Ace Software Co.signed a deal with Gill Associates,a partnership,and has extended credit to it.Paul,a partner in Gill associates,retires but his partners continue the business.In order to release Paul from the debt owed to Ace,which of the following must occur?
A)The continuing partners must release Paul from liability on the debt.
B)Paul must not secure his release from Ace.
C)Paul has to contribute toward the debt as early as possible.
D)The continuing partners should volunteer to set off Paul's liability.

Question

Quizplus · Accepted Answer

Dissociated partners remain liable to partnership creditors for partnership liabilities incurred while they were partners;however,a dissociated partner's liability may be eliminated by the process of novation.Novation occurs when the continuing partners release a dissociated partner from liability on a partnership debt,and a partnership creditor releases the dissociated partner from liability on the same obligation.