Deck 20: Partnerships

Question 1

An important difference between a partnership and a joint venture is the fiduciary nature of a partnership relationship.

Answer 1

True

Question 2

Which of the following is NOT an essential element for the creation of a partnership?

A)The partners must be carrying on a business in common.
B)The business must be carried on by or on behalf of all the partners.
C)The partnership must be registered with the Australian Securities and Investments Commission (ASI
D)The partners must intend to make a profit.

Answer 2

C

Question 3

If two parties enter into a share farm agreement in which one provides the land and the other provides the labour,this is most likely to be a(n):

A)partnership.
B)employment relationship.
C)joint venture.
D)tenancy in common.

Answer 3

C

Question 4

Identify the three circumstances required as proof of a partnership.

Question 5

A written partnership agreement must conform to the requirements of the Partnership Act of the relevant state or territory.

Question 6

When parties conduct an isolated commercial transaction,it is considered a joint venture rather than a partnership.

Question 7

Partnerships are regulated by:

A)the common law.
B)equity.
C)the Partnership Act of the relevant state or territory.
D)all of the above.

Question 8

Define a joint venture and discuss how it differs from a partnership.

Question 9

A form of property ownership in which the parties have equal shares which were created at the same time and which pass automatically to the survivor on the death of one of the parties is known as:

A)tenancy in common.
B)unity of ownership.
C)joint tenancy.
D)common ownership.

Question 10

The existence of a partnership is to be determined from what the parties do rather than what the parties call themselves.

Question 11

Which of the following situations is most likely to be a partnership?

A)Adam and Bruce have agreed to stage a play together and to share gross returns but not liability.
B)Adam and Bruce carry on a restaurant business together.
C)Adam and Bruce own land together;Adam owns two-thirds and Bruce owns one-third.
D)Adam and Bruce own land together as joint tenants.

Question 12

Which of the following does NOT fall within the implied authority of a partner to bind the firm?

A)Purchasing goods usually used by the firm.
B)Receiving payments and giving receipts.
C)Inviting others to join the partnership.
D)Employing suitable staff.

Question 13

The case of: Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance)Pty Ltd [1974] HCA 14 is authority for the principle that:

A)'carrying on' of a business requires repetition of acts.
B)the existence of a partnership is determined from what the parties do rather than what they call themselves.
C)partnership agreements should be in writing.
D)the existence of a fiduciary relationship is essential for the creation of a partnership.

Question 14

How would you explain to a person intending to form a partnership that although a written partnership agreement is not legally necessary,it is desirable?

Question 15

Only organisations created for the purpose of making a profit are considered partnerships.

Question 16

A form of property ownership in which the parties have shares which can be unequal and dealt with separately is known as:

A)common ownership.
B)unity of ownership.
C)tenancy in common.
D)joint tenancy.

Question 17

Which of the following statements is true?

A)A partnership will exist if the persons involved declare that they are in partnership.
B)Sharing of profits and losses is an essential element of a partnership.
C)All partners are equal.
D)A partnership agreement must be in writing.

Question 18

Which of the following situations is most likely to be a partnership?

A)Adam and Bruce are joint owners of a property.
B)Adam and Bruce work together on a single venture.
C)Adam and Bruce share the net profits from a business.
D)Adam and Bruce share the gross returns from a business.

Question 19

The existence of a partnership is established solely by the sharing of profits and losses.

Question 20

Which of the following is NOT an element of apparent authority?

A)The third party was not aware that the person lacked authority.
B)The transaction was business of the kind carried on by the firm.
C)The transaction was not carried out in the usual way.
D)The third party knew or reasonably believed the person to be a partner.

Question 21

Which of the following statements about partner's rights is true?

A)A partner who incurs liabilities at any time is entitled to indemnity from the other partners.
B)Any partner may access the partnership books in order to inspect and copy them.
C)Partners share in any profits and losses of the business in proportion to their investment in the business.
D)The consent of a majority of the partners is needed to introduce a new partner to the partnership.

Question 22

Under which circumstance may a partnership be dissolved?

A)Illegality.
B)The parties.
C)Operation of law.
D)All of the above.

Question 23

In what circumstances can a majority of partners expel a partner?

