On 1/1/2014, Adriana , Mary and Amy agreed to incorporate a partnership known as “AMA” to manage their business of selling fruits, vegetables and other organic stuffs under the label “Segar Sentiasa”. They agreed to inject equal capital of RM10,000 from each partner, and in return everyone shall be entitled to equal profit sharing throughout the business.
Being the daughter of a famous millionaire, Adriana proposed for the firm to rent one of her father’s shop buildings at Damansara for a mere annual payment of RM5,000. Adriana encouraged all the partners to agree to the suggestion because the low rental rate will protect the firm from unnecessary liability in the future. Considering this as a very good proposal, all partners agreed, and they subsequently executed the Tenancy Agreement on 1/2/2014.
To ensure the firm’s products meet consumer needs, Mary went to meet Prof. Ser Ba Tau at UPM for a detailed research information on the nutrition contained in organic products. Prof Ser Ba Tau agreed to sell his own research outcome (which contains some of new patent in certain local vegetables and fruits claimed to be “unknown vitamins”) for the price of RM80,000. Since the professor’s explanation was so persuasive, Mary was convinced to purchase the patent. On 28/2/2014, Mary paid RM40, 000 to Prof Ser Ba Tau and promised to pay the remaining balance in 3 months.
Meanwhile, Amy has been entrusted by the other partners to do the marketing and sales for “AMA” due to her talent in marketing skills. Throughout her various contacts with many people, Amy met Zack who represented himself as the Director of TNB Berhad. To her surprise, Zack proposed “AMA” to execute a contract to allow TNB Berhad to install one electrical wiring station in their building, and in return AMA will receive RM2,000.00 per month. Excited with the offer, on 25/3/2014, Amy executed the contract on behalf of the firm without informing the other partners.
On 3/4/2014, Adriana was surprised when she saw people coming to the firm’s building to install the electrical wiring station. Adriana confronted Amy about this and argued that Amy’s single decision over the matter is not acceptable for the firm’s benefit. It turned out that, the electrical station was not installed by TNB Berhad but BNB Sdn Bhd, a small wiring company. Amy did not realise that earlier because she did not peruse the content of the contract which clearly states that the party to the contract is BNB Sdn Bhd (not TNB Berhad as claimed by Zack), with nominal gratuity payment of RM500.00 per month.
AMA firm is now suffering a great loss and cannot sustain more liability in the future. Adriana proposed for the firm to be dissolved. However, AMA suddenly received a demand letter from Prof Ser Ba Tau claiming the balance of RM40,000.00 for the sale and purchase of his pattern.
Adriana is upset with the situation. She has come to you to resolve the above complication.
Explain to Adriana all arising legal issues with reference to the Partnership Act 1961. Justify your answer with related cases.
