LAW OF PARTNERSHIP

Introduction

The law of partnership has been said to be a combination of the law of contract and
the law of Agency. The word Partnership can be used in two senses; first, to
indicate an actual contract; and second, to indicate a relationship between two or
more persons. Partners are usually individuals, though artificial persons, e.g.
companies, may be involved in a partnership. Similarly, a partnership may be a
partner in another partnership.

NB: even though a partnership lacks legal personality, in terms of the Magistrates‟
Court (Civil) Rules and the High Court Rules, as a matter of convenience it may
bring and defend court actions in its own name. Any of the partners may represent
the partnership in legal proceedings, but may not do so for any fee or reward of any
kind.

DEFINITION

A contract between two to twenty people in which each agrees to contribute

something to a common business with the object of making and sharing a profit.

ESSENTIALS OF PARTNERSHIP

1. CONTRACT.

The contract must conform to all the requirements for a valid, lawful contract, e.g.
as regards contractual capacity. The partners must have contracted to carry out
business objectively to make profit and the profit accrued must be for the benefit of
the partners. Partnership is not a separate legal persona in terms of the Income Tax
Act and the Insolvency Act. Unlike a company (which is an artificial person), a
partnership is not a persona apart from its members. It is simply a group of persons
acting jointly. It is however, clear that in the common law a partnership is not a
persona but is “a contractual compound of several personae”
The number of persons in a partnership is governed by S 7 (1) of the company Act
and it prohibits the formation of partnership of more than 20 people. Exceptions
are given to Chartered Accountants. The contract must conform to all the
requirements for a valid lawful contract. A partnership can also be infected from
the conduct of particular individuals as in the case of:

CASE: Isaacs Vs Isaacs

FACTS

The two persons were married under Islamic rights. The couple was very poor and
the wife was a domestic worker and the husband was in a Tailor‟s Shop. However
through hard work they pooled their resources together and started a business and
make profits after 28 years. The husband decided to kick the wife out of the
business. The wife obliged but said would take half of the property which was her
contribution.

HELD

The court after looking at the contract of the parties carried the conclusion that
during the 28 years, the husband and wife acted in such a manner to leave one to
believe that there was partnership.

CASE: Fink Vs Fink

FACTS

Where a young married couple started an arrangement between themselves when

they kept a couple of calves in a field at the back of their home the surplus milk
they got was sold to their neighbors. As the years went by their little dairy
developed into a fair sized business and enjoyed good profits. Several years later,
the couple divorced and the husband claimed the assets of the business.

HELD
The court held that the business in fact should have all the characteristics of a
partnership and therefore the wife was fully entitled to a fair share of the business
assets.

2. CONTRIBUTION TO A COMMON STOCK

Every partner should contribute to the partnership. What is contributed is then

merged into a common stock or estate. The contribution need not be measured in
terms of money. One can contribute skills, labour, capital, property or anything
intangible. In a situation where one contributes capital, he does not become a
creditor of the partnership. If he becomes the perpetual creditor that grouping can
not be called a partnership. Contribution must be separated from partners private
estate and this contribution also is risked in the sense that it could be lost should
the business fail.

PARTNERSHIP PROPERTY

Every member should contribute something to the partners, other partners are
entitled to sue the other partner who fails to contribute for specific performance.
The partnership property consists of all the property contributed originally by the
individual partners or which was acquired subsequently by the firm:

I. Corporeal movables in the possession of a partner which are intended to

form partnership property must be ceded to the firm e.g. shares

II. Immovable property must be registered in the names of the partners.

III. Intangible assets of goodwill acquired by the partnership in the course of

carrying on business fall automatically into the partnership property.

CASE: Joubert Vs Tarry and Co.

FACTS

Two persons entered into a joint venture. One put in his property, which consisted
of a coal mine, the other who was a mining expect put in his industry and labour.
They agreed that they were to share profit but later changed the contract as one of
lease by the mine owner to the mining expert.
HELD

It was held that the agreement was one of partnership and not of lease.

