Issue
- Whether John is bound to purchase the tools even where he is a minor as he has not attained the age of 16
- Whether he can enforce the contract to gain profit as the contract is beneficial for him even where he is a minor as he has not attained the age of 16
- Whether the liquidator can sue John in relation to the money owed on shares even where this would not be beneficial to him
In Australian Contract Law, the minors are being restricted by the statute law and common law to form or enter into a contract. Both the common law and the other legislative rules of different state regarding the capacity of minors to get into a contract has made the judgement of the capacity of the minors to enter into a contract more complex (McKendrick 2014).
A contract that has been made by a minor for necessities has been binding on both the parties. Necessities can be said in relation with the current lifestyle of minor and it is necessary for the maintenance of one’s lifestyle. This has been stated in the case of Nash V Inman [1908] 2 KB 1 and also in the section 7 of the Goods Act (VIC). In the case of Nash V Inman [1908] 2 KB 1, it has been stated that a tailor Nash was working in Saville Row. A minor student studying in Cambridge University was sold a cloth on credit by Nash for the 145 pounds. Nash had sued Inman for the money recovery and Inman had pleaded infancy. The trial judge after hearing the evidence stated that Inman being a minor had enough clothing at that time of sale and for this reason it was found out by the trial judge that no proof was there that could consider clothing a necessity. The decision was made in favour of Nash and an appeal as made by Inman that the judges decided the fact’s issue without letting the jury decide. All the three members of the court had agreed upon the decision of the trial court that their decision in favour of the defendant.
A contract formed by a minor for employment has been binding unless it is beneficial and it is nor oppressive or unfair. A minor has a right to rescind the contract when he is above the age of 18 or adulthood (Fitzpatrick et al 2017).
Contracts that do not meet any of the above expectations then will be considered as voidable. However, the meaning of voidable in the court is different from what it has been given in the contract. While the contract made by minors results in minor acquiring the property permanently or involves any kind of obligation then the contract is binding unless it has been avoided by the minor itself. The minor has to bind by those obligations that are rising before that point (Knapp, Crystal and Prince 2016).
The minority’s effect at common law
In the present situation it can be stated that John is bound to the purchase of the tools as this is a contract of beneficial employment. The general rule of common law means that a contract that has been made through a minor who is under the age of 18 can be rescinded or is voidable. A contract formed by a minor for employment has been binding unless it is beneficial and it is nor oppressive or unfair. A minor has a right to rescind the contract when he is above the age of 18 or adulthood. Beneficial contract of employment include Apprenticeship, training and education. A contract that has been made by a minor for necessities has been binding on both the parties. Necessities can be said in relation with the current lifestyle of minor and it is necessary for the maintenance of one’s lifestyle. Thus, in the present situation it can be stated that the contract of purchasing to tools is in relation to apprenticeship and therefore it is to be considered as a contract for necessaries and for beneficial employment.
In relation to the shares it can be stated that He can enforce the contract to gain profit as the contract is beneficial for him. Contracts that do not meet any of the above expectations then will be considered as voidable. However, the meaning of voidable in the court is different from what it has been given in the contract. While the contract made by minors results in minor acquiring the property permanently or involves any kind of obligation then the contract is binding unless it has been avoided by the minor itself. The minor has to bind by those obligations that are rising before that point. Thus it can be enforced.
