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CS Professional · CSR and Social Governance · Partnership Firms

Farhan, Gita and Harsh are partners. Their deed is silent on whether Gita may share in a new line of business. For years, all three have by a regular course of dealing allowed Gita to run the firm's accounts separately and be paid a fixed monthly amount, with no written variation. Harsh now says the arrangement has no force because it was never written. Which statement is correct?

The arrangement can stand. Partners' mutual rights and duties may be set by a contract implied from a course of dealing, and the contract may be varied by the consent of all partners, which may also be implied by a course of dealing, so writing is not essential.

  1. AThe arrangement is valid only if it was recorded in a registered deed
  2. BThe arrangement can be implied by a course of dealing, and a contract may be varied by the consent of all partners, which may also be implied by a course of dealingCorrect
  3. CThe arrangement is void unless the Registrar approves it
  4. DThe arrangement binds only Gita and not Farhan or Harsh

Explanation

Partners' mutual rights and duties may be fixed by an express contract or one implied by a course of dealing. The contract may also be varied by the consent of all partners, again express or implied by a course of dealing. Writing is therefore not essential on these facts.

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