THE SALES OF GOODS ACT,1930

AND THE PARTNERSHIP ACT,1932

AABIL HUSAIN
ASSISTANT PROFESSOR
PRESTIGE INSTITUTE OF MANAGEMENT &
RESEARCH, GWALIOR
THE SALES OF GOODS ACT, 1930
History of the law
Originally, the law relating to sale of goods was contained in
Chapter VII of the Indian Contract Act, 1872. The same was
repealed and re-enacted by the Sale of Goods Act, 1930.
Application of the Act
• The act came into force on 1st July 1930.
• It extends to the whole of India.
• It does not affect rights, interests, obligations and titles
acquired or which before the commencement of the Act.
OBJECTIVE OF THE SALES OF GOODS
ACT,1930

The Sale of Goods Act 1930 was introduced with

the objective of balancing the rights, duties,
claims and expectations arising in the process
of transferring of property from one person
to another i.e. of buyers and sellers.
DEFINATIONS (section 2)
S. 2(1)“Buyer” means a person who buys or agrees to buy
goods.
S. 2(2)“Delivery” means voluntary transfer of possession
from one person to another.
S. 2(7)“Goods” means every kind of moveable property other
than actionable claims and money; and includes stock
and shares, growing crops, grass, and things attached to
or forming part of the land which are agreed to be
severed before sale or under the contract of sale.
S. 2(13)“Seller” means a person who sells or agrees to sell
goods.
ESSENTIALS ELEMENTS OF SALES OF
GOODS (SECTION 4)
According to Section 4 of the sales of goods act, 1930-
“A contract of sale of goods is a contract whereby
the seller transfers or agrees to transfer the property
in goods to the buyer for price.”
1) There must be at least two parties
A sale has to be bilateral because the property in goods
has to pass from one person to another. Its first
essential. therefore is that the seller and buyer
must be different persons. A person can not buy his
own goods.
2) Transfer or agreement to transfer the ownership of
goods
In a contract of sale, it is the ownership that is
transferred or agreed to be transferred as
agreement mere possession or limited interest.
3) The subject matter of the contract must necessarily
be goods.
Sale of immovable property is not covered under the
sale of goods act. The expression goods is defined in
section 2(7).
 GOODS Definition (Section 2(7)) of The
Sales of Goods Act, 1930

Meaning of goods [Section 2(7)]

Goods mean every kind of movable property other than
actionable claims and money, and include the following:
• Stock and share
• Growing crops, grass and thing attached to or forming
part of the land
which are agreed to be served before sale or under the
Contract of sale.
 Types of Goods 1/2
I- Existing Goods
Existing goods mean the goods which are either owned or possessed by the
seller at the time of contract of sale. The existing goods may be specific or
ascertained or unascertained as follows:
a) Specific and Ascertained Goods
Specified goods are the goods which are identified and agreed upon at the time
when a contract of sale is made.
For example- specified TV, VCR, Car, Ring.
b) Unspecified/Unsanctioned Goods
These are the goods which are not identified and agreed upon at the time
when a contract of sale is made.
Example- in a contract for the sale of 100 tonnes of Rice , the seller may deliver
any 1000 tonnes that answer the contract description.
 2/2
II- Future Goods
Future goods mean goods to be manufactured or produced or acquired by the
seller after the making of the contract of sale. There can be an agreement to
sell only. There can be no sale in respect of future goods because one cannot
sell what he does not possess.
Example- A makes a contract with B to sell some electronic equipment which
he will receive from Japan after 2 weeks. The contract in such case will be for
future goods.
III- Contingent Goods
These are the goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.
Example- Farmer making a contract to supply 100 KG of paddy if proper rain
falls
in the season.
 Nemo Dat Quod Non Habet (Section 27)
1/2
General Rule
“The general rule is that only the owner of goods can sell the goods
and transfer his title to the goods to the buyer. (no one gives what he
doesn’t have).
The Nemo Dat Quad non Habet rule is based on the Latin doctrine,
which means that No one can give or transfer what he himself does
not possess.
It means that “the buyer obtains no better title to the goods than the
seller.” thus if the seller has a good title to the goods the buyer would
also have a good title.
Example- Satish steals some goods and sells the same to Gopal. Since
Satish is not the owner of goods, Gopal too would not be an owner,
even if he has bought the goods in good faith.
 2/2
Section 27, as a general rule, tries to protect the interest of the
true owner when it provides that where the goods are sold by a
person who is not the owner thereof and who does not sell
them under the authority or with the consent of the owner, the
buyer acquires no better title to the goods than the seller has.
 If the title of the seller is defective, the buyer’s title will also
be subject to the same defect. The rule does not imply that
buyer’s title will always be a bad one.
What it means is that the buyer cannot acquire a superior title
to that of the seller. If a thief disposes of stolen goods, the
buyer of such goods has the same title as the seller had.
Conditions and Warranty (Section 11-17)

