Liability

Question 1

what is holding out and how can this take place?

Answer 1

If a person represents themselves as a partner (or allows someone else to) they can be liable for partnership debts to anyone who gave credit to the partnership on the basis of the representation

Can be orally, by conduct or in writing (i.e. on notepaper/letterhead)

Question 2

explain the general liability of partners

Answer 2

a partner is jointly liable for all debts + liabilities incurred whilst they are a partner

Question 3

when are partners jointly and severally liable?

Answer 3

Partners are jointly + severally liable for wrongful acts (i.e. tort, misuse of 3rd party money)

Question 4

explain the the liability of an incoming partner

Answer 4

a new partner is not liable for debts incurred before they joined

Question 5

explain the liability of an retiring (outgoing) partner

Answer 5

A retiring partner remains liable for debts incurred before retirement unless they enter into a novation agreement

A retiring partner is not liable for debts incurred after they retire unless:
o They have held themselves out; and/or
o They have failed to give creditors notice of their retirement, i.e.:
 Actual notice to creditors the firm has had dealings with
 Notice in the London Gazette for all other creditors

Question 6

what is a novation agreement?

Answer 6

creditor, existing partners and retiring partner agree the retiring partner can be released from liability