PROJECT

Contract Law-2
Partnership is nothing but extension of agency

SUBMITTED TO

Professor Nishtha Agrawal

United World School of Law (UWSL),
Karnavati University
(Faculty-Contract Law -2 )

SUBMITTED BY

Name: - Fatin Tirmizi

Roll No: -16
Semester: -3
Section: -B

United World School of Law ,

Karnavati University.
 CERTIFICATE OF DECLARATION
I hereby declare that the project work entitled “Partnership is nothing but extension of
agency” submitted to united world school of law, Gandhinagar, is record of an original work
done by me under the able guidance of Prof.Nishtha Agrawal mam, Faculty Member, United
world school of law.

Fatin Tirmizi
Roll No-16
Semester-3
Section-B
Batch-2018-2023
Date – 10/10/2019
 Acknowledgements
I would like to express my special thanks of gratitude to my teacher Prof.Nishtha Agrawal
mam who gave me the golden opportunity to do this wonderful project on the topic
“Partnership is nothing but extension of agency” , which also helped me in doing a lot
Research and I came to know about so many new things I am really thankful to them.

Secondly I would also like to thank my parents, friends and seniors who helped me a lot and
have given me valuable suggestion pertaining to the topic and in completing this project
within the limited time frame.

Thanking Everyone
Table of Contents
CERTIFICATE OF DECLARATION..................................................................................................................... 2
ACKNOWLEDGEMENTS................................................................................................................................. 3
INTRODUCTION............................................................................................................................................ 4
II. THE INDIAN PARTNERSHIP ACT, 1932:..........................................................................................................5
ESENTIALS OF PARTNERSHIP:...........................................................................................................................6
1. AGREEMENT........................................................................................................................................................6
2. AGREEMENT BETWEEN TWO OR MORE PERSONS:.......................................................................................................6
1.FIRM:..................................................................................................................................................................7
2.TRUSTEES:...........................................................................................................................................................7
3.BUISNESS:............................................................................................................................................................8
4.SHARING OF PROFITS:............................................................................................................................................8
5.MUTUAL AGENCY:................................................................................................................................................8
THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE LAW OF AGENCY:......................................................10
ADVANTAGES OF PARTNERSHIP:....................................................................................................................14
DISADVANTAGES OF THE PARTNERSHIP:........................................................................................................14
CONCLUSION:............................................................................................................................................. 15
BIBLIOGRAPHY:.......................................................................................................................................... 17
Case Laws:…………………………………………………………………………………...18
 Research Methodology

Objective:

To know is partnership extention of agency and underastand the concept of partnership

Hypothesis:

I have examined the facts that if partnership is extention of agency

Research Question:

Is partnership extention of agency?

What is partnership?
Who can enter into partnership?
What is essential for partnership?
 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.1
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, 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
1
1 S.D. Singh & J.P.Gupta, Law of Partnerships in India, Orient Law House, Third Revised Edition,(1988), at
p.8.
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.
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- v. A W
Figgies4 - v. G Parthasarthy Naidu 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

ESENTIALS OF PARTNERSHIP:2

1. Agreement.
2. Agreement between two or more persons
3. Business.
4. Sharing of Profits.
5. Business carried on by all or any of them acting for all. (Mutual Agency)
1. Agreement:
There has to be an agreement between two or more people to enter into partnership. The
agreement is the source of the partnership. It is not necessary that the agreement be formal or
written. An agreement can be express or implied. Further, such agreement must follow all the
requirements of a valid contract given by Indian Contract Act 1872. 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.
Thus, if there is no specific contract, there can be no partnership.
The Supreme Court, in Tarsem Singh v Sukhminder Singh3, has held that it is not necessary
under the law that every contract must be in writing. There can be an equally binding contract
between the parties on the basis of oral agreement, unless there is a law which requires the
agreement to be in writing.

2. Agreement between two or more persons:

The term ‘person’ as used in Sec.4 does not include a firm. This is because a firm is not a
separate legal entity. As such two partnership firms cannot enter into partnership, though all
2
Justice K. Sukumaran, Mulla The Indian Partnership Act, Pollock & Mulla, Lexis Nexis Butterworths, Sixth
Edition.
3
AIR 1998 SC 1400
the partners of the two firms may form a partnership out of their separate firms provided their
number does not exceed the statutory limit.
In agreement associated between two or more persons, the number of partners in a firm shall
not exceed 20 and a partnership having more than 20 persons is illegal. 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.
A company is a ‘person’ and being an entity distinct from its members; enter into a contract
of partnership if it is authorized by its Memorandum of Association.
The following can enter into a partnership:
Individual
Firm
Hindu undivided family
Company
Trustees
Individual: An individual, who is competent to contract, can become a partner in the
partnership firm. If there are more than two partners in a firm, an individual can be a partner
in his individual capacity as well as in a representative capacity as Karta of the Hindu
undivided family.
1.Firm:
A partnership firm is not a person and therefore a firm cannot enter into partnership with any
firm or individual. 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.
Hindu undivided family: A Karta of the Hindu undivided family can become a partner in a
partnership in his individual capacity, provided the member has contributed his self-acquired
or personal skill and labour.
company: A company is a juristic person and therefore can become a
partner in a partnership firm, if it is authorized to do so by its objects.
2.Trustees:
Trustees of private religious trust, family trust and trustees of Hindu mutts or other religious
endowments are juristic persons and can therefore enter into partnership, unless their
constitution or objects forbid.
3.Buisness:4

