This document defines partnership and outlines key aspects of partnership law in India. It states that a partnership requires an agreement between 2-20 persons to carry on a lawful business and share profits. A partnership is based on the law of agency, with each partner acting as both an agent and principal of the firm. The document discusses formation of partnerships, tests to determine partnership status, rights and duties of partners, and different types of partners defined under law.

1. Partnership

2. Definition
1. Association of more than two or more pesrons:
At least 2 persons with a maximum of ten in case of a bank
and in case of any other business 20 (Sec 11 of
companies act 1956)
Person should not be a firm because firm does not hava a
separate legal entity ( Duli chand vs commissioner of
income tax), two paretnership firm cannot enter into
partnership., a company being a speratrate identity
can enter into partnership if it is authorised by its MOA.

3. 2. Agreement : Partnership relation is one of contractual
nature.It arses from contract and not from status, as
agreement between the partners is the basis of this
contract.The agreement may be written or oral,
agreement may be fixed for a period or open to
partnership to withdraw from the partnership at any time.
Partnership does not arise out of provision of law.
3.Business : A partnership can be carried on for only
carrying on some business, it includes every
trade,occupation, and profession.Business means the
idea of running business involving numerous
transactions.

4. 4.Sharing of profits: The object must be made to
make,profit must be distributed according to agreed
ratio.If a person claimimngg to be a partner of his right to
profit is deprived of profits he is not a partner.A person
may share profit yet not be partner. As between partners
it may be agreed that one or more of the partners shall
not be liable for loss.
5.Mutual Agency; Can be carried on by one or all.A partner
is both an agent and principal.The question of whether a
person is a or is not a partner depends in nearly all
cases upon whether he has the authority to act for those
who are admittedly partners and whether those admitted
partners has the authority to act for him.

5. Law of partnership –An extension
of the law of agency
• A partnership can be carried out by all or one partner acting on his
behalf. Thus relationship between principal and agent is
established between them .Sec 18 also provides that the subject
to the provisions of the Partnership act a partner is a agent of the
firm for the purposes of the business of the firm
Case law : Cox Vs Hickman
A partner assumes a two fold character:
1. He is an agent of the firm, he ccan bind the frim by his acts
provided the acts are within his scope and they are done for the
purposes of business.
2. He is the principal so far as the other partner is concerned.

6. Formation of Partnership
• A partnership should be based on agreement.It
may be oral or written, there msut be free and
genuine consent of partners which must be
competent to contract. The object of
partnership should be lawful and other legal
formalities should be full flled.The follwing
points need to be noted:
1. Minor partner
2. Consideration
3. Partnership deed

7. Partners,firm and firm name
• Partners who have entered into partnership are called
as individually as partners and collectively as a firm, the
name underwhich business is carried on.. The name s
only a shart way of expressing the names of all the
partners. The name has follwing two limitations
1. A first name shall not contain any words expressing or
implying sanction, approval or patronage of govt,,the
state govt may however allow its name to be used.
2. The law safeguards the trade names and goodwill of
other persons who are already existing, the fact that a
firm has already been doing business under certain
name does not prevent a new firm from adopting it, but
if name is used with a fradulent intenetion the law may
intervene.

8. Test of partnership
• In order to determine the existence of partnership between group of
persons the definition in sec 4 is used as a test i,.e one must look at
the agreement between them. If the agreement is to share profits
and business is carried by one or all of them then there is
partnership otherwise not.
• The problem arises when there is no partnership agreement among
partners or agreement is such it does not speak of partnership then
we have to refer to sec 6 which lays down rules.
• Real relation is basis : In determining wheteher a group of people is
or not a firm whether a person is or not a partner in a firm, regard
shall be had to the real relation between the arties as shown by all
facts taken together.
• Mixed question of law and fact.

9. Cases where no partnership
relation
1. Joint owners sharing gross returns
2. Sharing of profits
The real test is Mutual Agency
Who are not partners:
1. The members of an Hindu undivided family
carrying on family business
2. A burmese Buddhist husband and wife carying
on business as such.

10. Relation of Partners
Right of a Partner
1. Right to take part in business
2. Right to be consulted
3. Right to access of accounts
4. Right to share profits
5. Right to interest on capital
6. Right to interest on advances
7. Right to be indemnified
8. Right to use of partnershipproperty
9. Right of partner as agent of firm]
10. No new partner to be introduced

11. 11. No liability before joining
12. Right to retire
13. Right to be expelled
14.Right of outgoing partner to share in the
subsequent profit.

12. Duties of partner
1. To carry on business to the greatest common advantage
2. To observe faith
3. To indemnify fraud
4. To attend dilligently
5. No to claim remuneration
6. To share losses
7. To indemnify to wilful neglect
8. To hold and use property of the firm exclusively for the firm
9. To account for personal profit
10. To account for profits in competing business
11. To act within authority
12. To be liable jointly and severally
13. Not to assign his rights

13. Types of Partners
• Actual or ostensible patner
• Sleeping or dormant partner
• Nominal partner
• Partner in profit only
• Sub Partner
• Partner by estoppel or holding out