aco aan’ SP. Law Classes, Pune. Page : 1 — LAWOF CONTIACT-It (REVISED) lass) 25510256, (Res) 26333908. CONTRACTS OF PARTNERSHIP - THE INDIAN PARTNERSHIP ACT, 1932 AND THE LIMITED LIABILITY PARTNERSHIP ACT 2008 (A) NATURE OF PARTNERSHIP Define Partnership Explain the salient feature of Partnership,’ , «Every man who has the share of profits of a trade ought also to bear the loss Examine the statement mentioning liow far it affords a satisfactory list of partnership? @) ‘Although a right to participate in the profits of a trade is a strong test of partnership and that there may be cases where from such participation alone, it may as a presumption not of law but of facts, be inferred that, whether the relationship does or does not exist must depend on the real intention and conduct of the parties’ examine the statement in determining the existence of partnership. (4 “The relation of ‘partnership arises from contract and not from status” Critically examine the statement with reference to the joint Hindu family business. (5) Define ‘Partnership? Distinguish between a partnership and registered company? Examine the mode of determining existence of partnership. (9) Discuss the conduct of business of ‘Partnership.’ (1) “Apartner is an agent of the firm for the purpose of business of the firm’. Critically explain the statement in the light of relation of partners to the third person, SYNOPSIS: - +. Introduction & Definition de Essential elements of partnership @) There must.be an associations of two or more persons b) There must be an agreement ) There must be a business @) ~ There must be an agreement to share the profits of a business 2) There must be an elements of agency Competency of parties 4. ‘The true test of partnership a) Mode of determining existence of partnership b) Sharing of profit - not conclusive ¢) Instances qd) Relevant circumstances @ Case law - Cox Vs. Hickman. ConclusionLaw OF CONTRACT AE (RENISED) Ra Prof. Pathan’s _S.P, Law Classes, Pune. Page : 92 ‘@ (Class) 25510256, ( 08) INTRODUCTIOI : ia, excepttbe di Indian Partnership Act, passed in 1932 and it exte nds tothe whole of India ea ‘ = “ Jammu and Kashmir, The Act came into force on 1s er 1932. ie Act is amended From tin A partnership is the outcome of contract and therefore the pro’ adieniC 1 om, The Indian Parti inly based ony 1872 are applicable to the partnership firm. The Indian Parinership Act is ly based ont corresponding The Act is tiv retrospective, hence, it docs not affect or incurred before the Act came into op contract. h Partnership Act, 1890. = ; ; : Tee eave ices not apply to Hindu j oint family business. The Actis Focenstal cin bligations or fiability already accru hip is a specialized branch of law of 2 | DEFINITION: - “partnership” in the sense of relationship. , a) Definition under English Partnership Act, 1890 - “Partnership is a relation which subsists between persons carrying on business ia common with a view of profit.” b) Sir Frederick Pollock - “The relation which subsists between persons who have agreed to share the profits of business carried on by all or any of them on behalf of all of them.” S<4of Indian Partnership Act, defines ‘Partnership’ as under - “Partnership is the relation betwe =n.petsons who have agreed to share the profits of i rm’ and business carried by all or any Name: Persons who have enterec individually partner” and collectively a firm’ Liscartied oniScalledthe “fir 1 as - “The relation, which subsis with a view of profit” a ESSENTIALELEMENTS OF PARTNERSHIP: - The definition of partnership contains the following essential elements - n There must be an associations of two or more persons be There must be an agreement ae There must bea business, om ad There must be an agreem s ad ent to share the rofits of i & There must bean elements ofagency, tS 28 business, f — Competeney of parties = Though the definition of partnership given in 4 ‘agreed’ it is not an agreement but issvar Pathan’s _S.P. Law Classes, Pune. Page : 93 2 REVISED) ‘@ (Class) 25510256, (Res) 26333908, There must be an associations of two or more persons: - A partnership arises out of contract made voluntarily. This contract needs mini two persons to form a partnership. S.11 of the Companies Act, 1956 put limitati upon the maximum number of | It provides that the number of partners in the firm carrying on bankin| s should not exceed aes twenty. rai orga The-term’ person includes legal as well as artificial person but does not include partnership. Partnership is not a legal person therefore one e partnership firm cannot form partnership with another partnership firm. Whereas, one company may be a partner of another company; as company isa legal person. There must be an agree The word ‘agreed’ in the del rather a defective word. As*partnership’is created bya contract and does not arise by operation of law or out of status. A partnership is a contract must be fulfilled ontract and not agreement. All the essential condit for creating a valid partnership, i Such a contract may be express or implied. Implied contract may be inferred from the course of the conduct of parties. Thus there must be a voluntary act by the persons. The persons may be natural or artificial. There must be a business: ~ One of the essential operative societies is n nota partnership. ‘There must be an agreement the profits ¢ The object of the business is to have profits but the word profit also includes losses. Thus for losses also partners have to share, The profit must be distributed among the partners as agreed between them. The essence of the partnership is the attempt to make profit in business for the partners. A sharing of profit in a business is one of the tests to determine the existence of partnership, The sharing profit is the most essential feature and basis of partnership. The word; ‘profit’ is not define in the Act but it means an excess of returns over outlays, i.e. excess of what is obtained over the cost of obtaining it, The partners may agree to share profits in any manner they like. They may share it equally or in any other proportion. There must be an elements of agency- One of the most crucial elements of partnership is principle of agency. The business of the firm is carried by all or by anyone acting for all. The underline and fundamental inciple herein, which constitutes parinership, i the idea of, ‘mutual ageney’ the either petal are bound by the act of one of them oiily'on principle of agency. When one partner acts as an agent the other partner acts as a principal. “principle of mutualLAW OF CONTRACT-II(REVISED) [Prof. Pathan’s SP. Law Classes, Pune. Page : 94 ae jo a) ig > Ina determining the existence of partnership. Sy 14 aay @ (Class) 25510256, (Res) 26333900) ability. The law of partnership is branch of jay, ium facit per se’ means he, who do throu acting asa ‘principal’ and ‘agent’ as therej, e foundation of partner’s of principal and agent. ‘Qui facit per after d ss for himself. Each part concept of mutual agency. Competency of parties - Partnership of the contract so as per : competent to enter into a contract can be onl competent parties includes - i) “major; Cii) sound mind; and ii) not disqualified by law. Analien enemy and i {tare not competent to contract. \ Bombay High Court in Shivam Vs. Gaurishankar, 1961 held that a partners consisted of all mit one a fher minor is not a partnership at ally agency i §.11 of Indian Contract Act, 1872, only who ae ly partner’s in the partnership fom THE TRUE TEST OF PARTNERSHIP: - htioned above must be present. A questioe mn business is or is not a partnership and aln rm. In S.6 the rules for determining the existence d two explanations to S.6 contained some useful rules fx true partnership, all the essential eler Mode of determining existence of partnership - S.5 provides the partnership is not created by status but arises out of cont ‘provides ‘The elation of partnership arises from contract and not from status; and, in particu the members of'a Hindu undivided family carrying on a family business, or a Buddhs husband and wife carrying on business as such are not partners in such business.’ S! provides - “In determining whether a group of persons is or is not a firth, or whethet! person is or is not a partner in a firm, regard shall be had to the real relation betwe the parties, as shown by all the relevant facts taken together.” ; Sharing of profit - not conclusive - In England in common law sharin, i of profit among the partn elements of partnership. Sharin, Part ove Nietatpietie 8 8 profit was one of the dominant test and ingredid of partnership. In partnership in Wa . i Charing profi nership in Waugh Vs. Carver 1793, itwas held that all pest This principle was followed in England ti Te ee of House of onde rein England till 1860 when itwas changed by the dec “harng ofp otanundenet ge Hickonan, Ttwas held in this casei of partnership may often be inferred from toot itselfa partnership though the existe Profits is no doubt stron; evider ferred from it.” Out of the above lements, sharing nce b aim evi e al that true test of partnership is agony epee ete evidence. In tis case Coutt i ip is agency while the sh; Toit i i evidence and nota conclusive evidence of the cristae oho : cain co OEE existence da ersh Mp,(fret °) Pathan’s _S.P. Law Classes, Pune LAWOF CONTRACT tava, @ (Classy 25510256, Res) 26333908. ] f r ircumstances is not 4.6 explanation 1 provides, * The sharing of profits oe of posse property by persons holding a joint or common interest in the he Srising from itselfmake such persons partners.”, SSS Property does not of Thus, right to receive a share of profit is not a conclu: ive — € test of, e Instances - Sn nensonlusve tet of prerhip, S.6 provides that though sharing in a profit of business is essential to cor partnership, it does not mean that every one whe ticipates in the rofitofabein, is apariner. In S.6 the instances are cited wherein person takes a rare of profit of the business without having ct interest in a busines: out having any dit s hence, is nota partner. 8.6 Explanation II “The receipt by a person of a share of the profits of tie business orofa payment contingent upon the earning of profits or varying with the profits eamed by abusiness, does not of itself make him a partner with the persons carrying on the business: and in particular, the receipt of such share or payment - i) bya lender of money to persons engaged or about to engage in any business, ii) _~ byaservant or agent as remuneration, iii) bya widow or child ofa deceased partner, as annuity, or iv) _ byaprevious owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business.” This explanation deals with certain instances, which commonly occur, in our day-to- day life. Thus a creditor j ointly advancing money does not become partners even though they possess a right to share profit. Similarly, a person acting as a servant though paid by share in the profit and is not to be liable for losses‘is no partner. A moneylender lending money for the business of the firm and sharing in a profit does not make him a Partner. In the same-way, an agreement between a trader and his customers, under which the trader is to distribute a portion of his profits among his customers in proportion to the purchases made by them, does not make a partnership. Relevant circumstances - ; In determining whether a person is or is not a partner in a firm, the Court must consider all the facts and circumstances of the case, for e.g., A) + ckistence ofany agreement between the parties; si). conduct of parties towards one another, it). the mode of doing business; W)_ the right to contract property; - the manner in which the accounts are maintained; i> the manner or distribution of profit etc. n ad levant factors. The legal existence of a partnership has to be determined from alll these rel ;LAW OF CONTRACT-1I (REVISED) Prof. Pathan’s _S.P. Law Classes, Pune. Page : 96 ‘@ (Class) 25510256, (Res) 2633) 5) CASELAWS- a) Hickman, 1860 - here was a partnership firm, certain partners having found themselves in fina difficulties, assigned there properties in favour of credit trustees for ¢ Tying | business and pat ing off their debts out of profits of the business, These eredi tru incurred certain liabilities and they were sued for liabilities. Mr. Cox, a creditor ra] who did not participate in the management was also sued. a ~ Held, he was not liable, as the real test was whether relation of mutual agency exiy not, Thus, the true test of partnership i dd sharing of profit is not Onell evidence of existence of partnersiip. « 2) Shantivanjan Das Gup Das Supreme Court in this case held tha not exist must dep from the whole of the facts of the rzamull, AIR 1973 SC 48, - er ation of partnership does or dey ntion and contract of the parties as appeas| merely on their expressed intent SY — CONCLUSION- ‘Thus a partnership is an agreement between the ‘persons who have agreed to share the profit] a business to be carried by all or ing for all of them. A partnership is not crea by status but arises from contract. Shariy of profit is one of the test but not a conclusive evidenced the existence of partnership but principle of mutual agency is foundation of the partnership] determining whether a group of persons is or is nota firm, or whether a person is or is not a pat ina firm, regard shall be had to the real relation between the parties, as soon by all relevant facts ti together, ; rs al 2.2) Discuss the difference between partnership and Hindu joint family business? | SYNOPSIS - 1. Introduction 2. Difference bety i indu joi i 3 Case tna PeMEeN partnership and Hindu joint Samily business 4 Conclusion business."The ‘Karta’ or ‘Manager’, who ig generally the seni; oes ‘feels the management ofa oint family business oe ale Meer of the fPathan’s _S-P. Law Classes, Pune. Page 297 Fos LAW OF CONTRACT-MGtEVisED) DISTINCTION n= 10256, (Res) 26333908, Point of Distinction Partnership —s - usiness J Mode of creation. Outcome of contract. Created by operation of Jaw or by status i.e, birth ‘inthat family, =~ 2 Admission of members |_ partners. No new partner can be admitted ‘without the consent of all existing ~A person become member by birth & by adoption. Be Position of a woman Female can become partner in partnership fic: Skene No position under J.H.F. under the ‘Act’. But by .amendment of 1993 a female is also a co~ parcenery, therefore share in the profit_of the business. ° 4, Position of a minor Minor cannot be a. partner, Minors are member of the butcan be adm the | firm from their birth. benefit of the firm. & Death of member Unless otherwise agreed J.ELF. business continues upon the death of partners with the other members, dissolves the firm. &. Liability of members Joint and several. ‘Karta’ - unlimited . liability, other members to the extent of their shar 1. J No. of members Limited upto 10 in case of banking business and 20 No such limit on number of members. nember in other kind of business. eo BR q ichtto | Manager/Karta alone can &_ Right to take part Every member has righ / a take part in management: take part, in manageme® . o> A et [ee: 8s) 25510256, (Res) 265 _ ee Classes, Pune. Page + 98 ‘@ (Class) rs Taw Classes, Prof. Pathan’s SP. i HUF Business Point of Distinction - Partnership int 0 s Insolvency ter ceases _to be a Ee Pittect of insolvency Hener of the firm. Tt is a coparceners does not pre ground of dissolution of the - | him continuing to partnership also. members. |_19. Registration Optional Ue Dissolution & “Partners entitled to ask for Member cannot ask for suck Accounts accounts of past profit of the account, can demand assets, “~~ pardtition, 2D. Dissoltion BY act of parties or decree of By filling suit for Partition: Court, a a Sod 3. CASE LAW: Le : 4) Commissioner. of! Income Tax M.P. Vs, Hukumchand: ‘Mannalal and Co. SC 3837 ; When the Karta ofajointHindy family enters into for the j oint family and utilising the jo vi 5) Nanchand Gangaram Va Supreme Court has discuss business and partnership, CONCLUSION. iron Hindu joint family, an associatio business. The Foectation of nun business is created by sige Ly operat fs la A Datinership isa rely be cattied by all or SRE WhO is acting for ath =< Y Operation flay. manofthem, eyBy 7 SP. Law Classes, Pune. " Lawor commer. é pana une. Page : 99 ‘B (Class) 25510256, (Re ic-nesrnsem 5 Discuss the difference between partnership and company 5 (Res) 26333908, | 0758 Introduction : Difference between partnership and company 3 Conclusion. DUCTION - «an artifical person, a corporate body ere 56., Ibis a group of persons associated to ‘ach cd by law and registered under the sve sorhe common obj jectives, with company i ies Act 19 Com nies — , 1 ae ansferable shares, with limited lability, having separate comorat body anda jaidusible nto ra 2 i ae an artificial person created by law. However, 1 DIFFERENCE, BETWEEN PARTNERSHIP AND COMPANY Point of distinction Company Partnership Comes into existence Registration is optional b Registration only after registration and not compulsory. Ithaslegal personality and | -Not a leg Beso is ify. | collection of persons. No 2, “Legal Status separate legal peisonal 3} Minimum no. of persons | TW0- Minimum no: Two company and § - case of public. company. 