Definition & the True Test — KSLU Contract 2 Notes

Definition & the True Test

A partnership (S.4) is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all — the last phrase encapsulates mutual agency, which is the true test. Sharing of profits is strong evidence but not conclusive (S.6, Cox v. Hickman): a lender or an employee paid out of profits is not thereby a partner. Persons who have entered into partnership are individually “partners” and collectively a “firm” (S.4).

flowchart TD
    A["Is there a PARTNERSHIP? (S.4)"]:::root
    A --> B["Agreement between persons?"]:::q
    B --> C["Business carried on?"]:::q
    C --> D["Sharing of profits?"]:::q
    D --> E["MUTUAL AGENCY —<br/>'acting for all'? (the true test)"]:::q
    E --> F["YES on all -> PARTNERSHIP"]:::yes
    E --> G["No mutual agency -><br/>mere co-ownership / lender"]:::no

    classDef root fill:#FFF8DC,stroke:#333,color:#000;
    classDef q fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    classDef yes fill:#E6FFE6,stroke:#1E7A1E,color:#000;
    classDef no fill:#FFE6E6,stroke:#8A1E1E,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;