LAW OF PARTNERSHIP PREPARED BY: MADAM NORAZLA
PARTNERSHIP • The relevant statue applicable- Partnership Act 1961
Definition • Section 3(1) Partnership Act 1961 Partnership is the relation which subsist between persons carrying on business in common with a view of profit. • Partnership must be registered under the Registration Business Act 1956. • However, Failure to register does not mean the partners cannot enforce their rights for each other.
Gulazam v Noorzaman and Sobath  23 MLJ 45 Facts: An agreement between the Plaintiff and Defendants where the Plaintiff would provide capital for the purchase of cattle and the defendants would look after the cattle and then sell them in order to gain profits to be distribute equally amongst them. When the defendants failed to pay the plaintiff an action was brought against them.
Continue…. The Defendant argued that the business had never been registered under any Acts, hence making it not a partnership at all. Held: The plaintiff could claim because the relationship between the individuals had the business character of a partnership within the scope.
1. More than one person • Must have more than one person. Partnership means…….two or more can become a partner in a partnership…..if one person it will be sole proprietorship…..
Section 47(2) of PA 1961 (Revised 1974), the maximum number of partners allowed in a partnership is twenty (20). • But, Section 14(3)(a) Companies Act 1965, a professional partnership can have unlimited numbers of partners. • i.e: lawyers- legal firms- LPA
Continue….. • Tan Teck Hee v Chong Tian Peng Held: The action against Defendant fail because the numbers of partners in the firm concerned was 25. Since the firm was void, any legal action taken could not be allowed.
Shim Fatt v Leyland Road Bus Co. The Plaintiff gave advance on money to the defendant, a firm consisted of more than 20 partners. The Court held: Plaintiff could not recover the money because a legal action could not be brought against a void firm,
2. Agreement between the partners • “relationship” : an agreement or a contract between the parties or a contract between the parties to the partnership either expressly or impliedly. • Although the word partnership does not appear in a agreement, a partnership may still exist if the relationship between the individuals has the business character of a partnership.
RatnalAmmal@anor v Tan Chow Soo  30 MLJ 399 Facts: The parties enter the agreement to form a ‘syndicate” for the purpose of selling condensed milk. The word “partnership” was not used in the agreement. Instead, the word ‘syndicate was used. Held: The relation of the parties had the business character of a partnership and although the word partnership was missing in the agreement, it was still a partnership.
3. Present transaction of business activities • The parties must be carrying a partnership business at the “present”. • Business refers to any trade, occupation or profession. (s. 2) • Hence, there will be no partnership if the parties are preparing a business for the future.
4. Each partner is an agent to one another • Partners in a partnership is an agent to one another. • It means that the act of one partner are also reflects of the act of the other partners, provided the act is in the course of the business of the partnership.
Continue…. • Section 7 Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership…. Acts of the other partners binds the other partner and the firms….
UNLESS; The partner acting without authority…. and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner….
5. For the Purpose to Profit • It is essential for the business to be carried on in a common with a view of profits. • Profits mean net profit. • Charitable or religious organization, clubs, societies & co-operative are NOT PARTNERSHIP. • Impliedly that the profit to be shared equally
Mollwo, March & Co. v The Court of Wards • Held: To constitute a partnership, the parties must have agreed to carry on business or to share profits in some way in common.
CARRIED ON COMMON ? • Must carried on or by or on behalf of all partner. • Must be one person or more carry on the business for himself and on behalf of the others. • However, it NOT NECESSARY- all partners must play an active part in business (sleeping partner).
Circumstances – NOT partnership • S. 4 (a), (b) & (c) of PA 1961 • Examples: • Joint tenancy, tenancy in common, joint property • Sharing of gross return
Types of Partners • General partners He is a partner in the fullest sense • Active partners A partner who is actively participates in the management of the business and is known to the world as the partner • Dormant/sleeping partner No active part in the management but still liable as partner.
Quasi- Partner • Not a partner but liable for debts of the partnership as a consequences of holding out (causing other people to believe that he is a partner). • S. 16- person who has retired from a partnership must ENSURE that no other representation made by words or conduct of himself or any other partner to the effect that he is still a partner of the firm.
Salaried partner • A partner who receives a fixed remuneration irrespective of profits or who received a fixed salary every months plus a small percentage of the profits.
Formation of Partnership • Formality Can be formed with or without written agreement • Capacity Any one of sound mind can be a partner. A minor partner cannot be held liable and responsible for any contracts made
Continue…. • Documents Partnership Agreement Or Articles of partnership which provides for all rights and duties of a partner • Duration Depends on the intention of the partners whether to fix the duration of the partnership or otherwise
S. 28 (1) : • no condition as partnership duration: may dissolve by giving notice. • Section 29(1): • if the duration of partnership has expired but all partners wishes to proceed with the partnership without having to make a new agreement, the rights and duties of the partners are still the same.
RELATIONS OF PARTNERS TO OUTSIDERS Power of Partners to Bind Firm Implied Authority Liability of Partners Liability of Persons for Holding Out
INCOMING & RETIRING PARTNERS Incoming Partners Retiring Partners
RELATION OF PARTNERS TO ONE ANOTHER Rights & Duties of Partners in the absence of Agreements Assignment of Partner’s Share
1. DISSOLUTION WITHOUT COURT’S INTERVENTION • By agreement • Partnerships articles may fix the duration of partnership, and the partnership is terminated on the expiry of the period. • The partners may mutually agree to dissolve the partnership at any time.
Continue…. • By operation of law • By expiration If a partnership is entered into a fixed term (section 34(1)(a)) or for a single adventure or undertaking section 34(1)(b), the partnership is dissolved on the expiration of the fixed term or termination of the adventure or undertaking
Continue…. • Notice Section 34(1)(c) If the partnership is entered into for an undefined time, any partner may determine the partnership at any time by notice to the other partners.
Continue…. • By death or bankruptcy Section 35(1) Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner
Continue….. • By charging on shares Section 35(2) when a partner suffers his share of a partnership property to be charged with payment of his personal debt, the other partner has an option of dissolving the partnership. • When a number of partners exceed 20
DISSOLUTION BY AN ORDER OF THE COURT • By the application of the partner: • Insanity of partner Section 37(a) • Permanent incapacity of a partner to perform his duties Section 37(b) • A conduct calculated to prejudicially affect the carrying on of the business Section 37(c)
Willful and persistent breach of the partnership agreement Section 37(d) • Carrying on business at a loss Section 37(e) • It is just and equitable to do so Section 37(f)