THE LAW OF PARTNERSHIPS.

The law applicable to partnerships includes; The partnership Act 2010,

General law of contract, Case law, Common law and doctrines of equity.

A Partnership is defined under s.2 as a relation which subsists/exists between

2 or more persons, not exceeding twenty, carrying on a business in common
with a view of making profit. Under s.2 where a partnership is formed for
purposes of carrying on a profession, the number of professionals who
constitute a partnership should not exceed fifty.

In order to prove the existence of a partnership, the following factors must be

established;
1. There must be a business
2. The business must be carried out in common
3. There must be a profit making motive.

The Act defines a business to include every trade, occupation or profession.

There must be a commercial or professional enterprise where goods are sold
or services are rendered. Mere joint ownership of property is not enough to
constitute the owners into partners and its immaterial whether or not they
share profits.

For an act to amount to a business the said business must have

commenced/started operating. In the case of EMOROT V OJAKOT 1984, the
plaintiff and his colleague the defendant and yet another unnamed person
decided to form a partnership. They duly registered the business name and
obtained a bank account in the names of the firm. The plaintiff did not pay his
contribution and because of this and other reasons, the business did not take
off. In the meantime, the defendant operated a carpentry business. The
plaintiff brought this action /case to court claiming an account and a share of
the defendant's carpentry business. This action/case failed on the ground that
there was no partnership in law.

The Court further held that the act of opening a bank account was an act
preparatory/in preparation for the commencement of the business & does not
create a partnership. For there to be a partnership, the business must have
commenced.

In the case of HENSNHAQ V ROBERT [1967] 1 ALRT it was held that its
basically the carrying out of business which determines the existence of a
partnership and that an agreement to carryout business in the future for a
future plan was just an agreement to carry out business in the future but not
an establishment of a partnership. Court held that in such circumstances the
fact that the parties believed they were in partnership was irrelevant.

In the case of RE KEITF SPICER LTD [1971] KLR 333 it was held that the
preparatory steps for formation of a partnership in future cannot constitute a
subsisting partnership even if the parties show a document, its just to show
their intention.

It should further be noted that in a partnership, the business must be one that
involves a repetition of actions and does not include the acts of an association
formed for doing one particular act which is never to be repeated

Carrying on business in common means that the business must be carried

on by or on behalf of all those involved in the undertaking/venture/business,
thus the mere sharing of gross returns (profits) does not in itself
constitute/make the persons sharing profits into partnership. Although the
sharing of profits is evidence for the existence of a partnership, something
more than this must be proved in order to prove the existence of a
partnership. This is because a person receiving payment out of the profits of
the business whether as a gift or in return for a service rendered e.g interest
on a loan can not be said to be a partner. The existence of a partnership can
only be effectively ascertained/ determined from the intention of the parties.

With a view of a profit. The persons must carry on this business with the
ultimate major objective of making profit and must at the end of the day each
share in profits. In the case of DAVIS V DAVIS [1894]1 CH 391 court
explained the apparent contradiction in s3 and held that one must look at the
evidence of sharing profit but this does not raise the presumption of existence
of a partnership. Court emphasized that if there is profit sharing and no other
evidence at all to construe the existence of a partnership, then you cannot
claim that there is existence of a partnership, one must look at all the
ingredients without undue weight to any one of them.
In the case of PENSTONE V JOHNSTONE [1945] 23 TC 29 Penstone wanted
to purchase and develop a piece of land but he lacked the money so he
approached a friend who advanced to him the money and the later described
in writing the relationship which was to follow between him and the former in
this piece of business and it was set out in a letter which Penstone assented to
in writing. The adventure was successful and profits were realized, on the
issue of whether the venture constituted a partnership because profits were
shared, it was held that persons involved in any trade or business or
adventure upon terms of sharing a profit and making good the loss arising
there from are to some extent partners, however it is not enough that profits
are being shared, if there other circumstances which show that there was no
intention to form a partnership, a partnership will not be presumed to exist
simply because two people are doing business and sharing a profit.

