Solution
Robert answered on
Dec 22 2021
Question 1
In the given case, Adam provides business and management advice to the partnership firm
operating the Bentley Physiotherapy clinic and conducting its business according to a
partnership agreement between the three partners – Tim, Kathy and Martin. Further, he has
contributed $15,000 to set up a corporate health and fitness program but he has clearly shown
to Tim, one of the partners in the firm, of his wish to not be a partner of the firm. However,
he is actively involved in promoting the above said program. So much so that in one of his
ecent business travels, he discovered some very high quality exercise and spin bikes and
decided to buy three of those for the corporate fitness program as he considered them to be a
very good buy. He was very sure that the clinic would easily agree to pay for these bikes. On
an analysis of these facts, we find that it is clear that Adam is acting in a manner which is
suitable for an actual partner of the firm.
Section 17 of the Partnership Act 1891 deals with persons who become liable for debts of the
firm by holding out as partners of the firm. As per this section, an person who by written or
spoken words or by conduct represents himself or lets himself be represented as a partner in
the firm; then, such person is liable in a capacity as the partner of the firm to all those persons
who acted on the basis of this representation by him and granted any kind of credit to the
firm. It is immaterial whether such has representation has or has not been made to or told to
the person who is giving such credit to the firm. Thus, such a person is called as a partner by
holding out. What this means is that such a person, in his dealings with outsiders, holds
himself out to be or conducts himself in a manner which is appropriate to a partner of the
firm. Thus, when a person so conducts or represents himself, then he is liable for all the sums
which may fall due to be paid by the firm because of such conduct by him. He is liable to all
those persons who may have acted due to such conduct by him or representations made by
him and as a result, have lent certain sums of money or given credit to the firm.
Applying this section to the facts of the case, we see that Adam has done all the acts which
are suitable of a partner of the firm. He has invested $15,000 in the clinic to set up a
corporate health program and is actively participating in the promotion of this program.
Further, he is also involved in setting up a dedicated facility, with a great range of equipment,
at the clinic. Also, when he discovers some very good quality exercise bikes and spin bikes
which might be suitable for the corporate fitness program; he independently decides to order
three exercise bikes and three spin bikes for an aggregate sum of $9,500. Thus, it is clear that
he is acting in a manner which is suitable of a partner in holding out as he is holding himself
to be a partner of the firm by taking such decision independently and without consulting or
seeking approval from the...