SG1: Actual or Apparent Authority
Who may be liable?
In deciding on who might be liable, it is necessary to assess whether
(they) had authority, as an agent, to bind the business to the
contract.
To begin with, Section 5 of the Partnership Act 1890 (hereafter PA
1890) states: “Every partner is an agent of the firm and his other
partners for the purpose of the business of the partnership…”, which
requires the act in question to be in the usual course of the firm’s
business.
Hence, if (they) had authority to (act), the business will be bound to
pay for them. Contrary, if no authority is established, (they) is liable
to pay. It needs to be considered whether (they) had Actual or
Apparent authority.
Did they have actual authority?
Actual authority is satisfied if (they) had permission from the other
partners to (act).
Is there evidence of express authority?
Is there evidence of implied authority? It could be argued that (they)
had implied actual authority if (they) had previously done this act
and the other partners had not objected. However, there is no
indication in the facts about this.
Yes = Business is liable
No = (they) is liable
Did they have apparent authority?
Section 5 PA 1890 continues: “and the acts of every partner who
does any act for carrying on in the usual way business of the kind
carried on by the firm of which he is a member, bind the firm and
his partners, unless the partner so acting has in fact no authority to
act for the firm in the particular matter, and the person with whom
he is dealing either knows that he has no authority, or does not
know or believe him to be a partner.”
Who may be liable?
In deciding on who might be liable, it is necessary to assess whether
(they) had authority, as an agent, to bind the business to the
contract.
To begin with, Section 5 of the Partnership Act 1890 (hereafter PA
1890) states: “Every partner is an agent of the firm and his other
partners for the purpose of the business of the partnership…”, which
requires the act in question to be in the usual course of the firm’s
business.
Hence, if (they) had authority to (act), the business will be bound to
pay for them. Contrary, if no authority is established, (they) is liable
to pay. It needs to be considered whether (they) had Actual or
Apparent authority.
Did they have actual authority?
Actual authority is satisfied if (they) had permission from the other
partners to (act).
Is there evidence of express authority?
Is there evidence of implied authority? It could be argued that (they)
had implied actual authority if (they) had previously done this act
and the other partners had not objected. However, there is no
indication in the facts about this.
Yes = Business is liable
No = (they) is liable
Did they have apparent authority?
Section 5 PA 1890 continues: “and the acts of every partner who
does any act for carrying on in the usual way business of the kind
carried on by the firm of which he is a member, bind the firm and
his partners, unless the partner so acting has in fact no authority to
act for the firm in the particular matter, and the person with whom
he is dealing either knows that he has no authority, or does not
know or believe him to be a partner.”
