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Partnership and Business Law

1,019 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

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.

Multiple choice

In case of insolvency of a partner,

  1. no public notice is needed to terminate his liability

  2. he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is thereby dissolved

  3. his position is different from that of a retired or expelled partner

  4. All of the above

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

Public notice is not mandatory in case of insolvency of a partner. An insolvent partner ceases to be a partner and retired partner and insolvent partner are different in position. Hence, all are correct.

Multiple choice

Mark the incorrect statement.

  1. A minor cannot be made liable for losses.

  2. A guardian may accept the benefits of a partnership on behalf of a minor without his knowledge.

  3. A minor cannot inspect the books of accounts.

  4. A minor has the right to sue only for accounts and his share, and not for dissolution.

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

A minor in a partnership firm may have access to and inspect and copy any of the accounts of the firm. But he doesn’t have any right with regards to any other books of the partnership firm.

Multiple choice

According to Section 30 of the Partnership Act, “at any time within 6 months of his attaining majority or of obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, a minor can elect to become or not to become a partner”.

  1. Such option is exercised by giving a public notice.

  2. If he remains silent and fails to give such a notice, then there is a presumption that he wants to be a partner and on the expiry of the 6 months, he shall become a partner in the firm.

  3. If he did not exercise the option, then he will be deemed to become a partner in the firm.

  4. All of the above

  5. No public notice is required according to Section 30 of the Act.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If the minor gives a public notice, then his position will be decided according to the particulars of notice. Otherwise, he will be deemed a partner in the firm.

Multiple choice

Where a minor elects not to become a partner,

  1. his rights and liabilities shall continue to be those of a minor up to the date on which he gives a public notice

  2. his share shall not be liable for any acts of the firm done after the date of notice

  3. he shall be entitled to sue the partners for his share of the property and profits

  4. All of the above

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

As provided in Section 30(8), a minor has all the above rights on attaining majority.

Multiple choice

Where a minor elects to become a partner,

  1. he becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership

  2. he becomes personally liable to third parties for all the acts of the firm done since the date of his attaining majority

  3. he becomes personally liable to third parties for all the acts of the firm done since the date of his becoming a partner

  4. he does not become personally liable at all to third parties

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

Where such person becomes a partner, his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all the acts of the firm done since he was admitted to the benefits of partnership.

Multiple choice

Representation under Section 28 of the Partnership Act by a person to be a partner of a firm

  1. may be by words spoken or written or by conduct

  2. should be made by himself or knowingly permitted by him to be made by someone else

  3. should be in the knowledge of the person acting on its faith and believed by him to be true

  4. All of the above

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

The starting words of Section 28 state that any person, who, by words spoken or written or by conduct, represents himself or knowingly permits himself to be represented to be a partner in a firm is liable as a partner in that firm to anyone who has on the faith of any such representation given credit to the firm.

Multiple choice

Section 29 of the Partnership Act lays down the rights of the transferee of a partner’s interest. Which of the following is/are inclded in these rights?

  1. Right to be a partner in the firm

  2. Right to interfere in the conduct of the business of the firm

  3. Right to inspect the books of the firm

  4. Right to receive the share of profits of the transferring partner

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

A transferee is only entitled to receive the share of profits of the transferring partner and the transferee shall accept the account of profits agreed to by the partners.