Partnership Act 1932.

Q.1. What do you understand by partnership at will?

A partnership is called a partnership-at-will;

a. when the partnership is not for a fixed period of time, and

b. when no provision is made as to when and how the partnership will come to an end. A partnership at
will can be dissolved whenever any partner chooses to do so.

Q.2. What do you mean by Registration of Firms?

Registration of firm means the registration of the contract with the registrar. It is not compulsory but an
unregistered firm suffers from certain disabilities and therefore registration is necessary for carrying on
business.

Q.3 Distinguish between an active partner and a sleeping partner. (May-June’05)

The partner who participates in the capital of the firm and participates in the operation &
management of the firm is known as Active partner. The partner who gives the capital but not
participates in the operation and management of the firm is known as Sleeping Partner.

Q.4. What do you mean by Partnership?

Partnership is the relation between persons who have agreed to share the profits of a business carried on
by all or any of them acting for all.

Q.5. What do you mean by Firm, Firm-name, Partner?

Persons who have entered into partnership with one another are called individually “partners” and
collectively “a firm” and the name under which their business is carried on is called the “firm name”

Q.6What do you mean by Partnership property?

The property of the firm includes all property and rights and interests in property originally brought into
the stock of the firm or acquired by purchases or otherwise, by or for the firm, or for the purposes and in
the course of the business of the firm, and includes also goodwill of the business. Thus the property of the
firm means – a. property originally brought in by the partners b. property obtained while the firm was in
business and c. the goodwill of the firm.

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Q.7. What do you mean by Goodwill?

Goodwill may be described as the advantage, which is acquired by a firm (over and above the value of
stock in trade and capital and funds) from the connections it has built with its customers and the
reputation it has gained.

Q.8. What do you mean by Partnership Agreement?

The writing or oral agreement in which the terms are incorporated to carry on business in a partnership is
called the Deed of Partnership or the Articles of Partnership.

Q.9. What do you mean by Retired partner and Deceased partner?

Retired partner: A partner who has retired from the firm but allows the use of his name in connection
with the firm may become liable to third parties by the principle of holding out.

Deceased partner: The legal representative of a deceased partner do not become liable for the debts of the
firm merely because the name of the deceased is used as a partner of the firm name.

Q.10. What do you mean by dissolution of firm?

Dissolution of a firm means the end of a firm by the breakup of the relation of partnership between all
the partners.

Q.11. What are the difference between Partnership and Co-ownership?

Difference between partner and co- Partnership Co-ownership

ownership are sited below:
Subject
1.Definition Partnership is the relation between Co-ownership means joint
persons who have agreed to share ownership
the profits of a business carried on
by all or any of them acting for all.
2. Agent In a partnership each partner is the But a co-owner is not the agent of
agent of the others. the other owners.
3. Agreement Partnership always arises out of Co-ownership may arise by
agreement. agreement or by operation of law.
4. Business A partnership always implies a Co-ownership may exist without
business. any business.
5. Sharing of profit In a partnership there must be Since a co-ownership may exist
sharing of profit. without a business, the question of
sharing profits or loss is immaterial
in a co-ownership.

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Q.12. Can a partner bind the firm?(Nov-Dec’03)

A partner can bind the firm by the means of his acts relating to partnership business. Persons carrying
on business in partnership are agents as well as principals. The business of a firm is carried on by all or
any one or more of them acting for all. Every partner has the authority to act on behalf of all and can, by
his actions, bind all the partners of the firm.

Q.13. What are the essential elements of a Partnership?

The following three elements are the essential of a partnership

a) Contractual relation / Voluntary agreement: There must be an agreement entered into by two or
more (20, but in case of Banking 10) persons.
b) Sharing profit/ loss: The agreement must be to share the profits of a business.
c) Carrying of business: The business must be carried on by all or any of the partners acting for all.

Q.14. Can a firm be liable for the wrongful acts of a partner?

A firm can be liable for the wrongful acts of a partner. Where, by the wrongful act or omission of a
partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss
or injury is caused to any third party, or any penalty is incurred, the firm is liable therefore is liable to the
same extent as the partner.

Q.15. Is it mandatory for a firm to registration?

The registration of a partnership firms is not mandatory. Therefore an unregistered firm is not an illegal
association. But an unregistered firm suffers from certain disabilities and therefore registration is
necessary for carrying on business.

