'A' and 'B' buys 100 bales of cotton, which they agree to sell for their Joint Account with a term that each party sharing profits and bearing losses equally. In the above Case 'A' and 'B' constitute a partnership or not

To constitute a partnership, the parties must have agreed to carry on a business and to share profits in common. "Profits" mean the excess of returns over advances, the excess of what is obtained over the cost of obtaining it. Sharing of profits also involves sharing of losses. It follows that the sharing of profits is an essential ingredient of partnership and there would be no partnership where only one of the partners is entitled to the whole of the profits of the business. But it is open to the partners to agree to share the profits in any way they like. They may agree to share the profits either in specific proportions or in specific sums. In the present case 'A' and 'B' buy 100 bales of Cotton, which they sell for their joint account. Both 'A' and 'B' sharing profits and bearing losses equally. It is essential element of Partnership so 'A' & 'B' are partners and they constitute a partnership.