Relations of Partners to Third Parties
Which act covers the provisions regarding the Relations of Partners with third parties?
The Indian partnership Act 1932 covers the provisions regarding the relations of partners with third parties. Section 18 to Section 22 covers the same.
What is a Partnership?
According to the provisions of Section 4 of the Indian Partnership Act, 1932, “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all.”
What is the true test of Partnership?
In simple terms, for an existence of a partnership, mutual agency is must. Also, for determining the existence of a partnership, following elements are needed to be proved:
- Agreement between all the persons engaged as partners.
- Agreement contains the provision to share the profits of a business.
- Business is carried on by all or any of them acting for all.
What are the provision regarding the Partner’s authority in emergency?
The section’s criteria are as follows:
- There was a crisis at hand.
- In view of it, the partner took action.
- To prevent losses for the firm, the partner took such action.
- In those conditions, the conduct made sense and was prudent.
When contracting with third parties, can a Partner represent himself?
No, a partner has obligations to the parties engaged in the business since he represents the firm. Therefore, a partner in a commercial partnership must act as both an agent and a principle.
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Relations of Partners to Third Parties (Law of Partnership)
The Indian Contract Act, 1872, governed the field of partnership law before the passage of the Indian Partnership Act, 1932. However, given the quick expansion of trade and industry as well as the escalating industrialization, a distinct partnership law was urgently required. “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all,” as stated in section 4 of the Indian Partnership Act, 1932. In this case, the individuals who have formed a partnership are referred to as Partners, and as a group, they are known as a Firm. A firm name is the name that all of the partners use to jointly manage the firm. In a partnership firm, two or more individuals work together to run a business to make money and divide that money according to the partnership deed’s established profit-sharing ratio.
Key Takeaways:
- Among company owners and entrepreneurs, partnerships are among the most well-known forms of commercial agreements.
- A partnership must be established under Section 12 of the Indian Partnership Act to conduct a lawful business.
- The general rules of the Indian Contract Act will, in any event, apply in situations where the Partnership Act is silent.
- Mutual agency is fundamental for the creation of valid partnership.
Table of Content
- Relations of Partners with Third Parties
- Express Authority of a Partner
- Implied Authority of a Partner
- Extension or Restriction of a Partner’s Implied Authority
- Partner’s Authority in an Emergency
- Liability of Partners to Third Parties
- Conclusion
- Relations of Partners to Third Parties- FAQs