The Partnership Act 1958 (Vic)
Partnerships are regulated by the Victorian Partnership Act 1958, the Common Law, the Rules of Equity and the partnership agreement (whether written, verbal and/or implied). Where there is inconsistency between the Act and the Common Law and/or the Rules of Equity, the Act prevails.
For those of you trading in partnerships, we thought it might be interesting to touch on aspects of the Victorian Partnership Act 1958 (Act).
“Partnership”
The Act only applies to “partnerships” proper, i.e. where there are two or more of you and you carry on a business in common with a view to make a profit.
Directors and shareholders of companies sometimes call themselves “business partners” but of course they are not “partners” in the true sense, and the Act does not apply to people carrying on business through a company. (The Commonwealth Corporations Act 2001 applies to companies). That being said, it is possible to have a partnership where one or more (or all) of the partners are companies (or trusts for that matter).
Variation by consent of terms of partnership
The mutual rights and duties of partners (as between themselves) defined by the Act may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing (but of course it is advisable to have the variation recorded in writing and signed by all parties in a suitably worded agreement).
Terms that cannot be varied
The Act also contains provisions which give rights to third parties, and which cannot be varied by the partners. For example, the Act gives third parties the right to assume, in certain circumstances, that the partner they are dealing with has authority to represent and bind the partnership (and all the partners). Further, the Act makes all partners liable for the debts and obligations of the partnership in certain circumstances.
For more information on the effect of the Partnership Act 1958 (Vic) and on the importance of partnership agreements, see:
See also our articles on structuring and other aspects of business relationships.