Unincorporated accounting practice

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Reference no: EM133938739

Question

Albert, Bernard, Carol and Dan together carry on an unincorporated accounting practice under the name of ABCD Associates. One weekend, Carol contracted on behalf of ABCD to buy luxury furnishings for her office at a cost of $30,000, to be paid for in monthly instalments. The seller was LO Furniture Ltd. Carol had the furniture delivered to her home address and has now quit the partnership. She refuses to pay for the furniture herself.

ABCD refused to make payments for the furniture, telling LO that according to their partnership agreement, all contracts over $2,000 had to be authorized by a majority of the partners and that as a majority had not approved the purchase of the furniture, ABCD had no responsibility for the debt.

a. Will ABCD be liable to LO for the debt?

b. Albert is nervous because he has heard that he might have to bear responsibility for 25% of the debt to LO if ABCD is found to be liable. Explain to him whether what he has heard is correct, and whether he could avoid this responsibility by retiring from the partnership.

Reference no: EM133938739

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