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

Priya and Quentin are partners. Quentin is declared bankrupt. The partnership agreement is silent on the effect of a partner's bankruptcy. Which statement is correct under the general law?

Where the agreement is silent, the bankruptcy of a partner automatically dissolves the partnership. Partners may contract out of this default rule in their agreement, but without such a term the firm ends on Quentin's bankruptcy.

  1. AThe partnership is automatically dissolved, unless the agreement provides otherwiseCorrect
  2. BThe partnership continues and Quentin's trustee becomes a partner
  3. CThe partnership is dissolved only if Priya applies to the court
  4. DThe partnership continues but Quentin's liability for past debts ends

Explanation

Under the default rule the bankruptcy of a partner dissolves the partnership automatically, and the partners can contract out of this. Option B is wrong because a trustee does not step in as a partner. Option D is wrong because liability for existing debts is not removed.

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