partnership act

Question 1

what are essentials of partnership ?

Answer 1

1. There must be an agreement: (stating Capital, P&L
   ratio, Duration, Rights and Duties)
2. There must be association of two or more persons (2
   – 20, except in bank, professional firms)
3. Parties must agree to carry on business: (charity, or
   rental income is not business)
4. There must be sharing of profits among partners
5. There must be mutual agency among partners
6. No separate legal status:
7. Unlimited Liability

Question 2

Parties who share profit, but are not

partner?

Answer 2

1. Lender.
2. Employee/Agent.
3. Retired/Deceased Partner.
4. Previous owner of business.
5. Minor admitted into benefits.
6. Transferee of interest

Question 3

define particular and patnership at will

Answer 3

Particular Partnership:
For a particular project or period
Dissolved on expiry
If continued after expiry, it becomes ‘partnership at will’.
Partnership at Will
Duration not specified.
Dissolved when a partner gives notice
if date of dissolution is mentioned it will dissolve from that date mentined in notice
if date of dissolution is not mentioned it wil disolve from that dateof communication of notice
If dissolution with consent of all, it will not be ‘partnership
at will’.

Question 4

define all types of partners?

Answer 4

Actual Partner
who actively manages business and is
known to others
Public notice is required if he retires.
Silent Partner:
has n voice in patnersip share profit and loss and fully liable
Sleeping or dormant partner
Not known to other
Public notice is NOT required if he retires
Partners in Profit only
by agreement is entitled to share profit only but Does not share losses.
Liability is still unlimited.:
Nominal Partner
dont contribute capital but lend his name to firm
Liability is still unlimited
Sub-Partner/Transferee of Interest
Not a partner
has no right in firm and Not liable for debts of firm
Partners by estoppels or by holding out
A person represented as partner

Question 5

rights of partners?

Answer 5

Rights of Partners:
1. Right to take part in the conduct of the business:
2. Right to be consulted: (decision on majority basis)
3. Right of access to books of accounts: (+ copy)
4. Right to share profits equally: (unless different agreed)
5. Right to receive interest on capital: (if agreed and firm
earns profit)
6. Right to receive interest on advance: (@6% or as
agreed)
7. Right to be indemnified:
8. Right to retire: (public notice in case of partnership at will
+with conent of all partners in case of partnrship at will)
9. Right of outgoing partner: (6% Interest or Share of
Profit proportionate to his share in property of firm until settled)
10. Variation in Partnership: (with consent of all partners)
> to change nature of buisness
> to change constitution of partnership i.e add new partner
> to change profit or loss sharing ratio
11. Rights of partners after a change in firm: (mutual
rights same as before)
> change in constitution
> frim created for fixed term nut carries on buisness after that term
> a firm carries on additional adventure or undertaking

Question 6

state Absolute dutiesof partners?

Answer 6

Absolute/General/Mandatory duties of Partners:
1. Joint and Several Liability: (i.e. Each partner has unlimited
liability)
2. Duty to act within authority: (compensate firm if exceeded
authority)
3. Duty in case of emergency: (can do acts to save firm from loss)
4. Duty to carry on business to the greatest common advantage:
(no personal gain)
5. Duty to be just and faithful:
6. Duty to provide true accounts:
7. Duty to provide full information: (disclose all interests in
transactions)
8. Duty to indemnify for fraud

Question 7

state Absolute duties?

Answer 7

Absolute/General/Mandatory duties of Partners:
1. Joint and Several Liability: (i.e. Each partner has unlimited
liability)
2. Duty to act within authority: (compensate firm if exceeded
authority)
3. Duty in case of emergency: (can do acts to save firm from loss)
4. Duty to carry on business to the greatest common advantage:
(no personal gain)
5. Duty to be just and faithful:
6. Duty to provide true accounts:
7. Duty to provide full information: (disclose all interests in
transactions)
8. Duty to indemnify for fraud

Question 8

List Qualified duties?

Answer 8

Qualified duties of Partners:
1. Duty to use firm’s property exclusively for
the firm: (return if benefit obtained)
2. Duty not to engage in competing business:
A partner can do any other business but
cannot do similar/competing business.
3. Duty not to assign/transfer his interest:
4. Duty to contribute to the losses:
5. Duty to indemnify for willful neglect:
6. Duty to perform diligently his duties:
7. Duty to work without remuneration

Question 9

state Property of the firm?

Answer 9

Property of the firm includes:
1. Property (OR rights or interest in property) originally
brought into common stock;
2. Property (OR rights or interest in property) acquired by
the firm or for the firm;
3. Goodwill of firm;
Any property purchased with partnership money will be
deemed to be partnership property, unless any contrary intention appears

Question 10

state authority and list Implied Authorities of partner?

Answer 10

Authority: means capacity of partner to bind firm by is acts

Implied Authority of a partner:
1. To buy and sell goods (of business).
2. To borrow money (in trading business).
3. To receive and pay cash.
4. To settle accounts.
5. To employ servants
6. To pledge movable property of firm
7. To draw cheques or negotiable instruments.
8. To sue or defend suits.
Firm shall be liable to third parties if a third party
makes such agreements with a partner

Question 11

list Restrictions on Implied Authority?

