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

Nandini and Omkar are the only partners of Zenith Ventures LLP. Omkar acts for the LLP in a deal and, without authority from Nandini, commits a fraud against a customer, Rohit, who deals with the LLP in good faith. Which statement best reflects the nature of an LLP regarding Omkar's act?

A partner of an LLP is the agent of the LLP, not of the other partners. So the LLP is liable for Omkar's wrongful act in its business, while Nandini is not personally liable for his independent act. Mutual agency among partners does not exist in an LLP.

  1. ANandini is personally liable for Omkar's fraud because all partners are agents of each other
  2. BOmkar is the agent of the LLP only, so Nandini is not personally liable for his wrongful act, though the LLP is liableCorrect
  3. CThe LLP is not liable because fraud is always outside a partner's authority
  4. DNeither the LLP nor Omkar is liable as the customer should have verified authority

Explanation

In an LLP a partner is an agent of the LLP, not of other partners. The LLP is liable for a partner's wrongful act done in the course of its business, but an innocent partner is not personally liable for another partner's independent act. Option A applies the ordinary partnership rule, which does not apply to an LLP.

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