Question

What is meant by ‘partner by estoppel? Explain.

Answer 1

To understand Partner by Holding out , first we need to understand difference between Partner by estoppel and Partner by holding out : Partner by estoppel -If a person falsely represents himself as a partner of any firm orbehaves in a way that somebody can have an impression that such person is a partnerand on the basis of this impression transacts with that firm then that person is heldliable to the third party. The person who falsely represents himself as a partner isknown as partner by estoppel. Take an example. Suppose in Ram Hari & Co firmthere are two partners. One is Ram, the other is Hari. If Giri- an outsider representshimself as a partner of Ram Hari & Co and transacts with Madhu then Giri will be heldliable for any loss arising to Madhu. Here Giri is partner by estoppel. Partner by holding out -In the above example, if either Ram or Hari declares that Gopal is a partner of their firm and knowing this declaration Gopal remains silent thenGopal will be liable to those parties who suffer losses by transacting with Ram Hari &Co with a belief that Gopal is a partner of that firm. Here Gopal is liable to those parties who suffer losses and Gopal will be known as partner by holding out.