RELATIOINS AMONG PARTNNERS.

Every partner is an agent of the firm and his or her other partners for the
purpose of the business of the partnership.section 5 of the Partnership
Act(Footnote 1)

The act of any partner in the ordinary course of business of the firm binds the
firm and the partners unless the partner so acting does not have authority to act
for the firm in that particular transaction and the person with whom the partner
deals with has knowledge that the partner has no authority.

A partner has authority to bind other partners. For such an arrangement the
partner is seen as an agent of other partners. There are different types of
authority that a partner as an agent of the others partners may have.

AUTHORITY OF AN AGENT

Authority of an agent means his capacity to enter into a given contract on

behalf of his principal and bind that principal by such contract. The agent can
only bind the principal by such contract. The agent can only where he acts with
the authority of the principal.In order for the agent to act with authority,he must
do that act which the principal gave him powers to do.It is incumbent on the
agent to act within the scope of his authority and for those acts where the agent
acts beyond his scope,he will be held personally liable for them.

Authority of an agent may be divided into the following types/categories;

EXPRESS/ACTUAL AUTHORITY

This is where the authority of an agent is clearly spelt out orally in writing.
Sometimes the law requires that authority of an agent be put in writing in a
particular form ie If partners want to buy land,one partner on behalf of others
must be given a special form called a power of attorney.

IMPLIED AUTHORITY/USUAL AUTHORITY

This refers to an agents authority to do all,acts necessary for the performance of

those acts where he has given express authority.Therefore,where an agent is
express authority to do a certain act, he will have implied authority to do all
other things that are necessary to perform such an act. For example if one
partner in a partnership is appointed to buy land for other partners. The one
given the authority will have the express authority to buy that land,he will also
have implied authority to look for the land,ascertain the real owner, the
value,sign the sales agreement, pay for the land and ensure transfer of the land
into the partnership name.

Implied authority also arises from customs, A principal who appoints an agent
to act for him in a particular market also gives him implied authority to follow
the customs of that market.Thus if there is a custom in that market,the principal
will be bound by it even if he did not know about it.

However, where the custom is inconsistent with the express instructions of the
principal,then the principal will be bound by that custom.

Implied authority may also mean that authority which a particular type of agent
usually has.In the case of PANAROMA DEVELOPMENTS LTD V
FEDELIS FURNISHINGS (1971)2 QB 711 it was held that a company
secretary had usual authority to hire cars on behalf of the company and the
company would be liable for the hire charges even if she had not been
authorized or actually used the car for her own purposes.

This is because a company secretary has usual authority to hire cars on behalf
of the company and anyone dealing with her in that capacity would assume she
had that authority.

APPARENT AUTHORITY/OSTENSIBLE AUTHORITY

This refers to the kind of authority that the agent appears to have but does
infact have.

It arises out of estoppel. Where the principal by his words or conduct has led
others to believe that an agent had authority and others have acted on this, then
he will not be allowed to turn around and say that the agent did not have
authority to act on his behalf.

In the case of RAMA CORPORATION V PROVED TIN AND GENERAL

INVESTMENTS LTD(1952) ALL ER It was stated that for one to say that an
agent has authority by estoppel,the following conditions must be fulfilled.

The principal must have made a representation that the agent has authority to
act on his behalf.The person to whom the presentation was made must have
relied on it and thereby acted upon it thinking it was true.

The person must have acted on it to her detriment.In the case of EDMUND
SCHULTEER &CO (U) LTD V PATEL (1969) EA 259,A principal
authorized his agent to sell his land to a buyer,The principal gave his title to the
agent. The buyer paid the deposit of the purchase price to the agent and the
balance was later paid directly to the principal. The agent however disappeared
with the deposit and the principal sought to recover the money from the buyer
arguing that the agent was not authorised to receive the money from the buyer
arguing that the agent was not authorized to receive the money and therefore
the buyer should not have given him the deposit. Court held that though the
agent had no express authority to receive the money,the fact that the principal
had given him the certificate of title to the land presented to him as having
authority to act on behalf of the principal and therefore the principal was
estopped from denying the agents authority.

