Nature of Partnership:

Application
The Indian prater ship Act of 1932 applies to partnership created by agreement
between parties The act is not retrospecti!e" it does not a#ect any right$ title
interest$ obligation or a liability ac%uired or incurred before the act came into
operation in 1932 &'ec ()* the act is not e+hausti!e It does not apply to ,oint -indu
family farms
The essential elements of a
partnership:
Defnition and Characteristics:
'ection ) of the partnership act de.nes a partnership as follows: /Partnership is the
relation between persons who ha!e agreed to share the pro.ts of a business carried
on by all or any of them acting for all0 A partnership$ as de.ned in the act$ must
ha!e three essential elements:
1 There must be an agreement entered into by two or more persons
2 The agreement must be to share the pro.ts of a business
3 The business must be carried on by all or any of them acting for all
112oluntary agreement
The .rst element shows the !oluntary contractual nature of partnership A
partnership can only arise as a result of an agreement$ e+press or implied$ between
two or more persons 3here there is no agreement there is no partnership 4ut a
partnership cannot be formed with more than 11 persons in 4an5ing and 21 persons
in other types of business A partnership with persons e+ceeding the abo!e limits
must be register under a company act
Partnership is not created by status: section 6 states that$ /the relation of
partnership arises from contract and not from status0 In particular the
members of a -indu undi!ided family caring on a family business$ as such$
are not partners in such business
7+ample: the sole proprietor of a business dies li!ing a number of heirs The
heirs inherit the stoc5 in trade of the business including the goodwill of the
business but do not become partners until there in an agreement$ e+press or
implied to carry on the business as partners
2 1 sharing of Pro.ts of a 4usiness:
The second element states the moti!e underline the information of a partnership It
also lays down that the e+istence of a business is essential to a partnership
4usiness includes any trade$ occupation or profession If two or more persons ,oin
together to form a music club it is not a partnership because there is no business in
this case 4ut if two or more persons ,oin together to gi!e musical performances to
the public with a !iew to earning pro.t$ there is a business and a partnership is
formed
318utual Agency:
The third element is the most important feature of partnership It states that
persons carrying on business in partnership are agents as well as principals The
business of a .rm is carried on by all or anyone or more of them on behalf of all
7!ery partner has the authority to act on behalf of all and can$ by his actions$ bind
all the partners of the .rm$ each partner is the agent of the others in all matters
connected with the business of the partnership The law of partnership has
therefore been called a branch of the law agency