Q.16.Spell out the grounds on which a court may dissolve a partnership firm on a suit filed by
a partner. (June’08) (May-June’02)

Dissolution of Partnership by Court

1. Unsound mind of a partner.
2. Permanent incapability of a partner
3. Misconduct of any partner
4. Continuing breach of terms of Contract.
5. Transfer of ownership of any partner.
6. Any other matter if the court deems just & equitable for dissolution.

Q.17. Can you spell out the procedure for registration of a firm?

A. If any firm wants to be registered then it shall have to made application to the registrar Under
prescribed form & fee mentioning the following subjects / information:
Name of the firm

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The principal office
The branch office (if any)
Objectives
Date of joining of each partner
Date of constitutions
Name and full address of the partners
Duration of the firm

B. The above application must be signed & verified by all partners or their agent specially authorized on
this behalf.
C. If registrar satisfies with the application he record an entry of the statement in the Register of Firm
and the firm is thereupon considered to be registered.

Q.18. What are the effects or consequences of Non-registration of a firm?

An un-registered firm and the partners thereof suffer from certain disabilities:
A partner of an unregistered firm cannot file a suit (against the firm or any partner thereof) for the
purpose of enforcing a right arising from contract or a right conferred by the Partnership Act.

No suit can be filed on behalf of an unregistered firm against any third party for the purpose of
enforcing a right arising from a contract.
An un-registered firm cannot claim a set-off in a suit.
Cannot claim to the court for the receivable amount exceeding Tk.100 from the third party.

Exceptions:
A partner of an unregistered firm can file a suit for the dissolution of the firm and for accounts.
Suits can be filed for the realization of the properties of a dissolved firm even though it was
registered.
The Official Assignee or Receiver can realize the properties of an insolvent partner of an
unregistered firm.
There is no bar to suits by unregistered firms and by the partners thereof in areas where the
provision relating to the registration of firms do not apply by notification of State Government under
Section 56.
Partners have right to claim for his portion of share from access the assets of dissolved firm.
An unregistered firm can file a suit (or claim a set off) for a sum of not exceeding Tk. 100.

Q.19. Can a minor be admitted as a Partner?

A minor cannot enter into a contract of partnership because an agreement by a minor is void. But if all
partners agree, a minor may be admitted to the benefits of an existing firm.

Q.20.Can a minor become a member of a partnership firm? If so, discuss his rights and
liabilities. (Dec’09) (May-June’05)

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As per section 11 of the Contract Act a minor is not competent to enter into a contract.So, he
cannot be a partner of a partnership firm. As per section 30 of the Partnership Act,1932, he can
be taken to receive the benefit of the firm. His rights as contained in that section are as under:
1. He can take the share of profit/benefit of the firm
2. He can see inspect the accounts of the firm.
3. He can sue to be separated himself from the relation of the firm.
4. He can take the share of the assets of the firm at the time of its liquidation.

Q.21. In what situations compulsory dissolution may take place? (May-June’02)

Dissolution of a partnership firm is compulsory in case of following cases:

a. by the adjudication of all the partners or of all the partners but one as insolvent, or
b. by the happening of any event which makes the business of the firm unlawful.

Q.22. What are the grounds of dissolution?

A firm may be dissolved on any of the following grounds:

A. By agreement: A firm may be dissolved any time with the consent of all the partners of the firm.
Partnership is created by contract; it can also be terminated by contract.

B. Compulsory dissolution: A firm is dissolved—

a. by the adjudication of all the partners or of all the partners but one as insolvent, or
b. by the happening of any event which makes the business of the firm unlawful.
C. On the Happening of Certain Contingencies: Subject to contract between the partners, a firm is
dissolved—

a. IF constituted for a fixed term, by the expiry of that term;

b. if constitute to carry out one or more adventures or undertakings, by the completion
thereof;
c. by the death of a partner; and d. by the adjudication of a partner as an insolvent.

D. By Notice :Where the partnership is at will, the firm may be dissolved by any partner giving
notice in written to all other partners of his intention to dissolve the firm.

E. Dissolution by the Court: At the suit of a partner the court may dissolved a firm on any one of
the following grounds:

a. Insanity: If a partner has become of unsound mind. The suit for dissolution in this case can
be filed by the next friend of the insane partner or by other partner.
b. Permanent Incapacity: If a partner becomes permanently incapable of performing his duties
as a partner. The suit for this case must be brought by a partner other than the person who
has become incapable.
c. Guilty Conduct: If a partner is guilty of conduct which is likely to affect prejudicially the
carrying on of the business, regard being had to the nature of the business.