A)If the power to expel is contained in the partnership agreement and exercised in good faith.
B)Partners cannot be expelled by a majority under any circumstances.
C)If the partnership agreement contains the power to expel.
D)Expulsion is allowed in equity for breach of fiduciary duties.

Question 24

In the context of a partnership,'joint and several liability' means that:

A)the partners can only be sued separately if action against the firm fails.
B)the partners can be sued collectively in the name of the firm or individually in their own name.
C)any legal action must name the firm and each partner individually.
D)all of the above.

Question 25

If you were forming a partnership with your best friend,which of the suggested rules in the Act regarding the rights and duties of partners would you modify? Explain your answers.

Question 26

Partners have which of the following duties:

A)to refrain from competition.
B)to account for private profits.
C)to render true accounts.
D)all of the above.

Question 27

Property of a partner used for the purpose of the partnership business automatically becomes partnership property.

Question 28

Is it necessary for a partnership to advise customers when a partner retires?

Question 29

Expulsion of a partner has the same effect as dissolution of a partnership.

Question 30

A partnership is automatically dissolved if one of the partners dies.

Question 31

Why was the partnership found to be liable in the case of Polkinghorne v Holland [1934] HCA 28?

A)The negligent advice was given within the normal course of the business of the partnership.
B)The negligent advice was given outside the partnership's business.
C)The negligent advice was not given within the normal course of the business of the partnership.
D)The negligent advice was given by a partner in the partnership without a disclaimer.

Question 32

Why did the court find a breach of duty in the case of Law v Law [1905] 1 Ch 140?

A)A partner had disclosed some,but not all,of the partnership's assets.
B)A partner disclosed the full extent of the partnership assets.
C)A partner had become a director of a client company.
D)A partner had entered into business with a client of the firm without the firm's knowledge.

Question 33

In the absence of an agreement to the contrary,a person joining a partnership is liable for:

A)none of the debts of the partnership.
B)only the debts of the partnership incurred after they joined.
C)only the debts of the partnership incurred before they joined.
D)all of the debts of the partnership.

Question 34

A person who obtains credit for a partnership may make themselves liable to the supplier by 'holding out.'

Question 35

In the event that notice of a retiring partner is given to all business associates of the partnership,the retiring partner will be liable for:

A)only the debts of the partnership incurred after they retired.
B)only the debts of the partnership incurred before they retired.
C)none of the debts of the partnership.
D)all of the debts of the partnership.

Question 36

A partnership is automatically dissolved if the purpose of the partnership becomes illegal.

Question 37

Which of the following is one of the grounds for which a court will dissolve a partnership?

A)If one of the partners dies.
B)If the purpose of the partnership is or becomes illegal.
C)If there has been persistent breach of the partnership agreement.
D)If one of the partners is declared bankrupt.

Question 38

Which of the following statements about partner's rights is NOT true?

A)A partner is entitled to interest on any money loaned to the business.
B)Each partner is entitled to claim reasonable remuneration for working for the partnership.
C)Any partner may take part in the management of the business.
D)No partner is entitled to interest on their investment in the partnership until net profit has been determined.

Question 39

According to the Partnership Acts,the liability of partners in contract is severable.

Question 40

Which of the following statements is NOT true?

A)Partnership books must be kept at the principal place of business of the partnership.
B)There is a rebuttable presumption that partner's interests in capital,profits and losses will be equal.
C)Partners are entitled to be paid interest on loans to the partnership at a rate agreed between the parties.
D)Where the agreement allows a partner to introduce a new partner the terms of the agreement must be followed exactly.

Question 41

A 'limited' partner has what type of liability?

A)Limited partners are liable for the debts of the partnership beyond their capital contribution.
B)Limited partners have unlimited liability for the debts of the partnership.
C)Limited partners are not liable for the debts of the partnership beyond their agreed capital contribution.
D)Limited partners have no liability for the debts of the partnership.

Question 42

Which of the following statements is NOT correct?

A)A limited partnership must be registered.
B)A limited partner has only a limited role in management of the partnership business.
C)A general partner has unlimited liability for partnership debts.
D)A limited partnership must have at least one general partner.

Question 43

A limited liability partnership can have a maximum of 20 general partners.

Question 44

A limited liability partnership can have a maximum of 20 limited partners.