Contract Liability of Partners

Question 1

What are partners in relation to a partnership?

Answer 1

Each partner is an agent of the partnership.

Question 2

When is a partnership bound by a partner’s actions?

Answer 2

The actions of every partner that are made within the ORDINARY COURSE OF BUSINESS (entering contracts in partnerships name), bind the partnership.

Question 3

How do partner actions outside the course of business affect the partnership?

Answer 3

Actions taken by a partner that are OUTSIDE the ordinary course of the partnership’s business do NOT bind the partnership.

Question 4

What is required for a partner’s actions, outside the course of ordinary business, to bind the partnership?

Answer 4

The other partners must UNANIMOUSLY authorize the action with actual or apparent authority.

Question 5

What is required for a partners actions, within the ordinary course of business, to not bind the partnership?

Answer 5

The partner has NO authority to act on behalf of the partnership;
And

The other side has knowledge or notice that the partner lacks authority.