4- Maximum no. of Public Co.- any member Cannot have mor ethan 10 members % Private Co.- not more carrying, notmore than 50 aa than 50 members members banking ae 1d 20 otherwise 5, Liabili extent of | Jointandseve Bachis, 5: Liability of members Limited to the ¢ “pple aT ebeand i all liability. shares. as are liable fo [ere ee Jo ‘Member can transfer his Partner cannot transfer S&. Transferability : share without consent of .| share_ { | allother io ee LotheLAW OF CONTRACT -II (REVISED) Page : 100 @& (Class) 25510256, (Res) 263 Prof. Pathan’s _S.P. Law Classes, Pune. Point of distinction Company Partnership 7, Contractual capacity 4 8 Length of existence Shareholder can contract with company Perpetual.succession. Partner cannot cont with the firm can be dissolved on de, or retirement. “= ; No Perpetual succesgjg 1 E hg 3, Management Board of Directors who is | The partners themselves elected manage a partnership fing, by shareholders manages ‘ acompany. Shareholder cannot participate in the - : management of company. ‘ a Fhe p Ae Property Property of company partnership is j oint belongs to company. property of partners. | — 2 ; Ea! Hs Authorityofmembers | Shareholder in his to bind the firm by hisact individual capacity cannot 7 bind the company. a - i , CONCLUSION. 4 A Partnership is a relation between the by operation of la Acom Acompany ii pany is registered under the Cy i sa legal person whee ee Companies Act, 1956; then is i “Son whereas partnership ig notalegal verso nes Py operation 1S.P. Law Classes, Panay opsiS:- sim Je Introduction 2. _ Difference between part i a 2 Cage Partnership and co-ownership . a Rangaswami Goundar Vs, ») Champaram Cane Conce 4, Conclusion : |, INTRODUCTION- Co-ownership means j oint ownership of some property, which does not partnership. In partnership the partners are necessarily co-owner: co-ownership the co-owners are not n between the two - . oo Easwarmurthi Goundar and Ors. AIR 1967 Mad. ir . : fad, rn Vs-State of Bihar AIR, 1963, 1737 necessarily result in sof the property of the firm, butin : =e Property ofthe fi ‘arily partners. The following are the Points of differencs eS, 2, DIFFERENCE BETWEEN PARTNERSHIP AND CO-OWNERSHIP Point of difference Partnership Co-ownership 1) Mode of creation tract Itis outcome of Itmay or may not arise out of contract: It may arise by status also. For the existence of the partnership _a business i necessary. (2) Business A co-ownership can exist without business. Every partner has interestin a business of the firm i involves 3) Nature of interest Co-ownership_may not necessarily involve any of. such interest, ‘A partner cannot transfer _ his share to a stranger the consent of other partners. @_Transfer of interest t his Co-owner can transfer share to stranger. are to stranger No more than 10 for banking and notmore. than 20 for. other than banking ©. No. of members Tn co-ownership there is 20 limit on maximumLAW OF CONTRACT-IT (REVISED) Page: 102 @_ (Class) 25510256, (Res) 26 [Prof. Pathan’s _S.P. Law Classes, Pune. Point of difference Partnership Co-ownership © {6) Authority of members A partner is the agent of his co- partners and hence t binds the firm. ‘A co-owner is nota agent of the other ¢,: owner. (2). Partition of property Co-owner can sue sa Partition of the prope, (8) Lien for expenses. 3. CASELAW . ® . Rangaswami Goundai Vs, Court held that co-ownershi Property jointly or in common. To b) can exist without bu: . : ip is a rel: ise out of contract. It siness. A co-owner is not agent of other co-owner. ee Ot other co-owner., }’ A partner has a lien on the Partnership property for expenses incurred by him V such property on behalf of the firm, Easwarmurthi Goun Constitute co- nership arises out of contract and not ‘ome+property, which does not neces r A co-owner has no such lien. dar and Ors. AIR, 1967 Mad. 731. lation, which subsists be tween persons who owl ‘Ownership there is no agreementit thet arise by status also, A'co-ownesbiS.P, Law Classes, Pune. Page 03 @ Ci TYPES OFPARTNERS y Enumerate different types of partners and briefly explain the extent of their liabiitic 7 ir liabilities? NOPSIS: - Je Introduction 2 Different typés of Partners i) Actual or ostensible partner wy) Sleeping or dormant partner 9 Nominal partner Partner in profi ) — Sub partner Fi WY Partner by estoppel or holding out 3 Case law - only a) _ Sugar Syndicate Vs. Commissioner of Income Tax, 1957, b) Mollow, March & Co. Vs. Court of Wards, 4. Conclusion 1, INTRODUCTION- i Anoutsider dealing with a firnyhaye to ascertain in certain cases and particularly when there is adefault by the firm, as to w1 pi Ts are, and to what 1e sa ent they are liable. The definition of Partnership given in S. 4 provides that partnership is a relation between the persons who have agreed ‘share the profit of business. carried on by all or f' them acting for ail. Persons who have énleredinto partnership with one another are called individually partner’ and collectively a firm, ¥ _DIFFERENTTYPES OFPARTNERS: (@) Actual or ostensible partner - ae ; Apperson who becomes a partner by an agreement and is actively engaged in the conduct of the business of the partnership is known as an actual parte ror setingparmes Hei is the agent of the other partners in the ordinary course of the business of the firm. He binds himself and ot ers, $0 far as third parties are concemed, for all the acts, 2 'y course of business and in the name of the firm. ©) Sleeping or dormant partner - A & Aslecping partner is ais who does not take an active part in the conduct of he sis of the firm. He, like other partners, invests capital and shares ne business. He is equally Trable along with other partners for all hee even though his existence is kept secret from the outsiders dealing with the fim, . The position of a sleeping partner is similar to that of an.ndisclosed prineip sleeping partner need not give a public notice of his retirement not Hable for any act of the firm done after his retirement. JF the ue lunatic, he is also called dormant partner. 5 =te 510256, (Re LAWOFCONTRACT-M1(REVISED) a FOES Tay s, Pune. Prof. Pathan’s._S.P. Law Classes, = (Nominal partner - .c to the firm, without having any real interest in it, is cay, A partner who lend ni ee bi iness of the firm, nor does este a nominal panier Me ir tne management ofthe business of the firm, BATT ze in a en poweeoion they rots ortake} ant in to th iders for all the debts ofthe firm, ; ; with othey parr eTS be disting is eping partner. A nominal partne;; . t be distingt ng par . Darter Noa ord seapariner in the firm, but he does snot share in the profits Of the Are A Gheping partner, on the other hand, is one whose name does NOt Appear ES he at ati ches in the profits ofthe business. Both are however, liable foral world, in the pro ‘the | s actgof the firm. ar Partner in-pr.ofits only - : ® Sometimes partner may agree that a partner shall get a share of the profits only and tha he shall not be liable to Contribute towards the losses. Such a partner is knowng, Partnerin profit only. But he is liable for all the debts of the firm against third paris (© Sub-partner-— the firm nor he is liable for the act of the firm, (Q- Partner by estoppel or holding out- = Sometimes ap n Who is nota partner ina firm may, Hable for its debts as ithe were a partner. Such a partn orholding out. . under certain circumstances, be er is called aparmer by estoppel SONDITIONS FOR LIABILITY ON THE GROUND OF HOLDING our- In order to render a person liable as a Partner on the ground of estoppel or holding out - (@~_ he must have, by words spo Sand 10 deals with the absolute duties ofthe partners, which c annot be changed by agreeme between the partners, where as'all other isions, can be changed & the rights & duties ca, varied by the consent of all the = partners. The basic 2 that partners are free to settle the voluntary agreement (S, 11) LAW OF CONTRACT -11(REVISED) e ~ fairness in all dealings in relation to partnership affair Prof. Pathan’s _ S.P. Law Classes, Pune. Page : 110 ‘@ (Class) 25510256, (Res) 2633390) SOME OF THE IMPORTANT DUTIES OF THE PAR [NERS AREAS UNDER- fo work for the greatest common advantage, A partner is expecta his knowledge, skill idual gain, He should not retain for himse s0 not to acquire a title to the property of the firm secretly. tobe just and faithful- wane ee ip of the partner with one another is fiduciary, so evtey partner : are it is dealing with the other partners. He is required to observe utmost good faith ar, and fin ee Similarly, he must not make fisg nother by'concealment of material facts, the benefit of partnetship business g ifany benefit arising form the Partnership Tepreseniations nor deceive oni to render true account = | Every partner is bound to render true, proper and-correct account. It is duty ofa Partners disclose all the facts affecting the affairs of the firm, Rendering an account means explaining the account, giving full information about them and producing vouchers in support of te entries. He should also permit the other patiners to inspect such accounts. ‘o provide full information = Itis daty of one partner towards another to give fall information ofall things affecting the firm, This duty to render full information extends to all Kinds of transactions. Each and every partner is under this duty to make a full and complete disclosure of All material facts relating to partnerst ip affairs. ae to pay indemnity - §. s : Every partner shall indemnity the firm for any loss caused to it by his fraud in the conductof the business of the firm. The partner shali be liable if i) he has been guilty of fraud if) the fraud [3s committed in the conduct of the business ofthe firm. ii) the firm should have suffered losses on account of fraud ofthe pariner.. Sones [See the case law (a)] i duty not to carry on business - S, 11(2) - Solongas he isa partner, he shall not. catty on any business other than of the firm, An agreement to that effect that the partner shall not carry o: $ 1 tha during the continuance of partnership is not void nr See partnership is not void under . 27 of Indi act Act, [Please ation FIndian Contract Act, [Pleas to attend diligently - $, 12 (b) - Every partner is bound to attend diligently to his duties, ho remuneration S. 13 (a) = rae Subject to any contract to the contrary, a i i Pn , 4 partner is i ic taking partie oes om 2. par Rot entitled to receive remuneration ft (i). wheréapariner willfully neg lects busi ' a. aang emealets busines nd the other has to put inextra laboured oti) where the surviving partner carties onb sinegs; Gil) where itis equitable to all ' 0 share losses S.13(b)- Contractto the contrary, partners are ; are bound to pay are to Be Shared'in the Same proportion j nite nel is shar "ay Ai the share in any propor ie tion they like, to share the I sss, Cy Uke, to share the losseLAWOP CONTRACT -It(@REVISED) ee WY willful neglect means the omission to perform.a duty when se B, “ 4) fail to do something which Fainan's_ SF Law Glasses, Pune, Pages 111 eae vo pay indemnity for willful neglect 8. 13(0: 10256, (Res) 26333908, ething wh ¢ ought not to do; or h he ought to have done. : for any loss caused to it by willful neglect in conduct of partner does som ‘Apartner shall indemnify the fi pusiness of the firm. to use the property for the firm S. 15: annot use the partnership property, dire i i : such properties belong es eS a a See Or indirectly forhis own benefit becaus However, if he does use, he is bound to account for the i words, he must account for the advantages ‘gained from anny Se aie wonny damage to of depreciation ofthe property done bys Trace oy “ to account for secret profit S. 16(a): = Ifa partner derives any profit for himself fro the property or business connection of the firm, { & pay it to the firm. : Apartner ¢ 1m any transaction of the firm or from the use of or the firm may, he shall account for the benefit & pa} no private profit S. 16(b): es on airy competing business ofthe firm or setup ari al business without the Ifapartner carr consent or knowledge of co-pariners, he shall account for pay to the firm al profits made byhimin that business. But he is not bound when the business 88 rnon-competing one. to act within authority S. 19: : Every partner is bound to act within the scope ofhis authority, Where he exceeds and the firm. n suffers a loss.as a consequence, hie shall have to compensate th jis authority frm for any such loss. liability joint & several S. 25: y Apartner is liable, j ointly with all other partners nls several forall an of Em done while he is a partner. i : hird person so as to not to assign his right S. 29: No partner can assign oF transfer his right ons0 a8 make him a partner. Where sic jgnment is made, it WILD good ground he of the firm. He can, however, assign his share ind his share in the 2SSS>— firm. interest in the firm to.anyt CASE LAW: - : mn 8) InNavinchandra Jethabhai Moolchand Sadaramt Gindodiya, i Be pee it was held by the Courtthat the partner committing fraud inthe a Me of di , of the firm, therefore, must ‘make good the loss sustained by ie : i y eae and the amount so brought in the partnership should be divided be ae cae B= Loch Vs. Lynam 185410 this case there Were fiancee "ment. Subsequently, it 1S Tound out! at 90ST ei meat to the governme! fi erson in supplyin: of meat to the same gov" with third p pp! account to the firm for the stamens2 LAW OF CONTRACT-II(REVISED) rT @ (Class) 25510256, I) ~ Page ) [Prof Pathan’s SP. Law Classes, Pune. . . b= aes d 10 i.e. every partner to ‘ ae duties, which are given in So ae acobtinen Wo > for greatest common advantage, to be just and faithful, sfeement between the parties, information, to pay indemnity etc. that cannot be vatied by ag cong themselves by agreement The pariners are at liberty to vary the rights and ae Ser ore co-related to eachare subj ect to.the provisions of this Act. The rights and duties of the p: athe and therefore'not absolute in n LIABILITY OF PARTNERS TO OUTSIDERS Om. Discuss the liabilities of the partners? SYNOPSIS: - LL hitroduction é Partners liability for the act of the firm. Liability of the firm for wrongful act of the partner Liability of the firm for misapplication by partner. Liabilities of a partners on dissolution of the firm Case law . Conclusion NAY’A WN 1. INTRODUCTION: - 7 S. 25 to 27 deals with the question of, partner’s liability = a) for.contract b) fortort,and c) for misappropriation by a partner. The partner’s liabilities can be grouped thus - Boe Sine D. Partners liability for the act of the fitm;~ 8.25 2)- Liability of the firm for wrongful act of the partner $.26; 3). Liability ofa firm for misappropriation by partner §.27, 2 LIABILITY OFA PARTNER FOR THEACT OFTHE FIRM- “Every partner is liable, jointly with ners firm, done while he is a partner.” . ae This section lays down the rule that ever i unlimited extent for all debts to third parties, Thus each at ae Whole debt: For every act of the firm, a pai partners, The liability that the partner incurs is for the acts pontoon f the firm dk ri not for liability Secured SEF Re Ris ceased 6 Be aparner While t ee Cease 10 be a part ther pariners & also severally for al the acts oft“a Foinan’s ‘S.P. Law Classes, Pune. Page : 113 LAWOFCoNTRACT-tt«REMIseD) f. za fe TABILITY OF THE FIRM FOR WRONGFUL AC (Class) 25510256, (Rea) TTT. = TOF ‘The firm is liable for the wrongful acts ofa partner in theoninmeee e : \e business ofa 5.26, reads as “Where by the wrongful act or omission of a partner actin in the ordii i zane Ordinary course ies ines oF a fc or wth the authority as.apariner os or nj df fad d the firm is li 22 patiner f08s or ry is caused to any third. is incurred the firm is liabl » any third party or enalty ist e fir ierefore to the some extent as the partners,” she oy ncurree ac 2 re to the partners are liable for the wrongs of each of the partner committ ; pe business but tlie same act must have been ; ited in the ordinary course of done by him in the ordinary course of the business of the firm: or ee? the artners; or ratified by all other partner Similarly, the firm is liable the firm. eo as partner commit fraud in otdinary course of business of LIABILITY OF FIRM FOR MISAPPLICATION BY PARTNERS -S.27- 4 SS i > Where a) a partner acting within his apparent authority received money or property form a third parties & misapplies it or 4} afirmin the course of business receives money or property is misapplied by any ofthe partners while it is in custody of the firm, or by the firm, the firm is liable to make good the loss. $. 