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CAPACITY TO FORM A PARTNERSHIP


It is presumed that a person who enters into a contract has the full capacity to do so. If not, the contract may be invalid.

1. Minor
A minor (under 18 years of age) does have the capacity to enter into a partnership. – Age of Majority Act 1971.
Minor can be a partner and be entitled to share of profits but cannot be personally sued for the firm’s debt incurred by him on behalf of the firm.

LOVELL & CHRISTMAS v BEUCHAMP [1894] AC 607
This case established  that although a minor can become a partner and be entitled to a share in the profits of a firm he cannot personally be sued for the firm’s debt incurred by the minor on behalf of the firm. The adult partners are, however, entitled to have any capital contributed by the minor applied in satisfaction of the firm’s debt and to deduct any losses from his undrawn or future share of the profits.

However can apply his capital contribution and can deduct losses from his share of profits
Before the age of 18 a minor may repudiate the partnership but once reached that age - if not repudiate will automatically become a full partner - but still will not be liable for debt incurred during infancy

GOODE v HARRISON [1821] 5 B & Ald 147
Before the age of 18, a minor may repudiate the partnership agreement but once he has reached that age he must decide within a reasonable time whether to do so. By carrying on he will automatically become a full partner although he will not be liable for debts incurred during his infancy.

A minor who failed to repudiate the agreement upon attaining 18 will be liable as partners of the firm.
WILLIAM JACKS CO v CHAN & YOUNG TRADING [1964] MLJ 305
J claimed RM 12,000 for goods sold and delivered to the defendants who were partners. Y, a minor at that time the goods were purchased , took no steps to defend the action but c denied J’s claim alleging inter alia, that the goods bought were for Y’s personal use and that therefore the partners were not liable.
Held -  that the fact that Y made use of the goods for his own purpose did not mean that the firm and consequently the partners were not liable. Further as Y had not taken any steps to repudiate the partnership after attaining the age of majority he was also liable as a partner of the firm.

2. Consent - partnership entered into without any consent e.g through undue influence, mistakes etc is void.

3. Illegality
Like any other contract partnership agreement may be void ab initio because it is illegality
 The reasons for illegality may be:
 - it is created for an illegal purpose
-  it is proposed to carry lawful business in an illegal manner
- by legislation – law prohibits partnerships with certain persons
 If a partnerships is illegal the parties under that agreement have no rights as against each other or against anyone else.

E.g. if exceeds the maximum number allowed i.e. 20 persons – S.14(3) (b) Companies Act 1965  , because an outbreak of war one partner  an enemy , agreement  between professionally qualified and unqualified persons
CAPACITY TO FORM A PARTNERSHIP CAPACITY TO FORM A PARTNERSHIP Reviewed by Kamaruddin Mahmood on 5:06:00 PG Rating: 5

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