Meaning of ‘Implied Authority’
As per Sec. 18 of the Indian Partnership Act, for the business of the firm, a partner is an agent of the firm. Thus a partner is both an owner of the firm as well as an agent for running the business. According to Sec. 19 of the Act, the act of partner which is done to carry on the business, of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by the Act is called as his ‘implied authority’.
Essential Conditions for the implied Authority
In order to bind the firm and the other partners, the following conditions are essentially required to be fulfilled :
(1) Act in the Name of the Firm- In order to make the firm liable, it is essential that the work to be done by the lnpartner must be done in the name of the firm. If it is notnundertaken in the firm’s name, the partner himself shall benpersonally liable for such act.
(2) Act Within the Jurisdiction of the Partnership-
The act done by the partner for the firm must be within thenlimits of partnership rights.
(3) Performance of Acts as to be Indicative of Binding the Firm- The act should be performed in such a way which is directly or implicitly expressive of the intention to bind the firm. What should be that way or mode, shall depend upon the nature of the business.
Scope of Implied Authority
What activities could the partners undertake under the implied authority, is an important question. In this connection, there has not been made any clear-cut or distinct mention in the Partnership Act. Even then, as per the Partnership Act, the partner may undertake such acts as follows:
(1) May purchase goods for the firm’s cause.
(2) May sell or dispose off the firm’s goods.
(3) May accept the payments for the firm.
(4) May accept or release the firm’s cheques or other negotiable instruments.
(5) May plead in the cases filed against the firm by other parties.
(6) May also employ some servants or employees for the partnership firm’s work.
(7) May seek loans or advances on the basis of the firm’s goodwill or reputation.
Acts Falling Outside the Jurisdiction of Implied Authority
The following activities don’t fall within the implied authority of the partners. The partners cannot undertake the following activities within the implied authority”.
1.Receiving or obtaining the immovable property for the firm.
2.Making agreement with any third party, in the capacity of the firm’s agent.
3.Entrusting his own rights to someone else.
4.Appointing an agent.
5.Making any mutual agreement for some claim or withdrawing the same from the court.
6.Opening the account in his own name on behalf of the firm.
7.Transferring the immovable property of the firm.
8.Making agreement for credit in the firm or reducing its liability.
9.Admitting the liability in the firm in the legal suits being run against the firm.
(10) Referring any business dispute to arbitration.
(1) Extending or Reducing the Implied Authority-
The partners of the firm, by making a mutual agreement, may increase or reduce the rights and powers of the partner. But if some partner does any act, despite the restrictions imposed by the firm, which was within his implied authority before the imposition of the restriction, and if such act binds the firm, for it the concerned partner shall himself be liable.
(2) Authority in Emergency- At the time of any emergency, the partner is authorised or rightful to do all such activities in which the firm could be protected against the loss which a man of ordinary prudence would have underpersonal matter in those conditions. By all taken in his own such acts, he may bind the firm.