The implied authority of a partner can be extended or restricted by the partnership agreement.
The partnership agreement can expressly grant a partner additional authority, or it can expressly restrict the partner’s authority.
For example, a partnership agreement may grant a partner the authority to borrow money on behalf of the firm, or it may restrict the partner’s authority to borrow money to a certain amount.
If the partnership agreement does not expressly grant or restrict a partner’s authority, the partner’s implied authority will be determined by the custom and usage of the business.
Here are some MCQs on the relations of partners to third parties: extension and restriction of partner’s implied authority:
- Which of the following is true about the implied authority of a partner?
- It can be extended by the partnership agreement.
- It can be restricted by the partnership agreement.
- It is determined by the custom and usage of the business.
- All of the above.
- The answer is (d). All of the above are true about the implied authority of a partner.
- A partnership agreement grants a partner the authority to borrow money on behalf of the firm. Is the firm liable for a contract made by the partner to borrow $100,000?
- Yes, the firm is liable for the contract.
- No, the firm is not liable for the contract.
- The answer is (a). The firm is liable for the contract, as the partnership agreement has expressly granted the partner the authority to borrow money.
- A partnership agreement does not expressly grant or restrict a partner’s authority to borrow money. Is the partner authorized to borrow money on behalf of the firm?
- Yes, the partner is authorized to borrow money on behalf of the firm.
- No, the partner is not authorized to borrow money on behalf of the firm.
- The answer is (b). The partner is not authorized to borrow money on behalf of the firm, as the partnership agreement does not expressly grant or restrict the partner’s authority to borrow money.