FORMATION OF CONVENTIONAL PARTNERSHIP

 Define partnership
Section 3(1) Partnership Act 1961
The relation which subsist between person carrying on business in common with a view of profit

 Types of Partnership
o Active partner
o Dormant/Passive partner
o Salaried partner
o Partner by estoppel

 Several elements:

 There must be an association of persons

o Must be > 1 person but not exceed 20 for ordinary partnership
 The person must be carrying on a business.
Business in sec 2 of Partnership Act, incl every trade, occupation/business. Society/clubs
is X
 The business must be carried on in common
But not all partner must be involved. Sithambaram Chetty & Others v Hop Hing &
Others
 The business must be carried with a view of profit.
 Sharing of profit (Sec 4c) – 5 situations

 Sharing of profits exception

i. Sec 4c(i) the receipt by a person of a debt or liquidated amount, by instalment

otherwise, out of the accruing profits of the business itself doesn’t make him a
partner/liable as such (Cox v Hickman)
ii. A contract for a remuneration of a servant/agent is repaid using profit of the firm doesn’t
make him a partner/servant in the business (Walker v Hirsch)
iii. Payment of annuity to a widow/child of a deceased partner doesn’t make them partner
of the firm (I.R.C vs Lebus’s Trustees)
iv. A person receiving by way of an annuity or otherwise, a portion of the profits of a
business in consideration of the sale by him of the goodwill of the firm doesn’t make
him partner Re Young
 RIGHTS & DUTIES OF PARTNERS

 According to Sec 26 (Rights)  Duties of partners based on principle

‘utmost in good faith’
i. All partners must share the capital
& profits equally. And also i. To render accounts (sec 30)
ii. To disclose all matters affecting
contribute equally to the losses. Or partnership (sec 30)
share the profits according to the iii. To account of profits made (sec 31)
contribution of capital. iv. Not to compete with firm (sec32)

ii. Indemnify every partner against

liabilities
iii. A partner is not entitle before the
ascertainment of profits to interest
on the capital subscribed by him
iv. Every partner may take part in the
management of the partnership
business
v. No person may be introduced
without the consent of all existing
partners
vi. Not entitled for remuneration

 Termination of Partnership

i. Agreement
ii. Operation of law
iii. Death of partner
iv. Bankruptcy
v. Court( insanity)