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Third Parties And Partnerships Notes

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Core Module: BLP Paper B

Partnerships Partnerships and third parties (partnership authority and liability for the partnership's debts) Relationship between fellow partners

S.5 PA 1890: Each partner is an agent for the other partners within the partnership for the purposes of the business There is a mutual agency agreement implied into a partnership.

Each partner is an agent for the firm. Therefore - actions of the partners are BINDING on the partnership.

Liability of the partnership:

Key question: Where one partner has concluded a contract (Partner X), is the firm (and therefore all partners) liable in relation to that contract? Are they bound?
S.6 PA 1890: partners are bound by the acts carried out on behalf of the firm by persons authorised.

An act or instrument relating to the business of the firm and done or executed in the firm-name, or in any other manner showing an intention to bind the firm, by any person thereto authorised, whether a partner or not, is binding on the firm and all the partners.

S.8 PA 1890: effect of notice that the firm will not be bound by acts of a partner. 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

Answer: Did Partner X have actual authority or apparent authority?
-YES: the firm is bound and therefore also all those who were partners at the time
-NO: X is liable (because he made the contract). No one else is liable. Establishing authority:

1 1. Actual Authority - S.5 A firm will always be liable for actions which they actually authorised.

Did partner's act jointly in making the contract?


Was there express actual authority? (by Partnership agreement / oral?)


Implied actual authority - A) If all partners involved in running the business without limitation being agreed. B) Regular course of dealing by one partner in which the others have acquiesced.

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