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Revised Statutes of Newfoundland 1990


CHAPTER P-3

AN ACT RESPECTING PARTNERSHIPS

Analysis

1. Short title

2. Definitions

3. Rules

4. Postponement of rights

5. Meaning of firm

6. Power of partner to bind firm

7. Partners bound by acts on behalf of firm

8. Partner using credit of firm for private purposes

9. Effect of notice that firm will not be bound

10. Liability of partners

11. Liability of the firm for wrongs

12. Misapplication of money

13. Liability for wrongs, joint and individual

14. Improper employment of trust property

15. Persons liable by 'holding out'

16. Admission and representation of partners

17. Notice to acting partner to be notice to firm

18. Liabilities of incoming and outgoing partners

19. Revocation of continuing guarantee

20. Variation by consent

21. Partnership property

22. Property bought with partnership money

23. Execution order

24. Rules as to interests

25. Expulsion of partner

26. Retirement from partnership at will

27. Partnership continued

28. Duty of partners

29. Accountability of partners for private profits

30. Duty of partner not to compete with firm

31. Rights of assignee of share in partnership

32. Dissolution by expiration or notice

33. Dissolution by insolvency, death or change

34. Dissolution of partnership

35. Dissolution by the court

36. Rights of persons dealing with firm

37. Right of partners on dissolution

38. Continuing authority of partners

39. Rights of partners re partnership property

40. Premium where partnership prematurely dissolved

41. Partnership dissolved for fraud

42. Right of outgoing partner to share profits

43. Retiring or deceased partner's share

44. Rule for distribution of assets

45. Saving for rules of equity and common law


Short title

1. This Act may be cited as the Partnership Act.

RSN1970 c287 s1

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Definitions

2. In this Act,

(a) "business" includes a trade, occupation or profession;

(b) "court" means the Trial Division; and

(c) "partnership" means the relation which exists between persons carrying on a business in common with a view to make a profit but does not include the relation between members of a company or association which is

(i) registered as a company under the Corporations Act or another Act of the Legislature which is in force and relates to the registration of companies, or

(ii) formed or incorporated by another Act of the Legislature or letters patent, or royal charter.

RSN1970 c287 ss2&45

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Rules

3. In determining whether a partnership exists, regard shall be had to the following rules:

(a) joint tenancy, tenancy in common, joint property, common property, or part ownership does not of itself create a partnership, as to anything held or owned, whether or not the tenants or owners share profits arising from the holding or ownership;

(b) the sharing of gross returns does not of itself create a partnership whether or not the persons sharing the returns have a joint or common right or interest in property from which or from the use of which the returns are derived;

(c) the receipt by a person of a share of the profits of a business is, in the absence of evidence to the contrary, evidence that he or she is a partner in the business, but the receipt of the share or of a payment contingent on or varying with the profits of a business, does not of itself make that person a partner in the business; and in particular

(i) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out of the accruing profits of a business does not of itself make that person a partner in the business or liable as a partner,

(ii) a contract for the remuneration of an employee or agent of a person engaged in a business by a share of the profits of the business does not of itself make the employee or agent a partner in the business or liable as a partner,

(iii) a person being the surviving spouse or child of a deceased partner and receiving by annuity a portion of the profits made in the business in which the deceased person was a partner is not by reason only of that receipt a partner in the business or liable as a partner,

(iv) the advance of money by loan to a person engaged, or about to engage, in a business, on a contract with that person that the lender shall receive a rate of interest varying with the profits or shall receive a share of the profits arising from carrying on the business does not of itself make the lender a partner with the persons carrying on the business or liable as a partner; as long as the contract is in writing and signed by or on behalf of the parties to the contract,

(v) a person receiving by annuity or otherwise, a portion of the profits of a business in consideration of the sale by that person of the goodwill of the business is not by reason only of that receipt a partner in the business or liable as a partner.

RSN1970 c287 s3

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Postponement of rights

4. Where a person to whom money has been advanced by loan upon the contract of a buyer of a goodwill in consideration of a share of the profits of the business is declared insolvent, enters into an arrangement to pay his or her creditors less than 100 cents in the dollar, or dies in insolvent circumstances, the lender of the loan shall not be entitled to recover anything in respect of the loan, and the seller of the goodwill shall not be entitled to recover anything in respect of the share of profits contracted for, until the claims of the other creditors of the borrower or buyer for valuable consideration in money or money's worth have been satisfied.

