Relationship between Partners and Third Parties Notes PDF

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Law Notes with reference to Nota Marinah (UiTM Alumni) and Lecture Notes....

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Relationship between partners and third parties -To determine whether an act of a partner towards a third party is binding upon the firm: -Sec 7: There are 4 elements to be met in order for an act of a partner to be binding upon the firm. 1. The act done must be of the type of business that is carried out by the firm

1) Union Bank of Australia v Fisher: The test—An act is usual way of business if it is necessary and not merely convenient for the carrying of such business.

2. The act must be carried on in the usual way in order for it to bind the firm

1) Chan King Yue v Lee & Wong: The act of a partner done in the usual course of the business is binding on the firm and the other partners. Since the loan taken was necessary for the firm to carry on business, the borrowing was in the usual and ordinary manner. (//)

2) Mercantile Credit Co. Ltd v Garrod: The business carried out was renting out garages and repair of cars. Garrod and Parkin (partners) expressly agreed not to be involved in the business of buying and selling cars. Nevertheless, Parkin sold a customer’s car and the Plaintiff sued Garrod (a sleeping partner) after knowing that the car had no title. Irrespective of the provision restricting such dealing in their partnership agreement, the court found that the act of dealing in motor vehicles was within the type of business carried out by motor garage companies.

2) Goldberg v Jenkins & Law: The borrowing of money by a partner was held not to amount to the “usual way” due to the excessive rate of interest charged by the lender on the loan. (XX) 3. The third party must know or believe the person with whom he entered into the transaction with is a partner

1) Sithambaram Chetty v Hop Hing & Ors: The court held the firm liable for failing to inform those who had business with the firm of the manager’s lack of authority. It has caused the plaintiff to think that the manager who had borrowed the money was a partner.

4. The third party must not know that the person with whom he has entered into the transaction has no authority or the permission of the other partners to act on behalf of the firm

1) Sec 8: -Actual authority: authority given to a partner to do an act or execute a function in the firm’s name and as such would bind the firm. -Apparent authority: Where an agent is represented by the principal as having authority to do an act and the third party relies on such representation. -Sithambaram Chetty: The partners were made liable for borrowings made by the manager of the firm.

2) William Jack & Co (Malaya) Ltd. v Chan Yong Trading Co: The acts of a person who had been introduced as a partner, even though an infant, was binding on the other partners.

2) Sec 9: -Where an act is not related to the firm’s business, the act will be binding on the firm only where a partner has expressly been given authority to act. 3) Sec 10: -If a partner does an act which is within his apparent authority, his act will bind the firm. The firm would not be liable if the third party knew that what the partner is doing is beyond his authority....