Chapter 03

Partnership Act 1932

“Partnership is the relation between persons
o who have agreed
o to share the profits
o of a business
o carried on by all or any one of them acting for all.”

Characteristics
o Contract of Agency
o major disadvantage - Unlimited liability; liability of business is liability of self
o Not a legal entity

Who may be a Partner – a Person

Prof. (Dr.) S N Ghosh 2
Test of Partnership – Mutual Agency
•Partnership Firm is not a legal entity; it is an association of Persons
Types of Partnership
•Partnership at will
•Particular partnership( specific venture)
Kinds of Partners
a.Active / actual / ostensible partners: must give public notice of his retirement
b.Sleeping/ dormant partners: undisclosed principal
c.Silent partners: no voice in Mgt.
d.Partner by estoppel /holding out/ Quasi Partner/ Nominal Partner:
o No agreement but the person holds out, represents himself to be a partner,
o It is not necessary that representation must be made directly to the person so giving
credit.
Prof. (Dr.) S N Ghosh 3
 Rights Duties

carry on the business with common To take part in the conduct and management of
advantage the business
just and faithful free access to all the records

render true accounts To express opinion in matters connected with

the business
to provide full information share in the profits of the business

indemnify for loss caused by fraud To get interest on the payment of advance

liable jointly and severally To be indemnified by the firm against losses or

expenses
not to assign his interest

Prof. (Dr.) S N Ghosh 4

 Dissolution of firm
A. Court
• Insanity of a partner
• Permanent incapacity of a partner
• Conduct affecting prejudicially to the business
• Breach of partnership agreement
• Transfer/Assignment of interest of a partner
• Just and equitable

B. Others
• agreement
• Compulsory dissolution – insolvency, Death, Resignation
• happening of certain contingency – expiry of fixed term
• completion of purpose.
• By notice if partnership is at will Prof. (Dr.) S N Ghosh 5