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If the agreement is oral and there is no written proof, what may be the biggest practical problem?

Answer and explanation

Correct answer: It will be difficult to prove the terms

The governing concept is the evidentiary importance of a partnership deed. An oral agreement may be legally relevant, but its terms are not recorded in a document that can be readily consulted or produced as proof. If the partners later disagree about the profit-sharing ratio, salary, interest on capital, drawings, authority, or other conditions, each person may remember the arrangement differently. This can cause disputes and make enforcement difficult. Therefore, option A is correct: proving the agreed terms becomes the main practical problem. Profit can still be earned, a bank account can normally be opened, and purchasing goods is not automatically illegal, so options B, C, and D are not valid consequences of an oral agreement.

Related tags

Partnership DeedOral AgreementEvidencePartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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