Page 172 - DMGT407Corporate and Business Laws

Unit 6: Partnership Act and Limited Liability Act

6.6.5 Death of a Partner Notes

Section 42(c) provides that a firm is dissolved by the death of a partner, in the absence of a
contract to the contrary. Section 35 deals with a situation where after the death of a partner, the
firm continues its business without dissolution and provides that the estate of the deceased
partner is not liable for any act of the firm done after his death. Proviso to s.45 lays down an
identical rule applicable to a case where the death of a partner has caused dissolution of the firm.
A public notice of the death of a partner is not required.
Transfer of Partner’s Interest: A partner may transfer his interest in the firm by sale, mortgage
or charge. The transfer may be absolute or partial. But as the partnership relationship is based on
mutual confidence, the assignee of a partner’s interest cannot enjoy the same rights and privileges
as the assignor. Section 29 provides that the transferee, during the continuance of the firm, is not
entitled to (i) interfere in the conduct of business of the firm or (ii) require accounts of the firm,
or (iii) inspect books of the firm.
The transferee of the partner’s interest is entitled to receive share of profit of the assignor.
However, he is bound to accept the profits as agreed to by the partners, i.e., he cannot challenge
the accounts.

On the dissolution of the firm or if the transferring partner ceases to be a partner, the transferee
will be entitled, against the remaining partners, to receive the share of assets of the firm to
which the transferring partner is entitled. Also for the purpose of ascertaining that share, he is
entitled to an account as from the date of dissolution.

6.6.6 Rights and Duties of Partners in some Specific Situation

Section 17 contemplates rights and duties of partners under the following three specific situations:
(i) where a change occurs in the constitution of a firm, (ii) where a firm constituted for a fixed
term continues to carry on business after the expiry of that term and (iii) where a firm constituted
to carry out one or more adventures carries out other adventures.
Subject to contract between the partners, where a change occurs in the constitution of the firm,
the mutual rights and duties of the partners in the reconstituted firm remain the same as they
were immediately before the change, as far as may be.
In case a partnership is created for a fixed term or for a particular adventure, it would naturally
come to an end on the expiry of such term or on the completion of such adventure. But sometimes
the partners continue the business even after the expiry of the term or completion of the
adventure, without any new agreement. In such a situation, s.17 provides that the mutual rights
and duties of the partners remain the same as they were before the expiry so far as they may be
consistent with the incidents of a partnership at will. Further, where a firm constituted for one
or more adventures or undertakings, carries out other adventures or undertakings, the mutual
rights and duties will remain the same. This is subject to the contract between the partners.

6.6.7 Revocation of Continuing Guarantee as a Result of Change in the
Firm

Section 38 provides that a continuing guarantee given to a firm or to a third person in respect of the
transactions of the firm is revoked as to future transactions from the date of any change in the
constitution of the firm. This provision is subject to an agreement to the contrary and if the surety
has not given his assent to the change. This provision is intended to protect the surety’s interest.

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