Shaun and Craig are friends who are studying business at a university in Adelaide. They are both keen musicians. Shaun is a drummer and Craig is a guitarist. In January this year, Shaun and Craig decided to start a business offering online music lessons. Shaun and Craig created accounts with WebTutorConnect1 and NetPaymentz2, both with the username NetMuso. These accounts were linked to a free email account which they created together. Besides this, they did not do anything to formally register the business or document the nature of their commercial relationship.

They operated the business out of Shauns Mums garage, which Shaun had previously sound-proofed and set up as a music studio for his regular drum practice. In February, Craig moved his extensive collection of guitars and equipment (worth approximately $25,000) to the studio at which time he said: this will come in handy for our lessons. The business started to grow very slowly with Craigs guitar lessons being more popular than Shauns drum lessons. Fees from both lessons were paid into their NetPaymentz account.

The following problems arose is the last month:

• - Shaun discovered that Craig had been doing a number of extra lessons outside the business at Craigs home. Craig kept the fees from those lessons to himself. Shaun confronted Craig on this. Craig dismissed Shauns concerns by saying: You dont own me I can do what I want.

• - Shaun discovered that Craig had used the limited income generated by fees (approximately $900) to re-string five of his guitars with expensive bronze guitar strings. Shaun thought this was excessive, and that he should have been consulted. Shaun confronted Craig on this as well, and this resulted in a confused and heated argument about whether the business owned the guitars.

• - The business received some negative feedback because Shauns Mum could sometimes be seen in the background unloading groceries from her car. This negative feedback was posted on Shauns personal Facebook page. Shaun was embarrassed and this led to a big argument with his Mum, which Craig unfortunately witnessed.

  Craig is now having second thoughts about the business but is not sure about where he stands legally.

A. Does a partnership exist between Shaun and Craig?

B. Is Craig permitted to do the extra lessons at home?

C. Are Craigs guitars and equipment partnership property?

PLEASE USE THE South Australia Partnership Act 1891 and IRAC Method to answer the questions