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Law of Business Organizations Assignment

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Assessment 2 Questions
Short Answer questions (12 marks).

  1. Explain what factors are considered in determining whether a partnership exists. (4
  2. Why is agency an important concept in partnership law? (4 marks).
    Unit 200183 Law of Business Organisations Autumn 2021 pg. 3
  3. Discuss the legal consequences flowing from the legal principle established in
    Salomon v Salomon & Co Ltd [1987] AC 22 House of Lords (UK). (4 marks).
    Problem Based Questions (23 marks)
    Question 1: (8 Marks)
    Helen one of two original partners in a printing business that had grown over the years
    from a two-person partnership in 2001 into a very successful business with 15
    partners. The business started on a very informal basis, with no formal partnership
    agreement ever being drawn up between the partners. Over the years Helena had
    drawn money from the firm account to pay for her personal debt, claiming she was
    repaying loans she had incurred for an on behalf of the firm. There is no evidence to
    suggest that this was the case and the other partners, while they were not happy with
    what she did, had not publicly complained in partner meetings. However, things came
    to a head when the partnership suddenly showed a significant decline in 2005 and it
    was apparent that Helena’s drawings were contributing significantly to the profit
    Advise the partnership.
    Question 2: (15 marks)
    Janice, Grace, and Aly who were fashion designers decide to form a company
    ‘Fashion Designs Pty Ltd’. They decided that they will be the only shareholders and
    directors of the company. Janice and Grace held 35% of the shares and Aly held the
    remaining 30% of the shares in the company. Aly is not involved in the process but is
    promised to get a $30, 000 from the creation of the company. Janice and Grace
    oversee the registration of the company. Janice oversaw finding a warehouse from
    which the company is to run the business. Grace gave instructions to Janice not to
    sign any lease without her approval.
    Unit 200183 Law of Business Organizations Autumn 2021 pg. 4
    Janice found the perfect warehouse for their business after two weeks and she
    becomes very excited. Besides Janice, there were five other interested parties wanting
    to rent the warehouse. Janice attempted to get in touch with Grace numerous times
    but was not able to as Grace on a business trip in Paris sourcing suppliers for their
    business and agents to market their product. Not wanting to lose the deal, Janice
    signs the lease with Samuel, the owner of the warehouse for and on behalf of ‘Fashion
    Designs Pty Ltd’ and as agents of Grace and Aly. The lease is for a period of four
    The company Fashion Designs Pty Ltd is registered after one week from the signing
    of the lease and on the first meeting of directors, a resolution is passed not to accept
    the contract because Grace and Ivy considered that a similar warehouse can be
    leased at a cheaper price.
    Advise Janice, Grace, and Aly on,
    i) their liability if Fashion Designs Pty Ltd decided not to go ahead with
    the contract after 1 month of the company’s creation; and
    ii) if the directors ratify the contract.

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