The contract to purchase the shares is not beneficial to John and also it is not a contract of necessity and thus it cannot be enforced. Contracts that do not meet any of the above expectations like beneficial contract of employment and contract for necessaries will be considered as voidable. However, the meaning of voidable in the court is different from what it has been given in the contract. While the contract made by minors results in minor acquiring the property permanently or involves any kind of obligation then the contract is binding unless it has been avoided by the minor itself. The minor has to bind by those obligations that are rising before that point
- John is bound to purchase the tools as it is a contract of beneficial services
- He can enforce the contract to gain profit as the contract is beneficial for him
- The liquidator cannot sue John in relation to the money owed on shares
There are three requirements for the purpose of finding out whether business is carried out in the form of a partnership or not under the rules of common law. Under the first requirement the partners have to carry out a business activity. Under the second requirement the partners have to have the intention of making profit through the business activity. Under the final requirement the business activity have to be carried out by the partners in common. Under a partnership business there is no specific requirement to register this means that even if the parties have not registered and are carrying out a business in common to make profit there would be a partnership according to the case of Wang v Rong [2015] NSWSC 1419
Partnership business and liabilities of partners
In a partnership business the partners are considered to be liable jointly and severally. This means that the partners are considered to be the principal as well as the Agents of the business. Any act which is done by the partner is binding on the business overall. As the partnership is not a separate legal entity the business and the partners are same (Milman 2017). This means that any act which is binding on the business would be binding on the other partners also. If one partner is not able to pay the other partners would be required to pay the partnership debt in full according to John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37
When the parties are carrying out business in form of a partnership they are in a fiduciary relationship with the business and with the other partners. Under this relationship they are not allowed to make any secret profit by using the resources of the partnership business. In case they have made any secret profit without consulting with the partners and using the resources of the business they would be holding the profit on trust for the business. The Other partners have the right to recover the Secret profit made by one of the partners in the course of business by making a legal claim against him or her.
In a partnership, no limited liability protection is provided to the partners. This signifies that the partners can be personally liable for any loss which has been incurred by the business. Unlike a company there is no corporate veil present between the Identity of the partnership business and the partners. Therefore any creditor has the right to directly make a claim against the partners and attached their personal assets (Cohen 2017).
A partnership business comes to an end when the partner dies. In addition the property of the partnership is the property which is used for carrying out the business. This property can be used by the business for the purpose of satisfying its debts. In case the property is not enough the personal property of the partners can also be attached (Fitzpatrick et al. 2017).
Lucy, Seamus and Koo are carrying out of partnership business. This is because the primary requirement for carrying out a partnership business is that there must be a profit making intention there must be a business in common. The facts of the study clearly provide that the parties had an intention to make profit in the spare time and that is why they have entered into a business. They are also carrying out business in common by using the skills and resources provided by each other. Therefore even if they are not registered it would be considered that they are carrying out a partnership business.
Seamus have purchase the mower without the consultation of the other partners. It is already analyse before that the business is carried out in the form of partnership. This means that the parties are jointly and severally liable for the actions carried out by each other in the course of business. Similarly Lucy, Seamus and Koo would be liable for actions which have been conducted by any of them in the course of business even if it is done without consultation. Therefore the mower which has been purchased by Seamus would have to be paid by all three of them in the course of partnership business.
It has been provided through the facts of the study that Lucy has entered into a weekend activity of cleaning the derbies of the existing clients of the partnership. This is done by her without any consent or information from the other partners. This means that she is using the resources of the partnership to make out secret profit. As discussed above in the rules it is the duty of a partner to not make any secret profit by using the resources of a partnership. Therefore any secret profit which has been made by her by using the clients of the partnership business would be held on trust for the business and she would also be liable for the breach of her duty.
In this case FastCut will have the right to directly sue Lucy, Seamus and Koo for recovering the money for the mower. This is because in a partnership, no limited liability protection is provided to the partners. Therefore any creditor has the right to directly make a claim against the partners and attached their personal assets.
Where it is seen that Seamus has died the partnership business would come to an end as discussed in the rules above. This is because partnership does not have a perpetual existence and a separate legal entity it comes to an end when any of its partners have died.
In the present situation the property of the partnership would be the truck, the mower and the computer which has been used by Lucy, Seamus and Koo to carry out the business. In case of a default these can be sold to satisfy debts.
References
Fitzpatrick J, Symes C, Veljanovski A & Parker D, Business and Corporations Law 3rd ed. (2017), LexisNexis Butterworths Australia.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.
Cohen, G.M., 2017. Law and Economics of Agency and Partnership. The Oxford Handbook of Law and Economics: Volume 2: Private and Commercial Law, p.399.
Milman, D., 2017. A review of developments in partnership law 2017. Sweet and Maxwell’s Company Law Newsletter, (399), pp.1-5.
Fitzpatrick et al. 2017 Business and Corporations Law 3rd edition
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