# Extent and Limitation of Liability of LLP and Partner [Sections 26 to 30]

## Extent of Liability [Sections 26-28]

Every partner of LLP is an agent of LLP but is NOT an agent of the other partners.

### Liability of LLP

Liability of LLP shall be met out of the property of LLP.
LLP is liable if a partner becomes liable to any person due to a wrongful act or omission in the course of business of the LLP (or with the authority of LLP).
LLP is NOT bound for anything done by a partner if BOTH:
The partner has no authority for such act on behalf of LLP, AND
The person dealing knew that he had no authority (or does not know that he is a partner of LLP).

### Liability of Partner

A partner shall be personally liable for his own wrongful act or omission.
But not liable for wrongful acts or omissions of other partners.
Generally, partner liability is limited to their agreed contribution.

## Holding Out [Section 29]

A person who by words or conduct represents (or knowingly permits to be represented) as a partner of an LLP:

Is liable to the person who gave credit to the LLP on the faith of such representation.
Liable whether or not such person knew that the representation reached the credit-giver.

### Continuation of LLP Name after Partner's Death

If LLP continues in the same name after a partner's death, use of such name (or the deceased partner's name) does NOT make:
His legal representative, or
His estate

…liable for acts of the LLP done after his death.

## Liability in Case of Fraud [Section 30]

If an act is carried by LLP or its partners with intent to defraud creditors or any person, or for any fraudulent purpose:

Liability of LLP and such partners shall be UNLIMITED for all debts/liabilities of LLP.
Persons knowingly party to such fraudulent business: Imprisonment up to 5 years AND fine — minimum ₹50,000, extendable up to ₹5 lakhs.
Exception: LLP is NOT liable if the act was done by a partner without the knowledge or authority of the LLP.

## Compensation for Fraud [Section 30]

If the LLP, partner, DP, or employee has conducted affairs in a fraudulent manner:

They shall be liable to pay compensation to the person who suffered loss/damage.
Exception: LLP is not liable if such partner, DP, or employee acted fraudulently without knowledge of LLP.

## Summary Table

Provision	Liability
Section 26-28	Partner is agent of LLP only; LLP liable for authorised acts
Section 29	Holding out — represented person liable to credit-givers
Section 30	Fraud — unlimited liability of LLP/partner + criminal punishment

Worked example

### Example 1

Example 1: Partner A of XYZ LLP signs a contract beyond his authority with Mr P. Mr P knew A had no authority. The LLP is NOT bound — both conditions of Section 27 are met (no authority + knowledge of no authority).

### Example 2

Example 2: Mr B introduces himself as a partner of ABC LLP at a meeting, even though he is not. A creditor extends credit to ABC LLP relying on Mr B's representation. Mr B is liable under Section 29 (holding out).

### Example 3

Example 3: Partner C of LMN LLP, with the LLP's knowledge, defrauds creditors by issuing false invoices. Both the LLP and Mr C have UNLIMITED liability. Mr C is also liable for imprisonment up to 5 years and fine up to ₹5 lakhs.

### Example 4

Example 4: Employee E of DEF LLP commits a fraud without the LLP's knowledge. The LLP is NOT liable for the fraud — only E is liable to pay compensation.

⚠️ Common exam mistakes

Believing partners are agents of each other — partners are agents only of the LLP, not of fellow partners.
Assuming a partner is liable for wrongful acts of co-partners — Section 28 expressly limits liability to one's own acts.
Forgetting that liability becomes UNLIMITED in fraud cases — limited liability is not a shield against fraud.
Treating the legal heir of a deceased partner as liable for post-death acts when the LLP name continues — they are NOT liable.
Confusing 'holding out' liability — the represented person is liable, not the LLP, unless the LLP authorised the representation.

Reference: Sections 26, 27, 28, 29 and 30 — LLP Act, 2008

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Extent and Limitation of Liability (Sections 26-30)

Worked example

⚠️ Common exam mistakes