RSN1970 c287 s4

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Meaning of firm

5. Persons who have entered into partnership with one another are for the purpose of this Act called collectively a firm, and the name under which their business is carried on is called the firm name.

RSN1970 c287 s5

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Power of partner to bind firm

6. (1) A partner is an agent of the firm and of his or her other partners for the purpose of the business of the partnership.

(2) The acts of a partner who does an act for carrying on in the usual way business of the kind carried on by the firm of which he or she is a member, bind the firm and the partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom that partner is dealing, either knows that he or she has no authority, or does not know or believe him or her to be a partner.

RSN1970 c287 s6

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Partners bound by acts on behalf of firm

7. (1) An act or instrument relating to the business of the firm and done or executed in the firm name, or in another manner showing an intention to bind the firm, by an authorized person, whether a partner or not, is binding on the firm and the partners.

(2) Subsection (1) does not affect a general rule of law relating to the execution of deeds or negotiable instruments.

RSN1970 c287 s7

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Partner using credit of firm for private purposes

8. Where 1 partner pledges the credit of the firm for a purpose apparently not connected with the firm's ordinary course of business, the firm is not bound unless the partner is in fact specially authorized by the other partners; but this section does not affect personal liability incurred by an individual partner.

RSN1970 c287 s8

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Effect of notice that firm will not be bound

9. Where it has been agreed between the partners that a restriction shall be placed on the power of 1 or more of them to bind the firm, an act done in contravention of the agreement is not binding on the firm with respect of persons having notice of the agreement.

RSN1970 c287 s9

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Liability of partners

10. A partner in a firm is liable jointly with the other partners for debts and obligations of the firm incurred while he or she is a partner; and after the partner's death his or her estate is also individually liable in a due course of administration for the debts and obligations where they remain unsatisfied but subject to the prior payment of the partner's separate debts.

RSN1970 c287 s10

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Liability of the firm for wrongs

11. Where, by the wrongful act or omission of a partner, acting in the ordinary course of the business of the firm, or with the authority of his or her co-partners, loss or injury is caused to a person not being a partner in the firm or a penalty is incurred, the firm is liable to the same extent as the partner so acting or omitting to act.

RSN1970 c287 s11

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Misapplication of money

12. Where

(a) 1 partner acting within the scope of his or her apparent authority receives the money or property of a 3rd person and misapplies it; and

(b) a firm in the course of its business receives money or property of a 3rd person, and the money or property so received is misapplied by 1 or more of the partners while it is in the custody of the firm,

the firm is liable to make good the loss.

RSN1970 c287 s12

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Liability for wrongs, joint and individual

13. A partner is liable jointly with his or her co-partners and also individually for everything for which the firm, while he or she is a partner, becomes liable under section 11 or 12.

RSN1970 c287 s13

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Improper employment of trust property

14. Where a partner, being a trustee, improperly employs trust property in the business or on the account of the partnership, no other partner is liable for the trust property to the persons beneficially interested in it, but

(a) this section shall not affect a liability incurred by a partner because of his or her having notice of a breach of trust; and

(b) nothing in this section shall prevent trust money from being followed and recovered from the firm if still in its possession or under its control.

RSN1970 c287 s14

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Persons liable by 'holding out'

15. (1) A person who by words spoken or written, or by conduct represents or who knowingly permits himself or herself to be represented, as a partner in a particular firm is liable as a partner to anyone who has on the faith of the representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or permitting it to be made.

(2) Where, after a partner's death, the partnership business is continued in the old firm name, the continued use of that name or of the deceased partner's name shall not of itself make his or her executor's or administrator's estate or effects liable for partnership debts contracted after his or her death.

RSN1970 c287 s15

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Admission and representation of partners

16. An admission or representation made by a partner concerning the partnership affairs, in the ordinary course of its business, is evidence against the firm.

RSN1970 c287 s16

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Notice to acting partner to be notice to firm

17. Notice to a partner who habitually acts in the partnership business of a matter relating to partnership affairs operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.

