Dissolution of a firm takes place on the happening of certain conting…

Dissolution of a firm takes place on the happening of certain contingencies in the following cases:

(A) By the death of a partner

(B) By the adjudication of a partner as an insolvent

(D) If constituted for a fixed term, by the expiry of that term

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (A), (B) and (D) only

The Partnership Act lists separate ways in which a firm is dissolved. “On the happening of certain contingencies” covers events that end the firm subject to the contract between the partners: expiry of the fixed term, completion of the venture, death of a partner and insolvency of a partner.

(A) By the death of a partner — True. It is one of the contingencies.
(B) By the adjudication of a partner as an insolvent — True. It is one of the contingencies.
(C) When the business of the firm becomes illegal — False. This is compulsory dissolution: the firm is dissolved by law, whatever the partners have agreed.
(D) If constituted for a fixed term, by the expiry of that term — True. It is one of the contingencies.

NCERT (2026-27 edition):
Dissolution of a Firm – “… 3. On the happening of certain contingencies: Subject to contract between the partners, a firm is dissolved : (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more ventures, by the completion thereof; (c) by the death of a partner; (d) by the adjudication of a partner as an insolvent.”

NCERT (2026-27 edition):
Dissolution of a Firm – “… 2. Compulsory Dissolution: A firm is dissolved compulsorily in the following cases: (a) when all the partners or all but one partner, become insolvent, rendering them incompetent to sign a contract; (b) when the business of the firm becomes illegal; or (c) when some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership, e.g., when a partner who is a citizen of a country becomes an alien enemy because of the declaration of war with his country and India.”