If Adamu and Mariam, perhaps on the advice of an accountant, intend to incorporate a company, this process will be governed by the requirements of the Companies and Allied Matters Act. Incorporating a company means the creation of an artificial legal person (ie the company) with an identity separate from Adamu and Mariam. This company will be able to own property, sue and be sued. It will have perpetual succession and a common seal. It may even commit criminal offences, and be persecuted.
The company will be a party to all contracts associated with the business. The company will no doubt be limited by shares, which means that Adamu and Mariam, as shareholders, will have limited liabilities. Their liability w
The hallmark of a partnership is the fact that the partners (Adamu and Mariam) are the principals and agents of each other. Consequently, the law of principal and agent permeates the whole area of partnership law and the acts of any partner (eg entering into a contract) which are done in the usual way for carrying on business of the kind, which is carried on by the firm (the collective name for the partners) binds the other partners even if they were not aware of that partner’s acts.
Sale of Goods Act 1893
This Act ‘cuts across’ the old rule of caveat emptor (let the buyer beware) and provides for certain terms to be part of every contract for the sale of goods. These terms require, in certain circumstances, that the seller (Adamu and Mariam) provide goods that are of merchantable quality and which are reasonable fit for the purpose made known to the seller. Remedies are available to the purchaser against Adamu and Mariam should they breach such terms.
Trade Practices and Fair Trading Legislations
If Adamu and Mariam decide to incorporate rather than form a partnership they will be subject in their business transactions to the provisions of the Restrictive Trade Practices Legislations. Part of these provisions related to the protection of consumers both with respect to misleading or deceptive conduct by the corporation (eg false advertising) in trade or commerce and with respect to transactions between the consumer and the corporation.
For example, in every contract between Adamu and Mariam’s company and a consumer, for either the sale of electrical goods or the repair of electrical items, there will be certain terms implied by law (whether or not the parties to the contract agreed to such terms). These terms, which relate to the quality of the services and the goods supplied, and to their fitness for the purpose, will if breached by the corporation provide a remedy to the consumer against the corporation.
As a result of constitutional limitations on the powers of the National Assembly, the Trade Practices Legislation will not apply to natural persons whether trading alone or in partnership provided such trade is confined within a State. Some State Assembly have legislation, which apply to sole traders and partnerships.