THE INDIAN PARTNERSHIP ACT, 1932

What are the mutual rights and liabilities as between the partners?

Subject to contract between the partners, -

a partner is not entitled to receive remuneration for taking part in the conduct of the business;

the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;

where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits;

a partner making, for the purpose of business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent per annum;

the firm shall indemnify a partner in respect of payments made and liabilities incurred by him -

in the ordinary and proper conduct of the business; and

in doing such act in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and

a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm .   

This section specifies the mutual rights and obligations as between the partners during the continuance of the partnership business, but, the various positions thereof have been made subject to the contract between the partners. The terms so provided in the sub-paragraphs may be an ideal to govern mutual rights and obligations as between the partners and or the firm taken as a whole yet it may not suit the requirements of the partners in a particular firm and they are at liberty to change or alter the mutual rights and liabilities as between themselves in the manner and to the extent it suits their requirements.

What would be the property of the firm and it is to be applied?
 

Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.
Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.
This section again is subject to the contract between the partners and they can vary the same to the extent as required. It has been held that the only fact that the partner has permitted his property for being used in partnership business does not make that property of partnership.
Again subject to contract between the partners the property of the firm shall be held and used by the partners exclusively for the purposes of the business. 

if a partner derives any profit for himself from any transaction of the firm, or from the use of any property or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;

This section again is subject to contract between the partners and can be varied by contract.   

 Subject to contract between the partners - 

after a change in the firm - where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be;

after the expiry of the term of the firm, and - where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will; and

where additional undertakings are carried out - where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings are the same as those in respect of the original adventures or undertakings.

Here again the rights as prescribed are subject to contract between the partners. The idea of making various provisions in various sections as subject to contact is to specify the rights and obligations as between the partners in relation to various affairs of the firm also in a case where there is no contract. It often happens that persons start partnership business only with an agreement with regard to some of the terms and conditions only leaving the rest unspecified in the agreement. These provisions which are subject to contract are important and they do apply as and when there is a dispute between the parties and they intend to find their legal position.

Q.16.

Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm.
The authority of a partner to bind the firm conferred by this section is called his “ implied authority”

Section 22 provides that in order to bind a firm, and act or instrument, done or executed by a partner or other person on behalf of the firm, shall be done or executed in the firm name, or in any other manner, expressing or implying an intention to bind the firm.

The words other person in section 22 will only include as is apparent, and authorised other person. Acting within the scope of his authority may be a servant, agent, or a power of attorney holder. Section 19 read with section 22 means that even when implied authority is exercised by the partner he should do so in the firm name or in any other manner expressing or implying an intention to bind the firm. 

An admission made on representation made by a partner, concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business.  

Notice to a partner, who habitually acts in the business of the firm, of any matter relating to the affairs of the firm, operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.

A: Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.
However, where, by wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefore to the same extent as the partner.
Where -

a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm,

the firm is liable to make good the loss.

Anyone who by words spoken or written by conduct represents himself or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to anyone who has on the faith of any such representation given credit to the firm, whether the person representing himself or represented to a partner does or does not know that the representation has reached the person so giving credit.

Where after a person’s death the business is continued in the old firm name, continued use of that name or of the deceased partner’s name as a part thereof shall not itself make his legal representative or his estate liable for any act of the firm done after his death.