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CSEET · Business Laws and Management · Elements of Law relating to Partnership and Limited Liability Partnership

Statement I: A contract between partners may provide that a partner shall not carry on any business other than that of the firm while he is a partner. Statement II: Such a provision is void because of section 27 of the Indian Contract Act, 1872. Which is correct?

Statement I is correct and Statement II is incorrect. The Partnership Act allows the partners' contract to restrict a partner from carrying on any other business during his partnership, notwithstanding section 27 of the Contract Act, so such a restriction is valid and not void.

  1. ABoth statements are correct
  2. BStatement I is correct and Statement II is incorrectCorrect
  3. CStatement I is incorrect and Statement II is correct
  4. DBoth statements are incorrect

Explanation

Section 11(2) of the Partnership Act says that, notwithstanding section 27 of the Contract Act, partners' contracts may bar a partner from carrying on any other business while he is a partner. So Statement I is correct, and Statement II is wrong because the provision is valid.

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