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

These flashcards cover key concepts about the relationship between a partnership firm and its partners, including fiduciary duties, authority, liabilities, and important legal provisions.

What happens upon the incorporation of a partnership firm?

It assumes a separate legal personality, distinct from the partners.

What type of relationship exists when a partner acts in the name of the firm?

An agency relationship is created between the partner and the firm.

What defines a fiduciary relationship between partners?

Partners must act in the best interest of the firm and owe each other a duty of good faith.

What does Section 34(1) of Act 152 state about partners?

Partners shall stand in a fiduciary relationship towards the firm and their co-partners.

What is the duty of partners concerning information?

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

In the case of LAW v. LAW (1905), what did the court determine about undisclosed assets?

The bought-out partner was not entitled to compensation for undisclosed assets as he accepted the original settlement.

What happens if a partner derives benefits without the consent of the other partners?

That partner must account to the firm for any benefit derived.

What is required for a partner to carry on a competing business?

They must not profit from it or must seek the consent of other partners.

What does Section 14(2) of Act 152 describe?

The acts of every partner shall bind the firm if authorized or were done for carrying on usual business.

When can the firm not be held liable for a partner's acts?

If the partner acts without authority and the third party knows of that lack of authority.

What governing rules apply to partners in the absence of a contrary agreement?

Partners share equally in capital and profits, indemnify for liabilities, and may manage the business.

What does liability mean in a business context?

The legal responsibility to pay money or perform some legal obligation.

What does Section 12(3) of Act 152 state about firm liabilities?

Each partner is liable, without limitation, for the debts and obligations of the firm.

What is the significance of joint and several liability for partners?

Creditors have the option to hold either all partners or any one partner responsible for debts.

What is the right to indemnity according to Section 12(3)?

A partner is entitled to indemnity from the firm and contribution from co-partners according to the partnership agreement.

What is the liability of incoming and outgoing partners?

Incoming partners are not liable for debts before their partnership; outgoing partners remain liable for debts incurred prior.

What signifies a partner holding out in the context of liability?

A person representing themselves as a partner can be held liable for debts incurred by the firm.