Q.Members of a Hindu Undivided Family (HUF) carry on an ancestral family business together. Are they, merely by virtue of this family status, 'partners' under the Indian Partnership Act, 1932?
(A) Yes, because they share the profits of a common family business
(B) No, because Section 5 makes clear that partnership arises from contract, not from status
(C) Yes, but only if the family has more than five members
(D) No, because HUF members are legally incapable of being partners under any circumstances

Section 5 draws a sharp line between a relationship created by status (like an HUF) and one created by contract, and only the latter is a partnership.

Profit-sharing alone (as HUF members naturally do) does not create a partnership without an actual agreement to that effect.

Why (B) is correct: Section 5 expressly states that the relation of partnership arises from contract and not from status; and, in particular, the members of a Hindu Undivided Family carrying on a family business as such are not partners in that business merely because of their family status.

Why the distractors are wrong:

• (A) wrongly treats profit-sharing arising from family status as sufficient to create a partnership — Section 5 specifically rules this out.
• (C) invents a family-size threshold that has no basis in the Act.
• (D) overstates the rule — HUF members are not barred from ever being partners; they simply are not partners merely because of their family status. If HUF members genuinely enter into a separate contract of partnership, they can become partners like anyone else.

A common error is assuming any group that shares profits from a joint venture is automatically a 'partnership.' The exam is testing the precise Section 5 point: status (family, co-ownership) is never enough by itself — an actual agreement is required.