Partnership Act of 1932

A partnership arises from a contract and is governed primarily by the Partnership Act of 1932. Where the Partnership Act is silent on specific matters, the general provisions of the Indian Contract Act come into play. The provisions of the Indian Contract Act that have not been repealed continue to apply to partnerships, unless they conflict with any provision of the Partnership Act. This means that the basic rules of contract law, such as those regarding capacity to contract, offer, and acceptance, are also relevant to partnerships. However, the status of minors in partnerships is specifically governed by the Partnership Act under Section 30.

Section 3: Application of the Indian Contract Act to Partnerships

Section 3 of the Partnership Act clarifies that the unrepealed provisions of the Indian Contract Act, 1872, will continue to apply to partnerships unless they are inconsistent with the express provisions of the Partnership Act.

Section 4: Definition of “Partnership,” “Partner,” “Firm,” and “Firm-Name”

Section 4 defines a "partnership" as the relationship between individuals who agree to share the profits of a business run by all or any of them acting for all. Those involved in a partnership are known as "partners," and collectively they form a "firm." The name under which their business operates is called the "firm-name."

Illustrations:

If X and Y purchase 100 bales of cotton to sell them together and share the profits, they are partners.
If X and Y agree to share profits from cotton they separately own, they are not partners.
If X agrees with Y, a goldsmith, to supply gold that Y will process and sell, with profits shared between them, they are partners.

Section 5: Partnership Not Created by Status

According to Section 5, a partnership arises from a contract, not from status. This means that members of a Hindu undivided family running a family business, or a Burmese Buddhist husband and wife carrying on a business together, are not considered partners simply because of their status in the family or marriage.

State Amendment:

In Goa, Daman, and Diu, the law substitutes the Burmese Buddhist reference with "a husband and wife under the regime of the communion of property."

Section 6: Determining the Existence of a Partnership

Section 6 outlines how to determine whether a group of individuals constitutes a partnership. The true relationship between the parties, as evidenced by all relevant facts, is what matters.

Explanations:

Sharing profits or gross returns from jointly owned property does not automatically create a partnership.
Receiving a share of profits or payments based on business earnings does not, by itself, make someone a partner. This applies in cases where:
- A lender receives a share of profits as interest.
- A servant or agent receives profits as remuneration.
- A widow or child of a deceased partner receives profits as an annuity.
- A former owner of a business receives profits as payment for the sale of goodwill.

Section 7: Partnership-At-Will

A partnership is considered "partnership-at-will" if there is no contract specifying a fixed duration or conditions for ending the partnership. This type of partnership exists as long as the partners wish to continue it, without any predefined term.

Section 8: Particular Partnership

A partnership can be formed for a specific venture or undertaking. If a partnership is established to complete a particular project or activity, it is called a particular partnership. Once the specific task is completed, the partnership automatically dissolves, unless the partners agree to continue it.