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partnership

A partnership is an arrangement where entities and/or individuals agree to cooperate to


advance their interests. In the most frequent instance, a partnership is formed between
one or more businesses in which partners (owners) co-labor to achieve and share profits
or losses.

Meaning of Co-Ownership
Partnership and co-ownership have different meanings. In partnership, there is an association of two or
more, persons who carry on common business for earning profit. They share its profits and losses as per
oral or verbal agreement.

Co-Ownership refers to joint ownership in a property by more than one person. If two, or more persons A 6
and C, purchase a property collecUvely without any business motive it will be a case of co-ownership. Co-
ownership thus has joint ownership but business is not combined with it. The main points of distinction
between partnership and co-ownership as stated by Lindley are as under:-

Basis of Difference Partnership Co-Ownership

1. Contract
Partnership always arises out of contract. Co-ownership may or may not be based on agreement. It can also
arise by operation of law, such as by inheritance. On -the death of father, sans and daughters become co-
owners of property.

2. Number of Partners The limit for maximum number of partners is 20 in a firm and 10 for banking.
There is no ceiling on the maximum limit of co owners.

3. Agency Relationship A partner is an agent of the other partners. He can bind them for his acts in the
ordinary course of business
A co-owner is not the agent of the other co owner/co-owners; every co-owner is responsible for his own
deeds only.
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4. Sharing of Profits and Losses A partnership is always entered into for business, it involve sharing of
profits and losses. A co-ownership does not involve sharing of profits and losses.

5. Transfer of Interest A partner cannot transfer his right and interest to any person without consulting his
partners. A co-owner can transfer his right and interest without the consent of the other co-owners.

6. Right of Investment If a partner spends money far the business, he can demand its repayment. If a co-
owner spends money for the improvement of the property, he has no legal claim (lien) for its refund.

7. Right of Division No partner can seek division of the partnership property in specie (in parts). His only
right is to have a share of the profits or demand the payment of his share in cash.
A co-owner has a right to demand the division of property n specie or parts.

8. Minor A minor cannot enter into a contract and as such is not able to become a regular partner of a firm.
A minor can be the co owner of a property.

9. Regulations Partnership business is regulated by the Partnership Act of 1932 as adopted in Pakistan.
There is no separate law to regulate co-ownership.

10. Dissolution Partnership can be dissolved on the insolvency, death, misconduct etc of a partner. A co-
ownership can not be dissolved on any such grounds.
What is the Difference Between
Partnership and Co-ownership?
“In co-ownership, there is only a combined ownership without any business purpose. In
partnership, joint ownership and business are pooled. ”

It would be naïve if we call Partnership and Co-ownership as one and the same thing. The
possession of a property by more than one persons is called co-ownership. If two brothers or friends
acquire property collectively, it is a case of co- ownership. The property can only be disposed off
with the approval of co-owners.

All the co-owners share ever kind of revenue arising from co-ownership. The property is not
purchased with the object of earning profits. If a house is purchased to let it for rent, it becomes a
case of partnership and not of co-ownership. So, any activity that is undertaken with a view to earn
profit does not fall under the purview of co-ownership.

In co-ownership, there is only a combined ownership without any business purpose. In partnership,
joint ownership and business are pooled. Partnership is based on contractual association among
partners. Co-ownership may be by a procedure of law.

On the death of father, sons become co-owners of his possessions. On the other hand partnership is
the result of an accord. The purpose of partnership is to enter into some business and earn profits
whereas co-ownership is not meant for business intentions.

No partner can reassign his interest without the approval off all other partners. A co-owner can
transfer his interest whenever he likes without asking from other co-owners. Partners can also act
as mediators of business. The have an indirect power to bind the firm by their acts.

No agency affiliation exists in co-ownership. Every co-owner is answerable for his deeds only. A co-
owner can insist the division of property but in partnership such a provision is not feasible. A
partner can demand the imbursement of his share in business through cash.