Meaning of Stipulation (Section 12(1))

“A stipulation in a contract of sale of goods may
be a condition or warranty.”
All the stipulations in a contract of sale are not
of equal importance. Some of them are essential
the main purpose of the contract which are
called conditions and some are collateral to the
main purpose of the contract which are called
warranties.
 Types of stipulation
I – Conditions
“A condition is a stipulation essential to the main
purpose of the contract, the breach of which gives rise to
a right to treat the contract as repudiated.

II – Warranty
“A warranty is a stipulation collateral to the main
purpose of the contract, the breach of which gives rise to
a claim for damages but not to a right to reject the goods
and not to treat the contract as repudiated”.
 Essentials of a Condition
Conditions
“A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to a right to treat the contract as
repudiated”.

There are following essentials of a condition-

1) It is essential to the main purpose of the contract.
2) The non fulfillment of condition causes irreparable damage to the
aggrieved party which would defeat the very purpose for which the
contract is made.
3) The breach of a condition gives a right to the aggrieved party to
rescind the contract and recover the damages for breach of
condition.
 Example
Ravi goes to a horse- trader and says that he wants to buy a
horse that can run at 40 km an hour. The trader gives him a
horse and says that the horse will run as per Ravi requirement.
Here the horse being fast enough to run 40 km/hour is the
essential condition of the contract. If the horse is not that fast a
runner as Ravi had stipulated and does only 20 km in an hour can
not only file a suit for damages against the trader but also
repudiate the contract.
 Essentials of a Warranty
Warranty
“A warranty is a stipulation collateral to the main purpose of the
contract, the breach of which gives rise to a claim for damages but
not to a right to reject the goods and not to treat the contract as
repudiated’.

There are following essentials of warranty-

1) It is collateral to the main purpose of the contract.
2) The breach of warranty causes damage to the aggrieved party
and does not defeat the main purpose of the contract.
3) The aggrieved party can only claim the damages for breach of
warranty but can not repudiate the contract.
 Example
Hari goes to a horse –trader and says that he wants to buy a
good horse. The trader offer him a horse and says that it can run
at 40 km an hour. Hari buys the horse. Later he comes to know
that the horse can only run 30 km in an hour. Here the
commitment of the trader is only a warranty and is not an
essential condition of the contract. Non- fulfillment of a warranty
only entitles the buyer to receive damages from the seller not to
repudiate the contract.
Test of Determination whether stipulation is
a Condition or Warranty

