The partnership deed specifies 6% interest on capital and 8% interest on drawings. Which principle does this demonstrate?

Correct answer: Terms of the partnership deed are binding on the partners

A partnership deed is a mutual agreement among partners. When the deed specifies different rates for interest on capital and on drawings, those rates are binding on the partners as per their agreement. Option B is incorrect because there is no general law mandating identical interest rates for all partnerships; rates are set by the deed or by agreement. Option C is wrong because interest on drawings can be charged if the deed provides for it. Option D is incorrect since bank or market rates are unrelated — the deed may prescribe its own rates. Exam tip: If a question explicitly mentions the partnership deed, treat the deed’s terms as binding unless stated otherwise.