ACCA LW · Chapter 7 · Question 5 of 10
Under s5 of the Partnership Act 1890, what is the position when a partner enters into a contract in the usual course of the firm's business but has been forbidden by the other partners to do so?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The firm is bound unless the third party knew the partner lacked authority or did not know or believe him to be a partner
Explanation
Every partner is an agent of the firm, and acts done in carrying on the firm's business in the usual way bind the firm. Internal restrictions do not bind a third party who is unaware of them, because the partner has implied usual authority. The firm is not bound if the third party knew the partner had no authority or did not know or believe him to be a partner.
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