Duties of a Partner in Partnership
The following are some of the important duties of partners in a partnership.
- To observe good faith.
- To Indemnify for Loss.
- To Attend to his Duties Diligently.
- Not to Claim Remuneration.
- To Indemnify for Willful Neglect.
- To Share Losses.
- To Hold and Use Property of the Firm.
- To Account for Private Profits.
- To Account for the Profits of a Competing Business.
- To Act within Authority.
- Not to Assign his Rights.
They are briefly explained as follows.
1. To Observe Good Faith
As per Sec. 9 of the Indian Partnership Act,
Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative.
It is an absolute provision and it is not possible for any partner to contract himself out even by an agreement with the other partners.
2. To Indemnify for Loss
Sec. 10 of the Indian Partnership Act provides that
Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.
This obligation is imposed upon every partner to save the other partners from loss caused to them by the fraud of a partner in conducting the business of the firm. It is an absolute provision. It is not subject to the terms of the contract between the partners. A clause in the partnership deed exempting a particular partner from liability to the firm for loss caused by his fraud shall be invalid and unenforceable.
3. To Attend to his Duties Diligently
Every partner is bound to attend diligently to his duties in conducting the business of the firm.
4. Not to Claim Remuneration
It is the prime duty of a partner to take part in the management of the partnership business. So none of them is entitled to any remuneration for taking part in the conduct of the business. However, it is usual to allow some remuneration to the working partners provided there is a specific agreement to that effect.
5. To Indemnify for Willful Neglect
Where a partner carries on the business of the partnership willfully negligently, but without a fraudulent intention, and the firm suffers any loss due to such negligence, the loss should be borne by the partner himself. But an act done by a partner in good faith and bonafide cannot be considered to be an act amounting to wilful negligence.
6. To Share Losses
In the absence of any contract to the contrary, each partner is liable to contribute to the firm’s losses equally.
7. To Hold and Use Property of the Firm
One of the important duties of partners in a partnership is using property of the firm exclusively to conduct partnership business. The partners may agree differently. But it should be supported by a specific agreement to that effect.
8. To Account for Private Profits
A partner is accountable for the private profits, without the consent or knowledge of other partners, arising out of transactions of firm or from the use of its property or goodwill.
9. To Account for the Profits of a Competing Business
If a partner carries on a business of the same nature as that of the firm in which he is a partner and such a business competes with that of the firm, he shall account for all profits made by him in that competing business to the firm.
However, this Section is also subject to a contract between the partners. As such, by virtue of a contract, the partners may allow any partner to carry on any business, whether competing or not. It is equally open to them to restrain any partner from carrying on any business other than that of the firm while he is a partner, and such an agreement is not to be considered as being in restraint of trade, as per Sec. 11(2) of the Indian partnership Act.
10. To Act within Authority
A partner is required to act within the scope of his actual or apparent authority. If he act excessively and the other partners do not ratify his unauthorized acts, he will be liable to the other partners for the loss that they may suffer as a result of such acts.
11. Not to Assign his Rights
A partner cannot assign his rights or interests in a partnership firm to an outsider, so as to make the outsider, a partner in the firm’s business without the consent of other partners. In case, such an assignment has been made, the assignee cannot, during the continuance of the firm, interfere in the conduct of the business, or require accounts or inspect the books of the firm.
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