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CSEET · Business Laws and Management · Elements of Law relating to Partnership and Limited Liability Partnership

Ravi, Sunita and Imran agree that Ravi will run a bakery and that the three will share its profits equally. Ravi will deal with customers and suppliers, but he will act on behalf of all three. Which feature of Section 4 does 'Ravi acting for all' illustrate, and does a partnership exist?

Mutual agency is illustrated and a partnership exists. The three have agreed to share profits of a business carried on by one of them, Ravi, acting for all, which satisfies the definition in Section 4 of the Indian Partnership Act, 1932.

  1. AMutual agency; partnership existsCorrect
  2. BSeparate legal personality; no partnership exists
  3. CPerpetual succession; partnership exists
  4. DLimited liability; no partnership exists

Explanation

There is an agreement to share profits of a business, and it is carried on by one of them acting for all, which is exactly what Section 4 requires. The 'acting for all' element reflects mutual agency. Separate legal personality, perpetual succession and limited liability are not features of a Section 4 partnership.

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