COMPARATIVE STUDY OF PARTNERSHIP UNDER ISLAMIC AND STATUTORY LAWS IN NIGERIA
COMPARATIVE STUDY OF PARTNERSHIP UNDER ISLAMIC AND STATUTORY LAWS IN NIGERIA
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Date
1998
Authors
IDRIS, SANI
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Abstract
Partnership as a means of trade and commerce is widely practice in an infinite variety
of circumstances. In choosing the type of business enterprise one is to engage in from range
of options such as sole proprietorship, forming a registered company or forming a partnership,
regard is to be heard to ones financial capability. This is more so in the contemporary
Nigerian society where the outcry of lack of funds is the order of the day in almost every
household. This condition makes investment as a sole proprietor or forming a company
affordable only to very few people. The option open to the vast majority of others is to
engage in Partnership - a system that permits people to put their respective resources together
with a view to profit.
Nigerian society is by all standards a complex one with multi-religious and ethnic
groups. Although majority of its population arc Muslims, the country follows English based
legal system with very few exceptions that permits the application of Islamic law in some
areas which include, the muslim personal laws. In this respect matters involving Muslims -
relating to marriage, divorce and civil transactions may be govern by Islamic Law. Thus the
choice of a comparative study of partnership under both statutory and Islamic Law is a
necessity.
The laws applicable to partnership involving muslim parties on the one hand is or
ought to be Islamic Law and statutory laws in all partnership involving other categories of
people with or without a muslim partner on the other. In respect of the statutory laws, we use
the English Partnership Act of 1890 which is a statute of general application and still applies
to many states that are yet to enact their own indigenous partnership laws. In fact in Northern
States, it is only Kaduna State that enacted their partnership Edict and in the South, states like
Lagos, former western state now Ekiti, Oyo, Ondo, Ogun and Osun and former Bendel State,
now Delta and Edo. It is not in doubt that even the states that have succeeded in enacting
their indigenous partnership laws, it was a substantial reproduction of the English Act with
virtually little or no modification. This makes the historical development of the Nigerian
Partnership laws (statutory) inseparable to that of the English Act.
The above notwithstanding, vast majority of partners are completely ignorant of the
legal provisions governing partnership both under the statutes and Islamic Laws alike. Thus
the rules for determining the existence or otherwise of partnership, capacity of the parlies to
enter into partnership and the essential issues that need to be agreed upon by potential partners
are the bedrock of any partnership agreement. This, considered as a prelude, forms the basic
of our discourse in Chapter one.
When a party decides to engage in partnership, the next huddle is to know and chose
the type of partnership he is to go into. Partnership both under Islamic and statutory Laws are
of various types and their division is based on the nature of business involved. Under
statutory laws, if it does not involve a lot of commercial activities it is categorised as civil this
include partnership such as that of farmers, artisans, labourers. While if it involve a lot of
commercial activities, like trading it is categorised as commercial.
Partnership may be divided into undisclosed, general and limited partnerships. In
some circumstances partnership may also arise by estoppel. Other type of partnership
includes corporate, group, particular, sub and illegal partnerships. Whereas under Islamic
Law Partnership is broadly categorised into proprietary (Sharikat al-milk) which does not
involve much commercial activities and contractual or commercial (Sharikat al-aqd); which,
as the name suggest involved commercial activities. It comprise of - unlimited investment
partnership (Sharikat-al-mufawada). limited investment partnership (Sharikat- ul-Inan),
commenda (Sharikat-al-mudarabah) skilled partnership (Sharikat al-Sanai), credit partnership
(Sharika al-wujuh), share tenancy (Muzara'a and Musaqat). Attempt has been made to high
light the areas of differences and similarities between the categories under statutory laws and
those under Islamic law. These have been exposed in chapter two.
The whole essence of engaging in partnership is to make profit. The profit cannot be
made except some obligations are met. It is the criss-cross of these two factors that
culminates into the rights and obligations of the partners which is our main concern in chapter
three. There are a lot of similarities in the rights and duties under the two laws but a sharp
distinction exist in the freedom of the parties to agree on the share of loss. Under Islamic Law,
loss follows capital contribution and it is not permissible for partners to agree on any
proportion other than that of capital contribution while under statutory laws the parties are
free.
As a necessary antecedent to rights and obligation of partners, comes the partners'
relationship to third parties. Part of each partner's obligation is how he relates to third parties
on behalf of the partnership firm. Each partner acts in dual capacity:- as principal when his
co-partners act for the firm and as agent when he acts for the firm. Here again there are a lot
of similarities with some sharp differences when it comes to the right of third party against the
firm. Under statutory laws a third party can sue the firm as a whole whereas under Islamic
Law, he can only sue the partner he had dealings with. This has been treated in chapter four.
Chapter five focuses on the relationship of partnership as a concept to other related business
concepts with particular references to company and agency. It examines the differences and
similarities between company and partnership in areas of legal personality, limited liability,
perpetual succession, possibility of transfer of shares and ownership of property as it applies
both under statutory and Islamic Laws. Whereas in the case of partnership and agency we
examined them as twin sisters in that partner acts as principal on the one hand and as agent on
the other. Principal and agent are the two pillars for the existence of agency relationship.
Having considered the formation and types of partnership, rights and obligation of the
partners, partners relation to third parties and the relationship of partnership to company and
agency. Chapter six examines the ways and manners through which partnership can be
dissolved. Dissolution under statutory laws is of two types i.e. dissolution in the ordinary
process not by court and dissolution by court, depending on the factor calling for the
dissolution. Although not expressly categorised, dissolution under Islamic law follows
virtually the same process to that under statutory laws with few differences.
Dissolution whether pre-arranged, or agreed by the parties or abrupt is always visited
with some consequences. The connection of the partners still remains, until the affairs of the
firm are finally wound up. In other words the dissolution give rise to certain rights and
obligations pending winding up and final settlement of account. Chapter seven examines the
processes of winding up to final settlement of account, as the consequences of dissolution.
Finally chapter eight reviews the whole work and attempted to harmonise the practical
operation of partnership with the legal provisions. It highlighted the lots of problems
associated with partnership and canvassed some suggestions with a view to arresting the
problems.
Description
Ph.D. THESIS
Keywords
COMPARATIVE,, STUDY,, PARTNERSHIP,, ISLAMIC,, STATUTORY,, LAWS,, NIGERIA