1.7 - Authority of Partners

Question 1

Each partner is what to the company and other partners?

Answer 1

Each partner is the agent of the firm and the others partners

Question 2

Actual authority

Answer 2

If a partner (A) enters into a transaction with the express or implied agreement of the other partners (B and C), the partnership is bound by the contract

Question 3

Actions done in the usual course of the firm’s business will bind the firm unless…

Answer 3

Unless a partner had no authority to act and the third party knows this, or the third party does not know or believe them to be a partner

Question 4

Apparent authority

Answer 4

If the other partners (B and C) make a representation to a third party (T) that partner A has authority to make the contract, if T acts on this representation to make a contract, the partnership is bound to the contract

Question 5

Usual authority

Answer 5

If the contract was
- made on behalf of firm
- type of contract firm would make
- made in usual way
the partnership is bound by contract

Question 6

If the third party genuinely believes a partner has the authority to act, it’s likely…

Answer 6

The partnership will be bound by the transaction, unless the transaction is clearly outside the ambit of the usual course of the business

Question 7

When is the partnership not bound by a contract in usual authority?

Answer 7

• if the third party knew partner A had no actual authority
• if the third party did not know or believe A to be a partner