Multiple choice

X fraudulently induced Y to enter into partnership with him and Y pays a premium of Rs. 5,000/- to A. Within three months the firm incurs liabilities to the extent of Rs. 10,000/-. On discovering the fraud, Y files a suit for the rescission of the contract creating partnership and contract is rescinded. The creditors of the firm also levy attachment on Y who pays Rs. 3,000/- to them as well. Which of the following is correct?

  1. Y can obtain a decree for Rs. 8000/- against A.

  2. Y can obtain a decree for Rs. 5000/- against A.

  3. Y can obtain a decree for Rs. 3000/- against A.

  4. Y cannot obtain a decree for either Rs. 5,000/- or Rs. 3,000/- or Rs. 8000/- against A.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Y can recover Rs 8000 from A: Rs 5000 premium paid + Rs 3000 paid to creditors. When fraud-induced partnership is rescinded, the fraudster (A) must restore all benefits and compensate all losses directly flowing from the fraud.

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