Question

Given below is a statement of legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.

Legal principle: A partner is liable for the debts incurred by the other partners in the course of the partnership.

Factual situation: Satwik and Prateek enter into a partnership to produce a film, wherein Satwik also directs the movie. The movie bombed at the box office. Consequently, they run into financial difficulties and the partnership ends. Prateek goes to Abbas to borrow some money, which Abbas understands is for repaying the debts from the partnership. Prateek takes the money and absconds to Malibu. Abbas sues Satwik for the amount. Decide. DECISION:

Options

• Satwik is liable to return the money as it was his partner, Prateek, who directed the movie.

• Abbas has been negligent in not properly enquiring the purpose for which Prateek borrowed the money. Satwik is not liable to pay him back according to the principle of contributory negligence.

• Satwik is not liable as Prateek absconded with the money instead of using it to pay off the debts in the partnership.

• Satwik is not liable as by the time Prateek borrowed money from Abbas, the partnership was no more in existence.

Answer 1

Satwik is not liable as by the time Prateek borrowed money from Abbas, the partnership was no more in existence.

Explanation:

Partner is liable for debts incurred by another partner until the partnership exists. In the present case, the partnership was over when Prateek took the debt.