RELATIONSHIP OF

PARTNERS TO PERSONS
DEALING WITH THEM
INTRODUCTION
Usually a partner in a partnership might do something in the course of it`s
business. The issue here is to what extent the act of a partner will will bind the
partnership individually and collectively.
According to Morse the dealing is a loose dealing.
2. The scope of the liability of one partner
for the act of fellow partners can be divided into two area:
i! contractual liability
ii!Tortial liability
LIABILITY OF PARTNERS FOR
CONTRACTS
AGENCY CONCEPTS
An act committed by one partner binds the
rest of the partners if it is carried out within
the ordinary scope of the firm`s business.
Thus each partner is an agent and a principal
at the same time.There is a fudiciary
relationship among partners.
eg! A " # and $ are partners.A orders good
from % . % delivers the good but A did not
pay. To what extent % can claim from # and
$.
&ere A is an agent to # and $ who is the
principals. A can bind his principal provided
he acted within his authority.
2. The Agency concept of 'artners originated
from common law "has been explained by
(ames )( in
Agriculturist Cattle Insurance C!" #air$%s
Case
whereby this common law rulling was codified
into s. * to s. + of ,nglish 'A which is in
parimeteria with s. - an to s. ./ of our Act.
s. & PA
e'er( )artner is an agent * t+e *ir, an$ +is
t+er )artners *r t+e )ur)se * t+e
-usiness * t+e )artners+i)
an$ t+e acts * e'er( )artner .+ $es an(
act *r carr(ing n in t+e usual .a( -usiness
* t+e /in$ carrie$ n -( t+e *ir, * .+ic+ +e
is a ,e,-er
-in$ t+e *ir, an$ +is )artners" unless
t+e )artner s acting +as in *act n aut+rit(
t act *r t+e *ir, in t+e )articular ,atter"
an$ t+e )ersn .it+ .+, +e is $ealing
eit+er /n.s t+at +e +as n aut+rit( " r
$es nt /n. r -elie'e +i, t -e a )artner!
Cnstructin Engineering 0Australia1Pt( t$ '
He2(l Pt( Lt$
s. - 'A has 2 limbs.
.! 0irst limb deals with actual authority
2! 1econd limb deals with2stensible
authority
Mrse commented on the wording of s. -s.*!
he said
That the word business of partnership is
misleading becox it is possible for a partner to
bind the co partner for acts unconnected with
the firm`s business if he has the authority to do
so.
TYPES OF AUTHORITY
There are 3 types of authority
ACTUAL AUTHORITY
An agent may bind his
principal(firm)to any act which he
is expressly authorised by his
principal to do.It is immaterial
whether he is a partner or not.
(eg) If his principal authorises him
to buy 100 tons of wheat and the
agent does so then the principal
will be bound by the contract.
Freeman Lock v (1964 Lor!
"#$%ock&
a legal relationship between
principal and agent created by
agreement to which they alone or
parties , this authority can be
construed from express word used
in the usage of the trade or the
course of business between
parties.
Ha#%e' H()c*#n+on v Bra'
Lev# .!ord "enning#
Actual authority may be express or
implied .It is express when it is
gi$en by express word and it is
implied when it is inferred from the
conduct of the party or the
circumstances of the case.
USUAL OR IMPLIED AUTHORITY
.. 4mplied authority arises from the status
of the partner involved. &ere it gives rise to
the presumption that he has authority to
carry out transaction. 4f a partner does an
act that the third party would regard as a
normal thing to do by the partner then the
firm will be bound by the act.
eg! what it is usual for an estate agent to
do.An act done in the usual course of the
partnership business.
5hether a business is a trading
partnershipcan borrow money buy good
sell! or a non trading partnership is
important to note.
C+an 3ing Yue ' Lee 4 Wng056781
ML9!
' sued for the recovery of 63* /// which
she lent to a firm where her husband was a
partner. The money was utalised by the
firm to pay debts. The co partners
contended hat her husband had no
authority of the firm to borrow money.
&eld: the partners were liable as it was an
act" committed by one partner neccesary
for the carrying on of the firm`s
business.#ut lecturer sai$ t+ere is n
i,)lie$ aut+rit(!-ec2 t+e *ir, .as
an.electrical engineering $o.i.e. non
trading co.!
Rsen #au, - #ailsen
Actual Authority is a 7uestion of fact but
implied authority it is a 7uestion of law.
The implied authoirty of a partner t8fore
depends upon the answer to the 3
7uestions:
i! does the act relate to the 9ind of
business carried on by the firm
ii! if so" was it the usual way of carrying on
that business
iii! and did the third party either 9now that
thepartner had no actual authority or
believe that he was not a partner:
This stated in the 2
nd
limb of s. - 'A
Pl/ing+rne ' Hllan$
APPARENT OR OSTENSI#LE AUTHORITY
Free,an Lc/ '
)ord ;iploc9
Apparent Authorityis a legal relationship
between the principal and the contractor third
party! created by a representation made by
the principal to the contractor intended to be
and infact acted upon by the contractor that
the agent has authoiryty to enter or before of
the principal into a contract
2. Apparent Authority arises from the
representation made by the principal to the
third party that the agent as having authoirty
to do a particular thing.
&ere there is doctrine of estopel whereby the
principal cannot in such circumstances deny
the agent`s authoirty.
The representation can be by express or
conduct
eg! 4f a partner employ wor9ers among the
people for many many years" then a third
party can imply from the conduct of the agent
as representing the firm and it is binding the
firm.
4t is a 7uestion of facts
Sit+a,-ara, C+ett( ' H)+in 4 Ors
0568:1SSLR ;8
Os,an -! H< M+a,e$ ' C+an 3ang S.i
A frim consisted of 3
$hinese 'artners managing it and 3 Malay
sleeping partners.The 3 chinese partners
borrowed money for the firm and $han <ang
1wi guaranted the loan .)ater the firm fail to
pay.$han paid the debt and sue the 3
partners. 0ive admitted liability but .
contested the claim. $2A held: ; is liable for
repaying the debt becos it was for the benefit
of the ban9 that money was loan for.
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A4(0)-I(5 (-efer 3orse pg 67)