Part-A Sale of Goods Act

Question 3.

Answer- a) The contract said that if Nitin is dissatisfied with the tractor, he can reject it and
return it to Satish, which Nitin did after one and a half months. Satish, on the other hand,
refuses to take the tractor that has been returned. The ‘’Sales of Goods Act, 1930, Chapter
III, Section 24,’’ Goods dispatched on permission or "on sale or return," deals with this type
of circumstance. This section addresses the issue of property transfer in situations where
"goods are sent on approval" or "on sale or return." In 'on approval' procedure, items are
delivered to the customer, who has the option to reject or keep the delivered good within a
given time frame, based on his satisfaction with it. "When goods are delivered to the buyer
on approval, the property permits to the buyer if the buyer keeps the good with himself
without notifying his or her acceptance to the seller within a stipulated, or in the absence of
a stipulated time, a reasonable time," according to subclause (b) of this section. In this case,
the facts show that the parties to the contract did not set a time limit for this 'on approval'
process. However, if no time is specified, a reasonable period can be expected in accordance
with section 24. (b). In the circumstances, Nitin did not express his agreement and instead
kept the tractor without communicating the rejection within a reasonable period, which in
this case appears to be one and a half months. According to Section 63 of this legislation,
"reasonable period" is "a question of fact," and in this situation, operating the tractor on
approval for one and a half months appears to be unreasonable. As a result of Nitin's
inability to notify Satish of the rejection within a reasonable time frame, the property,
namely the tractor, has been passed from Satish to Nitin. The property, in this example a
tractor, has been transferred from the seller to the buyer, and the buyer has no right to
reject the vehicle and return it to the seller.

b) This case involves the selling of unidentified goods, as Ritish, a wholesaler, has agreed to
sell 100 litres of olive oil from his unidentified stock. In this scenario, Section 23 of the
"Sales of Goods Act" will be used to see if the property has been transferred or passed from
Ritish to Kamal. The following requirements must be met for property to move from a seller
to a buyer, according to Section 23, "Sale of unascertained goods and appropriation." To
begin, the contract is for the sale of unknown commodities. Furthermore, goods that fulfil
the criteria and are in a deliverable state must be taken unconditionally. This appropriation
is done with the consent of both the seller and the buyer.

The consent that leads to unconditional appropriation gives ownership of the property to
the buyer, and it can be granted before or after the appropriation. So, in order for the items
to be appropriated, both parties must have the purpose to contractually commit to the
things that are up for sale, and this desire might be represented in the other party's assent,
stated or inferred. As a result, the most significant criterion is that either the vendor or the
buyer must agree to the products for sale. The property is effectively conveyed if one party
agrees to the act of selection performed by the other. In this scenario, Ritish chose 100 litres
of Olive oil from his inventory and informed Kamal. His action was restricted to informing,
and it is up to Kamal to provide his approval. However, because Kamal has not given his
approval, either explicitly or implicitly, the property in the items has not yet moved to Kamal
and remains with Ritish. Ritish's appropriation in this circumstance is not binding on Kamal
and can be overturned at Ritish's discretion unless Kamal agrees to the appropriation. The
products were not specified in the agreement, but the buyer determined them
subsequently. Kamal's assent, verbal or tacit, was not granted after the appropriation,
according to the question. The question therefore becomes whether the assent was
granted earlier or if Ritish had the right to make the election in this circumstance. When a
vendor makes an actual or constructive delivery, or when a vendor has the right to
dispatch or do anything with the products until they are appropriated, the property is
transferred the moment the items are dispatched or any other act is performed. Ritish
appropriated and informed Kamal to take the requested stock in this case, resulting in
irreversible appropriation. In this situation, the property is transferred when Ritish
prepares the products and informs Kamal of the same.

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Part-B Law of Partnership

Question 6.

