the essentials of a partnership:

1. Minimum of Two Persons: A partnership needs at least two people. If one partner
leaves or passes away, the partnership dissolves.
o Example: If Y in a partnership with X dies, X cannot continue alone.
2. Agreement: Partners must have a mutual agreement (written or oral) to form the
partnership, not based on family ties or status.
o Example: Friends agree verbally to share profits from an online business,
forming a partnership.
3. Business Activity: The partnership must involve a lawful business; charitable
activities don’t qualify.
o Example: A retail store qualifies, but charity events do not.
4. Sharing of Profits: Partners agree to share profits; sharing losses is common but not
required.
o Example: If Partner A invests and B manages operations, they split profits.
5. Mutual Agency: Each partner acts as both an agent and principal, meaning actions by
one can legally bind all.
o Example: Partner C’s contract with a supplier binds all partners.
6. Liability of Partners: Partners have unlimited liability for business debts, meaning
personal assets are at risk.
o Example: If the business can't pay debts, creditors can pursue the partners'
personal assets.

Types of Partnerships

1. Partnership-at-Will (Section 7)
A partnership without a fixed term or specific end date. It can be dissolved by any
partner through written notice to the others.
o Example: A and B form a partnership with no agreed end date. Either partner
can dissolve the partnership by giving notice.
2. Particular Partnership (Section 8)
A partnership formed for a specific purpose or time period. It ends upon the
completion of the project or term, unless the partners mutually agree to extend it as a
partnership-at-will.
o Example: X and Y partner for a construction project. Once the project finishes,
the partnership automatically ends.

Distinctions Between Partnership and Other Forms of Organization

1. Co-ownership vs. Partnership

 Origin: Partnership is based on an agreement; co-ownership may arise by law (e.g.,

inheritance).
 Agency: Partners act as agents for each other, but co-owners do not.
  Profit Sharing: Profit-sharing is essential in partnership, while it’s not required in co-
ownership.
 Transfer of Rights: Partners need mutual consent to transfer interests; co-owners do
not.
 Example: Two siblings inherit a property and decide to rent it. They are co-owners,
not partners, even if they split rental income.

2. Hindu Joint Family Firm (HUF) vs. Partnership

 Formation: A partnership is contractual; an HUF is by birth.

 Governance: Partnerships follow the Partnership Act; HUFs are governed by Hindu
law.
 Minor’s Role: A minor can enjoy partnership benefits but isn’t a partner; in an HUF,
a minor is a member by birth.
 Authority: All partners can act on behalf of the firm; in an HUF, only the Karta
(head) can make binding decisions.
 Example: In an HUF business led by the family Karta, only the Karta can take loans
in the family’s name, while each partner in a partnership firm can do so.

Types of Partners

1. Actual, Active, or Ostensible Partner

This partner is fully involved in the business's management and is liable for its
actions. They must give a public notice upon retirement to avoid liability for future
acts of the firm.
o Example: Partner A handles day-to-day business operations, so customers
view A as a core part of the business.
2. Sleeping or Dormant Partner
A sleeping partner invests and shares profits but does not manage the business. They
do not need to give public notice upon retirement and are still liable for firm activities.
o Example: Partner B provides funding but does not participate in management,
staying behind the scenes.
3. Nominal Partner
This partner lends their name to the firm without investing or managing it but is liable
to third parties.
o Example: Partner C allows the firm to use their name to enhance credibility,
though they are not actively involved in the business.
4. Partner in Profits Only
A partner who only shares profits, not losses, of the business but is still liable for firm
activities.
o Example: Partner D invests in the firm under an agreement to only receive
profits, avoiding losses, though still liable to third parties.
5. Sub-partner
A partner who shares their profit with a third party, who is not actually a partner in the
firm. This sub-partner has no rights or liabilities in the firm.
o Example: Partner E agrees to share part of their profit with F. F is a sub-
partner with no rights to manage or view firm accounts.
6. Partner by Estoppel or by Holding Out
If someone acts or speaks in a way that implies they are a partner and others rely on
 that impression, they become liable as a partner by estoppel. If the firm misrepresents
someone as a partner and they don’t deny it, they’re a partner by holding out.
o Example: If G attends business events claiming to be a partner, and third
parties rely on this, G is liable as a partner by estoppel.

Position of a Minor as a Partner

 Minor's Involvement in Partnership

While a minor cannot enter into a contract and thus cannot be a full partner, they can
be admitted to the partnership's benefits with all partners' consent. This allows the
minor to gain from the firm without full liability.
 Rights of a Minor (section 30(2))
o Entitled to a share in the profits and property as agreed upon.
o Has the right to inspect and copy the firm's accounts but not other records.
o Can sue for their share if they choose to leave the firm.

