Extension or Restriction of a Partner’s Implied Authority
- The terms of the current contract between the various partners in the firm determine how much authority a partner may extend or restrict. Nonetheless, a partner may act on his own behalf if he has the express consent of another partner, as granted by an agreement or if the trade’s conventions allow it.
- A firm’s partners may agree in writing to increase or decrease a partner’s implied power under Section 20 of the Indian Partnership Act, 1932. Only in situations where the third party is aware of the restrictions or is unaware that he is interacting with a partner of the firm do these limitations or extensions apply to them.
Relations of Partners to Third Parties (Law of Partnership)
The Indian Contract Act, 1872, governed the field of partnership law before the passage of the Indian Partnership Act, 1932. However, given the quick expansion of trade and industry as well as the escalating industrialization, a distinct partnership law was urgently required. “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all,” as stated in section 4 of the Indian Partnership Act, 1932. In this case, the individuals who have formed a partnership are referred to as Partners, and as a group, they are known as a Firm. A firm name is the name that all of the partners use to jointly manage the firm. In a partnership firm, two or more individuals work together to run a business to make money and divide that money according to the partnership deed’s established profit-sharing ratio.
Key Takeaways:
- Among company owners and entrepreneurs, partnerships are among the most well-known forms of commercial agreements.
- A partnership must be established under Section 12 of the Indian Partnership Act to conduct a lawful business.
- The general rules of the Indian Contract Act will, in any event, apply in situations where the Partnership Act is silent.
- Mutual agency is fundamental for the creation of valid partnership.
Table of Content
- Relations of Partners with Third Parties
- Express Authority of a Partner
- Implied Authority of a Partner
- Extension or Restriction of a Partner’s Implied Authority
- Partner’s Authority in an Emergency
- Liability of Partners to Third Parties
- Conclusion
- Relations of Partners to Third Parties- FAQs