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I. INTRODUCTION:
One of the forms in which business can be carried
on is ‘partnership’, where two or more persons join
together to form the partnership and run the
business. The Indian Partnership Act, 1932 is an
act enacted by the Parliament of India to regulate
partnership firms in India. Since public at large
would be dealing with the partnership as customers,
suppliers, creditors, lenders, employees or any other capacity, it is also very
important for them to know the legal consequences of their transactions and other
actions in relation with the partnership.

A partnership is mean of bringing together the person who can contribute capital
skill for expansion of business.

II. THE INDIAN PARTNERSHIP ACT, 1932:
The Indian Partnership Act, 1932 received the assent of the Governor-General
on 8 April, 1932 and came into force on 1 October 1932, except section 69 which
came into force on the 1st Day of October, 1933. Before the enactment of this act,
partnerships were governed by the provisions of the Indian Contract Act (Chapter
IX - sections 239 to 266). It was derived from English Partnership Act, 1890. The
act is administered through the Ministry of Corporate Affairs. The act is not
applicable to Limited Liability Partnerships, since they are governed by the Limited
liability Partnership Act, 2008.

 Features of the Act1:
 Act complimentary to Contract Act- The Indian Partnership Act is
complimentary to Contract Act. Basic provisions of Contract Act apply to
contract of partnership also. Basic requirements of contract i.e. legally
enforceable agreement, mutual consent, parties competent to contract; free
consent, lawful object, consideration etc. apply to partnership contract also.
 Partnership Contract is a ‘Concurrent subject’ - ‘Contract, including
partnership contract’ is a ‘concurrent subject, covered in Entry 7 of List
III (Seventh Schedule to Constitution). Indian Partnership Act is a Central Act,
1 S.D. Singh & J.P.Gupta, Law of Partnerships in India, Orient Law House, Third Revised
Edition,(1988), at p.8.

THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY

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but State Government can also pass legislation on this issue. Though
Partnership Act is a Central Act, it is administered by State Governments, i.e.
work of registration of firms and related matters are looked after by each State
Government. The Act is not applicable to Jammu and Kashmir.

 Partnership Firm is not a legal entity - It may be surprising but true that a
Partnership Firm is not a legal entity. Under partnership law, a partnership firm
is not a legal entity, but only consists of individual partners for the time being.
It is not a distinct legal entity apart from the partners constituting it -
Malabar Fisheries Co. v. CIT2

 Firm legal entity for the purpose of Taxation - For tax law, income-tax as
well as sales tax, partnership firm is a legal entity - State of Punjab v.
Jullender Vegetables Syndicate 3 - CIT v. A W Figgies4 - CIT v. G
Parthasarthy Naidu5 Though a partnership firm is not a juristic person, Civil
Procedure Code enables the partners of a partnership firm to sue or to be
sued in the name of the firm. - Ashok Transport Agency v. Awadhesh
Kumar 6

2 (1979) 120 ITR 49 = 2 Taxman 409 (SC).

3 1966 (17) STC 326 (SC)

4 AIR 1953 SC 455

5 (1999) 236 ITR 350 = 104Taxman 197 (SC)

6 1998(5)SCALE 730 (SC

THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY

DEFINITION:  The term 'Partnership' is defined under section 4 of Indian partnership act 1932 as under: "Partnership is an agreement between two or more persons who have agreed to share profits of the business carried on by all or any one of them acting upon all. 1932 provides that: THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . Page | 3 III.  Meaning of ‘Partner’ ‘Firm’ and ‘Firm Name’ Section 4 of Indian Partnership Act."  Sir Frederick Pollock defines “Partnership” as: “The relation which subsists between persons who have agreed to share the profits of a business carried on by all or any of them on behalf of all of them”.

