Q: What are the statutory restrictions on implied authority of a partner ?

Ans: In actual authority,  the partners have the knowledge of all the activities whereas in implied authority,  the partner is not aware of the activities of third person.

Thus, the following acts are not included in the implied authority of partner unless there is any usage or custom of trade in law : 

Arbitration: Submit a dispute relating to the business of the firm to arbitration.

Bank account: Open a banking account on behalf of the firm in his own name.

Compromise: Compromise or relinquish any claim or portion of a claim by the firm.

Withdrawal of suit: Withdraw a suit or proceeding filed on behalf of the firm .

Acceptance of liability: Admit any liability in a suit or proceeding against the firm

Acquisition: Acquire immovable property on behalf of the firm.

Transfer: Transfer immovable property belonging to the firm

Partnership: Enter into partnership on behalf of the firm i.e., if one partnership firm enters into another partnership firm.

The statutory restrictions are imposed whether a particular person dealing with the firm has knowledge of it or not.

Amzad, Babar and Zahid are partners.

Zahid an active partner signed a land transfer deed on behalf of the firm( without authorisation from other partners) to improve cash flows of the firm.

Such transfer is not a valid transfer because a partner does not have an implied authority to transfer immovable property belonging to firm.

The partners in a firm may, by contract between partners, restrict the implied authority of any partner.

Such restriction shall be effective only if third party:

Knows of the restriction or 

Does not know or believe that partner to be a partner.

Example: The partnership deed of a trading firm placed a restriction on the authority of Aslam( one of the partners) to sell the goods. Aslam sells the goods.

If third party did not know of the restriction, the firm is liable towards such third party.

If the third party knew of the restriction, the firm will not be liable rather only Aslam will be liable.

Example: Jazib and Ghalib are partners in a firm. 

The partnership deed restricts the implied authority of Jazib to borrow money in the name of firm. 

Jazib borrows money from Sahar Bank Limited (SBL).

The firm of Jazib and Ghalib is liable to SBL if SBL did not know of restriction.