Chi, Di and Fi formed an ordinary partnership to run an art gallery. Each of them paid £100,000 into the business.
As Fi had no prospect of raising any more money it was agreed between them that her maximum liability for any partnership debts would be fixed at her original contribution of £100,000. The partnership agreement specifically restricted the scope of the partnership business to the sale of 'paintings, sculptures and other works of art.' In January 20X0 Chi took £10,000 from the partnership's bank drawn on its overdraft facility.
She had told the bank that the money was to finance a short-term partnership debt but in fact she used the money to pay for a holiday. In February Di entered into a £25,000 contract on behalf of the partnership to buy some books, which she hoped to sell in the gallery.