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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: Every partner is liable alone and jointly with other partners for the debts of a partnership firm incurred for the business. Every partner is an agent of every other partner while being a principal in his own right in the business of the partnership.
Fact Situation: Varun is a partner in a firm with Chinmoy and Jaffar. Jaffar purchases a car for his personal purpose and obtains credit for the same in the name of the partnership behind the back of the other partners. He fails to pay the due amount on the expiry of the period of credit.
Which of the following statements is the most appropriate in relation to the legal principle stated above?
Options
Varun, Chinmoy, and Jaffar are liable to pay for the car since they are partners and the credit was obtained in the name of the firm.
Varun and Chinmoy are not liable to pay for the car since Jaffar purchased it for his personal purpose.
Varun, Chinmoy, and Jaffar are liable as partners for all credit obtained in the name of the firm even if it is for the personal purpose of a partner.
Jaffar can use the credit of the firm to make purchases even for personal purposes since he is a partner in the partnership.
Solution
Varun and Chinmoy are not liable to pay for the car since Jaffar purchased it for his personal purpose.
Explanation:
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner. In the light of the given legal principle and explanation provided above it is clear that Jaffer purchased the car for his personal use and obtained credit for it acting outside his authority behind the back of other partners, he was not acting as an agent of the company or as the partner to Varun and Chinmoy but was acting on behalf of himself and for a personal motive. Hence other two partners are not liable to pay. leading option (2) is the most appropriate statement
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