Special Contracts and Commercial Law
Rights and Duties of Partners
Learn the default rules on good faith, management, accounts, profits, losses, indemnity, firm property and secret benefits.
The short answer
Partners owe each other good faith and full information, while most financial and management rights remain subject to their agreement.
Core duties
The partnership relationship requires loyalty, candour and care for the common business.
Common advantage
Section 9 requires partners to carry on business to the greatest common advantage and remain just and faithful.
Information and accounts
Partners must provide true accounts and full information affecting the firm.
Fraud
A partner must indemnify the firm for loss caused by personal fraud under Section 10.
Secret profit
Section 16 requires a partner to account for personal benefit obtained from firm transactions, property, name or competing business.
Default rights under Sections 12 and 13
The partnership agreement can modify many of these rules.
Management
Every partner may participate. Ordinary matters follow majority decision after each partner can express a view, but changing the nature of business requires unanimity.
Books
Every partner may access, inspect and copy the firm's books.
Profits and losses
Partners share equally by default, regardless of capital contribution, unless they agree otherwise.
Remuneration and interest
No remuneration is due by default. Interest on capital is payable only from profits, while advances beyond capital carry statutory interest unless agreed otherwise.
Indemnity
The firm indemnifies a partner for proper business payments and reasonable emergency acts protecting the firm from loss.
Partnership deed and statutory default rules
The deed is the first document to read because many internal rights can be varied by agreement.
Section 11 permits partners to determine mutual rights and duties by contract. Sections 12 and 13 then supply defaults on management, access to books, remuneration, interest, profit sharing, losses and indemnity where the deed is silent.
The deed cannot turn fraud or bad faith into a protected partnership act. Duties of honesty, faithful dealing, true accounts and accountability for secret profit remain central to the relationship.
Consequences of breach by a partner
The remedy depends on the duty broken and the effect on the firm.
Account of profits
A partner who gains from firm property, business connections, the firm name or a competing business may be required to account to the firm under Section 16.
Indemnity for fraud
Section 10 requires the fraudulent partner to indemnify the firm for loss caused by that fraud.
Injunction or dissolution
Continuing misuse of firm assets, exclusion from management or persistent breach may justify preventive relief and, in serious cases, dissolution under Section 44.
Accounts and valuation
Financial misconduct often requires an account of transactions, restoration of secret benefits and adjustment of the partner balance before final settlement.
Internal rights and authority against outsiders
A restriction in the deed does not answer every third-party question.
Sections 18 and 19 treat a partner as an agent of the firm for the business of the firm. A partner may therefore bind the firm through an act done in the usual way, even though the act later creates an internal accounting dispute among the partners.
A private restriction on authority protects the firm against an outsider only where the outsider knew of that restriction or did not know or believe the person to be a partner. Analyse the firm's external liability separately from the acting partner's duty to indemnify or account internally.
Leading cases and what they establish
Read each authority for the proposition it proves, the legal question it answers and the reasoning that supports the result.
Bentley v. Craven
(1853) 18 Beav 75
Held: A partner who makes an undisclosed profit by supplying personal goods to the firm must account for that benefit.
Why it matters: Use it for secret profits and fiduciary duties reflected in Section 16.
Blisset v. Daniel
(1853) 10 Hare 493
Held: A contractual power to expel a partner must be exercised honestly and in good faith for the partnership.
Why it matters: Use it where majority power is exercised for an improper personal purpose.
Using this topic in a legal answer
A clear answer sequence
- Read the partnership deed before applying defaults.
- Identify the relevant duty or management right.
- Apply Sections 9 to 17 to the conduct.
- State the accounting, indemnity or management consequence.
Points that are often confused
- Ignoring the partnership agreement.
- Assuming profit shares always follow capital shares.
- Allowing majority vote to change the nature of business.
Open the revision and self-check sheet
Rules to retain
- Good faith and full accounts are core duties.
- Every partner may participate in business.
- Profits and losses are equal by default.
- Secret benefits must be accounted for.
Questions to test understanding
- Can a majority change the nature of the business?
- What is the default profit ratio?
- When must a partner account for personal profit?
Questions students ask
Are partners always entitled to salary?
No. A partner receives no remuneration for conducting firm business unless the partners agree otherwise.
Must partners contribute losses equally?
Equal sharing is the statutory default, but the partnership agreement may prescribe another arrangement.
Can a majority of partners change the nature of the firm business?
No. Ordinary matters may be decided by majority after every partner has an opportunity to express a view, but changing the nature of the business requires consent of all partners.
Primary sources and further reading
This article is written for legal education. Verify the governing provision, applicable amendments and complete judgment before relying on a proposition in practice.