Q.4: What is the implied authority of a partner as an agent of the firm? Discuss. OR What is the extent of the implied authority of a partner? What restrictions are imposed on such authority?
Ans: IMPLIED AUTHORITY OF A PARTNER
According to Section 18 of the partnership act, partner is the agent of a firm for the purpose of the business of the firm. So at the same time a partner is the principal as well as the agent of the firm. His authority for the acts of the firm may be express or implied. The authority given to a partner under a contract is known as an express authority. But the acts of a partner which are done to carry on the business of the firm in the usual way binds the firm and the scope of such authority is called as an implied authority of a partner.
LIMITS OF IMPLIED AUTHORITY
The following are the acts, which are generally considered within the implied authority of a partner as an agent of the firm. . .
1. TO PURCHASE GOODS
A partner of the firm has a implied authority to purchase goods for business of the firm.
2. TO SELL GOOOS
A partner has an implied authority to sell goods on account of the firm.
3. TO MAKE PAYMENT
A partner can make payment to creditors of the firm or to any other third party for the benefits of the firm.
4. TO RECEIVE PAYMENT
A party can also receive payment on account of the firm from the debtors or any other passion.
5. TO ISSUE BILLS
A partner can issue or receive bills of exchange or note on behalf of the firm.
6. TO SETTLE ACCOUNT
A partner can adjust and settle the accounts of the partnership transaction with third parties.
7. TO ENTER INTO CONTRACTS
A partner can enter into al! types of usual contract for the ordinary course of business dealing on behalf of the firm.
8. TO EMPLOY SERVANTS
A partner has an implied authority to engage servant and agents for the business of the firm.
9. TO BRING SUITS
A partner can also bring and defend suits in the name of the firm.
10. OTHER THINGS
A partner of the firm can do other things, which are necessary for the usual conduct of the ordinary business dealing of the firm.
PARTNER’S AUTHORITY IN AN EMERGENCY
A partner has authority, in an emergency to do all such acts for the purpose of protecting the firm from loss as would be done by a person ordinary prudence, in its own case acting under similar circumstances and such acts bind firm. Sec 21.
RESTRICTIONS OH IMPLIED AUTHORITY
According to Section 19(2), in the absence of any usage of custom or trade to the contrary, the implied authority of the partner does not empower him to do the following acts.
1. SUBMIT DISPUTE
He cannot submit a dispute relating to the business of the firm in arbitration.
2. BANK ACCOUNT
He cannot open a bank account on behalf of the firm in his own name.
He cannot compromise or relinquish any claim or portion of a claim by the firm.
4. WITHDRAWAL &ESUIT
He cannot withdraw a suit proceeding filed on behalf of the firm.
He cannot admit any liability in a suit or proceeding against the hn.
6. IMMOVABLE PROPERTY
He cannot acquire immovable property on behalf of the firm, or
7. ENTRY IN PARTNERSHIP:
He cannot enter into another partnership on behalf of the firm.