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CA Foundation · Business Laws · The Limited Liability Partnership Act, 2008

Mehul, a partner in Zenith Logistics LLP, signs a supply contract with a vendor, acting within his authority as per the LLP agreement. The LLP later fails to pay. Who is primarily bound by the contract?

The LLP is bound, because a partner acts as an agent of the LLP and not of the other partners. Since Mehul acted within authority, the contract binds Zenith Logistics LLP, and he is not personally liable merely for signing it.

  1. AMehul personally, since he signed it
  2. BThe LLP, since a partner is an agent of the LLP only and not of other partnersCorrect
  3. CAll the partners jointly and severally, without limit
  4. DThe Registrar of Companies, as the registering authority

Explanation

In an LLP, each partner is the agent of the LLP, not of other partners. An act done by a partner with authority binds the LLP. Mehul is not personally liable for the LLP's obligation merely because he signed. Option C describes ordinary partnership, not an LLP.

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