PREPARED BY:

MADAM NORAZLA ABDUL WAHAB

 PARTNERSHIP

 The relevant statue applicable-

Partnership Act 1961
 Definition
 Section 3(1) Partnership Act 1961
Partnership is the relation which subsist between
persons carrying on business in common
with a view of profit.
• Partnership must be registered under the
Registration Business Act 1956.
• However, Failure to register does not mean the
partners cannot enforce their rights for each
other.
 Gulazam v Noorzaman and Sobath
[1957] 23 MLJ 45
Facts:
An agreement between the Plaintiff and Defendants
where the Plaintiff would provide capital for the
purchase of cattle and the defendants would look
after the cattle and then sell them in order to gain
profits to be distribute
equally amongst them.
When the defendants failed to pay the plaintiff an
action was brought against them.
Continue….

The Defendant argued that the business had never

been registered under any Acts, hence making it
not a partnership at all.

Held:
The plaintiff could claim because the relationship
between the individuals had the business
character of a partnership within the scope.
 ELEMENTS OF PARTNERSHIP

Present
More than one Agreement
transaction of
person between partners
business activities

Each partner is
Purpose to profit
an agent
 1. More than one person
 Must have more than one person.

Partnership means…….two or more can become a

partner in a partnership…..if one person it will be
sole proprietorship…..
• Section 47(2) of PA 1961 (Revised 1974),
the maximum number of partners allowed
in a partnership is twenty (20).

• But, Section 14(3)(a) Companies Act

1965, a professional partnership can
have unlimited numbers of partners.
• i.e: lawyers- legal firms- LPA
Continue…..
 Tan Teck Hee v Chong Tian Peng

Held:
The action against Defendant fail because
the numbers of partners in the firm
concerned was 25.
Since the firm was void, any legal action taken
could not be allowed.
 • Shim Fatt v Leyland Road Bus Co.

The Plaintiff gave advance on money to the

defendant, a firm consisted of more than 20
partners.
The Court held:
Plaintiff could not recover the money because
a legal action could not be brought
against a void firm,
2. Agreement between the partners
 “relationship” :
an agreement or a contract between the
parties or a contract between the parties to the
partnership either expressly or impliedly.

 Although the word partnership does not appear

in a agreement, a partnership may still exist if the
relationship between the individuals has the
business character of a partnership.
 Ratnal Ammal@anor v Tan Chow Soo
[1964] 30 MLJ 399
Facts:
The parties enter the agreement to form a ‘syndicate”
for the purpose of selling condensed milk.
The word “partnership” was not used in the agreement.
Instead, the word ‘syndicate was used.
Held:
The relation of the parties had the business
character of a partnership and although the word
partnership was missing in the agreement, it was still a
partnership.
 3. Present transaction of
business activities

 The parties must be carrying a partnership

business at the “present”.
 Business refers to any trade, occupation or
profession. (s. 2)
 Hence, there will be no partnership if
the parties are preparing a business
for the future.
 4. Each partner is
an agent to one another

 Partners in a partnership is an agent to

one another.
 It means that the act of one partner are
also reflects of the act of the other
partners, provided the act is in the course
of the business of the partnership.
Continue….
 Section 7

Every partner is an agent of the firm and

his other partners for the purpose of the
business of the partnership….
Acts of the other partners binds the
other partner and the firms….
 UNLESS;
The partner acting without
authority….
and the person with whom he is
dealing either knows that he has no
authority or does not know or
believe him to be a partner….
 5. For the Purpose to Profit

 It is essential for the business to be carried

on in a common with a view of profits.
 Profits mean net profit.
 Charitable or religious organization, clubs,
societies & co-operative are NOT
PARTNERSHIP.
 Impliedly that the profit to be shared
equally
Mollwo, March & Co. v The Court of
Wards

 Held:
To constitute a partnership, the parties must
have agreed to carry on business or to
share profits in some way in common.
  CARRIED ON COMMON ?

 Must carried on or by or on behalf of all

partner.
 Must be one person or more carry on the
business for himself and on behalf of the
others.
 However, it NOT NECESSARY- all partners
must play an active part in business
(sleeping partner).
Circumstances – NOT partnership
 S. 4 (a), (b) & (c) of PA 1961
 Examples:
Joint tenancy, tenancy in common,
joint property
Sharing of gross return
 Types of Partners
 General partners
He is a partner in the fullest sense
• Active partners
A partner who is actively participates in the
management of the business and is known to the
world as the partner
 Dormant/sleeping partner
No active part in the management but still liable
as partner.
  Quasi- Partner
 Not a partner but liable for debts of the
partnership as a consequences of holding out
(causing other people to believe that he is a
partner).

