According to Section2(1) of the Partnership Act, a partnership is defined as the the relationship which

subsists between or among persons, not exceeding twenty in number, who carry on a business in
common with a view of making profit.

A partnership exists when two or more people have agreed expressly or tacitly to share in the profits
and the control of a business1

The partners must be carrying on a business in common as provided for under section 2. In Lang v James
Morrison & Co Ltd 2,Griffiths CJ held that in order to establish that a partnership was in existence, it is
necessary to prove that the appellant carried on the business on behalf of himself and his two
colleagues thus acting as their agent in what he did under the contract with the plaintiffs.

Section 3 of the Partnership Act provides for the principles or criteria that aid in the determination of of
the existence of a partnership . The section provides the conditions that may lead to the inference of
existence of a partnership but do not necessarily create a partnership. The principles are as follows;
Section3(a) is to the effect that holding property jointly as co-owners will not of itself create a
partnership. This was illustrated in the case of Davis v Davis [1894]1Ch393, where a father died leaving
property which his two sons took over as co-owners. And when one of the sons died an issue arose as to
whether the brothers held the property as tenants in common. It was held that the fact that the
brothers had inherited the houses and the business did not of itself create a partnership between them.
However, by carrying on the business in common with a view of profit, from the time of their father’s
death to the death of one of them, they had become partners in the business.

According to Section3(b),sharing of gross returns does not sufficiently prove that a partnership is in
exhistence, but rather court can consider the fact that there is sharing of net profits with less outgoings.
This is seen in the case of Cox v Coulson where it was held that sharing of gross box office receipts by
two parties was not enough to prove the existence of a partnership. That there was was merely an
arrangement to share gross returns.

1
Klein and Coffee, Business Organization and Finance, 62. Foundation press,2004
2
Lang v James Morrison & Co Ltd (1912) 13 CLR 1