any of its partners unless

A.            Notice has been given

B.            The partner has committed an offence

C.            The partner was given a warning

D.           There is an express provision in the partnership agreement

12.     Which of the following situation allow majority of partners in a firm to expel any of it partners?

A.            The partner has breached his duty

B.            The partner has committed crime

C.            There is an express provision to expel in the partnership agreement

D.           The partners refused to apologize for his mistake

SECTION B (20 MARKS)

Answer one (1) question from this section

Question 1

(a)      Explain briefly the duty of partners to render accounts and full information.

                                                                                                          [2 marks]

(b)     Explain the followings and support your answer with a relevant section and decided case.

          i.        the accountability of partners for private                                  [5 marks]

          ii.       the accountability of partners for profits from competing business.[5 marks]

(c)      Define what is a partnership property.                                                [2 marks]

(d)      Explain briefly the three rules to determine partnership property.                      [6 marks]

SECTION C

Answer any two questions from this section.

Question 1

(a)          With regard to section 27 of Partnership Act 1967, explain the right of partners relating to

(i)           capital and profit

(ii)          introduction of a new partner

                                                                                                [8 marks]  

(b)         Atabara Enterprise is a firm that run a business of photocopy, laminating and binding services. Fairuz, Suzana and Zakiah are partners in the said firm.

Suzana without knowledge of other partners, had used one of the printing machine of the firm to print wedding invitation cards ordered by some of her old friends. She earned profit from this activity which she kept in her personal account.

Later, both of the other two partners discovered about secret profit made by Suzana and claimed for repayment of the profit to the firm.

          Advise Suzana as to whether she is accountable for private profits obtained by her.            

[12 marks]

                                                                            

                                                                                         [Total : 20 marks]

            QUESTION TWO

a)            Isma and Raha were partners in woolen manufacturer’s business situated in Penang. Isma lived in Johor Bharu and took little part in the running of the business. Raha bought Isma’s shares for RM21,000. Later, Isma discovered that the business was worth considerably more and that various assets unknown to her had not been disclosed.

Advice Raha as to whether she had breached of a duty as a partner.    [10 marks]

b)           Aishah, Asmah and Hariz were partner in the firm. Aishah was the only one who had been sued by the third party and she settles the partnership debts. Discuss whether she has a right to claim indemnity from the other partner or the firm. State the authority.

 [5 marks]

RELATIONSHIP BETWEEN PARTNER INTER SE