A and B buy 100 bales of cotton to sell later on profit which they agree to share equally. 3. Agreement: There has to be an agreement between two or more people to enter into partnership. Sabyasachi of Supreme Court identified that the following elements must be there in order to establish a partnership – “There must be an agreement entered into by all the parties concerned. 4. Page | 4 “Persons who have entered into partnership with one another are individually called partners and collectively called a firm and the name under which their business is carried on is called firm name. 4. IV. Lexis Nexis Butterworths. Business. Sukumaran. J. A and B are carpenters working together.”“Partnership is thus Invisibility which binds the partners together and firm is the visible form of those partners who are thus bound together”. 7 AIR 1987 8Justice K. a goldsmith. The agreement is the source of the partnership. It is not necessary that the agreement be formal or written. Mulla The Indian Partnership Act. and the business must be carried on by all or any of the person concerned for all”. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . They agree that A will keep all the profits and will pay B a wage. Business carried on by all or any of them acting for all. Agreement between two or more persons 3.  In Helper Girdharbhai vs Saiyed M Kadri and others 7. A and B are partners in respect of such cotton. This circumstance does not make them partners. (Mutual Agency) 1. A and B are partners. An agreement can be express or implied. ESSENTIALS OF PARTNERSHIP8: 1. 5. the agreement must be to share profits of the business. Agreement. There is no partnership between A and B. Sixth Edition. Examples: 1. 2. 5. They are not partners. Pollock & Mulla. agrees with B to buy and provide gold to B to work on an ornament and to sell and that they shall share the profit. A and B buy 100 bales of cotton together for personal use. Sharing of Profits. 2. A and B jointly own a ship. A.

Agreement between two or more persons: The term ‘person’ as used in Sec. there can be no partnership. Page | 5 Further.4 does not include a firm. unless there is a law which requires the agreement to be in writing. though all the partners of the two firms may form a partnership out of their separate firms provided their number does not exceed the statutory limit. enter into a contract of partnership if it is authorized by its Memorandum of Association. can become a partner in the partnership firm. The following can enter into a partnership:  Individual  Firm  Hindu undivided family  Company  Trustees    Individual: An individual. has held that it is not necessary under the law that every contract must be in writing. As such two partnership firms cannot enter into partnership. who is competent to contract. the number of partners in a firm shall not exceed 20 and a partnership having more than 20 persons is illegal. 2. In agreement associated between two or more persons. an 9 AIR 1998 SC 1400 THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . If there are more than two partners in a firm. if there is no specific contract. in Tarsem Singh v Sukhminder Singh 9. A company is a ‘person’ and being an entity distinct from its members. Thus. such agreement must follow all the requirements of a valid contract given by Indian Contract Act 1872. There can be an equally binding contract between the parties on the basis of oral agreement. This includes the parties must be competent to contract and the object of the agreement should be legal as Section 5 of IPA 1932 provides that the relation of partnership arises from contract and not from status. The Supreme Court. If the partnership is between the Karta and member of Hindu undivided family the members of the joint Hindu family will not be taken into account. This is because a firm is not a separate legal entity.

It is however necessary that a business exists. But a partner of the partnership firm can enter into partnership with other persons and he can share the profits of the said firm with his other co-partners of the parent firm. they can engage in a transaction with an intention to share profits and can become partners in respect of that transaction. they are partners in respect to that case. The Sale of Goods & Partnership Act.    Company: A company is a juristic person and therefore can become a partner in a partnership firm. For example. if it is authorized to do so by its objects. if two persons are not partners. Chithale. 3. If a business is simply contemplated and has not been started. if two advocates are appointed to jointly plead a case and if they agree to divide the profits.  Ram Priya Saran vs Ghanshyam Das11: Fact: 10 H.R. Business10: They must intend to start or do a business. Business may not be of long duration or permanent and even a single activity may be considered a business. 11 AIR 1981 All THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . occupation.    Firm: A partnership firm is not a person and therefore a firm cannot enter into partnership with any firm or individual. Thus. family trust and trustees of Hindu mutts or other religious endowments are juristic persons and can therefore enter into partnership.S. provided the member has contributed his self-acquired or personal skill and labour. Pollock & Mulla. Page | 6 individual can be a partner in his individual capacity as well as in a representative capacity as Karta of the Hindu undivided family. Section 8 of the Act also mentions that a person may become partner with another in particular adventures of undertaking. or profession. A business is a very wide term and includes any trade. unless their constitution or objects forbid. the partnership is not considered to be in existence. Fourth Edition.    Trustees: Trustees of private religious trust.    Hindu undivided family: A Karta of the Hindu undivided family can become a partner in a partnership in his individual capacity. Tripathi. Gokhale & Y.

