Co-ownership is distinguished from partnership in the following particulars :
(i) partnership is necessarily the result of agreement, co-ownership is not, e.g. where A and B inherit property from C as Co-heirs.
(ii) Partnership necessarily involves working for profit, court-ownership does not.
(iii) A partner cannot transfer his share to an outsider, without the consent of the other partners. A court-owner can always do so.
(iv) A partner is the agent of the other partners to bind the firm, as court-owner is not.
Thus as joint owners of a house which is let out to tenants and who divide the net receipts bet themselves interest fixed proportions are not partners. similarly where two persons purchased a tea shop jointly and let it out to a third person, dividing the rent bet themselves proportionally, it was held that they were not partners, but co-owners only of the shop (b) on the other hand, if the same persons combine together for the purpose of buying properties and letting them out to tenants and sharing the profits thereof bet themselves, they will not be co-owners but partners.
Further a joint carrying on of as business alone, is not enough; there must be an agreement to share the profits. Thus if A and B agree to work together as partners and the agreement further provides that A shall receive all the profit and shall only receive wages for his services, it cannot been said that A and B are partners. Notice in this connection, however that a person may be admitted into a partnership with an agreement that he shall receive a fixed salary in lieu of his share in the partnership profits. Such as person would be a partner.
Notice further that though sharing of profits is one of the elements of as partnership and often affords cogent evidence of partnership . This is clearly pointed out by expl. 2 to sec. 6. Thus as lender of money to persons engaged or about to be engaged in a business as partners, is not necessarily as partner, because he receives a share of the profits of the business as consideration or part consideration for the loan. Similarly, a servant or a agent who receives a share of profits as his remuneration the widow or child of a deceased partner, who receives such share by way of annuity and the seller of the goodwill of a business who is given a share of profits as consideration for sale of the goodwill, are not by reason of such facts alone, liable as partners.
The third requirement is that the business must be carried only by all or by any of them on behalf of all. This feature underlines the cardinal principle of partnership law, which is that every partner is, by law, as agent of the other partners and of the partnership, of which held forms a member. Thus it is possible to have a partnership in which one or some of the partner have the sole right of management and control. Similarly, a partnership is possible with a “sleeping” or “dormant” partner or partners (see.seq).
Notice that executors carrying on business under the terms of a testator’s will are not partners. The question is always one of the intentions. It has been recently held by the Lucknow High Court that where certain persons agree to form a managing agency firm of a limited company about to be floated, there is no partnership, before the limited company comes into existence. Similarly, promoters associated for the purpose of a floating a company, the managing agency whereof they intend to acquire or carry on interest partnership, are not partners.
Their relations inter se can only be determined by the law of contract.A single venture may also amount to a particular partnership under sec. 8; e.g. an agreement between several persons to purchase lac, to be auctioned at different dates, and to sell the lot subsequently and to divide the profits.