POWERS AND LIABILITIES OF PARTNERS
IN RELATION TO PERSONS DEALING
WITH THE PARTNERSHIP
Sec. 26. Powers of partners in general. The extent of the
power of partners to bind the firm is determined by the law of
agency. Section 9 of the Uniform Partnership Act provides as
"Every partner is an agent of the partnership for the purpose of
its business, and the act of every partner, including the execution
in the partnership name of any instrument, for apparently carry-
ing on in the usual way the business of the partnership of which he
is a member binds the partnership, unless the partner so acting has
in fact no authority to act for the partnership in the particular mat-
ter, and the person with whom he is dealing has knowledge of the
fact that he has no such authority.
An act of a partner which is not apparently for the carrying on of
the business of the partnership in the usual way does not bind the
partnership unless authorized by the other partners.
Unless authorized by the other partners or unless they have aban-
doned the business, one or more but less than all the partners have
no authority to:
(a) Assign the partnership property in trust for creditors or on
the assignee's promise to pay the debts of the partnership,
(b) Dispose of the good will of the business,
(c) Do any other act which would make it impossible to carry
on the ordinary business of a partnership,
(d) Confess a judgment,
(e) Submit a partnership claim or liability to arbitration or ref-
No act of a partner in contravention of a restriction on authority
shall bind the partnership to persons having knowledge of the re-
Sec. 27. Express and implied powers. By express agreement,
authority that cannot be exercised by any of the other partners may
be given to a particular partner. This authority may be limited to
a particular act, it may be general, or it may be authority which
would seem to go beyond the scope of the usual authority of an
agent not specially authorized. The limitation of the authority of
248 BUSINESS ORGANIZATIONS PARTNERSHIPS
a partner as an agent does not bind third persons who have no
knowledge of the limit of authority.
In the absence of an express agreement describing the powers of
the partners, each partner has implied power to do all acts neces-
sary for carrying on the business of the partnership. The nature
and scope of the business, and what is usual in the particular busi-
ness, determines the extent of the implied powers.
Sec. 28. Trading and nontrading partnerships. Partnerships
for the purpose of determining the limit of a partner's powers may
be divided into two general classes trading and nontrading part-
nerships. A trading partnership is one which has for its primary
purpose the buying and selling of commodities. In such a trading
firm, each partner has an implied power to borrow money and to ex-
tend the credit of the firm, in the usual course of business, by sign-
ing negotiable paper.
A nontrading partnership is one which does not buy and sell com-
modities, but which has for its primary purpose the production of
commodities, or is organized for the purpose of selling services, such
as professional partnerships. In such partnerships, a partner does
not have implied power to borrow money or to bind the firm on
negotiable paper. 1 However, where the act is within the scope of
the partnership business, a member of a nontrading partnership
may bind the firm by the exercise of implied authority just the
same as a partner in a trading partnership.
Sec. 29. Notice and admissions. Each partner has implied
authority to receive notice for all of the other partners concerning
matters within the pursuit of the partnership business ; and knowl-
edge, held by any partner in his mind but not revealed to the other
partners, is notice to the partnership. Knowledge of one partner
is knowledge of all. This knowledge, however, must be knowledge
obtained within the scope of the partnership business. If the part-
ner could have and should have communicated knowledge to the
other partners and fails to do so, his failure would be chargeable
to the firm. This rule does not apply, however, if fraud is perpe-
trated on the partnership by the partner having such knowledge.
Admissions or representations, pertaining to the conduct of the
partnership business, made by a partner may be set up as evidence
against the partnership.
Sec. 30. Ratification. Acts of the partners with respect to
third parties, which have been committed without authority ex-
press or implied, may be ratified by the copartners, thus binding
v. Matheson et al., 1895, 12 Wash. 88, 40 P. 628; p. 677.
POWERS AND LIABILITIES OF PARTNERS 249
the firm. Whether there is a ratification is always a question of
fact in each particular case, and such question is determined by the
general law of agency.
Joint and Several Liability
Sec. 31. Contractual liability. Even though a partnership is
considered a legal entity for some purposes, the liabilities of the
partnership ultimately are the liabilities of the persons within the
firm. All obligations and risks assumed by contract in the pur-
suit of partnership business are joint obligations of the partners.
Hence, where two or more persons make one single promise, the
liability is joint. In a suit for recovery on such promises, all per-
sons making the single promise must be made party defendants. 2
Thus a contract between A, B, and C, as partners, with F, a fourth
person, is a joint contract by which A, B, and C jointly bind them-
selves to Y. Although the partners are bound jointly, nevertheless,
each individual partner is liable for the obligation if sued alone,
unless he pleads nonjoinder of his copartners. An individual part-
ner may, however, enter into a personal agreement with a firm cred-
itor in such a manner as to make himself responsible for the goods
sold to the firm. A release of one of the joint promisors, since there
is only one promise, will release all. Statutory regulations in some
states provide that partnership liability is joint and several.
If the liability is several, there are as many individual promises
as there are partners. If the liability is joint and several, there is
one more promise than there are promisors the combined prom-
ise of all and the several promises of each. Therefore the release
of one partner on his promise or liability does not release the others ;
a separate cause of action may be had against each promisor.
Sec. 32. Tort liability. In tort the partners are jointly and
severally liable. 3 The obligation does not arise by reason of any
intention of the parties, but by reason of some injury or loss caused
to a third party by some member or members of the firm in the
scope of the partnership business, or for the tort of a servant or
agent of the partnership within the scope of his employment. By
the law of agency the principal is liable for the torts of his agent,
and, since a partner is an agent of the other partners and the part-
nership, the firm is liable for the torts of its partners. Not only is
the firm liable for the tort committed, but the partner committing
the tort is personally liable.
3 Page v. Brant, 1856, 18 111. 37; p. 678.
8 Boston Foundry Company v. Whiteman, 1910, 31 HI. 88, 76 A. 757; p. 678.
250 BUSINESS ORGANIZATIONS PARTNERSHIPS
Review Questions and Problems
1. A and B are partners in the hardware business. It is expressly
agreed in the partnership agreement that the full duties of management
shall be intrusted to A and that he shall be the only purchasing agent of
the firm. Despite this fact, B orders from the X Company certain hard-
ware for the firm. A refuses to accept the goods for the firm. Is the
firm liable in damages to the X Company?
2. What is the difference between express and implied powers? Dis-
tinguish between a trading and a nontrading partnership.
3. A and B are partners in the retail clothing business. Being short of
funds in the business, A, without the consent or knowledge of B, bor-
rowed $500 from C and gave him a chattel mortgage upon the fixtures.
Is the mortgage good?
4. May a partnership become liable for the acts of a partner outside
the scope of the partnership business? How?
5. Aj B, and C are partners. The firm owes X $500 for goods furnished
to it. X obtains a joint judgment against A and B for the amount.
They are unable to pay the judgment. May X recover in another action
against C? Suppose X had released C from all liability upon the debt,
what would have been the effect upon A and B?
6. What is the difference between joint and several liability? May
an individual member of a partnership be held liable for a tort committed
by an agent of the firm?