Question 5 (c)

Short notes: partners' liability for fraud; illegal and void agreements; termination of agency

18 marks

Time to write
About 36 minutes
Topic
Short notes and true or false across several topics
Notes
Crux notes

Question

Question 5 (c) · 18 marks

Write a short note on any three of the following:

  1. Liability of the Partners in case of Fraud under the LLP Act of 2008,

  2. Whistle Blowing as provided in the LLP Act, 2008,

  3. Illegal agreements versus void agreements,

  4. Termination of Agency,

  5. Sale versus agreement to sell. (6×3=18)

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

36 minfor 18 marks

Read from the question

  • any threeAnswer any 3 of the 5, 6 marks each. Only 3 are marked: a fourth earns nothing.
  • short noteA note opens with the meaning, then two or three key points. No long introduction.

Write it in this order

The parts stand alone: start with the one you are surest of.

  1. Read; underline the asks; jot your points 2 min
  2. 1 (i) Liability of partners in case of fraud 6 marks 11 min
  3. 2 (iii) Illegal and void agreements 6 marks 11 min
  4. 3 (iv) Termination of agency 6 marks 10 min
  5. Check: every ask answered, key terms underlined 2 min

Easy marks

  • Choose the ones you know best: each carries the same marks.

Short on time? A few lines on every part beat a full answer to one: each part is capped at its own marks.

Try it first. About 36 minutes for 18 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Notes are written on three of the five topics: (i), (iii) and (iv).

Picture itShort notes: partners' liability for fraud; illegal and void agreements; termination of agency

1The sofa is paid for and ribboned—when it burns that night, the loss is the buyer's.

SaleProperty passes to the buyer at once; loss falls on the buyer.

2The chair is still under the carpenter's hammer—until it is finished and handed over, it burns as the seller's.

Agreement to sellProperty passes at a future time or on fulfilment of a condition; loss falls on the seller.

(i) Liability of the Partners in case of Fraud under the LLP Act of 2008 (s. 30):

  • Unlimited liability. Where an act is carried out by the LLP, “or any of its partners, with intent to defraud creditors of the” LLP “or any other person, or for any fraudulent purpose, the liability of the” LLP and of the partners who acted with that intent is unlimited for all or any of its debts and liabilities. Where a partner did the act, the LLP is liable to the same extent unless it shows that the act was without its knowledge or authority (s. 30(1)).
  • Punishment. Every person knowingly a party to carrying on business in that manner is punishable with imprisonment for up to two years and with fine of not less than fifty thousand rupees, extending to five lakh rupees (s. 30(2)).
  • Compensation. The LLP and the partner, designated partner or employee who conducted its affairs fraudulently must compensate any person who suffered loss, without prejudice to criminal proceedings; the LLP is not liable if he acted fraudulently without its knowledge (s. 30(3)).

(iii) Illegal agreements versus void agreements.

  • Void agreement: an agreement not enforceable by law (s. 2(g)). It is not forbidden by law, it is not necessarily illegal, and the parties to it incur no punishment.
  • Illegal agreement: one whose object or consideration is unlawful. It is forbidden by law, it is always void, and the parties to it are liable to punishment.
  • Hence every illegal agreement is void, but a void agreement is not necessarily illegal.

(iv) Termination of Agency. Under section 201 of the Indian Contract Act, 1872, an agency is terminated:

  1. by the principal revoking his authority;
  2. by the agent renouncing the business of the agency;
  3. by the business of the agency being completed;
  4. by either the principal or the agent dying or becoming of unsound mind; or
  5. by the principal being adjudicated an insolvent.

Exception (s. 202). Where the agent himself has an interest in the property that “forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of” that interest: if A authorises B to sell A's land and pay himself, out of the proceeds, the debts A owes him, A cannot revoke the authority, and A's death or insanity does not end it.

Where the 18 marks sit

#ComponentMarks
1(i) Liability of partners in case of fraud6
2(iii) Illegal and void agreements6
3(iv) Termination of agency6
Total18
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