In this case court looked at the letter that described the relationship of the
parties and found that from the contents of the letter, there was no intention
to form a partnership. Court went on to say that in determining whether there
is a partnership or not, it is not enough to just establish the existence of a
business, the business must be in common and with a vie w of a profit, all the
three ingredients must exist.

The Act stipulates rules for determining the existence of a partnership.s.3

provides for the following rules.
-Joint tenancy, tenancy in common, common property or part ownership does
not itself crate a partnership. In the case of SMITH V ANDERSON (1880) 15
CH.D 247, court held that co ownership does not imply a business or a
partnership. In the case of OGIN V OGIN it was held that co ownership does
not create a partnership whether or not the profits made are shared.
However sharing of losses may in certain circumstances create a partnership.
In the case of NORTHERN SALES V MINISTRY OF NORTHERN REVENUE
(1973) 37 DLR 612, there was sharing of both profits and losses of the firm
and the court found such circumstances to be conclusive for the existence of a
partnership.

-Sharing of gross returns does not itself create a partnership whether the
persons sharing those returns have or do not have a joint or common right or
interest in any property from which or from the use of which, the returns are
derived.
In the case of COX V COLSON (1916) 2 KB 177 Mr Colson was a theatre
manager who agreed with Mr. Mills to avail the theatre for some of Mr. Mills
productions. Mr. Mills was to provide the company and the scenery whereas
Colson was to pay for lighting, posters etc. under the agreement; Colson was to
receive 60% of the gross earning and the 40% for Mills. The plaintiff was shot
by one of the actors during the performance and sought to make Colson liable
since he was Mills partner. Court held that sharing gross returns in itself does
not create a partnership.
-The receipt of a person of a share of the profits of a business is prima facie
evidence of existence of a partnership but where the payment is contingent
upon the profits of the firm it does not mean that that person is a partner.

FORMATION OF A PARTNERSHIP

A partnership may be formed by oral or written agreement or the existence of

a partnership may be inferred or implied from the conduct of the parties.

Where the partnership contract is put in writing, it is contained in a document

called a partnership deed and that is what is called a partnership agreement.
The deed will then regulate the conduct of the parties. A partnership
relationship is essentially a contractual relationship so the general principals
of contract apply with equal force to the partnership. A partnership deed
must be drafted with care and be signed by all the partners. It must include
the following clauses:
(a) Name of the firm
(b) Names and addresses of the partners and their occupations
(c) Nature of the business and the place where it will be carried on.
(d) Date of commencement of business, the partnership and the duration of
the partnership if any.
(e) The amount of capital to be contributed by each partner.
(f) How the flow of profits and losses are to be shared.
(g) Interest on partners capital, partner's loans.
(h) Salaries, commissions payable to partners.
(i) Powers and obligations of the partners.
() Procedures to be followed in case of death, retirement and admission of
partner among others.
Where there is no express or oral agreement creating a partnership, the court
will look at the conduct of the partners to determine whether they constitute a
partnership.

NAME OF THE PARTNERSHIP AND MANDATORY REGISTRATION.

The Partnership Act provides that the persons who form a partnership are
called a firm (partners) and the name under which they conduct their
business is called the Firm name. A firm has a right to conduct its business
under any name but the name should not be similar to the name of another
firm which is already in existence.

s. 4 of the Partnership Act 2010 provides for mandatory registration of the

firm name, it provides that every firm carrying on a business under a business
name which does not consist of the surnames of all the partners must be
registered under the Business Names Registration Act, within 14 days after
the Firm has commenced business.

For the registration of the firm name, the following details must be submitted
to the Registrar.
1. The business name.
2. The general nature of the business carried on by the firm.
3. The principal place of business of the firm.
4. The present Christian name and surname of each partner.
5. The nationality and residential address of each partner.
6. Any other business or occupation of each partner.

