Partners' relations with outsiders Flashcards
s9 PA 1890 - every partner in a firm is liable…
Jointly with the other partners for all debts and obligations of the firm incurred while he is a partner
Novation
The substitution of a new contract for an old one, extinguishing the rights and obligations that were in effect under the old agreement
Which debts are relevant in the partnerships context?
Ones that arose from contracts made on behalf of the firm through its agents using their authority
s8 PA - if it has been agreed between the partners that any restriction shall be placed on the power of any one or more of them to bind the firm…
No act done in contravention of the agreement is binding on the firm with respect to persons having notice of the agreement
Actual authority
This is vested in a partner by express agreement or may be implied by the conduct of the members of the firm, which shows that the partners accept, notwithstanding the absence of express authority, that a particular partner has authority to do a particular thing or act on behalf of the firm
Ostensible authority
This is such authority as an outsider might reasonably expect the partner to have
A firm will be liable for the acts of a partner who has no actual authority where…
The transaction relates to the business in which the firm is engaged, a partner in such a firm would usually be expected to have authority to enter into such a transaction and the other party knew or believed that the person was a partner and did not know about his lack of actual authority
A person who is not a partner can be nevertheless liable for particular debts of the firm if…
- He represented himself to be a partner
- He knowingly allowed others to have represented him to be a partner
- The creditor claiming that must show that he gave credit to the firm in reliance of the representation
How can former partners protect themselves from liability under s14 PA?
By advertising their retirement under s36 PA
s10 PA - when will a firm be liable for wrongful act or omission?
Where a partner commits a wrongful act or is responsible for an omission where it is either authorised by his co-partners or if it occurs in the ordinary course of the firm’s business
Dubai Aluminium Co Ltd v Salaam and Others 2013
A firm was held liable for the senior partner’s dishonest assistance in a fraudulent scheme because the assistance took form of drafting the necessary agreements - held that any wrongful act or omissions encompass all acts and omissions, not only those which would be common law torts
Test for wrongful conduct to be done in the ordinary course of business
It has to be so closely connected with acts that the partner was authorised to do that, for the purposes of liability of the firm to third parties, it might fairly and properly be regarded as done by the partner while acting in the ordinary course of the firm’s business (Dubai Aluminium)
Hamlyn v Houston 1903
Bribing a clerk in a rival firm to obtain certain confidential information concerning the firm’s activities is acting in the ordinary course of business
Lloyd v Grace, Smith and Co 1912
A firm of solicitors liable when its managing clerk (not a partner) defrauded a client
s11 PA - a firm will be liable for the misapplication of money or property by individual partners where…
A partner is acting within the scope of his apparent authority and receives money or property of a third person or where a firm in the course of its business receives money or property of a third person
