Scarf v Jardine
Principle: Can A Person Be Held Liable As A Partner Even If He Is Not A Partner?
Judgment: This is an important case for the principle of holding out wherein the importance of notice of retirement was highlighted. The court, in this case, stated that the retiring partner must give notice of his retirement from a firm in the same manner as a notice of appointment is given, so that the people can know about his status with regard to the company. Or else, he might be treated as a partner by holding out no matter how long back he retired from the firm without notice.
The court further stated that such notice can be given either by the retiring partner or the existing partners of the company. Unless such notice of retirement is given, the liability of a retired partner to old creditors or customers subsists, and the firm would also be liable for the acts of the retired partner.
There are exceptions to the rule established in the Scarf v. Jardine case as given below:
- The death of a partner constitutes sufficient notice by itself.
- Insolvency of a partner is also sufficient notice and attracts Section 42 of the Indian Partnership Act.
- If one has been a dormant or sleeping from beginning to end, notice can be dispensed with as neither the customers nor the clients know of his participation in the firm.
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