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ACCA Applied Skills · Corporate and Business Law (Global) · Partnerships

Carla and Dev run a consultancy as a general partnership. Dev signs a contract for office equipment in the firm's name, within the usual scope of the business. Carla did not know about it. Which statement is correct?

The contract binds the firm and Carla can be liable, because each partner is an agent of the partnership for acts within its usual business. Carla's lack of knowledge of the transaction does not remove the firm's liability to the supplier.

  1. AThe contract binds only Dev, because Carla did not consent
  2. BThe contract is void because partners must act jointly on every transaction
  3. CThe contract binds the firm, and Carla may be liable for it, because each partner is an agent of the firm for acts within its usual businessCorrect
  4. DThe contract binds the firm only if it is approved later in writing

Explanation

In a general partnership each partner acts as agent of the firm and of the other partners for acts apparently within the ordinary course of business. Lack of Carla's knowledge does not prevent the firm being bound. Option A ignores this agency rule.

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