Implied Authority of a Partner
According to Section 21 of the Indian Partnership Act 1932, each partner is empowered to take whatever action a prudent person would take in an emergency to save the firm from harm. A firm is bound by such conduct. A partner is the firm’s agent for the purposes of the firm’s business, subject to the Partnership Act’s restrictions. Therefore, if the requirements outlined in Section 19(1) of the Partnership Act are met, a transaction entered into by one partner on behalf of the business is binding on the firm and entails liability on the part of all partners. The term “implied authority” refers to a partner’s ability to bind the business as granted by this clause. The following may be the implied authority of a partner:
- Send a disagreement pertaining to the firm’s operations to arbitration.
- Create a bank account for the firm under his name.
- Give up all or a portion of a claim made by the firm.
- Redraw a lawsuit or other legal action brought on the firm’s behalf.
- Accept responsibility for any actions or lawsuits brought against the firm.
- Get a piece of real estate for the firm
- Transfer a firm-owned piece of real estate
- Form a partnership on the firm’s behalf.
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