Partnership and Business Law

If the behaviour of a person arouses misunderstanding that he is a partner in a firm (when actually he is not), such a person is estopped from later on denying the liabilities for the acts of the firm. Such a person is called a partner by estoppel and is liable to all third parties.

Every partner, whether active or dormant, has a right of free access to all records, books and accounts of the business and also to examine and copy them. Every partner has a right to take part in the conduct and management of the business. Every partner is entitled to share in the profits equally, unless different proportions are stipulated. However, a partner has no right to receive any fixed remuneration from the firm.

As per statute, partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Existence of an agreement is essential for partnership. An agreement between the partners may be expressed or implied. Thus, the relationship of partnership arises out of both statute as well as an agreement.

All partners are liable jointly and severally for all acts or omissions binding on the firm, including liabilities arising from contracts as well as torts.

Under Section 20 of the Indian Contract Act, 1872, when both parties are under a mistake of fact regarding a fundamental fact essential to the agreement, the contract is void. This makes option C correct - a mutual mistake of fact renders the agreement invalid from the beginning.

Section 10 of the Indian Partnership Act, 1932 specifically provides that every partner must indemnify the firm for any loss caused by their fraud in conducting business. The section is limited to fraud and does not extend to negligence or wrongful acts generally. The narrow scope is intentional to protect firms from willful misconduct while allowing for ordinary business risks taken in good faith.

Under Section 7 of the Indian Partnership Act, 1932, a partnership where no fixed duration is specified is called a 'partnership at will'. This means either partner can dissolve the firm by giving proper notice. A general partnership refers to the broader category, a particular partnership is for a specific venture or transaction, and co-ownership is a distinct legal concept involving joint property ownership without mutual agency.

Under Section 133 and 134 of Indian Contract Act, 1872, a surety stands discharged both when the principal debtor is released/discharged by the creditor, and when there's a material variance in contract terms without surety's consent.

A partnership firm is not a separate legal entity from its partners - it's merely an aggregate of partners who work together. Unlike a company, which has a separate legal identity, a partnership firm cannot hold property or sue/be sued in its own name. The partners are personally liable for the firm's obligations.

Under Section 25 of the Indian Partnership Act, 1932, partners have joint and several liability for the firm's acts. This means creditors can sue all partners together (joint) or any one partner for the entire debt (several). This provision protects third parties dealing with the firm by ensuring they can recover from any partner.

Option (1) is incorrect: It is not a voidable agreement. Option (2) is correct: Under Section 2 of the Indian Contract Act, 1872, every promise and every set of promises, forming the consideration for each other, is an agreement. Hence, the given agreement is void from the beginning. Option (3) is incorrect: It is not enforceable in the court of law.  Option (4) is incorrect: Not enforceable at all, whether in writing or in oral.

Correct; when no agreement is there, profits are equally shared or are shared in the ratio of 1 : 1 : 1.

Option (4) is correct: All are types of partners.

Option (1) is correct: U/s 22 of the Act, in order to bind a firm, an act done by a partner or other person on behalf of the firm shall be done in the firm name or in any other manner expressing or implying an intention to bind the firm. Option (2) is incorrect: Partners are not bound by the acts done by the partners in name of the firm and in good faith. Option (3) is incorrect: Third party can never be bound by the acts done by the partners in name of the firm and in good faith.

Option (1) is incorrect: Under Section 12 of the Act, every partner can participate in the conduct of business subject to the contract between the partners. Option (2) is correct: Under Section 12 of the Act, every partner is bound to attend diligently to his duties in the company in the conduct of the business. Option (3) is incorrect: Under Section 12 of the Act, every partner does not have access to inspect and copy not only account books of the firm, he has right to have access to and to inspect and copy any of the books of the firm. Option (4) is incorrect: Under Section 13 of the Act, a partner is not entitled to receive remuneration for taking part in business subject to the contract between the partners.