11-30-2011, 09:13 PM
Implied authority
Q. What are implied authorities of a partner? What matters have been excluded specifically from such authorities by the act.1. Introduction:
Under partnership act 1932 every partner has right to takes part in management of business of the firm. Business is carried on by all the partners or any of them acting for all the partners. The partner have to exercise their authorities in order to conduct the business. The authority of a partner to act be express or implied.
2. Implied authority:
Where there is no express agreement, the act of a partner which is done to carry on in the usual way, business of the kind carried on by the firm binds the firm. It is implied authority.
3. Form of authority
Authority may be:
(i) Express or
(ii) Implied
4. Conditions of implied authority:
Conditions of implied authority are as under.
(a) Conditions on behalf of firm:
Act done by a partner is on behalf of a firm.
(b) Act done as partner:
Act done on behalf of firm is done by person as a partner of firm.
© Use the name of firm:
The act is done in the name of the firm.
(d) Business objects:
Act done is for business objects a firm.
(e) To carry on business:
The act done relates to the normal business of the firm.
5. Implied authority of a partner:
A partner can do the following acts under implied authority.
(I) Borrowing money:
A partner can borrow money on the credit of the firm
Case law
1987 CLC 2541
It was held that one partner can borrow on credit on the firm if the firm is trading firms, and no duty is cast upon the person advancing money to make any further enquiry.
(II) Purchasing of goods:
He can purchase goods for the firm on credit if it is necessary to carry on the business.
Case law
1998 CLC 1684
It was held that a partner had no implied authority to bind his firm by opening a bank account in his own name.
(III) Contracts:
He can make contract on behalf of firm.
Case law
P. L. D 1966 Lah. 452
It was held that where a partner enter into contract on behalf of the firm and his partner do not object to the contract, the opposite party can not say that the contract was entered into by the partner of the firm.
(IV) To sale property of firm:
He can sale the goods of the firm, (moveable)
(V) Granting the receipt:
He can issue receipt on behalf of a firm.
(VI) To pledge:
He can pledge property of firm for loan.
(VII) To receive money:
He can receive payment on behalf of firm.
(VIII) Legal services:
He can engage solicitor to defend an action against the firm.
(IX) Settlement of accounts:
He can settle accounts with the persons dealing with the firm.
6. Acts outside implied authority:
A partner can not do the following acts.
(I) Submit a dispute to arbitration:
He cannot submit a dispute relating to the business of the firm for arbitration.
(II) Bank account:
He can not open a bank account on behalf of the firm in his own name.
(III) Compromise:
He can not compromise any claim or portion of any claim by the firm.
(IV) Withdrawal of suit:
He can not withdraw any suit filed by the firm.
(V) Admit any liability:
He cannot admit any liability in a suit against the firm.
(VI) Acquire immoveable property:
He cannot acquire any immovable property on behalf of firm.
(VII) Transfer of immoveable property:
He can not transfer immovable property belonging to firm.
(VIII) Agreement:
He cannot enter in to agreement of partnership on behalf of firm.
7. Conclusion:
To conclusion it can be said that, implied authority is an authority of partner which binds the firm by his act under law. The scope of implied authority is linked with the nature of business of the firm. A partner’s authority is either implied or express. An act done by a partner which does not fall within the scope of his implied authority does not bind the firm.