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 d. Persistent Breach of Agreement: If a partner willfully and persistently commits breach of the
partnership agreement regarding management, or otherwise conducts himself in such a way
that it is not reasonably racticable for the other partners to carry on business in partnership
with him.
e. Transfer of Whole interest:
If a partner has transferred the whole of his interest in the firm to an outsider or has allowed
his interest to be sold in execution of a decree.
f. Loss: If the Business of the firm cannot be carried on except at a loss.

Just and Equitable Clause:

If the court considers it just and equitable to dissolve the firm.

Q.23. Happening of certain contingencies may lead to dissolution of partnership what are
those?

Subject to contract between the partners, a firm is dissolved on the happening the following of certain
contingencies
a. if constituted for a fixed term, by the expiry of that term;
b. if constitute to carry out one or more adventures or undertakings, by the completion thereof;
c. by the death of a partner; and d. by the adjudication of a partner as an insolvent.

Q.24. Can an outgoing partner carry guarantee?

A continuing guarantee given to a firm or to a third party in respect of the transactions of a firm is, in the
absence of agreement to the contrary, revoked as to future transactions from the date of any change in
the constitution of the firm.

Q.25.Can an outgoing partner carry on business competing with the firm? (June’08) (May-
June’02)

An outgoing Partner is not a Partner of the firm once he leaves it. An outgoing or retiring partner
has the rights to carry on business competing with the firm anywhere in Bangladesh but he
cannot use the name of the firm.

Q.26. What are the ten Important elements of a Standard Partnership Deed?

The important elements of a stand and partnership deed are as follows:

o Date of formation of partnership
o Name and address of the partners
o Firm name
o Nature of business
o Place of business and business address

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 o Name, Address & Occupation of all Partners
o Capital of the firm.
o Duration of the partnership and mode of dissolution
o The amount of capital to be contributed by each partner& ratio of capital
o Distribution of Profit
o The mode of management
o The powers of the partners
o Terms on which a partner can retire
o Expulsion of partners
o Introduction of new partners
o Name of Managing partner & his power.

Q.27. Who can be a partner?

Under the Partnership Act, a person may be partner if he has the capacity to enter into a contract. From
the purposes of the Partnership Act, the term ‘person’ does not include a partnership or a limited
company. Thus a company P cannot form a partnership with a company Q. Similarly, a firm X cannot
form a partnership with firm Y. But all the partners of firm X and all the partners of firm Y can form a
single partnership, subject to the rules regarding the number of partners. However, it is assumed that
except the followings all are eligible to become a partner of a firm:
a. Minor: A minor cannot be a partner. But in an existing partnership, a minor can be admitted into a
firm if all the partners of the firm agree. Such minor gets all the benefits of the partnership.
b. Person of unsound mind: A person who is of unsound mind cannot become a partner.
c. Insolvent: A person, who is adjudged insolvent by the court, cannot become a partner.
d. Company: In a Company the capacity to enter into contract is determined by the Memorandum and
Articles of the Association of the Company. The liability of the members of a firm under the Partnership
Act, for the debts of the firm, is unlimited. But a company cannot incur unlimited liability. Therefore a
company cannot become a partner of a firm.
e. An alien enemy: An alien enemy cannot enter into a contract of partnership with a citizen of the
country.
f. Ambassador: Any foreign ambassador in Bangladesh cannot enter into a partnership in the country.

Q.28. What are the classes of Partners?

a. Active partner: An active partner is one who actually participates in the business of the firm. A person
becomes a partner only by agreement.
b. Doormat, Sleeping or Nominal partner: These partners joint the firm by agreement but do not take
any active part in the business. Their liabilities are same as of Active Partners.
c. Sub-partner : The transferee of a share of a partner’s interest in a firm is called a subpartner. Suppose
P, the owner of ¼ of firm, transfers ½ of his share to Q. Q will be called a sub-partner. His rights and
liabilities are limited.

Q.29. What are the classes of Partnership?

There are four type of partnership are sited bellow:

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A. Partnership-at-will: U/s 7 of the Act, partnership is called a partnership-at-will; a. when the
partnership is not for a fixed period of time, and
b. when no provision is made as to when and how the partnership will come to an end.

B. Particular partnership: U/s 8 of the Act, a particular partnership is one, which is formed for a
particular adventure or a particular undertaking. Such a partnership is usually dissolve on the
completion of the adventure or the undertaking.

