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Partnership: Types, Deed, Rights, and Dissolution

22 questions

All types22Multiple choice12Matching4Ordering6
Question 1Question →

In a limited partnership operating under commercial legal regulations, which of the following statements correctly describes the liability status of the partners?

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Answer: At least one partner must have unlimited liability for the debts of the firm.

Answer

At least one partner must have unlimited liability for the debts of the firm.
Under commercial law, a limited partnership must consist of one or more general partners who have unlimited liability for the debts of the business, alongside limited partners whose liability is restricted to their capital contributions.

Step-by-Step Solution

1
Identify the key legal requirement defining a limited partnership.
Distinguish between limited partners and general partners.
A limited partnership is created to allow passive investors to limit their financial risk while retaining at least one general partner to handle full liability.
2
Evaluate the legal liability obligation under commercial partnership law.
Confirm that at least one partner must retain unlimited liability.
Creditors must have recourse to at least one partner's personal assets if the business assets are insufficient to cover debts.

Key Concept

Liability structure of a limited partnership
Estimated Time:45s
Question 2Question →

Match each type of partner in a business partnership with the statement that correctly describes their management role and liability status.

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Items

Sleeping (Dormant) Partner
Active Partner
Nominal Partner
Limited Partner

Matches

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Answer

Sleeping (Dormant) Partner matches with contributing capital and sharing profits without taking an active part in operations; Active Partner matches with taking an active role in operations with unlimited liability; Nominal Partner matches with allowing their name to be used without contributing capital or receiving profits while remaining liable; Limited Partner matches with having liability restricted to capital contributed without management rights.
Each partner type matches their statutory definition under commercial law: Sleeping Partners invest capital and share profits without managing; Active Partners manage operations with unlimited liability; Nominal Partners lend their name without capital/profit participation; Limited Partners have liability limited to capital contributed without management rights.

Step-by-Step Solution

1
Identify the key characteristics of a Sleeping Partner.
A sleeping partner invests capital and receives profit shares but is inactive in daily management.
Dormant or sleeping partners do not participate in day-to-day administration of the firm.
2
Identify the key characteristics of an Active Partner.
An active partner manages the enterprise directly and has unlimited liability.
Active partners hold full executive authority and bear full personal risk for partnership liabilities.
3
Identify the key characteristics of a Nominal Partner.
A nominal partner permits the firm to use their name, holds no financial stake in profits or capital, but is liable to third parties.
Lending one's name to the public creates legal liability to third parties despite lack of capital investment.
4
Identify the key characteristics of a Limited Partner.
A limited partner's liability is capped at their capital contribution, and they cannot take part in management.
Under partnership laws, limited liability status is contingent upon non-participation in management.

Key Concept

Classification, management rights, and legal liabilities of partners in a partnership business.
Question 3Question →

Match each type of partner in a commercial partnership with the statement that accurately describes their capital contribution, management rights, and legal liability status under commercial partnership law.

Click a left item, then click its matching right item

Items

Active Partner
Sleeping (Dormant) Partner
Limited Partner
Nominal Partner

Matches

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Answer

Active Partner pairs with full management rights and unlimited liability; Sleeping Partner pairs with no active management role and unlimited liability; Limited Partner pairs with no management rights and liability restricted to capital contributed; Nominal Partner pairs with no capital contribution or management rights but third-party liability due to lending their name.
Each partner type matches their specific legal standing: Active partners manage and face unlimited liability; Sleeping partners do not manage but still face unlimited liability; Limited partners exchange management rights for protection against debts exceeding their investment; Nominal partners contribute no equity but incur liability by lending their name.

Step-by-Step Solution

1
Examine the management role and liability of an Active Partner.
Identified as a partner who contributes capital, takes an active part in daily business decisions, and carries unlimited liability.
By definition in commercial law, active partners exercise management rights and have joint and several unlimited liability.
2
Distinguish a Sleeping (Dormant) Partner from a Limited Partner based on liability.
Sleeping partners take no part in management yet retain unlimited liability, whereas limited partners are legally prohibited from managing in exchange for liability restricted to their investment.
A common examination error is assuming inactivity grants limited liability; under partnership law, only formal creation of a limited partnership limits liability for non-managing partners.
3
Analyze the features of a Nominal Partner.
Identified as someone who contributes no capital and receives no profit share, but holds themselves out as a partner.
Under the principle of estoppel, holding oneself out as a partner creates legal liability to third parties who extend credit to the firm based on that representation.

