Contracts of Partnership

CONTRACTS OF PARTNERSHIP

(The Indian Partnership Act, 1932)

By Kapil Chawla

Contents1. Overview of The Indian Partnership Act,19322. Partnership : Meaning & Definition3. Features of Partnership4. Partnership & Joint Hindu Family5. Kinds of Partners6. Partnership and Agency( Rule in Cox vs.

Hickman)7. Registration of Firm 8. Effects of Non-Registration9. Rights Duties of Partners10.Dissolution of Firms

Partnership : Meaning & Definition

Partnership Meaning Definition (Section 4)

◦Partnership◦Partner◦Firm◦Firm Name

Features of Partnership

1.Association of two or more persons

2.Agreement 3.To carry on Business4.Sharing of profits

5.Mutual agency


1.Association of two or more persons


2. Agreement (Partnership Deed)


3. To carry on Business


4. Sharing of profits (equally or in proportion of capital)


5. Mutual Agency (One acting for all and all acting for one)

Partnership & Joint Hindu Family

Partnership Firm Joint Hindu Family Firm

1. The relation of partnership arises from contract, and not from status.

1. The relation of Joint Hindu Family firm arises from status, and not from contract. It arises by operation of law.

2. Every partnership firm is governed by provisions of Indian Partnership Act, 1932, Indian Contract Act, 1872 etc.

2. Every Joint Hindu Family firm is governed by the codified and uncodified Hindu Laws.

Partnership & Joint Hindu Family

Partnership Firm Joint Hindu Family Firm

3. The interest of the partners in a of a partnership firm is determined by contract.

3. The interest of the members of Hindu Joint Family firm in ancestral business is acquired by status, i.e. by birth.

4. A Partnership firm may be constituted irrespective of the members’ caste and religion.

4. A Joint Hindu Family firm is limited to Hindu religion, that too the caste to which the members belong.

Partnership & Joint Hindu FamilyPartnership Firm Joint Hindu Family Firm

5. A Partnership firm is by death, insanity of a partner.

5. A Joint Hindu Family firm is not dissolved by death or insanity of family member.

6. No person can be introduced as a partner without the consent of all the partners (Sec. 31).

6. A member of a Joint Hindu acquires an interest in the firm’s business by birth, marriage, adoption etc. No consent of the other members is necessary. Other members cannot deprive his right.


7. Partnership is a specific application of the principles of agency. It is often said “The law of partnership is undoubtedly, a branch of the law of Principal and Agent”.

7. The principles of agency does not apply in case of Joint Hindu Family firm.

8. There is restriction on the maximum number of members in the case of a partnership firm. Minimum two and maximum twenty partners are allowed.

8. There is no such restriction.


9. The liability of the members is not limited to the extent of his interest in the assets of the partnership firm.

9. The liability of the members is limited to the extent of his interest in the assets of Joint Hindu Family.

10.Doctrines of Holding Out and Estoppel are applicable.

10.Doctrines of Holding Out and Estoppel are not applicable.

11.A person can be admitted as a partner in the firm due to his money, reputation, skills, ability etc.

11.A person can be admitted as a members in a Joint Hindu Family by the fact of marriage, birth, adoption.

Kinds of Partners

1.Active Partner2.Sleeping Partner 3.Nominal Partner 4.Partner by Estoppel or

Holding out

5.Minor Partner

Kinds of Partners

1.Active Partner (works actively in firm)

Kinds of Partners

2. Sleeping Partner (does not work, but invests capital)

Kinds of Partners

3. Nominal Partner (firm uses his name for reputation)

Kinds of Partners

4. Partner by Estoppel or Holding out (keeps silence when announced as partner before others)

Kinds of Partners

5. Minor Partner (Minor as Partner)

Partnership and Agency

The Law of Partnership is an Extension of the Law of Agency or Law as to Partnership is undoubtedly a Branch of the Law of Principal and Agent or the Rule in Cox vs. Hickman

Partnership and Agency

◦ Cox vs. Hickman (1860) 11 ER 431◦ Facts of the case

Registration of Firm Procedure for Registration

◦ Application contains the following particulars (Sec 58)

Firm name Place or principal place of business Names of any other places, where firm

carries on business Date when each partner joined the firm Full names & permanent addresses of

the partners Duration of the firm

Effects of Non-Registration (Sec. 69)

1. Partner cannot sue 2. Firm cannot sue3. Claim of set-off

Effects of Non-Registration (Sec. 69)

Exceptions (Sec. 69(3))1. Suit for accounts of a dissolved firm2. Suit for dissolution of the firm Claim of set-off3. Suit for realising the property of a dissolved

firm 4. Proceeding by Official Assignee or Receiver to

realise the property of an insolvent partner5. Claim of set off not exceeding Rs.100 provided

it is not of a small cause nature

Rights & Duties of Partners

Rights of Partners

1. Rights to take part in the business(S.12(a)

2. Right to be consulted (S.12(c))3. Right to access to books (S.12(d))4. Right to Indemnity (S.13(e))5. Right to claim remuneration,

profits and interest on Capital (S.13(a), S.13(b) and S.13(c & d))

Duties of a Partner1. Duty to carry on business for common

advantage (S.9)2. Duty to render true accounts (S.9)3. Duty to indemnify loss (S.10)4. Duty to attend diligently (S.12(b))5. Proper use of firm’s property

Dissolution of Partnership Firm

◦ Dissolution of Firm Meaning & Definition

◦ Dissolution of Partnership

Modes of Dissolution of Partnership Firm 1. Without the Order/ Intervention of the

Courti. By agreement (S. 40)ii. Compulsory dissolution (S.41)iii. Dissolution on the happening of certain

contingencies (S.42)iv. Dissolution by notice of partners at will (S.43)

Modes of Dissolution of Partnership Firm

2. Dissolution by the Court (S.44)i. Insanity of partnerii. Permanent incapacityiii. Misconductiv. Breach of agreementv. Business working of lossesvi. Any other ground

Conclusion 1. Overview of The Indian Partnership Act,19322. Partnership : Meaning & Definition3. Features of Partnership4. Partnership & Joint Hindu Family5. Kinds of Partners6. Partnership and Agency( Rule in Cox vs.

Hickman)7. Registration of Firm 8. Effects of Non-Registration9. Rights Duties of Partners10.Dissolution of Firms

Thanks

Kapil Chawla

Contracts of Partnership

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