Question

An act done by a partner in the course of the firm's business is:

• A. Binding on all partners only when expressly authorised by all co-partners
• B. Binding on the firm and all partners if done within the scope of implied authority
• C. Not binding on other partners unless ratified after the act is performed
• D. Binding only on the acting partner unless specifically approved in the partnership deed

Hint:

Every partner is: \[ \text{an agent of the firm} \] Hence acts done within implied authority bind all partners.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
This question addresses the core legal doctrine of "Mutual Agency" in a partnership.
According to Section 18 of the Indian Partnership Act, 1932, "a partner is an agent of the firm for the purposes of the business of the firm."
This means that for the purpose of carrying on the business, each partner acts as a representative of the whole firm and all other partners.
Step 2: Detailed Explanation:
The concept of "Implied Authority" (Section 19) is what makes a partnership functional.
It implies that a partner has the authority to perform all such acts as are necessary for carrying on the business of the firm in the usual way.
For an act to be binding on the firm under implied authority, it must meet three criteria:
1. It must be an act done in the ordinary course of the business of the firm.
2. It must be done in the name of the firm or in a manner that expresses an intention to bind the firm.
3. The act must be "usual" for the type of business the firm conducts.
Example: If a partner in a grocery store buys sugar on credit from a supplier, all partners are liable to pay that supplier. Buying stock is a "usual" and "ordinary" act for a grocery business.
Why other options are incorrect:
Option (A) is wrong because if express authorization was required for every single act, the business would come to a standstill.
Option (C) is wrong because ratification is only needed for acts done outside the scope of authority.
Option (D) is wrong because it contradicts the very definition of a partnership as a collective liability entity.
Thus, an act done within the scope of implied authority automatically binds the entire firm and all its partners.
Step 3: Final Answer:
Under the principle of mutual agency, acts within implied authority bind all partners.
Correct Answer is (B).