Question

Assertion (A): Each partner is a principal as well as an agent for all the other partners.
Reason (R): As per the definition of Partnership Act, partnership business may be carried on by all the partners or any of them acting for all.
Choose the correct option from the following:

• A. Both Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).
• C. Assertion (A) is correct, but Reason (R) is incorrect.
• D. Assertion (A) is incorrect, but Reason (R) is correct.

Hint:

The most important feature of partnership is \textbf{mutual agency}. Each partner can act on behalf of the firm and bind all other partners.

Answer 1

The Correct Option is B

Step 1: Understanding the Assertion.
In a partnership firm, each partner acts both as a principal and as an agent. A partner is a principal because he shares the profits and losses of the business and has ownership in the firm. At the same time, he acts as an agent because his actions in the course of business can legally bind the firm and other partners.

Step 2: Understanding the Reason.
According to the Indian Partnership Act, 1932, partnership is defined as a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. This definition clearly indicates the principle of mutual agency.

Step 3: Link between Assertion and Reason.
The concept that the business may be carried on by all partners or by any one partner acting on behalf of others explains why every partner is both a principal and an agent. The doctrine of mutual agency forms the foundation of partnership relationships.

Step 4: Conclusion.
Thus, both the Assertion and Reason are correct, and the Reason correctly explains the Assertion.
Final Answer: Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).