PRACTICE QUESTIONS: PARTNERSHIPS
Tlotlo Tabane
QUESTION 01
1.1 The business structure that Mr Tau and Ms Stripes intend to start is a
partnership. minimum legal requirements for the formation of a partnership
between Mr Tau and Ms Stripes are:
• Each partner must contribute to the partnership: Mr Tau contributed 50 pregnant
cows worth R600 000, and Ms Stripes contributed R400 000 in cash to the
business. Thus, this requirement has been fulfilled.
• The aim of the partnership is to make a profit: Mr Tau and Ms Stripes had a
verbal agreement that their business will trade in cattle to make a profit. Thus,
this requirement is present.
• The partnership business must be conducted for mutual benefit: Mr Tau and Ms
Stripes verbally agreed to share the profit from the sale of cattle thereby fulfilling
the requirement.
1.2 The proportion according to which profits are distributed to the partners is a
naturalia of the partnership agreement and must be agreed to by partners. Since
Mr Tau and Ms Stripes never agreed to how profits will be shared amongst them,
the applicable general rule is that the profits are distributed to the partners in
proportion to the value of their respective contributions. Mr Tau contributed of
pregnant cows worth R600 000 and Ms Stripes contributed cashed valued at
R400 000. The business made a profit of R100 000. Mr Tau will be entitled to
60% of the profit made which amounts to R60 000. Ms Stripes is entitled to the
remaining 40% of profits and is entitled to R40 0000.
1.3 For purposes of sequestration the Insolvency Act1 treats partnerships as
independent entities which are separate from its members. If the partnership is
sequestrated the result is that the estate of the partnership is sequestrated along
with the estates of the respective partners. Thus, the estates of Mr Tau and Ms
Stripe will be sequestrated along with the estate of the partnership as
contemplated in section 13(1) of the Insolvency Act.
1.4 The two main duties Mr Tau and Ms Stripes owe to each other are:
• The duty to act in good faith which results in a reciprocal fiduciary relationship
and includes complying with the partnership agreement, promoting the interests
of the partnership and disclosure of all information concerning the partnership.
• Carrying out duties in terms of the partnership which entails the delivery of the
agreed upon contribution; rendering of services; refraining from participating in
the management of the partnership if required; and regular payment of the
partners’ share in the losses of the partnership.
Partnerships(2)
1
Act 24 of 1936.
QUESTION 01
The set of facts describes a partnership contract. The agreement does not
partnership agreement for the following reasons:
• Contribution: each partner contributed to the business. Mr Tau contributed
pregnant cows worth R600 000, and Ms Stripes contributed cash valued at
R400 000.
• The partnership aimed at making a profit. Mr Tau and Ms Stripes both agreed that
the object of their business is to trade in cattle for the purpose of making a profit.
• A partnership must be carried for a joint benefit. This is not present as Mr Tau and
Ms Stripes agreed that Mr Tau will keep all the profits.
Thus, the joint benefit essential requirement is not fulfilled in this scenario, and this
does not constitute a partnership.
QUESTION 02
A partner en commandite is a partner whose liability is limited to his partners to a
certain amount agreed upon on condition that he receives a fixed share of the profits.
If the partnership incurs losses, the partner en commandite cannot exceed the fixed
amount.
QUESTION 03
False. There are no general formalities of a partnership prescribed by law. The
agreement may be concluded orally, tacitly or in writing.
QUESTION 04
The legal position changes after dissolution of a partnership. The partners become
joint and several co-debtors in respect of their obligations concerning the partnership
and their unpaid debts. A creditor can claim the outstanding amount from an
individual partner.
QUESTION 05
The judgement in Pezzutto v Dreyer relates to the essential requirement that each
partner must contribute to the partnership and provides that each partner must make
an “appreciable” contribution even though it is not of a pecuniary nature such as the
contribution of labour or skills.
