Partners have duties of loyalty, obedience, and reasonable care towards the partnership. They must act in good faith, not take secret profits, share management rights, inspect books, and share profits equally unless otherwise agreed. Partners are jointly and severally liable for partnership debts and torts. They can be reimbursed for payments on partnership behalf and receive their share of capital after creditors are paid upon dissolution.

1. By
BRIG(R) MUHAMMAD SALEEM,SI(M)
Section 9-17

2.  Loyalty and Good Faith
 Obedience
 Reasonable Care
 Information
 Management
 Inspection of Books
 Share of Profits
 Compensation
 Payment of Loans
 Contribution and Indemnity
 Distribution of Capital
 Nature and Extent of Partners Liability
 Liability for Breach of Duty

3.  Each partner must act in good faith toward the
other partners and must not take any advantage
over the other partners by misrepresentation or
concealment. Each partner owes a duty of loyalty
to the partnership, and this duty bars the making
of any secret profit at the expense of the firm
and bars the use of the firm’s property for
personal benefit. A partner cannot promote a
competing business, and if he does so, he can be
liable for any damages sustained by the
partnership.

4.  Partners must observe any limitations adopted by
a majority of the partners with regard to the
ordinary details of the partnership business. For
example, if a majority of the partners operate a
retail store and decide that no sales can be made
on credit, a partner placed in charge of the store
must obey this limitation. If a third person does
not know of the limitation, the managing partner
will have the power to make a binding sale on
credit to such a person, but if the third person
does not pay his bill, the partner who violated the
limitation is liable for any loss caused by his
disobedience to the limitation.

5.  A partner must use reasonable care in
transacting the partnership’s business and is
liable for any loss resulting from a failure to
act with reasonable care.

6.  A partner has the duty to inform the
partnership of all matters relevant to the
partnership. For example, if one partner is
going to buy out the interest of another
partner, this must be revealed to the
partnership.

7.  Each partner has the right to take an equal
part in transacting the business of the
partnership. It is irrelevant that one partner
contributed more than another financially or
that one contributed only services when the
partnership was formed.

8.  All partners are equally entitled to inspect the
books of the partnership.

9.  Each partner is entitled to a share of the
profits. The partners may provide that profits
shall be shared in unequal propor-
tions. However, in the absence of such an
agreement, each partner is entitled to an
equal share of the profits without regard to
the amount of capital or services contributed
to the partnership by each partner.

10.  In the absence of an agreement to the contrary, a
partner is not entitled to compensation for
services performed for the partnership. Partners
may agree that one of the partners shall devote
full time as manager of the business and may
agree that a salary shall be paid to the partner in
addition to the managing partner’s share of the
profits. This sometimes occurs in legal
partnerships or accounting partnerships when
one of the partners is appointed managing
partner. In most cases, the managing partner
practices his profession, but also handles the
business affairs of the partnership and is paid or
compensated in some way for this extra duty.

11.  A partner is entitled to reimbursement of
money advanced to the partnership, such as
travel expenses incurred on partnership
business.

12.  If a partner pays more than his proportionate
share of the debts of the partnership, he has
a right to reimbursement from the other
partners. If an employee of a partnership
negligently injures a third person while acting
within the scope of employment, and if the
injured party collects damages from one
partner, this partner is entitled to
reimbursement from the other partners in
order to divide the loss equally.

13.  If a partnership is dissolved, every partner is
entitled to receive a share of the partnership
property after due payment of all creditors
and the repayment of loans made to the
partnership by the partners. Unless
otherwise stated in the partnership agree-
ment, all partners are entitled to the return of
their capital contributions to the partnership.

14.  Partners are jointly and severally liable for all torts
committed by one of the partners in the scope of the
partnership business. When partners are held to be liable
for an injury caused to a third person, the third person
may sue all or any of the members of the partnership.
Partners are also jointly and severally liable on all
partnership contracts.
 Each member of a partnership has individual and unlimited
liability for the debts of the partnership regardless of the
member’s investment or interest in the partnership. Even
if a partner only owns 5% interest in the partnership, a
judgment against the partnership in the amount of
$100,000.00 can be collected from the 5% owner’s
personal assets, particularly if the partnership or the other
partners did not have the money to pay this debt.

15.  If a partner breaches a duty to the
partnership, an injured partner may recover
damages from the partner who breached the
duty.

17. BRIG (R) MUHAMMAD SALEEM,SI(M)

18.  A person admitted as a partner into an
existing partnership has limited liability for
all obligations of the partnership which arose
before he was admitted as a partner. This
type of claim could only be satisfied out of
partnership property and would not extend to
the individual property of a newly-admitted
partner.

19.  A partner will remain liable after dissolution
of the partnership unless all claims against
the partnership have been paid or the
creditors of the partnership have released
their claims. The dissolution of the
partnership does not end or itself discharge
the existing liability of any partner.