ICAEW BL · Chapter 7 · Question 10 of 10
Bertrand, a retired accountant, lets his former firm keep his name on its letterhead as 'consultant partner', although he takes no part in the business. A bank lends money to the firm after seeing the letterhead and believing he is a partner. The firm cannot repay. Is Bertrand liable to the bank?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Yes, because he knowingly allowed himself to be represented as a partner and the bank gave credit on that basis
Explanation
Under s14 Partnership Act 1890, a person who represents themselves, or knowingly allows themselves to be represented, as a partner is liable as a partner to anyone who gives credit to the firm on the faith of that representation. This is liability by holding out (estoppel). It applies even though Bertrand is not actually a partner and takes no profits.
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