EXISTENCE OR NON EXISTENCE OF

PARTNERSHIP
s. 4 PA provides certain situations in which a partnership may either
exist or do not exist
JOINT TENANCY & TENANCY IN
COMMON
s. 4(a) it provides that a
Joint tenancy(two person hiring a
shop in common)Tenancy in
common, joint property, common
property or part ownership does not
itself create a partnership even
there is sharing of profit involve.
Eg. A & !rothers !"y a piece of
land. Each contri!"tes #$% share.
&ere they are joint owner !"t not
partners of the land. "t if they
c"ltivate the land for !"siness , then
they are partners as for the !"siness
is concern not the ownership of the
land.
Formount v Coupland
Davis v Davis
SHARING OFGROSS RETRNS
'. s. 4 (!) provides that the mere
sharing of gross ret"rns, does not !y
itself gives rise to a partnership.
(. )Gross R!turn" refers to profit
!efore e*penses.
+o if ( person share gross ret"rn does
not ma,e them a partners !"t if they
share m"st nett profit to !ecome
partners.
Eg. a p"!lisher agrees to pay to an
a"thor a royalty on the val"e of the
n"m!er of copies of his !oo, which
has !een sold.This does not of itself
create a partnership !etween them.
Co# v Coulson
RECEI$T OF SHARE OF $ROFITS
s. 4(c ) -A is to declare the previo"s
law in Co# v Hi%&man
The a!ove section has ( parts.
First $art' The receipt !y a person of a
share of the profit is prima facie
evidence that he is a partner in the
!"siness.
S!%ond $art. !"t the receipt of s"ch a
share , or of a payment contingent on
or varying with the profits of a
!"siness, does not of itself ma,e him a
partner in the !"siness.
(. /t loo,s li,e conflicting !etween the
!oth -art. According to 0orse the
correct intepretation .
1irst part is only partnership if there is
no other evidence e*cept profit
sharing.
"t if there are other evidence !eside
the profit sharing than the second part
comes in to negate the prima facie
pres"mption of the first part.
Davis v Davis
(!d!l!) v Consolidat!d (an&
SITATION *HERE THE RECEI$T OF
SHARE OF THE $ROFITS DOES +A,IFY
A $ERSON TO (ECOME A $ARTNER
s- ./% 0 /i0
$AYMENT (Y INSTA,MENTS
& ,I+ADATED DAMAGES
Eg./f one advances a s"m of
2'$$,$$$ to a firm and receives
repayment !y ten yearly
instalments of 2'$,$$$ from the
profit of the firm this does not
ma,e him a partner.
Co# v Hi%&man
s- . / % 0 /ii0
REMNERATION OF A
SER1ANT OR AGENT
-ayment can !e in the form of a
salary pl"s a commission of the
share of the profits. This
arrangement does not ma,e a
recipients lia!le as a partner.
*al&!r v Hirs%2
s- . / % 0 /iii0
ANNNITY TO *IDO* OR
CHI,D
/t is common for a widow or
child of a deceased partner to
receive an ann"ity from the firm
o"t of its profits and again this
does not 3"alify the recipient to
!e lia!le as a partner.
IRC v ,!3u4s Trust!!s
s- . / % 0 / iv0
$AYMENT OF THE INTEREST
TO A ,OAN
A person may advance a loan to a
person engaged in !"siness on a
contract that the lender shall
receive a rate of interest varying
with the profits of arising from
carying on the !"siness. +"ch a
contract (which m"st !e in writing
and signed !y or on !ehalf of all
the parties thereto) does not ma,e
the lender a partner.
(()/n practice it is diffic"lt to
ascertain the de!t and the interest
t4fore m"st loo, into the intention
of the parties and m"st constr"e it
o!jectively !y loo,ing at the
s"rro"ndings of the
circ"mstances.
R! Youn5
R! M!5avand !# part! D!l2ass!
s- . /%0 /v0
SA,E OF
GOOD*I,,/r!putation0
A person may sell his !"siness to
a firm together with his goodwill in
e*change for a commission of the
profits ( eg. payment in l"msom or
instalment or ann"ity) . This does
not 3"alify him to !e a partner.
$ratt v Stri%&
s- 6 $A $OST$ONEMENT OF
RIGHTS OF $ERSON
,ENDING OR SE,,ING IN
CONSIDERATION OF SHARE
OF $ROFITS IN CASE OF
(AN7R$TSY-
This section indicates that a
creditor in a sit"ation governed
"nder
(i) s. 4 ( c ) (iv) payment of
interest of a loan and
(ii)s. 4 ( c ) ( v) sale of goodwill
is not entitled to recover the
amo"nt of the loan where the
de!tor !ecomes !an,r"ptcy
"ntil the other creditors for
val"a!le consideration have
!een paid.
Fort E#part! S%2o8i!ld
R! Giv! E# part! S2o9