Answer- According to Section 4(4) of the Partnership Act, John's act of sharing his earnings
and liabilities with Dortha constituted Dortha a sub partner under the presented fact
situation in the query. A sub-partner is an independent entity from the company with no
responsibilities to it. He has no rights to the original business and is not responsible for its
partners' activities. From the partner that hired him as a sub-partner, he is solely entitled to
his agreed-upon share of earnings. Because Dortha and John's partnership is unrelated to
the company, it will have no impact on J. Vergees and Sukunna's interests. Moving on to the
Element of Partnership as according to this question, as per section 4 of partnership act
there are five most important elements from which the partnership can be constituted:

1. ‘’There has to be a contract’’ - A contract establishes a partnership. It isn't the

product of one's birth, social standing, or the application of the law. As a result, if the
father, who was a partner in the partnership firm, died, the son may claim his
portion of the partnership firm's property, but he could not become a partner unless
he entered into a contract with the other parties involved. Members of a family who
manage a family company, for example, cannot become partners just because their
connection is based on status rather than a contract. As a result, a "contract" acts as
the bedrock of a business relationship.
2. “Between two or more persons” - Because ‘’a partnership is the result of a
contract,’’ it must be formed by at least two persons. More than two persons are
allowed however, the total number of partners should not exceed twenty. A
partnership contract can only be entered into by those who are legally capable of
doing so, as ruled in the case of "Steel Bros & Co. Ltd. v. Commissioner of Income
Tax." There are two types of people: natural and manufactured. If its Association
authorises, a Company, as an artificial legal entity, may engage into a partnership
relationship. There may even be a partnership between two companies.
3. “Carrying on of Business in a Partnership” - As the third required component of a
partnership, the parties should have chosen to run a business together. Any trade,
activity, or profession is referred to as "business" in this context. As a consequence,
it isn't a partnership if the goal is to undertake some humanitarian activity. Similarly,
 if a group of individuals agree to divide the earnings from a certain property or to
split the cost of products purchased in bulk, there is no partnership and these
persons cannot be called partners because they are not in the business of doing so.
4. “Sharing of Profits” - According to the fourth essential component, the contract to
do business must have as its purpose the distribution of profits among all
participants. There would be no partnership if the business was run for humanitarian
purposes rather than profit, or if only one of the partners was entitled to the whole
profit. The partners, on the other hand, are free to divide the earnings in any
proportion they see proper.
In order to join a partnership, the partners do not have to agree to share the losses
(Raghunandan v. Harmasjee). One or more stakeholders may agree to take
responsibility for the entire business's losses.
5. “Mutual Agency” - The fifth feature of a partnership is that the business must have
been conducted by all of the partners or by any (one or more) of them acting on
their behalf, which is referred to as joint agency. As a result, each partner acts as
both an agent and a principal for himself, meaning that he may be held liable for the
activities of others and that others can be bound by his actions. The importance of
the mutual agency component stems from the fact that it permits each partner to
conduct business on the other's behalf.

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Question 7.

Answer- "The act of a partner which is done to carry on, in the normal fashion, business of
the sort carried on by the company binds the firm," according to Section 19 (1) of the
Partnership Act. "The authority of a partner to bind the firm provided by this section is
termed his implicit authority."

For an act of a partner undertaken within the scope of implied power to bind the company,
three requirements must be satisfied:

1. The act must be carried out as part of the company's regular business activities.
2. The act must be carried out in the manner that such a firm would anticipate.
3. Finally, the act must be done in the name of the firm or in any other way that
communicates or suggests a desire to tie the firm.

