Contract Law - Rights and Duties of Partners

 

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A PROJECT ON:

“Rights and Duties of partners”

Submi t t edby: PALLAVI VERMA

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CONTENT: 1.

INTRODUCTION

2.

DUTIES OF PARTNERS

3.

1)

General Duties of partners

2)

Duty to attain greatest common advantage

3)

Some aspect of fiduciary obligation

4)

Due diligence

RIGHTS OF PARTNERS

1)

Rights to take part in business

2)

Majority rights 3)

Right to indemnify

4)

Right to profit

5)

Right to interest

6)

Right to remuneration www.bleedlaw. com

 

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Rights and duties of partners  To  To fundamental principles govern relations of partners to one another another.. The rst principle gives the partners the free to sattle there mutual rights and duties by their own voluntary agreement. The statement of duties and rights should be prefaced with the contents of section 11 which gives freedom to partners, subject, of course, to the provisions of the act, to determine their mutual rights and duties. Section11- determination of rights and duties of partners by contract between the partnersSubject to the provision of this act, the mutual rights and duties of the partners of a rm may be determined by contract between the partners, and such contracts may be expressed or may be implied by a course of  dealing.

Determination Determinatio n by contract  The second principle of high importance is that relations of partners to one another are based upon the fundamental principle of absolute good fait faith. h. Mu Mutu tual al tr trus ustt an and d co con nde denc nce e am amon ong g the the pa part rtne ners rs,, ther theref efor ore, e, becomes a necessary condition of their relations. Section  gives statutory recognition to this principle by providing that !partners are bound to be  just and faithful to each other". This duty cannot be excluded by any Smith$ agreement to the contrary. #n e!more "# Smith$

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!#n duciary relationship means anything # cannot conceive a str stron onge gerr ca case se of d duci uciar ary y relat elatio ions ns th than an that that wh whic ich h ex exis ists ts be betw twee een n partners. Their mutual condence is the life blood of the concern. #t is because they trust one

 

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anot an othe herr that that th they ey ar are e pa part rtne ners rs in th the e r rst st pl plac ace e it is be beca caus use e they they continue to the trust one another that the business goes on."

Duti Du ties es o off pa part rtne ners rs $ /ll the duties of partners emerge from this overriding principle of good faith. The following are some of them$ 1# Duty of good faith$section#%& 'enera! duties of partners0ach partner owes to the others a duty of honest and good faith. This re reui uire reme ment nt of mu mutua tuall tru trust st ari arises ses bec becaus ause e the they y hav have e all vol volunt untari arily ly constituted one another their agents in relation to the partnership a2airs. (rst and  The (rst  and unchanging aspect is the obligation to be honest. 3ut this does not mean that a partner satises the duty by mere honesty the duty has other characteristic he may be in breach of it without being dishonest or negligent, for instance if he acts for an improper motive. Second aspect  The Second  aspect of the duty is the reuirement of openness. / partner must conceal nothing from his partners which is relevant to the rm4s business. Third!y,, he must act in favour of the rm and not against it. 5e must not Third!y exercise for for   his own advantage the powers which he holds as a partner only on ly.. 5e may no nott pu putt hims himsel elff in a po posi siti tion on wh whic ich h mi mili lita tate tes s ag agai ains nstt discharge of his duty to the rm. )ourth!y,, he must treat fairly a minority within the rm, for instance )ourth!y when contemplating an expulsion. when  )ina!!y, he must not compete with the rm or ma6e a prot at the )ina!!y, expense of his partner. www.bleedlaw.c om

 

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*& Duty to attain greatest common ad"antage  Thus all the endeavours of a partner must be to secure a maximum prot for the rm. 5e should not try to ma6e a secret prot for himself at the expense of the rm. +n ,ent!ey "# Cra"en

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/ partner in a rm of sugars reners, who had great s6ill in buying sugar at the right time, was entrusted to buy sugar for the rm. 5e supplied sugar from his personal stoc6, which he had bought earlier when the prices were low. 5e charged the prevailing mar6et price and thus made a considerable prot. 7hen 7h en his his co8 co8pa part rtne nerr disc discov over ered ed th this is,, they they br brou ough ghtt an ac actio tion n fo forr an account of the prot. The rm was held entitled to that prot. Similarly, where a partner, authorised to sell joint property for sold it to a company, in which he had a large interest, for a much higher price and concealed the excess price, he was held bound to share it with his co8 partner.

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:  / number of aspects of  )& Some aspects of (duciary ob!igation :  partner4s duciary obligation have found their way into the provisions of  the /ct, for example, the duty not to draw any exclusive advantage by the -

use of the partnership property or information , the duty not to draw any benet by engaging into transaction in

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