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Examples Of Apparent Authority As Laid Down By Case Law

In This Post, We Will Discuss About The Examples Of Apparent Authority As Laid Down By Case Law From Business Law. Please, Find The Answer Below.


Section 5 does not say what acts are ‘in the usual course of business’. However, the courts have, over the years, and sometimes in cases heard before the 1890 Act was passed codifying the law, decided that there are a number of definite areas in which a partner has apparent authority. These are set out below.

All partners in all businesses. Here there is apparent authority to sell the goods (but not the land) of the firm, and to buy goods (but not land) on behalf of the firm; to receive money in payment of debts due to the firm and give valid receipts. So if A pays a debt due to the firm to B, a partner, who gives A a receipt and then fails to put the money into the firm’s funds, A is nevertheless discharged from payment of the debt. There is also the power to pay debts owed by the firm including the power to draw cheques for this purpose.

Partners can also employ workers, but once they are set on they are employees of all the partners so that one partner cannot discharge an employee without the consent of the others. Partners also have an insurable interest in the firm’s property and can insure it. They may also employ a solicitor to defend the firm if an action is brought against it. The authority of an individual partner to employ a solicitor to bring an action on behalf of the firm seems to be restricted to actions to recover debts owing to the firm.

All partners in trading partnerships. Partners in trading firms have powers that are additional to those set out in 1 above. Thus partners in a firm of grocers have more powers than partners in the professional practice of, e.g. law or accountancy. There does not seem to be any good reason for this, but it has been confirmed by many cases in court and cannot be ignored.

In Wheatley v Smithers (1906) the judge said in regard to what was meant by the word ‘trader’: ‘One important element in any definition of the term would be that trading implies buying or selling.’ This was applied in Higgins v Beauchamp (1914) where it was decided that a partner in a business running a cinema had no implied power to borrow on behalf of the firm. The partnership agreement did not give the power to borrow and, because the firm did not trade in the Wheatley v Smithers sense, there was no implied power to borrow. If a firm is engaged in trade, the main additional implied powers of the partners are:

■ to borrow money on the credit of the firm even beyond any limit agreed on by the partners unless this limit is known to the lender. Borrowing includes overdrawing a bank account;


■ to secure the loan, which means giving the lender a right to sell property belonging to the firm if the loan is not repaid.

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