Page 155 - DMGT102_MERCANTILE_LAWS_I

Unit 11: Types of Partners

z To avoid future complications and dispute amongst the persons constituting partnership, Notes
agreement in writing must be preferred.
z A partnership is formed by an agreement between the partners. The rights and obligations
of the partners towards each other and towards the firm can be determined by an oral or

written agreement.
z To avoid future dispute it is always advisable to have partnership expressed in writing.

11.6 Keywords

Sleeping partner: It is one who does not take an active part in the business of the fi rm.
Sub-partnership: It comes into existence when one of the partners agree to share the profi ts
derived by him from the firm with a third person. This third person is called a ‘sub-partner’.

11.7 Self Assessment

Fill in the blanks:
1. A partner may transfer his interest in the firm by sale, ............................. or charge.

2. A person who deals with a firm may have to ascertain, at some time or the other (such as

where the fi rm has made a default) as to not only who the partners are, but also to what
extent each is ............................. .
3. If a partner is entitled to a certain ............................. without being liable for the losses, he is
known as partner in profi t only.

4. ............................. that the dissolution of partnership between all the partners of a fi rm is
called the “dissolution of the fi rm”.

11.8 Review Questions

1. Write a short note on ‘liability of a firm for wrongful acts of a partner’.

2. Explain the conditions under which a partner may be expelled from the firm. State the

consequences of such an expulsion.
3. In what circumstances is partnership dissolved: (i) automatically, (ii) compulsorily by the
court?
4. What is meant by dissolution of a firm? Is it different from the dissolution of partnership?

5. Describe the mode of settling accounts of a firm after dissolution with special reference to
a case where one of the partners has become insolvent and nothing is recoverable from his
estate.

Answers: Self Assessment

1. mortgage 2. liable
3. share of profi t 4. Sec.39 provides

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