ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships
Amara and Luis run a general trading partnership. Without telling Luis, Amara signs a contract in the partnership name to buy goods that a trading business of that type normally buys. The supplier did not know of any restriction on Amara's powers. Which statement is correct?
The partnership is bound by the contract. A partner acts as agent of the firm for transactions within the usual course of its business, and a third party without notice of any limit on authority can rely on that apparent authority, so Luis's lack of consent is irrelevant.
- AThe partnership is not bound, because Luis did not consent to the contract
- BThe partnership is bound, because Amara acted as an agent of the firm in the usual course of its businessCorrect
- COnly Amara is bound, because partners can never bind their co-partners without express consent
Explanation
Each partner is the agent of the firm for acts apparently carried on in the usual way of the firm's business. The supplier had no notice of any restriction, so the firm is bound. The first option is wrong because express consent from every partner is not required for usual-course acts.
Did you get it right without looking?
One question tells you little. A timed set on Partnerships shows your real accuracy, how long you take and where you lose marks.
More Partnerships questions
- Chen, Dara and Eli are partners in a design firm. Chen, without authority and outside the usual business of the firm, signs a long lease of …
- Dunmore LLP is a limited liability partnership with four members. It owes a supplier $90,000 and cannot pay. Which statement best describes …
- A partnership is dissolved and its assets are realised. The firm's assets are insufficient to pay its creditors. Which statement about the p…
- Jonas retired from a general partnership of three partners on 1 March. The firm's customers were not told, and the firm's letterhead still s…
- Lucia, Marco and Nadia are partners in a catering firm. Lucia commits a negligent act in the ordinary course of the firm's business, causing…
- Chen and Dalia are partners. Their partnership agreement is silent on how profits are shared. Chen contributed 80% of the capital and Dalia …