1. Legal Validity of Oral Agreements

An oral partnership is legally valid under Indian law.

• The Indian Partnership Act, 1932, does not mandate a written agreement.
  
• A partnership can be formed by mutual oral consent.
  
• Law recognizes oral contracts if the essential elements are fulfilled.
  
• The agreement must indicate an intention to carry on business jointly.
  
• All partners should agree to share profits and responsibilities.

2. Conditions for a Valid Oral Partnership

Even without a written deed, certain conditions must be met.

• There must be at least two competent individuals.
  
• There should be a common business with a profit motive.
  
• The partners must have mutual agency to act for each other.
  
• The relationship must be voluntary and based on trust.
  
• Oral terms should cover essential aspects of the partnership.

3. Practical Limitations of Oral Partnerships

While legal, oral partnerships have practical challenges.

• Difficult to prove in case of disputes or misunderstandings.
  
• No written record for contribution, roles, or profit-sharing.
  
• Complications arise in court due to a lack of documentation.
  
• Financial institutions may not accept oral partnerships.
  
• Lack of clarity can lead to internal conflicts.

4. Importance of Written Deed Despite Oral Validity

A written partnership deed is highly recommended for protection.

• It provides legal evidence of the partnership terms.
  
• Courts prefer written agreements for dispute resolution.
  
• It ensures transparency in roles, contributions, and liabilities.
  
• Useful for registration and banking formalities.
  
• Written deeds reduce the chances of misinterpretation.

5. Recognition by Authorities

Oral partnerships may face limitations in official dealings.

• Government registrations typically require a written deed.
  
• Registration with the Registrar of Firms requires documented proof.
  
• Tax authorities require written agreements for firm recognition.
  
• Oral firms may find it hard to open bank accounts.
  

Lack of formal proof can restrict growth and credibility.