Authority

Question 1

what type of law applies and why?

Answer 1

A partner is an agent of the partnership and so agency law applies

Question 2

what are the types of authority? explain each

Answer 2

o Express actual authority = partner explicitly given authority
o Implied actual authority = implied based on position or past conduct
o Apparent authority = partner gives the impression they have authority but they do not.

Question 3

when will a partner acting with apparent authority bind the partnership?

Answer 3

The firm will be bound by the partner’s actions if:
 The transaction is related to the firm’s usual business;
 One would expect a partner to have authority to enter into the transaction;
 The other party didn’t know the partner didn’t have authority; and
 The other party knew/assumed they were a partner

Question 4

explain who is liable to pay in relation to each type of authority

Answer 4

o Acts with actual authority = partnership bound
o Acts with apparent authority = partnership bound but partner liable to indemnify other partners for loss
o Acts outside the scope of actual/apparent authority = partner personally liable to perform contract