Winy Kay and Evans Jay have been long time friends. They have decided to form a partnership but do not want to be governed by a partnership agreement. Explain to Winy Kay and Evans Jay the rights and duties of partners in a partnership with no partnership agreement
Rights and duties of partners in a partnership with no partnership agreement
Rights of partners
- Equal profit and loss sharing
- Equal rights to participate in management.
- The right to require certain property of the firm to be sold in payment of a certain obligation (equitable lien).
- Right to oppose the introduction of new partners.
- Interest of 6% per annum on any money lends by partners to the firm.
- The books of the partnership are to be kept at the principal place of business of the partnership and every partner is to have access to them for the purpose if inspecting them, or of taking copies.
- Every partner must be indemnified by the firm in respect of personal liabilities incurred and payments made by him in the ordinary course of the firm’s business or in respect of anything necessarily done for the preservation of the business or property of the firm. This is a partner’s right as an agent of the firm.
Duties of Partners
- To carry on a business to greater common advantage of the firm. The basis of partnership is mutual trust and confidence thus the partners must carry on the business of the firm to the greatest common advantage. He is required to do his best in the interest of the firm.
- Act in good faith. A partnership agreement is a contract of utmost good faith and thus every partner must be just and faithful. Good faith means that he shall not obtain private advantage at the expense of the firm.
- To act diligently. Every partner is bound to attend diligently to his duties in the conduct of his knowledge and skill to the common advantage of the firm.
- Share of loses. 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 of the firm.
- Duty to render true accounts – partners are bound to render True account that is any money received and expenditure met must be clearly reflected. Full information of all things affecting the partnership must be reflected and communicated to any partner or his legal representative.
- Accountability – every partner must account to the firm for any benefit derived by him without the consent of another partner from any transaction concerning the partnership or from any use by him of the property of the firm or use of the names of the firm in any business connections.
- Duty not to compete – a partner must not carry on any business of the same nature as to compete with that of the firm. If he does so he is bound to account for and pay to the firm all profits made by him in that business.
- 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 loss he shall have to compensate the firm.
Share with your friends