Relations of Partners with Third Parties
The Indian Partnership Act 1932, Section 18, outlines a partner’s function as an agent. A partner has obligations to the parties engaged in the business since he represents the firm. Therefore, a partner in a commercial partnership must act as both an agent and a principle. A partner assumes the position of principle when he acts in the best interests of the firm as a whole. However, he is operating as an agent when he is doing so in the best interests of the other partners. Partners’ relationships with outside parties necessitate that they act as the firm’s agents. A partner is never, however, fully in charge of the transactions.
As a result, a partner accepts the traits of the principle and the agent. He is thus operating as a principle if he acts in the partnership’s best interests and on his own behalf. He is nevertheless operating as an agent if he acts on behalf of and in the best interests of his partners. It is crucial to remember that a partner serves as the firm’s agent solely for commercial purposes. He does not function as an intermediary in any of the partnerships’ business operations.
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