Whether stipulation in a contract of sale is

condition or a warranty depends upon the
structure of the contract and the intention of
parties.
 Rights and Duties of the Buyer
a) Rights
i. To receive delivery of the goods.
ii. To repudiate the contract if the seller commits breach of contract.
iii. To have reasonable opportunity to examine the goods.
iv. To sue the seller for damages for non-delivery of the goods.
v. To recover the amount paid if the seller fails to deliver the goods.
vi. To sue the seller for specific performance of the contract.
vii. To sue seller for damages for breach of warranty.
viii. In case of breach of contract by the seller, when the buyer sues for
the refund of the price, the buyer has a right to claim interest on
the amount of price paid from the date on which the payment was
made.
 Rights and Duties of the Buyer
b) Duties
i. To pay for the goods and take delivery thereof.
ii. To apply for the delivery of goods as the seller
is not bound to deliver the goods until the
buyer applies for delivery.
iii. To compensate the seller for any loss
occasioned by his neglect or refusal to take
delivery of the goods and also for reasonable
charge for care and custody of the goods.
 Rights and Duties of the Seller
a) Rights
i. To receive the price of the goods.
ii. To receive compensation or sue for damages for any loss occasioned by
him by neglect or refusal of the buyer to take delivery of the goods.
iii. To receive reasonable charge for care and custody of the goods.
iv. If he is unpaid seller then to exercise his right of lien, to exercise his right
of stoppage in transit; and to exercise his right of resale.
v. To sue the buyer for damages for wrongfully neglecting or refusing to
accept the goods.
vi. To recover interest from the buyer if there is specific agreement to that
effect or charge interest on the price when it becomes due.
vii. To sue for the price of the goods.
viii. To sue for damages on buyer repudiating the contract.
 Rights and Duties of the Seller
b) Duties
i. To deliver the goods when buyer demands the delivery
thereof.
ii. To compensate the buyer in case he repudiates the
contract or commits breach of the contract.
iii. To give reasonable opportunity to the buyer to examine
the goods.
iv. To refund the amount paid by the buyer in case he fails to
deliver the goods.
v. To compensate the buyer in case of delivery of wrong
quantity.
 UNPAID SELLER (Section 45)
“A person who has sold goods to another person but has not
been paid for the goods, or been paid partially is called an
unpaid seller.”
“When the whole of the price has not been paid or tendered.
When a bill of exchange or other negotiable instrument (such
as cheque) has been received as conditional payment, and it
has been dishonored. (Section 45).
Example- A purchased goods worth Rupees 20000 from B.
The ownership has already been transferred to A. But has not
paid whole price or paid rupees 15000 to B. Here B is an
unpaid seller.
RIGHTS OF AN UNPAID SELLER 1/3
The unpaid seller has the following rights-
I – Rights against the Goods
When the buyer has not paid the full or partial price of the goods supplied to
him, then the seller who has transferred the ownership of goods to the buyer
has the following rights with regard to the goods.
A) Right of lien
Lien is the right to retain possession of goods until payment in respect of them
is paid.
B) Right of stoppage of goods in transit
If he receives information that the buyer has become insolvent the seller has
the right to stop the goods in transit.
C) Right of re-sale
An unpaid seller has the right to re-sell the goods. If in case the buyer makes
default.
 2/3
II– Rights against the buyer of Goods
An unpaid seller has the following rights against the buyer-
A) Suit for Price
If the ownership of goods has been transferred to the buyer
and he refuse to make the payment for the goods the seller
has the right to file a suit against the buyer.
B) Suit for Damages
If the buyer refuses to accept the goods or defaults in making
the payment for them with a malafide intention the seller has
the right to file a suit against the buyer for damages.
 3/3
C) Repudiation of contract before due date
If the buyer repudiates the contract before the due date for the
delivery of goods and the seller does not accept the
repudiation and waits for the due date to make the delivery he
reserves the right to sue the buyer for repudiating the contract.
D) Suit for interest
the unpaid seller has the right to be paid interest by the buyer
for any delay in making the payment. Such interest is affective
from the date when the price is payable.
• If the goods are sold on credit, interest will run from the
expiry of the credit.
 DOCTRINE OF CAVEAT EMPTOR
The doctrine of caveat emptor means “let the buyer
beware”.
It is applicable in a contract of sale. The object of this
doctrine is that when a contract of sale is made between
the buyer and the seller it is the duty of the buyer to
examine the goods to his satisfaction before he buys them.
The seller of goods is not obliged to point out the defects
