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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

The expression ‘person suing’ in section 69(2) means

  1. all the partners of the firm who were its partners at the time of the accrual of cause of action

  2. all the partners of the firm who are its partners at the time of institution of the suit

  3. all the partners filing the suit

  4. all the partners of the firm when partnership came into existence

  5. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The expression ‘person suing’ in section 69(2) of the Partnership Act means ‘all the partners of the firm who are its partners at the time of the institute of the suit'. It may be possible that a new partner may be admitted in the firm after accruing of cause of action. Section 69(2) also includes that newly admitted partner in the definition of ‘person suing’.

Multiple choice

Mark the incorrect statement.

  1. The courts can see that the power of expulsion of a partner is exercised in good faith in the interest of the firm.

  2. Expulsion of a partner who has been held guilty of an offence has been considered to be justified.

  3. A partner convicted for travelling without a ticket with intent to avoid payment could be expelled on that ground.

  4. The liability of an expelled partner is not the same as that of a retired partner.

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The liability of an expelled partner is the same as that of a retired partner. A retirement can be made with the consent of all partners and expulsion can be made by majority of the partner in the exercise of good faith of powers conferred by contract between the partners.

Multiple choice

The liability of an incoming partner begins from

  1. the date of his joining the firm, i.e. admission

  2. the date when the firm came into existence

  3. the date of his joining the firm, i.e. admission, but he could agree to be liable for the acts of firm done before his admission

  4. the date of his joining the firm, i.e. admission, but he could be made liable for the acts of firm done before his admission when a fraud has been committed by the firm

  5. Both 3 and 4
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A person admitting as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred except that the liability shall be satisfied only out of partnership property.

Multiple choice

Mark the incorrect statement.

  1. The partnership between the remaining partners can continue after the retirement of a partner, but for that there must be at least two remaining partners to continue the business.

  2. There cannot be any retirement from liability for wrongful acts.

  3. A retired partner remains liable for all the acts of the firm done before and up to the date of the retirement.

  4. A retiring partner cannot make an arrangement with his co-partners under which he is released from liability for outstanding debts.

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Retiring partner by giving public notice of his retirement can make an arrangement with his co-partners to get relief from liability for outstanding debts.

Multiple choice

Which of the following is not a mutual duty of a partner?

  1. Duty of utmost good faith

  2. Duty to carry on business to the greatest common advantage

  3. Duty to render true accounts and full information

  4. Duty to contribute funds or capital for the firm’s business

  5. None of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Duty to contribute funds or capital for the firm’s business neither a statutory duty nor an implied duty of a partner towards a partnership firm.

Multiple choice

According to section 31 of the Partnership Act, a new partner can be introduced or admitted into a firm

  1. by the consent of all the partners

  2. by the consent of all the partners, but subject to contract between the partners

  3. by the consent of all the partners, but subject to the contract between the partners and to the provisions of section 30

  4. by the consent of majority of the partners, but subject to contract between the partners and to the provisions of section 30

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 31 of the Partnership Act clearly states that subject to the contract between the partners and to the provisions of section 30 of the act, no person shall be introduced as a partner into a firm without the consent of all the existing partners.

Multiple choice

Which of the following is/are not a sufficient ground to justify dissolution of a firm?

  1. Incompetence for business

  2. Ordinary partnership squabbles

  3. Misuse of partnership funds for payment of personal debts

  4. Persistent breach of agreement

  5. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When there are trivial quarrels continuously between the partners of the firm, then it is not a valid ground on the basis of which the partnership firm would be dissolved.

Multiple choice

Under Section 42 of the Partnership Act, a firm may be dissolved on the happening of certain contingencies, subject to contract between the partners. Which of the following is not such a contingency?

  1. Expiration of the partnership firm

  2. Completion of business

  3. Death or insolvency of a partner

  4. A partner becoming lunatic

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Where a partner becomes a lunatic due to any reason, the firm is not entitled to be dissolved.

Multiple choice

In the case of death of a partner,

  1. when the firm is not dissolved, then the estate of the deceased partner is not liable for any act of the firm done after his death

  2. the position of a deceased partner is the same as that of insolvent partner

  3. no public notice is required to be given on the death

  4. All of the above

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All are correct assertions with regard to deceased partner.

Multiple choice

Mark the incorrect statement.

  1. A contract of partnership cannot be entered into with a minor.

  2. There can be a partnership consisting of all minors.

  3. A minor is not a partner even if he is so described in the agreement.

  4. A minor could be admitted to the benefits with the consent of all the partners.

  5. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A contract with a minor is void ab initio. It means that a contract with a minor is not valid from the very beginning. There cannot be a partnership contract with a minor. No such concept arises that there can be a partnership consisting of all minors.

Multiple choice

A, B and C start a partnership firm. After some time, A dies and other partners continue the business in the firm’s name. Later, the firm becomes insolvent. Who will be liable to the creditors as per Section 28 of the Partnership Act?

  1. B and C alone

  2. B, C and A’s legal heirs

  3. B, C and A’s legal heirs and the estate of A

  4. B, C and A’s estate

  5. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

After the death of ‘A’, a partner, the business is continued in the old firm's name. The continued use of that name shall not make A’s legal representative or his estate liable for any act of the firm done after his death. It is termed as principle of holding out. Hence, only B and C will be liable for the insolvency of firm.