Nature of Partnership
Section 2. Definitions.
In this Act, unless the context says otherwise.
(a).
An Act of a firm includes any act or omission.
It may be done by all partners together.
It may also be done by any one partner.
It may also be done by any agent of the firm.
The act or omission must result in a right that can be enforced by the firm or against the firm.
(b).
Business includes every trade, occupation and profession.
(c).
Prescribed means prescribed by rules made under this Act.
(d).
Third party refers to any person who is not a partner in the firm.
(e).
Some terms used in this Act may not be defined within it.
If such terms are defined in the Indian Contract Act, 1872, their meanings will be taken from that Act.
Section 3. Application of provisions of Act 9 of 1872.
The Indian Contract Act, 1872 still applies to firms where its provisions have not been repealed.
These provisions apply only if they do not conflict and are consistent with the provisions of this Act.
Section 4. Definition of Partnership, Partner, Firm and Firm Name.
Partnership is the relationship between people who agree to share the profits of a business.
The business may be carried on by all partners, or by any one or more of them acting on behalf of all.
Each person in the partnership is called a partner.
All partners together are called a firm.
The name under which the firm conducts its business is called the firm name.
Section 5. Partnership not created by status.
A partnership is created by a contract, not by a person’s status.
This means partnership does not arise automatically because of family or personal relationships.
Members of a Hindu Undivided Family running a family business are not partners by that relationship alone.
A Burmese Buddhist husband and wife carrying on a business together are also not considered partners merely because of their marital status.
Section 6. Mode of determining existence of partnership.
To decide whether a group of people is a firm, the real relationship between them must be examined.
To decide whether a person is a partner in a firm, the actual relationship must also be looked at.
All relevant facts must be considered together, not in isolation.
What matters is the true nature of their arrangement, not just what they call themselves.
Explanation I:
People who share profits or income coming from jointly owned property are not automatically partners.
Simply having a joint or common interest in property and sharing its returns does not create a partnership.
Explanation II:
A person may receive a share of the profits of a business or
They may receive a payment that depends on the business earning profits, or changes according to the profits earned.
But this alone does not make that person a partner in the business.
Profit-based payment by itself is not enough to create a partnership.
The receipt of such profit share or payment does not make a person a partner, specifically when received:
(a). By a lender who has given money to people engaged in, or about to start, a business.
(b). By a servant or agent as part of their remuneration.
(c). By the widow or child of a deceased partner as an annuity.
(d). By a previous owner or part-owner of the business as consideration for selling the goodwill or their share of it.
Section 7. Partnership at will.
If the partners have not agreed on how long the partnership will last, and they have not agreed on how or when the partnership will end then:
The Partnership is called a Partnership at Will.
Section 8. Particular partnership
A person can become a partner with another person for a specific venture or undertaking.
