Partnership Decision-Making and Authority of Partners

Introduction

A **partnership** is one of the simplest and most flexible business vehicles in English law: it comes into existence automatically, by operation of the **Partnership Act 1890 ('PA 1890')**, the moment two or more persons carry on a business in common with a view of profit — whether or not they have signed any agreement. This chapter explains the **decision-making procedures** and **authority of partners** under the PA 1890, the **default (implied) terms** the Act reads into every partnership, and the **common provisions** the partners will usually wish to add by a written partnership agreement to displace those defaults. It is core SQE1 FLK1 Business Law and Practice material.

Assessment focus

For the SQE1 FLK1 assessment you must understand how a partnership is **formed** under **s. 1(1) PA 1890**, the principle that **every partner is an agent of the firm** who can **bind the firm in the usual course of business** (**ss. 5, 9, 10 PA 1890**) and carries **unlimited liability**, and the **default decision-making rules** (ordinary matters by **majority**; certain matters — change in the nature of the business, admission of a new partner — only by **unanimity**: **s. 24(7)–(8)**). You should know the **implied financial terms** (equal sharing of profits and losses, **s. 24(1)**; 5% interest on loans, **s. 24(3)**; no interest on capital, **s. 24(4)**) and the **fiduciary duties** (**ss. 28–30**). Questions are single best answer questions (SBAQs) set in **realistic client scenarios**: you must **apply** the default rules and recognise when, and how, a partnership agreement under **s. 19** has varied them. This is a closed-book assessment — learn the section numbers.

Study tips

1) Memorise that a partnership arises **automatically** under **s. 1(1)** — no agreement or registration is needed, and the start date may differ from any date in the agreement. 2) Learn the **majority v unanimity** split: ordinary matters **majority (s. 24(8))**; change in nature of business or new partner **unanimous (s. 24(7)–(8))**. 3) Lock in the **s. 24(1)** default — profits **and** losses, income **and** capital, shared **equally**, regardless of capital contributed or hours worked. 4) Distinguish the **implied terms** (which apply unless excluded) from the **gaps** the PA 1890 leaves (no arbitration, no expulsion power, no automatic right to retire, no non-competition restraint) — these are what a written agreement is for, under **s. 19**. 5) Remember the **fiduciary trio**: disclosure of information (**s. 28**), account for private benefits (**s. 29**), and account for profits of a competing business (**s. 30**).