CASE: Purden Vs Muller

FACTS

Purden owned a farm and agreed with Muller that Muller would work on the farm,
live on it, draw an allowance of only $15 a month for 2 years and then both share
profit after the pine apple begins to yield returns. Purden contributed the farm and
capital and Muller contributed the skill and labour.

HELD

It was held that it was a partnership not a contract of service as Muller ventured his
labour as contribution.

NB: the law says that however, if one of the partners is the defendant, his name
need not appear on the list of the plaintiff.

CASE: Shingadia Brothers Vs Shingadia

FACTS

It was a partnership of 3 brothers. It leased a property to one of the brothers in his

personal capacity who was a partner. The brother who leased these premises failed
to pay rent and the two brothers sought to recover their rent from the defaulting
brother. The plaintiff was cited as Shingadia Brothers. The question was the
citation of the plaintiff property so that it can recover from the defendant.

HELD

The other Shingadia brothers were unable to recover their rent because the citation
of the plaintiff was wrong. Shingadia brother was a name of a partnership of three
brothers, which made the defaulting brother both a defendant and a plaintiff.

3.MANAGEMENT OF COMMON BUSINESS/CARRYING ON BUSINESS

Provision is normally made as to how the business is going to be run and in this
agreement a partner is agreed to take part in the management. It is vital to specify
as to how the business is going to be run. In the event of no remuneration
stipulated the partner manageging the business cannot on his own accord withdraw
the remuneration. He can only claim to be indemnified for his expenses. He must
keep proper books of accounts and permit other partner to inspect the books. The
managing partner must exercise reasonable care and skill and the common business
must be carried on for the joint benefit of all the partners. In other words the
partners are really co-owners. If a partner secretly misuses or diverges partnership
property for his personal use he would have committed a breach of partnership
duties and trust.

Case: Blismass Vs Dardagan

Facts

These two partners thought that they had entered into a partnership. One of the
clauses was that they were to share profits equally. Blismas provided premises and
capital for the concern and Dardagan was the sole manager of the Trading Concern
of the business. However, it was discovered that Dardagan was always refered as
manager of the premises. Business was in the name of Blismas together with a
general dealer‟s license being in his name.

Held

Depsite sharing profits equally the court held that there was no partnership for the
reason that Blismas contribution of premises were not yet transferred to the
common stock together with the licence of the premises.

4.SHARING OF PROFIT AND LOSSES

(a). Profit

One of the main object of a partnership is to the right of each and every partner to
share the profit made from the partnership business profits is pro rata or
proportionate share to the amount of his contribution which will be stated in the
partnership agreement. By profit we mean gross returns less the expenses or net
profit and if you share gross profit the court can invalidate the existence of the
partnership. Profits are divisible periodically among the partnership in such
proportions as they have agreed.

NB: In the absence of any agreement on the point, they share the profit in
proportion to the amounts of their contributions, if it cannot be calculated in terms
of money e.g.where one contribututes capital, the other labour, they share the profit
equally.

Case: Blumberg and Sulski Vs Broun and Feitas

Held

It was held that he was not a partner i.e. it was not a partnership

Case: Keighley Vs Erasmus

Facts

The two parties entered into an agreement that for five years, Erasmus will be
conducting farming operations on the plaintiff‟s farm and the defendant could use
farming equipment, milk cows and grow such crops as he desired. Payment was
the handling to the owner one-third butter and cream.

Held

The court held that this agreement was not a partnership reason being stipulation of
the third of butter and cream did not mean that it would be considered as net profit.

(b). Losses

The losses of the partnership shared in such prportions as they have agreed upon.
In the absence of any agreement, the partners share losses in the same proportions
as thy share the profits. Partners may agree that one partner is to bear no share at
all in the losses. This agreement is not binding on the creditors of the partnership
since each member is ultimately liable in solidium for all the debts of the firm.

5. LEGALITY
The object of the partnership must not be contrary to public policy. A partnersip to
conduct a Brothel is illegal and void. No partnership consisting of more that 20
people shall be permited with certain exceptions as laid down in the Company‟s
Act eg Chartered Accountants. A partnership to do anything for which a license is
required is void unless the partners hold the necessary licence.

