Liability of Partners to Outsiders Flashcards
How are partners liable for the debts and obligations of the partnership?
They are liable without limit and their liability is joint in the case of contractual obligations and joint and several in the case of tortious obligations
What can happen if a partnership is unable to pay its debts out of partnership property?
The creditor is entitled to obtain payment from the private estates of the partners
Does one partner bind the whole partnership?
Yes, partners are agents of each other and the partnership as a whole is bound by a partner acting within the scope of their authority
How can the authority of a partner arise?
In three ways:
- express actual authority
- implied actual authority
- apparent or ostensible authority
What is express actual authority?
The authority of a partner may be specifically agreed upon by the partners
What is implied actual authority?
Authority may be implied either from a course of dealings between the partners or because the authority is a natural consequence of an authority actually given to the partner
What is apparent or ostensible authority?
Authority may arise from the fact that a person dealing with a partner is, in those circumstances, entitled to assume that the partner has authority to bind the firm
Can a single partner bind a partnership to a deed?
No unless their authority to do so is itself expressly granted by deed
What are the qualifications on a partner’s authority with section 5 PA 1890 recognises in terms of apparent authority?
- Partner can only bind the firm ‘for the purposes of the business of the partnership’
- Partner must do act ‘for carrying on in the usual way the business of the firm’
- No actual authority and outsider knows this or does not know or believe that person is a partner
What are some examples of powers assumed to be available to partners generally?
- power to buy and sell goods (not just stock) used in the business
- power to hire employees
- power to receive payment of debts due to the partnership
- power to pay debts
- power to engage a solicitor to represent the firm
What happens if a person holds themselves out as a partner?
They are liable to anyone who ‘on faith of such representation’ gives credit to the firm as if they were a partner
What is the liability of new partners admitted as a partner into an existing firm?
They do not thereby become liable to the creditors of the firm for anything done before they became a partner
Is the whole partnership liable if a partner commits a tort?
Where by any wrongful act or omission of any partner acting in the ordinary course of business of the firm, or with the authority of their co-partners, loss or injury is caused to any person the firm is liable to the same extent as the partner
Are partnerships liable for torts committed by its employees?
Yes, through vicarious liability
