Chapter 11, 12, 13 MindMap blaw sir asif

blaw sir asif

1. Overview:
This chapter discusses:
Chapter 11: Essentials of Partnership and Basic Terms
Chapter 12: Mutual Rights and Duties of Partners
Chapter 13: Authority and Liability of Partners + Other Concepts (Estoppel, Transferee, Minor)
Premium Content
(For Spring 2024)
CAF 04: Business Laws
Chapter 11 + 12 + 13: Partnership
Secret Sheet for Quick Revision
(For students of Muhammad Asif, FCA)
Chapter 11: Nature of Partnership
1. There must be an agreement: (stating Capital, P&L
ratio, Duration, Rights and Duties)
2. There must be association of two or more persons (2
– 20, except in bank, professional firms)
3. Parties must agree to carry on business: (charity, or
rental income is not business)
4. There must be sharing of profits among partners
5. There must be mutual agency among partners
6. No separate legal status:
7. Unlimited Liability
LO 1: Essentials of Partnership LO 2: Difference between Partnership and
Co-Ownership
1. Formation
2. Business
3. Number of persons
4. Sharing of profit
5. Agency
6. Transfer of interest
Chapter 12: Mutual Rights and Duties of Partners
LO 1:Mutual Rights and Duties of Partners LO 2: Property of the Partnership/Firm
LO 3: Types of Partnership LO 4: Types of Partners
Exceptions: Parties who share profit, but are not
partner:
1. Lender.
2. Employee/Agent.
3. Retired/Deceased Partner.
4. Previous owner of business.
5. Minor admitted into benefits.
6. Transferee of interest.
Case Study Tips:
1. If any essentials not present, no partnership.
2. A partner may NOT share losses, participate in
management or bring capital.
3. A partner may also get salary or interest, if agreed.
Particular Partnership:
For a particular project or period.
Dissolved on expiry.
If continued after expiry, it becomes ‘partnership at will’.
Partnership at Will:
Duration not specified.
Dissolved when a partner gives notice (wef specified date).
If dissolution with consent of all, it will not be ‘partnership
at will’.
Actual Partner:
who actively manages business and is
known to others.
Public notice is required if he retires.
Silent Partner:
Does not manage business.
Sleeping or dormant partner:
Not known to others.
Public notice is NOT required if he retires.
Partners in Profit only:
Does not share losses.
Liability is still unlimited.
Nominal Partner:
lends his name.
Liability is still unlimited.
Sub-Partner/Transferee of Interest:
Not a partner.
Not liable for debts of firm.
Partners by estoppels or by holding out:
A person represented as partner.
Rights of Partners:
1. Right to take part in the conduct of the business:
2. Right to be consulted: (decision on majority basis)
3. Right of access to books of accounts: (+ copy)
4. Right to share profits equally: (unless different agreed)
5. Right to receive interest on capital: (if agreed and firm
earns profit)
6. Right to receive interest on advance: (@6% or as
agreed)
7. Right to be indemnified:
8. Right to retire: (+ public notice)
9. Right of outgoing partner: (6% Interest or Share of
Profit until settled)
10. Variation in Partnership: (with consent of all partners)
11. Rights of partners after a change in firm: (mutual
rights same as before)
Absolute/General/Mandatory duties of Partners:
1. Joint and Several Liability: (i.e. Each partner has unlimited
liability)
2. Duty to act within authority: (compensate firm if exceeded
authority)
3. Duty in case of emergency: (can do acts to save firm from loss)
4. Duty to carry on business to the greatest common advantage:
(no personal gain)
5. Duty to be just and faithful:
6. Duty to provide true accounts:
7. Duty to provide full information: (disclose all interests in
transactions)
8. Duty to indemnify for fraud:
Qualified duties of Partners:
1. Duty to use firm’s property exclusively for
the firm: (return if benefit obtained)
2. Duty not to engage in competing business:
A partner can do any other business but
cannot do similar/competing business.
3. Duty not to assign/transfer his interest:
4. Duty to contribute to the losses:
5. Duty to indemnify for willful neglect:
6. Duty to perform diligently his duties:
7. Duty to work without remuneration:
Property of the firm includes:
1. Property (OR rights or interest in property) originally
brought into common stock;
2. Property (OR rights or interest in property) acquired by
the firm or for the firm;
3. Goodwill of firm;
Any property purchased with partnership money will be
deemed to be partnership property, unless any contrary
intention appears.

