Partnership at will
When the partners have not decided about the duration of partnership such partnership is known as 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 determination of their partnership, the partnership is partnership at will”.
Thus, a partnership is deemed to be a ‘partnership at will’ in following two situations:
i) When no provision is made in the partnership agreement as to its duration.
ii) When no provision is made in the partnership agreement as to its determination.
The provisions regarding as to the duration or determination of partnership may be either express or implied.
In a partnership at will partners are not legally bound to continue in partnership for any specified period and partnership can be ended at the sweet will of any of the partners.
Section 32(1) (c) of IPA postulates “in a partnership at will, a partner may retire by giving a notice to all other partners of his intention to retire”.
Section 43(1) lays down “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”.
Section 43(2) lays down that 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 communication of notice.
Although a partnership at will could be dissolved by mere notice but that does not debar a partner from filing a suit for its dissolution. (Under Section 44, I. P. A.) In such a case, the service of summons will be deemed to be communication of notice for dissolution and the firm shall stand dissolved when summons are served.
The observation of Supreme Court in Banarsi Das v. Kanshi Ram is noteworthy. “The sub-section of Section 43 provides that firm will be deemed to be dissolved as from the date of communication of notice. It would follow, therefore, that a partnership would be deemed to be dissolved when the summons accompanied by a copy of plaint is served on defendant where there is only one defendant and on all defendants when there are several defendants. Since the partnership will be deemed to be dissolve only from one date, the date of dissolution would be regarded as one on which the last summon was served.”
Whether the partnership is at will or not depends on contract between the partners, if the agreement does not expressly indicate nature of partnership then an inference may be drawn from terms of agreement it has to be seen that various terms of agreement are consistent with a partnership at will or not. It is also supported by Section 62 of the Indian Contract Act, which provides for the rescission of contract by the parties.
i) Arunachalan & Co. v. Sadasivam – Partnership created for three years
– Business continued without specifying the durations (even after three years).
– Held: It became partnership at will during extended time/can be dissolved with a notice.
ii) Moss v. Elphick – Partnership to be terminated by mutual agreement. – One partner sought dissolution by giving notice.
– Held: Partnership was not at will and cannot be terminated by a notice.
– Feltcher J – Partnership was for joint lives of parties, unless terminated by mutual agreement. – There is a specific provision as to its duration and in that sense was a partnership for fixed or defined terms.
iii) Abbott v. Abbott – Partnership agreement between father and his sons provided that the death or retirement of any partner shall not terminate the partnership, if any partner shall do or suffer any act which would be ground for dissolution of the partnership by the court then he shall be considered as having retired.
– Contention – Since no duration is mentioned it was a partnership at will and sought for its dissolution by notice.
– Held: 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. Therefore, not a partnership at will and cannot be dissolved by a notice.
– K.T. Chettiar v. E.M.I. Muthappa – The agreement provided for carrying on management of mill in rotation once in four years.
– The partners and their heirs and those getting their rights should carry on management in rotation.
– Held: Intention of partners could not be to create partnership of at will but to have a partnership of some duration though the duration was not expressly fixed in the agreement.
iv) Suresh Kumar v. Amrit Kumar (Delhi High Court)
In this case, terms of partnership agreement included –
– That any partner desirous of retiring from the partnership shall give six month notice of his intention to retire and on expiry of the notice he shall be deemed to have ceased to be a partner.
– That on the death or retirement of a partner the firm shall be continued with respect to other partners and the nominee or legal heirs of the retiring or deceased partner as the case may be.
>One partner contented that it was a partnership at will and sought the dissolution of firm.
– Held: The parties never intended that partnership be dissolved at the sweet will of any of the partners rather their intention was that business of partnership should continue as long as possible notwithstanding death or retirement of any of the partners. This being not a partnership at will could not be dissolved by a notice.