Partners' Liability by Holding Out After Retirement

After retirement from a firm, partners may still be held liable by holding out, which means giving the impression to the public that they are still a partner of the firm. However, there are certain exceptions to this rule, and the correct answer in this case is option 'D' - both (b) and (c) partners are not liable by holding out, even if the public notice of retirement is not given. Let's understand why they are exempt from this liability.

Sleeping Partner
A sleeping partner, also known as a dormant partner or a silent partner, is someone who contributes capital to the firm but does not participate in the management or day-to-day operations. They are not involved in the active running of the business and are often not even known to the public. As a result, they do not have any direct contact or influence with customers or suppliers. Therefore, when a sleeping partner retires from the firm, they are not liable by holding out because they were not actively involved in the business and did not hold themselves out as a partner to the public.

Representative of Deceased Partner
When a partner passes away, their legal representative or executor may continue to represent their interest in the firm until the affairs of the partnership are settled. The representative takes on the role of the deceased partner and is responsible for winding up the partnership's affairs. However, the representative is not liable by holding out because they are not actively participating in the management or operations of the firm. They are merely carrying out the necessary tasks to conclude the partnership's business.

Active Partner
In contrast to the sleeping partner and representative of a deceased partner, an active partner is fully engaged in managing and operating the firm. They have direct contact with customers, suppliers, and the general public. When an active partner retires from the firm, they have a duty to inform the public about their retirement to avoid any confusion or misrepresentation. If they fail to give public notice of their retirement and continue to hold themselves out as a partner, they may be held liable by holding out.

Conclusion
In summary, a sleeping partner and the representative of a deceased partner are exempt from liability by holding out after retirement, even if public notice of retirement is not given. This is because they were not actively involved in the business or holding themselves out as partners to the public. On the other hand, an active partner is required to give public notice of retirement to avoid any potential liability by holding out.