The document provides an overview of partnership law in Pakistan according to the Partnership Act of 1932. It defines key terms like partnership, partner, and firm name. It outlines essential elements of a partnership like two or more persons, an agreement to share profits of a business, the business being carried on by all partners, and mutual agency. It also describes types of partners, kinds of partnerships based on duration and business scope, requirements of a partnership deed, implied authority of partners, admission of new partners, borrowing by the firm, and dissolution of a partnership.

1. The Partnership
Act, 1932
ACCOUNTS OF PARTNERSHIPS
BY
ABDUL QADIR BHAMANI

2. INTRODUCTION
 The law of partnership is contained in the Partnership
Act, 1932, which came into force on 1st October, 1932
 A contract of partnership is a special contract. Where
the partnership act is silent on any point, the general
principles of the law of contract apply (Section 3)

3. Meaning and Definition of “Partnership”
Section 4 Para 1 of the of the partnership Act 1932,
defines partnership as:
 “ Partnership is the relation between persons who
have agreed to share the profits of a business carried on
by all or any of them acting for all”.
 Thus, partnership is the name of legal relationship
between or among persons who have entered into a
contract.

4. Meaning of ‘Partner’ ‘Firm’ and ‘Firm Name’
 Section 4 of Partnership Act, 1932 provides that:
Persons who have agreed into partnership with one
another are called individually ‘PARTNERS’ and
collectively ‘FIRM’ and the name under which their
business is carried on is called the ‘FIRM NAME’
“Partnership is thus Invisibility which binds the
partners together and firm is the visible form of
those partners who are thus bound together”.

5. Maximum Limit on Number of Partners
 Section 11 Companies Act provides that the maximum no.
of persons, a firm can have:
In case of partnership firm carrying on a banking business 10
In case of partnership firm carrying on any other business 20
If the number of partners exceeds the aforesaid
limit, the partnership firm becomes an illegal
association.

6. Two or more
persons
An agreement
Sharing of profit
Business
Mutual agency
Essential elements of Partnership

7. Real test of partnership [Sec. 6]
 The true test of partnership is the existence of ‘Mutual Agency’
relationship, i.e. the capacity of a partner to bind other partners by
his acts done in firm’s name and be bound by the acts of other
partners.
 Sharing of profit is an essential element of partnership but it is not a
conclusive proof of partnership.
 Sharing of profit is Prima facie evidence.
 Thus partnership can be presumed when
 a. There is an agreement to share the profits of business and
 b. The business is carried on by all or by any of them acting for all.

8. Types of PARTNERS
 Actual partner
 Sleeping partner
 Nominal partner(does not contribute any capital;but
lends his name and credit to the firm)
 Sub-partner
 Partner in profits only
 Minor as a partner

9. Kinds of Partnership
Partnership
at Will
Particular
Partnership
On the Basis of Duration On the Basis to the extent
of the business
Partnership for a
fixed period
General
partnership

10. Kinds of Partnership
 Partnership at will :- According to SECTION-7 of the act, it is a partnership
when:-
1. No fixed period has been agreed upon for the duration of the partnership and
2. There is no provisions made as to the determination of the partnership.
 Partnership for a fixed period :- Where a provision is made by a contract
for the duration of the partnership, the partnership is called ‘partnership for a
fixed period’.
 Particular partnership :- a partnership may be organized for the prosecution
of a single adventure as well as the conduct of a continuous business.
 General partnership :- where a partnership is constituted with respect to
the business in general, it is called a general partnership.

11. Partnership deed
A partnership is formed by an agreement. This agreement may
be in writing or oral. though the law does not expressly require
that the partnership agreement should be in writing, it is
desirable to have it in writing in order to avoid any dispute
with regard to the terms of the partnership. The document
which contains the term of a partnership as agreed among the
partners is called “partnership deed”.
The partnership Deed is to be duly stamped as per the
Pakistani Stamp Act, and duly signed by all the partners.
Contd.

12. Contents of partnership Deed
A partnership deed may contain any matter relating to the regulation of
partnership but all provisions in the deed should be within the limits of
Indian Partnership Act, 1932. However, A Partnership Deed should contain
the following clause:-
 Nature of business
 Duration of partnership
 Name of the firm
 Capital
 Share of partners in profits and losses
 Bank Account firm
 Books of account
 Powers of partners
 Retirement and expulsion of partners
 Death of partner
 Dissolution of firm
 Settlement of disputes

13. Implied Authority Of Partners
 The word implied authority denotes the authority to
bind the firm which arises by implication of law from
the fact of partnership. With the presence of implied
authority, a partner binds the firm with any of his act
done in connection with the business.
 Section 18 lays down that every partners is an agent of
the firm for the purpose of the business of the firm, a
partner is both a principal and an agent.
 Every partner embraces the character both of principal
and agent. But A partner is agent only for the business
of the firm.