The contract between Joseph and one of the partners for the delivery of bricks was fulfilled
in the course of the firm's commercial operations and was also carried out in the way
expected in such a business, according to the supplied fact situation in the question. As a
result, it would tie the company. It's also backed up by the case of Mathura Nath v.
Shreejukta Bageshwari, in which a partner in a company that specialised in catching wild
elephants hired an elephant for the job. An elephant was recruited by a partner in a
company that specialised in catching wild elephants for the purpose of trapping wild
elephants. The court determined that the other partners are also bound by this agreement.
In Sanganer Dal and Flour Mill v. F.C.I., one of the partners of the company (Satya Narain),
who had the right to enter into a contract with a legal entity with the implication to
facilitate the exchange of goods, entered into a contract with the respondent to provide
grant Dal at the negotiated rate, which is the appellant's normal process business. The
partner had the right to do business on behalf of the firm, and in exercising that authority,
he contracted with the corporation to supply the Dal in the usual course of business.
Pursuant to section 19(1) of the Partnership act and the aforesaid rulings, it can be said that
the counterparty is implicitly entitled to enter into a contract in the ordinary course of his
business and therefore the company is bound by the delivery, contract between Joseph and
one of his partners, and Tara Chand is responsible for paying for the goods he has delivered.

Grounds of extension and restriction of implied authority-

Section 20 of the Partnership Act provides that ‘’the partners of a company , by contract
between the partners, may extend or limit the implicit powers of any partner.
Notwithstanding such restrictions any action taken by a counterparty on behalf of the
company within his implied authority is binding on that company, unless the person to
whom the trading partner is aware is restricted that either doesn’t know or believes that
partner is a match.’’ According to Section 20, the implicit authority granted to the partners
might be curtailed or increased explicitly by a contract between the partners. Even if such a
restriction existed, an act committed on behalf of the firm by a partner would bind the firm
unless the entity with whom the partner was contracting was aware of the partner's implied
authority restriction. Section 18 of the Indian Partnership Act states, "A partner is the firm's
agent for the purposes of the firm's business." The partner has implicit authority to bind the
company unless there is a clause or language that says otherwise. It is evident that, unless
opposite purpose is demonstrated, every partner's implicit authority is inherent, and other
partners who disagree must establish the constraints, as in the case of State Bank of India
v. Simko Engineering Works.

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Question 8.

Answer- Section 28 of the Partnership Act recognises the premise indicated in the question.
"A person is held accountable as a partner by holding out if such circumstances are met, the
provision adds:

1. He consciously portrayed himself as a partner or permitted himself to be

represented.
2. Such representation can take the form of spoken or written words, actions, or
deliberately allowing others to make such representations through words or
actions.
3. The other party extended credit to the company on the basis of such
representation."

By refusing to pay, a partner owes the creditor compensation for any losses incurred by a
third party. He does not obtain any claim to the business or become a "real" partner, but he
does become liable for restitution to the third party he recruited as a partner by holding out
and who incurred loss or harm as a result of the deception.

Point of Partnership by Holding Out:

1. “There must be representation” - The individual should willingly portray

themselves as a partner of the company; however, the representation does not
have to be declared; it can also be implied. In the case of Bevan v. National Bank
Ltd., Mr. MW was the manager of one Mr. B's firm. The firm was renamed MW
and Co. and continued to operate. The Complainant who supplied the materials
sued MW as a partner in the business to recover his money, but B maintained
that he shouldn't be held accountable because the firm's logo only had MW's
name on it. The court declared him liable and said that when a person runs a
business on behalf of a person with the words "and company’’ added to the
name and uses that person as an employee of the business authorized to
manage the business, this does not necessarily imply that he is the principal
owner of the business; rather, it may imply that he is a partner in the business.
MW is also liable for making false statements that he is a partner when allowing
the use of his title in the company title, and he must be held accountable to
those who have recognized the company on the basis of this declaration.
2. “Knowledge of representation and acting on it in good faith”- The second
condition for establishing responsibility is that the person seeking to hold
another person accountable must show that he was aware of the representation
and acted in good faith believing the facts provided were true. If there is no
representation to him or, at the very least, no representation to his attention, the
plaintiff's capacity to sue the person who is making the representation is lost. In
order to hold the defendant liable as a partner on the basis of his representation
as a partner, the plaintiff must demonstrate that he has presented himself as a
partner with the plaintiff or that he has collectively represented himself as a
partner with the plaintiff or that he has collectively represented himself in of the
plaintiffs, having knowledge of the representation and believing that the
respondent is a partner, gave him credit on the basis of that belief.
The case of Scarf vs. Jardine represents a watershed moment in the history of holding out,
emphasising the need of giving notice of retirement. The court held that a leaving partner
must send a notice of retirement from the business in the same manner as a notice of
commission, so that the public is aware of his status with the firm. Alternatively, if he holds
out, he may be deemed a partner, regardless of how long ago he abruptly departed the
business. If a person presents himself as a member of a business and a third party believes
him, the person cannot later renounce his responsibility to the third party.

