Monday, October 08, 2007

Parternship Act_Practical Problems_5

A, B and C are partners in a firm called ABC. A, with the intention of deceiving D, a supplier of office stationery, buys certain stationery on behalf of the ABC firm. The stationery is of use in the ordinary course of the firm's business. A does not give the stationery to the firm, instead brings it to his own use. The supplier D, who is unaware of the private use of stationery by A, claims the price from the firm. The firm refuses to pay for the price, on the ground that the stationery was never received by it. Decide

(i) Whether the firm's contention is tenable?
(ii) What would be your answer if a part of the stationery so bought by A was delivered to the firm by him, and the rest of the stationery was used by him for private use, for which neither the firm nor the supplier D was aware?
(iii) Explain the provisions of the Indian Partnership Act in this regard.

The given problem relates to 'implied authority' of a partner. Sections 19 and 22 of the Partnership Act deal with the subject of implied authority of a partner. The two Sections when read together provide that the act of a partner which is done to carry on, in the usual way business of the kind carried on by the firm, binds the firm, provided the act is done in the firm's name, or in any manner expressing or implying an intention to bind the firm.

Besides, every partner is in contemplation of law the general and accredited agent of the partnership and may consequently bind all the other partners by his acts in all matters which are within the scope and objects of the partners. Considering the aforesaid provisions and explanation, the questions asked in the problem may be answered as under:

(i) The firm's contention is not tenable, for the reason that the partner in the usual course of the business has an implied authority to bind the firm. The firm is, therefore, liable for the price of the goods.

(ii) In the second case also the answer would be the same as above, i.e., the implied authority of the partner binds the firm.

(iii) It is explained above.

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