Saiyed Mohmad Mirasaheb Kadri14: 12 [2001] All ER 20 13 sydney. but not share the losses. Page | 7 Two persons agreed that after their tender is passed they will construct the dam in partnership. 4. It was held that there is no rule of law that parties to a joint venture do not become partners until they actually embark on the activity in question.au › lec › subject pages › law of associations THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . Held: It was held that since a business was only contemplated and not started. the plaintiff gave 2000 Rs. Thus. Here. This does not mean that the business has not started until the trading begins. there was no partnership and so the plaintiff was entitled to get 2000 Rs from the defendant. In order to deposit earnest money. The tender was not accepted. for a valid partnership to exist. an activity is done in partnership with a goal to make profits. But their relationship terminated before the opening of the restaurant. The partners may agree to share the profits of the business in any way they like. Sharing of losses is not necessary to constitute the partnership. the partners must agree to share the profits according to their investment. Held: It was held that in this case the activity of the business had begun and so the partnership was in existence. The partners may agree to share profits out of partnership business. The honorable apex Court of the nation has reiterated the provision in Section 6 of the Act in Girdharbhai v.edu.  Khan Vs Miah12 : Fact: Two persons obtained loan from the bank to start a restaurant. profits include losses as well. Sharing of profits13: Normally. Many businesses require a lot of investment and activities before the actual trading begins. It is necessary to identify the venture in order to decide whether the parties have actually embarked upon it but it is not necessary to attach any name to it. They also entered into a contract to purchase equipment and laundry for the restaurant.

labour or skill in some business.’ The present definition is wider than the one contained in the Indian Contract Act in so far as it includes the important element of ‘mutual agency‘. V. (c) the business must be carried on by all or any one for all. For example: An author receiving a royalty from publishers is not a partner because there is no mutual agency between them.’ The firm must be managed by the partners and thus when any partner acts. Therefore. (b) the agreement so entered into must be to share profits of a business. and to share the profits thereof between them. In absence of such mutual right of agency. The Supreme Court had laid down the elements to determine a partnership as (a) there must be an agreement entered into by all parties concerned. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY: 14 AIR 1987 SC 1782 THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . 5. Page | 8 that in determining whether a group of persons is a firm or not. Mutual Agency: The present definition replaces Section 239. the real intention of the parties has to be taken into consideration. he acts on behalf of the firm and thus on behalf of other partners. a partner is considered an agent of others. a partnership cannot exist. Indian Contract Act which defined ‘Partnership’ as under: ‘Partnership is the relation which subsists between persons who have agreed to combine their property. ‘Partnership is the relation which subsists between persons who have agreed to share the profits of a business carried on by all or any way of them on behalf of all of them. which was absent in the old definition. According to Pollock.

an agent) brings two other persons (i. They are as follows: (i) Agency implies that one person (i. b) He who does not act through a duly authorized agent does it by himself. “qui facit per alium. (iii) An agency can be established to do any act which the principal could do lawfully . acts in his or her own interests” and it is a parallel concept to vicarious liability and strict liability in which one person is held liable in Criminal law or Tort for the acts or omissions of another. the act of the agent are considered the acts of the principal (Sec.That is he makes the principal answerable to the third party for his acts and also entitles the principal to all the benefits accruing from his acts. i..e. He also creates a legal relationship between the principal and the third party . the one who acts through another. The relationship between the agent and the principal is called “agency”.That means an agent is a connecting link between the principal and the third person.e. facit per se . a principal and a third person) into contractual relationship . etc. The person for whom such act is done or who is represented is called the “principal”. The common law principle in operation is usually represented in the Latin phrase.That means an agency can be established only for lawful acts. 226). i. (iv) Agency can be created only for those acts which can be delegated by a person to another .  Essential features of agency: Agency has certain essential features.e. marriage. If an agency is established for an unlawful act it cannot be enforced by law. 1872 defines an ‘Agent’ as “a person employed to do any act for another or to represent another in dealings with third person”.  Principles of Agency: Contracts of agency are based on two important principles. namely: a) Whatever a person can do personally shall also be allowed to be done through an agent except in case of contracts involving personal services such as painting.That means agency cannot be created for acts which must THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . Page | 9 Firstly it is important to discuss something about Agency:  Definition: Sec 182 of Indian Contract Act.e. (ii) An agent is not mere a connecting link between the principal and the third party. singing.