in the goods he is selling.
When a buyer has bought the goods of his own will and
after examining it properly then the seller is not liable
afterwards.
 EXCEPTIONS TO THE RULE OF CAVEAT
EMPTOR 1/2
The doctrine of the buyer beware does not apply in the following situations-
1) Where the buyer relies on the skill and judgment of the seller
Where the buyer makes known his requirements to the seller of what he
expects from the goods or how he intends to use them and relies on the skill
and judgment of the seller and the deal is made by the seller or manufacture
with the buyer on such understanding the doctrine of caveat emptor is not
applicable.
2) Fitness for a particular purpose
The implied condition about the fitness of goods for a particular purpose in
terms of quality and usability in some circumstances depends on the customs
or practices of a trade and the doctrine of buyer beware is not applicable.
Example- when a person buys a water cooler, the implied condition is that it
cools the water.
 2/2
3) Sale by description
When the sale of goods is made by description it involves some
implied conditions and warranties and the caveat emptor doctrine
is not applicable.
4) Sale by fraud
Where the buyer relies on false representation of the seller and
suffers damages. A seller who is guilty of fraud shall have no
protection of the doctrine of caveat emptor.
5) Latent defects
The buyer cant spot the latent defects in goods that are not
apparent when he examines the goods. The liability for such
defects is therefore the sellers.
 The Indian Partnership Act, 1932
The Indian Partnership Act came into force on 1 October, 1932.
This Act is applicable to whole of India.
But wherever the situation is such that the Act does not
specifically dictate any measures, the provisions under the
Indian Contract Act continue to apply.
Objective of the Act
The main objective of the formation of the partnership should
be to earn profits and share them among partners. The
sharing of profit and losses can either be according to the ratio
of the capital contributed by each partner or be equally among
all the partners unless otherwise specified.
 Meaning of Partnership
Partnership is an association of persons with the object of jointly
doing something to make a profit.
Persons who have agreed into partnership with one another are
called individually “PARTNERS” and collectively “FIRM” and the name
under which their business is carried on is called the “FIRM NAME”.
In other words when two or more persons with the object of making
a profit agree to do business jointly it is deemed that a partnership
has come into existence.
Definition of Partnership (Section 4)
“Partnership is a relation between persons who have agreed to share
the profits of a business carried on by all or any of them acting for
all.”
Essentials elements of Partnership 1/4
1) Two or more persons
Partnership needs a minimum of two persons because a single
individual can not be his own partner. So if in future the number
of partners reduces to one, partnership is automatically dissolved.
The number of partnership can not be more than 50. if the
number of partners reduces below the minimum two and more
than 50 the partnership is declared illegal.
2) Existence of Business
The joining of two or more persons can be called partnership only
when they agree to run some business. It is very essential that
business should be legal.
 2/4
Example- if A and B buy 100 tons of rice and divide among
themselves they can not be called partners they are only co-
owners because the agreement between the two is not with
the object of doing any business. But if both jointly decide to de
trading in rice and share the profit or loss they will be called
partners.
3) Contractual Relationship
Partnership comes into existence only on the basis of a contract
between the partners. Hence it is important to have a contract
between the partners. Therefore those people who do not have
the capability to enter into a contract can not become partners.
 3/4
Example- minors, mentally unsound persons and persons
declared ineligible by law can not be taken as partners in a firm.
but minor can be admitted as a partner because he is a partner
only in the profits.
4) Profit Motive and sharing of profit
The aim of a partnership is not only to attempt to make a profit
but also to share the profit. If the objective of partners is not
earning the profit than it is not called as partnership.
Example- if Mohan and Sohan with the object of helping the poor
make an agreement to sell food items to them on a no-profit
basis it will not be deemed to be a partnership because their
objective is not to make a profit but to help the poor.
 4/4
5) Principal- Agent Relationship
In this way every partner plays a double role of an
owner and an agent.
6) Object of business being lawful
The business of partnership must not violate the
law of the land or go against the national interest.
Example- there can not be a partnership contract
to commit a theft and share the profits.
Rights and Duties of Partner 1/4