C. Limited partnership: If the liability of one or more partner of a partnership is limited whether by the
contract or by legislation, such a partnership is called limited partnership.

Q.30. When can the partnership business be registered?

A firm can be registered at any time. But an unregistered firm cannot file certain suits. A firm must be
registered before it can file suits or claim set-off. A firm can be registered even after the partners have
agreed to dissolve the firm.

Q.31. What are the rules regarding the relationship between the partners as regards the
management of the business and their mutual rights?

a. Rules regarding the conduct of the business.

b. Mutual rights and duties
c. Personal profits earned by partners
d. Continuance of per-existing terms

Q.32. What are categories of the authority of a Partner?

The authority of a partner to act on behalf of the firm can be divided into two categories:
a. Express Authority:
Any authority, which is expressly given to a partner by the agreement of partnership called
Express Authority. The firm is bound by all acts done by a partner by virtue of any express
authority given to him.

b. Implied Authority:
Implied Authority means the authority to bind the firm which arises by implication of law from
the facts of partnership.

Q.33. What are the limitations of a partner in case of implied authority?

The section 19(2) of Partnership Act 1932, which are given below, limits the implied authority of a
partner:
o Submission of a dispute relating to the business of the firm to arbitration,
o Open a banking account on behalf of the firm in his own name,
o Compromise or relinquish any claim or portion of a claim by the firm,
o Withdraw a suit or proceeding filed on behalf of the firm,

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o Admit any liability in a suit or proceeding against the firm,
o Acquire immovable property on behalf of the firm,
o Transfer immovable property belonging to the firm, or
o Enter in partnership on behalf of the firm.

Q.34. What are the rules regarding the alteration of authority?

The express or implied authority of a partner may be altered, extended, or restricted by agreement
between the partners at any time.

Q.35. What are the rules regarding the authority in Emergency?

A partner has authority in an emergency, to do all such acts for the purpose of protecting the firm from
loss as would be done by a person or ordinary prudence, in his own case, acting under similar
circumstances, and such acts bind the firm.

Q.36. What are the liabilities of partners to outsiders?

o Liability of a partner for acts of the firm.
o Liability of the firm for wrongful act of a partner.
o Liability of firm for misapplication by partners.

Q.37. What are the rights of Partners? (June’10)

o Conduct of business.
o Can express opinion.
o Access, inspection, copy.
o Equity of profits.
o Interest on capital.
o Interest on advance.
o To get indemnity.
o Application of property of firm.
o Partner’s authority.
o Powers in an emergency.
o Reconstitution.
o Dissolution.
o Rights to carrying on a competing business.
o Right to share profit after retirement.

Q.38. What are the duties of Partners?

o Justice, Faithfulness, True Accounts, Full Information.

o To pay indemnity.
o To attend diligently.
o No remuneration.
o Equity of losses.
o To pay indemnity for willful neglect.

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o No private benefit.
o No secret profit.
o Unlimited liability.

Q.39. When can the constitution of a firm be changed?

o Introduction of a new partner.
o Retirement of a partner.
o Expulsion of a partner.
o Insolvency of a partner.
o Death of a partner.
o Transfer of partner’s interest.

Q.40. When can a partner be expelled?

o When the contract of a partnership contains a provision for explosion under stated circumstances.
o The power to expel is exercised in good faith by the majority of the partners
o The expelled partner has been notice of the charges against him and has been given an opportunity
to answer the charges.

Q.41. What are the rights of an outgoing partner?

o Restraint of trade.
o To carry on competing business.
o To share subsequent profits.
o Revocation of continuing guarantee by change in firm.

Q.42. What are the consequences of dissolution?

A. Acts done after dissolution: Until public notice is given of the dissolution, the partners continue to be
liable to third parties for all acts done in connection with the affairs of the firm.

B. Winding up: Partner is liable to winding up by the following way:

a. Meet up liabilities by sale of properties; and
b. Meet up liabilities of 3rd parties at first
o If any deficit arise in doing the above work partners will bear that according to the terms of
agreement of partnership. And
o If any surplus arises they have right to take the same in proportion of their respective share.

C. Continuing authority of partners for purposes of winding up: Partners have right to a. complete
pending work regarding winding up; and b. complete incomplete transactions.

D. Profit earned after dissolution: If any partner earns any profit from any transaction connected with
the firm after its dissolution, he must share it with the other partners and the legal representative of the
deceased partners.

