Updated: Aug 16, 2020
1.General Duties of Partners
Partners are bound to carry on business to greatest common advantage such as they should be just, should be faithful to one another and should render true accounts and full information of all things which affect the firm to any partner or his legal heir.
2.Duty to indemnify for loss caused by fraud
Every partner shall compensate the firm for any kind of loss caused by fraud in the conduct of the business of the firm.
3. Determination of rights and duties of partners by contract between the partners
(i)The mutual rights and duties of the partners of the firm may be determined by contract between the partners and such contract can be either expressed or implied by a course of dealing.
Changes can be made in the contract by taking consent of all partners and such consent can be either expressed or implied by course of dealing.
(ii)Agreement in restraints of trade
According to Section 27 of Indian Contract Act, 1872, contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner at that particular firm.
4.The conduct of the business
a) Every partner has a right to take part in the conduct of the business.
b) Every partner is bound to do his duties in the conduct of the business.
c) If any difference arises as per prescribed terms and conditions then majority of partner would decide and each and every partner has right to express his/her opinion before matter is decided (no change can be made without consent of all the partners).
d)Each and every partner has right to access to or inspect the books of accounts of the firm.
e) In case of death of the partner his heir or legal representative has the right to access or inspect the books of account of the firm.
5.Mutual rights and liabilities
a) A partner will only be entitled to share profit and not receive remuneration.
b) The partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm.
c) When a partner is entitled to receive interest on capital then interest shall only be paid out of profit.
d) A partner for purpose of business gives any payment or advance amount of capital which he has agreed to subscribe is entitled to receive interest at 6% per annum.
e) The firm shall indemnify a partner in respect of payments made and liabilities incurred by him.
i) In the ordinary and proper conduct of the business
ii) In doing such act, in an emergency for the purpose of protecting the firm from loss as would be done by a person or ordinary prudence in his own case, under similar case.
f) A partner shall indemnify the firm for any loss caused to it by his willful neglect in conduct of business of the firm.
6. The property of the firm
Property of the firm includes all property and rights and interest in property of the firm brought into the stock of the firm or acquired or purchased or otherwise by or for the firm for some purpose and in course of the business of the firm and it includes goodwill of the business.
It would not be said as a property if property is acquired with the money belonging to the firm and are deemed to have been acquired for the firm.
7. Application of the property of the firm
The property of the firm shall be held and used by partners exclusively for the purpose of the business.
8. Personal Profit named by partners
a) If the partner derives any profit for himself from any transaction of the firm or using business connection or firm’s name, then he shall pay the profit to the firm
b) If a partner carries any business of same nature competes with the firm then he has to pay the profit made by him in that business to the firm.
9. Rights and duties of partners
a) After change in the firm
Where a change occurs in constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change.
b) After expiry of the term of the firm
Where a firm constituted for a fix term continues to carry on business after expiry of the term, the mutual rights and duties of partners remain the same as they were before the expiry.
c) Where additional undertakings are carried out
Where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertaking.