Question 4 OR (b)

Partner as agent of the LLP; liability for fraud

6 marks

Time to write
About 12 minutes
Topic
LLP: partners, designated partners, liability, whistle-blowing
Notes
Crux notes

Question

Question 4 OR (b) · 6 marks

"Partner act as an agent of the LLP". Comment. In addition, discuss the liability of the partners where fraud is involved.

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

12 minfor 6 marks

Read from the question

  • CommentA statement to judge: take a stand on it in your first line, and come back to it at the end.

Write it in this order

  1. Read; underline the asks; jot your points 1 min
  2. 1 Partner as agent of the LLP (s. 26), with comment 3½ marks 6 min
  3. 2 Liability in case of fraud (s. 30) 2½ marks 4 min
  4. Check: every ask answered, key terms underlined 1 min

Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.

Try it first. About 12 minutes for 6 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.

Comment. Every partner of an LLP is, for the purpose of the business of the LLP, the agent of the LLP, but not of the other partners (s. 26, Limited Liability Partnership Act, 2008). The statement is therefore true but incomplete. Because the LLP is a separate legal entity, a partner's authorised acts bind the LLP, not his fellow partners. Each partner can bind the LLP by his own acts, but not the other partners, whereas in a firm each partner binds the firm and all the other partners. An LLP is not bound by a partner's act where the partner had no authority and the person dealing with him knew it or did not believe him to be a partner. The liability of the partners is limited to their agreed contribution.

Liability of partners in case of fraud. Limited liability does not protect fraud. The liability of each partner is limited to his agreed contribution except in the case of wilful fraud. Where an act is carried out by an LLP or any of its partners with intent to defraud creditors 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 the debts and liabilities of the LLP, and every person knowingly a party to it is also punishable with imprisonment and fine.

Where the 6 marks sit

#ComponentMarks
1Partner as agent of the LLP (s. 26), with comment3.5
2Liability in case of fraud (s. 30)2.5
Total6
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