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LPC Law Notes Business Law and Practice Notes

Partnership Act 1890 Notes

Updated Partnership Act 1890 Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

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Section Meaning
Definition 1

  • 2 or more persons carrying on a business in common with a view of profit/¿risk?
Existence 2

  • Ownership of common property is not a P’ship (e.g. Joint tenancy, tenancy in common, joint property, common property, or part ownership)

  • Sharing of Gross Returns is not a P’ship (occasional or regular payments? Are profits being distributed? If it is profit then there is a P’ship See just below)

  • The share in profits primâ facie suggests a P’ship S.2(3) (But check s.2(3)(a)(b)(c)(d)(e))
P’s Power to bind 5

  • Every P is an agent of the firm and his acts will bind all Ps (acts within the normal course of business)

  • Unless the P had no authority (& the 3rd person either knows that he has no authority, or does not know or believe him to be a partner.)
6

  • An authorised agent of the firm, P or not, binds the firm and all partners
Firm money 7

  • If a P uses firm money for private purposes, the firm is not bound unless P was specifically authorised
Liability 9

  • Unlimited, joint and several liability (even after death but subject to prior payment of his separate debts)
Liability of Incoming & Outgoing Partners 17

  • Incoming P is not liable for anything done by the firm before he becomes a P (s.17(1))

  • Outgoing P remains liable for debts or obligations incurred before retirement (s.17(2))

  • Outgoing Ps may be discharged from liabilities expressly or impliedly by course of dealings (s.17(3)) (AKA “agreement to release” or “novation”. Novation has to be agreed upon by all P’s and the relevant creditor (only likely to be accepted by creditor if incoming P accepts liability. If no new P (or new P does not accept) very unlikely that creditor will sign a novation agreement))
Variation 19

  • Rights and duties of Ps may be varied by consent of all parties
Partnership property 20

  • Property bought exclusively for the purpose of P’ship

  • Held on trust for the Ps
Interests of Partners 24

  • Share equally in the capital and profits/losses (s.24(1))

  • Firm must indemnify every P for liabilities incurred in proper conduct of the business (s.24(2))

  • Payment beyond capital advanced for partnership, he’s entitled to interest at 5% per annum from date of payment (s.24(3))

  • P is not entitled to interest on subscribed capital before profits have been ascertained (s.24(4))

  • No P is not entitled to remuneration (s.24(6))

  • No person may be introduced as a P without consent of all other Ps (s.24(7))

  • Most decisions by simple majority (s.24(8))

  • P’ship books are to be kept at the place of business (s.24(9))
Expulsion 25

  • The Act does not permit expulsion. Expulsion requires an express agreement of all Ps.
Retirement 26

  • P@will If No fixed term of P’ship, leaving P just gives notice of intention to all other Ps.

  • Where P’ship constituted by deed, a signed notice in writing, shall be sufficient for retirem
Renewal 27

  • Where a fixed term P’ship continues after the fixed term, there is a presumption that it continues on the same terms
Accountability 29 & 30

  • Ps’ duty not to compete with P’ship, unless given consent by other Ps.

  • If no Consent, then P accounts for any private profits made from a transaction concerning the P’ship or a competing business (Competing means: doing the same business as the P’ship)

  • Applies to a post-dissolution P’ship
Dissolution 32

  • If P’ship is fixed term (s.32(a)) or single undertaking (s.32(b)) by expiration of term or undertaking

  • If P’ship is undefined term, by notice of intention to dissolve P’ship(s.32(c))
33

  • By death or bankruptcy of any Partner
34

  • If it is unlawful for the business to carry on
35

  • On application to the court after relationship breakdown (insanity/ P’ship runs at loss etc.)
Rights of Person dealing with the Firm 36

Outgoing partners “OP” will remain liable to creditors/persons who may want to do

business with them unless OP or firm:

  • Places an advertisement in the London Gazette

  • Gives Actual notice to creditors of retirement/change in P’ship,

  • (Holding out (s.14 PA 1890))
Distribution of Assets 44

  • Liabilities are paid first out of profits, next out of capital, finally out of P’s personal proportion to their capital investment (s.44(a))

  • Assets shall be applied in the following order: (s.44(b))

    • Pay debts to persons who are not Ps

    • Pay to each P proportionately as to advances made

    • Pay to each P proportionately as to capital investment

    • Residue is divided up equally

Partnership Act 1890 Index and direct link to provisions

  1. Introductory Text

  2. Nature of Partnership

    1. 1.Definition of partnership.

    2. 2.Rules for determining existence of partnership.

    3. 3.Postponement of rights of person lending or selling in consideration of share of profits in case of insolvency.

    4. 4.Meaning of firm.

  3. Relations of Partners to persons dealing with them

    1. 5.Power of partner to bind the firm.

    2. 6.Partners bound by acts on behalf of firm.

    3. 7.Partner using credit of firm for private purposes.

    4. 8.Effect of notice that firm will not be bound by acts of partner.

    5. 9.Liability of partners.

    6. 10.Liability of the firm for wrongs.

    7. 11.Misapplication of money or property received for or in custody of the firm.

    8. 12.Liability for wrongs joint and several.

    9. 13.Improper employment of trust-property for partnership purposes.

    10. 14.Persons liable by “holding out”.

    11. 15.Admissions and representations of partners.

    12. 16.Notice to acting partner to be notice to the firm.

    13. 17.Liabilities of incoming and outgoing partners.

    14. 18.Revocation of continuing guaranty by change in firm.

  4. Relations of Partners to one another

    1. 19.Variation by consent of terms of partnership.

    2. 20.Partnership property.

    3. 21.Property bought with partnership money.

    4. 22.Conversion into personal estate of land held as partnership property.

    5. 23.Procedure against partnership property for a partner’s separate judgment debt.

    6. 24.Rules as to interests and duties of partners subject to special agreement.

    7. 25.Expulsion of partner.

    8. 26.Retirement from partnership at will.

    9. 27.Where partnership for term...

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