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Dissolution Of A Partnership Firm Essay

2606 words - 11 pages

S.50. Personal profits earned after dissolution
Subject to Contract between the partners, the provisions of clause (a) of S.16 shall apply to transactions by any surviving partner or by the representatives of a deceased partner, undertaken after the firm is dissolved on account of the death of a partner and before its affairs have been completely wound up:
Provided that where any partner or his representative has bought the goodwill of the firm, nothing in this section shall affect his right to use the first name.

Profits by partner after dissolution and before winding up- Where a partner, after dissolution and before the affairs of the partnership are wound up, derives any profit for ...view middle of the document...

S.51. Return of Premium on Premature Dissolution
Where a partner has paid a premium on entering into partnership for a fixed term, and the firm is dissolved before the expiration of that term otherwise than by the death of a partner, he shall be entitled to repayment of the premium or of such part thereof as may be reasonable, regard being had to the terms upon which he became a partner and to the length of time during which he was a partner, unless-
a) The dissolution is mainly due to his own misconduct.
b) The dissolution is in pursuance of an agreement containing no provision for the return of the premium or any part of it.

When entitled to return of premium- In case of earlier dissolution the partner paying the premium is entitled to a return of a proportionate part of the premium, except when the partnership is dissolved-
1) by death of one of the partners;
2) owing to the misconduct of the partner paying the premium;
3) in pursuance of an agreement, which does not provide for the return of the premium or any part of it.

Where, therefore, the partnership is dissolved-
1) without the fault of either party
2) owing to the fault of both
3) owing to the fault of the partner receiving the premium
4) owing to the insolvency of the partner receiving the premium, where the partner paying the premium was not aware of the other’s embarrassed circumstances at the time of entering into partnership
the partner paying the premium is entitled to the proportionate part of the premium.

Return of reasonable premium- In absence of special reasons, the amount of premium to be returned should bear the same proportion to the whole premium as the unexpired term bears to the whole term agreed upon. But where part of the consideration of the payment of premium is not referable to the whole of the term it may be difficult to apply the said principle. The legislation has used the expression “as may be reasonable.” The said expression is controlled by the words which follow it. Under the said expression it may not be possible to take into consideration other advantages to the partner paying the premium, such as, obtaining a footing in a large town, making a large acquaintance with the customers or a misrepresentation as to the income of the original owner or the person was induced to enter partnership by reason of fraud.

Interest whether recoverable- In calculating what proportion of the premium should be returned, interest on the premium paid is not to be accounted for, as under the contract it belonged to the person who received it.
For example, A and B become partners for ten years. A paying B a premium of $1000. A quarrel occurs at the end of the eight years, both parties being in the wrong, and a dissolution is decreed. A is entitled to a return of $200 of the premium from B.

Sub-Section (b): Dissolution by mutual agreement – If by mutual agreement the partnership is dissolved before the expiry of the...

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