THEM INTRODUCTION s. 7 to s. 20 of the Partnerships Act covers the relations of partners with third party 2. The issue here is what is the laibility of the Partners due to an act of a partner to third party. 3. There basically two types of liabilities i.e. contractual and tortious liabilities. There are some important points to consider here: (i !ow and to what e"tend the partners are liable (ii #or how lon$ they are liable i.e. if partners retires %is heliable for debt incured after his retirement. AGENCY PRINCIPLE &. At common law the law of Partnerships are considered to be merely a$ent and principal relationships. !e is an a$ent to the Partnership as well as the principal.An a$ent owes a fudiciary duties (mutual trust ' confidence to his principal. Baird`s Case Constr!tion En"ineerin" #Ast$ Pt%& Ltd ' He(%) Pt%&Ltd& (. The partners may collectively authorise a partner to enter into a transaction on their behalf.This will bind the firm and it is immaterial whether the transaction falls within the scope of the partnership business and it has bindin$ effect. ). s& * PA provides that *every partner is an a$ent of the firm and that his other partners for the purpose of the business of the partnership. C+an Yin Tee ' Wi))ia, -a!. Co& LIABILITIES OF PARTNERS FOR CONTRACTS +n order to bind the principal an a$ent must have re,uisite authority.There three types of authorities. ACTUAL AUTHORITY -. .hereby an a$ent may bind his principal to any act which is e"pressly authorised by his principal can be implied throu$h conduct or circumstances. (e$ A % / % and 0 are Partners.A is authorised by / and 0 to buy -00 tons of wheat from 1. +f A fails to pay% then 1 can recover from the principal (/ and 0. Free,an and Lo!.%er ' B!.+rst Par. Pro/erties 2ord 1iploc3: Actual authority is a le$al relationship between principal and a$ent created by a consensual a$reement to which they alone are parties.This authority can be construed from the e"press word used in the usa$e of the trade or in the course of business between parties. He)%0Ht!+inson ' Bra%+ead Ltd 2ord 1ennin$: Actual authority may be e"press or implied .+t is e"press when it is $iven by e"press word and it is implied when it is inferred from the conduct of the party or the circumstances of the case. 2. The onus of proof lies on the Plaintiff (third party to proof. 3. +t is a ,uestion of facts. USUAL OR IMPLIED AUTHORITY -. +t is an authority which arises from the status of the partner involved. !ere it $ives rise to the presumption that he has the authority to carry out the transaction. +f a partner does an act% that the third party would re$ard as a normal thin$ to do by the partner then the firm will be liable for the act. 2. +t is a ,uestion of 2aw. C+an 1in" Ye ' Lee 2 Won" Rose,3a, ' Be)son 3. /y virtue of second limb of s. 7 PA : *4and the acts of every partner who does any act for carryin$ on in the usual business of the 3ind carried on by the firm of which he is a member bind the firm and his partners% unless the partner so actin$ has in fact no authority to act for the firm in the particular matter% and the person with whom he is dealin$ either 3nows that he has no authoirty% or does not 3now or believe him to be a partner5 &. There are & elements to be proved if the third party wants to bind the firm under +mplied Authority: i& Does t+e a!t re)ate to t+e .ind o4 3siness !arried on 3% t+e 4ir,& (e$ A and / carry on a business as butchers.A contract si$ned by A in the frims name to suplly furniture would not bind / unless A has actual authority of apparent authority. .hether a particular activity is or not related to the business is a ,uestion of facts. Mer!