Reference no: EM132624525

Question - X and Y jointly own a small apartment building in Suva, Fiji. The building produces only a modest rental income and X and Y decide it could be more profitably utilized as a hotel. In January X and Y enter into an agreement entitled 'Partnership Agreement.' The agreement contains, inter alia, the following provisions.

X and Y shall be partners in a hotel business

the firm shall trade under the name Capital Hotel

each of X and Y is to make a capital contribution being his interest in the building plus $35,000

each is to devote himself to the business full-time

profits and losses of the business are to be shared 50/50

each is to have full authority to act on behalf of the firm

Thereafter the apartment building is modified extensively and turned into a hotel with 20 fairly basic guest rooms. X and Y adopt a business plan under which the hotel is to be gradually upgraded. The business name Capital Hotel is registered and the hotel opens for business.

In May, X is on the lookout to buy air-conditioner units for each of Capital Hotel's guest rooms. R, the receiver for a large hotel property in receivership, advertises for sale various hotel items. X telephones R and introduces himself as X of the partnership X and Y trading as Capital Hotel. The following conversation ensues.

X - 'I'm looking for twenty air-conditioning units'

R - 'I've got many units for sale but I have to move them quickly. I'm not selling them in lots any smaller than sixty.'

X - 'That's three times more than I need. Capital Hotel is only a small hotel. We can't use more than twenty units.'

R - 'The decision is yours. The price on a lot of sixty is cheap. Why don't you take one lot and then sell off the those you don't need. With a bit of patience you should be able to unload the excess for a reasonable profit. We would be doing that ourselves if the creditors were not pressing us to come up with their money quickly.'

X -'I'll have to think about it. When can I inspect the air-conditioners?'

Subsequently X meets with R, inspects the air-conditioners, finds them to be in good working order and agrees to purchase a lot of sixty.

The following week Y arrives early at work and sees a large truck delivering the air-conditioners. (They are piled high on the footpath outside the Capital Hotel.) Y is not happy. He contacts X and asks what is going on. X duly explains. Y, still unhappy, gets on the phone and tells R he has no binding contract with Capital Hotel. R insists he has a binding contract with the firm.

So what do you think? Is there a binding contract between R and the firm?