Relation of Partners to one another
The partnership Act contains various provisions regulating the relationship between partners.
1. General Duties of Partners
Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other. To render true accounts and full information of all things affecting the firm to any partner or his legal representative.
The partners should carry business of the firm to the greatest common advantages. Later they should render to any partner or his legal representatives full information of all things affecting the firm. A partner must observe the utmost good faith in his dealings with the other partners.
All the partners are bound to render accounts to each other. But where some of the accounts are kept by one of them, prima facie he would be the proper person to explain and give full information about them.
2. Duty to Indemnify for Loss Caused by Fraud
Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.
The partner committing fraud in the conduct of the business of the firm must make good the loss sustained by the firm by his misconduct. The amount so brought in the partnership should be divided between the partners.
An act of a partner imputable to the firm or the principles of agency, which is a fraud on his co-partners, entitles the co-partners as between themselves to throw the whole of the consequences upon him.
3. Determination of Rights and Duties of Partners by Contract Between the Partners
The mutual rights and duties of a partner of a firm may be determined by the contract between the partners. Such contract may be expressed or may be implied by a course of dealing.
Such contract may be varied by consent of all the partners and express or implied by a course of dealing.
Agreements in restraint of trade- Notwithstanding anything contained in section 27 of the Indian contract act, 1872 such contracts may provide that a partner shall not carry on any business other than of the firm while he is a partner.
4. The conduct of the Business
Subject to contract between the partners-
Every partner has a right to take part in the conduct of the business.
(b) Every partner is bound to attend diligently to his duties in the conduct of the business.
(c) Any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners. Every partner shall have the right to express his opinion before the matter is decided. But no change may be made in the nature of the business without the consent of all the partners.
(d) Every partner has a right to have access, to inspect and copy any of the books of the firm.
(e) In the event of the death of a partner, his heirs or legal representatives or their duly authorized agents shall have a right of access to and to inspect and copy any of the books of the firm.
5. Mutual Rights and Liabilities
Subject to contract between the partners-
A partner is not entitled to receive remuneration for taking part in the conduct of the business.
The partners are entitled to share equally in the profits earned. And shall contribute equally to the losses sustained by the firm.
Where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits.
The firm shall indemnify a partner in respect of payments made and liabilities incurred by him-
- In the ordinary and proper conduct of the business.
- In doing such an act, in an emergency for the purposes of protecting the firm from loss, as would be done by a person of ordinary prudence in his own case under similar circumstances.
A partner making for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe to, is entitled to interest thereon at the rate of 6 percent per annum.
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.
Relation of Partners to Third Parties
1. Partner to be Agent of the firm
Subject to provisions of this Act, a partner is an agent of the firm for purposes of the business of the firm.
A partnership is a relationship between partners who have agreed to share the profits of the business carried on by all or any of them acting for all. Any of the partners can be the agent of the others.
Section 18 clarifies this position by providing that, subject to the provisions of the Act. A partner is the agent of the firm for the purpose of the business of the firm. The partner indeed virtually embraces the character of both a principal and an agent. So far as he acts for himself and in his own interest in the common concern of the partnership. He may properly be deemed a principal and so far as he acts for his partners, he may properly be deemed as an agent.
The principal distinction between him and a mere agent is that he has a community of interest with other partners in the whole property and business and liabilities of the partnership. Whereas an agent as such has no interest in either.
The rule that a partner is the agent of the firm for the purpose of the business of the firm cannot be applied to all the transactions and dealings between the partners themselves. It is applicable only to the act done by partners for the purpose of the business of the firm.
2. Implied authority of partner as agent of the firm
Subject to the provisions the act of a partner which is done to carry on, in usual, the 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 his implied authority.
In the absence of usage or custom of trade to the contrary, the implied authority of a partner does not empower him-
- To submit a dispute relating to the business of the firm to arbitration.
- Open a banking account on behalf of the firm in his own name.
- Compromise or relinquish any claim or portion of a claim by the firm.
- Withdraw a suit or proceeding filed on behalf of the firm.
- Admit any liability in a suit or proceedings against the firm.
- Acquire immovable property on behalf of the firm.
- Transfer immovable property belonging to the firm.
- Enter into partnership on behalf of the firm.
Mode of doing act to bind the firm
In order to bind a firm, an act is executed by a partner or other person on behalf of the firm. It shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the network.
3. Extension and restriction of partners Implied authority
According to section 20, the partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partners.
Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm. Unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner.
4. Partner’s authority in an emergency
A partner has authority in an emergency to do all acts for the purpose of protecting the firm from loss. As would be done by a person of ordinary prudence, in his own case, acting under similar circumstances and such acts bind the firm.
Also Read Minor As a Partner In a Partnership Firm
