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Types of business organisation

Authority of partners

When entering into a contract to carry out the business, each partner is acting as the
agent of all the partners.

Express or actual authority

This is set out in the partnership agreement.

Implied or apparent authority

The implied authority of a partner can exceed their actual authority. The implied
authority of partners is set out in s.5 Partnership Act 1890.

S.5 states that every partner is an agent of the firm and of the other partners. This
means that each partner has the power to bind all the other partners in any
transaction entered into in the course of the partnership business. A partner will be
acting within their authority if they enter into transactions that are usual for a partner.

In addition in a trading partnership the partners have the implied authority to enter
into contracts to borrow money on behalf of the firm.

In a question it is important to think about the type of business involved
to determine if the partner is acting within their implied authority. So, for
example, in an accountancy partnership if a partner in an accountancy
partnership entered into a contract to sell auditing services it is likely
that this would be held to be within their implied authority even if they do
not have the express authority to do. It is usual for that type of
business.

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