The registrar of business names issues a certificate indicating the firm name
registered. This certificate must be displayed at the Firm's principal place of
business.

NUMBER OF PARTNERS

A partnership cannot consist of more than 20 persons except where they are
professionals. In the case of banking business, the number of partners is
limited to 10. If the number of partners exceeds these limits, then the
partnership becomes an illegal association. In the case of FRORTHALL
BAKERY SUPPLY CO. V FREDRICK MUGHAIL WARGOE 1959 E.A 474, the
plaintiff was an association consisting of 145 persons trading in partnership
for gain but the firm was not registered under the Registration of Business
Names Ordinance. The issue was whether the firm had a legal existence and
court held that once a partnership exceeds 20 persons, it can no longer be
regarded as a partnership.

PARTNERSHIP PROPERTY

Partnership property is defined by the Act under s.22 as all property and
rights or an interest in property originally brought into the partnership stock
or acquired whether by purchase or otherwise on account of the firm or for
the purposes, and in the course of the partnership business.

Partnership property must be held and applied by the partners exclusively for
the purposes of the partnership and in accordance with the partnership
agreement.

Some property may be used for the purposes of the firm's business and yet
may not be part of the partnership property e.g office furniture or equipment
may be used by the firm and yet remain the property of one of the partners. It
is always necessary to distinguish between partnership properties from the
property belonging to the partners.

s.23 provides that property bought with the money belonging to the firm is
deemed/will be said to have been bought on behalf of the firm. It follows from
this therefore that property bought using the firm’s money is deemed to be
partnership property.

In case of execution of a decree of court, s. 25 provides that execution of a

decree shall not issue against any partnership property except on a judgment
against the firm. If a partner is a judgment debtor, then a creditor can apply to
court to have the share of that partner’s interest in the partnership property
and profits charged with payment of the amount of the judgment debt.

RETIRING PARTNER

A partner has the liberty to retire from the partnership at any stage before the
partnership expires;
-by giving notice to the other partners of his intention to dissolve the
partnership
-by obtaining the consent of the other partners regarding the dissolution.
Where the partners decline to give their consent to the dissolution, that
partner has the option of retiring from the partnership s. 28.

Where a person retires from a partnership, he ceases to be a partner (stops

being a partner). However where a partner has retired, the other partners
should not still represent/hold him out to third parties as a partner. Where
this happens, the retired partner will continue to be liable for the debts of the
firm even those which are incurred after his retirement.

Therefore to avoid all this, a partner on retiring must take steps and give
notice to the creditors and the general public that he is no longer a partner in
the firm so that in case the firm incurs debts after he retires then he will not
be liable.

RELATIONS OF THE PARTNERS/POWERS OF PARTNERS TO BIND EACH

OTHER.

Every partner is an agent of the firm and his or her other partners for the
purpose of the business of the partnership. s.5

The act of any partner done in the ordinary course of business of the firm
binds the firm and the partners unless the partner so acting does not have
authority to act for the firm in that particular transaction and the person with
whom the partner is dealing knows that the partner has no authority or does
not know or believe him to be a partner.

Thus a partner has authority to bind other partners. The partner is seen as an
agent of the other partners. There are different types of authority that a
partner as an agent of the other partners may have.

AUTHORITY OF AN AGENT.

Authority of an agent means his capacity to enter into a given contract on

behalf of his principal and bind that principal by such contract. The agent can
only bind the principal only where he acts with the authority of the principal.
In order for the agent to act with authority, he must do that act which the
principal gave him powers to do i.e. he must act within the scope of his
authority and not to go outside that scope. If he acts beyond those powers he
will be exceeding his authority and those acts where he has exceeded
authority will not bind the principal and the agent will be personally liable for
them.

Authority of an agent may be divided into the following types/categories.

EXPRESS/ ACTUAL AUTHORITY.

