Duties & Liabilities of Partnership

 

Duties of partner

Partnership is a contract of uberrimae fidea. The partners must act with utmost good faith as the very basis of partnership is mutual trust and confidence. According to Sec. 9, which deals with the general duties of partners, partners are bound —

a) to carry on the business of the firm to the greatest common advantage,

b) to be Just and faithful to each other, and

c) to render true accounts and full Information of all things affecting the firm to any partner or his legal representative.

 

The other duties are spread over the Partnership Act These duties are summed up as under:

1. To carry on business to the greatest common advantage. Every partner is bound to carry on the business of the firm to the greatest common advantage. He is bound, in all transactions affecting the partnership, to do his best in the ‘common interest of the firm. He must share with other partners any benefit which he may have been able to obtain from other people and in which the firm is in honour and conscience entitled to participate.

 

2. To observe faith. Partnership is a fiduciary relation. Every partner must be Just and faithful, and observe utmost good faith towards every other partner of the firm. Good faith requires that he shall not obtain a private advantage at the expense of the firm. He is bound, in all transactions affecting the partnership, to do his best In the common interest of the firm.

 

3. To indemnijy for fraud. Every partner is bound to indemnify the firm for any loss caused to it by his fraud In the conduct of the business of the firm. This is an absolute duty of a partner and no partner can contract himself out of it. The innocent partners of the firm are, however, liable to third parties for the fraud of any of the partners. But they can proceed to claim damages against the partner who has committed the fraud.

 

4. To attend diligently. Subject to contract, between the partners, it is the duty of every partner to attend diligently to his duties in the conduct of the business of the firm, and to use his knowledge and skill to the common advantage of all the partners.

 

5. Not to claim remuneration. A partner Is not entitled to receive any remuneration in any form for taking part in the conduct of the business of the firm. It is, however, usual to allow some remuneration to the working partners provided there is a specific agreement to that effect.

 

6. To share losses. It is the duty of every partner to contribute to the losses of the firm. In the absence of an agreement to the contrary, the partners are bound to contribute equally to the losses sustained by the firm. An agreement to share profits implies an agreement to share losses also.

 

7. To indemnify for wilful neglect. Every partner Is, subject to contract between the partners, bound to indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm. The firm is, however, liable to the third persons for the wilful neglect or fraud of any of the partners.

 

8. To hold and use property of the firm exclusively for the firm. It is the duty of every partner of the firm to hold and use the property of the firm exclusively for the purposes of the business of the firm. The partners may agree differently but, in such a case, there should be a specific agreement to that effect.

 

9.To account for personal profits. If a partner derives any benefit, without the consent of the other partners, from partnership transactions (or from any use by him of the partnership property, name or business connection), he must account for it and pay it to the firm. This is because the relationship between partners is a fiduciary relationships and no partner is entitled to make any personal profit.

 

10. To account for profits in competing business. A partner must not carry on any business of the same nature as competing with that of the firm. If he does that he is bound to account for and pay to the firm all profits made by him in that business. This is, however, subject to contract between the partners.

11. To act within authority. Every partner is bound to act within the scope of his actual or Implied authority. Where he exceeds the authority conferred on him and the firm suffers a loss, he shall have to compensate the firm for any such loss.

 

12. To be liable jointly and severally. Every partner is liable, jointly with all the other partners and also severally, for all the acts of the firm done while he is a partner.

 

13. Not to assign his rights. A partner cannot assign his rights and interest in the firm to an outsider so as to make him the partner of the firm. He can, however, assign his share of the profit and his share in the assets of the firm.

 

 

 

 

 

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