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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Chen, Dalia and Emeka are partners in a general partnership. The firm cannot pay a debt of 90,000 owed to a creditor on a contract properly made by Chen for the firm. The firm's assets are insufficient. Which statement about the partners' liability is correct?

Each partner is personally liable without limit. In a general partnership, the partners' private assets can be used to meet firm debts when firm assets are insufficient. Liability is not limited to capital contributed, and it does not fall only on the partner who made the contract.

  1. AEach partner is personally liable without limit, and the creditor may pursue the partners' private assetsCorrect
  2. BEach partner is liable only up to the capital they contributed to the firm
  3. COnly Chen is liable, because he made the contract
  4. DThe partners are liable only for one-third each of the debt and no more

Explanation

In a general partnership, partners have unlimited personal liability for the firm's debts, so private assets can be reached once the firm's assets are insufficient. Liability is not capped at capital contributed. It does not rest only on the partner who made the contract, since he acted as agent for all.

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