Section 6 of the Partnership Act, specifies that in determining whether a group of persons is or is not a firm, or whether a person, is or is not a partner in a firm, regard shall be had to the real relation between the parties shown b all relevant facts taken together. The intention of the partners will have to be decided with reference to the terms of the agreement and all the surrounding circumstances.
The true test in determining the existence of partnership is ‘Agency and Authority’. In determining the existence of partnership, it is essential to find out the real intention of the parties to the agreement and circumstances of the case. The question to be asked is – Whether the relation of principal and agent exists between the parties? Section 18 also provides that subject to the provisions of Partnership Act a partner is the agent of the firm for the purposes of the business of the firm.
In Cox Vs. Hickman it was held that the receipt by a person of a share in the profit is a prima-facie evidence that he is a partner but this is not a conclusive test the question whether a person is a partner or not therefore depends in all cases upon whether or not he has the authority to act for other partners and whether or not the other partners have the authorities to act for him. Thus a partners assumes a dual role; (a) he is an agent of the firm with regards to third parties and can thus bind the firm by his acts. (b) he is principal in respect of the act of the other partners.
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