Partnership can arise despite a fixed monthly payment instead of profit share where the parties clearly intended to act as partners.

An agreement may create a partnership in law even where one party receives a fixed monthly sum instead of a conventional share of profits, if the parties expressly intend to carry on business as partners and practise under a firm name. The Court treated the fixed payment as a permissible commercial variation of profit-sharing, and the absence of a conventional loss-sharing clause as non-decisive. It relied on the parties' wording and surrounding conduct, including their treatment of themselves as partners and the notice of dissolution, to give effect to their real intention. The agreement was therefore construed as a partnership.

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Issues: Whether the agreement of 31 July 1915 created a partnership in law between the parties notwithstanding the defendant's receipt of a fixed monthly sum instead of a conventional share of profits.

Analysis: The agreement expressly stated that the parties were to be partners and to practise under the firm name. Although the defendant was to receive Rs. 500 per month in lieu of a fluctuating share of profits, the Court held that partners may lawfully structure profit-sharing in different ways, including by substituting a fixed amount for an ordinary profit share. The absence of a conventional arrangement for sharing losses was not decisive, and the surrounding conduct, including the parties' treatment of themselves as partners and the notice of dissolution, supported the conclusion that the relationship was intended to be one of partnership. The Court applied Section 239 of the Indian Contract Act and preferred a construction consistent with the parties' real intention and commercial conduct.

Conclusion: The agreement did create a partnership in law, and the issue was answered in the affirmative.

Ratio Decidendi: A partnership may exist where the parties clearly intend to carry on business as partners and agree that one party will receive a fixed sum in lieu of an ordinary share of profits, so long as the arrangement satisfies the statutory conception of partnership in substance.

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