Key Concept

Classification, Rights, and Legal Liabilities of Partners
Question 4Question →

Three entrepreneurs established a commercial logistics enterprise as a partnership without drawing up a formal Partnership Deed. During the financial year, one partner advanced a personal cash loan to the firm beyond their agreed capital contribution to assist with operational expansion. Under the statutory provisions of the Partnership Act, which of the following is this partner legally entitled to receive in the absence of an agreement?

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Answer: Interest at 5% per annum on the cash loan advanced to the firm

Answer

The partner is entitled to receive interest at 5% per annum on the additional cash loan advanced to the firm.
In the absence of a Partnership Deed, the Partnership Act provides that any partner who advances money or a loan to the firm beyond their agreed capital contribution is entitled to interest at the rate of 5% per annum on such an advance.

Step-by-Step Solution

1
Identify the applicable statutory default rules under the Partnership Act when no formal Partnership Deed is executed.
The Partnership Act provides default provisions that automatically govern partner rights regarding salaries, profit sharing, interest on capital, and loans.
In the absence of an express written agreement, statutory implied terms take legal effect.
2
Evaluate each potential financial entitlement against the statutory provisions.
Loans advanced beyond capital earn 5% interest per annum, while salaries and interest on capital are barred, and profits must be split equally.
The law specifically encourages partners to provide temporary financial advances by granting them a guaranteed statutory interest rate of 5% per annum.

Key Concept

Statutory provisions governing partner rights in the absence of a Partnership Deed
Question 5Question →

Four trading partners dissolved their partnership firm after five years of business operations without drawing up a formal Partnership Deed. After liquidating all firm assets, the liquidator holds the total realized proceeds. Under the provisions of the Partnership Act applicable in commercial law, which of the following outlines the correct legal order of priority for applying these funds?

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Answer: Settle external debts first, pay partner advances next, refund partner capital contributions third, and distribute any remaining surplus according to the profit-sharing ratio.

Answer

The correct sequence for applying realized proceeds upon partnership dissolution is: first settle external debts, next repay partner advances/loans, then refund partner capital contributions, and finally distribute any remaining surplus according to the profit-sharing ratio.
The correct answer accurately reflects Section 44 of the Partnership Act 1890 regarding the distribution of assets upon dissolution. External debts owed to outside creditors take absolute priority. Once external liabilities are satisfied, any advances or loans made by partners to the business beyond their capital are repaid rateably. Next, capital accounts are refunded. Any ultimate residual surplus is treated as profit and distributed among the partners in their profit-sharing ratio (or equally if no ratio was agreed upon).

Step-by-Step Solution

1
Identify the governing legal framework when no Partnership Deed exists
The standard provisions of the Partnership Act 1890 apply to govern the dissolution and account settlement process.
In the absence of a written agreement specifying otherwise, statutory rules dictate the distribution order of partnership assets.
2
Apply the statutory order of asset distribution upon dissolution
1st: Debts to outside (non-partner) creditors; 2nd: Advances/loans made by partners; 3rd: Capital contributed by partners; 4th: Residual surplus.
Outside creditors have primary legal claim over firm assets to satisfy liabilities before any distribution to equity owners or partners.
3
Select the option reflecting this exact legal hierarchy
The option prioritizing external debts, followed by partner advances, partner capital, and residual profit sharing.
This directly aligns with the mandatory priorities established in statutory commercial law.

Key Concept

Partnership Dissolution and Settlement Hierarchy of Accounts
Question 6Question →

Arrange the following steps in the correct statutory sequence for settling accounts and distributing assets upon the dissolution of a partnership firm, from first to last.

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Answer

The correct statutory order for distributing assets upon partnership dissolution is: first, paying external third-party creditors; second, settling partner loans and advances; third, returning partner capital contributions; and fourth, distributing any remaining surplus in the agreed profit-sharing ratio.
Under standard commercial law (Section 44 of the Partnership Act), the settlement of accounts upon dissolution follows a strict hierarchy: external third-party liabilities are paid first, followed by partner loans and advances, then partner capital refunds, and finally the distribution of any remaining surplus among partners according to their agreed profit-sharing ratio.

Step-by-Step Solution

1
Discharge external liabilities
Debts owed to outside creditors and suppliers are fully paid.
Outside creditors hold primary legal claims against the firm's assets.
2
Settle partner loans and advances
Money lent to the firm by partners beyond their capital contributions is repaid.
Partner loans are treated as debt obligations taking precedence over equity capital repayment.
3
Refund partner capital accounts
Capital contributed by each partner is returned.
Equity capital is returned to owners only after all debt claims (external and internal) are cleared.
4
Divide the residual surplus
Remaining net assets are distributed among partners based on their profit-sharing ratio.
Partners receive residual profits in their capacity as equity owners.

Key Concept

Statutory Sequence of Asset Distribution upon Partnership Dissolution
Estimated Time:1m 15s
Question 7Question →

An experienced merchant allows his name and professional reputation to be published on the official letterhead and signpost of a newly formed trading partnership, despite contributing no capital and taking no active role in business operations. If the partnership subsequently defaults on a trade debt owed to a supplier who relied on this representation, what is the merchant's financial liability status under commercial partnership law?

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Answer: He bears unlimited personal liability to third parties as a nominal partner by holding out.

Answer

The merchant bears unlimited personal liability to third parties as a nominal partner (partner by estoppel or holding out).
Under partnership law, a person who permits their name to be publicly displayed as a partner is classified as a nominal partner (or partner by holding out/estoppel). Even though they share no profits and contributed no capital, they are held personally and unlimitedly liable for business obligations to third parties who extended credit relying on that representation.

Step-by-Step Solution

1
Identify the type of partner described in the scenario.
The individual is a nominal partner (or partner by holding out/estoppel) because he allows his name to be used by the business without contributing capital or participating in management.
Commercial law defines a nominal partner as one who lends their name and reputation to a firm.
2
Determine the legal liability associated with a nominal partner.
Under the law of partnership and estoppel, any person who represents themselves (or permits themselves to be represented) as a partner is liable to anyone who gives credit to the firm based on that representation.
Third-party creditors extend credit based on the creditworthiness and reputation of all ostensible partners.
3
Select the option that correctly describes this unlimited liability status.
The statement declaring unlimited personal liability to third parties as a nominal partner by holding out is the correct choice.
Nominal partners do not enjoy limited liability protection unless registered under a limited partnership act.

Key Concept

Liability of a Nominal Partner (Partner by Estoppel / Holding Out)
Estimated Time:1m 0s
Question 8Question →

Match each ground for partnership dissolution with its corresponding legal scenario or statutory circumstance under commercial law.

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Items

Dissolution by Operation of Law
Dissolution by Notice
Dissolution by Decree of Court
Dissolution by Expiration of Term

Matches

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Answer

Dissolution by Operation of Law matches automatic termination due to bankruptcy or illegality; Dissolution by Notice matches unilateral termination in a partnership at will; Dissolution by Decree of Court matches forced judicial winding-up for persistent breach or incapacity; Dissolution by Expiration of Term matches natural termination upon completion of a specific project.
Each mode of dissolution aligns with a distinct legal trigger under partnership law: operation of law covers automatic termination via bankruptcy or illegal business; notice applies to partnerships at will; court decrees deal with serious misconduct or incapacity; and expiration of term applies to fixed-period or single-adventure partnerships.

Step-by-Step Solution

1
Identify the criteria for automatic statutory dissolution (Operation of Law).
Bankruptcy of a partner or an event making the business illegal automatically terminates the partnership.
Commercial law prohibits carrying on a partnership with an insolvent partner or for an illegal purpose.
2
Examine how a partnership at will is terminated by notice.
A partner can terminate an open-ended partnership by serving notice to the other partners.
Partnerships lacking a fixed term depend on the ongoing mutual agreement of all partners.
3
Distinguish judicial dissolution from non-judicial dissolution.
Courts grant a decree of dissolution when requested due to severe partner misconduct or permanent insanity.
Judicial intervention is necessary when internal resolution fails and legal compulsion is required.
4
Analyze event-based or temporal dissolution.
Completion of a single undertaking or reaching an agreed target date ends the partnership automatically.
The contractual life of the firm expires when its defining goal or period is fulfilled.

Key Concept

Grounds and Legal Modes of Partnership Dissolution
Question 9Question →

In a registered limited partnership, a limited partner contributed capital but subsequently began taking an active role in negotiating binding business contracts and managing daily operations. Under commercial law, what is the legal consequence of this partner's participation in management?

