What happens if a partner conducts business on behalf of the partnership without authority?

What happens if a partner conducts business on behalf of the partnership without authority?

• A. The partnership can refuse to take responsibility.
• B. The third party can still hold the partnership liable.
• C. The partner is solely responsible for the loss.
• D. The partnership must provide a full defense against claims.

Answer: (B)

When a partner conducts business on behalf of the partnership without proper authority, the partnership can still be held liable to third parties under the principle of agency law. In partnership law, partners are generally viewed as agents of one another, and acts performed in the course of partnership business can bind the partnership, even if a particular partner did not have explicit authority to perform those acts. This means that if the third party is acting in good faith and does not know that the partner lacked the authority, the partnership can be held accountable for the obligations created by that unauthorized act. This liability exists to protect third parties who rely on the assumption that partners have the authority to bind the partnership in dealings and transactions. In contrast to this, other options do not reflect the principles of partnership liability accurately. For example, while a partnership may have the ability to assert a claim against the partner who acted without authority, that does not absolve the partnership from liability towards third parties. This balance is essential for maintaining trust and promoting business transactions in the marketplace.

When a partner conducts business on behalf of the partnership without proper authority, the partnership can still be held liable to third parties under the principle of agency law. In partnership law, partners are generally viewed as agents of one another, and acts performed in the course of partnership business can bind the partnership, even if a particular partner did not have explicit authority to perform those acts.

This means that if the third party is acting in good faith and does not know that the partner lacked the authority, the partnership can be held accountable for the obligations created by that unauthorized act. This liability exists to protect third parties who rely on the assumption that partners have the authority to bind the partnership in dealings and transactions.

In contrast to this, other options do not reflect the principles of partnership liability accurately. For example, while a partnership may have the ability to assert a claim against the partner who acted without authority, that does not absolve the partnership from liability towards third parties. This balance is essential for maintaining trust and promoting business transactions in the marketplace.