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Limits on Agency of partners

As stated above, every partner is an agent of the other partners and has implied authority to do all acts and things necessary for the purpose of carrying on business of the firm. But such an implied authority does not empower a partner to

a.     submit a dispute relating to the business of the firm to arbitration or

b.    open a banking account on behalf of the firm in his own name,

c.     compromise or relinquish any claim or a portion of a claim by the firm,

d.    withdraw a suit or proceeding on behalf of the firm,

e.     admit any liability in a suit or proceeding against the firm,

f.     acquire immoveable property on behalf of the firm,

g.    transfer any such property, or

h.     enter into any partnership on behalf of the firm.

These being the implied authorities they can be modified by express provisions in the partnership deed.

As stated above, the partnership is not a legal entity by itself, but only an association of persons and the name of the firm is only a mode or compendious expression representing the partners. However, section 22 of the Act provides that in order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name or in any other manner expressing or implying the Intention to bind the firm. This means that in order to bind the firm and all the partners thereof every act must be done in the name of the firm or expressly on behalf of the Firm. Therefore, when a contract is entered into for and on behalf of a partnership firm. It is desirable to make the firm by its one or more partners as a party or one or more partners can be made a party in his or their names but as partners of their firm. A mere description of the signatory that he is partner of a firm may not be sufficient to bind the firm. But here a distinction should be made between an ordinary contract and a deed of transfer of any immoveable property. In a case where an immoveable property is to be acquired by purchase or lease or otherwise, it is necessary to make all or some of the partners as parties and not the firm in its name. A firm is not a legal person and a transfer can be only by or in favour of a legal orjuridical person as provided in S. 5 of the Transfer of Property Act. A partnership firm by its name is not a juristic person like a corporate body. It is the partners who are as a body of persons juristic persons .

     It is not necessary to deal with the provisions of the Partnership Act contained in sections 20 to 30 as they are not relevant so far as drafting of a deed of partnership and other incidental documents, is concerned. Those provisions are also binding upon any firm as they are not subject to contract to the contrary

Retirement of a partner

            Under the Partnership Act no person can be admitted into partnership without the consent of the other partner or partners unless there is any contract to the contrary (s. 31).

            Any partner may. with the consent of all the other partners or in terms of the deed of partnership where the partnership is at will, by giving notice in writing to all other partners, to that effect, dissolve the partnership or retire from partnership.

            A retiring partner, however, continues to be liable to third parties even If the liability Is taken over by the remaining partners (s. 32) Therefore in a deed of retirement it is necessary to provide that In the event of the retiring partner being held liable by a third party, the remaining partners shall indemnify him to that extent, when the liabilities are taken over by the remaining partners.

            Insolvency of a partner also causes compulsory retirement of an insolvent partner (s. 35). It is, therefore, generally provided in a deed of partnership when there are more than two partners that the insolvency of any partner will not dissolve the partnership. If a partner retires, unless there is contract. to the contrary, the retiring partner cannot use the firm name, represent himself as carrying on the business of the firm or solicit the customers of the Firm. (s. 36).

            Therefore, in a deed of retirement It is generally not necessary to make explicit that the retiring partner shall not do any of these things. But if he is to be restrained from carrying on similar business for a specified period or in a specified area, such condition can be provided in she deed of retirement and it is legal (s. 36(2)).

 


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