This is where the authority of an agent is clearly spelt out orally or in writing.
Sometimes the law requires that authority of an agent be put in writing in a
particular form for example agency to buy or sell land on behalf of another
must be in from of a special document called a power of attorney.

IMPLIED AUTHORITY/USUAL AUTHORITY.

This refers to an agent's authority to do all acts necessary for the performance
of those acts where he has been given express authority. So where an agent is
given express authority to do a certain act, he will have implied authority to do
all other things that are necessary to perform such an act. For example if x
appoints y to buy him land. Y will have express authority to buy the land, he
will also have implied authority to; look for the land, ascertain the real owner
of the land, ascertain its value, sign the sale agreement and pay for that land
and transfer into the names of X.

Implied authority of an agent may also arise from custom. A principal who
appoints an agent to act for him in a particular market also gives him implied
authority to follow the customs of that market. Thus if there is a custom in that
market, the principal will be bound by it even if he did not know about it.
However where the custom is inconsistent with the express instructions of the
principal, then the principal will not be bound by that custom.

Implied or usual authority may also mean that authority which a particular
type of agent usually has. In the case of Panaroma Developments Ltd v
Fedelis Furnishings (1971)2 QB 711 it was held that a company secretary
had usual authority to hire cars on behalf of the company and the company
would be liable for the hire charges even if she had not been authorized or
actually used the car for her own purposes.
This is because a company secretary has usual authority to hire cars on behalf
of the company and anyone dealing with her in that capacity would assume
she had that authority.

A managing director of a company has usual authority to make commercial

arrangements binding the company.

APPARRENT AUTHORITY/ OSTENSIBLE AUTHORITY/ AUTHORITY BY

ESTOPPEL.

This refers to that authority which the agent appears to have but does not in
fact have.
It arises out of estoppel. Where the principal by his words or conduct has led
others to believe that an agent had authority and others have acted on this,
then he will not be allowed to turn around and say that the agent did not have
authority to act on his behalf.
In the case of Rama Corporation v Proved Tin and General Investments
Ltd [1952] ALL ER it was stated that for one to say that an agent has authority
by estoppel, the following conditions must be fulfilled
The principal must have made a representation that the agent has authority to
act on his behalf. A representation may be by word or conduct eg where a
principal makes an agent appear like he has authority.

The person to whom the representation was made must have relied on that
representation thinking that it was actually true.

And that person must have acted on it to his or her detriment.In the case of
Edmund Schulter & Co (U) Ltd v Patel (1969) E.A 259, A principal
authorized his agent to sell his land to a buyer. The principal gave his title to
the agent. The buyer paid the deposit of the purchase price to the agent and
the balance was later paid directly to the principal. The agent however
disappeared with the deposit and the principal sought to recover the money
from the buyer arguing that the agent was not authorized to receive the
money and therefore the buyer should not have given him the deposit. Court
held that though the agent had no express authority to receive the money, the
fact that the principal had given him the certificate of title to the land
presented him as having authority to act on behalf of the principal and
therefore the principal was estopped from denying the agents authority.
Apparent authority can only arise from a representation made by the
principal and not one made by the agent, in the case of Attorney General V
Silva (1953) AC, a crown agent falsely represented that he had authority to
sell steel plates which were crown property, it was held that the crown was
not liable since the representation was made by the agent and not the
principal (crown).

EXTENT OF PARTNERS AUTHORITY & LIABILITY.

The extent to which a partner may bind the firm was described in the case of
RE AGRICULTURALIST CATTLE INSURANCE CO [The Baird’s case] [1870] LR
5 or CH or AC 725 where the court observed that as between the partners and
the outside world each partner is the unlimited agent of every other in every
matter connected with the partnership business or which he represents as a
partnership business and not being in its nature beyond the scope of the
partnership. Court went on to say that a poor partner may bind the
partnership for contracts of any amount and may give the partnership
acceptance for any amount and may involve his innocent partners in unlimited
amounts for frauds which he has craftly concealed.

