1. Malvis, Nokuthula and Clara decide to form a partnership. They wish to engage in the business of moulding, making, and selling bricks. They agree that Malvis will contribute his newly acquired brick making machines for the purpose of producing bricks. Nokuthula who is a certified brick maker will contribute his skill of making bricks, whilst Clara would provide the land or premise and facility upon which to establish the brick making business. They further agree that Malvis will receive 30% of the profits, Nokuthula will receive 20% of the profits and Clara will receive 50% of the profits. Due to the current economic challenges including lack of reliable electricity supply, volatile rand and liquidity, the business fails and has a net loss of R1000 000.

Question

1.	Malvis, Nokuthula and Clara decide to form a partnership. They wish to engage in the business of moulding, making, and selling bricks. They agree that Malvis will contribute his newly acquired brick making machines for the purpose of producing bricks. Nokuthula who is a certified brick maker will contribute his skill of making bricks, whilst Clara would provide the land or premise and facility upon which to establish the brick making business. They further agree that Malvis will receive 30% of the profits, Nokuthula will receive 20% of the profits and Clara will receive 50% of the profits.  Due to the current economic challenges including lack of reliable electricity supply, volatile rand and liquidity, the business fails and has a net loss of R1000 000.

With reference to the essentialia of a partnership agreement, discuss whether a valid partnership was established between Malvis, Nokuthula and Clara. In your answer consider how the issue of liability will be dealt with.

Bot · Answer

The essentialia of a partnership agreement include an agreement to carry on a business, a sharing of profits and losses, and a mutual agency or trust relationship between the partners.

In this case, Malvis, Nokuthula, and Clara have all agreed to engage in the business of moulding, making, and selling bricks and have established the necessary contributions of machines, skill, and land or premise. They have also agreed on the sharing of profits and losses, with Malvis receiving 30%, Nokuthula receiving 20%, and Clara receiving 50%.

Thus, it can be concluded that a valid partnership was established between Malvis, Nokuthula, and Clara.

However, the issue of liability needs to be considered. In a partnership, each partner is jointly and severally liable for the debts and obligations of the partnership. This means that if the business fails and has a net loss of R1 000 000, each partner will be liable for the entire amount.

Therefore, Malvis, Nokuthula, and Clara will each be responsible for paying the full R1 000 000, unless otherwise stipulated in their partnership agreement or unless they can negotiate payment arrangements with their creditors. It is important for partners to understand the potential liabilities involved in a partnership and to structure their agreement accordingly.