RSN1970 c287 s17

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Liabilities of incoming and outgoing partners

18. (1) A person who is admitted as a partner into an existing firm does not become liable to the creditors of the firm for anything done before the person became a partner.

(2) A partner who retires from a firm does not stop being liable for partnership debts or obligations incurred before his or her retirement.

(3) A retiring partner may be discharged from an existing liability by an agreement to that effect between himself or herself and the members of the firm as newly constituted and the creditors, and this agreement may be either expressed or inferred as a fact from the course of dealing between the creditors and the firm as newly constituted.

RSN1970 c287 s18

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Revocation of continuing guarantee

19. A continuing guarantee or cautionary obligation given either to a firm or a 3rd person in respect to the transactions of a firm is, in the absence of agreement to the contrary, revoked as to future transactions by a change in the constitution of the firm to which, or of the firm in respect of the transactions of which the guarantee or obligation was given.

RSN1970 c287 s19

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Variation by consent

20. The mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of the partners, and the consent may be either expressed or inferred from a course of dealing.

RSN1970 c287 s20

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Partnership property

21. (1) Property and rights and interest in property originally brought into the partnership stock or acquired, whether by purchase or otherwise on account of the firm, or for the purposes and in the course of the partnership business, are partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement.

(2) The legal estate or interest in land which belongs to the partnership shall devolve according to the nature and tenure of it and the general rules of law but in trust where necessary for the persons beneficially interested in the land under this section.

(3) Where co-owners of an estate or interest in land not being itself partnership property, are partners as to profits made by the use of that land or estate, and purchase other land or estate out of the profits to be used in the same manner, the land or estate so purchased belong to them, in the absence of agreement to the contrary, not as partners, but as co-owners for the same respective estates and interests as are held by them in the land or estate first mentioned at the date of purchase.

RSN1970 c287 s21

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Property bought with partnership money

22. Unless the contrary intention appears, property bought with money belonging to the firm is considered to have been bought by the firm.

RSN1970 c287 s22

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Execution order

23. (1) An execution order shall not issue against partnership property except on a judgment against the firm.

(2) The court or a judge of the court may, on the application by summons of a judgment creditor of a partner, make an order charging that partner's interest in the partnership property and profit with payment of the amount of the judgment debt and interest on it, and may by the same or a later order appoint a receiver of that partner's share of profits, whether already declared or accruing, and of other money which may be coming to him or her in respect of the partnership, and direct accounts and inquiries and give other orders and directions which might have been directed or given if the charge had been made in favour of the judgment creditor by the partner, or which the circumstances of the case may require.

(3) The other partner shall be at liberty to redeem the interest charged, or in case of a sale being directed, to purchase it.

RSN1970 c287 s23; 1974 No57 s38 (262);
1986 c42 Sch A

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Rules as to interests

24. The interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to an agreement express or implied between the partners, by the following rules:

(a) the partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards the losses, whether of capital or otherwise, sustained by the firm;

(b) the firm must indemnify a partner in respect of payments made and personal liabilities incurred by that partner

(i) in the ordinary and proper conduct of the business of the firm, or

(ii) in or about anything necessarily done for the preservation of the business or property of the firm;

(c) a partner making for the purpose of the partnership an actual payment or advance beyond the amount of capital which he or she agreed to sign, is entitled to interest at the rate of 6% yearly from the date of the payment or advance;

(d) a partner is not entitled before the ascertainment of profits, to interest on the capital signed by him or her;

(e) a partner may take part in the management of the partnership business;

(f) a partner shall not be entitled to remuneration for acting in the partnership business;

(g) a person may not be introduced as a partner without the consent of existing partners;

(h) a difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners, but a change may not be made in the nature of the partnership business without the consent of existing partners; and

(i) the partnership books are to be kept at the place of business of the partnership, or at the principal place, and a partner may have access to and copy the books.

RSN1970 c287 s24

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Expulsion of partner

25. A majority of the partners cannot expel a partner, unless a power to do so has been conferred by express agreement between the partners.

RSN1970 c287 s25

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Retirement from partnership at will

26. (1) Where a fixed time has not been agreed upon for the duration of the partnership, a partner may determine the partnership on giving notice of his or her intention to do so to the other partners.

(2) Where the partnership has originally been constituted by deed, a written notice, signed by the partner giving it, shall be sufficient for this purpose.