Apparent authority can only arise from a representation made by the principal
and not one made by the agent,In the case of ATTORNEY GENERAL V
SILVA (1951) AC,A crown agent falsely represented that he had authority to
sell steel plates which were crown property, it was held that the crown was not
liable since the representation was made by the agent and not the principal.
(crown)

MANAGEMENT OF A PARTNERSHIP AND HOW IT DIFFERS

FROM A COMPANY
Every partner has the right to take part in the management of the firm as per
S.26(e) of the Partnership Act. It further states that, the partners may however
decide that one of them should be in charge of the management of the firm
unless the parties agree in tills manner, where a partner is excluded from taking
part in the management of the firm, this can be a ground for the dissolution of
the firm. The rules on how a partnership should be managed are laid down in
s.26 of the Act (Supra). However, I will refer to what court held in the case of
DAUDE Vs HOUSEN 17 EACA, court was of the view that forceful rejection
and refusal of one partner to take part in the management of the partnership
business could be a cause to dissolve the partnership on just and equitable
ground, no partner shall be entitled to remuneration for acting in the
partnership business.
And no person may be introduced as a partner without the consent of all the
existing partners, any difference arising as to ordinary matters connected with
the partnership business may be decided by a majority of the partners but no
change shall be made.
Where the business of the partnership is being carried out a loss, that is to say,
where a partnership is merely making losses then any of the partner or any
other third party may apply to court the partnership to be dissolved.
Where a partner becomes permanently incapable of continuing to perform the
activities of the firm for example, when he becomes permanently disabled, any
of the partners can apply to court for the partnership to be dissolved.
If a partner continuously breaches the partnership agreement, then any of the
partners can apply to court for the partnership to be dissolved and the Court
may also grant an application for dissolution of a partnership on an other just
and equitable ground.
When we look at the difference between a partnership and a company on the
other hand, it can only differentiated in regards to formation, legal status,
liability, size, ultra vires doctrine and et cetera as discussed below.
Formation of a partnership is easy that is to say, a partnership may be formed
by agreement, orally or the law may imply its existence from the conduct of
business by the parties. It therefore has fewer formalities for purposes of
formation where as a company requires formalities such as registration,
securing of a company name, filing of documents et cetera. The company is
therefore fairy expensive to form as there are a number of formalities which
must be complied with and a number of documents which must be filed with
the registrar of companies.
Legal Status; A partnership has no separate legal status that is separate from
the partner therefore; it cannot as of right sue or be sued in the partnership
flame. However, in practice where somebody wants to sue a partnership he
may sue in the firm name. If one wants to sue the firm, he must sue all partners.
A company On the other hand has a legal existence which is separate from its
members. See the case of Salomon Vs Salomon the consequences of
incorporation of the company where Lord Hulsbury stated that a company
is an artificial person separate and distinct from it's directors and share
holders and neither the former nor the later are liable for the company
defaults.

Liability; Partners have unlimited liability where as share holders in a

company enjoy limited liability. Creditors therefore of a partnership can
proceed against the personal property of the partners where the partnership
property is not enough to satisfy those debts.
Size; A partnership has a minimum of partners is 2 and the maximum in 50
while a company on the other hand has a minimum of one member and
maximum of 100 share holders for a private company and minimum of 7
members to a maximum of 200 share holders for a public company.
Ultra Vires doctrine; This does not apply to a partnership especially where the
existence of such partnership is implied from the conduct of the parties and it is
difficult to toll the scope of their objects/activities the partnership was set out to
do. More so, most partnerships are oral agreements.
Authority to build the enterprise; Shareholders have no authority to build the
company but only the directors can. In a partnership, every partner is an agent
of the others and the acts of one partner while acting in the course of the
partnership business are the acts of the other partners and therefore all the
partners are liable.
Management of the Enterprise; The day-to-day management of the company
is entrusted with the board of directors of a company by the shareholders of the
company where as in a partnership; every member has a right to take part in the
management of the firm. The structure of a partnership easily allows for each
of the partners to take part in any activity of the firm's business according to
their mutual understanding. In other words, there are no formalities or
demarcation of roles as in a company where you find shareholders on the one
hand and the directors and management on the other hand.
A company enjoys perpetual succession; this means that a company can
continue to exist even where all the shareholders die or leave the company,this
was stated in the case of Micheal Oscar V James Mulwana and 3 others
that's a company continues to exist despite the death of it's share holders.
The existence of a company can only be brought to an end by a legal process
called winding up. On the other hand, a partnership may be dissolved by death,
bankruptcy or insanity of a member.

