Chartered Accountancy CPT Course Lecture 18 Relations of Partners

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What is Partnership? Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all.

Session 1, Section B Mercantile Law Quick Revision Notes

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True Test of Partnership Sharing of profits is an essential but only a prima facie element of partnership and not conclusive evidence. Existence of Mutual Agency is cardinal principle of partnership law.

Essential Elements of Partnership

1. Agreement 2. Sharing profit of business 3. Business carried on by all or any of them acting for all

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1. 2. 3. 4.

Types of Partners Active Partner Sleeping or Dormant Partner Nominal Partner Partner by holding out

Minors Position in Partnership A Minor cannot be bound by a contract because a minors contract is void and not merely voidable. A minor cannot become a partner in a firm because partnership is founded on a contract. A minor can be admitted to the benefit of partnership can be validly given a share in the partnership profits Rights: (i) (ii) (iii) (iv) Right to agreed share of profits of firm Can have access to, inspect and copy the accounts Can sue the partners for accounts and for payment of share when severing connection with firm On attaining majority, he may within 6 months elect to become a partner or not to become a partner.

Liabilities: (i) (ii) Minors share is liable for the acts of the firm, not personally liable. If he becomes partner on attaining majority: a) Personally liable to third parties for all acts of the firm since he was admitted to the benefits of partnership. b) His share in the property and the profits of the firm remains the same to which he was entitled as a minor.

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