ALIGARH MUSLIM UNIVERSITY CENTRE MURHIDABAD

SUBJECT :- MERCANTILE LAWTOPIC :- PARTNERSHIP

SESSION – 2015-2016SUBMITTED BY:- SUBMITTED TO:-

NAME :- MOHD NAZIM Ms. SHAILA MEHMOOD

ROLL NO. :- 14BALLB62 ASSISTANT PROFESSOR

ENROLL. NO. :- GI-4920 FACULTY OF LAW , AMUCM

CONTENT 1. INTRODUCTION2. DEFINITION3. NATURE OF PARTNERSHIP4. ESSENTIALS OF PARTNERSIP5. KINDS OF PARTNERSHIP6. JUDICIAL REVIEW7. CONCLUSION BIBIOGRAPHY

The Indian partnership Act was enacted in 1932 and it came into force on 1st Day of October, 1932. The present Act superseded the earlier law relating to partnership, which was contained in chapter XI of the Indian Contract Act, 1872.

The Act is not exhaustive it only define and amend the law relating to partnership.

Partnership Act does not make any special provision. It also follow the general rule of contract. Rules relating to offer and acceptance, consideration, free consent, legality of the object, ect. Contained in Indian contract Act are applicable to a contract of partnership.

INTRODUCTION

NATURE OF PARTNERSHIP Partnership is a form of business organization, where two or more

persons joint together for jointly carrying on some business. It is an improvement over the sole trade business where one person with his own resource, skill, and efforts carries on his own business.

On the other hand in a partnership numbers of person could pool their resources and efforts and could start a much larger business, than could be afforded by any of these partners individually. In case of loss also the burden gets divided amongst various partners.

DEFINITION

Section 4 of the Indian Partnership Act, 1932 defines partnership as under :- “Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all. ”

ESSENTIALS OF PARTNERSHIP1. Agreement Section 5 declares that a partnership is created by contract, not by

status. Partnership can arise only by an agreement between the parties concerned and no other way.

It is one of elements which clearly display the distinction between a partnership and other business relation. Like joint family carrying on business which do not arise by an agreement.

It is not necessary that there should be a very formal and written agreement. An agreement to create a partnership may as well arise from conduct of parties concerned.

ESSENTIALS OF PARTNERSHIP2. Carrying a BusinessThe object of every partnership must be carrying on business and sharing its profits. It may be any business not be unlawful. The Act including “every trade, occupation or profession” the definition is not exhaustive and is capable of including any kind of commercial activity aimed at earning profit. The business, for instance may be of working tailors, engaging in legal profession, medical services, selling of goods, purchasing of goods, etc.

3. Sharing of profitThe term profit has not been defined in the Act. It means net gain, that is the excess of return over outlay. The object of the partnership must be to carry on business for the sake of profit and share the same. Therefore, club or societies which do not aim at making profit are not partnerships. Sharing of profit is one of the important essential element.In the case of Grace v. Smith , Grey C.J. said that “every man who has the share of the profit of a trade ought also to bear his share of the loss.”

ESSENTIALS OF PARTNERSHIP

ESSENTIALS OF PARTNERSHIP4. Mutual AgencyIt is one of the most essential element of partnership. According to section 4 of the partnership Act 1932, the partnership ‘business must be carried on by all or any of them acting for all.’ Thus, if the person carrying on the business acts not only for himself but for others also, so that they stand in the position of principals and agents, they are partners. This is principle of Cox v. Hickman.

KINDS OF PARTNERSHIPKINDS OF PARTNERSHIP

1. Partnership at will According to the section 7 of partnership Act, 1932 ;-“Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is ‘partnership at will”.

According to the above definition, a partnership is deemed to be a partnership at will in the following two situations :

i. When no provision is made in the partnership agreement as to its duration.

ii. When there is no provision in the partnership agreement as to its determination (come to an end) of partnership.

If the partnership agreement makes a provision for its duration, or where a provision is made for its determination, it is not a partnership at will.

KINDS OF PARTNERSHIP2. Particular PartnershipSection 8 of the Partnership Act 1932 defines as; “A person may become a partner with another person in particular adventure or undertaking.”