Case: Engelsman Vs Sarif

Facts

The two partners entered into a partnership to buy and sell uncut diamonds for
which a licence was reuired and they did not have it. Engelsman sued Sarif for his
share of the profits.

Held

The court refused the order declaring the partnership to be void.

FORMATION OF THE PARTNERSHIP

Partnerships may be formed expressly, implied or by estoppel. The first two

methods give rise to a contract of partnership which affects the relationship
between the partners, while estoppel only affects relationships with third parties.

NB: Note that there are no statutory requirements for the formation of a contract of
partnership.

(1). Express Agreement

Agreement may be oral or written, but it is obviously prefered for the contract to
be in writing and this is the more usual business method. Such document is called a
“Deed of Partnership” or ,less commonly. Articles of Partnership”, and only a legal
practtioner are entitled to draw it up for a fee. Those points provided for in a Deed
of partnersh should include, amngst other, the follwing:
  The period for which the partnership is entered into.

 The nature of the business.

 The contributions of each patner.

 Authorised withdrwals.

 Interest on capital and withdrawals of capital.

 Division of profits and losses.

 Salaries and/or bonuses to partners

 The control and authority of partners.

 The procedure and treatment of partners‟ interests at death or retirement.

 The settlement of dispute between partners.

(2). Agreement implied on the facts.

A partnership agreement may be implied where the conduct of the parties indicates
an intention to form a partnership, and nothing else. The essentials discussed above
must be present, and may be inferred from conduct, correspondence, statements,
etc.

A common example would be a tacit partnership formed by a man and a woman,

whether actually married or not, carrying on some business for their common
benefit.

Cases: Isaacs Vs Isaacs

Fink Vs Fink

(3). Estoppel

Liability may also be incurred under the doctrine of estoppel either by the so-called
„Partner‟ or the partnership itself. Thus the person who is not a partner of a
particular firm but who by words and/or conduct represents her/himself to be a
partner in it, is estopped from denying that s/he is a partner to anyone who has, on
the faith of such representation, dealt with or given credit to the firm. In other
words if you misled a reasonable person by words and/or conduct into believing
that you are a partner, then you will be liable as a partner to that person if that
person acts in good faith on the representation you have made. Note that here we
are only concerned with liability to third parties – the same conduct towards
partners will create a conduct of partnership in this way.

The partnership will be bound if it creates the impression that another person (who
is not a partner and has no authority to act on behalf of the partnership) is a
member of the partnership. The partnership will then be liable to any person who
has been misled by such impression and has acted on it to their detriment.

Case: Bain Vs Barclays Bank

Facts

Bain and Others were in partnership as chartered accountants for four years and the
partnership operated a current A/c with Barclays Bank which Bain did in his
personal capacity. After four years the partnership as reconstituted and Bain was
no longer a partner but an employee. Despite their changes the bank was not
notified and all cheques were still signed by other two partners. The firm was
involved in buying shares at the Joburg share exchange and they utilised the draft
facilities from Barclays. There was a collopse at Barclays. At this time Bain‟s
current A/c was very health. The two partners dissolved the partnership and the
bank attached the money owed to Bain‟s A/c . Bain objected saying he was no
longer a partner.

Held

The court held that Bain must be deemed to be a partner of the firm hence estopped
from denying the existance of partnership.

TYPES OF PARTNERSHIP

There are two types of partnerships, ordinary and extraordinary. In the former, the
liabilites of the partners are potentially unlimited, while in extraordinary
partnerships the liability of one or more of the partners is limited in some way. In
case of doubt, the court will interpret the contract as creating an ordinary
partnership.

