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Simba-business entities tutorial two-partnerships
Simba-business entities tutorial two-partnerships
TUTORIAL TWO
The word Partnership may be used to describe a relationship of mutual trust
in which every partner is a fiduciary (someone who exercises control over
the affairs of another eg an agent, trustee, director).
In Purdon v Muller the court held that the relationship between
partners is one of utmost good faith comparable to that between brothers.
Partners thus have a legal duty to act in good faith by;
1. disclosing all information pertaining to the partnership
2. complying with the provisions of the partnership agreement
3. unselfishly furthering the interests of the partnership.
Unselfishly furthering the interests of the partnership agreement is made up
of two duties namely, the duty to secure for the partnership all business
opportunities within the partnership’s scope of business, which the partner is
obliged to obtain for the partnership and the duty to disclose any benefits
acquired from the partnership and to share these benefits.
These duties form the basis of two rules; the No-Profit rule and the
Corporate Opportunity rule.
The No-Profit rule states that a partner cannot use his position to acquire any
personal profit or acquire personal profit whilst in the scope of the
partnership business. In Bentley v Craven, it was held that the No-profit
rule applies even if the benefits were not acquired at the partnership’s
expense.
This rule may be evaded by disclosure to the co-partners and
obtaining their consent to keep the profits.
The Corporate Opportunity rule was defined in DeJager v Olifants as the
principle that a partner may not take for himself any benefits which are in
the scope of the partnership business and which it was his duty to acquire for
the partnership. In essence, this rule implies that the corporate opportunity
must have been acquired at the partnership’s expense.
In Goldberg and Trimble v Bennet the court held that the first step
is to assess whether or not the opportunity was in the course of the
partnership business. In doing this, the court did not confine itself merely to
the stated course of business but considered whether there was an intimate
link between the opportunity and the stated objects of the partnership. This

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Simba-business entities tutorial two-partnerships
Simba-business entities tutorial two-partnerships
principle was extended in Transvaal Cold Storage Co v Palmer to include
any possible extensions (potential fields of expansion) to the actual business
carried out.
In this case, it is clear that Andrew (A) makes the profit whilst acting in his
capacity as a partner thus Brandon can rely on the breach of the No-profit
rule. The opportunity was in the line of the partnership’s scope of business,
therefore it is taken by A at the partnership’s expense. Consequently, B may
also sue for the breach of the Corporate Opportunity rule.
Our law provides two remedies for partners who wish to compel co-partners
who acquire profits to share these. The actions are the actio pro socii and the
actio communi dividundo. B may bring one of these actions against A to
recover his share of the profits.
A partnership will be bound to a contract if the agent concludes a contract in
the partnerships’ name. Whether the agent is a partner or not is irrelevant;
what matters is that she must have the requisite authority. Authority may
either be actual or ostensible. A partnership will also be bound if the agent
did not have the requisite authority at the time he entered into the contract
but the partnership subsequently ratifies the agreement.
Actual authority may be express or implied. Express authority is that
which is given directly by the partners - orally or in writing- to the agent.
Implied authority is that which is inferred from;
the naturalia of mutual mandate between the partners
incidental authority
necessary or reasonable inference from the conduct of the partners.
If there is no evidence of either express or implied authority, then there is no
actual authority and the question becomes whether there is ostensible
authority.
The test for ostensible authority is whether or not the partners created,
in the mind of the third party, the impression that the agent has the requisite
authority. This can only be raised as an estoppel, which is a remedy for the
third party to bar the partnership from raising the defense that the agent did
not have the authority to enter into such a contract. Importantly, the third
party must be able to show that;
1. the partners presented the agent as having the requisite authority

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Simba-business entities tutorial two-partnerships TUTORIAL TWO The word Partnership may be used to describe a relationship of mutual trust in which every partner is a fiduciary (someone who exercises control over the affairs of another eg an agent, trustee, director). In Purdon v Muller the court held that the relationship between partners is one of utmost good faith comparable to that between brothers. Partners thus have a legal duty to act in good faith by; 1. disclosing all information pertaining to the partnership 2. complying with the provisions of the partnership agreement 3. unselfishly furthering the interests of the partnership. Unselfishly furthering the interests of the partnership agreement is made up of two duties namely, the duty to secure for the partnership all business opportunities within the partnership’s scope of business, which the partner is obliged to obtain for the partnership and the duty to disclose any benefits acquired from the partnership and to share these benefits. These duties form the basis of two rules; the No-Profit rule and the Corporate Opportunity rule. The No-Profit rule states that a partner cannot use his position to acquire any personal ...
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