Question

Which of the following most accurately explains the legal foundation governing the mutual rights and obligations of partners in a partnership firm, particularly in the absence of an express written contract?

• A. A formal offer made by one partner and accepted by others
• B. An agreement—express or implied—enforceable by law between all partners
• C. A mutual understanding based solely on trust and verbal communication
• D. An acceptance of business terms without the intention to create legal relations

Hint:

Partnership relations are governed by: \[ \mathrm{Lawful\ Agreement} \] which may be: \[ \mathrm{Express\ or\ Implied} \]

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Partnership arises from a contract, not from status (like a Hindu Undivided Family).
This contract is known as the Partnership Deed.
Step 2: Detailed Explanation:
The relationship between partners is governed by an agreement.
This agreement does not necessarily have to be in writing (though it is recommended).
1. Express Agreement: Written or spoken words.
2. Implied Agreement: Inferred from the conduct of the parties and the circumstances of the case.
If there is no written contract, the provisions of the Indian Partnership Act, 1932 apply, but the "foundation" remains the agreement (consent) between the partners to form a business relationship enforceable by law.
Step 3: Final Answer:
The legal foundation is an agreement (express or implied) that is enforceable by law.