Peter and Lois are in business together, providing financial advice and accounting services. Due to their different experience, Peter handled the financial advice matters and Lois looked after the accounting clients. In recent times their business has not been performing well. Peter and Lois invite their friend Steve to help with the business. He invests $100,000 into the business, which they call a loan. Steve is to receive a share of profits at the end of each financial year and is to have input into how the business is run. Following the investment by Steve, the business begins to improve. Peter purchases an expensive new type computer on which to run his financial analysis models. Lois is furious about the $67,000 price tag for the computer. Peter has become distracted by the new computer and is often careless in the advice he gives to clients. Charles and Henrietta, two of Peter's clients, have suffered a loss of $450,000 as a result of Peter's careless advice.

Required

1. Who is liable for the debt incurred in purchasing the computer and the loss suffered by Charles and Henrietta? In answering this question students will need to consider who are the partners in the firm and whether the firm is liable for the loss incurred by Charles and Henrietta.

2. point out who is the parties, what issues, what rules apply, analysis and conclusion for the case