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Question 9.

Answer- The right of X as a departing Partner may be traced back to Section 36 of the
INDIAN PARTNERSHIP ACT, which governs exiting Partner rights. Unless there is a contract in
contradiction, Section 36 of the Partnership Act allows a retiring Partner to run a business
that competes with the firm's and to advertise it, but he cannot: ‘’(a) use the firm's name,
(b) portray himself as holding on to the firm's business, or (c) procure customers or persons
who did business with the firm before he officially ended to be a Partner.’’ As a result, X is
forbidden from utilising the firm's name under Section 36 of the INDIAN PARTNERSHIP ACT.

X may publicly sell his business, but he is not permitted to canvass the former firm's clients,
even if they choose to do so on their own; and he is not permitted to use the old firm's
name to signal that he is ongoing not just a similar, but the same business. Even running a
competitive firm under his own name may be a struggle. by the new holders of the
companies Y, Z, and A It would stand alone if that name had been used as the late firm's
name and had become part of its goodwill. This comprises the executor of X who is carrying
out a goodwill sale deal. Section 37 applies here as well, because a retiring Partner has the
right to share future revenues generated by the Partnership company. The clause states that
if current Partners have the opportunity to purchase an outgoing Partner's shares and have
exercised that option, the retiring Partner will not be entitled to a profit share. In this
situation, X exercises this privilege, and as a result, he forfeits his entitlement to future
gains. The existing Partners' rights are outlined in Section 13 of the Partnership Act. The
following is a description of these: Authorized Partners have the right to examine, copy, and
check any of the firm's books; they also have the right to partake in the administration of
the business. They are required to carry out their responsibilities diligently in the process of
the corporation; any disagreement over routine business matters may be determined by a
majority vote, with each Partner having the opportunity to express his or her opinion before
the matter is decided; however, no change in the nature of the corporation may be made
without the consent of all Partners.

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Question 10.

Answer- Section 39 of the Indian Partnership Act defines "dissolution of the firm" as "the
dissolution of Partnership between all the Partners of a firm." As a result, ‘’dissolution of
Partnership implies the complete dissolution of the Partnership between all Partners, as
well as the severance of the relationship formed by the legislation of Partnership.
Dissolution, on the other hand, does not always imply the end of the Partnership.’’ A firm is
not declared dissolved just because one or more of its members cease to be Partners while
others continue to do so, unless and until all of the company's members stop to do so.
When there are only two Partners in a company and one of them departs or relinquishes his
interest in favour of another, the partnership dissolves. When there are more than two
Partners, one Partner's resignation in favour of another does not result in the firm's
dissolution. According to Section 45 of the Act, Partners are liable as individuals to third
parties until public notice of dissolution is given for actions taken by any of them that would
be deemed as the firm's action if taken before the firm's dissolution; however, ‘’this
principle does not apply to recently deceased Partners, bankrupt Partners, dormant
Partners, or sleeping Partners.’’ ‘’The right of the firm's Partners to bind the firm, as well as
other duties of Partners, remain notwithstanding the company's dissolution, to the degree
necessary to wind up the business's activities and complete the unfinished operations,’’ as
provided for in Section 47 of the Act. As a result, even after the company is dissolved, each
Partner's capacity to bind the firm by acts made during the process of winding up the
business applies to pledging the firm's assets to repay debts or paying pending bills and
satisfying creditors' claims. A five-year Partnership was created in the case of ‘’Saligram
Ruplal Khanna v. Kanwar Rajnath.’’ The partnership was dissolved and continued after
August 30, 1957, which was the end of the five-year term for which it had been formed.
However, at the time of dissolution, there was a transaction involving arbitration
procedures that had begun but had not been finished. Following the firm's dissolution, one
of the Partners agreed to the arbitrator's judgement against the firm on behalf of the firm.
The Partner was permitted to do so since it was an essential step in the adjudication of a
dispute in which the firm was a Party previous to its dissolution, according to the court. The
dissolution of a business does not instantly dissolve the Partnership due to the provisions of
Sections 45 and 47 of the INDIAN PARTNERSHIP ACT.