Answer 11

Restrictions on Implied Authority:
1. Submit a dispute of the firm to arbitration.
2. Open a bank account on behalf of the firm in his own
name.
3. Compromise or relinquish any claim or portion of a claim
by the firm.
4. Withdraw a suit or proceeding filed on behalf of the firm.
5. Accept any liability in a suit or proceeding against the
firm.
6. Acquisition of immovable property on behalf of the firm.
7. Transfer immovable property belonging to the firm.
8. Enter into partnership on behalf of the firm.
Firm shall not be responsible if a third party makes such
agreements with a partner

Question 12

Legal Position if Partner

exceeds its Authority?

Answer 12

Legal Position if Partner
exceeds its Authority:
If a Partner exceeds his authority, Firm is
liable for his acts if:
1. Firm ratifies it, or
2. It is a case of emergency, or
3. Third party did not know actual authority

Question 13

what is liablity of partner for firm and his rights if pay more than share?

Answer 13

Liability of a partner for acts of the firm:
Each partner has unlimited liability.
If paid more than share, reimbursement from
other partners.

Question 14

state liablitie of firm and artner if exceed and if misappropriate money

Answer 14

Liability of firm for wrongful acts of a partner:
With respect to Third Parties:
Firm liable to third parties (if ordinary
course, third party acted in good faith)
With respect to Partners:
Guilty partner bears whole loss, and
indemnifies firm
Liability of firm for misapplication of money or
property by partners:
the firm is liable to make good of loss to third party if:
>if partner take money and misappropriate then firm is liable to third parties.
>if firm take money and any partner missappropriate it then firm is liable to third parties

Question 15

effect of notice and representation (admission) by any partners?

Answer 15

Effect of notice received by a partner:
Notice is served to whole firm if:
1. given to active partner.
2. relates to affairs of firm.
3. Does not relate to fraud by partner receiving notice.
Effect of representation/statement by a partner:
Representation can be used as evidence if:
1. relates to affairs of the firm.
2. made in the ordinary course of business

Question 16

define principle of holding out or estoppel or ostesible partner?

Answer 16

Principle of Holding out partner:
If a person is represent (or allow other to represent him) as a partner
third parties gave credit to firm on such
representation, person is liable for debt.
Representation may be made direct or indirect to person giving credit

Question 17

example of partner bys estoppel?

Answer 17

Examples/Application: (when a non-partner
is liable)
1. Minor attaining age of majority (if no
public notice given for 6 months)
2. Retirement of Active Partner (if no public
notice given

Question 18

give example of exception of partner by estoppel?

Answer 18

Exceptions: (when a partner is not liable)

1. Death of a partner:( buisness cotinue using old firm name or partner name)
2. Insolvency of a partner:

Question 19

define transferree of interest state Rights of Transferee?

Answer 19

Transferee of interest:
a partner can assign or transfer his share in property andprofit of firm by sale,mortage, or charge either fully or partially, with consent of all partners.
Rights of Transferee:
1. entitled to receive share of profits of transferring partner
2. On dissolution, he is entitled to recieve his:
(a) share of the assets of transferring partner, and
(b) Accounts of firm from date of dissolution

Question 20

Restrictions/Disabilities/Limitations

of Transferee?

Answer 20

Restrictions/Disabilities/Limitations 
of Transferee:
Transferee shall NOT:
1. interfere in business.
2. inspect books.
3. require accounts.
4. challenge Accounts.
5. sue for dissolutio

Question 21

Admission of minor and Legal Status of a minor admitted to benefits
of a partnership

Answer 21

Admission of minor:

As minor is incompetent to make contract so he cannot become partner in firm . but he can be admitted to benefits of partnership with consent of all partners

Legal Status of a minor admitted to benefits
of a partnership:
Rights of minor admitted to partnership:
1. to share profits and property of firm.
2. to access accounts.
3. cannot be declared insolvent.

Question 22

state Liabilities of minor admitted to partnership and Restrictions/Disabilities of minor admitted
to partnership?

Answer 22

Liabilities of minor admitted to partnership:

1. No personal/unlimited liability.
2. Only share in firm is liable.

Restrictions/Disabilities of minor admitted
to partnership:
1. Not a partner.
2. Cannot file suit for profit and property,
unless he disconnects.
3. No access to books

Question 23

Legal Status of a minor on attaining age of majority:
and
describe if he elect or not slected liabilities and rights?

Answer 23

Within 06 months of attaining majority (or becoming
aware of partnership whichever is later)

If elected to become a partner:
1. his share as minor will be share as partner to which he was entitled
2. liable as partner to third parties for act of firm since he was admitted to benifit of partnership
If elected NOT to become a partner:
1. status Continues as minor till public notice.
2. No liability for acts of firm after public notice.
3. Can sue for recovery of his share of profits an property.