Q: Explain the scope of implied authority ?

Ans: Scope of implied authority:



Implied authority arises only in relation to ordinary business of firm, therefore every partner within the scope of his implied authority may bind the firm by the following acts:

1. Buying and Selling goods, on behalf of the firm and giving valid receipts for them.

2. Receiving payments of the debts due to the firm and giving valid receipts or discharge for them.

3. Contracting debts and paying debts on behalf of the firm.

4. Settling Accounts with persons dealing with the firm.

4. Employing Servants for the partnership of the firm .

5. Drawing cheques,  accepting or endorsing bills of exchange and promissory notes in the name of firm.

6. Pledging movable property of the firm.

7. Suing on behalf of the firm and defending suits in the name of firm.

Example 1: 

Naina and Raima are partners in a cash business operating a petrol station. 

Naima orders in firm's name and on the firm's letter head to be supplied with two bags of wheat at her residence.
The  firm is not liable to pay because Naima's act in question is beyond the scope of her implied authority for which the firm can not be bound.
The pertrol station does not deal with wheat and it is personal transaction of Naima because she delivered it at home.

Example 2: 

Adeel,  a partner in the firm of chartered accountants , borrows money and executes a promissory note in the name of the firm.

The other partner's would not be liable on the note because it is not the part of ordinary business of chartered accountants to draw, accept or endorse a promissory note.

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