27(a) requires that i) partner acting within his apparent authority ii) receives money or property from a third party & iii) misapplies it $.27(b) requires that - i}. where the firm receives money or property froma| third party ii). the money or property is misapplie a Jil) by any of the parties ) where itis in custody of the firm. 9 LIABILITIES OFA PARTNERS. ONDISSOLULIONOETHEEIRMS45- After dissolution of the firm a public notice must be given ofthe aissolution ines ele absolve the liability of the partners for any act done alter C= io ne act such notice is given, the partners continue to be Liable as such to third parties for any 20 liable for the foll wing done b eer ation, However, the partners are not able EE O°" acs he a eion J notive of the same is given @ dissolution of the firm even m 2) the estate ofa deceased partner, b) i vent partner, ‘ ) _theinsalve who retires ee c) the sleeping g or dormant partners 6 tet ik CASE LAW: - ; 4) Begel Vs. Miller 1903 King Bench apatner In this : i ase of a deceased P . The principle of holding out does not es i = lied pen one of partners .d by a firm were P case when goods ordered by Tne decease is n0t tiable had died, Held, that the estate o oeLAW OF CONTRACT. (REVISED) raed (Chass) 25510256, (Res) 263 (Prof. Pathan’s _S.P. Law Classes, Pune. age t * & Co. AIR 1982 Bom.288 8) Nilkanth Balappa Mangave Shop Vs. M/s. Raj partner is joint and severg, The Bombay High Court held that the liability of anne i rorall ort Consequently, the creditor of a firm may sue anyone together. 5 INCLUSION: - HeRS , The lability oF rartner to outsider above discussed shows thatthe liabil ies are grouped sider of contract, tort or for in three categories. The partner's [ability to outsiders arises out of meee orf misappropriation by a partner. PROPERTY OF THE FIRM SYNOPSIS:- 1. Introduction 2. Definition of property of the firm 3.-° Illustrations ee . 4. Application of the property of firm 5. Goodwill is part of property of the firm 6. Caselaw : 7. . Conclusion : 1. INTRODUCTION:- : “Property of the firm’, ‘partnership assets’ or ‘joint estate” denotes all property, rights and interests to which the firm i.e. all the partners collectively may be entitled. It is considered as apart of the asset of the firm. In a joint éstate of pa inership fi ngs to the firm and noe aet Separately owns any property. Itmay thus consist of eash, immovable pra erty, goods, fade aris : ash, Immo ', Boods, trade marks, goodwill, ef. ~~=o-° Property, goods, trade marks 2- DEFINITION OF PROPERTY: OFTHE FIRM :- S. 14 ofthe Partnership Act defines thus: “Subject to contract be fs re tween the pa ofa firm includes all property and rights and interests in Property Finally bro EE the firm, OF aequited, by purchase or otherwise, by of fore foe OF for te nto the sto Course ofthe business ofthe frm, and includes also the poodsa he busing tie ens CSS, Unless the contrary intention appears, pro erty, rights and interes eA it i a Is iterests i irm. 3. ILLUSTRATIONS; : E a) A and B are partners. 4, without any authority of B buys som. le shares in hi ame but withthe mioneys and on account of the firms, The shares are partatig ope a te,cL 4 & oe _S.P. Law Classes, Pune, - LaWoF CONTRACT. Cpatnans ‘une, Page : 115 ‘®@ (Class) 25510256, Re ‘WREVISED) Aand B are partners. A buys a piece of land with (Res) 26333908, ] » _ghus, partnership property, include @ (i) (ii) property acqu dit (v) artnership monies for Thereafter, A debit himself in the firm books and becomes a debt. his sole benefit. lor amount of the purchase money. The landis not p tor to the firm for the ; F artnershi clearly a contrary intention, roperty, because there was A, Band C are partners, The partners buy a property in the name ofa factitious person with the-mor f the ership. The legal and equi 7 “ passes to-all the three partners. quitable interest in the property property originally brought into the partnership stock and the interest on such i property acquired sequent to the formation; i sd in the Course of the partnership business; the goodwi 1 of the firm. ‘ i The definition of the-term ‘property’ in the above section is not exhaustive. The word used in the section is ‘i ” Thus, other. items may also be included in the term ‘partnership property’, for e.g., a debt due to the firm. In short, whatever at the co ofa partnership is thrown into the common stock, and whatever has from time to,time during the continuance of the partnership been added thereto or obtained by means thereof, whether directly by purchase or subsequently by employment in trade, belongs to the firm, unless the’ 2 contrary intention can be shown. y APPLICATION OF THE PROPERTY OF THE FIRM ~ S.15 in this regard provide: “Subj ect to contract between the partners, the property ofthe frm Sualbeheld and used by the partners exclusively for the purpose of the business.” The word, “exclusively” would indicate that such property is not to be used fora purpose other ‘tan that of partnership b Willbe Hable to account to the firm for the pr erisnorule tat whatever is brought by a partner ina ndisco “eubersis presumed to have become the property of the partnership. It will Petner shows an intention [See the case (a)] iness. Ifa partner uses the property of the firm for his own purposes, he ifany, that he may make. It should be noted that a partnershi and is continued to be used by the = become so only ifthe make it so., * a GOODWILLIS PART OF PROPERTY OF THE FIRM: ~ aly Sl or, Goody .RT OF PROPER ak Will has not been defined in the Act. Itis commercial ee goodwill means the advantage which is acquired by a the mere value ¢ st 7 pence of the g Meo, “sete, Which it receives from constant o 1€ goodwill of the business of a firm forms part a i ect to ae i i iwill shall, subject Aetacts: “tn settling the azcounts of a firm after dissolution, the goodwill shall, subj ect between the partners, be included in the assets of the ‘2gwith other property of the firm.” al i rather than a legal term. Gen} pusiness, beyond the mere value of reper Pr i and tock, fund or property employed therein in consequence of the general public patronage an habitual customs, ofthe property ofthe firm and therefore, S. firm, and it may be soldeither. separatelyLAW OF CONTRACT-II (REVISED) . [Prof Pathan’s. S.P. Law Classes, Pune. Page : 116 @ (Class) 25510256, (Res) 2633399 In the absence of a provision expressly made or clearly implied the normal ul ofapartner in the assets devolves upon his legal representatives will apply to the to other assets, [See the case (b)] 6) CASELAW:- ' a) Noor Mohd. Vs. Gh. Qadir Mir 1983 - : Jammu and Kashmir High Court held that there is no rule that whatever is brought by partner in a partnership and is continued to be used by the partners is presumed to hay, becoine property of the partnership. It will become so only if the partner shows an intention to make it so. . there should be an emergency; i b.. power should have been exercised to protect the firm from loss threatened by emergency; . €+ the act must be reasonable in the circumstances, 7. CASELAW:- . a) —_S.N. Soni Vs, Taufiq Farooki, 1976 | Delhi High Court in this case held that all the partners of a firm can: ratify an act ofa partner, which has been done by him in exercise of the implied authority or without any authority, provided the act is such as could be legally done with the authority ofall the partners previously given and that the partners ratify the act with full knowledge of the facts, b) H.Manjunatha Vs, Ullal. Dayanand Nayak AIR, 1984 Kar. 55. ’. After the dissolution of the firm, the partner taking over the business signed the invoices for the goods sent to an old customer as the Proprietor by scoring out the word ‘partner’, It was held that the other membersiof the dissolved firm Were not liable for such ‘subsequent transactions. 8. CONCLUSION: - The authority of the partner means an act agent of the firm for the purposes of the busines ovided, he does the act for carrying on, in the usual way, business of the kind carrie and the act is done in the name ofthe fin. The authority of the partner may be express or implied, The implied authority of the parin be misused and hence there are certain restrictions on the implied authorities of tt ater Th Partner is given authority in an emergency Provided the act done to Protect the firm from the loss ney provid , rotect from the loss nthe cmeumstances,, it binds the firm, Every partneris the threatened by the emergency and the act must be reasonable;F 6 Lisi ClastouFuliey _Page ¢ 131 @ (Classy ee . 