Hank, Roger, and Aaron decide to start a business called 'The Lawnmower Men' (TLM). The trio draw up a written agreement. They agree that the business should be their priority and all three parties should make a full-time commitment to the business. Additionally, the agreement imposes a requirement that all expenditure above $5,000 must be agreed by all three at a formal meeting. Hank, Roger and Aaron all inject $50,000 each in start-up capital and deposit it in the newly created business bank account. Hank has a variety of second-hand gardening equipment which he is willing to allow the business to use. Despite, being in good order, Aaron is not convinced about the quality of the equipment and decides to purchase a new Weed Whacker 2000 lawn mower. Despite the cost being $20,000, Aaron does not obtain approval from Hank or Roger. Aaron claims it was his personal lawn mower.

The first year of business is tough, with high start-up costs. Despite a relatively healthy customer base and revenue, the business records a net loss of $20,000. Having worked tirelessly for no reward, all three parties decide to dissolve the business. As part of the dissolution process, Hank is reviewing all of the business receipts. He notes an invoice payable within 2 weeks for a $20,000 lawnmower. The equipment was purchased a year ago, but on 12-month interest free terms and so the balance had only just become payable. Hank confronts his two partners about the transaction and Aaron confesses. Aaron defends himself by stating 'Look, it's just as much the seller's fault, as I said "I probably shouldn't be doing this" and Aaron asked for the lawnmower to be delivered 6am Sunday when no one was around. Impressed by Aaron's honesty, Roger admits that he has been supplementing his income by mowing lawns every Sunday (TLM does not operate on Sundays). Whilst Roger does not use any of TLM's equipment, occasionally Roger would do work for TLM's customers. By now, Hank is furious and threatens legal action.

Hank comes to you for advice on his, Roger's, and Aaron's liability in relation to their business dealings. Please restrict your answer to discussion of the Partnership Act 1891 (Qld) and relevant Common Law

ILAC FORM -

ISSUE, LAW, APPLICATION, CONCLUSION