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Legally the brothers could now be a partnership emphasised by Jessel MR in Pooley v Driver [1876] that a labour contribution may be enough to found a partnership.

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Introduction

MG 2080A Company Law A) While Stan Wicks worked on his own as jobbing builder he would have been classed as a sole trader. As the business grew in size he took his brother on. Legally the brothers could now be a partnership emphasised by Jessel MR in Pooley v Driver [1876] that a labour contribution may be enough to found a partnership. Classed as "The relationship, which subsists between persons carrying on in business in common with a view to profit", sec 1 Partnership Act 1890. The Act defines a partnership as 'a relationship' that is to say its not a legal person in its own right. A firms name is merely an alias for its members jointly, so any contract entered into in the name of the firm would be with the partners jointly. The rules of the Supreme Court allow firms to sue and be sued in the firms name but unlimited liability is with the partners jointly and severally. In a partnership you have unlimited liability i.e. all the assets of Stan and Bill, whether used for the purpose of the business or not, are legally available to the firm's creditor's. Also any creditor to Stan or Bill for debts unrelated with the partnership can seize partnership assets to the degree of their share in the firm. ...read more.

Middle

As the public are invited to invest in companies by buying shares the company is legally obligated to provide information to the public about itself, e.g. who owns it, who are its manages and what was its financial position at the date of its last accounts. This is done via its files at the Companies Registration Office. The company must produce a balance sheet and profit and loss account, sec 226. The Companies Act also requires a company to keep various registers. The company can raise finance by selling shares or debenture stock. Shares give the holder part ownership of the company and carry with them aright to vote at the General Meeting, unless they are non-voting shares, and a right to a dividend if the directors declare one. Unless any other arrangement has been made the death or bankruptcy of a partner will dissolve the partnership. A company on the other hand, continues irrespective of death or bankruptcy of its shareholders. Most companies are created by Registration under the Companies Act 1985. To set up a company Stan and Bill must send to the Registrar of Companies A Memorandum of Association. Articles of Association, a company may produce its own or adopt those in Table A from the Companies (Tables A-F Regulations) ...read more.

Conclusion

When Stan signed the contract for the wicker furniture in Stability Builders name Bill could refuse to sign the cheque and say that Stan was not carrying on business in the usual way meaning therefore that the firm could not be bound by the contract. However Like in Mercantile Credit v Garrod [1962] the firm would be liable as the third party doesn't know what arrangements Stan and Bill have. 1) If however the company had been in the process of forming and had ordered in the name that had been submitted to the Registrar of Companies the person who signs the contract makes themselves personally liable as the company doesn't exist like in the case of Spicer (Keith) Ltd v Mansell [1970]. Spicer finally lost because they were not "carrying on business" yet. 2) Every company in its memorandum is required to 'state the objects of the company' if a company enters into a contract that exceeds its objects then the transaction may be void. This is known as the ultra vires doctrine. The third party may still sue if he acted in 'good faith' and misunderstood the objects clause. However Stan and Bill would have the protection of the company and would have limited liability meaning once all the company funds had been used the company would be wound up and Stan and Bill will still have their personal fortune. As the contract is made with the company not the individual. ...read more.

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