 Liabilities of a Minor
o Liability is limited to their share in the firm; their private estate cannot be used to
cover firm debts.
o They cannot be declared insolvent due to the firm’s debts.

 Upon Attaining Majority

o The minor must decide within six months whether to join as a full partner or leave
the firm.
o If they choose to join:
 Their rights and liabilities as a minor apply until they officially become a
partner.
 They become personally liable for firm actions since joining the benefits of
the partnership.
o If they choose to leave:
 Their minor status continues until they give public notice.
 Their share is not liable for firm actions after the notice date.
 They can claim their share of the firm’s property and profits.

Example: If a minor, M, is admitted to the benefits of a partnership, they can earn profits but
won’t bear losses beyond their share. Upon turning 18, M has six months to decide to join
fully or leave. If M chooses to leave, they can retrieve their share without further liability.

Formation and Registration of Partnership

1. Formation of Partnership

 A partnership is created by a contract, which can be written, oral, or implied through

business conduct.
 Competent parties must agree freely to form the contract, and the objective must be
lawful.
 Example: Two people agree to start a business together, discussing responsibilities
and profit-sharing. Even if not written, their verbal agreement forms a partnership.
2. Partnership Deed

 Though a partnership can be oral, a written deed is advisable to avoid future disputes.
 The partnership deed details partners' rights and duties and includes:
o Firm name, establishment date, business nature, capital contributions, profit-
sharing ratios, etc.
o Guidelines on withdrawals, account audits, partner roles, dispute resolution,
and retirement terms.
o Example: Partners create a written document that specifies each partner’s
profit share and roles in the firm to ensure clarity.

3. Registration of Partnership

 Registration is not mandatory but provides proof of the partnership's terms and
protects against potential conflicts.
 Application for Registration: Submit a statement with details like firm name, business
address, partner names, and dates of joining to the Registrar.
 Registered firms use "(Registered)" after their names and must update the Registrar
on any major changes.

4. Effects of Non-Registration

 Non-registration limits a firm’s legal rights, such as:

o Partners cannot sue each other for contract-related claims.
o The firm cannot sue third parties but can be sued.
 Exceptions: A non-registered firm may still:
o Dissolve the firm or settle accounts of a dissolved firm.
o Sue for any claim under ₹100.
o Example: A non-registered firm cannot initiate a lawsuit against a client for
unpaid fees, but the client can sue the firm for contractual breaches.

3.3 Formation and Registration of Partnership

3.3.1 Formation of Partnership

 A partnership is formed through a contract, which can be written, oral, or implied by

actions of the parties involved in business circumstances.
 Requirements: Under the Indian Partnership Act, 1932, an agreement is necessary
between the partners.
 To create a valid contract:
o Parties must be competent to contract.
o Consent must be free, and the purpose must be lawful.
o Exceptions:
1. A minor may be included in the benefits of an existing partnership with
the consent of all partners.
2. No consideration is needed to establish a partnership, as partners act as
agents for one another.

3.3.2 Partnership Deed

  While a partnership can be oral, a written deed is recommended to prevent future
disputes.
 Partnership Deed: A document detailing the mutual rights and obligations of
partners, which must be stamped according to the Indian Stamp Act.
 A copy of the deed should be given to each partner and filed with the Registrar at the
time of registration.
 Contents of the Partnership Deed:
o Firm name, establishment date, duration of partnership.
o Partner details (names, addresses, dates of joining).
o Business nature, principal business location, and capital contributions.
o Terms on drawings, capital interest, loans, salaries, commissions, and profit-
sharing ratios.
o Guidelines on accounts, audit, bank operations, partner rights and duties.
o Provisions for partner retirement, dissolution, and asset valuation on
retirement or death.
o Arbitration clause for dispute resolution.
o Terms in the deed can be modified with mutual consent, express or implied, as
per Section 11(1).

3.3.3 Registration of Partnership

 Registration is not mandatory, but it provides legal clarity for partners and third
parties.
 Application for Registration:
o Submit a form to the Registrar, with:
 Firm name and principal business location.
 Other business locations.
 Partner details (names, addresses, joining dates).
 Firm duration.
o The statement must be signed and verified by all partners or authorized agents.
o The Registrar, upon satisfaction, will issue a certificate of registration.
Registered firms must use "(Registered)" after their names.
o Changes to key details (like firm name or partners) must be notified to the
Registrar.

