Which of the following statements is INCORRECT?

Question

BlackTom AI · Accepted Answer

In a general partnership the entitlement is to share in profits (and losses) and to participate in management; partners are not automatically entitled to take a portion of the physical “product” of the business as if it were their personal property. Partnership property belongs to the firm as an entity and distributions are made in accordance with the partnership agreement or accounting, not by literal taking of produced goods.

1) Relevant knowledge points and concepts
- Fiduciary duties: partners owe duties of good faith and fairness to the partnership and to one another.  
- Agency: each partner (in a general partnership) is an agent of the partnership for carrying on its usual business, so their acts within authority bind the firm.  
- Liability: partners are liable for contracts and torts of the partnership; in a general partnership this liability is at least joint, and often joint and several, for obligations entered into on behalf of the partnership.  
- Distribution rights: partners receive a share of the partnership’s profits (and losses) per the agreement; partnership property remains partnership property until properly distributed.

2) Step-by-step evaluation of each option
- "Partners have a duty to act in good faith..." — correct. This is a basic fiduciary obligation in partnership law.  
- "Partners are agents of each other" — correct. Each partner typically acts as agent of the firm and can bind the partnership in the ordinary course of business.  
- "Partners receive a share of the product of the undertaking" — problematic/incorrect. The phrase implies partners take a direct portion of produced goods or outputs as personal property; legally partners share profits (monetary returns) and use or distribution of physical product is governed by the partnership’s property rules and agreement.  
- "Partners are jointly liable for contract entered into on behalf of the partnership" — correct. Partners incur joint (and often several) liability for partnership obligations.

3) Why the correct answer is correct
The third statement is incorrect because it conflates profit distribution with ownership of produced goods. Partnership property is owned by the firm; partners receive a share of profits after accounting, not an automatic slice of the physical product unless the agreement provides otherwise.

4) Why the other options are correct
They state standard legal principles: fiduciary duty (good faith), agency relationship, and joint liability for partnership contracts.

Conclusion: Therefore the incorrect statement is "Partners receive a share of the product of the undertaking," which matches the provided answer.

Which of the following statements is INCORRECT?Single choice

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