THE EXTENT TO WHICH A PARTNER MAY BIND THE FIRM BY

ACTIONS.
The extent to which a partner may bind the firm was described in the case of
RE AGRICULTURALIST CATTLE INSURANCE CO(1870) AC 725 where
the court observed that as between partners and the outside world each partner
is unlimited agent of every other in every matter connected with the partnership
business or which he represents as a partnership business and not being in its
nature beyond the scope of the partnership. Court went on to say that a poor
partner may bind the partnership for contracts of any amount and may give the
partnership acceptance for any amount and may involve his innocent partners
in unlimited amounts for frauds which he has in unlimited amounts for frauds
which has craftly concealed.
In the case of HAMLYIN Vs HOUSTON [1903]1 KB 81, H an active partner
in a firm consisting of himself and S bribed a clerk of a rival firm to disclose
confidential information concerning the contracts and tenders of his
employment. It was found that the obtaining of information lay within the
firm’s business and that the means employed were sufficiently related to that
end to make the firm liable.
The partners act may thus be wilful negligent or criminal‟ Collin MR went on
say that “it is too well established by the authorities to be now disputed that a
principal may be liable for the fraud or other illegal act committed by his agent
within the general scope of the 149 authority given to him and even the fact
that the act of an agent is criminal does not necessarily take it out of the scope
of his authority.” The act does not have to be for the principal’s benefit
according to the House of Lords judgment in the ease of; LLOYD Vs GRACE
SMITH &CO (1912) AC where Lord McNaughton said that “the principal
must be liable for fraud of his agent committed in the course of his employment
and not beyond the scope of his authority, whether the breach was committed
for the principals benefit or not. Whether an act was committed in the course of
business depends on the facts of each case”
Partners have unlimited liability. The liability of each partner is unlimited such
that if the firm defaults, creditors will have a personal claim against the
partners. This means that in case the firm incurs debts and the partnership-
property is not enough to meet the debts of the firm, then the partners will be
personally liable. An example in point, the partner’s personal property can be
sold to meet the firm’s debts.
Although a minor can be a partner in a firm and enjoy benefits of the
partnership but he is not personally liable for the debts of the partnership. In the
case of LOVELL Vs BEAUCHAMP[1894] AC 607, court observed data it is
clear that there is nothing to prevent an infant from becoming a partner but that
infant contract debts by such trading, although the goods may be ordered for
the firm, he does not become a debtor in respect of them. Court further
observed that however this does not mean that the adult members will not be
liable on such contract, court went on to say that if the adult members of a
partnership could avoid liability because one of the partners is a minor,, minors
would then be found 6 every partnership.
However, the share of that minor in the property of the firm is liable for any
obligations of the firm as per section 10 of the Partnership Act .But attaining
majority age, the minor, now adult, will be made liable for all the obligations of
the partnership from the date of his or her admission unless he or she gives
public notice within a reasonable time of his or her repudiation of the
partnership under Section 11 of the Act.
A new partner is not liable for the debts of the firm, which were incurred
before he became a partner. For him to be liable for such debts, he must have
agreed in writing at the time of joining the firm that he will pay the debts of the
firm which were incurred before he became a partner and this is provided for
under Section 19 of the Partnership Act.
A partner who retires from the firm does not cease to be liable for the liabilities
incurred while still a partner under Section 19 of the Partnership Act. However,
he may be discharged from his liabilities by agreement.
Since partners have unlimited liability, where a partner dies, his estate will be
liable to meet the debts of the firm. Section 19 of the Partnership Act and in the
case of KENDALL Vs HAMILTON.
Where a wrongful act or omission of any partner acting in the ordinary course
of business of the firm or with the authority of his or her co partners, loss or
injury is caused to any person not being a partner, the firm is liable according to
Section 12 of the Partnership Act.
Section 14 of the Partnership Act provides that where a partner acting within
the scope of his or her apparent authority receives the money or property of a
third person and misapplies that money or property, the firm is liable. Also
where a firm in the course of its business; receives money or property of a third
person and the money or property so received is misapplied by one or more of
the partners while it is in the custody of the firm, the firm is liable. However if
a partner misapplies trust property held by him as trustee in the business or on
account of the firm, the partners are not liable. In the case of EXPARTE
HEATON, liability of the partners where a partner employs trust property
partnership business was discussed, in this case, the father and sons who were
trustees of a will applied trust money for partnership purposes and on
bankruptcy, it was held that the amount so applied could not be proved against
the joint estate partners could only be made liable after proof that they were
implicated in the breach of the trust.

