Question 1

Which of the following statements is correct with respect to the Partnership Act?

Accepted Answer

The correct statement about the Partnership Act is that it sets out provisions that will govern the relations between the partners unless those partners have agreed otherwise. Option A is incorrect because provincial partnership acts can have their own specific provisions that will apply in that province. Option B is also incorrect because the Partnership Act is enacted by each province and territory, not the federal government, meaning there are variations in partnership law across Canada. Option C is also incorrect because partnerships can also be formed through the conduct of the parties, not just by written agreement. Option E is incorrect because the partnership agreement can override certain provisions of the Partnership Act if the partners have agreed otherwise.

Question 2

Discuss the problem of liability with respect to partnership and how this difficulty can be overcome if partnership is chosen as the method of carrying on business.

Accepted Answer

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Question 3

Joe sold Harry his barber shop for $100 000.He was paid $20 000 in cash,the other $80 000 to be paid by Harry giving Joe 20% of the profits of the business until the amount is paid off.Unfortunately,a customer,Sam,is injured by Harry,who manages to cut off Sam's right ear while shaving him.Sam sues both Harry and Joe.Explain his likelihood of success.

Accepted Answer

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Question 4

An example of estoppel is when a person allows himself or herself to be called a partner.

Accepted Answer

When a person allows himself or herself to be called a partner and does not object, they may be estopped from denying the partnership. This is an example of estoppel.

Question 5

"A partnership can be created by the conduct of the parties." Discuss the accuracy of this statement.

Accepted Answer

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Question 6

In which one of the following situations will a court find that a partnership exists?

Accepted Answer

A partnership exists when two or more people carry on a business with a view to a profit. In option C, Joe and Mary promote several dances and split the profits, indicating that they are carrying on a business activity with a view to making a profit, and therefore a partnership exists. In options A, B, D, and E, while there may be a business transaction or arrangement involved, there is no indication that there is a sharing of profits or intention to carry on a business together.

Question 7

Which of the following is correct with respect to the law of partnership?

Accepted Answer

The law of partnership holds each partner responsible for the wrongful acts of their partners done within the course of the partnership business. Hence, option B is correct. Option A is incorrect as a partnership can come into existence through implied or expressed agreement or even accidentally. Option C is incorrect since partners can be held liable for torts committed by other partners even if they were ignorant of it. Option D is also incorrect since joint and several liability means that each partner can be sued for the entirety of the debt or damages, rather than multiple times. Option E is somewhat true, but it doesn't cover the entirety of unlimited liability of the partners. Partners are responsible for all the liabilities of a business, including debts and judgments, and not just limited to their investment in the partnership.

Question 8

Which of the following statements is correct with respect to unlimited liability?

Accepted Answer

Unlimited liability means that each partner can be held responsible for the debts of the partnership no matter how great they are. This means that they can be required to pay an amount greater than what they have invested in the partnership.

Question 9

Which of the following will establish the existence of a partnership?

Accepted Answer

The parties intending to share the expenses of the business is an indication of the existence of a partnership. The other options may involve sharing profits or income, but they do not necessarily establish the existence of a partnership.

Question 10

Which of the following is incorrect with respect to the creation of a partnership?

Accepted Answer

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Question 11

When two people enter into a partnership by agreement but neglect to set out the terms of such agreement,or where the parties becomes partners inadvertently,where are the terms and arrangements of that partnership set out?

Accepted Answer

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Question 12

Chuck,Howard,and Ben decide to start a business venture,developing and distributing educational software.For tax reasons,they do not incorporate.Each contributes $10 000,and Howard also contributes a truck and his programming expertise.They agree that all three will be actively involved in the day-to-day management of the business.To determine their rights and obligations,they enter into a one-page agreement that provides only that each of Chuck,Howard,and Ben will receive 33.3% of the profits but also states specifically they are not to be viewed as partners.Based on these facts,which of the following statements is true?

Accepted Answer

Sharing profits and being involved in the management of the business are two of the key factors that indicate the existence of a partnership. The fact that they specifically state they are not partners in their agreement does not change this. Therefore, Chuck, Howard, and Ben will be considered partners in the eyes of the law.

Question 13

With regard to the liability of partners,which of the following is false?

Accepted Answer

This statement is false. A general partner can be held liable for losses suffered by a client due to misapplication of funds even if he did not know about or take part in the misapplication. General partners have joint and several liability, meaning they can be held fully responsible for the actions of other partners or employees of the partnership.

Question 14

Chan sold a business to Scott and in the process they valued the "goodwill" at $50 000.In the sale contract,it was agreed that this amount would be paid by Scott,giving Chan 15% of the business profits until it was paid.This creates a partnership between them.

Accepted Answer

The arrangement to pay for goodwill with a percentage of profits does not necessarily create a partnership between Chan and Scott. It could simply be a payment plan for the purchase of the business, and the legal definition of a partnership involves more criteria than just profit sharing.

Question 15

Explain why the law of partnership poses a danger to people carrying on joint business activities.

Accepted Answer

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Question 16

Which one of the following statements is correct with respect to the creation of a partnership agreement?

Accepted Answer

Partnerships are typically formed with the intention of carrying on a business in common with a view to profit, which implies an ongoing, not a one-time, business relationship. This distinguishes partnerships from temporary or single-project joint ventures.

Question 17

"For a partnership to exist,the parties must have consented to its creation." Comment on the accuracy of this statement.

Accepted Answer

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Question 18

Joe and Mary promote several dances at school and split the profits.Will this be enough to establish a partnership?

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Question 19

If Carol introduces Mary to a client as a partner in circumstances where it is reasonable for the client to believe that there is a business relationship between them (although there is not),Mary will not be able to deny it later if the client sues her as a partner because a partnership has been formed by estoppel.

Accepted Answer

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Question 20

A partnership is primarily a contractual relationship and can be created verbally or implied by conduct.

Accepted Answer

A partnership can be created through a written or oral agreement, or even by the behavior of the parties involved. However, it is advisable to have a written agreement to avoid any future misunderstandings.

Quiz 7: Methods of Carrying on Business