(1). ORDINARY PARTNERSHIP

This is the most common form of partnership, consisting of ordinary partners only.
Each partner is laible jointly and severally (in solidum) for all the debts of the
partnership once the partnership are brought to an end. By „jointly and severally‟
we mean that a creditor has the choice of suing all the partners (jointly) or of suing
one of the partners only (severally). Thus any one partner may be sued for all the
debts of the business to the full extent of her/his private assets. The effect of this is
that a creditor may choose to sue the partner who is mostly likely to be able to pay,
and then leave that partner to recover a proportionate share from former partners.

(2). EXTRAORDINARY PARTNERSHIP

Extraordinary partnerships, sometimes called special or limited partnership, are of

two forms- partnership en commandite and anonymous partnerships. Both forms
give some measure of protection to „sleeping‟ or „dormant‟ partners, and it is this
measure of protection that varies between the two. However, in both types of
extraordinary partnership, the sleeping partners must take no part in the activities
of the business, the running of the enterprise being left to the „diclosed‟ partner/s.

In the sleeping partner does take any active part in the running of the business, all
protection is forfeited and the „sleeping‟ partner is then laible to the same extent as
the disclosed partners. Where the sleeping partner becomes known to the public,
s/he does not automatically incur the liablity of an ordinary partner, unless s/he has
acted like a partner or held her/himself out to be a partner.

NB: There may in fact only be one of them in the partnership.

(i). Partnership en Commandite

Here the business is carried on by the disclosed or active partners in their names
alone and the liability of the commanditarian or undislcosed partners is limited.
The undisclosed partners contribute a fixed sum of money in return for a
specialised share of the profits or losses. Note the following points:
  Disclosed partners are liable in solidum (in full) to creditors.

 Commanditarian partners are not liable to creditors but only to the disclosed
partners.

 The liability of the commanditarian partners is limited to the amount of

capital they have contributed or agreed to contribute.

(ii). Anonymous Partnerships

Anonymous partners contribute their agreed shares to the business capital but take
no part in the running of the business, leaving that to the disclosed partners.
However, the liability of the anonymous partner is not limited in the same way as
the liability of the commanditarian partner is limited, as is indicated below. The
following points should be noted:

 Disclosed partners are liable in solidum to creditors

 Anonymous partners are liable to the disclosed partners for their full share of
the loss. In other words, the creditors but only to the dislosed partners.

 Anymous partners are liable to the disclosed partners for their full share of
the loss. In other words, the creditors will proceed against the disclosed
partners, who will then have to reclaim from the anonymous partners.

DUTIES OF THE PARTNERS

The most important duty of a partner is to show the utmost good faith in all
dealings involving the partnership. This requirement of good faith forms an
inseparable part of all the other duties.

(1). To show utmost good faith (uberrima fides)

In their dealings with each other, all partners must show the utmost good faith
(uberimma fides), since they are in effect agents of the partnerships. This requires
that partners must not acquire for themselves any advantages which could fall
within the scope of the partnership business. The utmost good faith is inherent in
the agreement of the partnership and can not be excluded. This duty of good faith
does not only come about when the partnership is in existence. It comes about even
when the partners are conteplating the formation of the partnership until the
partnership is dissolved. This means that no partner may:

 Make secret profits from transaction concerning the partnership;

 Compete for business with the partnership;

 Take or use partnership property for private benefit;

 Dissolve the partnership for private benefit.

Case: Olifants Tin B syndicate Vs Dejager

Facts

Olifants was a partnership formed for prospecting tin with the idea of working on
deposits and realise profits. Dejager was a partner. During was a partner. During
the course of prospecting he dscovered what he believed were tin deposits in a
certain farm. Instead of advising his partners he thought he could get rich quickly,
he secured rights in respect of the tin deposits. When the partners came to know of
the discoveries they went to court.

Held

The court ordered Dejager to transfer the right to the partnership saying he had
breached the utmost good faith.

Because of the duty of good faith, a partner can not make secret profits and it can
be traced back to the operation of the partnership and profits must be accounted
for.

Case: Weinman Vs Joyner

Facts

During the course of the partnership some plots of land were bought with the ideal
of reselling them and share profits. The partnership was dissolved before the sale.
A year after the dissolution Joyner had these plots registered in his own name and
thereafter sold them.
Held

Despite the fact that they were sold after a year of dissolution the court. Still
ordered jayner to account for the profit of the sale.