 S. 16- person who has retired from a partnership

must ENSURE that no other representation made
by words or conduct of himself or any other
partner to the effect that he is still a partner of
the firm.
  Salaried partner
 A partner who receives a fixed remuneration
irrespective of profits or who received a fixed
salary every months plus a small percentage of
the profits.
 Formation of Partnership

 Formality
Can be formed with or without written
agreement

• Capacity
Any one of sound mind can be a partner.
A minor partner cannot be held liable and
responsible for any contracts made
Continue….
 Documents
Partnership Agreement Or Articles of
partnership which provides for all rights and
duties of a partner

• Duration
Depends on the intention of the partners
whether to fix the duration of the
partnership or otherwise
  S. 28 (1) :
 no condition as partnership duration: may
dissolve by giving notice.

 Section 29(1):
 if the duration of partnership has expired but all
partners wishes to proceed with the partnership
without having to make a new agreement, the
rights and duties of the partners are still the
same.
RELATIONS OF PARTNERS TO
OUTSIDERS

Power of Partners to Bind Firm

Implied Authority
Liability of Partners
Liability of Persons for Holding Out
 Power of Partners to Bind Firm
 S. 7
Every partner is an agent of the firms and his
partners for business.

 Binds the firms & his partners

 But, the partners NOT LIABLE – if the partner
act without authority
 Implied Authority

 A partner should has authority to do acts as what

had usually done by partners in a particular kind
of business.

 Examples:
 Sleeping partner-bounds by the contract made by
active partners.
 Implied Authority
 Every partner has implied authority to BIND the
firm.
 Depend on the circumstances, nature of business
& practice of the person engaged .
 Examples:
 A partner sells the firm’s goods & chattels (Dore
v Wilkinson (18177))
 Purchasing on the firm’s behalf goods (Bond v
Gibson (1800) 1 Camp 185)
 Implied Authority

 However,

 The partner will be PERSONALLY LIABLE for

his unauthorized act
UNLESS
Be ratified
 Liability of Partners
 S.11

 Every partner in a firm is LIABLE JOINTLY with

the other partners for all debts & obligations of
the firm incurred while he is a partner .
 Liability of Partners
Example:
Mamat supplied stationeries worth RM 5K to the
firm of Didi, Dada & Dudu Trading. However, he
has not been paid for that and start to sue the
firm. If there is insufficient common partnership
property to satisfy the debt, he can levy
execution against private property of the Didi,
Dada & Dudu or anyone of them. If Mamat fails
to recover the debt from Dada ( i.e.) he cannot
later sue the other partner.
 Liability of Partners
 Tortius acts & wrongs (S. 12 &14)

 The partner are JOINTLY & SEVERABLY

LIABLE for such wrongs committed by one of
the partners in the ordinary course of business of
the firm with the authority of his co-partners.
 Liability of Partners
Example:
 The partner done illegitimate – ALL partners are
LIABLE.
 Partner that entrusted with the trust property-
OTHER PARTIES are NOT LIABLE except the
person that personally beneficially interested it.
 Liability of Person for “HOLDING
OUT”
Example:
 He is NOT a partner of the firm BUT he by
words spoken or written
represent himself or allow himself to be
represented as a partner in a firm.

LIABLE as partner BUT his liability only to those

who have given credit to that firm based on a
faith of that representation.
 Liability of Person for “HOLDING
OUT”

Bevan v The National Bank Limited (1906) 23

TLR 65

B carried on business as MW & Co. and employed

MW as a manager of the business.
The court held:
Holding out
 Liability of Person for “HOLDING
OUT”

HOWEVER,
When a partner dies and the partnership business is
continued in the old firm name,
the continued use of that name

DOES NOT make his estate LIABLE for any

partnership debts after his death.
(S. 16 (2))
INCOMING & RETIRING PARTNERS

Incoming Partners
Retiring Partners
 INCOMING PARTNER

 S.19(1)
 Person that admitted as a partner into an existing
firm will NOT be LIABLE for anything done
BEFORE he became a partner.
 RETIRING PARTNER
 S.19(2)
 A partner retires , he REMAIN LIABLE for
the partnership debts incurred BEFORE his
retirement.
 S. 38 (1)
 …He IS still LIABLE UNLESS he has given an
express NOTICE that HE IS NO LONGER A
PARTNER to the person he is dealing with
 PARTNERSHIP PROPERTY
 It must be used EXCLUSIVELY for the purpose
of the firm.
 Purchased with partnership money.
 It must be stated in the agreement OTHERWISE
It is separate property of partner although it may be
used for or even important to the partnership
business.
(see case Ponnukon v Jebaratnam [1980] 1 MLJ
283)
 PARTNERSHIP PROPERTY
Ponnukon v Jebaratnam [1980] 1 MLJ 283

