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introduction to

partnership & company law

prepared by:
group 1: partnership law
no. student’s name matric number
1. ahmad syafiq bin ahmad barhanudin 2017208464
2. ahmad amieyrul hazeeq bin rudie 2017210982
3. muhammad faris ikhwan bin mohd fauzey 2017208644

prepared by:
madam hajah wan murshida binti wan hashim

submission date:
23rd may 2019
year
issues:

i. whether there is a contract between david and the supplier?


ii. whether david make a secret profit between chua & abu?

The definition of partnership are divided into two sections. whereby on the first section is s3(1)-
”partnership is the relation which subsist between persons carrying on business in common with a view
of profit. which means in our literal definition, a person who has a common view of generating his or
her own income.

It then followed by s3(2)-”the relation between members of any company or association which is
registered as a company under the companies act, 1965 or as a co-operative society under any written
law relating to co-operative societies; or formed or incorporated by or in pursuance of: any other law
having effect in malaysia or any part thereof; or any letters patent, royal charter or act of parliament of
the united kingdom, is not a partnership within the meaning of this act. in the definition of a company
must be registered under companies act 1965 in order for an entity to entered a contract of a partnership.

A partnership is when two or more people work together and share the profits from the business or
profession. however, one must not always assume that all partners participate in the work or profits or even
liabilities of the firm equally. in fact, there are various types of partners based on the extent of their liability,
or their participation in the firm – like an active partner or dormant partner etc. let us take a look.

The types of partner where there are six types of partners we come across on a regular basis. this list is not
exhaustive, the partnership act does not restrict any unique kind of partnership that the partners want to
define for themselves. let us take a look at some of the important types of partners. the first partner is active
partner/managing partner

An active partner is also known as ostensible partner. As the name suggests he takes active participation in
the firm and the running of the business. He carries on the daily business on behalf of all the partners. This
means he acts as an agent of all the other partners on a day to day basis and with regards to all ordinary
business of the firm.
Hence when an active partner wishes to retire from the firm he must give a public notice about the same.
this will absolve him of the acts done by other partners after his retirement. Unless he gives a public notice
he will be liable for all acts even after his retirement. Second is dormant/sleeping partner this is a partner
that does not participate in the daily functioning of the partnership firm, i.e. he does not take an active part
in the daily activities of the firm. He is however bound by the action of all the other partners. He will
continue to share the profits and losses of the firm and even bring in his share of capital like any other
partner. If such a dormant partner retires he need not give a public notice of the same. The theres is nominal
partnerthis is a partner that does not have any real or significant interest in the partnership. so, in essence,
he is only lending his name to the partnership. he will not make any capital contributions to the firm, and
so he will not have a share in the profits either. but the nominal partner will be liable to outsiders and third
parties for acts done by any other partners. next is partner by estoppel if a person holds out to another that
he is a partner of the firm, either by his words, actions or conduct then such a partner cannot deny that he
is not a partner. this basically means that even though such a person is not a partner he has represented
himself as such, and so he becomes partner by estoppel or partner by holding out. the fifith is partner in
profits only this partner will only share the profits of the firm, he will not be liable for any liabilities. even
when dealing with third parties he will be liable for all acts of profit only, he will share none of the liabilities.
lastly, is minor partner. a minor cannot be a partner of a firm according to the contract act. however, a
partner can be admitted to the benefits of a partnership if all partner gives their consent for the same. he
will share profits of the firm but his liability for the losses will be limited to his share in the firm.

such a minor partner on attaining majority (becoming 18 years of age) has six months to decide if he wishes
to become a partner of the firm. he must then declare his decision via a public notice. so whether he
continues as a partner or decides to retire, in both cases he will have to issue a public notice.

A Contract is an exchange of promises with specific legal remedies for breach. It is a legally
binding agreement between two or more parties which, if it contains the elements of a valid legal
agreement, is enforceable by law or by binding arbitration. In simple words, a contract is an agreement
between two or more parties to do or not do something.

A Contract can be oral, written, formal, informal. Some contracts are required to be in written so that it
can be enforced. Examples of Contracts include a lease, a rental agreement or a promissory note.

30. Partners are bound to render true accounts and full information of all things affecting the partnership
to any partner or his legal representatives.
Accountability of partners for private profits

31. (1) 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 of the
partnership property, name, or business connection. (2) This section applies also to transactions
undertaken after a partnership has been dissolved by the death of a partner, and before the affairs thereof
have been completely wound up, either by any surviving partner or by the representatives of the
deceased partner.

