Limitation and the Extent of a Partner’s Authority and Liabilities in Relation to Third-party and its Legal Implications on a Firm

Sharing of liabilities amongst partners is one of the reasons for the formation of a partnership firm, meaning, thereby, the sole proprietorship distinguishes from the partnership in various aspects, including sharing of liability. On the occasion of insolvency, the sole proprietor risks all his assets, savings, and investments towards the satisfaction of liabilities and incumbrances of his particular line of business. However, in contrast, the partners share not only the profits but also the risks on the occasion of insolvency at the ratio predetermined in their partnership agreement. However, there are extents and limitations as to the authority and liabilities, which may be drawn either by the partners themselves or under the Partnership Act 1932. This article will address the legal implications of the authority and liabilities of partners while dealing with a third party. Further, it would identify the legal impact of a specific act of a partner towards his firm.