Implied Terms of Partnership

The Partnership Act 1958 (Vic) provides that unless otherwise agreed between them, the partners are taken to have agreed to a number of important terms, which are summarised in this article below. 

 

Those terms may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing (but of course it is advisable to have the variation recorded in writing and signed by all parties in a suitably worded agreement).

Implied terms of partnership agreement

 

The Partnership Act 1958 (Vic) provides that unless otherwise agreed between them, the partners are taken to have agreed to the following:

  • All the partners are entitled to share equally in the capital and profits of the business and must contribute equally towards the losses whether of capital or otherwise sustained by the partnership.

 

  • The partnership must indemnify every partner in respect of payments made and personal liabilities incurred by him or her—

 

-  in the ordinary and proper conduct of the business of the partnership; or

-  in or about anything necessarily done for the preservation of the business or property of the partnership.

 

  • A partner making for the purpose of the partnership any actual payment or advance beyond the amount of capital which he or she has agreed to subscribe is entitled to interest at the rate of seven per centum per annum from the date of the payment or advance.

 

  • A partner is not entitled before the ascertainment of profits to interest on the capital subscribed by him.

 

  • Every partner may take part in the management of the partnership business.

 

  • No partner shall be entitled to remuneration for acting in the partnership business.

 

  • No person may be introduced as a partner without the consent of all existing partners.

 

  • Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners but no change may be made in the nature of the partnership business without the consent of all existing partners.

  • The partnership books are to be kept at the place of business of the partnership (or the principal place if there is more than one) and every partner may when he or she thinks fit have access to and inspect and copy any of them.

 

Other Notable Provisions which apply unless varied by the Partners

 

Other notable provisions of the Act which apply unless varied by the partners are as follows.

 

Duty of partners to render accounts

 

Partners are bound to render true accounts and full information of all things affecting the partnership to any partner or his or her legal representative.

 

Accountability of partners for private profits

 

Every partner must account to the partnership for (i.e. must “pay”) any benefit derived by him or her without the consent of the other partners from any transaction concerning the partnership or from any use by him or her of the partnership property name or business connection.

 

Duty of partner not to compete with partnership

 

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 partnership he or she must account for and pay over to the partnership all profits made by him or her in that business.

For more information on the effect of the Partnership Act 1958 (Vic) and on the importance of partnership agreements, see:

See also our articles on structuring and other aspects of business relationships.

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Contact

If you would like to discuss any aspect of this article with us, or share your own experiences, please contact Rod Stumbles at +613 8692 7255 or here.

 

DISCLAIMER

 

This article provides general information only and is not intended to constitute legal advice.  No lawyer-client, solicitor-client or attorney-client relationship has been created between us.  You must not rely on the contents of this article, whether as an alternative to legal advice from a lawyer or other professional legal services provider or otherwise.  You should not take, discontinue or refrain from taking any action because of your understanding of the contents of this article, including without limitation delay seeking legal advice or disregard legal advice.  If you have any specific questions about any matter, you should engage us or other lawyers or other professional legal services providers to provide you with the necessary advice.  Keep in mind that you may be facing important deadlines so you should not delay in engaging someone to provide you with the advice.