Company Law Problem Question

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Coursework Question Fred and Anne have been operating in partnership for several years, running a business that renovates flats for rental. Occasionally Fred, who is responsible for repairs, has failed to get urgent repairs carried out when they are notified by tenants. One of the tenants, Lisa, has announced that she intends to raise a legal action against Fred, Anne and the partnership on the ground that the floor of her living room was allowed to become rotten and she fell through it and injured her leg. Inspection confirms the floor is rotten, and Lisa has evidence that she notified this to Fred many months earlier. When Fred heard about this legal action, and in an effort to escape liability, he immediately gave notice to Anne that he wished to terminate the partnership. Anne says that the problem was Fred’s fault and she and the partnership are therefore not liable. Anne spends a lot of her time at social functions where she does a lot of networking. Recently she heard about an opportunity to purchase a building for conversion to flats. Anne then immediately formed a private company, Cheap and Cheerful Ltd, with her husband as the sole shareholder and director, and without Anne saying anything to Fred, Cheap and Cheerful Ltd has now bought this building at a good price and renovated it and has let it at a good profit. Much later, Fred has found out about this and wishes to make a legal challenge. For his next venture, Fred is wondering whether a private limited company would be a safer business vehicle than a partnership, for a flat renovation business, and would welcome information on how to form such a company. Advise Fred and Anne on all the legal issues relating to the law of partnership and company law that arise in this question. Answer: Partnership according to the Partnership Act of 1890(S.1) is the relationship that subsists between the partners carrying out the business with the view of profit. ‘A partnership arises when a number of individuals are in business together, rather than in an employer-employee relationship. The legislation governing partnerships is the Partnership Act 1890.’ (Rati Shah MBE, 2011) Here, we see that Fred and Anne have been engaged in a partnership for many years. They run a business of renovating flats to be given on rent to the people. Fred being the partner in the business would usually take up the responsibility to do the repairs in the rented flats, if any. But he failed to make the urgent repairs when notified by the tenants. Lisa, being one such tenant, said that she would file a case against Fred, Anne, and the Partnership for not fulfilling their responsibility of making the repairs on the floor of her house which was rotten and due to which she fell and injured herself.

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