Questions and Answers
Under what conditions can the 3rd party hold the partnership firm and partners liable?
Which of the following is NOT a way in which a partnership can be dissolved?
What is the key factor that leads to the dissolution of a partnership by supervening illegality?
unlawful event that makes it impossible to carry on the business of the firm
A partnership can be dissolved by the court based on just and equitable grounds. Is this statement true or false?
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Can a minor become a partner?
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What is a partner who is not legally a partner but can be held liable as one due to 'holding out'?
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A minor can decide to stay in a partnership after reaching the age of majority.
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Persons may be made liable as an apparent partner if there has been a 'holding ___.'
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Match the following liabilities of partners with their descriptions:
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Study Notes
Partnership Basics
- A minor can become a partner, but they will not be liable for any debt.
- Once a minor reaches the age of majority (18 years), they can decide to stay in the partnership or not. If they stay, they will be jointly and severally liable for previous and future debts.
Types of Partnership
- There are five types of partnership:
- General
- Active
- Sleeping/Dormant
- Salaried
- Apparent/Quasi
Apparent/Quasi Partner
- A person who is not a partner but holds themselves out as a partner is known as an apparent/quasi partner.
- This can occur through spoken or written words, or by knowingly allowing themselves to be represented as a partner.
- Case: Bevan v The National Bank Ltd (1906) 23 TLR 65
Liability of Apparent Partner
- An apparent partner can be held liable as a partner if:
- They have represented themselves as a partner or allowed someone else to do so.
- The representation was made in oral, written, or conduct form.
- A third party has relied on the representation.
- The third party has given credit to the firm on the strength of the representation.
- Case: Lynch v Stiff (1944)
Effect of Holding Out on the Estate of a Deceased Partner
- If a partner's death leads to the continuation of the partnership business in the old firm's name, the holding out will not make the deceased partner's estate liable for any debts contracted after their death.
Relation between Partners
- In the absence of a partnership agreement, the following general provisions apply:
- Partners share equally in the capital and profits of the business.
- Partners must contribute equally towards losses.
- Every partner may take part in the management of the business.
- The firm must indemnify every partner in respect of payments made and personal liabilities incurred.
- Partners are entitled to interest on capital subscribed, but not on initial capital.
- No partner is entitled to remuneration for acting in the partnership business.
- No person may be introduced as a partner without the consent of all existing partners.
- Decisions on ordinary matters can be made by a majority of partners, but no changes to the nature of the business can be made without consent of all partners.
Liabilities of Partners
- Partners are liable for:
- Contractual liability (s.11 PA 1961)
- Ordinary torts (s.12 PA 1961)
- Jointly and severally liable (s.12 & s.13 PA 1961)
- Misapplication (s.13 PA 1961)
- Misappropriation of trust (s.15 PA 1961)
- Criminal liability (Case: Chung Shin Kian & Anor. v P.P. (1980) 2 MLJ 246)
- Incoming partner (s.19(1) PA 1961)
Liability of Retired Partners
- Retired partners remain liable for debts incurred before retirement, but not for anything done after their retirement.
- A retiring partner may take steps to release themselves from liability for existing and future debts.
Relations between Partners and Third Parties
- Partners are agents of the firm and can bind the firm through their acts.
- All partners are bound by acts done on behalf of the firm.
- A partner's authority can be actual or implied.
- A partner's wrongful act can render the firm and other partners liable if it is done in the firm's ordinary course of business.
Dissolution of Partnership
- Partnership can be dissolved by:
- Agreement
- Operation of law (s.34(1) PA 1961)
- Supervening illegality (s.36 PA 1961)
- Death or bankruptcy (s.35(1) PA 1961)
- Order of the court (s.37 PA 1961)
Grounds for Dissolution by Court
- Court can dissolve a partnership in the following situations:
- Insanity of a partner (s.37(a) PA 1961)
- Permanent incapacity (s.37(b) PA 1961)
- Prejudicial conduct (s.37(c) PA 1961)
- Carrying on the business at a loss (s.37(d) PA 1961)
- Willful or persistent breach (s.37(e) PA 1961)
- Just and equitable ground (s.37(f) PA 1961)
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Description
This quiz explores the role of a minor in a partnership, including their liability for debts and profit sharing. Learn about the implications of having a minor as a partner.
