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Law Assignment 5

assignelt of lev 5

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5 views2 pages

Law Assignment 5

assignelt of lev 5

Uploaded by

caloj31158
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Book Exercise Pg 269

Q.10 ​
(a) X is the sole owner of a firm. He admits Y as a partner on the following
terms: (i) Y is not to bring any capital (ii) Y is not to be responsible for any
loss (iii) Y is to receive Rs. 200 p.m. in lieu of profits and (iv) Y is to have all
the powers of a partner. Discuss the legal position of Y in the firm.

Answer: The elements of a partnership are voluntary agreement, sharing profits


of a business, and mutual agency. Y does not share in the profits or losses but
has the authority and powers of a partner, which is the most important test of
partnership. This arrangement is legally valid as long as it is agreed upon by
both parties. Y can thus be said to be a “nominal partner”.

At the same time, as Y receives Rs. 200 p.m. as remuneration rather than a share
of profits, Y might be classified as an employee rather than a partner.

(b) A and B agree to share profits of the business carried on by them but do
not state anything in the Deed about sharing of losses. Is it a valid
partnership?

Answer: Section 13 of the Partnership Act says “the partners are entitled to
share equally in the profits earned, and shall contribute equally to the losses
sustained by the firm”. A and B agree to share profits but do not mention
anything about sharing losses in their partnership deed.

2
According to the Partnership Act, if the partnership deed is silent on the sharing
of losses, it is implied that losses will be shared in the same proportion as
profits. Therefore, the partnership is still valid, and A and B will share losses in
the same ratio as they share profits.

(c) A person wants to join a firm as a partner on the following conditions:


he will devote himself entirely to business of the firm, but he will not bring
in any capital and will not be responsible for any loss of the firm. Discuss.

Answer: Capital contribution is not necessary to become a partner, and the


person will contribute in other ways, such as labor and skills. Mutual agency
implies that all partners, regardless of specific agreements, are liable to third
parties for firm debts​. But the partners may agree among themselves that one
or more of them will not be responsible for any losses.

Ultimately, the biggest deciding for whether this person can join as a partner
depends on whether this arrangement is agreed upon by all partners. If there is
mutual agreement between the existing partners, this partnership is valid.

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