Question

Given below are Legal Principles followed by a Factual Situation. Apply the principles followed by a factual Situation. Apply the principle to it and select the most appropriate answer for question among the four choices given.
LEGAL PRINCIPLES: Every partner in a partnership firm is liable for the act of every other partner during the course of business of the partnership firm.
FACTUAL SITUATION: "A" a partner in the firm "XYZ" with another partner "B" takes loan from a bank for the partnership firm. A misuses the fund for the personal use. "B" is a very resourceful person. Can the Bank demand the entire money from "B"?
DECIDE.

• A. No, because A misuses the money for his personal use.
• B. Yes, because both are partners in the same firm.
• C. No, because B has not taken loan.
• D. No, because B has another partners in his firm.

Answer 1

The correct option is B Yes, because both are partners in the same firm.

Here, every partner in a partnership firm is liable for the act of every other partner during the course of business of the partnership firm. So, when A took loan from the bank for the firm, it means it was done during the course of business. Hence, the bank can ask for the money from B in his capacity of the partner of the same firm of that of A.