BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
LAW OF PARTNERSHIP Act 1932
Q#3: What are partnership formation and agreement? Discuss the important point of this
documents?
Partnership agreement or Deed
Partnership deed is a document, which contains all necessary rules and regulations
required to run the partnership business.
Partnership agreement is a document, which determines the rights and duties of partner in
partnership.
Forms of partnership Deeds
A partnership can be formed by oral or written agreement. It is better to have a written
agreement. The partnership agreement in writing is called partnership deed. It contains the rights
and duties of the members.
Contents of partnership Deed
1: Name of firm:
Name of firm should be written in partnership.
2: Nature of Business:
Nature of business should be written in it.
3: Duration:
Duration of partnership whether it is for definite or indefinite period should be mentioned.
4: Capital:
The total capital of the firm and the share of each partner should be written in the partnership
deed.
5: Division of profit and loss:
Division of profit and loss of business should be mentioned in partnership deed.
6: Date:
Date of starting the business should be written in partnership agreement.
7: Name of partners:
Name of partners and their address should be mentioned in the partnership agreement.
By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
8: Salary:
The amount of salary payable to any partner for managing the firm should be written in the
agreement.
9: Location:
Location of the business should be written in agreement.
10: Rights and Duties of partners:
The requirements regarding the rights and duties of each partner are also written in the
agreement.
11: Entry and exit of partner:
Procedure to be followed for withdrawal or for the admission of new partner should be
mentioned in the partnership deed.
12: Ways of dissolution:
The manners under which the firm may be dissolved.
13: Audit and account:
Audit and accounts preparation provisions are also mentioned in the partnership deed.
14: settlement in case of dissolution:
At the time of dissolution of a firm there should be a provision for the settlement of accounts.
15: Arbitration:
In case of any dispute, a facility for settlement is also available.
16: witness:
The witnesses of agreement provisions are also found in it.
17: Determination of Goodwill:
How the value of goodwill is determined. The particular method for this purpose is suited in the
agreement.
18: Loan and interest:
Provisions in regard to the amount of loan and interest thereon.
19: Dealing with Bank:
The name of dealing bank and the names of authorized persons for the dealing are also written.
By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
20: Division of work:
The division of work among the partners for the management of firm.
21: Deficiency in capital:
How the deficiency of capital will be covered at the time of need.
22: Amendment in agreement:
The procedure of amendment in the agreement is also mentioned.
23: drawings:
The amount that each partner shall be allowed to withdraw in anticipation of profit and interest
thereon.
24: Minor partner:
Procedure and provisions regarding the admission of minor in partnership.
25: Revaluation:
The procedure of revaluation of assets and liabilities at the time of retirement or admission of
any partner.
Q# 4: Explain the duties, rights and liabilities of each partner?
The fundamental duties of partners are contained in section 9.
According to partnership act 1932, following are the imporatant duties of the partner.
1: To be sincere and faithful:
Every partner must be just and faithful to the other partners.
2: To render True accounts:
A partner is bound to keep and render true and correct accounts of the partnership. He permits
the other partner to inspect such accounts and to take copies of them.
3: To give full information:
Every partner is an agent of the other partners and such is bound to communicate full
information to them.
4: To indemnify for fraud:
Every partner is bound to indemnify the firm for any loss caused by his fraud in the conduct of
business. The liability of a partner is absolute and no partner can contract himself out of it. If a
partner commits a fraud on his co- partners, he must indemnify them for any loss caused to them
by his fraud.
By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
5: To carry on other business:
It is the duty of the partner that he should not carry on any other business except the business to
other partners.
6: To share losses:
As in the case of profits, in the absence of an agreement to the conflicting, every partner is bound
to share the losses equally with the other, if there is an agreement then in the proportion as the
agreement provides.
7: Compensation for loss:
If a partner commits a fraud to his copartner he must compensate the loss.
8: To act within authority:
Every partner is bound to act within the scope of the actual authority conferred upon him. Where
he exceeds his authority, he shall have to compensate the other partners for any ensuing loss,
unless they approve his act.
9: To abide by the decision:
The partner should abide by the decisions taken by the majority of the partners.
10: Not to assig his rights:
No partner can assign or transfer his partnership interest to any other person, so as to make him a
partner in the business.
Rights of partner
1: Right of profit:
Every partner is entitled to share in the profits equally, unless different proportions are specified.
There is no connection between the proportion of capital contributed by the partners and their
share in the profit earned, nor will fact that the work done by the partners in unequal affect the
question of their share.
2: Right of inspection:
Every partner has a right to check the accounts of the business.
3: Right to take part in Management:
Every partner has a right to take part in the conduct and management of the business. It may be
pointed out again that this rule, like most of the following rule subject to any contract to the
conflicting between the partners and applies only when no agreement regarding conduct of
business exists.
By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
4: Right of Opinion:
Every partner has right to express his opinion relating business activities. By a single partner
cannot change the nature of business.
5: Right of Salary:
A partner has a right to demand salary for performing his duties in the management of a
business.
6: Right of existence:
Any other partner from the business cannot expel a partner. Every partner has a right to live in
the business.
7: Right of retirement:
Every partner has a right to retire from the firm serving notice.
8: Right of access to account:
Every partner, active or dormant, has a right to free access to all records books and accounts of
the, business and also to examine and copy them. But a minor admitted to the benefits of the
partnership has only a right of access to accounts and inspect any copy them, but not to books.
9: No liability before joining:
An incoming partner will not be liable or any debts or liabilities of the firm before he become a
partner, excepting by his own consent.
10: No new partner to be introduced:
Every partner is entitled to prevent the introduction of a new partner into the firm without his
consent, unless there is an express contract permitting such introduction.
Liabilities of partners
1: Liabilities of new partner:
A new partner cannot be held responsible for the loss or the share of profit before his date of
admission or a new partner is liable all the acts of the firm after he becomes a partner.
2: Liability of insolvent partner:
The firm is not liable for any obligations of the insolvent partner after the date on which the
order of insolvent by court is make ‘
By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
BS COMMERCE BUSINESS LAW 3RD SEMESTER
CHAPTER #1
3: Liability of retired partner:
A partner who retired will not be responsible for any act of the firm after the date of his
settlement. However, he is liable for the debtes of the firm incurred before the date of his
retirement.
4: Liability of deceased partner:
The property of the dead partners not liable for any obligations of the firm after his death.
5: Liability of fraud:
If any partner commits fraud the other partners will also be equally liable with him.
6: Liability of all action:
All the partners of the firm are jointly responsible for all the action done by the firm.
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By: Mohammad Akram (((((Govt college of commerce, Quetta)))))
