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B contributes capital to a firm and shares its profits and losses but takes no part in running the business, and the firm's customers do not know he is a partner. A supplier sues for goods sold to…

Question and options

B contributes capital to a firm and shares its profits and losses but takes no part in running the business, and the firm's customers do not know he is a partner. A supplier sues for goods sold to the firm while B was a partner. What is B's liability to the supplier?

  1. His liability is limited to the capital he contributed to the firm

  2. He is liable jointly with the other partners and also severally

  3. He is not liable, as the supplier did not rely on his being a partner

  4. His liability depends on his having signed the contract himself

Answer and explanation

Correct answer: B - He is liable jointly with the other partners and also severally

A sleeping partner is a true partner, so section 25 of the Indian Partnership Act, 1932 makes him liable, jointly with the other partners and also severally, for acts of the firm done while he is a partner. Reliance by the creditor matters only for holding out under section 28, which concerns persons who are not partners; an actual partner is liable whether or not outsiders know of him.

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