How would you analyze this clause of a partnership agreement under the Indian Partnership Act, 1932: 'The partners shall share the profits and losses of the partnership in the ratio of their capital contributions.'?
This clause defines the profit and loss sharing ratio among the partners, based on their capital contributions. The Indian Partnership Act stipulates that, in the absence of any agreement, partners are entitled to share equally in the profits and losses. However, the Act allows the partners to agree on a different ratio. This clause is enforceable and can help avoid potential disputes among the partners.