No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the parties.
Where there is a power of expulsion it must be used in good faith, but allows service of notice of expulsion without warning or opportunity to offer an explanation.
Duties of Partners
Rendering true accounts and full information
Partners are in a fiduciary relationship with other partners and contract between them require full disclosure. This duty is owed to other partners or their legal representatives. In Law v. Law [1905], the parties were brothers and partners. The plaintiff sold his share in the partnership but later discovered that certain assets had not been disclosed to him. He succeded in an action for misrepresentation against the defendant.
Duty to account for secret profits
Every partner must account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership property name or business connection. In Bentley v. Craven (1853), the plaintiff was in partnership with the defendants as sugar refiners. Craven, the firm’s buyer, bought sugar cheaply and sold it to the firm at the market price. The court held the firm was entitled to the profit made by Craven.
The section also applies to transactions undertaken after the partnership has been dissolved by the death of a partner and before the affairs thereof have been wound up. In Thompson’s Trustee in Bankruptcy v. Heaton [1974], T and H were partners and as such held the lease of a farm. The firm was dissolved by mutual consent and the farm was occupied by H and later by a limited company controled by H and his wife. On H’s death, T claimed a half-share of the lease, and in the same year, H’s executors acquired the freehold reversion and later sold the farm. T’s trustee in bankruptcy succesfully sought a declaration that the executors held the reversion as trustees for themselves and T.
In Boardman v. Phipps [1966] the appellants acted as agents for a trust which held shares in a private company. As a result of information gained as trustees, the agents purchased nearly all the other issued shares in the company without the prior consent of the trustees and, as a result of their management skills, the shares increased in value to the benefit of the trust and themselves. In an action brought by one of the beneficiaries of the trust, the House of Lords held that the agents were accountable to the trust for the profit made by them since their opportunity for making a profit arose because of their agency on behalf of the trustees of the trust.
Duty not to compete with the firm
If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business. The partnership agreement would usually prohibit the carrying on of such a business.
The relations of Partners to Persons dealing with Them
Powers of partners to bind the firm
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner bind the firm and his partners, unless the partner has in fact no authority for the firm in the particular matter.
Liability for Debts and Contractual Obligations
Every partner in a firm is jointly liable with the other partners for all debts and obligations of the firm incurred while he is a partner; and after his death his estate is also severally liable for such debts and obligations, so far as they remain unsatisfied.
Joint liability means liability interdependently with the other partners to the joint creditors of the firm but not independent (or several) liability.
It is still normal for persons dealing with a firm to provide that partners shall be jointly and severally liable, however, since this means that, in the event of the bankruptcy of the firm, they would have an equal claim with other separate creditors against the estate of the individual partner, as well as against the joint assets of the firm.
Liability in Torts
A firm can be liable for the general torts of partners, and for the misapplication of money and property of third persons. It can also be vicariously liable for the torts of its employees under the normal common law rules. Every partner is jointly and severally liable for torts committed while he was a partner.
Vicarious liability
The firm is only liable where the partner was acting (i) in the ordinary course of the business of the firm, or (ii) with the authority of his copartners and where (iii) loss or injury is caused to any person not being a partner. In Hamlyn v. John Houston & Co. [1903], a partner of the defendant firm bribed a clerk of a rival firm to disclose confidential information causing that rival firm to suffer loss. The Court of Appeal held the defendants liable for the wrongful act of the partner. It was in the ordinary course of business to obtain information about a trade rival, whether the means employed were legitimate or illegitimate.
Questions
1) What is the main distinction between sole trader or partnership, on the one hand, and registered company, on the other hand?
2) Give the definition of a partnership.
3) What persons can be partners and what persons cannot?
4) In what situations are partnerships considered illegal?
5) What are the rights of partners?
6) What are the duties of partners?
7) What are partners liable for?
8) What kind of name cannot be used as a name of a partnership?
4. Find the following sentences in the text.
1) Собственник, конечно, может нанимать других людей, но ответственность за успех или неудачу предприятия в руках индивидуального предпринимателя.
2) Условие относительно прибыли означает, что эта форма не может быть использована для благотворительных или некоммерческих целей.
3) Компания с ограниченной ответственностью может быть партнером, если это разрешено меморандумом ассоциации.
4) Капитал, вложенный несовершеннолетним, может быть использован для оплаты долгов фирмы.
5) Товарищество является нелегальной ассоциацией, если количество партнеров превышает законный максимум, который равен 20 для торговых товариществ.
6) Все партнеры имеют одинаковую долю в капитале и прибылях и должны иметь одинаковую долю в убытках.
7) Таким образом, работающие партнеры получают больше, чем те, кто не посвящает все свое время делу.