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Good day,
Some clarity please on question 2 of partnership end of chapter question……a firm refers to an unlimited partnership as per 1890 Act…..according to that Act incoming partners are only liable to debts incurred after they became partners.
However question 2 ….ask if a partner joins a firm and soon after it declares itself bankrupt what is the extent of the new partners liability?
When I select a….for entire debits and liabilities incurred since admission into the firm…its incorrect.
However the correct answer is d…for the entire debits and liabilities for firm.
Kindly explain as what I have read so far ….is that only if the unlimited partnerships didn’t form their own contract would the default provisions for the 1890 Act come into play and the question didn’t make mention to any such details.
Thank you for your assistance.
Where a new partner is admitted into the firm, that partner would normally accept liability for the debts (note, not debits) and liabilities of the firm as at the date of entry.
There is the possibility that, at the same time as the new partner is admitted, one of the existing partners retires. That retiring partner remains liable for the debts and liabilities up to the date of retirement. However, by the signing of a “novation”, the old partner can be relieved of that liability and the new incoming partner will assume liability
It sounds like I need to look at question 2 again
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