Partnership Act 1961

Partnership Act 1961
By Azam
Question
No. 1
 Ahmad, Firdaus and Wafi wish to form a
partnership. Define ‘partnership’ as stated in

the Partnership Act, 1961.
No. 2
 State the circumstances under which
‘partnership’ may be dissolved.
 Partnership Act 1961 was originally enacted in 1961 as Sabah
Ordinance No. 1 of 1961 and revised in 1974 as Law of
Malaysia Act 135.
 The revised version come into force for Sabah (retrospective
Introduction from 29 April 1961) and other states (1 July 1974).
 Section 47(1) provide that “the rules of equity and of
common law applicable in partnership shall continues in
force, except so far as they are inconsistent with the express
provision” of the Act.
Section 3(1) defined partnership as “the relationship*

which subsists between persons carrying on business
in common with a view of profit”.
*Partnership is a relationship. It is established by an
Definition agreement, whether express or implied as the source of the
relationship involving 2-20 persons.
3 Essential Ingredients
i. a business
ii. carried on in common; and
iii. with a view of profit.
 Section 2 defined “business” includes every trade,
occupation, or profesion.
 There must be some commercial venture like selling goods or
Business services for reward before a partnership can be established.
 Chooi Siew Cheong vs Lucky Height Development
Sdn Bhd, Federal Court held that no partnership resulted
from a joint venture agreement between a landowner and
housing developer because each party to the agreement
intended a wholly separate business, there was no business
in common with a view of profit.
 Although the word partnership does not appear in

agreement, partnership still exists if the relationship between
Carried the individuals has the business character of partnership.
on in
 In the case Ratna Ammal & Anor v Tan Choo Soo,
Common Federal Court held that notwithstanding of the avoidance of
word partnership in the agreement by using “syndicate”, the
parties has a relation of partnership as carrying the business
“in common with a view of profit”.
 The view of profit must established in order to establish
partnership.
 For example, based on Question 1, if among the agreed terms
View of is one of them is excluded from sharing any profit, he/she is
Profit will not considered as partner.
 In the case Soh Hood Beng v Khoo Chye Neo, the Court
held that partnership was not existed as intention or view of
profit was not established.
Registration of Partnership Business

 Partnership Business must be registered:
1. Registration of Businesses Act 1956 (Peninsular Malaysia)
2. Sarawak Cap.64 and Cap. 33 (Sarawak)
3. Trade Licensing Ordinance No. 16, 1948 (Sabah)
 Failure to register the partnership would not mean partners cannot enforce
their right based on case Gulazam v Noorzaman and Sobath.
Summary of Exclusion from Partnership Act
Section Exclusion
3(2) Co-operative Societies, Registered Statutory, Chartered
Companies
Circumstance Not Prima Facie Partnership
4(a) Joint Tenancy / Tenancy In Common
4(b) Sharing Of Gross Return
4(c) Receipt Of Shares Of Profit
4(c)(i) Payments By Installment
4(c)(ii) Payment Of Servant Or Agent
4(c)(iii) Annuity To The Widow/Children Of Deceased Partner
4(c)(iv) Loan Given With A Rate Of Interest Varying Of Profit
4(c)(v) Sale Of Goodwill
State The Circumstances Under Which ‘Partnership’
May Be Dissolved.
Circumstances Section Case
Expiration Of Notice/ 34(1)PA Sukhinderjit Singh Muker v
By Agreement Arumugam Deva Rajah.
o Expiration of term (a)
Ariffin Jaka J. “provision in sub
o Termination of (b) section 28(1) and 34(1)(c) are subject
adventure/ to any agreement between the
undertaking partners.
o Undefined time – (c)
When any partners
giving notice
o No fixed term on 28PA
duration – notice of
retirement to all
partners
State The Circumstances Under Which ‘Partnership’
May Be Dissolved.
Bankruptcy, death,
charge
o Death or bankruptcy 35(1) Khoo Yoke Wah v Lee Choo Yam
of any partner Holdings. Supreme Court dismissed
the appeal and reiterated the death of
a partner dissolves the partnership.
o Any partner suffers 35(2) Davies v Barlow. Held: an

his shares of assignment by a partner of his share in
partnership property the partnership assets, in
to be charged for his circumstances amounting to
separate debt under bankruptcy brought an automatic
PA. dissolution of partnership.
State The Circumstances Under Which ‘Partnership’ May Be Dissolved.
Illegality of 36PA English case of Hudgell Yeates & Co v
partnership Watson, English Court of Appeal held in
o Any event led to certain circumstances a partnership may remain
unlawful for the legal but association between the partners may
business to be become illegal. The partnership is dissolve by
carried out by operation of law but reconstituted as
members. partnership between parties who are not
incapacitated.
Dissolution by the 37PA
court
o Insanity of a (a) Jones v Noy. Held: The permanent insanity of
partner a partner is a ground for dissolution of
partnership.
o Permanent (b) Whitwell v Arthur. Held. Permanent

incapacity of any paralytic stroke of a partner is a ground for
partner to dissolution of partnership.
perform duties
State The Circumstances Under Which ‘Partnership’ May Be Dissolved.
Dissolution by the 37PA
court
o Prejudicial (c) Carmichael v Evans. Held: A partner
Conduct criminal conviction injured firm reputation.
o Willful Or (d) Cheesemen v Price. Held: Persistent failure of
Persistent Breach a partner to account money receive from clients
justified court to dissolve partnership.
o Loss Making (e) Jennings v Baddeley. Held: Failed to make
Business profit after exhausted all avenue, court may
ordered partnership dissolution.
o Just And (f) Re Yenidje Tobacco Co Ltd. Held. Court
Equitable Relief order dissolution of the company when the
shareholder refused to communicate and the
same principle were applicable to partnership.
THANK YOU

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What is the definition of partnership according to the Partnership Act 1961?

What are the 3 essential ingredients required to establish a partnership?

Partnership Act 1961

partnership. Define ‘partnership’ as stated in

Section 3(1) defined partnership as “the relationship*

 Although the word partnership does not appear in

Registration of Partnership Business

o Any partner suffers 35(2) Davies v Barlow. Held: an

o Permanent (b) Whitwell v Arthur. Held. Permanent

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