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The deed says one partner will not bear losses. How will losses be shared in such a case?

Answer and explanation

Correct answer: In the ratio stated for remaining partners in the deed

Direct answer: Option A is correct. A partnership deed may contain a special agreement that one partner will not bear losses. Such a valid agreed clause is followed instead of applying an automatic general rule. First exclude the protected partner from the loss. Then distribute the loss among the remaining partners in the ratio stated in the deed. Option A works because it follows the deed’s specified ratio. Option B is wrong because equal sharing is used only when the applicable agreement requires it or when no different ratio is available; it cannot override this special clause. Option C is wrong because losses are not automatically divided according to capital contributions. Option D is wrong because drawings measure withdrawals, not the agreed loss-sharing basis. The important reasoning is: read the special clause, remove the exempted partner, and use the remaining stated ratio. The exact figures are not supplied, so no numerical allocation should be invented. Exam cue: a clear partnership agreement normally controls the distribution.

Related tags

Loss SharingSpecial ClausePartnership Deed

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