What is meant by 'partner by estoppel'? Explain.
A partner by estoppel refers to a person who, through their own initiative, conduct, or behaviour, gives an impression to others that they are a partner of the firm. Such individuals are held liable for the debts of the firm because third parties consider them partners, despite the fact that they do not contribute capital or participate in management.
For instance, if a person actively participates in business negotiations and gives the impression that they are a partner, they become liable for debts incurred by the firm on the basis of that representation. They do not share in profits or losses but possess unlimited liability towards third parties for any debts extended to the firm.
Explanation
The answer is derived directly from the definition and example provided in the textbook context. It covers the essential elements required for a 3-mark answer: the definition based on conduct/behaviour, the lack of capital/management contribution, and the liability aspect. The example of Rani from the text is generalized to illustrate the concept clearly.