They must intend to start or do a business. A business is a very wide term and includes any
trade, occupation, or profession. Business may not be of long duration or permanent and even
a single activity may be considered a business. Thus, if two persons are not partners, they can
engage in a transaction with an intention to share profits and can become partners in respect
of that transaction.
For example, if two advocates are appointed to jointly plead a case and if they agree to divide
the profits, they are partners in respect to that case.
Section 8 of the Act also mentions that a person may become partner with another in
particular adventures of undertaking. It is however necessary that a business exists. If a
business is simply contemplated and has not been started, the partnership is not considered to
be in existence.

4.Sharing of profits:

Normally, an activity is done in partnership with a goal to make profits. Thus, for a valid
partnership to exist, the partners must agree to share the profits according to their investment.
Here, profits include losses as well. The partners may agree to share profits out of partnership
business, but not share the losses. Sharing of losses is not necessary to constitute the
partnership. The partners may agree to share the profits of the business in any way they like.
The honorable apex Court of the nation has reiterated the provision in Section 6 of the Act in
Girdharbhai v. Saiyed Mohmad Mirasaheb Kadri:5
that in determining whether a group of persons is a firm or not, the real intention of the
parties has to be taken into consideration. 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; (b) the agreement so
entered into must be to share profits of a business; (c) the business must be carried on by all
or any one for all.

5.Mutual Agency:

4
H.R. Gokhale & Y.S. Chithale, The Sale of Goods & Partnership Act, Pollock & Mulla, Tripathi, Fourth
Edition
5
AIR 1987 SC 1782
The present definition replaces Section 239, Indian Contract Act which defined ‘Partnership’
as under:
‘Partnership is the relation which subsists between persons who have agreed to combine their
property, labour or skill in some business, and to share the profits thereof between them.’
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‘, which was absent in the old definition.
According to Pollock, ‘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.’
The firm must be managed by the partners and thus when any partner acts; he acts on behalf
of the firm and thus on behalf of other partners. Therefore, a partner is considered an agent of
others. In absence of such mutual right of agency, a partnership cannot exist.
For example: An author receiving a royalty from publishers is not a partner because there is
no mutual agency between them.

THE LAW OF PARTNERSHIP IS AN EXTENSION OF THE

LAW OF AGENCY:

Firstly it is important to discuss something about Agency:

Definition: Sec 182 of Indian Contract Act, 1872 defines an ‘Agent’ as “a person employed
to do any act for another or to represent another in dealings with third person”. The person for
whom such act is done or who is represented is called the “principal”. The relationship
between the agent and the principal is called “agency”.
The common law principle in operation is usually represented in the Latin phrase, “qui facit
per alium, facit per se , i.e. the one who acts through another, 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.
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, marriage, singing, etc.
b) He who does not act through a duly authorized agent does it by himself, i.e.,
the act of the agent are considered the acts of the principal (Sec. 226).
Essential features of agency: Agency has certain essential features. They are as follows:
(i) Agency implies that one person (i.e. an agent) brings two other persons (i.e. a principal
and a third person) into contractual relationship - That means an agent is a connecting link
between the principal and the third person.
(ii) An agent is not mere a connecting link between the principal and the third party. He also
creates a legal relationship between the principal and the third party - 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.
(iii)An agency can be established to do any act which the principal could do lawfully - That
means an agency can be established only for lawful acts. If an agency is established for an
unlawful act it cannot be enforced by law.
(iv)Agency can be created only for those acts which can be delegated by a person to another -
That means agency cannot be created for acts which must be done by a person himself and
cannot be delegated to an agent say painting, marrying, singing.
(v) The agency relationship may be established by a contract between the principal and the
agent which may be written or oral, or may be established by implications, as in the case of
husband and wife, master and servant etc.
(vi)Though a valid contract requires that both the contracting parties must be competent to
contract, for a contract of agency, it is enough if only the principal is competent to contract -
The agent need not be competent to contract. In other words an agent may be incompetent to
contract, say a minor, lunatic, idiot etc.
(vii) There should be the intention on the part of the agent to act on behalf of the principal -
As such, 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. 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,
even if the person contends that he is an agent.
(viii) No consideration is necessary to create an agency - 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. Though no consideration is necessary to support a contract of
agency, an agent may be paid for. That means an agent may be paid for his services.
(ix) An agent is appointed with specific instructions and is authorized to act within the scope
of the instructions (i.e. the authority) - 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.
Who may employee an agent- Any person who is of the age of majority according to the law
to which he is subject, and who is of sound mind, may employee an agent (Sec. 183). Thus
any person competent to contract can appoint an agent.
Who may be an agent- As between the principal and third person any person can become an
agent, but no person who is not of the age of majority and of sound mind can become an
agent, so as to be responsible to his principal according to the provisions in that behalf herein
contained (Sec. 184).
The concept of “agency” has been thus explained by RAMSWAMI J. of the Madras High
Court in Krishna v Ganapathi6; ―In the legal phraseology, every person who acts for another
is not an agent. A domestic servant renders to his master a personal service; a person may till
another’s field or tend his flocks or work in his shop or mine; one may for another in aiding
in the performance of his legal or contractual obligations of third persons.... In none of these
capacities he is an agent and he is not acting for another in dealings with third persons....
Representative character and derivative authority may briefly be said to be the distinguishing
feature of an agent.
In Shivraj Reddy & Bros v S. Raghu Raj Reddy7 it was held that “A person can become a
partner in a firm, which is the position of an agent, without making any capital contribution.”
Now we will discuss that how Partnership is an extension of Agency: As mentioned above
there are five essential characteristics of partnership. An association of two or more persons