Breach of Good Faith Amounts to:

(i). Any contract thus entered into is unenforceable.

(ii).it allows other partners to terminate the partnership.

(2). To Contribute

The partners must deliver whatever they have agreed to contribute, and the failure
to do so will allow the other partners to bring an action to make the partner deliver.

(3).To Carry on Business

In carrying on the business, each partner is at the same time in the position of
principal and agent, unless there is an express agreement to the contrary. Thus, like
an agent, a partner must:

 Act in accordance with her/his mandate, whether such mandate is express or

implied; and

 Account to the other partner for all that s/he has received or paid out in the
course of the business.

A partner must exercise reasonable care and diligence in carrying out the mandate,
and in a partnership requiring special skill (eg.a legal or accounting partnership) a
partner may be held liable for lacking the skill that s/he should possess.

(4). To Share The Losses

The obligation to help bear the loss is a natural consequence of a contract of
partnership. However, it is not necessary that each partner should be obliged to
share in the loss, since this duty can be limited or excluded by agreement between
the parties.

The general rule is that losses will be shared in the same proportion as profits, but
the partners may come to some other arrangement, eg it may be agreed by all that
only one partner will bear the losses.

(5).To Account

RIGHTS OF THE PARTNERS

The rights of the partners may be stated briefly as follows:

 Every partner may demand an account of other partners‟ dealings.

 Partners may inspect all books of accounts at any reasonable time

 If a partner asks the court to order another partner toproduce an account, the
order is unlikely to be granted unless the petitioning partner also seeks the
dissolution of the partnership and produces an account of her/his own
tranactions.

 Partners are entitled to be reimbursed for necessary expenses, or indemnified

for any losses, arising during the course of the partnership business.

 Partners have a right to a share in the profits in the agreed proportions. If no

proportions have been agreed, then profits are shared in proportion to the
partner‟s contribution. Where it is not possible to calculate each partner‟s
contribution, eg where one contributes labour or skill and the other capital,
and no specific agreement was made, then the profits are shared equally.

 Partners have no right to a salary or interest on their contribution, unless this

has been agreed beforehand.
THE LEGAL RELATIONSHIP BETWEEN PARTNERS AND THIRD
PARTIES.

 Any contract between a 3rd party and a partner binds every

partner.(case:Meyer Vs Mosenthol Brothers Ltd)

 If a 3rd party is to hold a partner to a contract he must first establish

existence of partnership and that the partner was acting in his capacity as a
partner not in his paersonal capacity.

 Liability – a partner‟s assets can be sequestrated by third part in the event of

the partnership assets not satisfying a debt (undoubted liability)

 Dormant, sleeping, anonymous, commonditarians are not liable to third

parties unless they are disclosed. Their liability is limited to the amount of
contribution.

 Third parties can sue for payment from any individual partner for the full
partnership debt (severall or jointly in solidum)

 Where a partner transacts business with a third party outside his implied
authority the partnership may nonetheless be liable on the basis of estoppel.
(Meyer Vs Mosenthol Brothers Ltd)

 An outsider who is not a member of the partnership, but yet by his words or
conduct represents himself to be a partner, or knowingly allows himself to
be represented as a partner, is liable as a partner to anyone who has on the
faith of that representation dealt with or given credit to the firm.

 If a partnership agrees expressly to restrict the authority of a partner to make

contract for the firm. It is of no force against creditors who contract with an
unauthorised partner within the scope of the partnership business. The
partnership is liable unless if the creditor knew of the restrictions at the time
of entering into the contract.

PARTNERS AS AGENTS

We must determine what is meant by “within the scope of the mandate”, for if the
partner is acting outside this, then the partner is bound but not the partnership –
unless estoppel applies. We must also determine whether the partner is acting in a
personal capacity, or on behalf of the partnership.

