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Recap of Accounting Process

X, Y and Z ar...

Question

X, Y and Z are partners ole trading firm. X who actively participates in the management of the business of the firm, bought for the firm, certain goods. The seller told X about the defect in the goods. Is the firm liable to seller? Would it make any difference if there was a collusion between X and the seller to conceal the defeat from the other partners

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Solution

Solution: Section to which the given problem relates: Section 24.
Decision and Reason:
Part (a) The firm is liable to seller because notice to a working partner operates as notice to the firm.
Part (b) The firm is not liable to seller because notice to a working partner does not operate a notice to the firm in case of fraud committed by a partner and third party against the firm.

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