• Rights
1) Rights to share profits
The partners are entitled to share equally in the profits earned and shall contribute equally
to the losses sustained by the firm.
2) Right to take part in the conduct of the business
Every partner has a right to take part in the conduct of the business.
3) Right to express opinion
Any difference arising as to the ordinary matters concerned with the business may be
decided by a majority of the partners and every partner shall have right to express his/her
opinion before the matter is decided.
But no change may be made in the nature of the business without the consent of all
partners.
 Rights and Duties of Partner 2/4
4) Right to inspect books of accounts and other books
Every partner has a right to have access to and inspect and copy any of the books of the
firm.
5) Right to receive remuneration (subject to agreement)
A partner is not entitled to receive remuneration for taking part in the conduct of the
business but only if mutually agreed by the partners.
Example- There is a firm consisting of Active and Dormant partners. In such a case, the
partners can form an agreement entitling the active partners to receive a particular sum
as remuneration.
6) Right to receive payment of interest on capital (subject to agreement)
A partner is entitled to interest on capital subscribed by him but interest shall be payable
only out of the profits.
Example- A person X, invests ₹50,000 in a partnership firm and provides ₹60,000 to the
firm as advance. In this case, X will receive interest from the profits of the firm for
₹50,000 which he had invested in the firm and will get 6% interest on the advances made
by him to the firm.
 Rights and Duties of Partner 3/4
• Duties
1) General duty
a) To carry business to greatest common advantage to firm
b) To be just and faithful to each other
c) To render true accounts and full information of all the things affecting the
firm.
2) Duty to Indemnify
Every partner shall indemnify the firm of any loss caused to it by his fraud or
wilful neglect in the conduct of the business of the firm.
Example- A, B, C, and D entered into a partnership for the banking business. A
committed fraud of ₹30,000 against one of the customers. As a result, all the
co-partners i.e. B, C, and D were held liable. Here, A is bound to indemnify
the firm for the loss caused to the firm because of fraud committed by him.
 Rights and Duties of Partner 4/4
3) Duty perform by Diligently
Every partner is bound to attend diligently to his duties in the
conduct of the business.
4) Duty to act in good faith.
it is the duty of partners to act for good faith of the firm.
Therefore, the partner should work to secure maximum profits for
the firm.
5) Duty not to earn personal profits.
Example- A, B, and C were partners in a firm. Goods were supplied
to a person D. D paid some extra commission to A, for using his
influence to deliver the goods to D. Here, A has the duty towards
the co-partners to account for the commission.
 Incoming Partners
Incoming Partners are the new partners who get admitted to the
firm. Such admission is subject to any procedure that the firm at
its will and understanding adopts to include new members.
Section 31[3] of the Partnership Act lays down two rules for the
inclusion of new members.
• Firstly, the new members can only be admitted with the
consent of all the existing partners.
• Secondly, once a person is made a partner in the firm, he shall
become jointly liable to only the acts that happened after him
joining the firm.
Therefore we can say that the legal liabilities of any new member
begins only after he is admitted to the firm and not before that.
 Outgoing Partners 1/3
The Indian Partnership Act states four kinds of situations in which
a person may on his own or due to other reasons be ousted from
the firm. Sections 32-35 states such four conditions-
1. Retirement of a Partner- There are three ways a partner may
retire out of a firm.
• Firstly, he may retire with the consent of all other existing
partners;
• secondly, if an expressed contract between the partners
instructs such retirement, and;
• thirdly, in situations of partnerships at will, the retiring
partner may serve a written notice disclosing his intention to
retire.
 2/3
2. Expulsion of a Partner- Generally, a partner can only be expelled from a
firm in the presence of a pre-decided procedure through an express
contract. For such expulsion to happen, there must be a majority of the
partners to agree to the same. Also, such expulsion must be done only in
the exercise of good faith. Good Faith is tested through three sets of rules:
firstly the expulsion shall be in the interest of the firm;
secondly, due notice shall be served to the partner before expelling him
and
thirdly, the concerned partner shall be given an opportunity to justify the
actions that were leading him to an expulsion
3. Insolvency- Whenever any partner is ‘adjudicated’ as an insolvent, he
becomes an outgoing partner and ceases to be a part of the firm from the
date of such order of adjudication.
 3/3
4. Liability of estate of deceased Partner
Usually, death of a partner renders the partnership firm
dissolved. However, the exception to it is an expressed
contract stating otherwise.
In the case of ‘Mohd. Laiquiddin and Ors. vs. Kamala Devi
Misra (Dead) by L.Rs. and Ors.’ the court laid down that the
death of a partner automatically dissolves the firm of two
members. Also, after the death of a partner, his estate is
liable to the firm only to the extent of acts done in the firm
during his life. Acts done by the firm after the death of the
partner have no liability to be born by the deceased’s estate.
 Can a minor become a Partner in a
Partnership Firm?
Section 30 of the Indian Partnership Act,
provides that though a minor cannot be a
partner in a firm, but, with the consent of all the
partners for the time being, he may be admitted
to the benefits of partnership by an agreement
executed through his guardian with the other
partners.
 Partnership with a Minor
• A minor can be admitted to the benefits of
partnership with the consent of all the existing
partners. It should be noted that consent of all the
partners is required for a minor to be admitted in a
partnership.
• There must be a partnership in existence before a
minor can be admitted to its benefits. Thus, a minor
cannot form a new partnership but can be admitted
in an existing partnership.
• There cannot be a partnership consisting of all minors
 The rights and liabilities of a minor in
Partnership Firm
• The minor is entitled to receive his agreed share of the property and
of the profits of the firm.
• The minor has the right of inspecting and taking copies of the books
of account of the firm. He has, however, no such right in respect of
books other than accounts, as they may contain secrets which should
be restricted to the partners alone
• The minor is not personally liable to the debts of 3rd parties for the
debts of the firm, but his liability is limited only up to his share in the
partnership assets and profits. If partnership falls short in short in
extinguishing the debts of the firm the separate person property of
the minor cannot be applied for the payment of the debts of the firm.
• The minor is not entitled to take part in conducting of the business as
he has not representative capacity to bind the firm.
• The minor cannot bring any suit against the partners for an account
or payment of his share of the property or profits of the firm.
 Dissolution of Firm 1/3
There are following modes of dissolution of a firm-
1) By mutual agreement
A firm may be dissolved when all the partners agree for its
dissolution. A partnership firm is set up by an agreement,
similarly it can be dissolved by an agreement.
2) Compulsory dissolution
A firm may be compulsorily dissolved in following cases-
a) When all the partners becomes insolvent except one
become insolvent.
b) When business of the firm becomes unlawful.
 Dissolution of Firm 2/3
3) By notice
In case partnership at will, the firm may be dissolved by any
partner giving notice in writing to all the other partners of his
intention to dissolve the firm.
4) On happening of an event (Behalf of Conditions)
A firm may be dissolved in any of the following events if the
partnership deed so provides-
a) On expiry of the term for which the firm was constituted
b) On completion of the venture
c) On death of a partner
d) On adjudication of a partner as insolvent.
 Dissolution of Firm 3/3
5) Dissolution by court
Court may pass order for the dissolution of the firm when-
a) A partner becomes a person of unsound mind
b) A partner becomes permanently incapable of performing
his duties as a partner
c) A partner is found guilty of misconduct which is likely to
adversely affect the business of the firm.
d) Partnership agreement is breached persistently by a
partner or partners.
e) When the business of the firm can not be carried on except
at a loss.
 Limited Liability Partnership Act, 2009
(LLP)
• LLP was governed under LLP, Act 2008
• LLP bill was presented on 12 December, 2008
• This Act was enforced from March 31, 2009
• When this Act was enforced it has 81 sections and 4
schedules.