If a partner pays out some money for business he can demand its repayment. On the other hand, if
a co-owner spends money for the upgrading of property he cannot claim it by the way of a lien of
property.

Co-ownership does not require the formation of a well-defined act that can govern its functioning,
whereas such an act is mandatory in the case of partnership.

C. Partnership And Co-Ownership

Story Case

Albert Bosworth, in a conversation with Edward "West, made this statement "I know of a splendid
section of land in Florida which can be purchased at a bargain. Will you buy one half if I purchase
the other?" West assented to the agreement, answering, "Go ahead, buy, and I will take a half."
Bosworth therefore purchased the land, putting the title in the name of himself and West. Later,
without any authority from "West, Bosworth made a contract with Alonzo Hart for the fencing of
the entire section. Before the work was begun, Bosworth became ill, and as a consequence,
desired that the work should not be started. When Hart was informed of this, however, he
maintained that a contract existed between himself and the other two as partners. The liability of
West depended upon whether he and Bosworth were partners.

Ruling Court Case. Helme Vs. Smith, Volume 7 Bingham Reports, Page 709

Plaintiff and defendant owned a certain vessel jointly; the plaintiff acted as manager of the vessel,
and as such, incurred large expenses in fitting the vessel out for several voyages. All of these
voyages proved unsuccessful, and the plaintiff brought this action against the defendant, as part
owner of the vessel to recover the share of expenses which he contended the defendant owed,
by virtue of the fact that he was part owner.

The defendant contended that they, as part owners of the vessel, were partners; and accordingly
one partner could not sue another at law, and that the case, therefore, was started in the wrong
court.

Decision

"If, indeed, the plaintiff and defendant were partners, there is an end of the question; but part
owners of a vessel are not necessarily partners; if the parties had laid out money on a speculation
in goods, the proceeds to be divided on the ship's return, they would have been partners in every
sense; but there is nothing here to show that they were more than part owners, and the question
is whether, if one lays out money to enable the ship to proceed, he may not sue each of the
owners for his share of the expense. There is nothing to show that the plaintiff's claim was to
depend on the profits of the voyage, or that he was to be deprived of remuneration if the voyage
turned out to be without profit."

Accordingly, it was held that the plaintiff was entitled to recover from the defendant his share of
the expense in fitting out the vessel for the several voyages in question, in accordance with their
contract. Therefore, the suit started in a common law court, was good, and the plaintiff need not
proceed in a court of equity for an account, as he should, had they been partners.

Ruling Law. Story Case Answer

The existence of the relation of partnership depends entirely upon the intention of the members
for its creation. "Whereas the relation of co-ownership does not necessarily depend, for its
creation, upon the intention of the co-owners; as for example, heirs may be co-owners of land. A
co-owner may assign his interest in the joint property without the consent of the other, and his
transferee will take his place, but such a transfer by a partner will operate to dissolve the relation.
In dealing with partnership property, the partners necessarily share in the losses and participate
in the profits, in the absence of an agreement to the contrary. Such is not the case in co-
ownership; the liability of one for the losses occasioned by the other, or his right to the profits
made by the other, depend upon their agreement. Finally, each partner, as such, is an agent of
his copartner; but a co-owner has no power to bind the other, by virtue of the relation, but must
have the authority of some agreement between them.

In the case of Helme vs. Smith, the parties were probably more than merely co-owners, and had
it been shown in evidence that this was intended as a joint venture and that the parties were to
share in the profits and losses, then the Court would have decided that a partnership existed. If it
were a partnership the plaintiff should have brought an action for an accounting against the other
partners. A partnership always implies a co-ownership, but, as is shown, a co-ownership does not
always imply a partnership.

In the Story Case, Bosworth and West were merely co-owners. There was no agreement to share
in a joint business venture, in which each was an active agent of the other, and from which each
should divide the profits or share the losses; there was merely an agreement consenting to the
common ownership of property.