2: fr FE RELATING TO MINORS ADMITTED TO TIE BENEFTTS OF PARTNERSHIP -RSHIP na Minor be admitted to a partnership? If so what are his ri; i cir a minor become a partner. Explain the rights & iiabtider et and liabilities. ty short Notes. . of a minor in a firm. 00 Position of minor 2. Minor ’s position under the Partnership Act 3.» Minor asa partner {Minor partner g¢) Diowss he right of minor under the la of partnership. sINOPSIS:~ 1, _ Introduction x 3. Admission of minor for the benefit of partnership 3. Rights of minor whee . 4, .. Duties of minor $, Position. of minor on attaining ‘majority. a) minor elects to become a partner b) minor does not elect to become partner 6. - Case law i 7. _. Conclusion. 1, “INTRODUCTION: - . Partnership is a contract as per S.40f Indian Partnership Act, 1932. A contract of, partnership naybe entered nto by every person who is competent {0 ent Tnto the contract. According to S.11 stkelndan Contmuct Aet, 1872, every person is competent fo contract, Whois of the age of majority, ist ‘d from contracting by any law. jen enemy, insolvent cannot ener into contact ficiary inthe > partnership. E RTNERSHIP: - 1Lof Indian Contract Act and S. whois dfsound mind and is not disquali F Therefore ‘a minor, a person of unso Ratnership. Buta minor can be admi dL ADMISSION OF MINOR FOR THE BENE Aminor i ‘ontract ws. ae is not competent person to enter into ac a of Indian Maj ority Act, and therefore as he ;s not a competent person, he cannot become s Teteerina firm and eannot create the relationship, ot parersip. Te partnership secon ’ of 4 nP p Act provides the existence ofvali "Y definition i i n of partnership given ws. 4 of Indian ship Act| " igen. A minor thus cannot be a partner but can be admitted to the benefit of artnership, already ‘Stistence, ene i ong i f the partnership fim, AS Principle of agency is one of the essential elements for the cxistenct sisof inerstip aay minor cannot bea pariner thou Jha minor may beadmited tone ts of partners tn existence. rm, The Act provided. that Ami i . 7 isting fi athe minor thus, can be admitted to the benefit ofan ale onsen of not of pares Partners of the partnership firm agree To admit him. Wout E ldnot be sufficiers but the consent of all the partners is necess® Peed a.LAW OF CONTRACT -I1(REVIsED) [Prof Pathans S.P. Law Classes, Pune, Page 2 122 BE (Class) 25510256, Res) 265ypy - i nuld enjoy ifhe Benefit of partnership” includes the benefits, which the minor would Werey major. In partnership the pariners are liable jointly and severally, which means every partner gj 4 ly and severall ile sonate Jointly and severally .¢. all are liable for the whole, forall the gets ofthe Frm, while aotng a Partner. - As he is nota partner, the minoris not personally liable, nor his senatels-brpen ofthe firm be atiached. His lability is only tothe extent of his share in partners aon Thus he can enj oy the fruits without any personal liability, The rights and lil minor partner are Soverned by the rules stated in S. Fthe Act. smned by the rules sta 2s RIGHTS OF MINOR: a to share profit S. 30(2) - The minor has a right to such share of property and of the profits of the firm aS may be ~ agreed upon by the partners, b. to inspect & copy S. 30(2) - The minor may have a inspect and copy any of the accounts ofthe firm, By he is not entitled to have access to all the books maintained by the firm as they might al partners alone. 4 DUTIES OF MINOR:- : al : a Liability for the act of the firm S. 30(1) - Such minor’s share is liable for the act of the fi forany such act. He cannot bead) udge n but minor is not personally liable ent, if the debts of the firm cannot: Satisfied out of the property of‘the firm, b. ~ Nosu accounts S. 30(4) - bg Such minor may not sue the partners for an account or payment of his share of property ts of partnership. or profit of the firm so long as he continues to get the benefi file such a suit only when he wants to severe his con: case, the amount of his share shall be determined by vali in accordance with the rules contained in $. 48 $- No rule of joint and several are applicable to minor like partners - The rule that a partner is Tiable to the debts of the ip jointly'and severallyis cris liable to the debis of the partnershi not applicable to a minor. , aera ‘ation made, as far as possible, 5) POSITION OFMINOR ON ATTAINING MAJORITY: - He has got two-fold choice: - aca i) —_toconfinueasapartner, or if) ‘not io continue as a partner, He ceases fo bea beneficiary and become parineFattersae gee Partner if he elects 10 d0.S0 or he may elect not to be « partner Minor elects fo become a partner: — PTET Atany time within six months of his attaining maj ority or wh ct! Hed phe t knowled; he had been admitted to the benefit OF partnership, whichewss ae oe inet - st shi er is later, such mi may give a publio noice that he has eleted ip become the has elected 01° SERA to become or that he has elected 1 Be ‘ aj ority & continues 5 a.lawor commer t@evse atvan's SP. Law Classes, Pune. Page? 123 ~ os @ (Class) 25510256, (Res) 26333908. ] { become a partner in the firm and such notice sh: all determine his position as regard the firm. Ifwithin the period of six months no public notice is given by him, irrespective of his knowledge he “ipso facto” by the fact itself minor becomes a partner, The burden of proving the absence of knowledge of being a partner will after six months 0 ining maj ority is on him. i Parrecrsers en _Jfa minor elects to become a partner: i) His right & liabilities minor continues upto the date on which he becomes partner but he also become personally lable to third person forall the acts of the firm done since he was admitted to the benefit of partnership, (retrospective effect i.e. date back to his admission) : Hes now j ointly & severally liable. This is in short a confirmation ortatification all such acts, transactions prior to his majority, ~~~ ji) The share in the property & profit of the firm shall be the same share to which he was entitled. as aminor unless varied by the consent ofall the partners,, }) Minor does not elect to become partner: 30 (8)(a) (b) & (©) i) His rights & liabilities shall continue fo be those of minor upto the date on which he gives public notice. S.30 (8) (a) ~ ka sban-ii) — Heis ot liable for any act of the.firm done after the date of notice. $,30 (8) (b) WR LAY iii) He shall be entitled to sue the partners for his share on the property & profits of the firm, $.30.(8) (0). : 6& . CASELAW:- 7 venkat i 4) Shivram v/s Gaurishankar 1961, Itwas held by Bombay High Court that a partnership consisted of all minors or one adult & all other minor is not a'partnership at all. ) Dharam Veer v/s Jagannath 1968, / The Supreme Court held in that'a minor cannot become a full-fledged partner in the existing firm. v ' CONCLUSION: - 1 Coy An agreement by aminoris void-ab-initio, Therefore a minor is incapable of entering into 28 y LAW OF CONTRACT-1I(REVISED) 3) 4) Prof. Pathan’s a) b) c) i) RIGHTS AND DUTIES OF PARTNERAFTER RECONS SE Lav Gases Fn Page 18 @ (Class) 25510256, (Res) 26333909- P. Law Classes, Pune. z aa i but the partners? | (The firm is dissolved on the date, of the order of ad vie finn aber ee a may specifically provi at_on such a contingency the firm shall not be dissolved | | (D- © The estate of the insolvent partner is not liable for the sets of the frm done after the date of the order of adj udication. A public note to the effect that been adj udicated insolvent reds, partner has been adj udicated insolvent is not requir Gii) The firm is also not liable for any act of the insolvent partner after the date of the order of adj udication. ‘Transfer ofa partner’s share.S. aaa A partner may transfer his int in the firm by sale, mortgage or charge. The transfer may absolute or partial. Tt does not, however, entitle the transferee, continuance of the firm- @. to interfere'in the conduct o GW). to require accounts of the firm, Gii)_to inspect the books of the firm. On transfer of interest by a partner, the transferee only becomes entitled to receive the share of profit of the iransferring partner. But in this case also, the transferee has to accept the account of