Court held :
The land was not paid with the funds of the
partnership but the fund that raised by the J
himself which is independently of P and the
partnership as well.
 PARTNERSHIP PROPERTY
 S. 25 (1)
A creditor who obtained judgment against the firm may
SEIZE the partnership property in execution of the
judgment.
 HOWEVER,
 S. 25(2)
A creditor who obtained judgment against AN
INDIVIDUAL PARTNER, CANNOT seize all the
partnership property but only on the partner’s interest
in the partnership property including profits etc.
RELATION OF PARTNERS TO ONE
ANOTHER

Via agreement

Mutual rights & duties of the partners

i.e. conduct & management of the business, the
capital to be provided by each partner, the
proportion of profits, rights & duties of the
partners.
 RELATION OF PARTNERS TO ONE
ANOTHER

Via agreement

If No specific provisions- rules in PA will

apply.
However, may be varied by the consent of all the
partners.
 RELATION OF PARTNERS TO ONE
ANOTHER
S. 26

All the partners SHARE the capital, profit & loss

EQUALLY.
The firm must indemnify every partner in payment
made & personal liabilities incurred by him.
Entitled for the interest of 8% per annum for the
advanced made.
 RELATION OF PARTNERS TO ONE
ANOTHER
S. 26

No partner entitled for the interest of the capital

before the ascertained of profits.
Every partner may take part in the management of the
business.
No partner is entitled to remuneration.
 RELATION OF PARTNERS TO ONE
ANOTHER
S. 26

No person be introduced as partner without consent

of the other partners.
Any differences may be decided by majority but
subject to the consent of all existing partners.
The partnership books/account must be kept at the
place of business.
 RELATION OF PARTNERS TO ONE
ANOTHER
Above all

Principle of “UTMOST GOOD FAITH” between the

partners is implicit in every partnership agreement.

(see case Vasu Devan& Ors vV.V.Nair (1985)1 MLJ 137)

 Assignment of Partner’s Share
A partner is entitled for the proportion of the assets
when the firm’s assets have been sold and after the
deduction of the debt.
A partner may assign his share absolutely or assign the
assignee in the case of mortgage or redeemable charge.
 Assignment of Partner’s Share
However,
the assignee is not entitled to interfere in the:
 management of the partnership business
To require any account of the business transaction
To inspect the partnership book
( S. 33(1))
 Assignment of Partner’s Share
The assignee only entitled:
Receive the share profit to which the assigning
partners entitled to
To accept the account & profit agreed to by the
partners
( S. 33(1))
DISSOLUTIONS OF PARTNERSHIP

Without
Order of the
Court’s
Court
intervention
 1. DISSOLUTION WITHOUT
COURT’S INTERVENTION

 By agreement
Partnerships articles may fix the duration of
partnership, and the partnership is terminated
on the expiry of the period.
The partners may mutually agree to dissolve
the partnership at any time.
Continue….
• By operation of law

By expiration
If a partnership is entered into a fixed term
(section 34(1)(a)) or for a single adventure or
undertaking section 34(1)(b), the partnership is
dissolved on the expiration of the fixed term or
termination of the adventure or undertaking
Continue….
 Notice
Section 34(1)(c)
If the partnership is entered into for an
undefined time, any partner may determine
the partnership at any time by notice to the
other partners.
Continue….

• By death or bankruptcy
Section 35(1)
Subject to any agreement between the
partners, every partnership is dissolved as
regards all the partners by the death or
bankruptcy of any partner
Continue…..
• By charging on shares
Section 35(2)
when a partner suffers his share of a partnership
property to be charged with payment of his
personal debt, the other partner has an option of
dissolving the partnership.

 When a number of partners exceed 20

Continue…..
• By supervening illegality
Section 36
it is unlawful for the business of the partnership
to be carried out
 DISSOLUTION BY AN ORDER
OF THE COURT
 By the application of the partner:
Insanity of partner
Section 37(a)
Permanent incapacity of a partner to
perform his duties
Section 37(b)
A conduct calculated to prejudicially
affect the carrying on of the business
Section 37(c)
Willful and persistent breach of the
partnership agreement
Section 37(d)
Carrying on business at a loss
Section 37(e)
It is just and equitable to do so
Section 37(f)