JAIIB LRAB Unit 51 - Relations of Partners to Third Parties

JAIIB LRAB Unit 51 - Relations of Partners to Third Parties (Year: 2019)

An act done by a partner to carry on the kind of business done by the firm (in the usual way) binds the firm. This authority of a partner to bind the firm is called his 'implied authority'.

 

A partner is the agent of the firm for the purpose of the business of the firm.

  • An act done by a partner to carry on the kind of business done by the firm (in the usual way) binds the firm. This authority of a partner to bind the firm is called his Implied Authority. The partners in a firm may by mutual agreement amongst themselves, extend / restrict the implied authority of any partner.
  • Every partner is liable jointly with all other partners and also severally for all acts of the firm while he is a partner.
  • Holding Out when a person who is not at all partner in a firm, either represents himself, or knowingly permit himself to be represented , as a partner in a firm and as a result of this, he induces others to give credits to the firm, he is known as a partner holding out.
  • A transfer by a partner of his interest in the firm does not entitle the person to whom the interest is transferred (transferee) to interfere in the conduct of the business but entitles the transferee only to receive the share of profits of the transferring partner and the transferee has to accept the account of profits agreed by the partners.

 

The implied authority of a partner does not empower him to

 

(a) submit a dispute relating to the business of the firm to arbitration (i.e. for settlement by an independent person other than the parties to the dispute);

 

(b) open a banking account on behalf of the firm in his own name;

 

(c) compromise or relinquish (give up) any claim by the firm;

 

(d) withdraw a suit or proceeding filed on behalf of the firm;

 

(e) admit (accept) any liability in a suit or proceeding against the firm;

 

(f) acquire immoveable property on behalf of the firm;

 

(g) transfer immoveable property belonging to the firm; or

 

(h) enter into partnership on behalf of the firm.

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