• use the IRAC problem solving method to answer

Question:

Peta, Joel and Emily are friends who have just finished university. Joel has a business degree, Peta has a law degree and Emily has a visual arts degree. They decide that they want to have a go running their own business.

Peta and Joel love house plants, and Emily is an artist, so they decide to open up a boutique store that sells indoor plants, plant accessories and homewares. Emily's paintings will be sold in store. They want to call the business 'Botanica'.

Joel works on setting up the accounting and management systems and develops a business plan. Peta registers the business name 'Botanica', sets up a business bank account, and starts talking to various plant suppliers. Emily designs the business logo, and is also busy creating artworks to sell in the store.

Peta, Joel and Emily each contribute $15,000 into the Botanica business account. Peta and Joel will have access to the bank account. Emily has just inherited a small retail premises in the CBD, and has agreed to allow Botanica free use of the premises for 2 years, with the arrangement being reviewed at the end of 2 years.

It is decided that both Peta and Joel will work in the store full time and they will be in charge of the daily business. Emily will work in the store 1 day per week (the remainder of the time she will be working in her art studio). Emily wants to be involved in major decisions, but is happy to leave the day to day matters to Peta and Joel. Decisions around the business, including purchases, must be made by majority.

As Peta and Joel will be working in the store full time, they will receive 40% of the profits each, and Emily will receive 20% of the profits. They have agreed that if any losses are made, they will be shared in this same ratio. For each of Emily's paintings sold in Botanica, 20% will go into the Botanica account, and Emily will keep 80% of the proceeds.

After 6 months of operations, Botanica has done really well. Peta and Joel believe that this is all because of their hard work. They do not feel that Emily is really contributing like a partner should, and only one of Emily's paintings has been sold.

When it comes to distributing profits, they divide the profits between themselves and do not pay Emily her share. Emily is very upset and demands to be paid her share of the profits. Joel and Peta refuse, claiming she is not a partner, and is not entitled to the profits.

Using the Partnership Act 1891 (SA) and key cases, discuss whether a partnership exists between Peta, Joel and Emily. based upon the law.