LLP is a new form of legal business Entity with limited

liability.
It refers in that form of business organization which has the
features of both the partnership organization and company.
 Salient Features of LLP
1) Partner
• For the establishment of LLP the minimum number
of partners has to be not less than two. There is no
limit imposed on the maximum number of
partners. The following can be partners in an LLP.
• Individuals
• LLP
• Company: if a company becomes a partner of LLP,
it has to nominate one of its members for this
 Salient Features of LLP
2) Contribution
There is no practice of share Capital in LLP. But all the
partners contribute to LLP in some or the other form.
Contribution can be of several forms, namely , cash,
movable or immovable property.
3) Limited Liability
The liability of partners in LLP is limited. Every partner
has his liability limited to the investment made by him.
Besides every partner is responsible for any of his
misconduct rather than any other partner.
 Salient Features of LLP
4) LLP Agreement
• A written agreement is a must among the people interested in
establishing an LLP. Such an agreement is known as LLP Agreement.
• This agreement is in two parts. In the first part the agreement done
among the partners is shown, while in the second part the
agreement done between the partners and LLP is indicated.
5) Designated partner
• In LLP there should be at least two designated partners. One of
them must be resident in India.
• A designated partners is one who has been designated partners are
responsible for implementing all the provisions of LLP Act 2008 in
the LLP Organization.
 Salient Features of LLP
6) Designated Partner Identification Number(DPIN)
• Every designated partner has to obtain an identification
number from the Central Government. We call it DPIN. If a
partner has already got DPIN, he can use it in LLP.
7) Separate Legal Entity
LLP has a separate legal entity. It implies that LLP and its
members both have a separate entity. It means that the
partners of a firm neither individually nor collectively are
responsible for the liabilities created by the activities of the
firm. Also it implies that a firm can have assets in its own
name it can file a suit and a suit can also be filed against it.,
 Salient Features of LLP
8) Creation
The LLP is created by law and its registration is a must.
The registration is done in accordance with the
provisions of Limited Liability Partnership Act, 2008.
9) Common Seal
LLP is an artificial person by law can not put its
signature. That is why LLP has its common seal. So
Common seal is the official signatures of LLP and it
is affixed on all the important documents of LLP.
 Difference Between Partnership ,Company and LLP

