A Disadvantage of a Partnership Is That of 'Mutual Agency

question 59

Multiple Choice

A disadvantage of a partnership is that of 'mutual agency' which means:

• A) each partner has limited liability for the debts incurred on a contract entered into by any other partner.
• B) each partner must contribute the same capital and skills to the partnership.
• C) each partner has the right to enter into contracts on behalf of the partnership.
• D) only the partner with the highest cash contribution has the right to enter into contracts on behalf of the partnership.

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Definitions:

Guarantee Indebtedness

A commitment by one party to answer for the financial liabilities or obligations of another party, ensuring the debt will be paid.

Breach of Contract

Violation of any terms or conditions in a contract without a lawful excuse, which may result in legal action.

Adequacy of Consideration

A legal principle assessing whether what is exchanged in a contract (goods, services, or money) is fair and of sufficient value.

Mistake as to Existence

A legal misunderstanding or error regarding the actual existence of a subject matter or condition of a contract.