p ed to by the partners, s of the firm, or STITUTION OF THE FIRMS.17; ion of the firm - Subj ect to contract between the constitution ofa firm, the mutual rights and d firm femain the same as they were immediately Where a change occurs in the constitut the partners, where a change occurs in duties of the partners in the reconstitute before the change, as far as may be, After the expiry of the term of the firm - Subject to contract be where a firm constituted for a fixed term Continues to carry on business afier 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 2 partnership-at-will, Where additional undertakings or adventures are carried out - Subj ect to contract between the partners, where a firm consti ‘tween the partners, » ~ Chancery Court in this case he rding ing to the clause in th case B and R were partners in the firm. that B could introduce into partnership ‘Id that a partner cannot prevent! \¢ partnership agreement, Inthis One of the terms of the Partnership deed wasad Fahan's_ SP. Law Classes, Pune, Page 79 @ Classy a — — f ji) Bagel v. Miller, 1903, - King Bench in which M was a sa se 2695908 ordered goods in M's lifetime but delivery was made afte Heese in a firm. The firm that IM estate was not liable for the price in action for goods seta ey te Cout tee was no deb ‘due in respect ofthe goods in M's liteime “ei and delivered as iii) Laxmidas Dayabhai Kabrawala v. Nanabhai i , Hi) "was held by Supreme Court inother words a Rabravla, AIR 1964 1, law relating to the liability ofa surviving partne . ins section lays down the substantive r it a with the legal representatives of the deceased: pater wiles fit dont tae me ; for continuing the business of his own, Sse oftheparineship ivy) MC Sharma v. B.C. Sharma; AIR 1986 All, 69, sought to be continued by all the remaining pai that he cannot claim the benefit of S. 37. ~Itwas however, if the ‘business is not irtners but by only one of them, itis held 5) CONCLUSION: Reconstitution of the firm is nothing buta \ change in the composition, structure of the firm. It ray occur either by introduction, retirement, expulsion, inslvenay death ofa patnsor ee of a share of a partner. A retirement of a partner and introduction of new partner is a voluntary act whereas expulsion insolvency or a death of a partner is involuntary act. A partner may transfer his stare to third person with the consent of all partners and if there is a specific provision to do so in the purteship deed. A transfer of share to third person without the consent of other partners isa ground of dissolution of partnership firm u/s.44 of the Partriership. An ‘insolvency of a partner is also a ground of ‘compulsory dissolution a partnership firm w/s.41. A death of any partner, unless contrary to contract; becomes a ground for dissolution of partnership w/s.42 of the Partnership Act. The rights and liabilities of the partners changes on the reconstitution of the firm. PARTNER BY ESTOPPEL OR HOLDING OUT/ LIABILITY BY HOLDING OUT StNopsis ; Introduction Definition i Conditions for liability on ground of holding out Exception to partner by estoppel Case law : Conclusion OSE SEE INTRODUCTION: . ost inequitable andy, The Doctrine of Estoppel is based upon the principle or easton cause Toss angus ifone person is allowed to spake contra OTS Peo of tus doctrine ito prevent Uy to don such statement, The obj ect 0 pee Coniiemet0 the person who has acted 0} : iso “ninon of Fad against smother, The meaning of Estoppel, Estoppedy LAW OF CONTRACT M1 (REVISED) Canc PORE Page) 130 “@ (Class) 25510256, (Res) 2633359 Prof. Pathan’s _S.P. Law a ae is earlier statement Estoppeyj, i itted to s| si : s not allowed or permitted to speal o his earlier statement Bev wan met estar by which a person is held bound by representation, made by him of arising out of e ” a . cones i jay be under circumstances, be liable. Sometimes a person who is nota partner in Hemme Oe 1 opel ot holding one its debt, as if he were a partner. Such a partner is called as partne! holding out DEFINITION: on or by conduct represents himself, or kno ; Wingh y v) ords spoken or writtet cuct i ee ey vcunted to bes partner inthe fim, is liable as a partner in that ese’ permits his: presen th he faith of any such representation, given credit to the firm. Whether the persy 7 ited to be a partner does or does not know that the Tepresentationta, 8 (1); 3+ CONDITIONS FOR LIABILITY ON GROUND OF HOLDING OUT: To hold person as a partner by holding out, itis necessary to establish the following: he must have, by words spoken or written or by his conduct represented himselftobe a pariner.e. active representation; be be he must have knowingly, ed himself to be represented as a partner to the otke person i.e. tacit represent nd, the other person must have acted upon the faith of such representation and given cred to the firm, It may be noted that, where a retiring partner does not give a public notice oft Tetirement and the continuing partners ill use his name as a partner on letter headand the bills, etc., he will be personally liable on the ground of holding out, to third paris: Who give credit to the firm on the faith that he is still a partner, But where after a pariner’s death, the business of the : firm continued in the old named! the firm, the continued use of that name of deceased partner’s name of a part there! his estate liable for any act of t one who has reached the person so giving cre ‘i does not of itself, make his legal repres firm done after the death, be EXCEPTION TO PARTNER, BY ESTOPPEL: & The Doctrine of holding out is not applicable in case of death of the partner is dead, the firm is dis e solved and estoppel not b- The doctrine holding out is not a Y. W ipplicable to liability for civ’ ne partner. Wheng! S.28(2) 5. CASELAW: a) Privy Council, Calcutta in Sara Vs, Gopal Chander 1893, discussed the doctti®™ Pern rby By agreement - 5,40 4+ — Compulsory dissolution - SAL ‘er On happening of certain contingency - S.42 dp Bynotice - $.43 in Distotition with intervention of Court - S44 @ ‘Insanity Permanent incapacity Misconduct @. Breaches of agreement Transfer of whole interest - Business carried on at a loss “gr Any other grounds i 6&- Case law Conclusion : we fe SERGE= LAW OF CONTRACT -II (REVISED) jain (Gass) TSO, Ray RR Prof. Pathan’s _ S.P, Law Classes, Pune. . INTRODUCTION: He ; ‘Dissolution of the firm’ means the cessation of jural relationship amongst all the Partners o a firm. A firmis not said to be dissolved by the fact of one or more members ceasing Hobe panne i it while others continue to remain in the firm, but only where all and every one of the embers ofthe ¢ firm : 7 The tt firin cease fo carry on its business in partnership, the firm is said to be dissolved. Thus, itimplies jy, complete breakdown of the rel 1 of partnership between alll the partne 2... DISSOLUTION OF FIRM: . . . . * It means complete breakdown or extinction of the relation: ship of partnership between a the partners ofa firm. If this breakdown rance of partnership relation is between a few rand, all the partners, and the business , this amounts to dissolution of partnership a not of the firm. 3, DISSOLUTION OFPARTNERSHIP: / ~~ Itinvolves only a change in the relation ofthe partners. For example, if there isa partners tw end and partnership between 4, Band C and Cretires, the partnership between 4, B and C come between A and B comes into being, S. 39 states - “The dissolution of partnership betwe ‘sof a firm is called the dissolution of the firm.” . Dissolution is the process whereby the life of partnership or firm comes to an end, The relationship amongst all the partners of the firm ceases to exist, tis the complete breakdown ofthe relation o, partnership between all the partners. In case of dissolution of the firm, the business ofthe firm is closed. Mt part 4 DISSOLUTION WITHOUT THE INTERVENTION! OFTHE COURT: By agreement - S. 40 - A firm may be dissolved with the cor contract between the partners. As per this @. with the'consent ofall the partners; (ii). in accordance with the contract between the parties, , 2 all the partners or in accordance with ion a firm may be dissolyed - Asa partnership is created by agreement, so also itcan be dissolved by all the parines agreeing to dissolve. rn The contract for the dissolution ofthe firm may be expressed or implied. The conse#! required for dissolution should be the consent of all the partners. In