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Answer: The partner loses limited liability protection and becomes personally liable for all business obligations incurred while acting in management

Answer

The partner loses limited liability protection and becomes personally liable for all business obligations incurred while acting in management.
Under partnership law governing limited partnerships, a limited partner enjoys protection from personal liability only if they refrain from taking part in the management of the firm's business. If a limited partner takes an active management role, such as negotiating contracts or directing operations, they forfeit their limited liability status and become liable for all debts and obligations incurred by the firm while participating in management.

Step-by-Step Solution

1
Identify the partner's status and actions in the scenario.
The individual is a limited partner in a limited partnership who actively engages in contract negotiation and daily management operations.
Limited partnership law strictly segregates capital investment from managerial control.
2
Apply the statutory rule governing limited partner conduct.
A limited partner who takes part in the management of the partnership business loses statutory immunity and becomes liable for all debts and obligations of the firm incurred during that period.
Limited liability is contingent upon remaining a non-managing investor; control over operations exposes the partner to unlimited personal liability.

Key Concept

Liability implications of limited partners taking part in partnership management
Estimated Time:1m 0s
Question 10Question →

In a commercial partnership, which type of partner contributes capital and shares in profits or losses, but takes no active part in the day-to-day management of the firm?

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Answer: A sleeping partner

Answer

A sleeping partner (also known as a dormant partner)
A sleeping partner, also referred to as a dormant partner, invests capital into the business and is entitled to share in the firm's profits and losses, but chooses not to take an active role in conducting or managing the daily affairs of the enterprise.

Step-by-Step Solution

1
Identify the key characteristics given in the scenario
The partner contributes capital, shares in profits/losses, but does not manage day-to-day operations.
Partnership law classifies partners based on their management involvement, liability, and capital contribution.
2
Match these characteristics to the legal definitions of partner types
A partner who invests capital and receives profit shares while remaining inactive in administration is defined as a sleeping (dormant) partner.
Distinguishing between active management rights and passive investment defines the classification of partners.

Key Concept

Classification of Partners in a Partnership Firm
Estimated Time:45s
Question 11Question →

A commercial receiver is executing the final liquidation of a dissolved general trading partnership pursuant to statutory commercial law provisions. In what precise sequence must the realized partnership assets be applied to settle the firm's financial obligations and distribution claims?

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Answer

The correct statutory order for applying assets upon partnership dissolution is: first, paying external third-party debts; second, settling partner loans and advances; third, returning partner capital contributions; and fourth, distributing any remaining surplus according to the profit-sharing ratio.
Under statutory partnership law governing account settlements upon dissolution, assets realized during liquidation must follow a strict statutory hierarchy: 1) Paying debts to non-partner third parties; 2) Paying each partner rateably for loans/advances beyond capital; 3) Paying each partner rateably for capital contributions; 4) Distributing any remaining surplus according to the agreed profit-sharing ratio.

Step-by-Step Solution

1
Identify the primary obligation to non-partner creditors under commercial partnership law.
External debts to suppliers and institutions take absolute priority over internal claims.
Protecting third parties ensures commercial integrity and complies with statutory dissolution rules.
2
Distinguish between partner loan advances and equity capital.
Partner loans beyond capital are settled rateably in the second position.
Advances are treated as internal debt, ranking higher than capital accounts.
3
Determine the priority of returning subscribed capital to partners.
Partner capital accounts are paid rateably in the third position.
Capital is equity investment and can only be refunded after all liabilities and loans are cleared.
4
Allocate any residual funds remaining after all claims and capital returns.
The final residual surplus is shared among partners according to profit-sharing ratios.
Surplus assets represent accumulated net profit belonging to the partners.

Key Concept

Settlement of Accounts upon Partnership Dissolution
Question 12Question →

When individuals form a commercial partnership, they frequently draft a written document known as the Partnership Deed. What is the primary purpose of this agreement?

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Answer: To define the internal rules, rights, duties, and profit-sharing ratios among the partners

Answer

The primary purpose of a Partnership Deed is to define the internal rules, rights, duties, and profit-sharing ratios among the partners.
The Partnership Deed acts as an internal contract that establishes the governance framework for the business, detailing capital contributions, decision-making rights, partner duties, and profit or loss sharing ratios to prevent conflicts.

Step-by-Step Solution

1
Identify the nature and definition of a Partnership Deed.
A Partnership Deed (also known as Articles of Partnership) is a legal document that outlines the terms of agreement between partners.
Understanding the function of commercial documents helps determine their specific business objective.
2
Evaluate the primary relationship governed by the deed.
The deed governs internal operations, such as capital contribution, profit and loss sharing, interest on capital/drawings, and duties of each partner.
It resolves potential future misunderstandings and disputes among members of the firm.

