Professional Documents
Culture Documents
13/10/15
Definitions-
Any act/omission by all the partners, or by any partner or agent of the firm which
gives rise to a right enforceable by/ against the firm even if one partner does
something, the liability passes to everyone in the firm. With an act that has an
intention to create a legal relation.
Relationship between persons who have agreed to share profits of a business carried
on by all, or by any of them acting for all
Essential of a partnership
1. Agreement
2. Business
3. Share profits
4. Mutual agency
Persons who have entered into a partnership with one another individually- Partner
The name under which their business is carried on- Firm Name
1. Agreement
Partnership exists only for the purpose of business alone. NGOS dont
come under this.
Minck v Roshan Lal Shorey, 1931, Lah HC- two persons joining and
investing to produce a movie and deciding to share the profits are
considered to be partners. Although it maybe a single adventure but the
same requires a series of transactions and continous relationship. Particular
partnership.
Keith Spicer Ltd v Mansell, 1970, CA- Two people decided to join and
form a private limited company and one did not want to invest as the
company had not come into existence yet. The other filed a case, but it was
held that the partners should have a business in existence.
3. Share Profits
4. Mutual Agency
14/10/15
Question: S & S were partners who were badly in debt. So they contracted with their
creditors, whereby they made their creditors, as trustees of their business and take
profits to clear the debts. These trustees bought coke from Mr. H and didnt give
money. So he filed a case against all the trustees including Mr. C, who never worked.
Is there any partnership between the trustees?
Answer: No there is no partnership as I was not carrying on the business and merely
just deriving the profits (a passive member). The court said partnership isnt just the
sharing of profits and rather in order to determine partnership, whether there is an
agreement to act as agents for each other. Cox v Hickman, 1860
Each male member is called Co- parcener (after 2005 females were also included).
The eldest male member is called Kartha. As soon as a child is born it has a right over
the ancestral property, only applicable for Mithakshara School of law. To stop the
Kartha, the others can ask for partition.
Agarwal & Co v CIT, 1970, SC A HUF can never become a partnership. This is
because its not a commercial enterprise and it is a family business. Its governed
under Hindu Succession Act and not governed by commercial laws. The co- parceners
never act as agents of each other. Thus if one party enters into a contract, this doesnt
equate to ipso facto other members also enter into the contract.
Section 5- Relationship of Partnership arises from contract and not status, members
of HUF/ Burmese Buddhist H&W carrying on business are not partners
CIT v Nandlal Gandalal, 1960- HUF is neither a partnership nor can they join any
partnership.
Firm HUF
Mutual agents. An act done by Co- parcener are not agents and
any of the partners binds the firm. Kartha has the sole authority
Can ask for profits and accounts Cannot ask for profits and
as a matter of right accounts as a matter of right.
Partnership
Collection of partner- no separate existence
Partners are the co-owners
Partners have unlimited liability
No right to transfer share without the consent of others
Registered Company
Legal person with separate existence
Shareholders are not co-owners
Shareholders have limited liability on shares/ guarantees.
Shareholders can transfer without consent.
15/10/15
No partnership:
1. Joint owners of property sharing gross profits or return- Govind Nair v Maga,
1948; teashop, when two people are jointly owning a property, carrying out,
splitting of profits but however they were not agents of each other. So there is
no partnership. Sharing of profits between certain persons does not make such
persons partners.
2. Lender of money receiving profits
3. Servant/ agent receiving profits
4. Widow/ child of deceased partner
5. Seller of Goodwill
Karmali Abdulla v Vora Karimji, 1915- Rashid and Karim are two Indian traders from
Bombay. They along with a Hong Kong trader enter into partnership agreement. The
agreement between them was to ship brown sugar from Mauritius. The shipping from
Mauritius reaches the Bombay port and from the Bombay port the order gets split
respectively between them. And then the ship was sent to Hong Kong and the
shipment was lost. The Indians said that as it was a partnership, the loses should be
split, the guys at Hong Kong did not agree to this. The Court held that the partnership
was a particular partnership and a same adventure and it had to be shared.