fact, majort¥! the partners have no po to dissolve th hes of the maj ois WY By compulsory dissolution (S. 41) - a i S. 41 provides “A firm i: lissolved - @ by the adj udication ofall the partners or ofall the partners but oneas insole! or ut one as 15 : By the happening ofany event which makes it unlawful for the business off ‘rm to be carried on or for the partner to carry iton in parinesshiy aloa g LAW OF CONTRACT-H REVISED) @ (Class) 25510256, (Res) 26333908, the firm, the illegalit ‘Patate adventure or undertakit - Ly Of one o1 4 lertaking is carried firm in respect of its law fil acy el BOt Of itself cause the dissolution oft te D Insolvency: In case of insolvency 0} might be continued wil ss there is Contract in? ith the other part oe fiem Ie follows that Fall the pane tee es Heres contacto thecontary = id'Geolare eal the partners are adj udged insolvent or Tal betes eae insolvent, the firm ceases to exist for the fi sate east two persons as partner, TT , ~ ee Nnust consist ofa Ji) Business Deco illegal (unlawful) In case of the busine ess of the pee Partnership is prohibited by law or becomes illegal, the Partnership is dissolved or ifthe partners become alien enemy due to declaration of war, On happening of certain contingencies (S. 42) - ; A firm may be automatical n hay i H can make the contintis i tary ofestainevens,Buttheparters a On expiry of th : If the firm is constituted for certain, specific period, then partnership ‘ipso facto’ comes to an end on the expiry 0 pity of the period. , by) On compl ti n yr undertaking: Ifa partnership is constituted for a specific undertaking or adventure then on the completion or fulfillment of such adventure or undertaking the firm ‘ipsa facto’ is dissolved. <9) By death of a partner: Unless contraryio contract, the death of a partner becomes a ground for dis n of partnership. @) Partner declare¢ |. These rules are applicable where there is no contract ip agreemen ide that the partnership is dissolve to the contrary. In other words, the partnership agreement may will not above-mentioned case. firm will not be dissolved in any of the above-ment DQ Bynotice: (8. 43)- ; ip ii i iy yed by any partner i. ‘Where the partnership is at will the firm ma be dissolve et: Be — giving notice in writing to all other partners of this intention t the firm. a ‘Tho firm is dissolved as from the date mentioned in the notice-as the i date is so mentioned as from the date of date of dissolution or if'no * communication of notice. Voluntary dissolution : Wears ip ill, the firm ma is ae ahd pee of his intention to dissolve the firm. in writing to all the partners of his 17 riod Requirement of valid notice for dissolution service of notice; 5 i coerced . i Gi} such notice must be in writ sive the HAF a ii). i i ion to dissolvé tice or notice in (i)- it should express an intenti se Tn. An or 10 cores Such notes maa 1 not be sufficient. Once a notice isgiven, tcannot ill ' Writing so only some of ets ‘consented to such withdrawal. jess al be withdrawn unl iving notice be dissolved by any partner, givingLAWOF CONTRACT-T(REVISED) Tinsses, Pune, _ Page + 134 @ (Class) 25510256, (Res) 2653350m) [Prot Pathan's SP Law Classes, OFCOURT-S.44: <5 DISSOLUTION SOE E ee TE cour at the suit ofa partner provided that condition y The partnership may eacl pariner io seck the assistance ofthe court, to have partner see grounds speciid inthe section. Total diseretionary power under ths econ, Bi cinercan fila suit and court may dissolve the f ge Insanity: S. 44 (a) - Insanity or lunacy “ips bringing a suit f contract it may va 8.44 (b) Incapacity : S.44 (B) - - resorts a permanently incapacitated then other partner may file asuitin court for dissolution, However, the incapacity must be permanent in nature, Howeve, if'a partner is imprisoned for a long time, the court may dissolve the firm, Similay when one partner becomes blind or paralytic and thereby permanently incapacitated, the other partners may seek dissolution, In Whitwell v, Arthur, 1865, a partner was attacked with paralysis, which on medical evidence was found to be curable, Hence, dissolution was not granted. & Misconduct : S. 44.(c) - It provides “that a partner, other than the partner suing, is guilty of conduct whichis prej udicia arrying on of the business, regard being had to the onany of the follo ing grounds. 0 facto’ does not dissolve the firm but it is sufficient ground fo, ound fy ‘olution of the firm. A partner must be capable of entering inig missible fo carry on business, when one partner becomes, cS Ifa pariner is guilty of which is likely to affect the business of partnership, then the innocent partner can file a suit for dissolution Partnership. The misconduct onthe Part of partner should be connected with the part nership business, , Itis not necessary that misconduct on the part of ssary th the partner should be conneoted with the partnership business. [See case law (c) & (d)] Breaches of agreement : $.44 (d) - Itprovides “that a partner, other thai breach of agreements relatin, to conduct of its business, or business that it is n business in partnership ‘ F i ve been he ‘ ie re aa to be sufficient round for directing dissolution - *clusal or neglect to attend to the business: b). neglect to account; mains, taking aw. ay of partnership books;, 8) continucd quarrel i : arreting without any hope of reconciliation: 3 4 Partners making up a false Balance shesterspone ost et or keeps erroneou: : is Partner is guilty of conduct, whi ind = ‘ NC] a ing; ~ But, dissolution will not boo. ale austen quarrel between pang ree weet on ground of mere incomnpal By i ity of tamper or: occas ; * in the partner suing, willfully or persistently commits the management of the affairs of the firm orl otherwise so conducts hiniself in matters relating to Sonably practicable for the other partners to carry oa thLAW OF CONTRACT-II(REVISEM) ‘S.P. Law Classes, Pune. ‘@ (Class) 25510256, (Res) 26333908 SE aw che Page : 135 1 of whole interest : §. 44 When a partn ‘as in any ; i ‘hen a partner has in any way transferred the whole of his i ir ae Ble le of his interest in the firm to the or under execution of decre ob ihe recovery of arrears of land are revenue due by the partner, then other partner can sue for dissolution. Only the trans ire i olution. sfer of entire i Gane ceniei Saini tcon heres of a partner gives ground for action. Every partnership exists for the sake of gait on save ata low, or the Taian Of he common end, SIRS See ane ee partnership was formed, becomes impossible, or there is no reas view 10 which the eaming the profit, in all such cases, iso reasonable likelihood of continuance of the business is not adv Op, because the g Any other grounds : S.44 (g) - © The jurisdiction under this clause is ve partnership in the interest of all.cone the Court to dissolve the partnership. & ide. This enables the court to dissolve the ed. To meet such situation S. 44(g) empowers & CASELAW: 2) Babulal v. Kanhaiya Lal, 1953, Court held that want of co-operation or mutual confidence and chronic dispute between the partners is j ust and equitable ground for the dissolution of partnership firm. b) Hasham v: Nariman, 1924, Bombay High Court held that state of tensed feelings between partners would entitle: a Court to order dissolution under this clause. ©) Abbot v. Crump, 1870, A and B were:partriers in the firm. A had adulterous relation with B's wife. Court held that it is sufficient ground for the compulsory oe of ely t0 the firm. The conduct of A, though.not committed in the actual business, is li effect prej udicially the carrying on the business so far as and Bare concerned, because this destroys mutual confidence. “3 : 8 Carmichael v. Evans, 1904, when there Wer two partners ofasolicitor farm, ne 7 found traveling without ticket and with intent to commit a acai was : " ate it Since the conviction was for the dishonesty, it washeld that itis likely t0 De tothe partnership business and the dissolution was granted. ' ; 1 is called the, “dissolution of CONCLUSION: C ION: . 4 artners of SS nership between all The dissolution of partnership between allthe oetationship of partnership between 2 the the fine ion of t gm’. Tt i ‘edown or extinction © ; ce, by the order of the is complete breal be voluntary oF involuntary Le. Tine firm. Tatiners of the firme: Dissolution of the firmmay DCT ig wound up the business of ®utL On dissolution of the partnership firm Pasine