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Section 256: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 75 All 266 Sections of Indian Contract Act Section 77

Legal Commentary & Landmark Judgments: Section 256

Section 256 historically governed the continuance of a partnership after the expiration of its agreed fixed term, presuming that the mutual rights and duties of the partners remain unchanged so far as consistent with a partnership at will, now reenacted as Section 17(b) of the Indian Partnership Act, 1932.

  • Presumption of Continuance of Terms: Where a partnership formed for a fixed term or specific venture continues in business without executing a new deed, the covenants, profit shares, and management duties of the expired deed are presumed to remain in full force.
  • Transformation into Partnership at Will: The sole fundamental alteration is that the firm becomes a partnership at will, terminable by any partner giving written notice of dissolution under modern Section 43 of IPA 1932.
  • Survival of Compatible Covenants: Arbitration clauses, restrictive covenants, and accounting provisions from the expired agreement survive and remain fully enforceable between the partners.
  • Modern Reenactment in Section 17 IPA 1932: Repealed by Act 9 of 1932 and reenacted as Section 17(b) of the Indian Partnership Act, 1932, ensuring commercial stability in ongoing enterprises.
Key Landmark Precedents:
  • Neilson v. Mossend Iron Co. (1886) 11 App Cas 298: The House of Lords established that when a partnership continues after its term, the old articles govern except those inconsistent with dissolution at will, a principle adopted in Section 256 and modern Section 17 of IPA 1932.
  • Daw v. Herring [1892] 1 Ch 284: Affirmed that an option in the original partnership deed for one partner to purchase the share of another upon termination remains valid and exercisable during the continuance of the partnership at will.
  • Sharad Vasant Kotak v. Ramniklal Mohanlal Gokuldas (1998) 2 SCC 171: The Supreme Court recognized the statutory continuity of partnership arrangements upon changes in constitution or continuation beyond initial periods.
Courtroom Practice & Strategic Litigation Guidance:

In disputes arising after the expiration of a fixed-term partnership deed, invoke Section 17(b) of IPA 1932 to enforce the deed's dispute resolution and arbitration clauses. If seeking to dissolve such an informal ongoing firm, simply serve a written notice under Section 43 dissolving the partnership at will.

Section 75 All 266 Sections of Indian Contract Act Section 77