Partnership Tutorial Question

Joseph owns five acres of land. At one time Joseph used to work the land as
a market garden, successfully growing vegetables that he sold. However,
growing older himself, he ran out of energy and let the land rest idle.
When Tony and Marco were retrenched they were each paid $12,000. Tony
and Marco were unable to gain other employment. They proposed to Joseph
that they use their retrenchment pay to buy seeds, fertiliser and equipment
and that they employ their time working Josephs land, as a market garden
once again. They proposed Joseph should get half the gross profits, and
themselves one quarter each. They said they would contribute $4,000 each,
annually, to cover expenses such as water, petrol, seed and fertiliser. Joseph
agreed to their proposal though he told Tony and Marco not to purchase new
equipment but rather to use his which was still in good order. Tony and Marco
agreed to that. Joseph also said he would advise Tony and Marco about
suitable crops and fertilisers, and he did so from time to time.
The agreement worked well, and profitable, for three years. At that point in
time Tony suggested to Joseph and Marco that they should purchase a new
improved watering system. Joseph and Marco were reluctant but Tony was
insistent. Finally, Marco said, If you are so keen Tony, you go off and get it.
Tony ordered the watering system in his own name. It was installed and Tony
was sent an account for $8,000. Joseph and Marco refused to contribute
towards the account. Tony had no savings with which to pay the account and
when the supplier threatened legal action against him, he was forced to
borrow the sum to pay the account.
Over the next two years, although profits were maintained and divided as
before, relations between Joseph, Tony and Marco deteriorated. Tony
continued to suggest that Joseph and Marco should contribute to the cost of
the watering system, but without any success. Tony paid almost $4,000
interest on his loan over these years. As well, Tony and Marcos annual
contributions of $4,000 for expenses became no longer sufficient. Joseph
contributed $500 once but refused to contribute again, and Marco has
consistently refused to contribute anything more than the agreed $4,000 per
annum. Tony has twice contributed an additional $500.
Tony would like to call an end to the arrangement, but he is anxious that he
will then never recover any contribution from Joseph and Marco towards the
$8,000 he paid for the watering system, nor towards the $4,000 interest he
has had to pay. Josephs land is worth $60,000 and his equipment is worth
$3,000. The watering system, which could easily be removed, is now worth
$4,000. Advise Tony.