Types of PARTNERS
16/10/15
Duties of Partners.
1. Goodfaith
Duty of absolute good faith-Section 9- Uberimae Fidei- utmost good
faith.
Greatest common advantage.
Just and faithful to each other.
Render accounts and full information. Bentley v Craven, 1857- firm for
refining of sugar was established between 4 partners. One of the
partners considered to be an expert was authorized to purchase for the
firm for refining. Instead of purchasing sugar from the market he
supplied his own sugar, which he had purchased earlier when the
prices were considerably lower. He did not disclose the fact and it was
held that the firm was entitled to recover the profits made by the
partner.
2. Not to compete
Not to compete in the same business
If so, return profits to firm- Pulin Hihari v. Mahendra Ghoshal, 1921-
We will import salt from a foreign country and a partner bought salt for
himself and was also selling the salt privately. The Court did not allow
this.
Case 1: Dean v. Mac Dowell 1878- Salt manufacturing and distribution
are different.
Case 2: Ass v Banham, 1891- Partner from ship brokers- ship building
Co.s director- Both are different.
3. Due diligence
Duty of due diligence 12(b) + 13(f)
Any willful diligence
Indemnify
Question. A partnership was into dissolution. One partner asked the
managing partner to sell bales of cotton immediately. But he didnt and
said will sell it in the end of dissolution. By the time it was supposed to
be sold, the rates went down. Will the partner be liable for willful
neglect? No, as the partner never anticipated any such loss- Market
speculation. Cragg v Ford
Rights of partners.
Every partner is liable, jointly with all the other partners and also severally, for all the
other partners and also severally, for all acts of the firm done while he is a partner.
B. Emergency- Sec 21- A partner has the authority in the case of an emergency
to do all such acts for the purpose of protecting the firm from the loss as would
be done by a person of ordinary prudence.
C. Ratification- Even if the partner has acted without authority, if the partners
subsequently ratify the act then the act will become binding on them.
D. Admission made by a Partner- Sec 23- The admission and representation
made by a partner constitute evidence against the firm.
E. Notice to an Acting Partner-Sec 24- Notice to an Acting partner equates to a
notice on the firm.
F. Torts and Wrongful Acts- Sec 26 - The firm is liable to the same extent as
the partner. It has to be done in the usual course of business and the wrongful
act done within the realm of Implied authority. Then the firm will be liable.
Hamlyn v Houston, Two firms were rivals of eachother. A partner in one firm
bribes the clerk of the other to get details of the clients and to find out the
purchase price. Firm A makes a profit and Firm B loses 750 pounds. Since Mr
X did a wrongful act through the course of business and hence the firm was
also held liable for the acts.
G. Misapplication of money or property- Section 27- Liability when a) money
or property has been received by a partner and he misapplies the same without
accounting for it to the firm b) when the money or property has been received
by the firm from a third party and the same is misapplied by any of the
partners.
Apparent and ostensible authority- the firm will be liable to the 3rd party.
Firm receives the money- The firm will be made liable to the 3rd parties.
(1) A minor may not be a partner in a firm but with the consent of the other
partners, he maybe admitted to the benefits of partnership.
(2) The minor has the right to share in property and profits of the firm as agreed
upon and he may have access to the accounts of the firm.
(3) Minors share is liable for the acts of the firm but the minor is not personally
liable.
(4) The minor may not sue the partners for an account or payment of his share of
the property or profits until he severs such a connection.
(5) At any time within 6 months of attaining majority or of his obtaining
knowledge that he has been admitted to the benefits of a partnership such a
person may give a notice that he has elected not to become a partner in the
firm. If he fails to give such a notice then he will become a partner by default.
(6) When such a person has been admitted his rights and liabilities as a minor
continue up to the date he becomes a partner, but he also becomes liable to
third parties for all the acts the firm has done since he has been admitted to the
benefits of partnership.
(7) His share in the property and the profits shall be the same as when he was a
minor.