RSN1970 c287 s26

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Partnership continued

27. (1) Where a partnership entered into for a fixed term is continued after the term has expired, and without an express new agreement, the rights and duties of the partners remain the same as they were at the expiration of the term, where it is consistent with the incidents of a partnership at will.

(2) A continuance of the business by the partners or those partners that habitually acted during the term, without a settlement or liquidation of the partnership affairs, is presumed to be a continuance of the partnership.

RSN1970 c287 s27

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Duty of partners

28. Partners are bound to make true accounts and full information of things affecting the partnership to a partner or his or her legal representatives.

RSN1970 c287 s28

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Accountability of partners for private profits

29. (1) A partner must account to the firm for a benefit derived by the partner without the consent of the other partners from a transaction concerning the partnership or from a use by him or her or the partnership property, name or business connection.

(2) This section applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs of it have been completely wound up, either by a surviving partner or by the representatives of the deceased partner.

RSN1970 c287 s29

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Duty of partner not to compete with firm

30. Where a partner without the consent of the other partners, carries on a business of the same nature as and competing with that of the firm, he or she must account for and pay over to the firm profits made by the partner in that business.

RSN1970 c287 s30

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Rights of assignee of share in partnership

31. (1) An assignment by a partner of his or her share in the partnership, either absolute or by mortgage or redeemable charge, does not, as against the other partners entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership, business or affairs, or to require accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to by the partners.

(2) In case of a dissolution of the partnership, whether as respects the partners or as respects the assigning partner, the assignee is entitled to receive the share of the partnership assets to which the assigning partner is entitled as between himself or herself and the other partners, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.

RSN1970 c287 s31

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Dissolution by expiration or notice

32. (1) Subject to an agreement between the partners, a partnership is dissolved,

(a) where entered into for a fixed term by the expiration of that term;

(b) where entered into for a single adventure or undertaking, by the termination of that adventure or undertaking;

(c) where entered into for an undefined time, by a partner giving notice to the other of his or her intention to dissolve the partnership.

(2) Where a partner gives notice to the others under paragraph (1)(c), the partnership is dissolved from the date mentioned in the notice as the date of dissolution, or, where no date is mentioned from the date of the communication of the notice.

RSN1970 c287 s32

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Dissolution by insolvency, death or change

33. (1) Subject to an agreement between the partners, a partnership is dissolved as regards the partners, by the death or insolvency of a partner.

(2) A partnership may, at the option of the other partners, be dissolved where a partner suffers his or her share of the partnership property to be charged under this Act for his or her separate debt.

RSN1970 c287 s33

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Dissolution of partnership

34. A partnership is dissolved by the happening of an event which makes it unlawful for the business of the firm to be carried on, or for the members of the firm to carry it on in partnership.

RSN1970 c287 s34

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Dissolution by the court

35. On application by a partner, the court may decree a dissolution of the partnership in the following cases:

(a) where a partner is found to be mentally incompetent, the application may be made on behalf of that partner by his or her committee or next friend or person having title to intervene, or by another partner;

(b) where a partner, other than the partner suing, becomes permanently incapable of performing his or her part of the partnership contract;

(c) where a partner, other than the partner suing, has been guilty of conduct that, in the opinion of the court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on of the business;

(d) where a partner, other than the partner suing, wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself or herself in matters relating to the partnership business that it is not reasonably practicable for the other partner to carry on the business in partnership;

(e) where the business of the partnership can only be carried on at a loss;

(f) where circumstances have arisen which, in the opinion of the court, make it just and equitable that the partnership be dissolved.

RSN1970 c287 s35

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Rights of persons dealing with firm

36. (1) Where a person deals with a firm after a change in its constitution, the person is entitled to treat apparent members of the old firm as still being members of the firm, until he or she has notice of the change.

(2) An advertisement in the Gazette and 1 other newspaper published in this province, shall be notice to persons who had no dealings with the firm before the date of the dissolution or change so advertised.

(3) The estate of a partner who dies, or who becomes insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable for partnership debts contracted after the date of the death, insolvency, or retirement.

RSN1970 c287 s36

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Right of partners on dissolution

37. On the dissolution of a partnership, or retirement of a partner, a partner may notify the public of the change and may require the other partners to concur for that purpose in necessary or appropriate acts which cannot be done without his or her concurrence.

