Retired partner's liability to an existing customer without notice (Partnership Act 1890 s.36)
Rowena retired on 30 April from Harrow & Beck, a firm of building contractors in England trading as a general partnership. The firm placed a notice of her retirement in the London Gazette but did not write to its customers or suppliers. Delmont Timber Ltd had supplied the firm regularly for several years and knew Rowena was a partner. In June it supplied £14,000 of timber to the firm on credit. It had not seen the Gazette notice and had received no other notice of the retirement. The firm cannot pay the invoice.
Can Delmont Timber Ltd hold Rowena liable for the June debt?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: Yes, because Delmont had dealt with the firm before she retired and could treat her as a partner until it had notice of the change.
THE RULE TO REMEMBER
Until they have notice, those who dealt with a firm before a change may treat apparent partners as continuing; a Gazette notice binds only those with no prior dealings (PA 1890 s.36).
Retired partner's liability to an existing customer without notice (Partnership Act 1890 s.36)
Under s.36(1) of the Partnership Act 1890, a person who deals with a firm after a change in its constitution may treat all apparent members of the old firm as still being members until they have notice of the change. Section 36(2) makes an advertisement in the London Gazette notice only to persons who had no dealings with the firm before the change. Delmont had dealt with the firm regularly before 30 April and knew Rowena was a partner. As an existing customer, it is not fixed with notice by the Gazette advertisement and needed actual notice, which it never received. Delmont can therefore treat Rowena as still a partner and hold her liable for the June debt. The protection in s.36(3) for a retiring partner who was not known to be a partner does not help her, because Delmont knew she was one.
Why A is wrong: A Gazette advertisement is notice only to those who had no dealings with the firm before the change (s.36(2)); existing customers need actual notice.
Why B is wrong: Section 36(1) can make a retired partner liable for later debts to someone who dealt with the firm and had no notice of the change.
Why C is wrong: Section 36 contains no three-month period; liability depends on whether the creditor had notice.
Why E is wrong: There is no public register of the partners of a general partnership, and s.36 depends on notice, not on any search.
A little more practice done.
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