3.3.4 Effects of Non-Registration

 Non-registration restricts the legal rights of the firm:

1. Partners cannot sue each other or the firm to enforce any partnership-related
rights.
2. The firm cannot sue third parties but can be sued.
3. Third parties can sue the firm or its partners.
 Allowed Suits Despite Non-Registration:

o Suits for firm dissolution.

o Suits for accounting of dissolved firms.
o Suits for realization of dissolved firm assets.
o Small claims (up to ₹100).
 o Suits by firms without a business location in territories covered by the
Partnership Act.
o Suits for recovering the property of an insolvent partner.
 Exceptions to Non-Registration Consequences:
o Third parties may sue the firm or its partners.
o Partners can sue for firm dissolution or to settle dissolved firm accounts.
o Court-appointed receivers can claim the insolvent partner’s assets.
o Suits for claims up to ₹100 are unaffected.
o Legal representatives of deceased partners can sue for accounts or firm
property.

3.4 Relation of Partners to One Another

The partnership deed usually defines partner relationships. In the absence of specific terms,
Sections 9-17 of the Indian Partnership Act apply, detailing duties and rights of partners.

Rights of Partners

1. General Rights:
o Participation: Every partner can participate in business conduct.
o Consultation: Partners have the right to be consulted on business decisions.
o Access to Records: Right to inspect all business records.
o Profit Sharing: Partners share profits equally unless agreed otherwise.
o Interest on Advances: Partners earn 6% interest on extra capital
contributions.
o Indemnification: Partners are reimbursed for expenses incurred for business.
2. Special Rights:
o In Emergencies: Right to act to protect the firm.
o Admission of New Partners: Can block new partner admissions.
o Retirement: Right to retire with proper consent or notice.
o Non-Compete: Outgoing partners may compete but cannot misuse firm assets
or client base.

Duties of Partners

 Good Faith: Must work in the firm's best interest and be transparent.
 Indemnify for Fraud: Liable to the firm for losses caused by fraud.
 Diligence: Attend to firm business diligently.
 No Competition: Cannot compete with the firm without consent.
 Proper Use of Assets: Use firm assets only for business.

3.5 Relation of Partners to Third Parties

Partners act as both agents and principals, making each partner liable for acts done in the
firm’s name within business scope.

Authority of a Partner

 Express Authority: Granted explicitly through words or writing, binding the firm to
those acts.
 Implied Authority: Inferred through actions customary for the business, covering
typical business tasks like selling goods or hiring employees.

Liability of Partners

 Partners are jointly and severally liable for acts done on behalf of the firm. Each
partner’s actions can legally bind the firm if done within the scope of the business.

3.6 Reconstitution of a Firm

A firm is reconstituted when there is a change in the partnership composition. This can
happen due to admission, death, retirement, expulsion of a partner, change in business
purpose, or continuation beyond a fixed term. Reconstitution alters partners' rights and
liabilities.

3.6.1 Admission of a Partner

New partners cannot join without all partners' consent. An incoming partner is generally not
liable for past debts unless they agree to be liable through a tripartite agreement with
creditors and current partners.

3.6.2 Retirement of a Partner

A partner may retire with other partners' consent, as per agreement, or by giving notice if it's
a partnership at will. Retiring partners remain liable for prior debts unless discharged by an
agreement with creditors or if they give a public retirement notice.

3.6.3 Expulsion of a Partner

Expulsion is permitted only if allowed by contract, exercised by the majority, and done in
good faith. Otherwise, it may be considered unfair. The expelled partner’s rights and
liabilities are similar to those of a retired partner.

3.6.4 Death or Insolvency

A deceased or insolvent partner’s estate is liable only for debts incurred before their death or
insolvency, not after.
3.7 Dissolution of a Firm

According to Section 39, the "dissolution of a firm" occurs when the partnership between all
partners ends. There’s a distinction between “dissolution of partnership” and “dissolution of
firm.” The firm is dissolved when the partnership relation between all partners ends, while a
partial dissolution (dissolution of partnership) ends the relation between some partners
without necessarily dissolving the firm itself.

Dissolution of Partnership

A partnership can dissolve without ending the firm in certain situations:

1. Expiry of a fixed term for which the partnership was formed. [Section 42(a)]
2. Completion of a specific adventure or project for which the firm was formed. [Section
42(b)]
3. Death of a partner. [Section 42(c)]
4. Insolvency of a partner. [Section 42(d)]
5. Retirement of a partner. [Section 42(e)]

If the remaining partners choose to continue the business, they may do so by agreement. If
not, the firm dissolves automatically.