as in the case of husband and wife. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY .Any person who is of the age of majority according to the law to which he is subject. marrying. (vi) Though a valid contract requires that both the contracting parties must be competent to contract. may employee an agent (Sec. (viii) No consideration is necessary to create an agency . and who is of sound mind. say a minor. even if the person contends that he is an agent. if a person intends to act on behalf of another an agency arises even if the contract between the parties provides that there is no such relationship. idiot etc. P a g e | 10 be done by a person himself and cannot be delegated to an agent say painting. (v) The agency relationship may be established by a contract between the principal and the agent which may be written or oral. Though no consideration is necessary to support a contract of agency.The agent need not be competent to contract.The fact that the principal has agreed to be represented by the agent is a sufficient detriment to the principal to support the contract the contract of agency. master and servant etc. (ix) An agent is appointed with specific instructions and is authorized to act within the scope of the instructions (i. singing.As such the agents within the scope of his authority are regarded as the acts of the principal and such acts bind the principal as if the principal has done them himself. Thus any person competent to contract can appoint an agent. an agent may be paid for. That means an agent may be paid for his services. 183). or may be established by implications. lunatic. for a contract of agency.  Who may employee an agent. On the other hand if a person intends to act on his own behalf and not on behalf of another there cannot arise any agency.As such. In other words an agent may be incompetent to contract.e. it is enough if only the principal is competent to contract . (vii) There should be the intention on the part of the agent to act on behalf of the principal . the authority) .

 The concept of “agency” has been thus explained by RAMSWAMI J.” Now we will discuss that how Partnership is an extension of Agency: As mentioned above there are five essential characteristics of partnership. A domestic servant renders to his master a personal service.  In Shivraj Reddy & Bros v S. ―In the legal phraseology. Representative character and derivative authority may briefly be said to be the distinguishing feature of an agent. so as to be responsible to his principal according to the provisions in that behalf herein contained (Sec. but no person who is not of the age of majority and of sound mind can become an agent. P a g e | 11  Who may be an agent. 15 AIR 1955 SC Mad 648. which is the position of an agent. Even a mere statement that the parties are to be partners will not necessarily constitute them as partners in law. In none of these capacities he is an agent and he is not acting for another in dealings with third persons…. 184).As between the principal and third person any person can become an agent. every person who acts for another is not an agent. 16 AIR 2002 NOC 120 (AP) THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . without making any capital contribution16. Raghu Raj Reddy it was held that “A person can become a partner in a firm. a person may till another’s field or tend his flocks or work in his shop or mine. Similarly mere sharing of profits may exist between the joint owners of the property and therefore this may also not determine the existence of partnership. one may for another in aiding in the performance of his legal or contractual obligations of third persons…. So also a person who holds out himself to be a partner is not a partner in law though he may be liable to third parties. An association of two or more persons entering into an agreement to share profits may not necessarily determine partnership because such an agreement may not be able to carry on business and may be formed for charitable or social objects. of the Madras High Court in Krishna v Ganapathi 15.

or (d) by a previous owner or part-owner of the business. Similarly. The members of a Hindu Undivided family carrying on family business are not partners. P a g e | 12 Section 6 of the Act provides for the Mode of Determining Existence of Partnership which reads as: “In determining whether a group of persons is or is not a firm. as consideration for the sale of the goodwill or share thereof. He is not a partner but a joint owner. Joint ownership is a family quasi-partnership created by the operation of law and is not a partnership arising out of a contract. or whether a person is or is not a partner in a firm. as annuity. Explanation II : The receipt by a person of a share of the profits of a business. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . and. the intentions of the partners will have to be decided with reference to the terms of the agreement and all the surrounding circumstances including evidence as to the interfacing or interlocking of management finance and other incidents of the respective businesses. 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. does not itself make him a partner with the persons carrying on the business. or of a payment contingent upon the earning of profits or varying with the profits earned by a business. (c) by the widow or child of a deceased partner. in particular. because a male child of a Hindu acquires an interest in such business by birth apart from any agreement to that fact. does not of itself make the receiver a partner with the persons carrying on the business. regard shall be had to the real relation between the parties. “ Thus. as shown by all relevant facts taken together. Explanation I: 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. a Burmese Buddhist husband and wife carrying on business are not partners.

