relation of partners

8/4/2019 Relation of Partners

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4/14/12

Ravi chouhan

215111061

PROPERTY OF THE FIRM(Sec. 14)


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It is up to the partners of the firm todetermine by agreement that what shall bethe property of the firm and what shall be the

separate property of one or more of thepartners.

If there is no express agreement then

the source from which the property was


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In the absence of the contract -

1. All property originally brought into the common stockof the firm.

2. All rights or interest in the property, so brought.

3. All property acquired for or by the firm and all rightsand interest in any property so acquired.

4. All property acquired for the purpose of the business of

the firm and all rights and interest in any property soacquired.

5. Goodwill of the business of the firm(Sec. 14 para 1).


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GOODWILL

Property of a firm includes the goodwill of the business(Sec. 14).

Goodwill is the value of reputation and connection which

the firm establishes over time due to its integrity, efficientservice to the customers, quality of its products etc.

Goodwill is also the sap and life of the business, withoutwhich the business would yield little or no fruit.


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Agreement between partners in restraint of trade

According to Section 27, every agreement by whichanyone is restrained from exercising, a lawful profession,trade or business of any kind, void.

But the partners of a firm may agree that a partner shallnot carry on any business other than that of the firm whilehe is a partner[Sec. 11 (2)].

If a partner carries on any business of same nature,competing with that of the firm, he has to account for and

pay to the firm all profits made by him in that business.


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Exceptions to the general rule -

A partner shall not carry on any business other thanthat of the firm while he is a partner[Sec. 11(2)].

An outgoing partner may agree with his partners not to

carry on a business similar to that of the firm within aspecified period or within specified locallimits[Sec.36(2)].

Upon anticipation of the dissolution of the firm,

partners may make an agreement that some or all ofthem will not carry on a business similar to that of thefirm within a specified period or within specified locallimits(Sec.54).


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Exceptions to the general rule (cont.)

Where the goodwill of the firm is sold afterdissolution, a partner may carry on a businesscompeting with that of the buyer and he may

advertise such business.

Upon the sale of the goodwill of the firm, any

partner may make an agreement with the buyer thatsuch partner will not carry on any business similarto that of the firm within a specified period orspecified local limits[ Sec. 55(3)].


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RELATION OF PARTNERS TOTHIRD PARTIES


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Implied authority of a partner

May be Express authority.

May be Implied authority.1. The act done must relate to the usual business

of the firm.

2. The act must be such as is done within thescope of the business of the firm in the usualway.

3. The act must be done in the name of the firm.


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Acts within the implied authority of a partner:

Purchasing goods (in which the firm deals).

Selling the goods of the firm.

Receiving payments of the debts due to the firm.

Settling accounts with the persons dealing with the firm.

Engaging servants for the partnership business.

Borrowing money on the credit of the firm.

Drawing, accepting, and indorsing bills in the name of the firm.

Pledging any goods of the firm for the purpose of borrowing


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The implied authority does not empower a partner 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 any claim or portion of a claim by the firm.

Withdraw a suit on behalf of the firm.

Admit any liability in a suit or proceeding against the firm.

Acquire immovable property on behalf of the firm.

Transfer immovable property belonging to the firm.


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Partners authority in an emergency (Sec. 21)

1. They are done to protect the firm from loss.

1. The partner acts as a prudent person would actunder similar circumstances in his own case.


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Implied authority and third parties

1. Extension and restriction of a partners implied

authority(Sec. 20).

2. Effect of admission by a partner (Sec. 23).

3. Effect of notice to an acting partner (Sec. 24).

4. Liability of a partner for acts of the firm (Sec. 25).

5. Liability of the firm for the wrongful acts of a

partner (Sec. 26).

relation of partners

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