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MGT611 - Business & Labor Law Assignment No.2 Solution & Discussion Spring 2013 Due Date:01-07-2013

“Partnership and Liabilities on Partners through Partnership Agreement”
Learning Objective:
• To help the students in understanding the term “Partnership” and the kinds of Partners.
• To help the student in understanding the position of minor partner in a Partnership
Learning Outcomes:
• After attempting the assignment, students will be able to know about the Partnership,
Partners' liabilities and participation.
• Students will be able to handle the situation during minority and majority phases in a
Partnership agreement.
Partnership is the relation between persons who have agreed to share profits of the business
carried on by all or any one of them acting for all.A Partnership is an association of two or more
individuals who agree to share the profits of a lawful business which is managed or carried by
them. Partnership is the relation between persons competing to make contract who agrees to
carry on a lawful business in commonwith a view of private gain.
A well known garment company XYZ, start a new product for youngsters. When they launch the
product the active partner Mr. Nadim admitted his minor son Mr. Salman to the benefits of the
partnership. Mr. Salman reaches his majority after 6 months and elected to remain a partner of
the firm. XYZ company makes a fresh partnership deed and implement with all legal
After One week of partnership deed, the company lost Mr. Salman in a road accident and they
lost a partner. All the accounts of the company were closedat the end of the year and the
income-tax officer calculated all the Profits betweenthe partners and also the tax to be paid by
1. Give some solid reasons that why the father’ is liable to pay tax on the income of his
minor son. (10)
2. What are the possible conditions for the existence of a “Partnership Agreement”. Explain
in your own words. (10)

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Replies to This Discussion

Hello Guys

Look at this statement

"Mr. Salman reaches his majority after 6 months and elected to remain a partner of the firm."

This statement is telling us, He was a minor but after Six months he elected as partner and A new partnership deed is formed.

So, I think there is no need to discuss he is minor or not

Yes dear me agree with u. Now MR. Sulman is partner after new partnership deed. When he deid he is a partner of the firm and liable for every act of the firm Due to the unlimited liabiliy his father pay income tax.


Aleem you are 100% right. Thanks for confirm

There is word MINOR in the very question ur discussing. (income tax on his minor son)

Most welcome amir mugal. tmhari kaha tak pohanchi he assignment????????????? i think this is not so difficult. just need to understand the scenerio

Bro...abhi to aik lafz nahi likhaa....just scanning the material

In determining whether a partnership does or does not exist, regard must be had to the following rules:

(a) joint tenancy, tenancy in common, joint property, common property or part ownership does not of itself create a partnership as to any property that is so held or owned, whether the tenants or owners do or do not share any profits made by the use of the property;
(b) the sharing of gross returns does not of itself create a partnership, whether the persons sharing the returns have or have not a joint or common right or interest in property from which or from the use of which the returns are derived;
(c) the receipt by a person of a share of the profits of a business is proof in the absence of evidence to the contrary that he or she is a partner in the business, but the receipt of a share, or of a payment contingent on or varying with the profits of a business, does not of itself make him or her a partner in the business, and in particular
(i) the receipt by a person of a debt or other liquidated amount by installments or otherwise out of the accruing profits of a business does not of itself make him or her a partner in the business or liable as a partner,
(ii) a contract for the remuneration of an employee or agent of a person engaged in a business by a share of the profits of the business does not of itself make the employee or agent a partner in the business or liable as a partner,
(iii) the spouse or child of a deceased partner who receives by way of annuity a portion of the profits made in the business in which the deceased person was a partner is not merely because of the receipt a partner in the business or liable as a partner,
(iv) the advance of money by way of loan to a person engaged or about to engage in a business, on a contract between that person and the lender under which the lender is to receive a rate of interest varying with the profits or is to receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person carrying on the business or liable as a partner, as long as the contract is in writing and signed by or on behalf of all the parties to it, and
(v) a person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by him or her of the goodwill of the business is not, merely because of the receipt, a partner in the business or liable as a partner.

There are three conditions for a partnership agreement to be established, namely,
1) the carrying on of a business
2) in common
3) with a view to profit
missing any one of which there cannot be a partnership. Yet these features are not always easy to be identified and very often it would be left as a matter of construction for the court.

 In order to function well of a firm, there must be some important Conditions for the existence of a “Partnership Agreement”, some of them are illustrated below.


 1.    Felt of Need

2.    Willingness for the use of Money / Asset

3.    Willingness for the use of intellectual power 

4.    Number of Persons

5.    Applicable law

6.    Duration and effective date

7.    Intent for Sharing of Profits

 8.    Carrying out Business Activities

 9.    Mutual Rights and Obligations

 10. Characteristics of Firm

Guys Please ignore my previous posts, I tell you the exact idea abt Q # 1
A minor can entertain the benefits of a partnership firm by entering into firm with consent of all partners but this minor is not liable to for any liability of the firm or even take part into the management of the firm according to law.
Paying Income Tax is the liability of the firm on behalf of partners, but minors are exempted, therefore his father who admitted him into benefits of the partnership is liable to pay income tax.

Remember, He died just after 1 week of new partnership agreement.

plz koi to pora solution upload kr do


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