What do you mean by incoming and outgoing partners ?

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incoming outgoing partners

Q.8. What do you mean by incoming and outgoing partners ? What are the rights and liabilities of incoming and outgoing partners ?

Ans. Incoming Partner – It maybe noted that where a person becomes the member of a firm already constituted, he is known as incoming partner, it is significant to note that a new partner can be admitted into a firm with the consent of all the partners. The relations of partners being those of trust and confidence, only such person can be admitted in whom all the partners have confidence. This is, how are, subject to a contrary arrangement between the partners. For there is nothing to prevent the partners from giving power to one or more of them of nominating a partner in the firm. Pollock & Mulla are of the opinion “that Where a person nominated is not acceptable to the other partners, the court cannot force them to enter into partnership with him, “because the foundation of partnership is mutual confidence, which the court cannot supply where it does not exist.”

According to S. 31 (1) subject, to the contract between the partners and to the provisions of S. 30, no person shall be introduced as partner and a firm without the consent of all the existing partners.

(2) Subject to the provisions of S. 30, a person who is introduced as a partner into a firm does not thereby become iiabie for any act of the firm done before he became a partner.

Liability of Incoming Partner—S. 31(2) provided that, “a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner.” .Thus, the liability of the new partner commences from the date of admission. lie is not liable for the pre-existing debts. He may, however, agree with his’partners to be liable for the debts incurred up to the date of his. admission But such an agreement is binding only upon the partners and does not give the right to any creditor to sue the new partner for past , debt In order to make the new partner able to the creditors for debts incurred prior to his admission, a complete novation must be proved and this requires two things. Firstly, the new partner or.the new firm as constituted after his admission should have assumed liability for the past debts. Secondly, the creditors should be informed of the new arrangement and then the new partner becomes liable to those of the creditors who expressly or impliedly accept the new agreement.

For Example; in British Home Insurance Corpn. Vs. Paterson (1902), the plaintiffcorporati on appointed B Their solicitor and instructed him to act for them in a mortgage transaction. While the business was pending, B took the defendant P into partnership and gave the plaintiffs notice in writing. The plaintiffs paid no attention to the notice continued to correspond with 3 in his own name and finally sent the money to advance on the mortgage by cheque made payable to his order and accepted his receipt in his own name. B paid the money into his own account and misappropriated it. The plaintiffs sued the new partner. It was held that the plaintiffs had by their conduct declined to accept the liability of the new partner. They had elected to deal with the old partner alone and could not afterwards hold the new partner liable.