The court stated in ‘’Damodar Jamunadas Zawar v. Chaturbhuj Dharamdas’’ ‘’Factory that
while the dissolution of a firm results in the dissolution of the Partnership between Partners,
the Partnerships themselves continue to exist, but only for the purpose of winding up the
firm's operations and adjusting the Partners' inter se rights.’’

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Question 11.

Answer- Section 32 of the INDIAN PARTNERSHIP ACT specifies the methods through which a
Partner may retire-

1. A Partner may resign— (a) with the approval of all other Partners, (b) according to
an express agreement by the Partners, or (c) if the Partnership is at will, by notifying
the other Partners in writing of his desire to retire." When the Partnership is at will, a
Partner may quit the company with the consent of all other Partners, or he may
depart by giving notice in writing to all of the Partners of his desire to do so. If a
departing Partner enters into a direct or implicit agreement with a third Party, he
may be exempt from liability to that third Party for activities committed by the firm
prior to his superannuation. The departure of a Partner from the firm does not lead
to the firm's demise. It does not determine if all of the Partners are part of a
Partnership. It simply dissolves the Partnership between the retiring Partner and the
remaining Partners, leaving the Partnership of the remaining Partners intact, and the
organization continues with the new constitution of continuing Partners. A firm's
decision to dissolve might be inferred from circumstances showing that a Partner has
abandoned his share in the company. There is no hard and fast rule for determining
what evidence is sufficient. Whether a Partner's interest has been abandoned,
 explicitly or covertly, is a matter of interpretation based on the circumstances of
each scenario.
2. ‘’LIABILITY OF OUTGOING PARTNER’’- Section 32(2) of the INDIAN PARTNERSHIP
ACT states this. The goal of Section 32 is to defend the interests of other parties,
especially the firm's creditors. Petitioner's exit from the Partnership company does
not absolve him of his need to pay the Partnership firm's dues that accumulated
while he was a Partner, i.e., pre-retirement transactions or obligations. To bring a
claim under section 32, it must be established that the firm was liable to a creditor
previous to the retirement, and that the retirement took place without the creditor's
agreement or knowledge, either express or tacit. The responsibility of a failed
Partner as a result of difficulties to publish a public notice is addressed in subsections
(2) and (3), which do not control the operation of subsection (1). In the case of
Kamutala Laxminarayana v Firm Laxmi Venkata Satyanarayana, the Andhra Pradesh
High Court held that a simple disintegration is not the same as retirement, and the
stipulation cannot apply in balance in favour of a retiring Partner attempting to avoid
public notice on the assumption that the third party with whom he is trying to deal is
unsure of his partnership in the firm.
3. ‘’RIGHTS OF A RITIRING PARTNER’’- Unless there is a contract in inconsistency,
Section 36 of the Partnership Act enables a retiring Partner to operate a company
that wants to compete with the firm's, and he may advertise it, but he cannot: ‘’(a)
use the firm's name, (b) portray himself as holding on to the firm's business, or (c)
procure customers or persons who did business with the firm before he officially
ended to be a Partner.’’ Section 37 deals with the rights of departing partners. It
provides important legislation relating to the obligations of a continuing or carrying
Partner who utilises the Partnership's assets to continue on the company without
first settling accounts with the dead member's legal counsel. Although the principle
that applies in such cases is obvious, some knotty difficulties occur when differences
arise between both the retiring Partner or his heirs on the one hand and the
continuing Partners on the other hand in reference to future activities.

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