Free Judiciary Notes · Partnership Act Notes
DURATION OF PARTNERSHIP
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DURATION OF PARTNERSHIP
Partners are free to decide as to how long partnership between them shall continue. It may be partnership for a fixed term, say for 2 years or 5 years, or it may be until the completion of certain adventures or undertakings, for instance, until the production of a film.
Sometimes the agreement may stipulate about the determination end of partnership on the happening of certain events, e.g., if the business runs into loss for consecutively five years.
When the partners have not decided about the duration of partnership, such a partnership is known as partnership at will.
PARTNERSHIP AT WILL
According to Section 7:
Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is "partnership at will".
According to the above definition, a partnership is deemed to be "a partnership at will" in the following two situations:
1. When no provision is made in the partnership agreement as to its duration, and
2. When there is no provision in the partnership agreement as to its determination coming to an end of partnership.
If the duration of partnership has been fixed but the partnership is made to continue thereafter without specifying any fixed duration for the same, then subsequently it becomes a partnership at will.
When the duration of partnership cannot be found either by any express provision in the partnership agreement or by implication, and the same is dependent on a totally uncertain event like grant of permanent licence for running cinema business , it would be a partnership at will.
If an agreement between the partners contemplates that the partnership would continue 'till there are two partners', it is not a partnership at will.
Since in a partnership at will duration of partnership is not fixed , nor is there any provision as regards its determination, the partners are not legally bound to continue in partnership for any specified period, etc. and the partnership can be ended at the sweet will of any of the partners.
The following provisions of the Partnership Act in this regard may be noted:
1. Where a partnership is at will, a partner may retire by giving a notice to all the other partners of his intention to retire. Sec. 32(1)(c).
2. Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm Sec. 43(1). The firm is dissolved as from the date mentioned in the notice as to the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice. Sec. 43(2).
3. When the partnership is not at will, neither a person can retire nor can he seek dissolution of the partnership firm, just by giving a notice to the other partners to that effect.
4. Whether the partnership is at will or not depends on the contract between the partners.
An agreement between the two partners provided that the partnership shall be terminated by mutual arrangement only. It was held that the partnership was not at will.
In' M.O.H. Uduman v. M.O.H. Aslum, the partnership deed contained a clause to the effect that "the partnership shall continue between the remaining partners unless all the partners 'mutually agree' to determine the relationship". Considering this clause, the Apex Court held that the partnership was not 'At Will'.
ABOTT V. ABOTT,
In Abott v. Abott ,the partnership agreement between a father and his 5 sons inter alia provided that the death or retirement of any partner shall not terminate the partnership, and if any partner shall do or suffer any act which would be ground for the dissolution of the partnership by the court, then he shall be considered as having retired.
One of them contended that since no duration had been mentioned, it was a partnership at will and sought the dissolution of the same through a notice.
It was held that a single partner could not determine the partnership by a notice, although he could retire or cease to be a partner allowing the partnership firm to continue thereafter, and hence it was not a partnership at will and could not be dissolved by a notice by any one partner.
If the partnership agreement contemplates that the partnership will continue till completion of the job,(i.e.), completion of a particular venture of a certain construction work. It was held that) (the partnership was not a partnership at will and it stood dissolved on the completion of the said venture.