7.2 Partnership Agreement Flashcards
How are profits and losses shared in a partnership without an agreement?
Equally between all partners.
What management rights do partners have without a written agreement?
Each partner has an equal right to manage the business. Written partnership agreement would be needed to write out the specific roles and vary contributions
Are partners entitled to a salary by default?
No, partners are not entitled to a salary for their work. (remuneration)
Can new partners join without consent? Without a partnership agreement
No, all existing partners must unanimously agree to admit a new partner.
How are decisions about day-to-day business made?
By a majority of partners.
How can the nature of the business be changed?
without partnership agreement
Only with unanimous agreement of all partners.
What happens if a partner dies or becomes bankrupt?
The partnership automatically dissolves.
What is a partner entitled to if they incur expenses for the firm?
They are entitled to be indemnified by the partnership.
What happens when a partner leaves a partnership?
The default rule is that the partnership dissolves unless otherwise agreed. Remaining partners may continue if a written agreement allows.
Why is it important to advertise a partner leaving in the London Gazette?
To give public notice and protect the outgoing partner from future liabilities for debts incurred after leaving.
Why should notice of a partner’s departure be placed in the London Gazette?
It limits the risk of claims by third parties who are unaware the partner has left the firm.
Why should partners have a written partnership agreement?
To clearly set out terms on profit sharing, management, decision-making, admission/exit of partners, and dissolution, preventing default rules from applying.
In the context of a one-off joint venture, why is a written agreement essential?
Because partners need to ensure they have more than just a right to manage — they must formalize profit sharing, liability, and management duties.
How are profits and losses shared if there is no agreement?
Equally between all partners.
What is a partner’s authority to bind the firm in purchases?
A partner has implied authority to make purchases connected to the firm’s usual business; purchases outside this require express consent.
When are partners liable for expenses incurred by other partners?
When the expenses are incurred within the ordinary course of the firm’s business or are properly authorised.
when does a partnership form
When they started to carry on a business together in common (even without a written agreement)
without a written agreement, can a partner work for another company
The partner can work for the primary school and will not have to account for their wages to the partnership.
Are partners without a written partnership agreement and by default jointly and severably liable
Every partner is liable jointly with his co-partners and also severally for everything for which the firm while he is a partner therein becomes liable under either of the two last preceding sections.
How can an outgoing partner limit their liability for future/ongoing debts?
they can serve notice under s36 PA (advertisement in the Gazette etc) or they can avoid being held out as a partner under s14 PA.
s36 of the PA
Actual and constructive notice
actual - directly informing clients
constructive - potential / future clients informing them via a notice in the London Gazette or Welsh equivalent
how can a partner relieve themselves of existing debts?
- a novation agreement
- deed of release
- an indemnity
s14 of the PA
person’s liable by ‘holding out’ ie continuing to act like they are a part of the partnership
when will a partner’s purchase bind the firm
when they actual authority, apparent or ostensible
