Tutorial 9 Partnership

1. Define partnership.

S 3(1) Partnership Act 1961 defines partnership as a form of business structure which
is formed between 2 or more people carry on business in common with a view of
making profit.

2. Discuss how a partnership can be formed.

There is no formal registration process for the formation of a partnership, a partnership

can be formed with or without a written agreement.

The minimum number to form a partnership is 2 and the maximum number to form a
partnership is 20 (not more than 20 person).

3. Explain the law which regards to a minor who is a partner in a

partnership.

4. Explain the liability of the partners in a partnership.

5. Describe the ways in which a partnership can be dissolved.

6. Jack and Jill are partners of Syarikat JJ, a food cateringbusiness.

(a) Jack went to Moni Bank Bhd to take a loan for RM50,000 to develop Syarikat
JJ’s business. The loan was approved and was utilized by Syarikat JJ to market
their business and to buy some cooking equipments. Moni Bank made a claim to
recover the loan but Jill claims that Jack had no authority to borrow the money.

• In order for Moni Bank Bhd. to claim Rm50,000 from Jack or Jill, Moni Bank Bhd is
under the burden to prove the following: (a) the loan was given to Jack for the ordinary
course of business of the firm; (b) whether the loan was given for the purpose of
business of Syarikat JJ; and (c) whether the loan was given to Jack in his capacity as a
partner of the Syarikat JJ and not in his own capacity.

• If the Moni bank Bhd can prove that the loan of RM50,000 was given to Jack based
on the partner of Syarikat JJ to market their business and the cooking equipment was
used for the purpose of the business and ordinary course of business then Moni Bank
Bhd can claim the loan from either Jack or Jill.

(b) Bob, a customer who had catered food for a party from Syarikat JJ went to
cancel his order because he had found another caterer to supply the food. Jack
became angry and punched Bob in his face causing him to bleed severely. Bob
later went and reported to the police and brought a charge against Jack for
causing serious injury.
Based on the fact given, Jack punched Bob and caused him to bleed severely, therefore
the act is considered as criminal offence. Although all the partners are jointly liable in
civil cases, however they cannot be held liable for the partner’s criminal act as stated
in the case of Chung Shin Kian & Anor v Public Prosecutor. In conclusion, Jack is
personally liable, Jill and Syarikat JJ are not liable.

7. With reference to partnership law explain the THREE (3) conditions that need
to be satisfied for a third party to hold the partnership firm and its partners
liable for any wrongful acts done by any of the partners.

• The third party must prove 3 conditions:

(a) the act is done for the purpose of then business of the partnership

(b) the act is done for the ordinary course of business in the firm

(c) the act is done by the partner in the capacity as the partner of the firm and not in
his personal capacity.

8. Explain the advantages and disadvantages of forming a partnership as

compared to:

(i) sole trader

• Partnership vs Sole trader (advantages):

(a) more capital

(b) combination of different skill

(c) the losses by the firm can be shared among the partners.

• Partnership vs Sole trader (disadvantages):

(a) the liability of the partners are equal

(b)there may be a conflict of opinion

(c) the profit must be shared among the partners

(d) all the partners are jointly liable for civil action

(ii) a company

Partnership vs company (advantages):

(a) easy to form (with or without agreement)

 (b) easy to terminate (the partnership can be dissolved upon death, retirement or
bankruptcy of any partner)

(c) less capital required if compare to company.

Partnership vs company (disadvantages):

(a) no separate legal entity (the assets of the firm and the assets of the partners are not
separated.)

(b) Partnership has no perpetual succession

(c) Partnership has unlimited liability. (Partners shall be fully responsible for the debt
of the firm)