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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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Q. 'A', 'B', 'C', 'D' and 'V are partners in partnership firm. The firm has different types of partners. Mr. A has contributed capital and participates in the management of firm. He shares profits and losses and is liable to an unlimited extent to the creditors of the firm.
Mr. B has contributed capital and shares its profits and losses. He also has unlimited liability but he does not take part in day to day activities of business. Association of Mr. C is not known to the general public but in all other respects he is like an active partner. Mr. D has allowed the firm to use his name as he enjoys good reputation among clients but he does not either contribute capital or take part in the management.
Master 'E', 15 years of age is entitled to the benefits of partnership with mutual consent of all their members. He is not eligible to take part in management of firm and shares only profits and not losses of the firm.
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(iii) Who is the sleeping partner in the firm and what is the nature of his liability?
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(v) How does the partnership relationship of Mr. C differs from Mr. D ? How do they differ in their liability?
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