Legal Frame Work - Mba

LEGAL FRAMEWORK FOR MANAGERS

QUESTION 1 (PARTNERSHIP)

(a) In law a partnership is not a legal entity separate and distinct from its partners. The partners are the recognized legal persons for purposes of the debts and liabilities of the partnership for which they remain liable on a joint and several basis. Liability of partners in a firm is stipulated under Section 11 of the Partnership Act 1961 wherein any partner of the firm is liable jointly with the other partners for all debts and obligations of the firm incurred while he is a partner and after his death his estate is also severally liable in a due course of administration for such debts and obligations, so far as they remain unsatisfied but subject to the prior payment of his separate debts.

One characteristic of a partnership firm is that the liability of the firm is not separate from the liability of the partners. If a partnership does not have enough assets to meet a claim against it, the claim will have to be met from the partners’ personal assets. Indeed, all the partners in the firm are jointly responsible for the acts of every other partner. It is therefore possible for one partner's mistake to wipe out the personal assets of all the other partners.

The liability of partners are clearly spelt out under Section 14 of the Act whereby every partner of the firm is liable jointly with his co partners and also severally for everything for which the firm while he is a partner therein becomes liable under Section 12 and Section 13 of the same Act. For ease of reference, Section 12 of the Act is dealing with the Liability of Firm For Wrongs where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefore to the same extent as the partner so acting or omitting to act. Section 13 of the... [continues]

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