2. Overview:
This chapter discusses:
Chapter 11: Essentials of Partnership and Basic Terms
Chapter 12: Mutual Rights and Duties of Partners
Chapter 13: Authority and Liability of Partners + Other Concepts (Estoppel, Transferee, Minor)
Premium Content
(For Spring 2024)
CAF 04: Business Laws
Chapter 11 + 12+ 13 : Partnership
Secret Sheet for Quick Revision
(For students of Muhammad Asif, FCA)
Chapter 13: Authority, Liability
Implied Authority of a partner:
1. To buy and sell goods (of business).
2. To borrow money (in trading business).
3. To receive and pay cash.
4. To settle accounts.
5. To employ servants
6. To pledge movable property of firm
7. To draw cheques or negotiable instruments.
8. To sue or defend suits.
Firm shall be liable to third parties if a third party
makes such agreements with a partner.
LO 1: Authority of Partners LO 2: Liability of Partners, and Notices
Liability of a partner for acts of the firm:
Each partner has unlimited liability.
If paid more than share, reimbursement from
other partners.
Liability of firm for wrongful acts of a partner:
With respect to Third Parties:
Firm liable to third parties (if ordinary
course, third party acted in good faith)
With respect to Partners:
Guilty partner bears whole loss, and
indemnifies firm.
Liability of firm for misapplication of money or
property by partners:
The firm is liable to third parties.
Restrictions on Implied Authority:
1. Submit a dispute of the firm to arbitration.
2. Open a bank account on behalf of the firm in his own
name.
3. Compromise or relinquish any claim or portion of a claim
by the firm.
4. Withdraw a suit or proceeding filed on behalf of the firm.
5. Accept any liability in a suit or proceeding against the
firm.
6. Acquisition of immovable property on behalf of the firm.
7. Transfer immovable property belonging to the firm.
8. Enter into partnership on behalf of the firm.
Firm shall not be responsible if a third party makes such
agreements with a partner.
Case Study Tip: Legal Position if Partner
exceeds its Authority:
If a Partner exceeds his authority, Firm is
liable for his acts if:
1. Firm ratifies it, or
2. It is a case of emergency, or
3. Third party did not know actual authority.
Effect of notice received by a partner:
Notice is served to whole firm if:
1. given to active partner.
2. relates to affairs of firm.
3. Does not relate to fraud by partner receiving notice.
Effect of representation/statement by a partner:
Representation can be used as evidence if:
1. relates to affairs of the firm.
2. made in the ordinary course of business.
Chapter 13: Other Concepts
Principle of Holding out partner:
If a person is represented as a partner
and third parties gave credit to firm on such
representation, person is liable for debt.
Examples/Application: (when a non-partner
is liable)
1. Minor attaining age of majority (if no
public notice given for 6 months)
2. Retirement of Active Partner (if no public
notice given)
Exceptions: (when a partner is not liable)
1. Death of a partner:
2. Insolvency of a partner:
LO 3: Principle of Estoppel or Holding out
Partner
LO 4: Transferee of a Partner’s Interest
Rights of Transferee:
1. To receive share of profits.
2. On dissolution:
(a) share of the assets, and
(b) Accounts of firm from dissolution.
Restrictions/Disabilities/Limitations
of Transferee:
Transferee shall NOT:
1. interfere in business.
2. inspect books.
3. require accounts.
4. challenge Accounts.
5. sue for dissolution
LO 5: Minor in a Partnership
Legal Status of a minor admitted to benefits
of a partnership:
Rights of minor admitted to partnership:
1. to share profits and property of firm.
2. to access accounts.
3. cannot be declared insolvent.
Liabilities of minor admitted to partnership:
1. No personal/unlimited liability.
2. Only share in firm is liable.
Restrictions/Disabilities of minor admitted
to partnership:
1. Not a partner.
2. Cannot file suit for profit and property,
unless he disconnects.
3. No access to books.
Legal Status of a minor on attaining age of majority:
Make Decision and Public Notice whether to become
Partner:
Within 06 months of attaining majority (or becoming
aware of partnership whichever is later)
If elected to become a partner:
1. his share as minor will be share as partner.
2. Personal/unlimited liability, since admission as minor.
If elected NOT to become a partner:
1. Continues as minor till public notice.
2. No liability for acts of firm after public notice.
3. Can sue for recovery of his share of profits and property.