Implied authority of a partner

By Koushambi Sengupta

The implied authority of a partner can be inferred from the circumstances of the case. Those acts of partner are incidental to or usually done during proper conduct of the business and come within the scope of his implied or apparent authority.

The scope of the implied authority of a partner are as follows- 

A. The act done for carrying out a business must of such kind which is carried out for the firm.

B. The act to be done must be in a usual way followed in such a business.

C. The act has to be done in the name of the firm or in a manner that binds the firm, whether be in expressed or implied form.

The implied authority of a partner cannot extend to his acts done beyond the scope of the business firm.

In the case of a commercial or a trading firm, a partner while exercising it's implied authority can bind the firm by doing any of the following acts- 

A. Receiving payments due to the firm and giving receipts of such payment.

B. Buying and selling of goods on behalf of the firm.

C. Contracting debts and paying debts on behalf of the firm.

D. Settling of account with the person who is dealing with the firm.

E. Employing workers for the partnership firm.

F. Pledging movable property of the firm.

G. Accepting and endorsement of bills of exchange and promissory note on behalf of the partnership firm, drawing cheques for the firm.

H. Suing or defending the firm in Court.

However, there are some statutory restrictions on the implied authority of a partner in a partnership firm.

Statutory restrictions on implied authority- 

There are certain acts that have been excluded statutorily from the scope of the implied authority of a partner. Therefore, a partner, in any way, cannot bind the firm by such acts unless there are some customs and usages of trade that would permit him or all other partners expressly authorize him.

Therefore, it is extremely necessary for a third party to ascertain as to whether the partner is authorized or not. If this third party deals with an unauthorized partner, he later cannot hold the partnership firm liable for any loss caused.

Following are some of the acts for which a partner does not have an implied authority unless some custom or usage permits to do so.

A. Opening of a bank account on behalf of the firm in his own name.

B. Compromise or relinquish any claims made by the firm.

C. Withdrawal of a suit or proceeding filed on behalf of the firm.

D. Acquire immovable property on behalf of the firm.

E. Transfer immovable property belonging to the firm etc. 

This article does not intend to hurt the sentiments of any individual, community, sect, or religion, etcetera. This article is based purely on the author’s personal opinion and views in the exercise of the Fundamental Rights guaranteed under Article 19(1)(A) and other related laws being enforced in India for the time being.