Also in the case of WATTEAU V FENWICK the managing partner of a

partnership exceeded his authority in the usual course of business, the other
partners were held liable as principals for the acts of their agent even though
he had exceeded his actual authority.

In the case of HAMLYN V HOUSTON [1903]1 KB 81, H an active partner in a

firm consisting of himself and S bribed a clerk of a rival firm to disclose
confidential information concerning the contracts and tenders of his
employment. It was found that the obtaining of information lay within the
firm’s business and that the means employed were sufficiently related to that
end to make the firm liable.

The partners act may thus be willful or negligent tortuous or criminal’ Collin
MR went on to say that
“ it is too well established by the authorities to be now disputed that a
principal may be liable for the fraud or other illegal act committed by his
agent within the general scope of the authority given to him and even the fact
that the act of an agent is criminal does not necessarily take it out of the scope
of his authority.”
 The act does not have to be for the principal’s benefit according to the House
of Lords judgment in the case of LLOYD V GRACE SMITH &CO [1912] AC
where Lord Macnaughten said that
“ the principal must be liable for the fraud of his agent committed in the
course of his employment and not beyond the scope of his authority, whether
the breach was committed for the principals benefit or not.

Whether an act was committed in the course of business depends on the facts
of each case”

However, where the partner pledges the credit of the firm for a purpose
apparently not connected with the firms ordinary course of business, the firm
is not bound, unless that partner is infact specially authorized by the partners.

Where it has been agreed between or among the partners that a restriction
shall be place d on the power of any one or more of them to bind the firm, an
act done in contravention of the agreement is not binding on the firm with
respect to persons having notice of that agreement.

LIABILITY OF PARTNERS

A partner in a firm is liable jointly with the other partners for all debts and
obligations of the firm incurred while he is a partner. S.9 KENDALL V
HAMILTON.

Partners have unlimited liability. The liability of each partner is unlimited such
that if the firm defaults, creditors will have a personal claim against the
partners. This means that in case the firm incurs debts and the partnership
property is not enough to meet the debts of the firm, then the partners will be
personally liable. i.e the partners personal property can be sold to meet the
firm's debts.

Although a minor can be a partner in a firm and enjoy benefits of the

partnership but he is not personally liable for the debts of the partnership.

In the case of LOVELL V BEAUCHAMP [1894] AC 607 court observed that it

is clear that there is nothing to prevent an infant from becoming a partner but
that infant cannot contract debts by such trading, although the goods may be
ordered for the firm, he does not become a debtor in respect of them. Court
further observed that however this does not mean that the adult members will
not be liable on such contract, court went on to say that if the adult members
of a partnership could avoid liability because one of the partners is a minor,
minors would then be found in every partnership.

However, the share of that minor in the property of the firm is liable for any
obligations of the firm s.10.

But on attaining majority age, the minor, now adult, will be made liable for all
the obligations of the partnership from the date of his or her admission unless
he or she gives public notice within a reasonable time of his or her repudiation
of the partnership. s.11.

A new partner is not liable for the debts of the firm which were incurred
before he became a partner. For him to be liable for such debts, he must have
agreed in writing at the time of joining the firm that he will pay the debts of
the firm which were incurred before he became a partner. S.19

A partner who retires from the firm does not cease to be liable for the
liabilities incurred while still a partner. S 19. However he may be discharged
from his liabilities by agreement.

Since partners have unlimited liability, where a partner dies, his estate will be
liable to meet the debts of the firm. S.9 KENDALL V HAMILTON.

