Skip to content

CS Executive · Setting Up of Business, Industrial and Labour Laws · Limited Liability Partnership

Ravi, a partner of Nilgiri Foods LLP, has no authority to sign supply contracts. He signs a bulk purchase contract with a supplier who knows that Ravi lacks such authority. What is the position of the LLP?

The LLP is not bound by the contract. A partner without actual authority cannot bind the LLP when the third party knows about that lack of authority. Mere status as a partner is not enough to make the LLP liable in such a case.

  1. AThe LLP is bound because Ravi is a partner
  2. BThe LLP is bound only to the extent of the credit received
  3. CThe LLP is not bound because Ravi had no authority and the supplier knew itCorrect
  4. DThe LLP is bound but Ravi alone must pay the supplier from the LLP's property

Explanation

An LLP is not bound by a partner's act if the partner in fact had no authority for it and the other person knows he has no authority or does not know or believe him to be a partner. Both conditions are present here, since the supplier knew of the lack of authority. Being a partner alone does not bind the LLP in these circumstances.

Did you get it right without looking?

One question tells you little. A timed set on Limited Liability Partnership shows your real accuracy, how long you take and where you lose marks.

Practise Limited Liability PartnershipFree diagnostic mock

More Limited Liability Partnership questions