Pakistani Partnership Act 1932

"It is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all"
"When two or more persons may become joint owners with a view to carry on a business together and sharing the profits in agreed proportions, this is know as partnership." The Contract Act has defined partnership as, "The relation which subsists between persons who have agreed to combine their property, labor or skill in some business and share in the profits thereof between them".

The persons who constitute this organization are individually termed as partners and collectively known as firm and the name under which their business is conducted in called the "Firm Name". The number of partners must not exceed twenty in ordinary business and not more than ten in banking business.

A partnership can be formed without any legal formalities. Like sole trader-ship it is easy to form and simple to run. Similarly partnership may be dissolved without performing any legal process. It does not possess a legal identity apart from its members. From the operating stand point, the partnership may conduct a business in very much the same manner as a sole proprietorship.

This form of organization is very popular in our country. The small and medium size business activities i.e. whole sale or retailing, production or distribution are performed under this form. Two or more persons may start this business with a moderate capital and new partners may be admitted for getting additional capital.

Agreement, Number of Partnership, Business, Profit motive, Conduct of Business, Entity, Unlimited liability, Investment, Transfer ability of share, Position, Mutual Confidence, Free Operation are benefits or Characteristics of Partnership.... For more details visit CHARACTERISTICS OF PARTNERSHIP


Principles of Contract

A contract is an agreement between two or more persons to do or not to do some particular thing, such agreement being enforceable at law.
Section 2 (h) of the contract Act. 1872, defines a contract as “An agreement enforceable by law”
A Contract, therefore, is an agreement the object of which is to create an obligation. In other words a contract is a combination of two ideas- Agreement and obligation.


Contract = Agreement + Obligation


SALMOND defines a contract as
“An agreement creating and defining obligation between the parties”.

LEAK Observes
“An agreement as the source of a legal contract import that one party shall be bound to some performance, which the other shall have a legal right to enforce”.

ANSON defines
“A contract is an agreement enforceable at law made between two or more persons by which rights are acquired by one or more to act or forbearance on the part of the other or others”.
If there is an agreement between X and Y, that X will construct a house for Y, and Y will pay rupees 5 Laces to X, the agreement is contract.

The term agreement is wider than the term “Contract”. An agreement may exist without any legal obligation and it covers a variety of transactions which may not be enforceable by law. All contracts are, therefore, agreement, but all agreement are not necessarily contracts. An agreement can be a contract only when it is enforceable at law.

Essential of Valid Contract

The following are the essential of a valid Contract:-

1. Agreement:

There should be an agreement between the two parties i.e. purposer and acceptor. One making the proposal and other accepting it. The proposal and acceptance must be made in accordance with the rules contained in the contract Act.

X Offers to sell his house to Y for Rs.7 laces Y accepts the offer to purchase the house for Rs.7 laces. This is an acceptance by which agreement may be made between proposer and acceptor

2. Creation of Legal Relationship

Intention of the agreement must be to create legal relationship between the proposer and acceptor. Agreement must be capable of performance with terms clear and certain.

X offers to sell his car to Y for Rs.3 laces and Y is ready to purchase it at Rs. 3 laces. There is contract as it creates legal relationship between X and Y.

3. Competent to Contract:

Every person is not competent to enter into a binding contract. Under section II, the persons who are not competent to contract are those
  • (i) who have attained the age of majority according to the law by which they are governed.
  • (ii) Who are of sound mind, and
  • (iii) who are not disqualified by any law to which they are subject. Minor has no capacity to contract so his agreement is void. He is not liable to perform what he has promised to do under and agreement.

4. Free Consent:

For the validity of an agreement, it is essential that it must have been made by the free consent of the parties. Under Section 13, two or more persons are said to consent when they agree upon the same thing in the same sense. It is when there are consent that the parties are said to of the same mind. When one party has a different thing in mind or when each understands the thing in different way, there is no consent by the promise.

Under section 14, consent is said to be free when it is not caused by
(1) Coercion
(2) Undue influence
(3) Fraud
(4) Misrepresentation or
(5) mistake as defined in relevant sections. It is an important essential for the validity of a contract. Where there is consent, but not free consent, there is generally a contract voidable at the option of the party whose consent was not free.

5. Consideration:

Consideration is indispensable for every contract. An agreement is invalid if it has been concluded without any consideration. It is an act i.e. past, present or future done or to be done at the request of the promisor, by the promise or any other person. For the validity of an agreement, the consideration must be lawful

X agrees to sell his car to Y for Rs.5 laces. Here X’s promise to sell his car is for Y’s consideration to pay Rs.5 laces. Similarly, Y’s promise to pay Rs.5 laces is for X’s consideration to sell his car to Y

6. Capability of Performance:

Contract must be made for definite, certain and capable of performance terms. Agreement, the meaning of which is not certain and clear or capable of being made certain are void.

i. X agrees to sell to Y a hundred ton of oil. There is nothing whatever to show what kind of oil was intended to sell. The agreement is void for uncertainty
ii. X agrees to sell to Y five hundred tons of rice at a price to be fixed by Z. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.

7 Not expressly declared void

In order to make a valid contract, an agreement must not be one of those that are expressly declared by law to be void. The agreement that are expressly declared to be void are as follows:

a. Agreements in restraint of Marriage.
b. Agreement in restraint of trade.
c. Agreements by way of wager.
d. Agreement to do impossible acts.
e. Agreements in restraint of legal proceedings.

8. Legal relationship

An agreement is a contract only when it is made with a lawful objects. Under section 23, “Every agreement of which the object or consideration is unlawful is void.”

X, Y and Z enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud, the agreement is void as its object is unlawful

9. Other Legal Requirements

The agreement must be in writing, attested by witness and registered. If so required by any provision of law in force in our country. Some agreements such as:

a. Agreements to transfer of immoveable property
b. Agreement to pay a time barred debt

Agreement to refer the disputes to an arbitrator for arbitration, are such agreement which must be reduced to writing and registered before they can be legally enforced.

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