Monday 19 May 2025
Dear Subscriber,
I hope you had a great weekend! Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
Question: Charlotte is a solicitor acting for a client purchasing a freehold residential property for £550,000 in England. The transaction is proceeding smoothly, and contracts are about to be exchanged. However, Charlotte realises that no Stamp Duty Land Tax (SDLT) advice has yet been given to the client, and the client is unaware of their obligation to pay SDLT following completion. The client is also unaware that they must submit an SDLT return to HMRC within a strict time limit. Charlotte now wants to ensure her client is properly advised before exchange and completion. Under current legal requirements, what must Charlotte advise her client in relation to Stamp Duty Land Tax (SDLT)?
A. That SDLT is only payable if the buyer is purchasing a second property or buying with the intent to rent the property out.
B. That SDLT must be paid by the seller on all residential transactions above £250,000.
C. That the buyer must file an SDLT return and pay the tax within 14 days of completion, or penalties and interest may apply.
D. That SDLT does not apply to freehold property purchases and is only payable on leasehold transactions.
E. That SDLT is automatically deducted by the Land Registry at the point of registration and requires no action from the buyer.
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Answer and feedback to last week’s question: Liam and Aisha run a small graphic design studio in London under the name CreativeSpark. They do not have a written partnership agreement but share profits equally, jointly make decisions, and present themselves to clients as co-owners of the business. One day, Aisha enters into a contract with a printing company on behalf of CreativeSpark, agreeing to purchase services worth £8,000. Liam was unaware of the contract and objects to the expense, stating that he never authorised the transaction. The printing company now seeks payment from CreativeSpark and threatens legal action. Liam argues that he shouldn’t be liable because he didn’t personally approve the deal. Under the Partnership Act 1890, which of the following statements best reflects Liam’s legal position in relation to the contract entered into by Aisha?
A. Liam is not liable because Aisha acted without his consent, and partners are only bound by transactions approved by all partners.
B. Liam is liable because partners are jointly liable for business obligations entered into in the ordinary course of the partnership’s business.
C. Liam is not liable because the absence of a written partnership agreement prevents the creation of any enforceable legal obligations.
D. Liam is liable only if Aisha expressly stated that she had his authority before entering into the contract.
E. Liam is not liable because Aisha acted beyond her authority and exceeded the partnership’s borrowing limit.
Correct Answer: B. Liam is liable because partners are jointly liable for business obligations entered into in the ordinary course of the partnership’s business. Under the Partnership Act 1890, a partnership arises when two or more people carry on a business in common with a view to profit. In the absence of a written partnership agreement, the Act supplies default rules. According to section 5 of the Partnership Act 1890, every partner is an agent of the firm and has authority to bind the firm and the other partners in contracts made in the usual course of the partnership’s business.
- Since CreativeSpark operates a graphic design business, and Aisha entered into a printing contract (which is closely related to their business activities), this is within the ordinary course of business.
- Therefore, the partnership (including Liam) is bound by the contract, and both partners are jointly liable for debts and obligations of the firm (section 9 of the Partnership Act).
Why the Other Options Are Incorrect:
- Option A is incorrect because unanimous consent is not required for contracts made in the ordinary course of business by one partner acting as an agent of the firm.
- Option C is incorrect because a written agreement is not necessary to form a partnership; conduct and intention to share profits can be sufficient.
- Option D is incorrect because express authority is not required when a partner is acting within the usual scope of the business.
- Option E is incorrect because, unless a specific borrowing or expenditure limit was agreed and communicated to third parties, apparent authority applies in the ordinary course of business.
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Dr Ioannis Glinavos
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