Why is a settlement-on-death clause necessary in a partnership deed?

Correct answer: To decide proper payment of deceased partner's share

The governing concept is settlement of the deceased partner’s financial interest when the firm’s constitution changes. Death may require the deceased partner’s legal representative to be paid amounts that are due under the partnership arrangement. Depending on the deed and the facts, the settlement can include capital, share of accumulated profits or reserves, profit earned up to the date of death, goodwill and other agreed adjustments. A clear clause specifies the calculation basis, the date of measurement, the person entitled to receive payment and the timing or form of settlement. This reduces uncertainty and disputes between the continuing partners and the representative. Increasing sales, exchanging goods or stopping bank interest is unrelated. Therefore option A is correct.