Question 1
Alan and Bob are partners in a printing firm. The management of the day-to-day business of the firm is left to an employee, Dave. When a paper-merchant, Edward, visits the firm, Dave tells him that he, Dave, has recently become one of the partners. Edward is impressed by Dave and supplies £10,000-worth of paper to the firm on favourable credit terms. Payment is now due but the firm does not have sufficient funds to pay any of the money owed.
Advise all the parties concerned as to their rights and liabilities.
Question 2
Frank, George and Henry formed a partnership to produce computer software. Last year, Henry retired and Ian replaced him in the partnership. Because of Ian's negligence, a faulty software package has caused considerable damage to a customer's computer system.
Examine the liability of all of the parties.
Question 3
(a) Distinguish between 'partnership property' and 'property of partners'. Why is the distinction important?
(b) Al, Ben and Con formed a partnership three years ago. At that time, Al contributed £10,000, Ben contributed £5,000, and Con contributed £2,000. The partnership agreement stated that profits and losses were to be divided in proportion to capital contributions. The partnership was to be conducted from Al's shop, which was to remain his personal property. It was soon realised that the business was undercapitalised and to remedy the shortfall Ben made a loan to the firm of an additional £5,000. The business has not been a great success, however, and as Con has been declared bankrupt, it has been decided
to dissolve the partnership. At the time of dissolution the partnership's assets are worth £25,000: it has debts of £9,500.
Additionally, the shop is worth £50,000.
Consider the financial arrangements involved in dissolving the partnership.