INTERNAL RELATIONS PARTNERSHIPS GOOD FAITH GOOD FAITH Highest

INTERNAL RELATIONS PARTNERSHIPS

GOOD FAITH

GOOD FAITH �Highest good faith = uberimae fidei �Relationship between brothers �Good faith arise at outset when negotiating partnership agreement and continues after dissolution until final liquidation �Ground for dissolution of partnership �From relationship of good faith arise rights and duties of partners

GOOD FAITH �Purdon v Muller “A partnership is very much like a marriage; there must be give and take; the partners must bear with one another” One partner should not try to outsmart the other

RIGHTS OF PARTNERS �Set out in p/s agreement �No agremeent = common law Right to share in profit Right to participate in management Right to compensation Right to distribution of assets on dissolution Right to inspect partnership books

RIGHTS OF THE PARTNERS RIGHT TO SHARE IN PROFIT �Essentalia and objective - to make profit to divide �Agreement �Proportion of contribution �Equal �If a partner is excluded = societas leonine Not allowed Is whole p/s agreement void or only the section? �Sharing of losses

RIGHTS PARTICIPATE IN MANAGEMENT �With in scope = each partner may represent the partnership – partners bound by it �Naturalia �Can be limited or excluded

RIGHTS RIGHT TO COMPENSATION �Unless otherwise agreed, NO right to compensation �May receive a salary under certain circumstances �May be compensated for services rendered (Bell v Estate Douglas): Reasonable compensation; Indemnified for all expenses in service of the p/s; and Damages personally suffered in fulfilling his p/s duties

RIGHTS � RIGHT TO INSPECT PARTNERSHIP BOOKS � Every partner has this right � Access to financial information required for sound management decisions � Reasonable time � Can approach third party - may not lead to the breach of confidentiality between partners � May make extracts from and copies of records � Record must be kept at partnership’s principal place of business

RIGHTS RIGHT TO DISTRIBUTION OF ASSETS ON DISSOLUTION �Undivided share in the partnership assets until dissolution and liquidation of partnership estate �Debt of partnership paid = partner has right to a share in the surplus assets �P/ship assets during liquidation made into cash = share in surplus paid out to partners

DUTIES �Duties: Contribution Sharing in losses Duty of care Duty of full disclosure Rendering of accounts

DUTIES CONTRIBUTION �Every partner must contibute as promised �Money, labour, rights etc �If not only the use is contributed, the fruit (interest) obtained from contribution will fall to the partnership �Subject to the risks of a partnership

DUTIES SHARING IN LOSSES �Naturalia �Agreed �Same as profits �Exclusion of partner

DUTIES DUTY OF CARE � Every partner must act with the necessary care and skill for the benefit of the partners � Damages suffered due to the negligence of a partner = partner liable � Reasonable person-test / Reasonable partner? � Roman Law = Paterfamilias? � Act as he would in his own affairs? � Test partly objective, partly subjective � Correct approach can only expect the partner to act with care according to own knowledge and capabilities

DUTIES FULL DISCLOSURE �Uberimae fidei �Partner may not gain advantages within scope of p/s business �De Jager v Olifants Tin “B” Syndicate 2 rules: Partner must give account of secret profit made Not place himself in position where his own interests are in conflict with that of the partship

DUTIES �RENDERING OF ACCOUNTS �Partner or person may be appointed �Assets, liabilities, expenses and income �Periodical �Agreement to non-rendering usually void – agreement not to expose fraud

ACTIO PRO SOCIO �General partnership action �Instituted against a partner �Can be used for multiple purposes �Eg: to enforce specific performance i. t. o. the contract; to ask for an interdict against a specific partner to request a declaratory order; to demand the dissolvement of the partnership; after dissolvement, to enforce the rights of the partners to liquidate the estate of the partnership

ACTIO COMMUNI DIVIDUNDO �Action for co-owners to enforce the physical division of things hold in joint ownership �Partners can, eg. after the dissolvement of the p/ship, use this action for the division of the common p/ship assets �Use extended to things such as copyright, patents and goodwill (utilis actio communi dividundo)

Robson v Theron �Facts (Vet practices/goodwill) �Decision �Which of the two actions � R 15 000 instead of R 12 000

Purdon v Muller �Facts (pineapple farmers) �Decision Essentialia Can a salary be paid to a partner ? Contract silent about losses Rendering of accounts/Right to inspection Bona fide (10 marks)