RSN1970 c287 s37

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Continuing authority of partners

38. (1) After the dissolution of a partnership the authority of a partner to bind the firm, and the other rights and obligations of the partners continue where it may be necessary to wind up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the dissolution.

(2) The firm is not bound by the acts of a partner who has become insolvent but this does not affect the liability of a person who has after the insolvency represented or knowingly permitted himself or herself to be represented as a partner of the insolvent.

RSN1970 c287 s38

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Rights of partners re partnership property

39. On the dissolution of a partnership, a partner is entitled, as against the other partners in the firm, and persons claiming through them in respect of their interests as partners, to have the property of the partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after the payment applied in payment of what may be due to the partners, respectively, after deducting what may be due from them as partners to the firm; and for that purpose a partner or his or her representatives may, on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.

RSN1970 c287 s39

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Premium where partnership prematurely dissolved

40. Where 1 partner has paid a premium to another on entering into a partnership for a fixed term, and the partnership is dissolved before the expiration of that term otherwise than by the death of a partner, the court may order the repayment of the premium, or of the part of it that it thinks just, having regard to the terms of the partnership contract and to the length of time during which the partnership has continued; unless

(a) the dissolution is in the judgment of the court, wholly or chiefly due to the misconduct of the partner who paid the premium; or

(b) the partnership has been dissolved by an agreement containing no provision for a return of a part of the premium.

RSN1970 c287 s40

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Partnership dissolved for fraud

41. Where a partnership contract is rescinded on the ground of the fraud or misrepresentation of 1 of the parties to it, the party entitled to rescind is, without prejudice to other rights, entitled

(a) to a lien on, or right of retention of, the surplus of the partnership assets, after satisfying the partnership liabilities, for a sum of money paid by him or her for the purchase of a share in the partnership and for capital contributed by him or her;

(b) to stand in the place of the creditors of the firm for a payment made by him or her in respect of the partnership liabilities; and

(c) to be indemnified by the person guilty of the fraud or making the representation against the debts and liabilities of the firm.

RSN1970 c287 s41

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Right of outgoing partner to share profits

42. (1) Where a member of a firm has died or otherwise stopped being a partner, and the surviving or continuing partners carry on the business of the firm with its capital and assets, without a final settlement of accounts as between the firm and the outgoing partner or his or her estate, then in the absence of an agreement to the contrary, the outgoing partner or his or her estate is entitled to the share of the profits made since the dissolution that the court may find to be attributable to the use of his or her share of the partnership assets, or interest at the rate of 6% annually on the amount of his or her share of the partnership assets.

(2) Where, by the partnership contract, an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is exercised, the estate of the deceased partner, or the outgoing partner, is not entitled to a further share of profits.

(3) Where a partner claims to act in exercise of the option does not in material respects comply with the terms of it, the partner is liable to account under this section.

RSN1970 c287 s42

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Retiring or deceased partner's share

43. Subject to an agreement between the partners, the amount due from surviving or continuing partners to an outgoing partner, or the representatives of a deceased partner, in respect of the outgoing or deceased partner's share, is a debt accruing at the date of the dissolution or death.

RSN1970 c287 s43

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Rule for distribution of assets

44. In settling accounts between the partners after a dissolution of partnership, the following rules shall, subject to an agreement, be observed:

(a) losses, including losses and deficiencies of capital, shall be paid 1st out of profits, next out of capital, and lastly, where necessary, by the partners individually in the proportion in which they were entitled to share profits; and

(b) the assets of the firm, including the sums, contributed by the partners to make up losses or deficiencies of capital shall be applied in the following manner and order

(i) in paying debts and liabilities of the firm to persons who are not partners,

(ii) in paying to each partner rateably what is due from the firm to the partner for advances as distinguished from capital,

(iii) in paying to each partner rateably what is due from the firm to the partner in respect of capital, and

(iv) the ultimate residue shall be divided among the partners in the proportion in which profits are divisible.

RSN1970 c287 s44

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Saving for rules of equity and common law

45. The rules of equity and common law applicable to partnership shall continue in force, except where they are inconsistent with the express provisions of this Act.

RSN1970 c287 s46

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