Arun is not a partner in a firm. He tells a supplier that he is a partner, and the supplier gives the…
Holding out also covers knowingly allowing oneself to be represented as a partner. Liability is to a person who gave credit to the firm on the faith of the representation.
Choose your answer
Arun is not a partner in a firm. He tells a supplier that he is a partner, and the supplier gives the firm credit in reliance on that representation. What follows under section 28(1) of the Indian Partnership Act, 1932?
Answer and explanation
Correct answer A
Holding out also covers knowingly allowing oneself to be represented as a partner. Liability is to a person who gave credit to the firm on the faith of the representation.
Option feedback
Option A
The supplier extended credit to the firm on the faith of Arun's representation.
Option B
Section 28(1) imposes liability to the relying credit provider. It does not create an actual partnership agreement.
Option C
The section requires the representation and reliance when credit is given. It does not require prior approval from the true partners.
Option D
Holding out can create liability as a partner even in the absence of actual partnership.
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