CAF-4 · Chapter 13 · Question 6 of 10
Kamran, a partner, obtained a loan of Rs. 500,000 from a bank in the name of his trading partnership. He secretly used the money to pay for a personal family vacation. The firm later goes bankrupt. How is liability assigned for this bank loan?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) All partners are jointly and severally liable for the repayment of the loan.
Explanation
Because borrowing money is within the implied authority of a partner in a trading firm, the act binds the firm. Every partner is jointly and severally liable for acts of the firm done while they are a partner.
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