Relations of Partners to Third Parties

Question 1

Authority of a partner

Answer 1

1- Implied authority
2- Restrictions on implied authority
3- Ostensible/apparent/Estoppel authority
4- Authority in emergency

Question 2

Implied authority

Answer 2

1- To buy and sell goods by ordinary course of business

2- To receive and pay cash from/to persons dealing with firm

3- To borrow (trading)

4- To employee servant

5- To draw cheques

6- To pledge movable property

7- To sue or defend

• can bind firm if act done:
  1- in ordinary course of business and usual way
  2- in name of firm with intention to bind firm

Question 3

Restrictions on implied authority

Answer 3

1- To acquire or transfer immovable property

2- To withdraw a suit, admit liability in a suit, or submit dispute to Arbitration

3- To compromise or relinquish any claim

4- To open bank account on behalf of firm

5- To enter into partnership on behalf of firm

Question 4

Liability towards third parties

Answer 4

1- Liability for act of firm
- Every partner liable
- Unlimited liability
- partner paying more can claim reimbursement from other partners

2- Liability for wrongful act by a partner
- Firm is liable to third party
- Full loss borne by guilty partner

3- Liability for misappropriation of money or property by partner
- Firm is liable to third party if:
1- A partner receive
2- A firm receive

Question 5

Effects of notices / Representation

Answer 5

Notice Received
- By active partner
- Relate to affairs of firm
- not related to fraud of partner

Representation made
- Relate to affairs of firm
- Made in ordinary course of business

Question 6

Principal of holding out
(Principal)

Answer 6

If a person represent himself a partner he is liable for debt given to firm on such representation

Question 7

Principal of holding out
(Examples)

Answer 7

1- Active partner does not give notice on retirement
2- Minor does not give notice on majority (after 6 months)

Question 8

Principal of holding out
(Exceptions)

Answer 8

• Death of partner
• insolvency of partner

Question 9

Transferee of a partner interest
(Definition)

Answer 9

A person to whom:

• interest of a partner in profits and property of firm is transfered (by sale , Mortgage)
• with consent of all partner

Question 10

Transferee of a partner interest
(Rights)

Answer 10

1- share of profits
2- share of property / assets
3- Accounts for calculation of shares

Question 11

Transferee of a partner interest
(Restrictions / Disabilities)

Answer 11

Can’t:
- Manage/interfere business
- Inspect books
- Inspect accounts
- Challenge profits
- Sue for dissolution

Question 12

Minor (Definition)

Answer 12

Can be admitted into benefits of existing partnership with consent of all partners

Question 13

Minor
(Legal status as minor)
(Rights)

Answer 13

1- To shae profits / property
2- To inspect accounts
3- not to declared insolvent

Question 14

Minor
(Legal status as minor)
(Liabilities)

Answer 14

1- Share is liable
2- Minor not liable personally

Question 15

Minor
(Legal status as minor)
(Restrictions)

Answer 15

1- Not a partner
2- cannot inspect books
3- cannot file suit for profit / property (unless he disconnects)

Question 16

Minor
(Legal status on attaining majority)
(If decided to become partner)

Answer 16

• His shares as minor will be his shares as partner
• Personally liable for debts since he was admitted into benefits

Question 17

Minor
(Legal status on attaining majority)
(If he decided not to become partner)

Answer 17

• His share not liable for acts of firm after notice
• can receive shares and can sue partners

Question 18

Minor
(Legal status on attaining majority)
(If he remains silent)

Answer 18

• Held out as partners on expiry of 6 months