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Partnership Law

Description: Law Aptitude
Number of Questions: 15
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Tags: Law Aptitude CBSE (UGC) NET
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Which of the following is not a valid mode of retirement?

  1. By consent of all other partners

  2. By agreement

  3. By notice in case of partnership at will

  4. By one's own choice or liking

  5. None of the above


Correct Option: D
Explanation:

Partnership act does not provide any mode of retirement where a partner by his own choice or liking can choose retirement from the firm.

Mark the incorrect statement.

  1. A third party is not barred from bringing an action against an unregistered firm.

  2. A suit by an unregistered firm for the recovery of the price of goods obtained by fraud is maintainable under section 69.

  3. An action for the tort of passing off by an unregistered firm against a third party is not permissible.

  4. The right to file a suit for eviction of a tenant under the Transfer of Property Act is a statutory right and an unregistered firm can file an eviction suit.

  5. None of the above


Correct Option: C
Explanation:

If the action against a third party is not based on contract but on tort, fraud or any other wrongful act, the same is not hit by section 69 of the Partnership Act and the action for the same is maintainable.

Which of the following is not a mode of dissolution of a firm provided for under sections 40 to 44 of the Partnership Act?

  1. Dissolution by agreement

  2. Compulsory dissolution

  3. Dissolution by court

  4. Dissolution by minor through a guardian

  5. None of the above


Correct Option: D
Explanation:

No such mode of dissolution is provided for under sections 40 to 44 in the act for the dissolution of a partnership firm.

Which of the following is not an outgoing partner?

  1. An expelled partner

  2. A retired partner

  3. An insolvent partner

  4. A deceased partner

  5. None of the above


Correct Option: D
Explanation:

On the death of a partner, the valuation of the share of the deceased partner should take place as at the date of realization and not at the date of death. A deceased can never be considered as outgoing partner and his estate of the deceased partner is entitled to the subsequent profits.

Which of the following is not a ground for dissolution of a firm by the court under section 44 of the Partnership Act?

  1. Unsoundness of mind

  2. Misconduct

  3. Persistent breach of agreement

  4. Death or insolvency of a partner

  5. None of the above


Correct Option: D
Explanation:

Where death or insolvency of a partner occurs, then the other partners need not go to the court for the dissolution of the firm.

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


Correct Option: B
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’.

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


Correct Option: D
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.

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


Correct Option: C
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.

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


Correct Option: D
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.

An application for registration of a partnership firm is not required to contain

  1. the duration of the firm

  2. signatures of all the partners

  3. the date when each partner joined the firm

  4. specific shares of the partners of the firm

  5. None of the above


Correct Option: D
Explanation:

An application for registering partnership firm does not include specific shares of the partners of the firm.

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


Correct Option: D
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.

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


Correct Option: C
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.

The relation of partnership need not be a permanent bond. There can be a partnership in a single or particular business venture. This is laid down in which section of the Partnership Act?

  1. Section 8

  2. Section 9

  3. Section 10

  4. Section 11

  5. Section 12


Correct Option: A
Explanation:

Section 8 of the Indian Partnership Act provides that a person may become a partner with another person in particular adventures and undertakings.

In the case of registered firm, the notice of retirement of a partner must be given

  1. in the official gazette

  2. in one vernacular newspaper circulating in the district where the firm has its principal place of business

  3. to the registrar of firms

  4. All of the above

  5. Both 1 and 3


Correct Option: D
Explanation:

All the above mentioned options fall under statutory requirements.

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


Correct Option: B
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.

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