partnership law. section 3(1) partnership act 1961 partnership is the relation which subsists...

PARTNERSHIP LAW

SECTION 3(1) PARTNERSHIP ACT 1961

• Partnership is the relation which subsists between persons carrying on business in common with a view of profit.

It means:

• *Relationship between person

• *Carried on business in common(intention)

• *With a view of profit

• *In common

• Business – defined in section 2 as ‘including every trade, occupation or profession”

NATURE OF PARTNERSHIP

A partnership business must be registered under the Registration of Business Act 1956.

However the mere failure to register the partnership under these statute would not mean that the partners cannot enforce their rights againts each other if on the facts a partnership exists

A partnership need not have to be created by a formal deed or written agreement. May be created orally or in writing.

SECTION 4: LAYS DOWN THE CIRCUMSTANCES IN WHICH THERE

ARE NO PRIMA FACIE PARTNERSHIPS

Situation which are not partnership:

Sec.4(a) :

Joint tenancy, tenancy in common, joint property

Davis v Davis

French v Strying

SECTION 4: LAYS DOWN THE CIRCUMSTANCES IN WHICH THERE

ARE NO PRIMA FACIE PARTNERSHIPS

Sec. 4(b)Sharing of gross return

Cox v Coulson

Lyons v Knowles

TO BE A PARTNER

Sec 4(c)

As a general rule, a person who receives a share of a profits is deemed to be a partner.

However there are special cases whereby the receipt of the share of the profits does not quality the person to be a partner

EXCEPTION

Sec. 4(c)(i):

Payments by instalments Cox v Hickman Badeley v Consolidated Bank

Sec. 4(c)(ii):

Payment of servant or agent Walker v Hircsh Abdul Gaffoor v Mohamed Kassim

EXCEPTION

Sec. 4(c)(iii):

Annuity to the widow or children of a deceased partner

I.R.C. v Lebus’s Trustees

Sec. 4(c)(iv):

Loan given with a rate of interest varying with profits

Re Young

Sec. 4(c)(v):

Sale of goodwill Pratt v Strick

TYPES OF PARTNER

General Partner

Active Partner

Dormant(sleeping/passive) Partner

Quasi-partner

Salaried partner

POWER OF PARTNER TO BIND THE FIRM

• The general rule is that as partners are agents of the partnership firm, any act or omission committed by one partner binds the rest of the partners if it is carried out within the ordinary scope of the firm’s business.

• The authority of each partner may be either actual(express or implied) or apparent(ostensible)

• Sec. 7 of Partnership Act

AUTHORITY OF EACH PARTNER

Actual Autority

Express authority

May be given in writing or orally

Implied autority

is inferred from the conduct of the parties

Apparent Autority

arises when the partner holds out to others that he had such authority(section 8, Partnership Act)

S.7: 4 RELEVANT FACTORS THAT HAVE TO PROVEN IN ORDER TO DETERMINED THE

EXTEND OF LIABILITY OF PARTNERS:

1. The particular partner who did the act and done it under the name of the firm.

S.8: Partners bound by act of firm

An act@instrument relating to the business in the firm’s name showing the intention to bind the firm by any person authorized.(a partner or not) is binding on the firm and all partners.

S.10:

If the party knows that the person has no authority but ignores the fact.. .The firm exclude liability.

2. The particular partner who did the act done it within the ordinary course of business.

This factor is supported by S 9

’within the ordinary scope of business’ appears

3. The particular partner commit the act in usual way of making business

4.The third party has no knowledge

If the third party knows that the particular partner whom he is dealing with has no implied nor express authority to do the act then the rest of the other partners or the firm can be excluded from being bound by the act of that one particular partner

CASES:

Mercantile Credit Co v Garrod

Osman b. Haji Mohamed Usop v Chan kang Swi

Chettinad Bank v Chop Haw Lee & Chop Lee Chan

Chan King Yue v Lee & Wong

Sithambaran Chetty v Hong Hing and others

Chan Yin Tee v William Jacks & Co

LIABILITY OF PARTNERS Contractual Liability

Sec. 11 of Partnership Act :

that all partners in a firm are jointly liable for all contractual and others debts and liabilities including tax and judgement debts which are incurred while each is a partner

After his death his estate is also severally liable in due course of administration for such debts and obligations , so far as they remain unsatisfied but subject to the prior payment of his separate debts.

Osman b. Mohamed Usop v Chan Kang Sim

Kendall v Hamilton

Bagel v Miller

LIABILITY OF PARTNERS

Ordinary Torts

Sec.12 of Partnership Act

In order to make a firm liable, the tortious act must be committed by a partner either in the ordinary course of the business of the firm or with the authority of his co-partner

Hamlyn v Houstan & Co


Misappropriation

S.15 of Partnership Act

• It means that if a partner acting in his individual capacity, improperly makes use of trust property in the business of the firm, as a general rule, his other partners are not liable to the beneficiaries.