Dissolution of the Firm

Complete dissolution ends the relationship between all partners, closing the business:

1. Mutual Agreement – All partners agree to dissolve. (Section 40)

2. Insolvency of all but one partner – If only one partner remains solvent, the firm must
dissolve. [Section 41(a)]
3. Illegality of business – If business becomes illegal due to changes in law, dissolution occurs
by law. [Section 41(b)]
4. Notice of Dissolution – In a partnership at will, any partner can dissolve the firm by notifying
others in writing. (Section 43)

SALES OF GOOD ACT, 1930

1.2 Definitions (Simplified with Examples)

The Sale of Goods Act, 1930 defines key terms used in the Act, as outlined below:

A) Buyer and Seller:

 Buyer: A person who buys or agrees to buy goods. SECTION 2(1)

o Example: If A agrees to buy a car from B, A is the buyer.
 Seller: A person who sells or agrees to sell goods. SECTION 2(13)
o Example: If B agrees to sell a car to A, B is the seller.

These two terms represent the parties involved in a contract for the sale of goods.

B) Goods and Other Related Terms: SECTION 2(7)

 Goods: Refers to any movable property, excluding actionable claims (like debts) and
money. It includes stock, shares, growing crops, and anything attached to land that is
agreed to be severed before sale.
o Example: A washing machine, shares of a company, or a growing crop of
tomatoes are considered goods.
 Actionable Claims: Claims that can only be enforced through a legal action, such as
a debt.
o Example: A debt owed to someone is an actionable claim, not goods.

Classification of Goods:
 1. Existing Goods: Goods that are in existence at the time of the contract.
o Specific Goods: Identified and agreed upon at the time of the contract.
 Example: A specific phone model, like a Samsung Galaxy S7 Edge, is
specific goods.
o Ascertainable Goods: Goods that are identified after the contract is made but
before delivery.
 Example: A wholesaler agrees to sell 50 bales of cotton, and after
choosing, these bales are identified as the ones being sold.
o Unascertained Goods: Goods that are not identified at the time of the
contract.
 Example: A person agrees to buy one packet of salt out of many
available in a shop.
2. Future Goods SECTION 2(6): Goods that will be made or acquired after the
contract.
o Example: An agreement to sell 1000 tons of potatoes that A will grow in the
future is a contract for future goods.
3. Contingent Goods SECTION 6(2): Goods whose acquisition depends on an
uncertain event.
o Example: A person agrees to sell a Picasso painting to another person only if
they can buy it from the current owner. This is contingent on the uncertain
event of the purchase.

C) Delivery:

 Delivery: The voluntary transfer of possession of goods.

o Example: When a shopkeeper hands over a purchased item to a customer, it’s
a delivery.
 o Delivery can happen in three ways:
1. Actual Delivery: Physical handover of goods.
 Example: The shopkeeper hands over a washing machine to the
customer.
2. Constructive Delivery: Transfer of possession without physically
handing over the goods.
 Example: A warehouseman agrees to hold goods for a buyer;
the goods are still in the warehouse but are now considered to
be in the buyer's possession.
3. Symbolic Delivery: When documents (like a bill of lading or receipt)
are given instead of the physical goods.
 Example: A person hands over a bill of lading for goods that
are in transit.

D) Document of Title to Goods: This refers to documents that prove possession of goods
and allow the transfer of goods.

 Example: A bill of lading (a document showing that goods have been received by a
carrier) is a document of title to goods.

E) Mercantile Agent SECTION 2(9): An agent authorized to sell goods or raise money on
goods in the course of business.

 Example: A broker who sells goods on behalf of a company is a mercantile agent.

F) Property SECTION 2(11) : This means the ownership of goods. It refers to the right to
possess and transfer goods.

 Example: If A owns a laptop and sells it to B, A transfers the property (ownership) of

the laptop to B.

G) Insolvent SECTION 2(8): A person who cannot pay their debts as they become due.

 Example: If A cannot repay a loan when due, A is considered insolvent.

H) Price SECTION 2(10): The money paid for the goods in a sale.

 Example: The price of a mobile phone might be Rs. 30,000.

I) Quality of Goods SECTION 2(12): Refers to the state or condition of the goods.

 Example: A used car may be of lesser quality than a new one, depending on its
condition.

DIFFERENCE BETWEEN Sale vs. Agreement to Sell (In Short)

1. Transfer of Property:
o Sale: Ownership passes immediately.
 o Agreement to Sell: Ownership passes later or on a condition.
2. Nature of Contract:
o Sale: Executed contract (consideration paid).
o Agreement to Sell: Executory contract (consideration to be paid).
3. Breach Remedies:
o Sale: Seller can sue for the price.
o Agreement to Sell: Only damages can be claimed.
4. Risk:
o Sale: Risk of loss is with the buyer.
o Agreement to Sell: Risk of loss is with the seller.
5. Rights:
o Sale: Buyer has rights against all (Jus in rem).
o Agreement to Sell: Buyer has rights only against the seller (Jus in personam).
6. Resale Rights:
o Sale: Seller cannot resell.
o Agreement to Sell: Seller can resell.
7. Insolvency:
o Seller's Insolvency: In sale, official assignee can't take goods, but can claim
the price.
o Buyer's Insolvency: In sale, official assignee takes goods. In agreement to
sell, they don't.

