Nature and Extent of Partner’s Authority to Bind the Firm by His Acts

Sections 18 declares that from the point of view of the third parties a partner is an agent of the firm for the purposes of the business of the firm. Even if only one partner acts on behalf of the firm liable. One partner can make all the other partners liable only if he acts within his express or implied authority.

Thus, it is the express and implied authority of the partners which decides the nature and extent of their authority to kind the firm.

Express authority of a partner

When a partner is expressly authorized by an agreement of all the partners to do certain acts on behalf of the firm, it is called the express authority of a partner. A partner can kind the firm by any such act which falls width the scope of his authority, even if it does not fall within the scope of business.

Implied authority of a partner

Such acts of a partner which are incidental to or usually done in the course of proper conduct of business come within the scope of his implied authority.

Sections 19(1) & 22 lays done certain provisions. For an act to be covered within the implied authority it is necessary that,

(a)        the act is done in the name of the form,

(b)        in the ordinary course of the business of the firm and,

(c)        with the intention to bind the firm.

Statutory restrictions on implied authority [Section 19(2)]

The implied authority of a partner does not empower him to:

(a)        submit a dispute relating to the business of the firm or arbitration,

(b)        open a bank account on behalf of the firm in his own name,

(c)        compromise or relinquish any claim or portion of a claim by the firm,

(d)       withdraw a suit or proceeding field on behalf of  the firm,

(e)        admit a liability in a suit on behalf of the firm,

(f)        acquire or transfer any immovable property on behalf of the firm,

(g)        enter into partnership on behalf of the firm.

However, the partners in a firm may, by contract among themselves, extend or restrict the implied authority of any partner.

Partners authority in an emergency

Section 21 extends the authority of a partner in an emergency. According  to this section, a partner, in an emergency, has authority to do all such acts to protect the firm from loss, as would be done by a person of ordinary prudence, in his own name, under similar situation and such acts will kind the firm.

Effect of admissions by a partner

If a partner makes any admission concerning the business of the firm in the ordinary course of business, it is considered as a sufficient evidence against the firm and it binds the firm.

Effect of notice to acting partner

Any notice given to a partner who habitually acts in the business of the firm, for any matter relating to the affairs of the firm, acts as a notice to the firm, except in case of fraud on the firm and that too by with the consent of that partner. Thus, any such notice to an acting partner, not to a dormant partner, cannot to ignored by other partners.

Source: Scribd.com

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