Where by a wrongful act or omission of any partner acting in the ordinary

course of business of the firm or with the authority of his or her co partners,
loss or injury is caused to any person not being a partner, the firm is liable.
S.12.

s.14 provides that where a partner acting within the scope of his or her
apparent authority receives the money or property of a third person and
misapplies that money or property, the firm is liable. Also where a firm in the
course of its business receives money or property of a third person and the
money or property so received is misapplied by one or more of the partners
while it is in the custody of the firm, the firm is liable.
However if a partner misapplies trust property held by him as trustee in the
business or on account of the firm, the partners are not liable. In the case of
EXPARTE HEATON, liability of the partners where a partner employs trust
property for partnership business was discussed, in this case father and sons
were partners, the sons who were trustees of a will applied trust money for
partnership purposes and on bankruptcy, it was held that the amount so
applied could not be proved against the joint estate , partners could only be
made liable after proof that they were implicated in the breach of the trust.

VARIATION BY CONSENT OF THE TERMS OF A PARTNERSHIP.

S.21 provides that the mutual rights and duties of partners, whether
ascertained by agreement or defined by the Act, may be varied by the consent
of all the partners, and that con sent may be either express or inferred from
the course of dealing.

DUTIES/OBLIGATIONS OF PARTNERS

1. Duty of outmost good faith. This principal is not outlined in the

Partnership Act but it is a recognized principal that all provisions in the PA
rotate around it. Under this duty of outmost good faith, partners are expected
to be honest and fully disclose to each other matters and issues involving the
firm. Each partner is expected to deal with his fellow partners honestly and to
disclose any relevant facts fully and must act transparently. This was
illustrated in the case of LAW V LAW [1905]1 CH 140 where it was held that
every partner owes a duty of disclosure of information regarding the
partnership business. In this case court held that it is clear law that in a
transaction between two co-partners for the sale by one to the other of a share
of the business, the co-partner should disclose all the information that is
within his knowledge about that transaction and where he does not do that,
then sale is voidable and may be set aside.

2. Duty to render true accounts; every partner has a duty to render true
accounts and give all information about all aspects and matters of the
partnership business.s.30

3. Duty not to make secret profits; A partner is under a duty not to make
secret profits. He must not secretly benefit from the firm's property, firm's
name, or business connections. S.31. He must not use the firm's name or his
position as a partner or his business connections as a partner to make secret
profits. Where he makes such profits, he will be called upon to refund to the
firm any benefits or profits that he may have made. In BENTLEY VS CRADEN
[1853] BEFD 75; the plaintiff and defendant were in a business of sugar
refining. The defendant was the purchasing officer for the firm. He bought
sugar at a low price and kept it and waited for the price to rise and he resold it
to the firm at the prevailing market price which was higher than the price at
which he bought it. Court held that the defendant was accountable to the firm
for the profits made. Also in the case of PATHIRANA V PATHIRANA [1967] 1
ac 233, the two partners dissolved the partnership but one of them continued
to use the partnership assets and the other partners share capital and made
profits, it was held that that partner was liable to account to the other partner
for the profits made out the partnership assets and capital after dissolution
and that the plaintiff partner was entitled to a share of the profits.

4. Duty not to compete with the firm; A partner must not set up a business
which is similar to that of the firm unless with the consent of the partners.
Where he does this he will be accountable to the firm for all the profits he
makes out of that business. S.32. He must not in any way compete with the
firm. In AAS VS BENHAM [1891] 2CH 244; a partner in a firm of ship brokers
whose business was to charter ships used information which he obtained in
the business to set up a ship building company for which he also received
remuneration and also became a director. His fellow partners brought an
action for an order for him to account for the remuneration and salary in this
second company. Court held that this type of activity was outside the scope of
the partnership business and was therefore not in competition with it. That
the partner was therefore under no duty to account for the remuneration he
received as a director.

This principal was also illustrated in the case of TRIMBLE V GOLDBERG

[1906] AC 494.

5.Duty with regard to partnership property; every partner has a duty to

hold and apply partnership property exclusively/only for the purposes of the
partnership business.
6.Since partners have unlimited liability, every partner has a duty to share in
the debts of the firm.
MANAGEMENT AND CONTROL OF THE PARTNERSHIP.

