A right to participate in profits, although strong but not a conclusive test of partnership was laid down in :
Cox Vs. Hickman.
In Cox v. Hickman (1860) 8 HLC 268, creditors of a business carried it on through trustees and shared its profits; the House of Lords held that they were not partners merely because they shared profits.
The case overruled the old rule of Waugh v. Carver and Grace v. Smith that participation in profits is the conclusive test of partnership. It established that sharing of profits is strong evidence but not conclusive; the real test is whether the business is carried on by or on behalf of all (mutual agency). This is now embodied in Section 6 of the Indian Partnership Act, 1932.
Grace v. Smith (1775) stated the opposite, older view; Re Somtow Iron Co. and Tellis v. Saldanha do not lay down this test.
Hence, the answer is Cox Vs. Hickman.
Similar Questions
The personal liability of a partner in limited liability partnership arises in :
An agreement without mentioning the terms of its existence is dealt under the Partnership Act, 1932 under Section :
Important Questions from Partnership Act, 1932
- Which of the following is correct?
The important provision affecting partnership accounting, in the absence of a partnership deed is: As per Section 6 of the Indian Partnership Act, 1932, in determining whether a group of persons is or is not a firm, regard shall be had to which of the following?
- Atul, Bharat, and Chetan enter into a partnership. Atul invests $₹25,000$ for 6 months, Bharat invests $₹30,000$ for 8 months, and Chetan invests $₹40,000$ for 9 months. If the total profit is $₹37,000$, what is Chetan's share of the profit?
- According to Section 12 of the Partnership Act, any difference arising as to ordinary matters connected with the business of partnership may be decided by
Match List - I with List - II and select the correct answer using the code given below :
List - I List - II (a) Partnership not created by status (i) CST v. K. Kelukutty (b) Essentials of partnership (ii) Kshetra Mohan v. Commr. of Excess Profit Tax (c) Joint Hindu Family and partnership (iii) Rakesh Kumar Dinesh Kumar v. U.G. Hotels and Resorts Ltd. (d) Partnership between outsiders and joint family (iv) Ganpat v. Annaji