the contract will be binding on the other partners of the firm when validity of the contract or authority of the partner to enter into the contract is not denied by other partners. The above discussion establishes that Partnership is the branch of the law of agency. Agency is an essential element of partnership just sharing of profits and contribution to losses is not sufficient. P a g e | 13 The true test for determining the existence of partnership is Agency and Authority. Section 18 provides: “Subject to the provisions of this Act. a partner is the agent of the firm for the purposes of the business of the firm. read as a whole and having regard to the ordinary sensible meaning. Intention of parties to be gathered from the language used in the deed. but this is not a conclusive test. Section 18 of the Partnership Act further clarifies and confirms this. . if two persons own a house and give it on rent. It is only where there is a difference of opinion between the partners that the matter is connected with the business has to be decided by a majority of partners. The question whether a person is a partner or not therefore depends in nearly all cases upon whether or not he has the authority to act for other partners and whether or not other partners have the authority to act for him. It was held that the receipt by a person of a share in the profits of businesses is prima facie evidence that he is a partner. It is the reaction of agency which distinguishes a partnership from co- ownerships.” Thus the firm as well as other partners will be bound by the act of the firm. It was held that in cases where losses as well as profits are shared. though not conclusive. the sharing of the rent does not create a partnership. Hence control and management can be exercised by a single partner and need not be by the majority. For example – . where a contract was entered into by one of the partners of a firm with the Finance Corporation for supply of dal. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . the presumption about the existence of partnership still becomes stronger.

17 (1860) 8 H. P a g e | 14 . A qualified benefit derived from a trade does not make a person a partner in it. They owed a lot of money to the creditors and a meeting took place. Cox Vs Hickman 186017:  Facts - Benjamin Smith and Josiah Timmis Smith carried on business as iron workers and corn merchants under the name of B Smith & Son. and Wheatcroft resigned after six weeks after which no trustee was appointed. The suit was first tried in front of Lord Jervis who ruled in favour of the defendants.  Leading Case Laws – 1. which the business accepted but did not honour. as if Hickman had heard that Cox and Wheatcroft were the trustees. a payment to a person contingent upon profits also does not necessarily create a partnership until the element of mutual agency is not present. The goods for the business were provided by Hickman who drew 3 bills of exchange. The action was then taken to the Exchequer Chamber wherein three judges wanted to uphold the judgment and the other three were for reversing it. there exists no partnership. There was no action against the appellant. They were to carry on business under the name of “The Stanton Iron Company”. Similarly. The trusts were enumerated and the lease was fixed at 21 years. he would have realized that Cox had never been a trustee and Wheatcroft had resigned. The ownership of the partnership never changed and was still owned by the Smiths. The deed also contained a clause which prevented them from suing the Smiths for existing debts. unless the profits are taken. 3. 2. Cox never acted as trustee. 268 THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . A deed of arrangement was executed by more than six-sevenths in number and value of the creditors.L.  Issues - Whether there is a partnership between the traders who were in essence the creditors of the firm?  Contentions - The counsel for Wheatcroft contended that: 1. amongst whom were Cox and Wheatcroft. Here.

2 Authorized someone else to put their name on the bill 1. however. If they had carried out the business they could have made sure none of the trustees accepted the bill of exchange as they would be the principals. The defendant can be held liable only if: 1. As to the first and third points he is not liable. Trustees are liable as they are the agent by the contract but the creditors are not the principals of the trustees. did not carry out the business of the trade when they could have but let the trustees do the same. By this act of theirs. The creditors. P a g e | 15 The counsel for Cox contended that: 1.3 Held himself to have given the authority 1.1 He put his name on the bill 1. 2. which are the powers that partners have. to repay the creditors out of existing and future profits. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . They were given the choice by majority regarding whether or not the trade should be continued and making rules and regulations as to the carrying out of that trade. The scheduled creditors are allowed to participate in the profits of the firm thereby making them partners 3. It is up to the defendant to show that the plaintiff is a partner. the defendant cannot be held liable unless an agency is proved. The deed in this case is merely an arrangement between the creditors and the Smiths. they did not make themselves partners of the trade. Any one of the partners may bind all the others by the acceptance of the bills in the regular course of business  Judgement – The deed gave special powers to the creditors. There was a contract of partnership under which business was to be carried out for the benefit of creditors 2. This relationship between the creditors and debtors is not enough to constitute a relationship between a principal and agent. As far as the second is concerned. The counsel for Hickman contended that: 1.

