#3259 - Third Parties And Partnerships - Business Law and Practice

1. Actual Authority – S.5

A firm will always be liable for actions which they actually authorised.

2. Apparent authority – S.5

Definition: Authority as it appears to the third party.

The partner “holds out” to be acting with authority” -

He makes a representation to a third party.

TEST (S.5 PA 1890):

1. Did the transaction relate to business of the kind carried on by the firm (objectively assessed){YES}

2. Would a partner in such a firm usually be expected to have the authority to do this (objectively obsessed){YES}

3. Did the third party believe X was acting with authority? {YES}

4. Did the third party know or believe X to be a partner? {YES}

1. X can be sued individually – because of privity of contract

2. The partnership as a whole – S.9 every partner is liable jointly.

3. Any person who was a partner at the time when the debt / obligation was incurred can be sued individually

4. Any person who had left the firm BEFORE the debt / obligation was incurred or who joined the firm AFTER that time - so long as there is evidence of:

1. Holding out (see above)

2. Failure to give proper notice of retirement (liability of outgoing partners):

• S.36: “a partner must give notice of his leaving, otherwise he becomes liable for the debts of the partnership after he leaves, IF the creditor is unaware that he has left.

• How to give notice:

36(1) To all those who have dealt with the firm prior to his leaving – give actual notice (sending out standard letters announcing his leaving. The letter must be received to constitute actual notice).

36(2) To any person who did not deal with the firm prior to his leaving – an advertisement in London Gazette (Or Scotland – the Edinburgh gazette)

3. A Novation agreement: a tripartite contract involving the creditor, the partners at the time the contract was made and the newly constituted partnership.

Liability of incoming and outgoing partners – ...