• However, if the trust money is still in the firm’s possession or under its control, the beneficiaries can recover the same from the firm.

• Ex parte Heaton


Liability of Persons for Holding Out


Provides that persons may be liable by ‘holding out’

Tower Cabinet v Ingram

Re Buchanan & Co

Bevan v the National Bank Limited


Duration of Liability

S.19 (1) of Partnership Act :

A new partner who has been admitted into a firm is not liable for the debt


A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations incurred before his retirement.


Duration of Liability


A retiring partner may be dicharge from any existing liabilities by an agreement to the effect between himself and the members of the firm as newly constituted and the creditors, and this agreement may either express or inferred as afact from the course of dealing between the creditors and the firm as newly constituted

LIABILITY OF RETIRED PARTNERS

S.38(1) of Partnership Act :

After retirement, a partner is still liable to person who deal with the firm after a change in its constitution unless he had given notice to such persons that he is no longer a partner.

RELATIONS BETWEEN PARTNERS

The relations between partners to one another are determined by their partnership agreement

The partnership agreement normally provides for the rights and duties of the partners, the conduct and management of the firm, the capital and their profit sharing arrangement.

RIGHTS OF PARTNER

The Partnership Act 1961 applies in the absence of provisions being made under the agreement.

The interests and duties of partners in the absence of agreements to the contrary are provided for in section 26 of the Partnership Act 1961

S.26 OF PARTNERSHIP ACT :

S26(a): Capital & Profits

All the partners are entitled to share equally in the capital and profits of business and must contribute equally towards the losses, whether of capital or otherwise.

26(b): Indemnification of partner


26(c): Advanced/actual payment beyond the amount agreed to be subscribed.

26(d): Partner not entitled to interest on capital subscribed by him, before ascertainment of profit.

26(e): Every partner may take part in management of partnership business

26(f): No partner shall be entitled to remuneration for acting in the partnership business.


26(g): no person may be introduced as a partner without the consent of all existing partners

26(h): Majority of partners may be decide if there is any difference arising to ordinary matters connecting

to the partnership business, it must be made with consent of all existing partner.

26(i): Access and inspect to partnership book.

DUTY OF PARTNERS/DUTY OF GOOD FAITH

• Duty of Partners of Render Accounts

• S. 30 of Partnership Act :

“ Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives”

• Law v Law


Accountability of Partners for Private Profits

S.31 of Partnership Act : He must reveal the benefit to the partnership:

If a partner received any benefit without consent of other partner and

The benefit derived by using the partnership property, name, business connection or anything relevant to the partnership

S.31 OF PARTNERSHIP ACT

Even though the transaction happen after a partnership has been dissolved by death of a partner. But it must be before process of wound up is complete.

• Aas v Benham

• Bentley v Craven

• Pathirana v Ariya Pathirana


S.32 of Partnership Act :

Duty of Partner not to complete with firm/partnership

No partner can carries on any business of the same nature as and therefore complete with his partnership without consent of the other person

If he does so he must account for and pay over to the firm all profits made by him in that business.

Trimble v Goldberg

Ass v Benham

DISSOLUTION OF PARTNERSHIP

By Agreement: S.34(1) of Partnership Act

If the duration of the partnership has been specified in the particular agreement, the partnership is terminated on the expiry of that period

If the partners mutually agree to dissolve the partnership


By operation of Law : S.34(1) of Partnership Act

S.34(1)(a): If the partnership was entered into a fixed term and the term expires

S.34(1)(b): If the partnership is working on a project or work, the termination of such partnership is assumed as soon as the project/work is completed

S.34(1)(c): any partner may give notice to other


By notice: S.34(1)(c) of Partnership Act

any partner may give notice to other partners to terminate the partnership on the date mentioned in the notice. If there is no date mentioned, then according to the date when the notice is delivered.


By Death or Bankruptcy :

S.35(1) of Partnership Act

Every partnership is dissolved as regards all the partners by death or bankruptcy of any partner


By charging on shares:

S.35(2) of Partnership Act

A partnership may , at the option of the other partners, be dissolved if any partners suffers his shares of the partnership property to be charged under this Act for his separate debt


By supervening illegality


Every partnership is dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or

For the members of the firm to carry it on in partnership


By Court Order : S.37 of Partnership Act

The court on application of any partner, may declare a partnership to be dissolved under the following reasons:

i) when any partner is confirm to have become insane

ii) any member loose the capability of working totally or permanently


By Court Order : S.37 of Partnership Act

iii) any partner threaten the partnership with any of his act without any reasonable cause

iv) There is breach of promises continuously

v) The continuance of partnership will only renders a lost

vi) Exist any situation where the court thinks fit and fair to terminate the partnership

partnership law. section 3(1) partnership act 1961 partnership is the relation which subsists...

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