(8) When a person elects not to become a partner, then his rights and liabilities
shall continue to be that of a minor until the date of the public notice. His
share shall not be liable for any acts of the firm after that date. He shall be
entitled to sue the partners for his share of property and profits in accordance
with sub-section (4).
CIT V Dwarkadas Khetan co, 1961, SC, Within 6 months of his option, if any suit is
filed against the firm, the minor will not be personally liable. If the monor accepts to
be a partner, then his liability is retrospective from the date of admission to when he
first attained benefits from the firm.
12/11/15
Offer to sell or buy goods. There must be an acceptance for selling or buying
goods.
Delivery- immediate, simultaneous by installments/ future.
Payment of price- Immediate, simultaneous, by installments/future.
The goods that form the subject of the sale, owned by the seller or possessed
by the seller or for future goods.
Case 1: A agrees to sell Hemp to B to be delivered on arrival per Fanny and
Almira. Ship arrives, but no goods on board. Is the seller liable? No.
Case 2: A agrees to sell 50 cases of tallow to be delivered on safe arrival of
the ship Elgin. Ship arrives safely, but no goods on board. Is the seller
liable? Yes.
Before the title is passed the contract can be voided at any time. Before the
risk passes.
Agreement to sell specified goods.
Without the fault of buyer or seller
Goods are damaged or no longer same to the description.
Howell v Coupland, 1876, QB, Was a potato grower, however a disease
struck the potatoes and the promised value was 52 tonnes however he could
only grow 8 tonnes and hence the contract was repudiated.
Essay question.
Expressed conditions
Expressed
Breach: repudiate and sue for damages
Expressed warranties
Section 13
1. Waiver by buyer
2. Elect to treat a breach of Condition as Warranty
3. Contract is not severable and the goods were accepted in parts.
4. Excused by law impossibility of performance otherwise
Acceptance- Section 42
Nagardas v Velmahomed, 1930, Bom HC, Konda rice, was delivered in port of
Mumbai and here one can inspect the goods. He did not inspect but just sealed and
stacked it in the goodown. He had to ship the rice to Liverpool and thats when he
checked the goods and found it was Paddy husk. And then he rejected the goods, as it
was a breach of an implied condition. The courts said that there was a breach of an
implied condition however he waved of his rights when he did not inspect it in the
port.
Remedy 1
Remedy 2
Wallis, Sons and Wells v. Pratt & Haymes, 1911, HL, Commons English Sanfoin
seeds and Giant Sanfoin seeds. The buyer wanted to buy a CES but he was given
GSS, however he did not know the difference in the seeds. When the plants grew, he
found out that he had been given the wrong type of Sanfoin seeds. There was a breach
of condition and he sued. The sellers said there is an exception clause for implied
warranty, that is that the sellers give no warranty express or implied as to growth,
description or any other matter. The court said that this would not stand and that it
was in fact an implied warranty. The condition is converted into a warranty for
damages.
IMPLIED WARRANTIES
Transfer of Property
Badri Prasad v State of Mp, 1971, SC, cut teak trees of more than 12 inches grith.
Stunps of trees after the cutting should be 2 inches high
Till the tree is felled in the prescribed limits, it does not pass to the buyer, but
remains with the state.
They are unascertained.
Specific/Ascertained
As parties intended.
Depends on
o Terms of contract
o Conduct of parties
o Circumstances of the case
Section 20-24- rules to determine the intention unless intended otherwise.
The case involves the delivery of Copra from Kerala to Hyderabad. The seller loads
all the goods in a truck and the contractual terms tell us that that when the goods have
been loaded, it is no longer his responsibility. The buyer has also acquired a insurance
on the goods. A sales tax is imposed buy the AP government. The buyer argues the
contractual term shows us that the ownership has been transferred. The conduct of the
parties, there is insurance, so the buyer has accepted the ownership of the goods.
Property passes
When signifies his approval/accepts or does any act to indicate the same.
No notice of rejection and retains the goods
-If time for approval-no communication of dismissal.