P a g e | 16 Lord Cranworth held that – “The liability of one partner for the acts of his copartner is in truth the liability of a principal for the acts of his agent. all are. as much as a single principal would be by the act of an agent who was to give the whole of the profits to his employer. In return. Lord Wensleydale also observed that – “So if two or more agree that they should carry on a trade. Mollow March Co Vs the Court of Wards 187218 :  Fact - A Hindu Raja loaned some money to Watson & Co.  Held – In the present case there is no relation of partner.”  Consequences of the case –  Mere sharing of profit does not make one partner. He was not empowered to direct the transactions of the company. and each bound to the other’s contract in carrying on the trade.  Should be in the capacity of partner. Where two or more persons are engaged as partners in an ordinary trade each of them has an implied authority from the other to bind all by contracts entered into during the course of business. The decision of the Court of Common Pleas was reversed and the defendant’s were not held liable. and each is an agent of the other. he was to get a % of profit and was to exercise control on some aspects of the business. therefore. 419 THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY .R. liable for the ordinary trade contract of the other”. 2. and share the profits of it.  Held - 18 L. 4 P.C. Every partner in trade is the agent of his co-partner. each is a principal. It is only prima facie test •  Work should have been done by him personally or on his behalf with his real or ostensible authority.

They alleged that the 3 defendants carried on business in melb as partners under the names ‘T McFarland & Co’ and on occasions ‘McFarland. Further Lang and Keates took no part in the business of the new firm other than to sign two letters. but each party had certain rights against each other. J McFarland and W Keates became insolvent and the action proceeded against their assignees and Lang. 20 AIR 1933 Cal 204 THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . James Morrison & Co Ltd. T Lang and W Keates. Abdul Latif v Gopeshwar20: 19 (1912) 13 CLR 1. J McFarland. Evidence for this finding was found in the fact that separate bank accounts were kept as it was apparent that neither Lang nor Keates operated on the account of T McFarland & Co. Lang and Keates’. The plaintiffs carried on the business of receiving and disposing of frozen meat from abroad.” In the circumstances. They were not partners against third parties.  Held - There was no partnership as there was no real evidence that the plaintiffs and Thomas McFarland intended on entering into a joint venture. Lang and Keates. that he was their agent in what he did under the contract with the plaintiffs. against 3 defendants. in this sense. 4. Lang v James Morrison & Co Ltd19:  Fact - An action was bought by an English company. it is necessary to prove that JW McFarland carried on the business of Thomas McFarland & Co. P a g e | 17 It was held that although sharing of profits is a very strong test. yet whether a relation of partnership exists depends on the real intention and conduct of the parties. on behalf of himself. Before the action commenced. there was no such agency. It was stated: “Now in order to establish that there was a partnership. 3.

Hirabai v. policies are also to be signed by him or by the plaintiff as his agent. Bhagirath & Co. The plaintiff sued the defendant for accounts in the capacity of agency whereas the defendant claimed that there exists partnership. 21 AIR 1964 Bom 174 22 (1875) THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . 6. P a g e | 18  Facts – The plaintiff undertook a contract with a company and he appointed the defendant to manage the business who was also authorized to receive advances from the company and also to extend advances in favour of the company. The plaintiff was supposed to maintain the account of the firm and in return he was to get a fixed sum as salary and 1/5th part of the profit. Defendant was also liable for all the losses in case of negligence. the plaintiff was supposed to pay his share of the same but that would not exceed in any circumstances from the money he has received as his share of profit.  Held – That there is no agency and mere sharing of profit does not make one partner.21:  Facts – Managing owner of an agency gave agency to defendant on temporary basis for 15 years but kept receiving the profits. Further.  Held – There was no mutual agency hence no partnership. The loss was to be borne by the defendant. 5.  Held - There is no partnership as the business was exclusively in the name of the plaintiff and the defendant was only managing the same on sharing of profit and loss basis. in any year after division of profit if an unexpected claim is made. Subscription. Ross v Parkyns22:  Facts – The defendant Parkyns agreed with the plaintiff that accounts are to be carried in defendant’s name.

