Partnership Act

Partnership Act, 1932

Definition of Partnership and Partner

• Partnership is defined as the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.
• A partner is a person who has agreed to share the profits of a business carried on by all or any of them acting for all.

Determining Existence of a Partnership

• The existence of a partnership is determined by the agreement between the parties, and the sharing of profits is a prima facie evidence of a partnership.
• The Partnership Act, 1932, does not require any formal registration or documentation to establish a partnership.

General Duties of Partners

• Partners have a duty to carry on the business of the firm to the greatest common advantage.
• Partners have a duty to be just and faithful to each other.
• Partners have a duty to provide true accounts and full information of all things affecting the firm to any partner or his legal representative.

Rights and Duties of Partners after a Change in the Firm

• After a change in the firm, such as the admission of a new partner, retirement of a partner, or the death of a partner, the rights and duties of the partners remain the same unless agreed upon otherwise.
• The continuing partners have a duty to account to the outgoing partner or his legal representative for all profits and transactions up to the date of the change.

Implied Authority of a Partner as an Agent of the Firm

• A partner is an agent of the firm and has the implied authority to bind the firm in all matters related to the business of the firm.
• The implied authority of a partner includes the power to buy and sell goods, to borrow money, and to enter into contracts on behalf of the firm.

Application of the Property of the Firm

• The property of the firm is applied firstly in payment of the firm's debts and liabilities, and then in the payment of the partner's advances, and finally, the residue is divided among the partners according to their shares.