-If no time is fixed-within reasonable period.
State of Maharashtra v Britannia Biscuits Co Ltd 1955, SC, Biscuits sold in
tins and these are refundable within reasonable time in addition with a
refundable deposit of 20%- boxed not returned it is a sale.
Seller
Passing off property- buyer even if no delivery
Proviso- if any delay in delivery issue to seller/buyer- faulty party
Proviso- bailees right and duties with regard to seller/buyer remains the same.
Unless there is contract to contrary.
Demby Hamilton and Co ltd v Barden, 1949, 30 tonnes of apple juice was to
be delivered. The delivery is asked to be retained for a few days. The delivery
re-started and then he stopped accepting the goods.. The apple juice then
becomes totally unmarketable. The court held because the delay was due to the
buyer and hence the risk passed to the buyer.
Nemo Dat Quad Non Habet- No one can transfer what they dont have.
Buyer gets only what the seller has.
Lee v Bayer, 1856, Auction for a stolen horse. The owner claims it back and
the court held that there was no transfer of title and the horse had to be
returned back.
Problem on Exceptions:
estoppel. Study 1. Estoppel
Morvi Mercantile When the seller makes representations with regard to authority
case. to sell.
Buyer innocently believes the same.
Mercantile agent
Consent of owner
Goods/ documents to title
Ordinary course of business
Buyer acted in good faith and knows that seller doesnt have authority to sell.
Folkes v R, 1923, KB,
Section 32
As parties agreed
Effect of putting the possession of goods in buyer and any such person
authorized to do so.
It can be symbolic, constructive or actual.
For the delivery of hay stacks and it was put in a truck and delivered. The
buyer only took half and paid for it. When the parties are delivering in part
SECTION 35
A) Place of Delivery
Whether seller should send/buyer takes the ossession- intention of
parties
In the absence of any contract
Sale-delivered where the goods are at the time of sale.
Agreement to sell- where the goods are at the time of agreement/
manufacturing or produced (if future)
C) If the goods are in 3rd partys custody, unless the 3rd party acknowledge the
same, the buyer is not delivered the goods.
D) Buyer/ seller should tender the performance at a reasonable hour which
depends upon facts of the case.
E) Expenses for putting goods into deliverable state are born by the seller by
default.
Section 37- Delivery of Wrong Quantity
If less quantity you can either reject of accept and pay for the same.
If the quantity is more you can accept whatever agreed and send the rest
back/reject fully/accept fully= pay fully.
Mixed goods are sold- accept whatever he wants/ reject fully.
Subject to the agreement, trade usage, course of dealings.
Levy v Green, 1859, got goods from China and the goods were mixed. They
can either accept the quantity you want or reject it fully and sue for a breach of
contract.
FOB-Free on Board
SECTION 40-
Hardy & co v. Hillman & Fowler, 1923 KB, For the delivery of wheat. The
buyer did not check the wheat and he sold it to sub- buyers. Then he came to
the information that the wheat was of poor quality and he rejected the goods.
The court held that you cannot reject the goods as the sale to your sub- buyers
indicated your acceptance of the goods.
Section 43
Unless agreed
If buyer rejects the goods
No duty to return it back
Only intimation of rejection is sufficient.
Section 44-
Question?
J co. Sold some quantity of citric acid crystals to P who resold it to M & B.
Later due to bad quality of crystals, P rejected the goods.
J and co said that they would refund the price and send a cheque to M&B.
The check bounced.
Can M&B retain the goods as unpaid seller until the refund is made? The
property doesnt revert back seller just because of the acceptance of the
refund.
Section 46- UNPAID SELLERS RIGHT.
1. Possession of goods
2. Goods sold without stipulations as to price.
3. Goods sold in credit, but the term of the credit has expired
4. Buyer is insolvent
5. Irrespective of whether he is an agent/bailee of the buyer.
Ex parte Golding Davis and Co 1883, Ch.D, There was a delivery of drums to
Liverpool and then sub selling to a customer in New York.