XYZ LLP is a consulting firm where four partners—A, B, C, and D—are responsible for various functions. Partner B, without consulting the other…

CA Intermediate · Corporate and Other Laws · RTP · January 2025
XYZ LLP is a consulting firm where four partners—A, B, C, and D—are responsible for various functions. Partner B, without consulting the other partners, enters into a contract with a third party, Mr. P, for a high-value procurement deal on behalf of XYZ LLP. It is later found that Partner B did not have authority to engage in such deals, and XYZ LLP has no history of involvement in procurement. Mr. P, who is an experienced business- person, was aware that Partner B was not authorized to enter into procurement deals for XYZ LLP. In this scenario, which of the following is correct based on the Limited Liability Partnership Act, 2008?
(A) XYZ LLP is bound by the contract because partner B is a partner in the LLP.
(B) XYZ LLP is bound by the contract as Mr. P believed partner B was authorized to act on behalf of the LLP.
(C) XYZ LLP is bound by the contract because Mr. P is a third party and was not aware of the internal matters of XYZ LLP.
(D) XYZ LLP is not bound by the contract as partner B lacked authority, and Mr. P knew of this lack of authority.

Suggested Answer and Working Notes:

Correct Answer: Option (D)

XYZ LLP is not bound by the contract as partner B lacked authority, and Mr. P knew of this lack of authority.

Topics: The Limited Liability Partnership Act, 2008, Registration of Charges

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