14. Operation of Partnership Account
 Section 19(1) and 22 defines the scope of implied authority of a
partners .
 Section 19(1) lays down that subjects to provisions of sections
22,the acts of a partner which is done to carry on in the usual
way business of the kind carried on by firm binds the firm.
Acts within implied authority
 Every partner within the scope of his implied authority may bind the firm
by the following acts
1. He may sell goods of the firm, but he cannot sell the immovable property of
the firm without the consent of other partners.
2. He may purchase such goods on the credit of the firm as are necessary for
carrying on the business of the firm.
3. He may engage servants to perform the business of the firm.
4. He can receive payments of the debts due to the firm. But in the case of non
trading a partner cannot issue a post dated cheque.

15. Operation of Partnership Account
 All Account opening related documents should be sign
by all the Partners.
 Both registered and unregistered partner ship deed are
acceptable for opening of account.
 Bank should also obtain the letter from the firm in
which all the partner in their personal capacity
undertake that they are jointly and severally assume
the liability of the firm.
 Clear instruction should be obtain regarding the
operation of account like issuance of cheque, indorsing
of bills ect.
 However act of any partner is binding for whole firm.
 stop payment of cheque can be done by any partner
and it is banker’s duty to comply accordingly.

16.  Extension and restriction of partners implied
authority
 Section 20 lays down that the implied authority of any
partners may be extended or restricted by an agreement
between all partners
 Section 21 provides that a partners has authority in an
emergency to do all such acts for the purpose of
protecting the firm from loss, as would be done by a
persons of ordinary prudence in his own case, under
similar circumstance .

17. Admission of New Partner
 In case of admission of new partner the operation
of account should not be stopped but written
consent of all the existing partners should be taken
by the Banker which cover future operation in
account
 If the account running in credit balance there is no
problem in operating of account.
 If the account running in debt then according to
sec 31 new partner is not liable to pay old debts
unless express agreement to do so.
 If new partner not agreed to accept the debit
balance of old partners then operation of account
should be stopped by the banker

18. Admission of New Partner
 Other wise the account will be subject to the rule in
CLAYTON’S CASE.
According to this rule all the future credits will be reduce the
old debts and all the fresh withdrawals will be the liability of
new firm.
 New partner will have to sign his agreement to retention of
security held by the banker as collateral.
 Effects of notice to acting partners (Section 24)
Notice to one partners relating to the business of the
firm ,operating as notice to the firm . The partners to whom
such notice is given must be acting in the business at that
time. so a notice to a dormant or sleeping partners would not
operate as a notice to the firm.

19. BORROWING BY FIRM
 A Partner in partnership has a implied authority to
borrow for the firm and it is binding for all the
partners but banker should not rely on this implied
authority he rather obtain signatures of all the
partner on legal document before landing.
 In case of mortgage all the partner should execute
the mortgage deed because one partner don’t have
the implied authority to bind all the partners in
this case.
 According to sec19 if one partner sign a legal
mortgage it treated as equitable mortgage.

20. Dissolution of partnership
 Expiry of term
 Completion of adventure
 Death of Partner
 Insolvency of partner
 Insanity of partner
 Retirement of partner
 In capability of partner
 By court of law

21. Retirement of a partner
 As a general rule of partnership the retirement of partner
change the constitution of firm and remaining partners
cant run the firm unless expressly agreed.
 According to sec 32 retiring partner liable for firm
present debt till the time of notice of retirement unless
expressly agreed.
 In case of credit balance in account banker should not
stopped the operation presuming that remaining partner
carry on the business for winding up
 in case of account is over drawn operation immediately
stopped to determine the liability otherwise rule of
Clayton case will operate.
 Banker retain or realized the retiring partner personnel
security if any to meet the firm’s debts.

22. Insolvency of a partner
 Sec 34 of contract act 1872 provided that a partnership is
dissolved as soon as one partner declare insolvent. Unless
expressly agreed.
 In case of credit balance in account banker should not stopped
the operation presuming that remaining partner carry on the
business for winding up but they are accountable official
assignee for the shear of insolvent partner.
 Banker should obtain the undertaking for this purpose
 Banker should not pay the cheques signed by insolvent partner.
without written approval of solvent partners.
 in case of account is over drawn operation immediately stopped
to determine the liability otherwise rule of Clayton case will
operate.
 Banker retain or realized the retiring partner personnel security
if any to meet the firm’s debts.

23. Death of Partner
 As a general rule of partnership the Death of partner change
the constitution of firm and remaining partners cant run the
firm.
 Legal heirs of deceased cant act on his behalf but they are
entitle to receive deceased shear in the firm
 In case of credit balance in account banker should not stopped
the operation presuming that remaining partner carry on the
business for winding up.
 Surviving partner accountable for deceased shear in firm to
their legal hiers.banker should obtain the undertaking in this
regard.
 in case of account is over drawn operation immediately
stopped to determine the liability of deceased partner
otherwise rule of Clayton case will operate.
 Banker entitle retain or realized the deceased partner
personnel security if any to meet the firm’s debts.

24. THANK YOU