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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

A partnership firm may be dissolved

  1. with the consent of all the partners

  2. in accordance with a contract between the partners

  3. Both (1) and (2)

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

A partnership firm may be dissolved either with the consent of all the partners (as per general principles of contract and partnership law) or in accordance with a contract between the partners that specifies dissolution terms. The Partnership Act, 1932 recognizes both modes of dissolution through Sections 40 to 43, which provide for dissolution by agreement, by notice, or on occurrence of specified events.

Multiple choice

The authority of a partner to bind the firm by his acts done in the usual course of business is called his ‘implied authority’. Such authority does not include

  1. selling the firm’s goods

  2. to borrow in a trading firm

  3. settling accounts with the persons dealing with the firm

  4. withdraw a suit or proceeding filed on the firm’s behalf
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under Section 19 of the Partnership Act, 1932, a partner's implied authority includes acts in the usual course of business such as selling goods, borrowing on behalf of a trading firm, and settling accounts with persons dealing with the firm. However, withdrawing or compromising a suit or proceeding filed on the firm's behalf requires express authority as it is a matter of grave legal significance beyond ordinary business operations.

Multiple choice

In which of the following cases, a partner may cease to be a partner without the dissolution of the firm?

  1. Retirement

  2. Insolvency

  3. Death

  4. All these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A partner may cease to be a partner without dissolution of the firm through retirement (with consent), insolvency (which automatically terminates partnership status), or death (which doesn't necessarily dissolve the firm if the partnership agreement provides for continuation). These events affect individual partners but the firm itself can continue surviving the departure of partners.

Multiple choice

When a minor elects to become a partner he becomes personally liable to third parties for all acts of the firm done since

  1. he was admitted to the benefits of partnership

  2. from the date of his attaining majority

  3. from the date of his becoming a partner

  4. Both (2) and (3)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under Section 32 of the Partnership Act, 1932, when a minor who was admitted to the benefits of partnership elects to become a partner upon attaining majority, they become personally liable for all acts of the firm done both from the date of attaining majority and from the date they formally become a partner. This dual liability ensures protection for third parties dealing with the firm.

Multiple choice

Which section of the Partnership Act lays down that where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, loss or injury is caused to any third party, the firm is liable to the same extent as the partner?

  1. Section 20

  2. Section 24

  3. Section 26

  4. Section 27

  5. Section 30
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section 26 of the Indian Partnership Act provides liability of the firm for the wrongful acts of the partner.

Multiple choice

A salaried partner

  1. is not a partner

  2. is a partner

  3. could be a partner, depending upon the real relation between the partners

  4. is a partner recognised only in the English law

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

A salaried partner could be a partner, depending upon the real relation between the partners.

Multiple choice

Mark the incorrect statement.

  1. A partner can always enter into partnership on behalf of the firm.

  2. A partner can acquire immovable property on firm’s behalf.

  3. A partner can transfer immovable property on firm’s behalf.

  4. A partner can admit any liability in a suit or proceeding against the firm.

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

All the authorities mentioned above fall under the implied authority of a partner. In other words, it can be said that a partner has an authority to act on behalf of the firm.

Multiple choice

A person who is not a partner in any firm may under certain circumstances be liable for the debts as if he were a partner on the basis of the ‘doctrine of estoppel’ or ‘holding out’. Under which section of the Partnership Act is this laid down?

  1. Section 26

  2. Section 27

  3. Section 28

  4. Section 29

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

Doctrine of holding out or doctrine of estoppel is laid down under Section 28 of the Partnership Act.

Multiple choice

For an account and a share of profits of a dissolved partnership, the period of limitation is _______ from the date of dissolution.

  1. 2 years

  2. 3 years

  3. 12 years

  4. 30 years

  5. 6 months
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option (1) is incorrect: No such provision Option (2) is correct: Under Article 5 of Limitation Act, the period of limitation for an account and a share of profits of a dissolved partnership is 3 years. Option (3) is incorrect: No such provision Option (4) is incorrect: No such provision 

Multiple choice

A partner of an unregistered firm can sue for ____ of the firm.

  1. goodwill

  2. share in property

  3. dissolution

  4. nothing
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The non-registration does not affect the following rights of a firm: (a) Suit for Dissolution (b) Right of an official receiver or official assignee (c) Right to Claim a set-off where the subject-matter of the suit does not exceed Rs. 100 in value.

Multiple choice

In which of the following cases, is the firm not bound by the act of the partner?

  1. When act is done by a partner or his agent on behalf of the firm.

  2. When act is done by a partner in the name of the firm.

  3. When act is done by a partner in any manner expressing or implying an intention to bind the firm.

  4. When act is done fraudulently or negligently.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Firm is not bound by the acts done fraudulently or negligently as a partner is doing fraud on his own behalf.

Multiple choice

Ram, Sham and Mohan are in partnership. Ram and Mohan are declared insolvent while Sham wants to continue the firm. Which of the following is true?

  1. Firm is also declared insolvent.

  2. Sham has to repay the debts of the firm.

  3. Firm is automatically dissolved, and hence Sham cannot continue.

  4. The court has to give order for dissolution.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When all the partners of a firm are declared insolvent, or all but one partner is insolvent, the firm is compulsarily dissolved.