S.1 Partnership Act, 1890
The "relation which subsists between persons"
Person includes a corporation as well as an individual.
Companies can enter into partnership with each other.
Partners are usually individuals and there must be
at least 2 partners. The standard maximum number of
partners is 20 (S716 Companies Act 1985)
Some professions are permitted to extend this to make a partnership without a legal maximum.
"Carrying On a Business"
A business is defined to include "every trade, occupation
or profession". A single transaction may suffice.
Liability
Every partner is liable without limit for the debts of the partnership. Liability is joint and several.
Death of a Partner
This may dissolve the partnership unless otherwise agreed.
The estate of the deceased partner is liable for the
debts of the partnership incurred up to her/his death
Retirement
The retiring partner is still liable for any outstanding
debts incurred whilst she/he was a partner unless the
creditor has agreed to release them from liability.
The retiring partner is also liable for debts of the firm after her/his retirement if the creditor has not had notice of the retirement. To avoid liability the retiring partner should give actual notice to the creditors.
In respect of future creditors, the retiring partner should place an advertisement in the London Gazette.
New Partners
Are liable for debts after she/he becomes a partner
Property of the Partnership
That which the partners expressly or impliedly agree.
Some property used in the business may belong to one
of the partners and not to the partnership.
Partners Authority
Every partner is an agent of the firm and her/his other
partners for the purpose of the business of the partnership
The acts of every partner in the usual way of business
of the kind carried out by the firm bind the firm
and the partners unless the partner has in fact no
authority to act for the firm in the particular matter
and the person with whom she/he is dealing either knows
she/he has no authority or does not know or believe
her/him to be a partner.
Sect. 5 Partnership Act [1890]
The Partnership is only bound by acts done by a partner in the firm's name and not apparently for the partners personally.
Mercantile Credit v Garrod (1962)
Evidence was adduced which showed that other businesses of a type similar to the Defendant's business did buy and sell cars.
Held: the test for what is a firm's business is 'what it appeared to the outside world' to be
'Usual Way'
Depends upon particular business and what is the general
practice of similar businesses in terms of type and
size
Main Differences Between Companies and Partnerships
A partner of a commercial firm acting on behalf of the firm and within the apparent limits of its kind of business, is deemed to have authority to:-
The Terms of a Partnership
Usually contained within a partnership agreement although
the law does not require there to be such. An oral
agreement or even conduct may in law create a partnership.
Certain terms are implied into a partnership by the Act of 1890. However, a written agreement will override such terms. An example is that the Act implies a term that all partners will share the profits equally, whereas senior partners will want to take the larger share!
Implied Terms of the Partnership Act 1890
Dissolution
Unlike the company there is no formal statutory supervision of partnerships. Partners who carry on business in a name that is not the surnames of all the partners must state all such names on their letterheads and at their places of business.
Partnerships must make a return for purposes of income tax and usually to register for VAT.
Companies must provide information concerning their accounts. There is no means by which the public has a legal right to inspect a firm's accounts.
