1.0 INTRODUCTION: Partnership Act 1961 is a govern partnership law in Malaysia. It provides for among of other thing liability of a partner towards another partner and or third party. Liability under PA is not only limited to civil but also criminal liability.
2.0 FIRST ISSUE: The partners have agreed that the day-to-day business of the firm will be left to Ahmad but he would not have authority to buy more than RM20,000 worth of goods on credit. Is Ahmad is an agent of the firm? Section 7 of the Partnership Act 1961 states:
Power of partner to bind firm
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.
Based on section 7 of Partnership Act 1961, Ahmad is an agent to the firm. Ahmad has authority to run day-to-day business of the firm with restriction to purchase not more than RM20,000 worth of goods on credit. In the circumstance, section 10 of Partnership Act 1961 for the restriction on authority said If it has been agreed between the partners that any restriction shall be placed on the power of any one or more of them to bind the firm, no act done in contravention of the agreement is binding on the firm with respect to persons having notice of the agreement.
As a conclusion, Ahmad is an agent of the printing business and so long as he does not act beyond his authority he will bind the firm and his partners (Jamal & Ramli).
3.0 SECOND ISSUE: Ahmad purchases some stationeries and papers and tells the supplier that he intends to sell some books and stationeries ‘for his own account’. Did Ahmad make secret profit and did he breach his fiduciary duties as a partner of the said printing business?
Section 31 of the Partnership Act 1961:
Accountability of partners for private profits
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.
Section 32 of the Partnership Act 1961:
Duty of partner not to compete with firm
If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business.
In GREEN v HOWELL (1910) 1 CH 495, the partnership agreement provided that if either partner committed any breach of the articles or any flagrant breach of his duties as a partner, the other partner might, by notice in writing,...