Relationship of Partners to Outsiders
Part A
Relevant Law
Relationship of Partners to Outsiders
Common Law Position
An outsider has two possible grounds to recover from the partnership – where the partner has actual authority or apparent authority.
Actual authority: the authority of a partner to do acts clearly stated and agreed to by the other partners (whether written or oral).
Apparent authority: the authority that the partner appears to have to third parties (e.g. buying and selling goods, receiving payments, issuing cheques and taking out insurance policies).
The basis of fiduciary relationships between partners was explained by James LJ in Re Agriculturist Insurance Co (Baird’s case) (1870).
“As between the partners and the outside world, (whatever may be their private arrangements between themselves), each partner is the unlimited agent of every other in every matter connected with the partnership business, and not being in its nature beyond the scope of the partnership.”
Ref:http://www.studentatlaw.com/articles/157/4/Partnership/Page4.html
Therefore, the general rule is:-
If an action is within the partner’s actual or apparent authority, the firm is liable for the partner’s actions.
If an action falls outside the partner’s actual or apparent authority, the partner is personally liable and the firm is not bound by the partner’s actions.
Section 26 recognises that each partner is an agent of the firm and therefore bound to a partner’s actions within their actual authority. Further, there are four requirements to establish apparent authority:-
1. The transaction involved must be within the scope of the partnership business (“business of the kind”); (Polkinhhorne V Holland 1934)
2. The transaction must be effected in the usual way/ when the partner actions are carried out in the usual way. (Goldberg V Jenkins 1889)
3. The outsider must have known, or at least must have believed, that the person with whom he or she was dealing was a partner and must
Relevant Law
Relationship of Partners to Outsiders
Common Law Position
An outsider has two possible grounds to recover from the partnership – where the partner has actual authority or apparent authority.
Actual authority: the authority of a partner to do acts clearly stated and agreed to by the other partners (whether written or oral).
Apparent authority: the authority that the partner appears to have to third parties (e.g. buying and selling goods, receiving payments, issuing cheques and taking out insurance policies).
The basis of fiduciary relationships between partners was explained by James LJ in Re Agriculturist Insurance Co (Baird’s case) (1870).
“As between the partners and the outside world, (whatever may be their private arrangements between themselves), each partner is the unlimited agent of every other in every matter connected with the partnership business, and not being in its nature beyond the scope of the partnership.”
Ref:http://www.studentatlaw.com/articles/157/4/Partnership/Page4.html
Therefore, the general rule is:-
If an action is within the partner’s actual or apparent authority, the firm is liable for the partner’s actions.
If an action falls outside the partner’s actual or apparent authority, the partner is personally liable and the firm is not bound by the partner’s actions.
Section 26 recognises that each partner is an agent of the firm and therefore bound to a partner’s actions within their actual authority. Further, there are four requirements to establish apparent authority:-
1. The transaction involved must be within the scope of the partnership business (“business of the kind”); (Polkinhhorne V Holland 1934)
2. The transaction must be effected in the usual way/ when the partner actions are carried out in the usual way. (Goldberg V Jenkins 1889)
3. The outsider must have known, or at least must have believed, that the person with whom he or she was dealing was a partner and must