PARTNERSHIP COMPANY LLP

1. Indian Partnership Act,1932. 1.Indian Companies Act, 1956. 1.LLP Act, 2008.
2. Registration is Optional 2. Registration must with the 2.Registration must with the
3. Creation through Contract. Registrar of Companies. Registrar of LLP.
4. No separate Legal Entity. 3. Creation by Law 3. Creation by Law
5. Partners joint ownership of 4. Separate Legal Entity 4. Separate Legal Entity
partnership firms assets. 5. Separate from the members 5. Separate from the partners
6. Partnership-[minimum-02 company independence company independence
maximum-50] members. ownership of its assets ownership of its assets
7. Every partner is an agent of 6. Company- [private company- 6. LLP- [minimum-02 maximum-
the firm and other partners. minimum-02 maximum-200 and No limit]
8. The partners have unlimited public company – minimum-07 7. Every partner works like an
liability. maximum-no limit] agent of LLP not of the other
7. Directors are the company partners.
agents not of the members. 8. The liability of partners is
8. Normally liability is limited to limited to the investment made in
the value of shares. LLP.
 Kinds of Partnership 1/3
1) Partnership at will
If the duration of the partnership has not been defined in the
contract and any partner can opt out whenever he desires it is
deemed to be a partnership at will.
2) Particular partnership
The partnership formed for some specific object and it ends with
the attainment of pre-determined specific object.
Example- two persons jointly take up a contract to construct a
building. The contract is for a particular venture and the moment
the construction of the building is complete the contract
terminates because the contract was made for a particular
venture and expires with its completion.
 2/3
3) Partnership for a fixed period
If the partners make the contract for a fixed period, the
contract is valid only for the specified period.
Example- two persons make a contact to provide hotel facilities
to the visitors to an exhibition in Delhi which is for a period of
two months and share the profit. The contract of partnership in
such case would be for the fixed period of the duration of the
exhibition and would terminate when the exhibition is over.
4) General Partnership
In the general partnership the liability of the partners is
unlimited.
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5) Limited partnership
It has two types of partnership-
A)General partner- the general partners liability
is unlimited.
B)Special partner- the special partners liability is
limited.
 KINDS OF PARTNER 1/4
There are following type of partners-
1) Active Partner
An active partner is one who participates actively in the day to
day operations of the business as the firms conduct and
management and carries the daily business activates on behalf
of other partners.
2) Sleeping Partner (also known as a Dormant Partner)
Sleeping Partner does not participate in the day to day
functioning activities of the partnership firm and they has
sufficient money or interest in the firm but can not devote his
time to the business but however he is bound by all the acts of
the other partners.
 KINDS OF PARTNER 2/4
3) Nominal Partner
This partner does not share any profit and losses in the
firm and does not have a voice in the management of
the firm. He does not contribute any capital to the
firm.In simple words he is only lending his name to the
firm. Example- any celebrity doing any advertisement.
4) Partner by Estoppel
A partner by estoppel is a partner who shows that he is a
partner of the firm through his words, actions or
behavior.
 KINDS OF PARTNER 3/4
5) Partners in profit only
This partner of a firm will only share the profits of the firm
and won’t be liable for any losses of the firm.
6) Minor Partner
A minor is a person who is yet to attain the age of majority
i.e 18 years.
A minor will share the profits of the firm and his liability for
losses is only limited to his share of the firm. After
reaching the age of majority (i.e. 18 years old) a minor
must decide within 6 months whether or not to join the
firm as a partner.
 KINDS OF PARTNER 4/4
7) Limited Partner
A limited partner is one whose liability is limited
to the amount of capital he contributes to the
partnership firm.