Q.Distinguish between a 'sleeping (dormant) partner' and a 'nominal partner'.

Both types stay out of the firm's day-to-day management, but they differ sharply in what they actually contribute to — and gain from — the firm.

A sleeping (or dormant) partner genuinely invests capital in the firm and shares in its profits and losses exactly like any other partner — the only thing he does not do is take an active part in the day-to-day conduct of the business. His liability to outsiders remains unlimited, exactly as if he were an active partner.

A nominal partner, by contrast, contributes no real capital and takes no active part in management either — but unlike a sleeping partner, he also has no genuine share in the profits of the business (he may be paid a fixed sum for permitting the use of his name). His entire contribution to the firm is the use of his name and reputation, which the firm uses to attract customers or credit. Despite contributing neither capital nor labour, he is held just as **fully liable to third parti …

Assuming a nominal partner has lighter liability because he contributes no capital or labour — his liability to third parties is exactly as unlimited as any othe …