In relation to law governing partnerships, explain the legal position in a cases where, The liability of an individual partner for the liability of the firm
Liability of an individual partner for the liabilities of the firm
The liability of a general partner extends to the whole of the debts of the partnership.
He jointly with the other partners for this reason a creditor can pursue one of two courses of action.
Firstly, he can proceed against the partners jointly i.e. in the firm name. If he obtains judgment against the firm, the debt must be satisfied out of the assets of the firm. If, however, the assets of the firm are insufficient, then the creditor can look to the private assets of the partners in order to satisfy his debt.
Secondly, the creditor can proceed against any individual partner. If he obtains judgment against a certain partner and this judgment cannot be satisfied out of the private property of that partner, then the creditor cannot proceed against the remaining partners.
The creditor must pursue either one course or the other. If he pursues the second course described above, the partner against whom the judgment is obtained will be liable to pay the full amount. He has a right to call upon the other partners, however, to contribute the shares which they should bear.
Under section 12 of Partnership Act, an infant/ minor partner is not liable for debts and other liabilities during his infancy as the contract of partnership is voidable at the infant’s option during infancy or within a reasonable time after attaining the age of majority. Under section 13, if an infant partner does not avoid the agreement during infancy or within a reasonable time after attaining the age of majority he becomes liable for the debts and liabilities from the date he became a partner.
Unless otherwise agreed, an outgoing partner is only liable for the debts and other liabilities of the firm upto the date he ceases to be a partner.
Under section 18 of Partnership Act, a person who by words spoken or written or by conduct represents himself as a partner or knowingly permits himself to be represented as a partner and the 3rd Parties rely upon the representation such a person is Liable to such 3rd parties through the equitable Doctrine of Estoppel. This was the case in Freeman and Lockyer V BurkeBust