Acting within the scope of the mandate

If the partner acts outside the scope of business, then the partnership will not be
bound by any contracts s/he enters into. For example, if a partner in a milling
business buys groceries, then the partnership will not be liable for payment since
the transaction falls outside the scope of the partnership business.

Note the following points:

 Sometimes partnership agreements expressly restrict the authority of a

partner to make contracts for the firm. While such restriction is binding
between the partners, it is of no force against creditors who contract with an
unauthorised partner within the apparent scope of the partnership business.
Such creditors can thus hold the partnership liable for debts so incurred –
unless the creditor knew of the restriction at the time of entering into the
contract.

 Every partner has the implied authority to enter into agreements reasonably
related to the proper running of the business.

 Where express or implied authority is given to a partner to make contracts,

all the partners are bound to the same extent as if they had all acted together.

 Where a partner exceeds her/his authrity and contracts the scope of the
mandate, the contract may be subsequently ratified, either expressly or
impliedly, by the other partners if it is for the benefit of the partnership.

Acting in a Personal Capacity

A partnership is only liable if a contract is concluded in the name of the

partnership. Thus where a partner contracts in a personal capacity, even if it is
within the scope of the partnership mandate, then only that partner may be held
liable on the contract.

Joint and Several Liability

Once a partnership is a set up the contributions of all the partners form part of a
common fund, of which the partner‟s beocme joint owners. This means that the
partners are jointly co-creditors and co-debtors in respect of all the rights and
obligations of the partnership. Thus while the partnership still exists, creditors may
only bring an action against the individual partners on their own. Similarly, the
partnership must bring an action jointly against a 3 rd party, rather than in the name
of one partner.

However, once the partnership has been dissolved (for whatever reason) there is no
longer a distinction between a partner‟s property and her/his interest in the
partnership. Thus each partner is not separately liable for all thepartnership debts
and may be sued severally (individually).

DIFFERENCE BETWEEN A PARTNERSHIP AND A COMPANY

PARTNERSHIP COMPANY

FORMATION Verbally or writing Incorporated in terms of

the Companies Act

SEPARATE Does not have an Exists separately from the

EXISTENCE existence separate from members and is a legal
the members who form it persona

NUMBER OF 2 - 20 Private company 2-50,

MEMBERS Public company a
minimum of 2.

LIABILITY OF Except in limited Shareholders liable only

MEMBERS partnerships, each partner for the amount unpaid on
is liable personally for all their shares.
partnership debts.

CAPITAL Usually modest and Private Company –

usually modest and
 provided by the partners provided by those
involved in the business.
Public Company – may
have hundreds of
shareholders, who take no
part in running the
business, contributing
large amounts of capital

TRANSFER OF All partners must consent Private Company –

INTEREST to the transfer of interest restricted. Public
from one partner to Company – usually fully
another. A transfer will paid shares freely
terminate the original transferable.
partnership.

MAKING CONTRACTS Each partner is an agent Shareholders have no

of the partnership and has power to contract for the
implied authority to enter company unless
into contracts within the authorised.
scope of the business.

PROPERTY Any property acquired by Property belongs to the

the partnership belongs to company, not the
all the partners in shareholders.
common.

INTERNAL AFFAIRS Partners may make any Controlled by the Act,

arrangements they wish, Memorandum and
as long as they are lawful. Articles os Association.
Voting usually in
proportion to the numbers
of shares held.

AUDIT Do not require an annual Annual audit compulsory,

audit. except for a private
company with less than
 10 members.

SUCCESSION Except where specific Perpetual succession – the

provision is made in a company may continue
deed of Partnership or by indefinitely.
will, a Partnership
terminates upon the death
or insolvency of a partner.

NB: unlike a Company (which is an Artificial person) a Partnership is not a

persona apart from its members. It is simply a group of persons acting jointly.

It is, however, clear that in the common law, a partnership is not a persona but is a
“contractual compound of several personae”

TERMINATION OF PARTNERSHIP

Partnerships may be terminated or dissolved in any of the following ways.

