This report aims to evaluate the legal case for the recovery of purchase costs for a car subject to a signed contract between Porsche Dealership and PhysioBest
The first step being to establish the nature of the PhysioBest Company and the Legal Regulations which may govern it and its members, looking at:
The type of partnership agreement
Joint and singular liabilities of partners
Mandate to sign on behalf of the Company
Use of Company Funds-
The second step being an assess the validity of the contract between PhysioBest and the Porsche Dealership, reviewing:
The original offer and acceptance
The form and terms of the agreement
Breach of contract
Finally to establish whether, based on the law governing all parties and agreements Porsche might have a case to sue PhysioBest for the recovery of purchase costs.
The review is made without sight of a deed of partnership for PhysioBest or the Contract between PhysioBest and Porsche, which would ordinarily form evidence within the case.
The conclusion relies upon legal precedence regarding the requirement for honest disclosure within a traditional partnership where no majority vote was made in relation to a contractual obligation made on behalf of all members without majority consent.
PhysioBest is understood to be a partnership and as such is an unincorporated organization, meaning that it has no separate legal personality distinct from its members; all parties are representative of the company. Section 1 of The Partnership Act (PA)1890, defines a partnership as ” the relation which subsists between persons carrying on business in common with a view of profit” which might include different types of partnership:
The traditional partnership.
Limited liability partnerships.
A limited liability partnership must have at least one ‘general partner’ and one ‘limited partner’. General and limited partners have different responsibilities and levels of liability for any debts the business can’t pay. All partners pay tax on their share of the profits. Whereas in a limited liability partnership some or all partners have limited liabilities. It, therefore, exhibits elements of partnerships and corporations, so not one member has majority liability. PhysioBest, have no written agreement, but each partner contributed equal amounts of capital to start up the business and have agreed to share profits equally. The partners pay themselves a fixed salary every month, and the balance of any profits are distributed at the end of the year after the accounts have been drawn up and agreed. This would suggest that PhysioBest is a traditional partnership as the legal structure of the business is set up by two or more people to make a profit, the internal management structure is very flexible. Best is a traditional partnership we can review their joint or individual liabilities for the contract with Porsche.in that context.
The main principle of a traditional partnership is that is has no separate existence from its members:
This would mean that they are both liable; as one partner’s actions represent all members, irrelevant to the fact that there was no majority vote. As Petra signed the contract as ‘PhysioBest, she did so on behalf of her partner not as a separate; making both of them responsible for paying.
-S5 of the PA 1890: Partners are regarded as agents of each other;
Linking to the point above in the traditional partnership, Partners are regarded as agents of each other, meaning that as Petra signed the deal on behalf of PhysioBest, she was acting as an agent of PhysioBest and therefore the other member. of the partnership
– S9 of the PA 1890: Jointly liable for all debts (Unlimited Liability);
PhysioBest is a traditional partnership this means that considered a liability of both Petra and her business partner.
Though there is no legal requirement to do so, most partnerships will execute a deed of partnership, which will cover:
Name of the firm and nature of business
Termination of the partnership
Profit and losses division
We do not have sight of the deed so will have two assume partnership has followed the regulated rules of the Partnership Act 1890
-S24 and 25 of the Partnership Act governs the partnership relationship unless partners have agreed otherwise;Partners can claim an indemnity for expenses incurred on the firm’s business S 24- Petra might claim the as an expense from the companies accounts, her reasoning behind the purchase was to attract more customers and impress them. As her explanation for the purchase is in the best interests of the company in heart and not for own personal gain, she could claim the car against the companies accounts as an expense. Meaning that Porsche would not need to sue PhysioBest but the cost was still be covered by the company.
Where there is dispute about ordinary matters these should be settled by a majority vote – S 24(8)- as there are only two partners in PhysioBest, in order to achieve majority vote both members would have to vote for the same outcome. With this case, the decision to purchase the car does not have a majority and does not stand as a partnership decision.
-S30-1. Honesty and full disclosure- A partnership agreement is one of uberrimae fidei – each partner must deal with his fellow partners honestly and disclose any relevant facts in dealing with them. Failure to do so would mean a breach of duty. If we look at the case of LAW v LAW 1905- W and J were partners in a woolen manufacturer’s business in Halifax, Yorkshire. W lived in London and took little part in the running of the business. J bought W’s share for £21,000. Later W discovered that the company was worth considerably more and that various assets unknown to him had not been disclosed. The Court of Appeal held that in principle this would allow W to set the contract aside. It could be argued that Petra had a duty as a partner to disclose the intent to purchase the car before signing the deal with Porsche. As she did not do this, she is in breach of duty to the partnership agreement of PhysioBest. and could be considered the principal participant in the transaction with Porsche.
Moving to consider the Contract, which is “an agreement giving rise to obligations which are enforced or recognized by law”; involving; in this case the Porsche Dealership, the offeror, making an offer which once accepted by PhysioBest, the offeree, creates a binding contract. For this contract to be legitimate it will follow certain principles which are completed in three stages:
Formation of a Contract
Contents of a Contract
The end of a Contract
Formation of a contract;
In common law, there are 3 basic essentials to the formation of a contract:
(a) agreement; (b) contractual intention; and (c) consideration.
The first part of the contract is for both parties to reach agreement, this happens when one party makes an offer to the other and it agreed on by second party.If there is not a high level of intent to complete the transaction the contract does not stand as legally binding and can be said to be an offer. Looking at the case of Carlill v Carbolic Smoke Ball Company 1893. A medical firm advertised that its new drug, a carbolic smoke ball, would cure flu, and if it did not, buyers would receive £100. When sued, Carbolic argued the advert was not to be taken as a legally binding offer; it was merely an invitation to treat, “a mere puff or gimmick.” However, the Court of Appeal held that the advertisement was an offer. An intention to be bound could be inferred from the statement that the advertisers had deposited £1,000 in their bank “shewing our sincerity”. In the case of PhysioBest and Porsche, it is clear that the transaction between the two companies is a legally binding contract rather than offer. This is because terms of contract have been agreed by both parties, the price of £43000 has been agreed, and Petra who is buying the car has shown high-level of intent to complete the transaction.
give grounds to sue.’ A breach of contract is committed when a party, without lawful excuse, fails or refuses to perform what is due from him under the contract, or performs defectively, or incapacitates himself from performing’. In the case of Porsche and PhysioBest, it could be said that there is a breach of contract due to defective performance; where a party promises to do one thing but does another, which differs, for example, in time, quantity or quality. The contract with Physio Best required them to pay £43000, in a given timeframe for the car accepted by Petra. As this has not been honoured, there would be opportunity to sue for breach of contract.
To conclude having looked at the PhysioBest partnership in detail, the fact that the partnership is traditional, means that even though Petra did not achieve majority vote for the purchase of the car, she was still acting as agent of the company and the invoice from Porsche would reflect as a liability on the PhysioBest Company Accounts. This means that the cost would need to be covered by the company. Furthermore the contract for the car is a valid transaction completed on behalf of PhysioBest by Petra, who had a high level of intent, to purchase the vehicle and had contractually accepted the offer for the car, for the sum of £43,000. The fact that the contract was not fulfilled within a presumed time limit, means that PhysioBest is in breach of the contract, giving Porsche grounds to sue. Ultimately Porsche would seem to have a case to sue PhysioBest but Petra’s partner might also claim that the lack of honesty and disclosure of intent to purchase the car was a breach of duty in their partnership, which could bring the validity of the contract into question.
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