Partner’s Authority in an Emergency
In the event of an emergency, each partner is authorized by Section 21 of the Indian Partnership Act, 1932, to take whatever action a prudent person would take to safeguard the firm from harm. A firm is bound by such conduct. In an emergency, a partner must take all necessary steps to safeguard the firm from suffering losses that a prudent individual would do in a comparable situation. The business will be bound by the partner’s actions. The section’s criteria are as follows:
- There was a crisis at hand.
- In view of it, the partner took action.
- To prevent losses for the firm, the partner took such action.
- In those conditions, the conduct made sense and was prudent.
Relations of Partners to Third Parties (Law of Partnership)
The Indian Contract Act, 1872, governed the field of partnership law before the passage of the Indian Partnership Act, 1932. However, given the quick expansion of trade and industry as well as the escalating industrialization, a distinct partnership law was urgently required. “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all,” as stated in section 4 of the Indian Partnership Act, 1932. In this case, the individuals who have formed a partnership are referred to as Partners, and as a group, they are known as a Firm. A firm name is the name that all of the partners use to jointly manage the firm. In a partnership firm, two or more individuals work together to run a business to make money and divide that money according to the partnership deed’s established profit-sharing ratio.
Key Takeaways:
- Among company owners and entrepreneurs, partnerships are among the most well-known forms of commercial agreements.
- A partnership must be established under Section 12 of the Indian Partnership Act to conduct a lawful business.
- The general rules of the Indian Contract Act will, in any event, apply in situations where the Partnership Act is silent.
- Mutual agency is fundamental for the creation of valid partnership.
Table of Content
- Relations of Partners with Third Parties
- Express Authority of a Partner
- Implied Authority of a Partner
- Extension or Restriction of a Partner’s Implied Authority
- Partner’s Authority in an Emergency
- Liability of Partners to Third Parties
- Conclusion
- Relations of Partners to Third Parties- FAQs