law notes


Business organisations & agency

• Partnerships & companies contract through agents.

• Partners can be agents of the partnership; directors agents of the company

• In most cases agents will have actual authority.

• If no authority then ostensible authority may apply.


• Not 4 profit 4 members.

• Types:
1. Unincorporated (> 2 members)
 liability 2 outsiders uncertain

2. Incorporated (> 5 members)
 Registered
members liability limited
 association can be sued

• This is where 1 person owns the business.

• They take profits & bear losses.

• Unlimited personal liability applies.

• Minimal formalities.
• Relevant statute is the Partnership Act
– this is State legislation

• Each state of Australia hs a Partnership Act.

• The Partnership Act determines the obligations of the partners 2 each other & 2 outsiders

• A partnership exists where 2 or more carry on business in common with a view of profit – s.1 Partnership Act (NSW)

• Section 2 Partnership Act sets out rules 4 determining the existence of a partnership – 4 example – net rather than gross returns R more likely 2 create a partnership; receipt of a debt by instalments out of accruing profit does not necessarily create a partnership

• Partners R agents of the partnership in certain circumstances (s.5 Partnership Act)

• An important factor in establishing agency is whether the
partner is carrying out the usual partnership business.

• Partners’ liability 2 outsiders can be:
Joint – s.9 Partnership Act (contract)
Joint & several – s.12 Partnership Act (tort &
• Case: Polkinghorne v Holland
• Partners arrangements between themselves do not prejudice
outsiders’ rights under the Partnership Act

• Section 24 Partnership Act sets out certain relationships between the partners themselves unless a contrary intention exists – 4 instance, the equal sharing of capital & profits, & the equal contribution 2 losses

• Partners have unlimited personal liability.

• Partners may be liable 2 outsiders even after leaving
the partnership (s.17, s.36 Partnership Act)

• Partners R fiduciaries (s.29, s.30 Partnership Act)

• Distinguish partnerships from joint ventures

• Case: UDC v Brian
Comparing Business Organisations

Companies – Registration

• Companies R regulated pursuant 2 the Corporations Act (Cth)
– this is Commonwealth (federal) legislation

• All companies that operate in Australia must be registered.

• Companies R registered @ ASIC (s117 Corporations Act)

• Upon registration, ASIC will issue:
 Certificate of registration ( s118)
 ACN (Australian Company Number), a 9 digit number

• Registration process: (4 companies – Starting a company)

• Following registration @ ASIC, a company comes into
existence & adopts a legal status (s119).

• A company hs perpetual succession. A company
exists until deregistered (s601 AD).

Shares may change hands in an existing company but the corporate entity continues without change of legal status.

• Companies R legal individuals. They have the legal capacity of an individual plus ‘body corporate’ powers (s124).

 Issue shares (share capital);
 Issue debentures (loan capital);
 Power 2 acquire, hold & dispose of property;
 Grant a circulating security interest;
 Register as a company in a foreign jurisdiction;
 Capable of suing & being sued

• As a separate legal entity, a company is distinct & separate, not only from other companies, but also from its own members & directors. (Corporate Veil)

• Corporate Veil cases:

 Salomon v Salomon (company & its controllers)
 Macaura v Northern Assurance (company & its members)
 Lee v Lee’s Air Farming (company & its employee)

• The corporate veil protects (in most cases) company management from liability. However, the court will lift the corporate veil if it is used 4 fraud; 2 avoid a contractual or a legal obligation; or where there is insolvent trading (s 588G).

• Cases:
 Gilford Motor Co Ltd v Horne (avoiding a contractual obligation)
 Creasey v Breachwood Motors Ltd (avoiding a legal obligation)


• Companies classified by:
 Member Liability

 Limited by shares (public or proprietary)
 Limited by guarantee (public only)
 No liability (public only)
 Unlimited liability (public or proprietary)

*Companies limited by shares R the most common form of company.
*In companies limited by shares shareholders’ liability
is limited 2 the unpaid value of their share (s 516).

 Public Status

 Public companies (Ltd)
a. Listed (ASX)
b. Unlisted

 Proprietary companies (Pty Ltd)
a. Small
b. Large
• A subsidiary is a company controlled by holding or parent company. (s46)

• Where there is 100% ownership of a company that company is called a wholly owned subsidiary.