Unit 2 Relations of partners

• General duties of partners

  • Cerry business to greatest common advantages
  • Observe dealings with other partners
  • Render full information to any partner
• Duty to indemnify


  Partners must indemnify for loss caused by committing fraud
• Partners must act with utmost good faith
• Determination of rights and duties of partners can be by contract
• Contract between partners


  Can be express or implied
• Agreements in restraint of trade are not allowed
• Conduct of the business


  Every partner has the right to conduct business
• Partners must attend diligently to the books of accounts
• Partners have the right to inspect the books of accounts
• Partners must not assign their own share to another party
• Partners must contribute to the losses of the firm in equal proportion or agreed ratio
• Personal profit earned by partners

  A partner must account for any profit derived from transactions of the firm
• A partner must account for profits made from competing businesses
• Partner as an agent of the firm

  A partner is the agent of the firm for the purpose of business
• Implied authority of a partner


  Enables a partner to act on behalf of the firm
• Actions a partner can take under implied authority

  • Submit disputes to arbitration
  • Open bank accounts
  • Withdraw claims
  • Admit liability in a suit
  • Acquire immovable property
  • Transfer immovable property
  • Enter into partnership
• Partner's authority in an emergency


  A partner has authority to act for the firm to protect from loss
• Transferee of a partner's interest is not entitled to interfere with the conduct of business
• Transferee is entitled to receive profits as agreed by the partners
• On dissolution or retirement of a partner, the transferee is entitled to receive the share of assets
• Minors admitted to benefits of partnership


  Have rights to agreed share of profits and access to accounts
• Liabilities of minors are confined only to the extent of their share
• Minors cannot be held liable for debts of the firm beyond their share
• A minor may give public notice if they decide not to continue as a partner
• Incoming Partners


  • Section 31(1)
  • Section 31(2)
• Outgoing Partners


  • Retirement (Section 32)
  • Insolvency (Section 34)
  • Expulsion (Section 33)
  • Death (Section 35)
• The firm is not necessarily dissolved if a partner retires
• Retirement (Section 32)


  A partner can retire from the firm with the consent of all partners or as per agreement or by giving notice
• A retiring partner is liable for all acts done before retirement
• A retiring partner is not liable for acts done after retirement
• Expulsion (Section 33)


  A partner may be expelled from the firm by a majority of the partners
• Conditions for expulsion


  • Power of expulsion must exist in a contract
  • Must be exercised in good faith
  • Must be in the interest of the partnership
• A partner ceases to be a partner on the date on which the adjudication of insolvency is made
• The firm is not dissolved by the death of a partner if there is a contract between the partners
• Rights of an outgoing partner

  To carry a competing business subject to agreement<|>Solicit customers of the firm<|>Represent himself as a former partner
• Section 36(2) restricts competing within specified limits
• Right to share subsequent profits (Section 37)

  Subject to claim over profit proportionate to the share or interest at 6% per annum
• Revocation of continuing guarantee (Section 38)

  A continuing partner's guarantee can be revoked as to future transactions upon any change in the firm