+anti)e Credit Co& Ltd& 5 Garrod Po).in"+orne ' Ho))and There are two sections which must be read to$ether with the above element. (a s. 6 PA acts or instrument to the business of the firm and in a manner showin$ an intention to bind the firm. (this sect. Also deal with 7deeds5. Any transaction dealin$ with *deed7 under Partnership must be carried out by all partners or by a person authorised by all partners (b s. 8 where one partner pled$e the credit of the firm for the purpose apparently not connected with the firm7s ordinary course of business% the firm is not bound unless he is in fact specially authorised.. ii& In T+e sa) Wa% 9ometime an act may falls w:thin the scope of the 3ind of business carried on by the partnership but it is carried out in an *unusual manner5. .hether it is usual or not depends on the whether it is a Tradin$ or ;on Tradin$ Partnership. #a$ Tradin" Partners+i/ +n the absent of e"press prov.the usual authority of a partner inn a tradin$ partnership has: -./uyin$ sellin$ (W+eat)e% ' S,it+ers$ 2. /orrowin$ money on accounts of firm (Hi""ins ' Bea!+a,/ 3. <n$a$e employees for the firm Mer!+anti)e Credit Co& Ltd ' Garrod( even clause restrict buyin$:sellin$ still liable C+an 1in" Ye6 ' Lee 2 Won"(even not usual but if neccesary for the firm still liable..depart from <2 3&Non Tradin" Partners+i/ Partners don5t have implied authority to buy:sell:borrow money Hi""ins ' Bea!+a,/ !& A!ts Ne'er Wit+in Usa) At+orit% There are no implied authority in -. =ivin$ $uarantee in the firms name unless a trade custom to that effect is proved 2. <nters into arbitration on behalf of the firm 3. >a3e his partners into partners with other person from another business (e$( +f A / and 0 are partners % 0 don5t have implied authority to ma3e 1 a partner &. Act authorisin$ a third person to ma3e use of the firm7s name in le$al or other proceedin$. s. -7 an admissim or representation made by any partner concernin$ the partnership affairs and in the ordinary courseof its business% is evidence a$ainst the firm.( this shows partner has implied authority and it is only admissible and not conclusive s. -6 notice to any partner who habitually acts in the partnership business of any matter relatin$ to partnership affairs operates as a notice to the firm e"cept in the case of fraud on the firm committed by or with consent of that partner. APPARENT7OSTENSIBLE AUTHORITY +t arises when the principal has held out the a$ent as havin$ authority to do a particular thin$ that the third party relies on the representation. 2. The representation can be e"press: or by conduct and it is a ,uestion of facts. 3. s. -7 tal3s about representation. Sit+a,3ara, C+ett% 2 Ors ' Ho/ Hin" 2 Ors Os,an 3 H8& Mo+a,ed ' C+an 1on" S6i iii& Mst A!t Under T+e Ca/asit% As A Partner The partner must enter into the transaction on behalf of the firm . +f he enter under his own capasity then it is not bindin$ the firm. 5as De'an 2 Anor ' U&A& Nair Re Bri""s 2 Co& i'& 1no6)ed"e 2 Be)ie4 1id the Third Party either 3now that the Partner had no actual authority or believe that he was not a partner There are two situation to be considered here: (a where the partner has no actual authority and the third party 3nows that he has no such authority. ?nowled$e of lac3 of authority destroys the essence of implied authority since the third party cannot then be said to be relyin$ on appearance. (b where the partner has no actual authority and the third party 7does not 3now or believe him to be a partner5 Do!trine o4 Undis!)ose Prin!i/a) This is a doctrine in 2aw of A$ency i.e. where an a$ent has authority to act for a principal but does not tell the third party that he is actin$ as an a$ent% the third party may sue either the a$ent or principal. /y virtue of s. 7 PA this principal is not applicable in 2aw of Partnership beco" .. if the third party does not 3now or believe that he has the actual authority or is a partner.. Rati4i!ation This is another common law principle of 2aw of A$ency @nder this principle% where a person has purpotedly to act as an a$ent% but in fact has no authority to act% and the principal subse,uently adopts the transaction. Then it will bind the firm . Adoption can by e"press or implied by conduct. <$. A ' / are sleepin$ partners to the firm +f they adopts the transaction then binds them.