Key Concept

Purpose and function of a Partnership Deed
Question 13Question →

Match each partnership term on the left with its correct legal definition or characteristic on the right.

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Items

Sleeping Partner
Partnership Deed
Dissolution by Notice
Right to Share Profits

Matches

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Answer

Sleeping Partner matches with contributing capital without active management; Partnership Deed matches with the written agreement governing internal rules; Dissolution by Notice matches with terminating a partnership at will via written notice; Right to Share Profits matches with statutory entitlement to equal returns unless otherwise agreed.
Each term is correctly matched to its statutory definition under commercial partnership law: a sleeping partner contributes capital but stays inactive in operations; the Partnership Deed is the foundational written agreement; dissolution by notice applies to partnerships at will; and profit sharing is a core entitlement of partners.

Step-by-Step Solution

1
Identify the characteristic of a sleeping partner.
Sleeping partners provide capital and share gains/losses but remain non-active in management.
Differentiates dormant partners from active managing partners.
2
Identify the document governing partnership rules.
The Partnership Deed serves as the legal blueprint for firm operations.
Articles of partnership outline rights, duties, and financial ratios.
3
Determine the mechanism for dissolving a partnership at will.
Dissolution by notice occurs when a partner gives formal notification.
Partnerships at will do not have a fixed duration and can be ended by notice.
4
Match the statutory partner right regarding earnings.
Partners have an inherent right to share in profits.
Profit sharing is a fundamental element of partnership contracts.

Key Concept

Partnership concepts including partner classifications, constitutional agreement, partner rights, and statutory dissolution mechanisms.
Question 14Question →

Ade, Bello, and Chidi established a general business partnership in Nigeria without executing a written Partnership Deed. Ade contributed ₦6,000,000 in capital, Bello contributed ₦4,000,000, and Chidi contributed no capital but managed daily operations. During the financial year, Ade advanced an additional personal loan of ₦500,000 to the firm. At year-end, the firm realized a net profit of ₦1,200,000. Under the statutory implied provisions of the Partnership Act, how must the loan interest and net profit be distributed?

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Answer: Ade receives 5% per annum interest on his loan advance, and the net profit is shared equally at ₦400,000 each among Ade, Bello, and Chidi.

Answer

Ade is entitled to 5% interest per annum on his ₦500,000 loan advance, and the net profit of ₦1,200,000 must be shared equally (₦400,000 each) among all three partners.
When partners do not execute a Partnership Deed, section 24 of the Partnership Act outlines default rules: all partners are entitled to share equally in capital and profits, no partner is entitled to interest on capital before profit calculation, no partner is entitled to remuneration for acting in the business, and a partner making an advance beyond capital is entitled to interest at 5% per annum.

Step-by-Step Solution

1
Identify the statutory default rules applicable when no written Partnership Deed exists.
Under the Partnership Act 1890 applicable in Nigerian Law, default statutory implied terms apply automatically.
The absence of a written agreement means statutory provisions govern partner rights, profit sharing, and interest allocations.
2
Determine the entitlement and rate of interest on partner loan advances.
Ade is entitled to interest at the statutory default rate of 5% per annum on the ₦500,000 loan.
Advances made by a partner beyond their agreed capital contribution draw a statutory 5% interest per annum prior to profit distribution.
3
Determine the profit-sharing ratio and entitlement to partner remuneration or interest on capital.
Net profit is divided equally (1:1:1), giving ₦400,000 each to Ade, Bello, and Chidi. No partner receives a management salary or interest on capital.
Without an agreement, all partners share profits and losses equally regardless of capital contributed, and no partner is entitled to salary or interest on capital.

Key Concept

Statutory Implied Provisions in the Absence of a Partnership Deed
Estimated Time:1m 30s
Question 15Question →

Following the voluntary dissolution of a general commercial partnership firm operating in Nigeria, the appointed liquidator must realize the firm's assets and settle all liabilities pursuant to statutory commercial law (Partnership Act provisions). In what correct statutory sequence must the liquidator prioritize the disbursement of realized funds and asset distribution?