Distinction between Sale and Other Similar Contracts:

1. Sale vs. Hire Purchase:

o Transfer of Property:
 Sale: Property is transferred immediately.
 Hire Purchase: Property transfers only after the last installment is
paid.
o Position of Parties:
 Sale: Buyer is the owner immediately.
 Hire Purchase: Hirer is a bailee until the final installment is paid.
o Termination of Contract:
 Sale: Buyer cannot terminate the contract.
 Hire Purchase: Hirer can terminate by returning the goods.
o Risk of Insolvency:
 Sale: Seller bears the risk if the buyer becomes insolvent.
 Hire Purchase: Owner takes no risk; goods can be reclaimed if the
hirer defaults.
o Transfer of Title:
 Sale: Buyer can transfer a good title to a third party.
 Hire Purchase: Hirer cannot transfer title until all installments are
paid.
o Resale:
 Sale: Buyer can resell goods.
 Hire Purchase: Hirer cannot resell without paying all installments.
2. Sale vs. Bailment:
o Transfer of Property:
 Sale: Transfer of general property (ownership).
  Bailment: Transfer of possession for a specific purpose (not
ownership).
o Return of Goods:
 Sale: Goods are not returned after transfer.
 Bailment: Goods must be returned after the purpose is fulfilled.
o Consideration:
 Sale: The price in money.
 Bailment: Consideration may be gratuitous or non-gratuitous.
3. Sale vs. Contract for Work and Labour:
o Sale: Involves the transfer of goods for a price.
o Work and Labour: Involves the exercise of skill or labor, with no transfer of
goods.
o Example:
 Sale: Buying a piece of furniture.
 Work and Labour: Commissioning a carpenter to make furniture.

1.7 Subject Matter of Contract of Sale:

1. Existing or Future Goods (Section 6):

o Existing Goods: Goods that are owned, acquired, or possessed by the seller.
o Future Goods: Goods that the seller may acquire or manufacture in the future,
such as in the case of a contract for a contingency (e.g., a sale of goods to be
manufactured in the future).
o Contingent Contracts: If the acquisition of goods by the seller depends on a
condition, the contract remains valid, e.g., a contract for goods to be
manufactured by a mill.
o Agreement to Sell Future Goods: If the goods are future goods, the contract
is an agreement to sell and not an immediate sale.
2. Goods Perishing Before Making the Contract (Section 7):
o If specific goods are the subject of a contract and they perish or are damaged
without the seller's knowledge before the contract is made, the contract
becomes void.
o Example: If A agrees to sell 50 bags of wheat stored in a godown to B, but the
wheat is destroyed by water logging before the contract is made, the contract
is void.
3. Goods Perishing Before Sale but After Agreement to Sell (Section 8):
o If specific goods perish or are damaged between the time of the agreement to
sell and the passing of risk to the buyer, the agreement is void.
o Example: A agrees to sell 100 tons of tomatoes to B, but due to disease, only
80 tons can be delivered. A is not liable because the performance of the
contract became impossible.
4. Perishing of Future Goods:
o If future goods, which are specific, perish or are destroyed, it renders the
contract void due to supervening impossibility.
o Example: A agrees to sell 100 tons of tomatoes to B, but the crop fails. The
contract is void due to the impossibility of performance.
1.8 Ascertainment of Price (Sections 9 & 10):

1. Ascertainment of Price (Section 9):

o Price refers to the monetary consideration for the sale of goods.
o The price may be:
1. Fixed by the contract.
2. Agreed to be fixed in a manner specified by the contract (e.g., by a
valuer).
3. Determined by the course of dealings between the parties.
2. Agreement to Sell at Valuation (Section 10):
o If the price is to be fixed by a third party, and the third party does not or
cannot fix it, the agreement is void.
o If the third party is prevented from fixing the price due to the default of one
party, the defaulting party is liable for damages.
o Example: P agrees to sell two bikes to S at a price to be fixed by Q. One bike
is delivered, but Q refuses to fix the price. P can ask for the return of the
delivered bike, and S must pay a reasonable price for the bike received. The
contract for the second bike can be avoided.