Only the consent of all the partners is required. 2) Flexibility in operations: A partnership firm is a flexible organization.”  Partnership vs. either oral or in writing. A simple agreement or partnership deed. the partners can decide to change the size or nature of the business or area of it’s operation. There is no need to follow any legal procedure. 4) Availability of large resources: Since two or more partners join hands to start a partnership business. is sufficient to create a partnership. there is less scope for reckless and hasty decisions.” ii. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . The partners can contribute more capital. an agent never acts for himself but only for his principal. Each of them has equal right to participate in the management of the business. a partner is both a principal (for his own interest) and an agent (for the firm and the others). it may be possible to pool together more resources as compared to a sole proprietorship. 3) Easy to form: Like sole proprietorships. Agency - i. more effort and more time for the business. “agency” may in one sense be considered the broader term because: partnership” is only a form of “agency. P a g e | 19 Thus. from the above discussions it can be concluded that “the Law of Partnership is an extension of the Law of Agency. It is not necessary to get the firm registered. ADVANTAGES OF PARTNERSHIP: Following are the advantages of the Partnership: 1) Better decisions: The partners are the owners of the business. Since all partners participate in the decision-making process. In case of any conflict. At any time. partnership businesses can be formed easily without any compulsory legal formalities. they can sit together to solve the problem. VI.

4) Lack of harmony: In a partnership firm every partner has an equal right to participate in the management. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others. without the consent of other partners. It may not be possible to start a very large business in partnership form. 2) Uncertain life: The partnership firm has no legal existence separate from its partners. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners. P a g e | 20 VII. Further. 5) Limited capital: Since the total number of partners cannot exceed 20 (10 for Banking business). incapacity or the retirement of a partner. you cannot transfer your share or part of the company to outsiders. the capital to be raised is always limited. Because of this. 3) No transferability of share: If you are a partner in any firm. sometimes there is a possibility of friction and discontent among the partners. any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. insolvency. It comes to an end with death. every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Difference of opinion may lead to the end of the partnership and the business. Also. DISADVANTAGES OF THE PARTNERSHIP: Following are the advantages of the Partnership: 1) Unlimited liability: All the partners are jointly liable for the debt of the firm. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY .

partnerships are still preferred by professionals and small trading and business enterprises in India and abroad. Yet partnership is preferred in India. as the firm is not a legal entity. typically all other partners have to agree. THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY . The joint efforts of all the member results in successful accomplishment of tasks and that task or job can be easily afforded. And similar is the case when some loss occurs then that is also beard among all the members and it’s not that only one has to take responsibility or give compensation. over time the general form of partnership has lost its charm because of the inherent disadvantages in it. but. General partnership holdings are not easy to transfer. Though limited liability companies have replaced partnership firms in complex businesses. General partners are also jointly and severally liable for tortuous acts of co-partners. which cannot be altered by contract inter-se. the most important is the unlimited liability of all partners for business debts and legal consequences. because of the ease of formation and lack of compliances involved. When some job is done by consent of all the members and if some profit is earned then it is shared among the different partners. Partnership is one of the oldest forms of business relationships. though at times subterfuges are resorted to by unscrupulous partners to avoid personal liability. It has at least two members who joined capital or services for prosecuting of some business. These are statutory position. a partnership is a form of business. CONCLUSION: It can be said that. Division of work leads to increase in efficiency at work among different partners. The Indian partnership act of 1932 provides for a general form of partnership which is the most prevalent form in India. Partnership is very important because in day to day activities we enter into partnership agreements and by making partners big goals are achieved with the help of joint and more number of people. Each partner has the exposure of their personal assets being appropriated and liquidated to meet partnership dues. So in my view Partnership is a good form of doing business than a company which is owned by a single person. P a g e | 21 VIII. regardless of their holding.

Lexis Nexis Butterworths. Sukumaran. S.K. Mulla The Indian Partnership Act. Pollock & Mulla.hanumant. Gokhale & Y.scribe. Pollock & Mulla.com/  www. Contract – II. 2012  S. The Sale of Goods & Partnership Act. Twelfth Edition.com THANKS THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY .  H.D. Law of Partnerships in India. at p.in  www.indiankanoon.com  www. Central Law Agency.freellbnotes.C. P a g e | 22  BIBLIOGRAPHY  Dr.wikipedia.Gupta. Tripathi.8. Sixth Edition.  G.P.blogspot.(1988).S. Special Contracts. 12 th edition 2012  REFERENCE  www. Kapoor. Chithale. Third Revised Edition.com  www. Subba Rao’s .R.V. Orient Law House. Fourth Edition.studymode.com/  www. s. Singh & J.google.gogia & company.org  www.  Justice K.