Legal Aptitude MCQs – Commonly Asked Questions for Exams – Must Know Topics and Concepts Part 8

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55. Legal Principle Mode of determining existence of partnership - In determining whether a group of person is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant fact taken together.

What is the parameter of determining existence of partnership?

a) A firm

b) Group of persons

c) Real relation between the parties

d) None of the above

Ans: (d)

56. Legal Principle The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not in itself make such person’s partners.

The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business.

Which of the following is not sufficient to constitute a partnership?

a) the sharing of profits by persons having a joint or common interest.

b) the receipt by a person of a share of the profits.

c) the receipt by a person of a payment varying with the profits earned by a business

d) All of the above.

Ans: (d)

57. Legal Principle Partnership at will — Where no provision is made by any contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is ‘partnership at will’.

Section 7 of the Indian Partnership Act provides for

a) partnership

b) general partnership

c) special partnership

d) partner at will

Ans: (d)

58. Legal Principle General duties of partners- Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative.

What are the general Duties of partners in the firm?

a) To carry on the business of the firm

b) Partners to be just and faithful to each other

c) Render true account and full information

d) All of the above

Ans: (a)

Legal Principle The conduct of the business - Subjected to contract between the partners

i. every partner has right to take part in the conduct of the business

ii. every partner will attend diligently to his duties in the conduct of the business

iii. any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion, before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners; and

iv. every partner has a right to have access to and to inspect and copy any of the books of the firm.

Mutual rights and liabilities - Subject to contract between the partners,

i. a partner is not entitled to receive remuneration for taking part in the conduct of the business

ii. the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm

iii. where a partner is entitled to pay interest on the capital subscribed by him such interest shall be payable only out of profits

iv. a partner making, for the purposes of the business, any payment or advance beyond the amount of capital has agreed to subscribe, is entitled to interest thereon at the rate of six per cent per annum

v. they shall indemnify a partner in respect of payments made and liabilities incurred by him

1. in the ordinary and proper conduct of the business, and

2. in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and

vi. a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm.

59. According to Section 12 of the Partnership Act, what should be the conduct of the business in a firm?

a) Every partner has a right to take part in the conduct of the business.

b) A partner is not entitled to receive remuneration

c) A partner should indemnify

d) Partnership at will

Ans: (c)

60. The partners are entitled to share equally in the profits earned, and shall contribute equally to the lasses sustained by the firm”, it covers under

a) the conduct of the business

b) general duties of partners

c) mutual rights and liabilities

d) None of the above

Ans: (d)

61. Legal Principle Introduction of a partner- Subjected to contract between the partners and to the provisions of Section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners.

Subjected to the provisions of Section 30, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he because of a partner.

A new partner can be introduced into a firm in the following ways

a) with the consent of all the existing partners

b) In accordance with a contract between the partners

c) In accordance with the provisions of Section 30

d) All of the above

Ans: (c)