Liability of Partner

Liability of Partner

1. Contractual Liability

   • Section 11 PA 1961 - "every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while he is a partner; and after his death his estate is also severally liable in a due course of administration for such debts and obligations
     • Osman B Haji Mohamed Usop V Chang Kang Swi
       • A partnership has been formed by six partners including the Appellant. 3 of the partners borrowed RM10,000 from the third party by affecting a promissory note. The loan was guaranteed by respondent (CKS). Later, firm failed to pay debt. Respondent been called to pay for the debt on his account. 5 partners accept their liability except Appellant
         • Court Held - The debt was the firm's debt and was obtain for the purpose of partnership. Partners who signed the promissory note had acted for the firm and were authorized to do so, therefore all six partners or firm were liable

2. Tortious Liability

   • Torts is a civil wrong. Example acts of tort are nuisance, defamation, trespass and negligence.
   • Section 12 PA 1961 - Liability of firm for wrongs.
     • Hamlyn V Houston & Co
       • H and S were partners in a firm. H bribed a clerk of another firm to get secret information on contracts and tenders of the said firm
         • Court Held - H as the partner had done illegitimately that which was part of his business to do legitimately. Hence, firm liable for his act

3. Improper use of trust property

   • Section 15 PA 1961 - If a partner being trustee, improperly employs trust property in the business or on the account of the partnership, no other partner is liable for the trust property to the persons beneficially interested therein provided as follows :
     • shall not affect any liability incurred by any partner by reason of his having notice of a breach of trust money from being followed and recovered from the firm, if still in its possession or under control
     • nothing in this section shall prevent trust money from being followed and recovered from the firm, if still in its possession or under its control

4. Liability for holding out

   • Section 16

5. Liability for Criminal Offences

6. Liability of incoming and outgoing (Retiring) Partners