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Answer

The correct statutory sequence for distributing partnership assets upon dissolution is: First, pay winding-up and realization expenses; Second, discharge external third-party debts; Third, repay partner loans and advances rateably; Fourth, refund partner capital contributions; Fifth, divide any remaining surplus among partners according to their agreed profit-sharing ratio.
Under Section 44 of the statutory Partnership Act governing Nigerian commercial law, upon dissolution, the realized assets of a firm must be applied in a strict priority sequence: realization costs take ultimate priority to fund the liquidation, followed by external liabilities to outside creditors. Internal liabilities are then settled by first repaying partner loans/advances rateably, followed by partner capital refunds. Finally, any remaining residual surplus is shared among partners according to their agreed profit-sharing ratio.

Step-by-Step Solution

1
Identify legal costs and realization expenses
Discharge winding-up and legal expenses first from realized asset proceeds.
Administrative expenses incurred during asset realization must be settled first to preserve the legal integrity of the liquidator's work.
2
Discharge external liabilities
Pay off all trade creditors, bank overdrafts, and third-party liabilities.
Under statutory partnership rules, outside creditors hold absolute priority over internal partner claims.
3
Settle partner loans and advances rateably
Repay funds advanced by partners in excess of their capital contributions.
Partner loans represent debt obligations owed by the firm to partners acting in the capacity of creditors.
4
Return partner capital contributions
Refund capital balances to partners rateably.
Equity capital represents partner ownership rights, which can only be refunded after all debt obligations (external and internal) are cleared.
5
Distribute residual surplus assets
Divide net remaining funds among partners according to their profit-sharing ratio.
Any remaining surplus after satisfying all debt and capital claims constitutes net profit accruing to the partners.

Key Concept

Partnership Dissolution Asset Distribution Hierarchy
Question 16Question →

During the winding up of a dissolved commercial partnership, the firm's assets must be applied to discharge liabilities in a specific statutory sequence. What is the correct order of priority for settling these claims from first to last?

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Answer

The correct sequence for distributing assets upon partnership dissolution is: first, paying external third-party liabilities; second, repaying partner loans and advances; third, returning partner capital contributions; and finally, distributing any remaining surplus among partners in their profit-sharing ratio.
Under partnership law, asset distribution upon winding up follows a strict statutory hierarchy: outside liabilities are paid first, followed by partner loans and advances, then partner capital refunds, and lastly the distribution of any remaining surplus in the profit-sharing ratio.

Step-by-Step Solution

1
Identify external debts owed to non-partners.
External third-party liabilities must be discharged first before any payments to partners are made.
Commercial law protects outside creditors by giving their claims top priority.
2
Identify internal liabilities owed to partners as lenders.
Loans and advances made by partners beyond capital are repaid second.
Advances are treated as debts owed by the firm to partners acting as creditors.
3
Identify equity claims of partners.
Capital contributions are refunded to partners third.
Capital represents ownership equity and can only be returned after all debts are paid.
4
Identify any remaining funds after capital is refunded.
Residual surplus is divided in the agreed profit-sharing ratio.
Any remaining balance represents net capital gain or profit accrued during liquidation.

Key Concept

Statutory Order of Asset Distribution upon Partnership Dissolution
Question 17Question →

Chief Kalu permitted a newly established commercial firm to use his name on its signboards and business stationery as a senior partner, despite contributing no capital and receiving no share of profits. When the firm defaults on a debt owed to a supplier who extended credit relying on this representation, what is Chief Kalu's legal liability to the supplier?

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Answer: He is fully liable for the debt as a partner by holding out.

Answer

Chief Kalu is fully liable for the debt to the supplier as a partner by holding out (estoppel).
Under Nigerian commercial law and the Partnership Act, a person who holds himself out (or allows himself to be held out) as a partner is liable as a partner to anyone who has given credit to the firm on the faith of any such representation. Therefore, Chief Kalu is liable to the supplier as a partner by holding out.

Step-by-Step Solution

1
Identify the type of partner representation described in the scenario.
Chief Kalu is acting as a nominal partner / partner by estoppel (holding out) because he allowed his name to be used to induce confidence in the firm.
Under partnership law, allowing one's name to be published as a partner creates legal reliance for third parties.
2
Evaluate legal liability to third parties who acted on that reliance.
Any person who holds themselves out as a partner is held personally liable for debts incurred by third parties relying on that representation.
The doctrine of estoppel prevents him from denying partnership status to defeat the creditor's claim.

