Partnership Law Act 2019

Relationship of partners to third persons and to each other - Relationship of partners to third persons

18: Power of partner to bind firm

You could also call this:

"Partners can make decisions that affect the whole partnership, but there are limits"

When a partner does something for the usual business of their firm, it generally counts for the whole firm and all the other partners. This means that what one partner does can affect everyone in the partnership.

However, there are times when a partner's actions don't count for the firm. This happens if the partner isn't allowed to do that specific thing for the firm, and the person they're dealing with either knows they're not allowed or doesn't know (or believe) that they're a partner at all.

So, if you're dealing with someone who says they're a partner in a firm, it's a good idea to make sure they're actually allowed to do what they're saying they can do. Otherwise, what they agree to might not actually count for the whole firm.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS206004.


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17: Partner is agent of firm and other partners, or

"Partners can speak and act for their business and each other"


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19: Effect of notice that firm will not be bound by acts of partner, or

"What happens when a partner acts against agreed limits on their authority"

Part 3Relationship of partners to third persons and to each other
Relationship of partners to third persons

18Power of partner to bind firm

  1. An act of a partner (A) binds the firm and A’s partners if the act is done for carrying on in the usual way business of the kind carried on by the firm.

  2. However, this section does not apply if—

  3. A has no authority to act for the firm in the particular matter; and
    1. the person with whom A is dealing—
      1. knows that A has no authority; or
        1. does not know or believe A to be a partner.
        Compare
        • 1908 No 139 s 8