Rights and Obligations of a Partner – My Study App – 2024 Best Study

Rights and Obligations of a Partner – My Study App, latest study online about partnership study in business study, my study about relations of partners to third parties on My Study App. 

Rights and Obligations of a Partner – My Study App

1. Every partner has a right to take part in the conduct and management of the business.

2. Every partner has a right to be consulted before taking important decisions. The decisions should be taken by mutual consent. If the decisions are unimportant, then they can be enforced by majority, but consensus of all partners is necessary for taking important decisions.

3. The partners have a right to inspect books of accounts.

4. Every partner will have an equal share in profits, unless otherwise mentioned, in partnership deed.

5. No new partner can be admitted into partnership without the consent of all partners.

6. Every partner has a right to receive interest at the rate of 6% per annum on the excess money supplied over his capital.

7. Every partner has a right to be indemnified by the firm in respect of expenses incurred or losses suffered for the normal conduct of the business.

8. A partner has a right to get the firm dissolved under appropriate circumstances.

9. The property of the firm shall be held and used exclusively for the purpose of the business.

Obligations of a Partner

1. Every partner should carry on the business to the greatest common advantage. He must perform his duties honestly and diligently.

2. A partner is not entitled to get remuneration for the conduct of business, unless otherwise it is specially mentioned in the partnership deed.

3. A partner must indemnify the firm for loss suffered because of his fraudulent conduct or willful neglect.

4. A partner is bound to keep and render true and correct accounts of the business.

5. A partner cannot carry on a competing business. If he carries on such business he shall account for and pay to the firm all profits made by him in that business.

6. A partner is bound to act within the scope of his authority.

7. No partner can make a secret profit of the partnership business by way of commission, etc. If he does so, he must return the money to the firm.

RELATIONS OF PARTNERS TO THIRD PARTIES

As per the definition of Partnership, any partner acting for the firm can bind other partners for

his acts. The acts done for the firm become the liability of the partners both jointly and severally. According to section 25 of Partnership Act, “Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.” The significance of this section is that partners can be used for the acts of the firm both jointly as well as separately.

The English Law is, however, different in this regard. In that law, “The liability of each partner in respect of the firm’s contracts is joint and in respect of the firm’s liability earned by the partners for the acts of the firm will relate wrongs joint and several.” The to the period when they were partners. If a partner ceases to be a partner due to death or any other reason, then the liability incurred after his cessations will not become his responsibility.

Doctrine of Implied Authority – My Study App

This doctrine means that partners have an implied authority to bind the firm by their acts. The firm is not a person; so the acts of the partners become the acts of the firm. The acts of partners must be on behalf of the firm or with an intention to bind the firm. Sections 18 and 19 of Partnership Act explain as to what acts of partners become the acts of the firm.

Section 18. Subject to the provisions of this Act, a partner is the agent of the firm for the purposes of the business of the firm. This section explains the implied authority of the partners. A partner is an agent of the firm and his acts can bind the firm. The acts must be for the purpose of the business of the firms. To the outside world, every partner is the unlimited agent of every other in everything connected with the partnership business.

Section 19 (1) the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm.” This provision of Section 19 gives the scope of implied authority. The implied authority is linked with the nature of business. The transactions undertaken by the partner must relate to the business carried on by the flow.

The second limitation is that the act of the partner must be done in the usual way. Under implied authority, a partner may bind the firm for such type of acts

(1) He can purchase and sell goods on behalf of the firm. (if) He may borrow money, contract debts and pay debts

(iii) He may pledge or sell property of the firm.

(iv) He may make, draw or accept or otherwise deal with negotiable instruments on account of the firm.

(v) He may engage servants for the conduct of business.

(vi) He may take a lease of premises on behalf of the firm or mortgage the assets of the firm should that be necessary for purposes of business.

Restrictions on Implied Authority – My Study App

When a partner is prohibited from doing an act which is otherwise within his implied authority, it will be known as restrictions on implied authority. The partner might have acted, otherwise, but he is restricted from doing so. Sections 19(2) and 20 put restrictions on implied authority of partners Section 19(2) says that in the absence of any usage of customs of trade to the contrary, the implied authority of a partner does not empower him to:  

(a) submit a dispute relating to the boniness of the firm to arbitration, (A) open a banking account on behalf of the firm in his own name,

(c) compromise or relinquish any claim or portion of claim by the firm,

(d) withdraw a suit or proceeding against the firm,

(e) admit any liability in a suit or proceeding against the firm,

() acquire immovable property on behalf of the firm,

(g) transfer immovable property on behalf of the firm,

(4) enter into partnership on behalf of the firm.

The other type of restrictions are those that may be imposed by the partnership deed or any agreement between the partners. According to Section 20, “The partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner.”

Authority in Emergency – My Study App

Section 21 of the Act empowers a partner to do any act which is necessary in the interest of the firm. According to this section, “A partner has authority, in an emergency, to do all such 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.”

The partners have been given authority to do any act which is necessary to save the firm from any loss. The act must be reasonable under the circumstances. So, partners can bind the firm for their acts done in an emergency situation.

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