Relations of Partners with Third Party
Relation of Partners with Third Parties
A. Implied Authority of the Partners
B. Partners are agents for each other
C. Liability of Partners
D. Doctrine of Holding Out
Essentials of Implied Authority of the partners: Implied authority refers to those powers of a partner which are not expressly given to him or are not written down in a partnership agreement. An act of the partner to come within the preview of implied authority must fulfill the following conditions:-
(1) The act must be done in the capacity of a partner. Any act done before a person becomes a partner will not bind the firm.
(2) The act done must have been done on behalf of the firm
(3) The act done must relate to a matter which comes within the scope of partnership business
(4) The act done to carry on the business in the “usual way”
Ordinary or Non commercial Partnership:
Implied authority includes:
(1) Receive payment on debts of the firm & issue receipts
(2) Assign/transfer debt due to the firm.
(3) Purchase goods on credit for the firm which are required to carry the business in the usual way
(4) Sell any of the partnership goods.
(5) Enter into a contract if necessary for partnership
(6) Borrow debt
(7) Engage or dismiss servant/employees for the business
Commercial Partnership:
Implied authority includes
(1) Partner (in his personal capacity) can acquire credit on behalf of the firm. Creditor is not bound to make any further inquiry.
(2) May pay debts on account of partnership.
(3) Draw, indorse, accept a negotiable instrument
(4) Pledge goods of the firm. Make an equitable mortgage
(5) Sell partnership property.
Statutory Restrictions: (Where no implied authority exists.)
(1) Cannot submit a dispute relating to the business of the firm to arbitration.
(2) Open a banking account on behalf of the firm.
(3) Compromise or relinquish any claim or part of it
(4) Withdraw a suit or proceedings filed on behalf of the firm
(5) Admit any liability in a suit
A. Implied Authority of the Partners
B. Partners are agents for each other
C. Liability of Partners
D. Doctrine of Holding Out
Essentials of Implied Authority of the partners: Implied authority refers to those powers of a partner which are not expressly given to him or are not written down in a partnership agreement. An act of the partner to come within the preview of implied authority must fulfill the following conditions:-
(1) The act must be done in the capacity of a partner. Any act done before a person becomes a partner will not bind the firm.
(2) The act done must have been done on behalf of the firm
(3) The act done must relate to a matter which comes within the scope of partnership business
(4) The act done to carry on the business in the “usual way”
Ordinary or Non commercial Partnership:
Implied authority includes:
(1) Receive payment on debts of the firm & issue receipts
(2) Assign/transfer debt due to the firm.
(3) Purchase goods on credit for the firm which are required to carry the business in the usual way
(4) Sell any of the partnership goods.
(5) Enter into a contract if necessary for partnership
(6) Borrow debt
(7) Engage or dismiss servant/employees for the business
Commercial Partnership:
Implied authority includes
(1) Partner (in his personal capacity) can acquire credit on behalf of the firm. Creditor is not bound to make any further inquiry.
(2) May pay debts on account of partnership.
(3) Draw, indorse, accept a negotiable instrument
(4) Pledge goods of the firm. Make an equitable mortgage
(5) Sell partnership property.
Statutory Restrictions: (Where no implied authority exists.)
(1) Cannot submit a dispute relating to the business of the firm to arbitration.
(2) Open a banking account on behalf of the firm.
(3) Compromise or relinquish any claim or part of it
(4) Withdraw a suit or proceedings filed on behalf of the firm
(5) Admit any liability in a suit