Question

Paula, Fred, and Stephanie agree that Paula and Fred will form and conduct a partnership business and that Stephanie will become a partner in two years. Stephanie agrees to lend the firm $50,000 and take 10 percent of the profits in lieu of interest. Without Stephanie’s knowledge, Paula and Fred tell Harold that Stephanie is a partner, and Harold, relying on Stephanie’s sound financial status, gives the firm credit. The firm later becomes insolvent, and Harold seeks to hold Stephanie liable as a partner. Should Harold succeed? Explain

Answer 1

Harold would not Succeed

Step-by-step explanation:

Stephanie has only agreed to become partner after 2 years and she (Stephanie) was not aware that she was presented to Harold as a partner. Her agreeing to collect 10% profit in lieu of interest does not make her a partner. Therefore, she can not be held liable in the event of insolvency.