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CA Foundation · Business Laws · The Limited Liability Partnership Act, 2008

Mehul, a partner in Zenith Infra LLP, signs a contract with a vendor without any authority from the LLP, and the vendor knows he has no authority. Who is bound by this contract?

Mehul is personally bound. In an LLP a partner is the agent of the LLP only, and the LLP is not bound where the partner lacks authority and the vendor knows it. The other partners are not liable for his unauthorised act.

  1. AThe LLP, because every partner is an agent of the LLP
  2. BMehul personally, because the LLP is not bound where the partner has no authority and the other party knows thisCorrect
  3. CAll the other partners personally, because they are jointly liable for each other's acts
  4. DNobody, because an LLP can never enter into contracts through its partners

Explanation

A partner is the agent of the LLP, not of the other partners. The LLP is not bound by an act of a partner who has no authority to act, if the other party knows of this lack of authority. The liability then falls on Mehul himself. Other partners are not personally liable for his unauthorised act, so the 'all partners' option is wrong.

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