Partnership Act 1932

Partnership Act 1932

Law of partnership is governed by Partnership Act, 1932

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. 

Essentials of Partnership.

1. There must be an agreement entered into by all the person concerned with partnership. 
2. The agreement must be to share the profits of the business; 
3. The business must be carried on by all or any of the persons concerned acting for all.

Kind of Partnership

1. Partnership at will (sec. 7) where no provision is made by contract between the partners for the duration of their partnership or for the determination of their partnership the partnership is “partnership at will”.
2. Particular Partnership (sec 8) A person may become a partner with another person in particular adventure or undertaking.

General Duties of Partners Sec-9

Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative. Mutual Rights and Liabilities of Partners (sec 13)

1. A partner is not entitled to receive remuneration for taking part in the conduct of the business.
2. The partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm.
3. Where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits.
4. A partner making for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent per annum.
5. The firm shall indemnify a partner in respect of payment made and liabilities incurred by him.(i) In the ordinary and proper conduct of the business (ii) in doing such act in an emergency for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence in his own case, under similar circumstances.
6. A partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm.

Rights and duties of partners after a change in the firm 

1. Where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the re-constituted firm remain the same as they were immediately before the change as far as may be,
2. Where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will.
3. Where a firm constituted to carry on one or more adventures or undertaking carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings.

Relations of Partners to Third Parties

Implied authority of partners as agent of the firm Sec-19

How a partner act as agent:

1. Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called implied authority.
2. In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to:-

i.    Submit a dispute relating to the business of the firm to arbitration.

ii.   Open a banking account on behalf of the firm in his own name. a partner does not open

      a bank account for firm with his own name without consent of other partners.  

iii.   Compromise or relinquish any claim or portion of acclaim by the firm.

iv.   Withdraw a suit or proceeding filed on behalf of the firm.

v.    Admit any liability in a suit or proceeding against the firm.

vi.   Acquire immovable property on behalf of the firm.

vii. Transfer immovable property belonging to the firm or

viii.   Enter into partnership on behalf of the firm.