Partnership is a popular business model where multiple individuals pool resources to carry on a commercial venture jointly.
1. Definition: Section 4
Under Section 4:
"Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all."
- Partnership arises from contract (agreement), not from status (Section 5), distinguishing it from a Hindu Undivided Family (HUF).
2. The Conclusive Test of Partnership
Is sharing profits proof of a partnership?
- The Cox v. Hickman (1860) Benchmark: The sharing of profits is strong *prima facie* evidence of a partnership, but it is not the conclusive test. Creditors or employees may share profits without being partners.
- Mutual Agency: The true and conclusive test of partnership is Mutual Agency—whether the business is carried on by all or any of them acting for all. Every partner is both a principal (binding themselves) and an agent (binding the other partners) by their acts in the usual course of business.