Chapter X. Partnership

PARTNERSHIP is defined to be the relation which subsists between persons carrying on a business in common with a view to profit. Business here includes every trade, occupation, or profession. The partners collectively are called a firm, and they carry on business under the firm name.

In general, all persons are capable of entering into partnership, and no special formality is required for the purpose; it may be done by word of mouth, or inferred from the conduct of the parties. By English law not more than ten persons may form a partnership for carrying on a banking business, and not more than twenty for other purposes.

Every member of a firm is an agent of the firm and of the other members for doing any act which is necessary for the carrying on of the business of the firm in the usual way.

The partners may indeed agree among themselves to restrict this power with reference to one or more of their members, and this agreement will be upheld and will excuse the firm from liability for the acts of those members against the claims of all who had notice of the agreement. Unless otherwise provided by the partnership articles, any member as agent of the firm has implied authority to receive and give receipts for debts due to the firm, to draw cheques on the firm s bankers in the firm name, to purchase on the credit of the firm goods required for carrying on its business in the usual way, to sell the goods of the firm, to engage servants for the business of the firm, and to borrow money on its credit. In order that the firm may be liable for these and other acts of a member, it is necessary that they should have been done by him in the firm’s name as agent, not as principal and in his own name.

As a principal is liable for the fraud and wrongdoing of his agent in the course of his agency, so is the firm liable for the fraud and wrongs done by a member in the ordinary course of the business of the firm. The members of the firm are jointly liable for the debts and obligations incurred by it, and the property of a deceased member is liable also severally, but not until the separate debts of the deceased have been paid.

The relations of the partners between themselves may be determined by special agreement, but in the absence of such specialagreement every partner is entitled to share equally in the profits of the business, and he must contribute equally to its losses. This remains true in the absence of agreement to the contrary even if the partners contributed unequal shares to the capital of the firm. Every member has a right to take part in the business of the firm, to express his views about the conduct of its business, and no change may be made without all being consulted. In case of disagreement, the majority decides. Partners are bound to observe the utmost good faith in their dealings with one another, to work for the benefit of the firm, and in the conduct of the partnership business they may not obtain private advantage at the firm’s expense.

A partnership may be dissolved by effluxion of time, by mutual consent, by the death of a partner, by the bankruptcy of a partner, by a judgement of the Chancery division of the High Court of Justice which may be obtained on several grounds. After dissolution, the authority of each partner to bind the firm ceases, except in so far as is necessary to wind up the affairs of the firm,