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
dispute relating to the business of the firm to arbitration or
banking account on behalf of the firm in his own name,
or relinquish any claim or a portion of a claim by the firm,
a suit or proceeding on behalf of the firm,
any liability in a suit or proceeding against the firm,
immoveable property on behalf of the firm,
any such property, or
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
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)).