The Indian Partnership Act, 1932

Partnership, Partner, Firm & Firm Name

Meaning

4. Definition of “partnership”, “partner”, “firm” and “firm

name”

“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.

Persons who have entered into partnership with one

another are called individually “partners” and collectively “a
firm”, and the name under which their business is carried
on is called the “firm name”.

Prerequisites

1. Agreement

2. Purpose – to carry out business

3. Motive – to share profits

4. Mutual agency

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 1. Agreement

5. Partnership not created by status

The relation of partnership arises from contract and not

from status;

and, in particular, the members of a Hindu undivided

family carrying on a family business as such, or a
Burmese Buddhist husband and wife carrying on
business as such are not partners in such business

The relationship must arise from contract & must not

created by status.

2. Purpose – to carry out business

A. S. 2(b) – Business includes every trade, occupation, or

profession
Coope v Eyre & Co. (1788) 126 ER 24

3. Motive – to share profits

6. Mode of determining existence of partnership.

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In determining whether a group of persons is or is not a firm,
or whether a person is or is not a partner in a firm, regard
shall be had to the real relation between the parties, as
shown by all relevant facts taken together.

Explanation 1.—The sharing of profits or of gross returns

arising from property by persons holding a joint or common
interest in that property does not of itself make such
persons partners.

Explanation 2.—The receipt by a person of a share of the

profits of a business, or of a payment contingent upon the
earning of profits or varying with the profits earned by a
business, does not of itself make him a partner with the
persons carrying on the business; and, in particular, the
receipt of such share or payment—

(a) by a lender of money to persons engaged or about to

engage in any business,

(b) by a servant or agent as remuneration,

(c) by the widow or child of a deceased partner, as annuity,

or

(d) by a previous owner or part owner of the business, as

consideration for the sale of the goodwill or share thereof,

does not of itself make the receiver a partner with the

persons carrying on the business.

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S. 6 Whether a group of persons is or is not a firm regard is
to be given to real relation between the parties

Exceptions

Explanations to S.6

i. Sharing of profit arising from property jointly owner

ii. Money lender
iii. Servant or agent
iv. Widow or child of deceased partner
v. seller of good will

Cox v Hickman (1860) 3 LT 185 (HL)

4. Mutual agency

18. Partner to be agent of the firm.—

Subject to the provisions of this Act, a partner is the agent

of the firm for the purposes of the business of the firm.

Types of Partnership

1. Partnership at will (7)

2. Particular partnership (8)

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 2. Particular partnership (8)

8. Particular partnership

A person may become a partner with another person in

particular adventures or undertakings.

1.Partnership at will

Meaning

7. Partnership at will

Where no provision is made by contract between the

partners for the duration of their partnership or for the
determination of their partnership, the partnership is
“partnership at will”.

If there is no provision either as to its duration or as to when

comes to an end

Moss v Elphick (1910) 1 KB 486

Consequences

1. 32(1) c – partnership may retire by giving notice to all

32. Retirement of a partner

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(1) A partner may retire

(c) where the partnership is at will, by giving notice in

writing to all the other partners of his intention to retire.

2. 43(1) – dissolved by giving notice to all other partners

intention to dissolve

43. Dissolution by notice of partnership at will.

(1) Where the partnership is at will, the firm may be

dissolved by any partner giving notice in writing to all the
other partners of his intention to dissolve the firm.

(2) The firm is dissolved as from the date mentioned in the

notice as the date of dissolution or, if no date is so
mentioned, as from the date of the communication of the
notice.

1. To start a partnership business, what should be

the minimum number of partners?

A) 2

B) 10

C) 4

D) 20

2. What type of agreement is used to form a

partnership business?
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 A) Written agreement

B) Oral agreement

C) Written or oral agreement

D) None of them

3. In partnership, partners liabilities are

A) Unlimited

B) Limited to the capital of the business

C) Limited

D) Both A and C

4. Is a partnership firm a legal person.

A) No

B) Yes

C) Partially Yes

5. What is the partnership written agreement known

as?:

A) Partnership contract

B) Agreement

C) Partnership deed

D) Partnership Act

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6. Which is not a feature of a partnership
business?

A) Ease of formation

B) Limited liability

C) Limited life

D) Mutual agency

7. Which types of partnership have no agreement

in terms of the duration of partnership?

A) Partnership-at-will

B) Limited partnership

C) General partnership

D) Particular partnership

8. Collective name under which a business carries

on is called-------

9. All partners are entitled to share-------

10. Where partnership is not for a fixed period of

time, it is known as------

11. Partners who takes part in business of firm is

called ____

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12. Law dealing with partnership is contained
in_______

13. True test of partnership is________

14. Partnership arise by way of agreement only. (True

/ False)

15. Under which Act, Maximum number of partnership

is mentioned ?
16. Law of partnership in India was earlier contained
in____________
17. Partnership is relation__________
18. Each of partner is principal as well as an ______.
19. Partnership of particular adventure or
undertaking__________
20. Sharing of profit is _______ evidence of existence
of partnership.