There is a case call Pathirana v Pathirana (1967) where Both plaintiff and defendant were running a
petrol station as agent of Caltex.After sometimes, R then served a three months notice of determining
the partnership to A. During such period,A had obtained a new agreement with Caltex transferring the
agency in his name alone and he later continued the business at the same premise under his own name.
Upon discovery, A brought an action to the court for a share of the profits from the business. The court
held that the agreement that R entered with Caltex under his name was a partnership assets and the
benefits obtained by him without getting any consent from A was a clear breach of fiduciary duty.

Another case that is similar is Bentley v Crave.The partners were doing business in a sugar refinery and
one of them was the firm’s buyer and as such he was able to buy sugar at the discounted price. He then
sold it to the firm at market price. Other partners later discovered that this partner had been buying and
selling sugar to them on his own behalf and the court held that the firm could claim the profits obtained
by the partners from the dealings.

According to the Law and cases, this issues could be applied with the cases and the law. The Law that
could be apply is second duty which was duty of not obtain unauthorised personal profit.This state in
Section 31 of Partnership Act 1961, (a) Every partner must account to the firm for any benefit derived
by him, without the consent of other partners, from any transaction concerning the partnership or from
any use by him of the partnership property, name, or business connection.

For conclusion, the company Melting Delights are consists of three members, (David, Chua & Abu).
David was the buyer of supplies and he got the price lower than the Market Price. Then, he charged the
firm at the Market Price. Chua and Abu found out the action and wanted to claim the profit. According
to the act, section 31 (a), every partner must account to the firm for any benefit derived by him, without
the consent of other partners, from any transaction concerning the partnership or from any use by him
of the partnership property, name, or business connection. With this,we can conclude that Chua and
Abu can claim the profit from David.
issues:

iii. whether david breach fiduciary duty between partners?

Under section 26 Partnership Act 1961 it stated the duties of partners where they have to fulfil. The interests
of partners in the partnership property, and their rights and duties in relation to the partnership, shall be
determined, subject to any agreement, express or implied, between the partners, by the following rules:
(a) all the partners are entitled to share equally in the capital and profits of the business, and must
contribute equally towards the losses, whether of capital or otherwise, sustained by the firm; (b) the
firm must indemnify every partner in respect of payments made and personal liabilities incurred by him.
(i) in the ordinary and proper conduct of the business of the firm; or (ii) in or about anything necessarily
done for the preservation of the business or property of the firm; (c) a partner making, for the purposes
of the partnership, any actual payment or advance beyond the amount of capital which he has agreed to
subscribe, is entitled to interest at the rate of eight per cent per annum from the date of the payment or
advance; (d) a partner is not entitled, before the ascertainment of profits, to interest on the capital
subscribed by him; (e) every partner may take part in the management of the partnership business; (f)
no partner shall be entitled to remuneration for acting in the partnership business; (g) no person may be
introduced as a partner without the consent of all existing partners; (h) any difference arising as to
ordinary matters connected with the partnership business may be decided by a majority of the partners,
but no change may be made in the nature of the partnership business without the consent of all existing
partners; and (i) he partnership books are to be kept at the place of business of the partnership (or the
principal place, if there are more places than one) and every partner may, when he thinks fit, have access
to and inspect and copy any of them.

Example of the case is Bevan v Webb. The sleeping partner who decided to sell their interest in the
business to the managing partner had employed a valuer to inspect the books of partnership for them.
The managing partner, however, refused the valuer to do so and claimed that the right the right of the
books can only be exercised by partners. The court held that the right of inspection could be exercised
not only by partners but by reliable agent appointed by the partners without any objections.
According to the case about Chua and the partnes of company David and Abu that he wanted to inspect
the partnership books. So this can relate to the section 26 (i) that stated the partnership books are to be
kept at the place of business of the partnership or the principal place, if there are more places than one
and every partner may, when he thinks fit, have access to and inspect and copy any of them. This means
that the partnership books and accounts must be kept at the premise of the firm or if there are many
premises, it should be at the principal place of business of the firm that the books of the partnership
should be made available to every partner to access, inspect and have a copy of them. It also can relate
with Bevan vs Webb case that about the partnership books.

In conclusion, Chua is a partner of Melting Delights. So Chua has right to inspect the partnership books
according to Section 26 (i). Moreover, David and Abu cannot refused Chua to inspect the partnership
books as he also partner of the Melting Delights.

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