Key Concept

Partner by Holding Out (Estoppel) and Liability to Third Parties
Estimated Time:1m 0s
Question 18Question →

Emeka and Folake have been operating a general partnership business involved in retail logistics for five years without executing a written Partnership Deed. Emeka decides to admit his sibling as a third active partner to expand operations, despite Folake's explicit objection. Under the provisions of the Partnership Act, what is the legal standing of Emeka's action?

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Answer: The action is legally invalid because introducing a new partner requires the unanimous consent of all existing partners.

Answer

The admission of the new partner is legally invalid because introducing a new partner requires the unanimous consent of all existing partners.
Under the statutory provisions of the Partnership Act, which govern partnerships lacking a written Partnership Deed, no person may be introduced as a partner without the consent of all existing partners. Because one partner explicitly objected, the requirement for unanimous consent was not met, rendering the action invalid.

Step-by-Step Solution

1
Determine the governing rules when partners operate without a written agreement.
In the absence of a written Partnership Deed, the statutory default provisions of the Partnership Act apply to determine the rights and duties of partners.
The Partnership Act provides standard rules for partnership operations when partners have not agreed otherwise.
2
Identify the statutory requirement for admitting new partners.
Under the Partnership Act, no new partner may be introduced into an existing firm without the unanimous consent of all existing partners.
Partnership is based on mutual agency and trust, meaning no partner can be forced into a contractual partnership relation without their consent.
3
Apply the rule to the given scenario.
Because Folake explicitly objected, unanimous consent was not obtained, making Emeka's unilateral admission legally invalid.
A single existing partner's objection is sufficient to block the introduction of a new partner.

Key Concept

Implied Rights of Partners and Admission of New Partners under the Partnership Act
Estimated Time:1m 0s
Question 19Question →

Which of the following represents the correct chronological sequence of procedural steps for registering a partnership enterprise with the Corporate Affairs Commission (CAC) in Nigeria?

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Answer

The correct order of steps is: conducting a name search and reservation with the CAC, drafting and executing the Partnership Deed, submitting the registration application forms with statutory fees, and receiving the official Certificate of Registration.
The correct procedural order begins with verifying and reserving an available business name with the Corporate Affairs Commission (CAC). Next, the partners execute their Partnership Deed to govern their internal relationship. Following this, the formal registration forms and statutory fees are submitted to the CAC. Finally, upon review and approval, the CAC issues the Certificate of Registration.

Step-by-Step Solution

1
Determine the initial administrative requirement prior to registration.
Conducting a name availability search and reservation with the CAC comes first.
The regulatory authority must confirm that the proposed firm name is unique and legally permissible before any documentation can be processed.
2
Identify the internal legal agreement step among partners.
Drafting and executing the Partnership Deed follows name approval.
Partners must establish their contractual rights, capital contributions, and operational rules before submitting business details.
3
Determine the formal filing phase with the regulatory body.
Submitting completed registration forms and statutory fees to the CAC is the third step.
The application materials and required fees must be lodged with the commission to initiate official evaluation and approval.
4
Identify the concluding outcome of the registration process.
Receiving the Certificate of Registration is the final step.
The certificate serves as legal proof of registration, granted only after full compliance and verification by the CAC.

Key Concept

Partnership Formation and Business Name Registration Procedure
Question 20Question →

A commercial enterprise is registered as a limited partnership under statutory commerce laws. If the business encounters financial distress and incurs debts beyond its total capital assets, which condition must strictly be fulfilled regarding the liability of the partners?

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Answer: At least one general partner must have unlimited personal liability for all debts of the firm.

Answer

At least one general partner must have unlimited personal liability for all debts of the firm.
Under statutory partnership legislation, a limited partnership must contain at least one general partner whose personal assets can be attached to discharge unpaid debts if the firm's assets are exhausted. Other members may be limited partners whose loss is restricted to their agreed capital investment.

Step-by-Step Solution

1
Identify the core legal definition of a limited partnership.
A limited partnership must consist of both limited partners and general partners.
Unlike a standard general partnership where all partners have unlimited liability, a limited partnership permits certain partners to cap their financial liability.
2
Apply statutory partnership provisions regarding liability structure.
The law mandates that at least one partner must remain a general partner with unlimited liability.
This rule ensures third-party creditors have recourse to at least one individual's personal assets if firm debts exceed business assets.

Key Concept

Limited Partnership Structure and Partner Liability
Estimated Time:1m 0s
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Partnership: Types, Deed, Rights, and Dissolution Practice Questions — JAMB UTME | Examkin