Bill and Ben are close friends and keen cyclists. Bill has competed successfully
ID: 1103169 • Letter: B
Question
Bill and Ben are close friends and keen cyclists. Bill has competed successfully in cycling events and is well known in the cycling fraternity. Both men have recently retired from full time work and, with time on their hands, they decide to set up a small business selling bicycles. They register the name ‘Mamils’, and opened for business in April 2015. The business premises consisted of a small shop that they rented in both their names. No formal agreement is signed, although Bill and Ben did open a business bank account with both being authorised to make transactions on the account. They also approached one of their cyclist friends, Henry, and invited him to lend $50,000 to the business for additional working capital. Henry agreed to do this, on condition that he was paid interest on the loan at 5% per annum and that he would be paid 10% of the annual net profit of the business whilst the loan was outstanding. The loan was to be repaid within 5 years. Henry was in the Mamils shop frequently and, on occasions, he helped out by answering the phone and assisting with stocktaking.
Over the initial months of the business, Ben played a prominent role in running the cycle shop, whereas Bill was frequently away promoting the business at cycling events. Ben also used his own computer and van in the business.
During April 2016 the following things occurred:
i One Sunday morning Bill, riding his bicycle and dressed in lycra gear prominently advertising the Mamils business, struck David, a pedestrian, and injured him seriously;
ii Bill ordered three top-of-the range mountain bikes, valued at $10,000 each, from Bush Treks Ltd, as he wanted to diversify the operations of the business. When the invoice arrived, Ben would not agree to it being met by the business. The supplier threatens to sue the business and, on discovering Henry’s involvement, threatens to include him in the legal action.
Required
a Has a partnership been created between Bill and Ben? What is Henry’s position?
b Who, if at all, is liable to compensate David for his injuries?
c Who is liable to pay the debt owed to Bush Treks Ltd?
Refer to relevant legal principles, case law and legislation in your answer.
Explanation / Answer
A. No legal partnership wasnt existing between Bill and Ben as they never got in to partnership agreement but only have legally registered the business name as 'Mamils' under their names.And Henry is considered to be one of thier (Bill and Ben) stake holders for the business with no legal agreement between them but with a verbal condition of getting 5% of annual income and 10% of net profit of the business which is not safe and is always advisable to put it on paper.
B. Bill and Ben are liable to the compensation as legally the mamils business is registered on thier names.
C. Since US doesnt have a seperate law governing the partnership, each of the US states gorverns the partnership with common laws between them. Hence Ben and Bill did not have a General partnership agreement/Limited partnership agreement/limited liability agreement between them,So the norms of those agreement cant be appied here. As Bill is involved in the incident that happened so he alone is liable to pay the Bush Treks Ltd untill and unless Ben accepts to share the debt
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