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LPC Law Notes Business Law and Practice Notes

Third Parties And Partnerships Notes

Updated Third Parties And Partnerships Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

A collection of the best LPC BLP notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short these are what we believe to be the strongest set of Business Law and Practice notes available in the UK this year. This collection of notes is fully upda...

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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. 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 –

  1. If all partners involved in running the business without limitation being agreed.

  2. Regular course of dealing by one partner in which the others have acquiesced.

  3. The act was a natural consequence of express agreement?

  1. Apparent authority – S.5

Definition: Authority as it appears to the third party.

The partner “holds out” to be acting with authority” -

He makes a representation to a third party.

TEST (S.5 PA 1890):

  1. Did the transaction relate to business of the kind carried on by the firm (objectively assessed){YES}

  2. Would a partner in such a firm usually be expected to have the authority to do this (objectively obsessed){YES}

  3. Did the third party believe X was acting with authority? {YES}

  4. Did the third party know or believe X to be a partner? {YES}

Holding out


Where a creditor has relied on a representation (or “holding out”) that a person was a partner in that firm, he may be able to hold that person liable for the firm’s debts.

  • Even if that person had never been a partner, or had retired before contract was made.

  • Representation can be oral, in writing or implied through conduct

  • Representation can be made by x...

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