The section clearly recognizes the possibility of a partnership in a particular adventure. The relation of partnership need not be a permanent bond. There can as much be a partnership in a single and brief business venture as in a business of everlasting nature.

The ingredients of a partnership designated by section 4 are present, it will be immaterial whether the business is of temporary or permanent nature.

In the case of Gherulal Parakh v. Mahadeodas Maiya,

Fact : where a partnership between two person for entering into certain wagering transaction for particular season only.

Held : To be valid particular partnership.

KINDS OF PARTNERSHIP3. General partnership: In a general partnership, the liability of each partner is unlimited. It means that

the firm's creditors can realise their dues in full from any of the partners by attaching their personal property if the firm's assets are found to be inadequate to pay off its debts.

An exception is made in the case of a minor partner whose liability is limited to the amount of his share in the capital and profits of the firm. In India all partnership firms are general partnerships.

Each partner of a general partnership is entitled to take active part in the management of the firm, unless otherwise decided by the other partners.

KINDS OF PARTNERSHIP4. Limited partnership: A limited partnership is a partnership consisting of some partners whose liability

is limited to the amount of capital contributed by each. The personal property of a limited partner is not liable for the firm's debts.

He cannot take part in the management of the firm. His retirement, insolvency, lunacy or death does not cause dissolution of the firm. There is at least one partner having unlimited liability. A limited partnership must be registered.

Limited partnership is now allowed in India under the Limited Liability Partnership Act. In England limited partnership can be formed under the Limited Partnership Act, 1907 and in the USA under the Partnership Act, 1890.

DIFERRNCE BETWEEN PARTNERSHIP AND JOINT FAMILY BUSINESS(1) The basis of partnership is a contract between persons. No partnership can arise without a

contract. The relation of members of Joint Hindu Family is based on the status of person, i.e., a person becomes its member by virtue of his being born in the particular family.

(2) When a new partner has to be introduced into a partnership firm, consent of all partners is needed for the same. But in Joint Hindu Family, there is no such consent.

(3) There is mutual agency between the partners of a partnership firm, and the act done by any of the partner binds the firm, Whereas there is no such mutual agency between the members of a Hindu Joint Family.

(4) The liability of a partner is not only joint liability or limited to his share in the partnership business, the liability is several liability also. Such liability is unlimited and even a partner’s personal property can be attached for the partnership debts. The liability of the coparceners, on the other hand, is limited only to the extent of their shares in the family business.

(5) A partnership is dissolved b the death of partner but that is not so in the case of Joint Hindu Family.

JUDICIAL REVIEW Court regarding to partnership pronounce many judgment and opinion. They

also classified the kinds of partnership . The court , also pronounce judgment regarding to the essential of partnership.

In case of Walker West Developments v. F.J. Emmett, court says that, the section does not insist upon sharing of loss. Thus, a provision for loss-sharing is not essential.

The Karnataka High Court in Usha Gopirathnam v. P.S. Rangnathan, said the the word “entitled” used in the clause would not be construed to mean “in place of deceased partner”.

CONCLUSION

Partnership is contract between the Parties for carrying a mutual business. Also there sharing of profit. In the situation of loss all parties have to suffers and they to give the share in debts. In the partnership personal property of the partners also included in the situation of loss or

debts. There is not necessary that there should be a very formal or written agreement. An agreement

to create a partnership may as well arise from the conduct of the parties concerned. The validity of a partnership agreement does not depend upon capital contribution by partner.

A person may contribute his know-how, or intellectual property rights, or skill and experience, or even sheer labour in consideration of becoming a partner.

BIBLIOGRAPHY1. R.K. Bangia, Principles of Mercantile Law, sixth edition

2009, reprint 2013, Allahabad Law Agency, Faridabad2. Avtar Singh, Mercantile Law, Eight edition 2006, reprint

2008, Eastern Book Company3. http://www.preservearticles.com/2012022323658/kinds-

of-partnership-and-its-advantages-and-disadvantages.html

Thanks to all