6
AIR 1955 SC Mad 648.
7
AIR 2002 NOC 120 (AP)
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. 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. Even a mere
statement that the parties are to be partners will not necessarily constitute them as partners in
law. 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.
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, 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 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.
Explanation II : 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 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. “
Thus, 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 members of a Hindu Undivided family carrying on family business are not partners,
because a male child of a Hindu acquires an interest in such business by birth apart from any
agreement to that fact. 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. Similarly, a Burmese Buddhist husband and wife carrying on business are not
partners.
The true test for determining the existence of partnership is Agency and Authority. It is the
reaction of agency which distinguishes a partnership from co- ownerships. It was held that in
cases where losses as well as profits are shared, the presumption about the existence of
partnership still becomes stronger, though not conclusive. Agency is an essential element of
partnership just sharing of profits and contribution to losses is not sufficient. 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, but this is not a conclusive test. 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.
The above discussion establishes that Partnership is the branch of the law of agency. Section
18 of the Partnership Act further clarifies and confirms this. 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.” Thus the firm as well as other partners will be bound by the act of the firm.
Intention of parties to be gathered from the language used in the deed, read as a whole and
having regard to the ordinary sensible meaning. 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. Hence control and management can be exercised by a single partner
and need not be by the majority.

ADVANTAGES OF PARTNERSHIP:

Following are the advantages of the Partnership:

1) Better decisions: The partners are the owners of the business. Each of them has equal right
to participate in the management of the business. In case of any conflict, they can sit together
to solve the problem. Since all partners participate in the decision-making process, there is
less scope for reckless and hasty decisions.
2) Flexibility in operations: A partnership firm is a flexible organization. At any time, 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. Only the consent of all the partners is required.
3) Easy to form: Like sole proprietorships, partnership businesses can be formed easily
without any compulsory legal formalities. It is not necessary to get the firm registered. A
simple agreement or partnership deed, either oral or in writing, is sufficient to create a
partnership.
4) Availability of large resources: Since two or more partners join hands to start a partnership
business, it may be possible to pool together more resources as compared to a sole
proprietorship. The partners can contribute more capital, more effort and more time for the
business.

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. 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.
2) Uncertain life: The partnership firm has no legal existence separate from its partners. It
comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any
unsatisfied or discontent partner can also give notice at any time for the dissolution of the
partnership.
3) No transferability of share: If you are a partner in any firm, you cannot transfer your share
or part of the company to outsiders, without the consent of other partners. This creates
inconvenience for the partner who wants to leave the firm or sell part of his share to others.
4) Lack of harmony: In a partnership firm every partner has an equal right to participate in
the management. Also, every partner can place his or her opinion or viewpoint before the
management regarding any matter at any time. Because of this, sometimes there is a
possibility of friction and discontent among the partners. Difference of opinion may lead to
the end of the partnership and the business.
5) Limited capital: Since the total number of partners cannot exceed 20 (10 for Banking
business), the capital to be raised is always limited. It may not be possible to start a very large
business in partnership form.
 CONCLUSION:

It can be said that, a partnership is a form of business. It has at least two members who joined
capital or services for prosecuting of some business. 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. The joint efforts of all the
member results in successful accomplishment of tasks and that task or job can be easily
afforded. Division of work leads to increase in efficiency at work among different partners.
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. 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. So in my view Partnership is a good form of doing business than a
company which is owned by a single person. Partnership is one of the oldest forms of
business relationships. Though limited liability companies have replaced partnership firms in
complex businesses, partnerships are still preferred by professionals and small trading and
business enterprises in India and abroad.
The Indian partnership act of 1932 provides for a general form of partnership which is the
most prevalent form in India, but, over time the general form of partnership has lost its charm
because of the inherent disadvantages in it, the most important is the unlimited liability of all
partners for business debts and legal consequences, regardless of their holding, as the firm is
not a legal entity.
General partners are also jointly and severally liable for tortuous acts of co-partners. Each
partner has the exposure of their personal assets being appropriated and liquidated to meet
partnership dues. These are statutory position, which cannot be altered by contract inter-se,
though at times subterfuges are resorted to by unscrupulous partners to avoid personal
liability. General partnership holdings are not easy to transfer; typically all other partners
have to agree. Yet partnership is preferred in India, because of the ease of formation and lack
of compliances involved.

BIBLIOGRAPHY:

Dr. S.K. Kapoor, Contract – II, Central Law Agency, Twelfth Edition, 2012
S.D. Singh & J.P.Gupta, Law of Partnerships in India, Orient Law House, Third Revised
Edition,(1988), at p.8.
Justice K. Sukumaran, Mulla The Indian Partnership Act, Pollock & Mulla, Lexis Nexis
Butterworths, Sixth Edition.
 H.R. Gokhale & Y.S. Chithale, The Sale of Goods & Partnership Act, Pollock & Mulla,
Tripathi, Fourth Edition.
G.C.V. Subba Rao’s , Special Contracts, s.gogia & company, 12th edition 2012

Case Laws:

1.CoxVsHickman186017:8
Facts -

8
(1860) 8 H.L. 268
Benjamin Smith and Josiah Timmis Smith carried on business as iron workers and corn
merchants under the name of B Smith & Son. They owed a lot of money to the creditors and
a meeting took place, amongst whom were Cox and Wheatcroft. A deed of arrangement was
executed by more than six-sevenths in number and value of the creditors. The trusts were
enumerated and the lease was fixed at 21 years. They were to carry on business under the
name of “The Stanton Iron Company”. The deed also contained a clause which prevented
them from suing the Smiths for existing debts. Cox never acted as trustee, and Wheatcroft
resigned after six weeks after which no trustee was appointed. The goods for the business
were provided by Hickman who drew 3 bills of exchange, which the business accepted but
did not honour.
The suit was first tried in front of Lord Jervis who ruled in favour of the defendants. 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.
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. There was no action against the appellant, as if Hickman had heard that Cox and
Wheatcroft were the trustees, he would have realized that Cox had never been a trustee and
Wheatcroft had resigned.
2. The ownership of the partnership never changed and was still owned by the Smiths.
3. Aqualifiedbenefitderivedfromatradedoesnotmakeapersonapartnerinit. Here, unless the
profits are taken, there exists no partnership.
The counsel for Cox contended that:
1. The defendant can be held liable only if:
1.1 He put his name on the bill
1.2 Authorized someone else to put their name on the bill 1.3 Held himself to have given the
authority
1. As to the first and third points he is not liable. As far as the second is concerned, the
defendant cannot be held liable unless an agency is proved.
2. It is up to the defendant to show that the plaintiff is a partner.
The counsel for Hickman contended that:
1. There was a contract of partnership under which business was to be carried
out for the benefit of creditors
2. The scheduled creditors are allowed to participate in the profits of the firm
thereby making them partners
3. 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. 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, which are the powers that partners have.
The creditors, however, 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, they did not make themselves partners trade.
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 deed in this case is merely an arrangement between the creditors and the Smiths, to repay
the creditors out of existing and future profits. This relationship between the creditors and
debtors is not enough to constitute a relationship between a principal and agent. Trustees are
liable as they are the agent by the contract but the creditors are not the principals of the
trustees.
of the
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. 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. Every partner in trade is the agent of his co-partner; all
are, therefore, liable for the ordinary trade contract of the other”.
2.Ross v Parkyns:9
Facts –
The defendant Parkyns agreed with the plaintiff that accounts are to be carried in defendant’s
name. Subscription, policies are also to be signed by him or by the plaintiff as his agent. 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. The loss was to be borne by the defendant. Further,
in any year after division of profit if an unexpected claim is made, the plaintiff was supposed

9
Ross v. parkyns (1875)
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 –
There was no mutual agency hence no partnership.
3.Abdul Latif v Gopeshwar:10

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. Defendant was also liable for all the losses in case
of negligence. The plaintiff sued the defendant for accounts in the capacity of agency
whereas the defendant claimed that there exists partnership.

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.

10
AIR 1933 Cal 204