Module 2 - Partnership

Module 2- Rights, Duties and
Obligations of Partners
1. Relations of Partners with each other-
 S.11(2) gives the liberty to the partners to make a contract that a partner shall not
carry on any business other than that of the firm while he is a partner.
 Although according to S.27 of the Indian Contract Act, agreement in restraint of trade
is void, but such an agreement entered into between the partners will be valid.
2. Rights and duties of Partners-
 The Rights and duties of partners with each other and with respect to the firm are
divided into two categories-
Indian Partnership Act (Module 2)

The LAW Learners 1|Page
Mandatory
• Universal
Subject to agreement
• Voluntary
i. Mandatory
ii. Subject to the agreement among partners
 The mandatory right & duties cannot be changed or contracted out by agreement
between the partners. Following are the mandatory duties & reciprocal rights of a
partner:
a. To carry on the greatest common advantages (S.9)
b. To be just & faithful (S.9)
c. To render true accounts and full information (S.9)
d. To indemnify (S.10)
e. Right to take part in the conduct of business [S.12(a)]
f. Right to express opinion [S.12(c)]
g. Right to have access to books of the firm. [S.12(d)]
h. Right to share profits [S.13(b)]
i. Right to interest on capital and advances [S.13(c) & (d)]

j. Right to indemnity [S.13(e)]
Duties of Partners-
1.Duty to carry on the business to the greatest common advantage [S.9]
2.Duty to be just and faithful to each other [S.9]
3.Duty to render true accounts [S.9]
4.Duty to render full information of all things affecting the firm [S.9]
5.Duty to indemnify for fraud [S.10]
6.Duty to be diligent [S.12(b) & S.13(f)]
7.Duty to properly use the firm’s property [S.14 & S.15]
8.Duty not to earn personal profits or to compete [S.16]
Liability of a Partner with regards to third party-
1) Liability for the acts done within the authority of a partner (S.18-22)
2) Liability when a partner acts in emergency (S.21)
3) Liability on ratification of a partners act
4) Liability for admission made by a partner (S.23)
5) Liability on notice to an acting partner (S.24)
6) Liability for torts & wrongful acts (S.26)
7) Liability for misapplication of money or property (S.27)
Test to determine the scope of implied authority

1. The act should be done in relation to the partnership business and,

2. The act should be done in usual way, in relation to the business of the kind carried on by
the firm.
3. Nature of the business is thus a relevant factor
Law of agency –notice to agent = notice to principal
 If a fraud has been committed on the firm by or with the consent of a particular
partner, notice to such a partner regarding that matter is not deemed to be a notice to
the firm.
 A principal is vicariously liable for the torts & wrongful acts committed by his agent,
since every partner is the agent of the firm, same principal is applicable & recognised
by the Indian Partnership Act.
Doctrine of Holding out, Creating liability of a non-partner :Sec.

28
 In certain cases, a person who is not a partner, may be deemed to be a partner or held
out to be a partner for the purpose of his liability towards third party.
 The basis of liability is the application of the law of estoppel because of which he is
held out to be a partner or is deemed to be a partner by “holding out”
 Law of Estoppel –if a person, by his representation, induces another to do some act
which he would not have done otherwise, then the person making the representation is
not allowed to deny what asserted earlier.
 The Doctrine of Holding out is a branch of the Law of Estoppel.
 Therefore, if a person who is not a partner, by his representation, created an

impression in the mind of the third party that he is a partner, on the basis of which the
third party gives credit to the firm, the person making such representation will be held
out to be a partner.

 For the application of the doctrine of holding out, following essentials are needed:
1.Representationor knowingly permitted the representation to be made
2.Acting on the faith of representation and giving credit.
Position of Minor in a Partnership firm-

S.30 (1) -A person who is a minor according to the law to which he is subject may not be a
partner in a firm, but with the consent of all the partners for the time being, he may be
admitted to the benefits of partnership.
 A partnership between the competent parties to the contract must exist for a minor to
be admitted to the benefits of the partnership.
 According to S.30(5), at any time within six months of his attaining majority or of
obtaining knowledge that he had been admitted to the benefits of partnership,
whichever date is later, he can elect to become or not to become a partner.
 If he remains silent and fails to give such a notice, it is presumed that he wants to be a
partner and on the expiry of the said six months, he shall become a partner in the firm.
If Minor Accepts the Partnership then-
 His rights and liabilities continue to be same up to the date on which he becomes a
partner.
 His share in the property and profits of the firm shall be the same to which he was
entitled as a minor.
 He becomes personally liable to all the creditors for the acts of the firm,
retrospectively from the date of his admission to the benefits of partnership.
 When a minor elects not to become a partner, his rights and liabilities continue to be
the same up to the date of his giving public notice.

 His liability up to his share in the firm, continues only till the date he gives a public
notice.
 If after attaining majority, he represents or knowingly permits himself to be

represented as a partner in the firm, his liability on the ground of holding out can still
be there.


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Module 2- Rights, Duties and

2. Rights and duties of Partners-

Indian Partnership Act (Module 2)

b. To be just & faithful (S.9)

c. To render true accounts and full information (S.9)

f. Right to express opinion [S.12(c)]

g. Right to have access to books of the firm. [S.12(d)]

h. Right to share profits [S.13(b)]

i. Right to interest on capital and advances [S.13(c) & (d)]

Indian Partnership Act (Module 2)

2.Duty to be just and faithful to each other [S.9]

3.Duty to render true accounts [S.9]

5.Duty to indemnify for fraud [S.10]

6.Duty to be diligent [S.12(b) & S.13(f)]

7.Duty to properly use the firm’s property [S.14 & S.15]

8.Duty not to earn personal profits or to compete [S.16]

Liability of a Partner with regards to third party-

2) Liability when a partner acts in emergency (S.21)

3) Liability on ratification of a partners act

4) Liability for admission made by a partner (S.23)

5) Liability on notice to an acting partner (S.24)

6) Liability for torts & wrongful acts (S.26)

7) Liability for misapplication of money or property (S.27)

Test to determine the scope of implied authority

Indian Partnership Act (Module 2)

3. Nature of the business is thus a relevant factor

Law of agency –notice to agent = notice to principal

Doctrine of Holding out, Creating liability of a non-partner :Sec.

 The Doctrine of Holding out is a branch of the Law of Estoppel.

 Therefore, if a person who is not a partner, by his representation, created an

Indian Partnership Act (Module 2)

1.Representationor knowingly permitted the representation to be made

2.Acting on the faith of representation and giving credit.

Position of Minor in a Partnership firm-

If Minor Accepts the Partnership then-

Indian Partnership Act (Module 2)

 If after attaining majority, he represents or knowingly permits himself to be

Indian Partnership Act (Module 2)

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