BBBA 306: Company and Partnership Law - Relationship Between a Firm and Its Partners

Flashcards covering the legal relationship between partnership firms and their partners, including agency, fiduciary duties, liability, and default rules under Act 152.

What occurs when a partner acts in the name of the firm or carries out business in the name of the partnership firm according to Section 14(1) of Act 152?

An agency relationship is created where the partner is an agent and the firm becomes the principal in respect of the transaction.

What is the core obligation of a partner under the fiduciary relationship established with the firm?

The partner has a duty to always act in the best interest of the firm when carrying on the business of the firm.

What principle regarding partner relationships was established in the case of CONST vrs. HARRIS (1924)?

Partners are bound to be true and faithful to each other, acting in the interests of the partnership rather than themselves.

Under Section 34(2)(a) of Act 152, what is the 'positive duty' regarding information?

Every partner is bound to render to every other partner full information of all things affecting the firm.

According to the ruling in LAW vrs. LAW (1905), why was the bought-out partner not entitled to compensation despite the duty to disclose?

Because he had validly elected to reach a settlement without full disclosure.

What must a partner do if they derive a benefit from a transaction concerning the firm without consent, according to Section 34(2)(b)?

The partner must account to the firm for that benefit.

What are the consequences if a partner carries on a competing business of the same nature without consent under Section 34(2)(c)?

The partner shall account for and pay over to the firm all profits made by him in 그 business.

Under Section 14(2) of Act 152, when do the acts of a partner bind the firm?

When the acts were authorized (expressly, impliedly, or ratified) or were done for carrying on the business of the firm in the usual way.

In MERCANTILE CREDIT VRS GARROD [1962], why was the partnership held liable for a car sale that was expressly excluded in their agreement?

The court looked at 'what was apparent to the outside world in general' and concluded the act was of the kind done in a garage business.

Why did the court hold that the partner's acceptance of shares did not bind the partnership in NIEMANN VRS NIEMANN (1890)?

Because it was not considered a usual method of repayment of a debt.

According to Section 14(4), what is the effect of an act that contravenes a restriction on a partner's powers?

The act will not bind the firm with respect to persons who are aware of such restrictions.

Under the default rules of Section 35, how are capital and profits shared?

Partners are entitled to share equally in the capital and profit of the firm.

What is the rule regarding partner remuneration under Section 35(e) of Act 152?

A partner is not entitled to remuneration for acting in the firm's business.

What level of consent is required to change the nature of the firm’s business according to Section 35(g)?

The consent of all existing partners is required.

What does Section 12(3) of Act 152 state regarding partner liability for firm debts?

Although the firm is a separate legal entity, each partner is also liable, without limitation, for the debts and obligations of the firm.

What is the purpose of 'joint and several' liability under Section 16 of Act 152?

To protect creditors by allowing them to hold either all partners responsible or select any single partner they believe can settle the debt.

According to the lecture, what is necessary for a partner to be entitled to indemnity?

The right to indemnity must be conferred by the partnership agreement.

What is the liability status of an incoming partner regarding firm activities prior to their admission?

An incoming partner is not liable to creditors for anything done before he/she became a partner.

When is a person who had prior dealings with a firm deemed to have notice of a partner's retirement?

Only when that person has received actual notice of the retirement.

According to Section 17(6), how can notice of retirement be given to persons who have NOT had prior dealings with the firm?

By advertising the retirement in a daily newspaper circulating in the district of the firm's principal place of business.

What is 'Liability by Holding Out'?

When a person represents themselves (or allows themselves to be represented) as a partner, they become liable for debts incurred by others who relied on that representation.