Every partner has the right to take part in the management of the firm.S.26.e
The partners may however decide that one of them should be in charge of the
management of the firm. Unless the parties agree in this manner, where a
partner is excluded from taking part in the management of the firm, this can
be a ground for the dissolution of the firm. In the case of DAUDE V HOUSEN
17 EACA, it was held that forceful ejection and refusal of one partner to take
part in the management of the partnership business could be a cause to
dissolve the partnership on just and equitable ground.

No partner shall be entitled to remuneration for acting in the partnership

business.

And no person may be introduced as a partner without the consent of all the
existing partners.

Any difference arising as to ordinary matters connected with the partnership

business may be decided by a majority of the partners but no change shall be
made in the nature of the partnership business without the consent of all the
existing partners.
In the case of HIGHLY V WALKER [1910] 26 TLR 685, Three partners run a
large and profitable business, two of the partners agreed to allow the son of
one of them to be taken on as an associate to learn the business. The other
partner objected and applied for an injunction. Warrington J decided that
since the majority had accepted and after properly discussing the matter with
the other partner, listening to his arguments and generally acting bonafide,
their decision should stand, it was an ordinary matter connected with the
partnership business and therefore a decision for the majority.

MINORITY PARTNERS AND THE MANAGEMENT OF THE PARTNERSHIP.

Where a minority partner thinks that he is being unfairly treated by the

majority, he can sue the majority for breach of a particular agreement or opt to
seek dissolution of the partnership. However one problem for a minority
partner is to prove unfair treatment. He can perhaps look at the partnership
books of accounts and use them as evidence since he has a right of access. In
the case of LAKHANI & LAKHANI V BHOJANI [1950] 18 EACA 27 & 29 one
partner kept the books of accounts and refused access to a co-partner, the
supreme court ordered the production of the same and held that;
‘where one party has a document in his possession in which both parties have
a common interest, the other party is entitled to inspection of it, and in this
case it was obvious that both parties had common interests in the books of
accounts and that the plaintiff was entitled to access of such’.

EXPULSION OF A PARTNER.

s.27 provides that a majority of the partners have no powers to expel any
partner unless a power to do so has been conferred by express agreement
between or among the partners. In the case of ZODO V OKWANIZOR [1961] 1
NLR 29 it was held that there are three questions involved in considering
expulsion clauses.
-is the expulsion within the terms of the expulsion clause of the partnership
agreement?
- do the rules of natural justice apply to the expulsion procedure and if so have
they been complied with?
- did the expelling partners act in good faith and in accordance with their
fudiciary duties? If the answer to all the above questions is yes, court will
support the expulsion. In the case of GREEN V HOWELL [1910 1 CH 495 and
CAR MICHEAL V EVANS [1904] 1 CH 486. In the case of Car Micheal articles
of a partnership provided that in the event of either of the junior partners
being addicted to scandalous conduct detrimental to the partnership business
or being guilty of any flagrant breach of the duties of a partner, the senior
partner might give the offending partner 6 days notice of expulsion from the
partnership.
One of the junior partners having been convicted of a related offence was
given notice of expulsion, he applied to court for an interlocutory injunction.

It was held that the plaintiff had been convicted of dishonesty and the
notice of expulsion was justifiable and that under the circumstances, the court
declined to interfere by interlocutory injunction.

RIGHTS OF PARTNERS s.26

Every partner has the right to share equally in the profits of the Firm.
Every partner has a right to be compensated for any expenses or liabilities
incurred when doing the work of the Firm.
Every partner who lends money to the Firm has a right to be given interest.
Every partner has the right to take part in the management of the firm.
Every partner has a right to have access to the partnership books. Therefore
partnership books must be kept at the place of business so that every partner
should have access to inspect them and make copies from them.
Every partner has a right to object on a new person entering into the firm as a
new partner.
Every partner has a right to participate in decision making, if the decision is
regarding change of the nature of the business, the consent of all the partners
must be obtained, however other decisions in the firm are to be decided by
majority vote.
Right to share in partnership property upon dissolution.s.41

