Partnership Act 1932 Problem and solution

1. Partnership Act 1932

2. Presented By
Lutfur Rahman
ID: 141-26-565
Section: A
Department of Law
Daffodil International University

3. Problem
X and Y agreed to share the profits of a
business carried on by all any of them
action for all. Z lent Rs 1,00,000 to the
firm on the condition that he will take 25%
share in profits. Can Z regarded as a
partner?

4. Decision
No, Z Can not regarded as a partner.
Because Sharing of profit which is a
prima facie evidence, exists, but the
mutual agency relationship among X, Y
and Z which is a Conclusive evidence,
does not exist.

5. Reasoning
The partnership is determined from the real
relation between partners and such relation must
show the existence of mutual agency relation, and
the sharing of profit is prima facie evidence but not
a conclusive test of partnership.
The real relation between the partners shows that
all essential elements of partnership are present,
but in this case mutual agency does not exist.

6. Problem
 X, Y, Z are partners in a trading firm. They decide
that no partner shall have the right borrow beyond
Rs 20,000 without the consent of other partners, X
without consulting Y and Z borrows from W RS
25,000 in the name of the firm and utilized the
same in paying of the debts of the firm. Is the firm
liable to pay to W? Would it make any difference if
W was aware of this restriction?

7. Decision
 Part (a): The firm is liable to pay to W
because W was unaware of the
restriction.
 Part (b): The firm is not liable to pay to
W because W was aware of the
restriction.

8. Reasoning
The partners of a firm by mutual agreement may
extend or restrict the scope of implied authority of
any partner. But a third party is not bound by any
such restriction unless it has the knowledge of such
restriction. In other words, the firm is liable to third
party only if the third party has no knowledge of the
restrictions.

9. Thanks Everybody