Commercial Law Part 7

(5) Where the t.i.tle to real property is in the names of all the partners, a conveyance executed by all the partners pa.s.ses all their rights in such property.

11. An admission or representation made by any partner concerning partnership affairs within the scope of his authority as conferred by this act is evidence against the partnership.

12. Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.

13. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership, or with the authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.

14. The partnership is bound to make good the loss:

(a) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and

(b) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership.

15. All partners are liable

(a) Jointly and severally for everything chargeable to the partnership under Sections 13 and 14.

(b) Jointly for all other debts and obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract.

16. (1) When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to any one, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner, he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.

(a) When a partnership liability results, he is liable as though he were an actual member of the partnership.

(b) When no partnership liability results, he is liable jointly with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.

(2) When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. Where all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the person consenting to the representation.

17. A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred, except that this liability shall be satisfied only out of partnership property.

POWERS OF A MAJORITY OF PARTNERS.--If partners disagree, then a majority of them have power to decide what shall be done; but there are limits even to the power of a majority. They can only carry on the business of the firm, and any vote of the majority, or action of the majority, to change the character of the business for which the firm was organized, or to make any fundamental change in the original articles of the partnership, would be invalid.

RELATION OF PARTNERS TO ONE ANOTHER.--The rules determining the rights and duties of partners in relation to the partnership are concisely but fully set forth in the Act as follows:

18. The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:

(a) Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied; and must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits.

(b) The partnership must indemnify every partner in respect of payment made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.

(c) A partner who, in aid of the partnership, makes any payment or advance beyond the amount of capital which he agreed to contribute, shall be paid interest from the date of the payment or advance.

(d) A partner shall receive interest on the capital contributed by him only from the date when repayment should be made.

(e) All partners have equal rights in the management and conduct of the partnership business.

(f) No partner is ent.i.tled to remuneration for acting in the partnership business, except that a surviving partner is ent.i.tled to reasonable compensation for his services in winding up the partnership affairs.

(g) No person can become a member of a partnership without the consent of all the partners.

(h) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightly without the consent of all the partners.

19. The partnership books shall be kept, subject to any agreement between the partners, at the princ.i.p.al place of business of the partnership, and every partner shall at all times have access to and may inspect and copy any of them.

20. Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or partner under legal disability.

21. (1) Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.

(2) This section applies also to the representatives of a deceased partner engaged in the liquidation of the affairs of the partnership as the personal representatives of the last surviving partner.

22. Any partner shall have the right to a formal account as to partnership affairs:

(a) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners.

(b) If the right exists under the terms of any agreement.

(c) As provided by Section 21.

(d) Whenever other circ.u.mstances renders it just and reasonable.

TERMINATION OF THE PARTNERSHIP.--A partnership is terminated either by act of the partners, or by law. Under the first heading, we may mention such things as the partnership being terminated by the accomplishment of the object for which the same was formed, or by the termination of the time during which the partnership was to exist, or by mutual consent of all parties concerned. Under the head of termination by operation of law, we have such topics as the death of a partner, the insanity of a partner, or the bankruptcy of a partner, and a dissolution by a court, as for example, where it is absolutely certain, in the opinion of the court, that the business cannot be successfully continued longer. In such a case, although some of the partners may not wish to wind up the affairs of the business, the court may order it done in the interest of all parties concerned.

OWNERSHIP OF FIRM PROPERTY AND CREDITORS' RIGHTS.--The firm property is owned by all the partners jointly, but the interest of each individual partner is not an interest in each piece of firm property, but a right to have an accounting and to receive on the accounting such share of the a.s.sets as belong to him when all debts due from him to the firm and all liabilities to the outside world are settled. Consequently, a creditor of an individual partner cannot seize or attach or levy on firm property, because that firm property does not belong, nor does any part of it belong, to his debtor. The creditor must file a bill in equity asking that the partner's share be determined, and that on an accounting so much as is found due to the debtor partner be applied to discharge that partner's indebtedness.

THE DIVISION OF a.s.sETS.--Upon final dissolution, the question of division of a.s.sets comes up, and the Uniform Partnership Act gives us the general rule as to how the firm's a.s.sets are divided. Section 40 of the Act reads:

In settling accounts between the parties after dissolution, the following rules shall be observed, subject to any agreement to the contrary:

(a) The a.s.sets of the partnership are:

I. The partnership property,

II. The contributions of the partners necessary for the payment of all the liabilities specified in clause (b) of this paragraph.

(b) The liabilities of the partnership shall rank in order of payment, as follows:

I. Those owing to creditors other than partners,

II. Those owing to partners other than for capital and profits,

III. Those owing to partners in respect of capital,

IV. Those owing to partners in respect of profits.

(c) The a.s.sets shall be applied in the order of their declaration in clause (a) of this paragraph to the satisfaction of the liabilities.

(d) The partners shall contribute, as provided by Section 18 (a) the amount necessary to satisfy the liabilities; but if any, but not all, of the partners are insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities.

(e) An a.s.signee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in clause (d) of this paragraph.