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Solution to 1a)
Issue:
The issue involved in this case is to determine the nature of business i.e. the form of business in
which Mary, Fred and Chris have been ca
ying on business in Melbourne.
Rule:
1. The laws of Australia have laid down three essential1 elements that are required to
construe partnership. They are as under:
• the ca
ying on of a business
• in common
• with a view to profit
2. It was stated that, the basic of understanding of a partnership should be defined by
mutual participation, although the participants do not create a legal entity when
they create a partnership.
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3. A partnership is constituted when a business is ca
ied on continuously by, or on
ehalf of, all the partners even if all the partners are not taking an active role in
the daily affairs of the business.
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4. Various early decisions laid down by judicial authorities have been emphasising
on the need for continuity or repetition for determining whether there has been a
usiness or not. Even if isolated transactions are repeated with a view to earn
profits, it would be deemed business for the purposes of construing partnership.
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What we have to look for decision is the intent of the partners whether they want

1
See Partnership Act 1892 (NSW), 1963 (ACT), 1958 (Vic), 1891 (Tas), 1891 (SA), 1895 (WA), 1891 (Qld).
2
Green v Beesley (1835)
3
(Re Ruddock (1879))
4
Re Griffin; Ex parte Board of Trade (1890)
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to continue the activity of a continuous basis or they just want a single transaction
to happen and do not intend to repeat the same.
Application:
1. In the given case Mary, Fred and Chris have agreed to start a cafe in Melbourne. With the
motive of saving costs they are avoiding getting into too many complexities and have just
decided to keep the things going in a simpler manner.
2. They have contributed equal share of money into the business and have decided to share
the profits they earn from business equally amongst themselves. All the three will be
involved in the management of business on a daily business.
3. Going with the essential ingredients for the partnership, what is required is ca
ying on
usiness which is common to all and is done with the motive of profit. In this case there
is a certainty about the profit motive that exists amongst the partners.
4. In this case the first limb of the essentials of partnership i.e. there should be a business
eing ca
ied on as well as the second limb i.e. it should be in common also seem to have
een satisfied.
5. The case laws as discussed above clearly lay down that even if no separate legal entity is
created amongst the partners, the partnership would still be valid. Just like in this case
Mary, Fred and Chris have chosen not to go form any formal agreements amongst
themselves but have written down the understanding between themselves and the rules of
their agreement on a serviette. Even the rules written on that serviette would be binding
for them as it is governed by the principle of mutuality amongst those partners.
6. Lastly, since all the three limbs of partnership are being satisfied, there is no need of
other things even if they fall short in formality.
Conclusion:
As per the above discussed laws and the application thereof in the facts of the given case it is
quite clear that all necessities of partnership are being satisfied and therefore the kind of business
structure that Mary, Fred and Chris have chosen is partnership as per the provisions of
Partnership Act of Australia.
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Solution to 1b)
Issue:
The issue involved in this case is the determination of person who holds the liability to pay the
damages to the customer of the café who has suffered second-degree burns on her lips due to
very hot coffee served to her out of negligence by Chris.
Rule:
1. The liability of each partner of the firm is liable jointly with the other partners in the firm
for the debts and obligations of the firm incu
ed while the partner is a partner.
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2. The Partnership has a necessary feature of joint and several liabilities of all partners. In
general the partners of the firm can be made liable even out of their personal assets where
there are: liabilities of tort, partnership wrong, misappropriation of funds and
misapplication of trust money.
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3. A manufacturer or the supplier of goods is liable for the loss or damages suffered by a
person as a result of a safety defect. The aggrieved person can seek compensation for:
a. personal injury
. death– compensation to be paid to relatives
c. loss relating to other consumer goods providing the person harmed
In other words, liability only follows if both an objective and subjective test are satisfied
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.
Application:
1. Mary, Fred and Chris spent huge amounts for the purpose of buying coffee maker
machine. But the equipment so supplied by the vendor was not the value for money. The
manufacturer or the supplier of said machine can be held liable for replacement of the
5
Partnership Act 1963 - Sect 13
6
Cox v Hickman
7
Part 3-5 Australian Consumer Law
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machine or refund along with any loss or damages suffered by the buyer due to such a
defective product supplied by him. This would make the partnership entitled to claim
such benefit as per the provisions of Consumer Law of Australia.
2. Another issue...