DISSOLUTION OF PARTNERSHIP. S34-37

A partnership can be dissolved in the following ways;

By lapse of time; where a partnership was set up to carry on business for a

specified period of time, the partnership will come to an end at the expiration
of that period.
Completion of the venture for which the partnership was set up; Where the
partnership was set up to do a particular venture, e.g. construction of a dam or
a road, the partnership will come to an end on completion of that venture.
By agreement. If it was for an undefined time, if the partners agree to dissolve
it.
By notice of intension to dissolve the partnership; any of the partners may give
notice of intention to dissolve the partnership.
Death/bankruptcy /insanity, of the partner; Death, or insanity or bankruptcy
of any one of the partners automatically brings the partnership to an end
unless there was an agreement to the contrary.
A partnership can be dissolved where the partnership engages in an illegal act.
Where the business of the partnership is being carried out at a loss, i.e., where
a partnership is merely making losses, then any of the partner or any other
third party may apply to court for the partnership to be dissolved.
Where a partner becomes permanently incapable of continuing to perform the
activities of the firm. E.g. when he becomes permanently disabled, any of the
partners can apply to court for the partnership to be dissolved.
If a partner continuously breaches the partnership agreement, then any of the
partners can apply to court for the partnership to be dissolved.
Court may also grant an application for dissolution of a partnership on any
other just and equitable ground.

DISTINCTION BETWEEN A COMPANY AND A PARTNERSHIP

Formation. Formation of a partnership is easy i.e a partnership may be

formed by agreement, orally or the law may imply its existence from the
conduct of business by the parties. It therefore has fewer formalities for
purposes of formation where as a company requires formalities such as
registration, securing of a company name, filing of documents etc. The
company is therefore fairy expensive to form as there are a number of
formalities which must be complied with and a number of documents which
must be filed with the registrar of companies.
Legal Status. A partnership has no separate legal status that is separate from
the partner therefore it can not as of right sue or be sued in the partnership
name. However in practice where somebody wants to sue a partnership he
may sue in the firm name. If one wants to sue the firm he must sue all
partners. A company on the other hand has a legal existence which is separate
from its members. See the case of Solomon Vs Solomon and the
consequences of incorporation of a company.
Liability: Partners have unlimited liability where as shareholders in a
company enjoy limited liability. Creditors therefore of a partnership can
proceed against the personal property of the partners where the partnership
property is not enough to satisfy those debts.
Size: A partnership has a maximum number of 20 members and in case of a
partnership for banking business; the maximum is 10 partners, whereas for a
private company, the minimum of partners is 2 and the maximum in 50.
Ultra vires doctrine:This does not apply to a partnership especially where
the existence of such partnership is implied from the conduct of the parties
and it is difficult to tell the scope of their objects/activities the partnership
was set out to do. More so, most partnerships are oral agreements.
Authority to build the enterprise. Shareholders have no authority to build
the company but only the directors can. In a partnership, every partner is an
agent of the others and the acts of one partner while acting in the course of
the partnership business are the acts of the other partners and therefore all
the partners are liable.
Management of the Enterprise:The day to day management of the company
is entrusted with the board of directors of a company by the shareholders of
the company where as in a partnership, every member has a right to take part
in the management of the firm. The structure of a partnership easily allows for
each of the partners to take part in any activity of the firm's business
according to their mutual understanding. In other words there are no
formalities or demarcation of roles as in a company where you find
shareholders on the one hand and the directors and management on the other
hand.
Continuity:
A company enjoys perpetual succession. This means that a company can
continue to exist even where all the share holders die or leave the company.
The existence of a company can only be brought to an end by a legal process
called winding up. On the other hand, a partnership may be dissolved by
death, bankruptcy or insanity of a member.

 Homework.
Read about limited liability partnerships under the
Partnerships Act 2010.

END