The rights and duties of a partner in the management of the partnership.

The right to management of the firm; Section 26 of the Partnership Act
which states that every partner may take part in the management of the
partnership business. In Daule v Hussein it was held that forcible ejection and
refusal to allow one partner to take part in the management of the business is a
definite intimation of a final intention to dissolve the partnership.
This right will not exist if there is an agreement between the partners excluding
one or more of them from active management as is usually the case with a
dormant partner. The agreement may also restrict the area of the partner's
authority as is normally the situation with junior partners, where certain powers
are reserved to the senior partners. It is notable thought that such restrictions
have no effect on the partner's authority to saddle the firm with liability if he
carries on the business the kind carried on by the firm in the usual way.

Duty not to compete with the firm. Section 32 of the partnership act which
has it that if a partner, without the consent of the other partners on any business
of the same nature as and competing with that of the firm, the partner must
account for and pay over to the firm all profits made by him in that business.
The issue as to whether the business carried on by a partner is on the same
nature and competing with that of the firm is one fact. Thus in Aas v Benham
[1891] 2 Ch. 244, a partner in the firm of ship brokers whose business was to
charter ships used information which he obtained in the business to set up a
shipbuilding company. He subsequently became director of the company. It
was held that this type of activity was outside the arm bit of the partnership
business and not in competition with it. Consequently, the partner wa under no
duty to account for the fees he received from the company as director. Further
more, in the case of Marshal Thomas (exporters) Ltd v Guinlel which further
illustrates the ingredients in Section 32 of carrying on business of the same
nature in competition with the firm. In that case, under the agreement
between the defendant managing director and the plaintiff company, the
defendant was not to engage in any other business without the company's
consent while employed as a managing director. Additionally he was not to
disclose confidential information in relation to the affairs, customers or trade
secrets of the company and its group and that after ceasing to.be a managing
director he was neither to use or disclose confidential information about
suppliers and customers of the group nor for a period of five years to employ
any person who had worked for the company during the last two years of his
employment. Without the company's knowledge the defendant traded on his
own account and in behalf of his two companies in competition with the
company and in so doing he bought from the company's suppliers and sold to
the company's customers.
Duty not to make secret profits; A partner is under a duty not to make secret
profits. He must not secretly benefit from the firm's property, firm's name or
business connections. Section 31 of the partnership act, which states that 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,
or from any use by him or her of the partnership property name or business
connection. He must not use the firm's name or his position He must not use the
firm‟s name or his position as a partner or his business connections as a partner
to make secret profits. Where he makes such profits, he will be called
upon to refund to the firm any benefits or profits that may have been made. In
Bentley Vs
Craden [1953], BEFD 75, the plaintiff and defendant were in a business of
sugar refining.
The defendant was the purchasing officer for the firm: He bought sugar at a
low price and kept it and waited for the price to rise and he resold it to the firm
at the prevailing market price which was higher than the price at which he
bought it Court held that the defendant was accountable to the firm for the
profits made. Also in the case of PATHIRANA Vs PATHIRANA [1967] 1 ac
233, the two partners dissolved the partnership but one of them continued to
use the partnership assets and the other partners share capital and made profits,
it was held that that partner was liable to account to the other partner for the
profits made out the partnership assets and capital after dissolution and that the
plaintiff partner was entitled to a share of the profits.

Duty of outmost good faith. This principal is not outlined in the Partnership
Act but it is a recognized principal that all provisions in the Partnership Act
rotate around it. Under this duty of outmost good faith, partners are expected to
be honest and fully disclose to each other matters and issues involving the firm.
Each partner is expected to deal with his fellow partners honestly and to
disclose any relevant facts fully and must act transparently. This was illustrated
in the. Case of V LAW [1905) CH 140 where it was held that every partner-
owes a duty of disclosure of information regarding the partnership business. in
this cast court held that it is clear lawa transaction between two co-partners for
the sale by one to the other of a share of the business. In the case court held that
information that is within his knowledge about that transaction and where he
does not do that, then sale is voidable and may be set aside.
Duty to render true accounts; every partner has a duty to render true accounts
and give all information about all aspects and matters of the partnership
business Section 30 of the Partnership Act.
5. Duty with regard the partnership property; every partner has a duty to
hold and apply partnership property exclusively / only for the purposes of the
partnership business.
6. Since partners have unlimited liability, every partner has a duty to share the
debts of the firm