Categories in which the liability of partners to the third parties are divided are as follows:
1. Liability of a partner for acts of the firm.
2. Liability of the firm for wrongful acts of a partner.
ADVERTISEMENTS:
3. Liability of the firm for misapplication by partners
1. Liability of a partner for acts of the firm (Sec. 25):
Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. Further, the liability of all the partners is unlimited. By virtue of joint and several liabilities, a creditor of the firm has several causes of action.
He can sue all partners together, or can sue them separately (in successive actions if necessary). As between the partners themselves, the partner paying for more than his share of the liability may claim contribution from the others according to the terms of the partnership agreement.
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ADVERTISEMENTS:
2. Liability of the firm for wrongful acts of a partner (Sec. 26):
Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefore to the same extent as the partner.
The wrongful act may be tort, fraud or negligence. It is important to note that although the firm is liable to the third party for loss caused to him by fraud committed by a partner, but, as between the partners, as per Section 10, the same must be borne by the partner committing the fraud and cannot be shared among all the partners.
ADVERTISEMENTS:
Of course, in the case of loss caused by tort or negligence of any partner all partners are liable inter-se in their profit sharing ratio and the firm is liable to the third party as it is liable in the case of fraud.
3. Liability of the firm for misapplication by partners (Sec. 27):
Where (a) a partner acting within his apparent authority receives money or property from a third party and misapplies it, or (b) a firm in the course of its business receives money or property from a third party, and the same is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss.
Under this Section it has been recognised that the firm must be treated as receiving what any partner receives in the ordinary course of the business of the firm.
Accordingly, if any partner misappropriates any money or property which he might have received either in repayment of a debt or as a loan on account of the firm; the third party can make the firm or any of the partners liable for the same.