[Anonymous]

When a partner in a general partnership lacks actual or apparent authority to contract on behalf of the partnership, and the party contracted with is aware of this fact, the partnership will be bound by the contract if the other partners:

I. Ratify the contract

II. Amend the partnership agreement

The answer is “I only.”

I thought it would be neither. In Becker’s textbook, it says that a principal cannot ratify an agent’s actions if “the third party did not believe the agent was acting for a principal.” In the question, it says the party knew the agent did not have any authority. Why can this specific transaction be ratified?

[melnp]

@Birds CPA

By ratifying the contract, the partnership chooses to be bound by the contract. As part of Agency law, if the agent acts beyond the scope, the principal may ratify providing that all material facts was disclosed to the principal. I believe the same applies to the partnership.

[melnp]

@Birds CPA

By ratifying the contract, the partnership chooses to be bound by the contract. As part of Agency law, if the agent acts beyond the scope, the principal may ratify providing that all material facts was disclosed to the principal. I believe the same applies to the partnership.

[Anonymous]

My confusion stems from the fact that the “third party” knew that the agent did not have the authority to bind the principal to the contract. If the third party knew that the agent had no authority, ratification wasn't an option? Or am I understanding something incorrectly here?

[Anonymous]

My confusion stems from the fact that the “third party” knew that the agent did not have the authority to bind the principal to the contract. If the third party knew that the agent had no authority, ratification wasn't an option? Or am I understanding something incorrectly here?

[melnp]

@Birds CPA

I could not find any information that addresses if the 3rd party was aware.

Any explanation would be my interpretation that regardless of the fact that the 3rd party knew, the partnership can ratify the contract and receive the benefit.

[melnp]

@Birds CPA

I could not find any information that addresses if the 3rd party was aware.

Any explanation would be my interpretation that regardless of the fact that the 3rd party knew, the partnership can ratify the contract and receive the benefit.

[Author]

Replies