CSEET · Business Laws and Management · Elements of Law relating to Partnership and Limited Liability Partnership
Statement I: A retired partner is not liable to a third party who deals with the firm without knowing that he was a partner, even if no public notice of retirement was given. Statement II: A retiring partner may be discharged from liability to a third party for earlier acts of the firm by an agreement with that third party and the partners of the reconstituted firm, and such agreement may be implied from a course of dealing. Which is correct?
Both statements are correct. Under Section 32(3) proviso, a retired partner is not liable to a third party who dealt without knowing he was a partner. Under Section 32(2), discharge may be by agreement with the third party and the reconstituted firm, even implied from a course of dealing.
- AOnly Statement I is correct
- BOnly Statement II is correct
- CBoth statements are correctCorrect
- DNeither statement is correct
Explanation
Section 32(3) proviso protects a retired partner from a third party who dealt with the firm without knowing he was a partner. Section 32(2) permits discharge by agreement with the third party and the reconstituted firm's partners, and the agreement may be implied from a course of dealing after knowledge of retirement. Both statements are therefore correct.
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