(1). Mutual Agreement

Mutual agreement between the partners will bring the partnership to an end, no
matter whether such agreement was made at the time the contract was entered into
or subsequently. Thus where the partners agree from the beginning that the
partnership is to endure for a set length of time or for a specific purpose, once that
time is reached or the purpose achieved, then the contract of partnership will
terminate.

(2). Death of a Partner

The death of one of the partners terminates the partnership, unless provision for the
continuation is provided for in the deed of partnership. This may take two forms,
either(i) permitting the remaining partners to carry on the business in partnership
with each other only; or (ii) providing for the heir or legatee (a person who
receives a benefit in terms of a will) of the deceased partner to take her/his place.
In the later case, the will of the deceased partner must provide for this situation and
the heir or legatee must accept the rights and obligations.

(3). Change in Membership

Upon either the retirement of an old member or the admission of a new member,
the old partnership is dissolved and replaced by a new agreement. The new
partnership does not automatically succeed to all the rights and obligations of the
old partnership.

(4). Notice of Dissolution

A contract of partnership may be brought to an end by notice of dissolution given

by one or more of the partners, providing such notice is given in good faith and
within a reasonable time. It will not be good faith, for example, where a partner
seeks to dissolve a partnership in order to obtain for her/himself alone benefits
which would otherwise have to be shared with the other partners.

(5). Insolvency

On insolvency of the partnership, the estates of the individual partners will be

simultaneously sequestrated, unless such partners are anonymous or
commanditarian partners, or unless the individual partner undertakes to pay all the
debts of the partnership. The insolvency of one of the partners will not normally
involve the sequestration of the partnership estate, although it will terminate the
partnership agreement.

(6). Order of Court

Any partner may apply to the court for the termination of the partnership,
providing they can show good reasons why the partnership should be dissolved.
For example, courts have granted applications where it has been shown that no
likelihood of future profit exists, or where it has become impossible for the
partners for the partners to work together because of disputes or mutual distrust.

The court has also discretion to dissolve a partnership for the following reasons:

(i). mental disorder of partner

(ii). incapacity through illness, the incapacity need not be permanent but must
render the partner substantially incapable of performing his duties for a reasonable
time.

(iii). Conduct by a partner e.g adultery by one partner with the other‟s spouse.

(iv). Fundamental breach by a partner, e.g. persistent absence from

work/expropriation of profits to himself.

(7). Operation of Law

A partnership is terminated by the opertation of law where its continued existence

becomes illegal. An example of this is where the number of partners exceeds
twenty. In terms of the Companies Act such a partnership ceases to exist.

(8). Expiration of Time

Whether express or implied if it has been agreed that the partnership shall
terminate at a certain date, it is terminated when agreed date has lapsed.

CONSEQUENCES OF TERMINATION AND LIQUIDATION (WINDING-

UP)

Dissolution amounts to termination and adequate publicity must be done.

Liquidation entails the payment of debts of the partnership, the realization of the
assets and division of surplus. A liquidator is appointed by the partners who collect
what is due to the partnership and pays the debts. If partners can not appointed one,
the court can appoint one.

RULES OF FINAL DISTRIBUTION

(a). losses shal be paid first out of profits next out of capital and lastly if necessary
by the individual partners.

(b). the assets of the firm including the sums contributed by the partners to make
up losses or deficiencies of capital shall be applied in the following order:
(i). Paying the debt and liabilities of the firm to persons who are not partners in it.

(ii). Ultimate residue if any shall be divided among the partners in the proportion in
which profits were shared.

List of authorities

(i). Peter Volpe: Commercial Law of Zimbabwe – Contract

(ii). R.H. Christie: Business Law in Zimbabwe

(iii). E.C. MacColl: Case Briefs in Contract and Sale for Zimbabwean Students

(iv). JTR. Gibson : Mercantile and Company Law in South Africa

(v). R.H. Christie: Practical Commercial Law in Zimbabwe

(vi). L. Madhuku: A handbook on Commercial Law in Zimbabwe.

(vii). L. Mahduku: An Introduction to Zimbabwe Law.