When an outsider dealing with a partner does not know or does not believe that he is contracting with a partner but an individual only
Verified Answer
A. The firm incurs no liability even if the benefits of the contract have gone to the firm
B. The firm incurs liability even if benefits of the contract have not gone to firm
C. The firm incurs liability if the benefits of contract have gone to the firm
D. Either (B) or (C)
Explanation:
Even if an outsider deals with a partner believing him to be acting as an individual, the firm can still incur liability if the benefits of the contract have actually gone to the firm. This is based on the principles of agency and ratification. If the firm, as the principal, accepts the benefits of a contract entered into by one of its partners (acting as an agent), even if the partner did not disclose his agency at the time of contracting, the firm can be held liable.