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Partnership and Business Law

1,007 Questions

Test your knowledge of partnership regulations and business law with these practice questions. The topics include the rights of minor partners, firm dissolution, retirement rules, and public notices. This material is crucial for law exams and legal studies.

Rights of minor partnersPublic notice requirementsFirm dissolution rulesPartner retirementHolding out partner principlePartnership deed provisions

Partnership and Business Law Questions

Multiple choice

x and y jointly acquired a grocery shop and incurred additional expenses for purchasing furniture for the business, contributing required money equally. They leased out the shop on rent which was shared equally. In this situation, X and y are coowners and not partners since they never carried on any business.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

For a partnership to exist, there must be a business being carried on. Merely co-owning property and earning rental income does not constitute partnership. X and Y are co-owners, not partners, because they only lease out the property rather than actively conducting business activities.

Multiple choice

Pledging movable property of the firm is an implied authority of a partner.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under Section 19 of the Partnership Act, partners have implied authority to pledge movable property of the firm in the ordinary course of business. This is a standard incident of partnership that allows partners to secure loans or credit using firm assets, provided it's done for business purposes.

Multiple choice

If an active partner is served a notice, the other partner can not plead ignorance of the same

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a notice is served on an active partner, it is considered notice to the firm under Section 23 of the Partnership Act. Other partners cannot claim ignorance; the law treats the firm as a single entity for such purposes. This principle ensures third parties can deal with the partnership confidently.

Multiple choice

An active partner in the firm, knowing that the goods were stolen ones, purchased and sold them in the firm's name. the other partner, who was a sleeping partner, knew nothing about the theft. In such a situation the partners will be held liable for the tort

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under Section 26 of the Partnership Act, the firm is liable for wrongful acts of a partner done in the firm's name or business. Even if one partner (the sleeping partner) was unaware, the firm remains liable for the active partner's tort committed while ostensibly acting for the firm. This protects third parties dealing with the firm.

Multiple choice

Section 26 of the partnership Act states the liability of the firm wrongful acts of a partner.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 26 of the Indian Partnership Act 1932 specifically states that every partner is liable jointly with all other partners and also severally for all acts of the firm done while they are a partner. This includes liability for wrongful acts committed by any partner in the ordinary course of business.

Multiple choice

The significant elements of partnership include contract, association of two or more persons, carrying on of business and sharing of profits. All these elements must coexit.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 6 of the Partnership Act states that partnership is the relation between persons who have agreed to share profits of a business carried on by all or any acting for all. The four essential elements - contract, association of 2+ persons, carrying on business, and profit-sharing - must ALL coexist. Missing any element means no partnership.

Multiple choice

On death of a father, the son can claim share in partnership property, but he can not be a partner since he has not entered in to contract for the same with the other persons concerned.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A son cannot automatically become a partner on his father's death. Partnership is based on contract (Section 6), not status. While the son may inherit the father's share in partnership property, he doesn't become a partner unless there's a fresh agreement with remaining partners. This distinguishes partnership from Hindu Undivided Family (HUF) which is status-based.

Multiple choice

Section 6 of the partnership Act states that the relationship arises from the contract and not from status.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 6 of the Partnership Act explicitly states that partnership is the relation between persons who have agreed to share the profits of a business. The use of 'agreed' confirms it arises from contract, not from status or inheritance. This foundational principle distinguishes partnership from relationships based on family status or property rights.

Multiple choice

Section 27 of the partnership Act states the liability of the firm for the misapplication by the partners.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 27 of the Partnership Act imposes liability on the firm for misapplication of money or property by partners. When a partner misappropriates funds entrusted to them in the course of business, the firm is liable to make good the loss. This protects third parties who deal with the firm in good faith.

Multiple choice

X and Y carry on business in a partnership as bankers. A sum of Rs. 10000 is received by X on behalf of the firm of which Y is not aware. X appropriates the money to his personal use. The partnership is liable to make good the money since receipt of the money by X is in the ordinary course of business.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When X received Rs. 10,000 on behalf of the banking firm, it was in the ordinary course of business. Under partnership law principles (Sections 19-20), any money received by a partner in the firm's name or business is received for the firm. Even though Y was unaware, the firm is liable because X had apparent authority to receive banking transactions.

Multiple choice

A partner can build the firm by his acts provided (i) he acts are within the scope of his authority, (ii) the acts done in the firm's name and (iii) they are done for the purposes

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A partner can bind the firm when acting within their authority, in the firm's name, and for the firm's purposes. This is a fundamental principle of partnership law - partners act as agents of the firm and each other.

Multiple choice

M is a partner in a firm whose business was to collect legitimately information about the business contracts of competitors. He bribed the clerk of a rival firm to give secret information about his master's customers and business contracts and prices. As a result the rival firm lost business worth Rs. 1, 00,000. Sufficient evidence is available with the rival form about such a bribe. In such a case, the rival firm can sue and the firm is liable to the rival firm.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The firm is vicariously liable for a partner's wrongful act committed in the course of business, even if the method used (bribery) was illegal. Since the firm's business was collecting competitor information, the act fell within business scope.

Multiple choice

Section 9 of the Indian partnership Act states (i) duty to carry on the business to the greatest common advantage, (ii) duty to be just and faithful inter se, (iii) duty to render the accounts and (iv) duty to provide full information.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Section 9 of the Indian Partnership Act imposes four key duties on partners: to carry on business for greatest common advantage, to be just and faithful to each other, to render accounts, and to provide full information. These are mutual obligations between partners.