question archive The Family Clothing Market Baker, Felice, and Toby carried on business for many years as clothing retailers under the firm name of Family Clothing Market
The Family Clothing Market Baker, Felice, and Toby carried on business for many years as clothing retailers under the firm name of Family Clothing Market
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The Family Clothing Market
Baker, Felice, and Toby carried on business for many years as clothing retailers under the firm name of Family Clothing Market. The store premises were large and consisted of three separate smaller shops located side by side in the downtown shopping district of a large city. Different clothing lines were sold in each shop, and each shop was managed exclusively by one of the partners. Baker managed the children's clothing shop; Felice, the women's clothing store; and Toby, the men's clothing store. Each shop had its own distinctive name displayed on its shop window and entrance door.
Toby eventually grew tired of the business and decided to retire. He did so on March 1st. The two remaining partners purchased Toby's interest in the partnership and placed an employee (who had previously been the buyer for men's clothing) as manager in charge of the men's clothing store. This employee continued to act as the buyer for men's clothing and to deal with the clothing suppliers, without informing them of the change in the partnership. Nor was any notice of change in the makeup of the partnership filed under the provincial partnership registration legislation.
On April 1st, Baker died. Following his death, the auditors discovered that he had been systematically concealing the true state of the children's clothing operation from the other partners by creating fictitious assets to offset the losses. When the overall loss was calculated, the business was determined to be in serious financial straits.
News of the discovery soon leaked to the suppliers. When all of the creditors' claims were presented, the liabilities of the business exceeded its assets by some $50,000.
Rogers, a supplier, brought an action against the partnership for payment of his account in the amount of $5,000.
Discuss the status and liability of the partners, indicate any defenses that might be raised, and render a decision.
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In this question, you are supposed to analyse the case study and give remedy.
Step-by-step explanation
The case is revolving around the terms and conditions of the partnership, changing of terms and the performance of the partnership in regard to the profit and loss sharing. The partnership is in the state of liquidation and finally may become bankrupt. When the firm is unable to pay its debts, the partners are jointly responsible for the payment of the creditors. The creditors can take action against one partner or more partners.
In the case of Family clothing market, the partners are jointly responsible for offsetting their debts. The partnership did not update the retirement of Toby as well the other partners went forward and bought his shares. Baker's debt is a blow to Felice and the new manager of Toby's shop as they will be accountable to the debts of the partnership.