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E. Returns of premium: Where a partner has paid a premium on entering into partnership for a fixed
term, and the firm is dissolved before the expiration of that term, he shall be entitled to repayment of
the premium.

F. Right to restrain from use of firm’s name: Every partner has right to restrain any other partner from
using firm’s goodwill. But if a partner has purchased the goodwill of the firm, he can use the firm’s
name.

Q.43. What are the modes of setting accounts upon dissolution?

Subject to agreement between the partners following rules are laid down for settlement of accounts—
A. Losses are to be paid first out of profits, next out of capital, and lastly if necessary by the partners
individually in the proportions in which they were entitled to share profits. Capital deficiency is to be
treated as loss and is to be borne by the partners in proportion to the profit sharing ratio.

B. The assets of the firm including any sums contributed by the partners to make up deficiencies of
capital, shall be applied in the following manner and order:
a. In paying the debts of the firm to third parties;
b. In paying to each partner ratably what is due to him from the firm for advances as
distinguished from capital;
c. In paying to each partner ratably what is due to him on account of capital; and
d. The residue, if any, shall be divided among the partners in the proportions in which they were
entitled to share profits.
e. If a partner becomes insolvent or otherwise cannot pay his share of the contribution, the
capital of the solvent partners cannot be returned in full. In this case, the solvent partners
must share ratably the available assets, i.e. the rule laid down in the English case, Garner Vs.
Murray.

C. Payment of the firm debts and of separate debts:

Where there are joint debts from the firm, and also separate debts due from any partner, the property
of the firm shall be applied in the first instance in payment of debt of the firm, and if there is any
surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him
The separate property of any partner shall be applied first in the payment of his separate debts, and the
surplus (if any) in the payment of the debts of the firm.

Q.44.Happening of certain contingencies may lead to dissolution of partnership – What are

those? (Dec’08) (May-June’02)
Dissolution on the happening of certain contingencies, which are:
1. The partnership established for a certain period, the period is ended.
2. The partnership is established to obtain certain objective and the objective is achieved.
3. Death of a partner
4. Insolvency of a partner

Q.45What are the rules for a minor to become a partner in a firm? Discuss the rights and

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responsibilities of a minor becoming a partner of a firm under Partnership Act,1932

A minor cannot be bound by contract and cannot become a partner, partnership being based on
contract. Section 30 of Partnership Act makes it explicit that a minor cannot become a partner, but
with the consent of the other partners, he may be admitted to the benefits of partnership.Should a
minor be admitted to the benefits of partnership his rights and liabilities are as follows:

(i) He has the right to the share agreed by the partners in the profits.
(ii) He has a right of access to inspection and copies of the accounts.
(iii) His share is liable for acts of the firm but the minor is nor personally liable.

Q.46Describe the rules of an outgoing Partner to carry on competing business.

An outgoing partner may carry on a competing business, but subject to contract he may not
a) Use the firm name
b) Represent himself as carrying on a business competing with firm and
c) Solicit customers of the firm
d) An outgoing partner’s agreement not to carry on a business competing with firm is valid
if the restriction imposed is reasonable notwithstanding that agreements in restraint of
trade are declared void under section 27 of the Contract Act.

Q.47Point out the main contents of a Partnership deed.

A partnership deed should include the following information:

 Name of the Partnership

 Term (length) of the partnership
 Purpose of the partnership (also might include partners’ goals)
 Contributions of each partner, in cash, deferred contributions (installments), property
(including intellectual property), and service.
 What happens if a partner fails to make initial contribution
 Additional future contributions
 How profits and losses are distributed (equal, unequal, percentages, etc.)
 Draws to partners (how determined, limitations, when may draw)
 Retention of profits for business needs
 Management powers and duties, including skills contributed, hours of work
 Financial matters, including periodic accountings, as requested by a partner
 Power to borrow money on behalf of partnership
 Power to authorize expenses, signatures required
 Maintenance of records
 Partner time off, including leaves of absence, vacations, sick leaves
 Outside business activities (permitted, restricted)
 Ownership of business assets,Transfer of a partner’s interest
 Sale of partner interest to partnership ,Buy-sell agreement (specific buy-out methods)

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 Continuity of partnership business when a partner leaves, dies, is terminated
 Expulsion of a partner from the partnership,Mediation and arbitration
 Amending partnership agreement (procedure,Admitting new partners
 Adherence to state law

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