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Solution for Business Law 3rd Edition Chapter 12, Problem 1

by Nickolas James
128 Solutions 13 Chapters 13474 Studied ISBN: 9780730305743 Business Law 5 (1)

Chapter 12, Problem 1 : 1.Maria decides to purchase a delivery van for...

1.Maria decides to purchase a delivery van for The Lame Duck restaurant for $40 000 without discussing it with Johnny first. She buys the van on credit with finance provided by Will, the seller of the van. The interest rate is 25 per cent. When Johnny finds out he is furious and insists that Maria will have to pay off the interest on the loan from her own share of the profits. If Maria is unable to make the payments, could Will recover the money owing from Johnny?

 

Step-By-Step Solution

See Business Lawpp601-604.

 

Issue

Is Johnny personally liable for the debt incurred by Maria?

 

Law

Each partner in a partnership has express authority, implied authority and apparent authority to act on behalf of the other partners.

The express authority of each partner is the authority expressly granted by the other partners.

Partners have implied authority to act on behalf of the other partners in doing all the usual things that are necessary to carry on the business of the partnership.

Where a partner acts without the actual authority of the firm, the other partners will be still liable for the actions of the partner — including debts incurred by the partner and torts committed by the partner — if four requirements are satisfied.

  •                  The partner was carrying on business of the kind carried on by the firm.
  •                  That business was being carried on by the partner in the usual way.
  •                  The person with whom the partner was dealing knew or believed that they were a partner.
  •                  The person with whom the partner was dealing did not know or suspect that the partner had no actual authority.

Partners are jointly liable for debts and other contractual obligations incurred while they are partner. This means that each partner is liable for the whole amount, and that the partners must be sued collectively for the debt to be recovered or the obligation enforced.

 

Application

Maria (did/did not) have express authority to purchase the van on behalf of the partnership because …

Maria (did/did not) have implied authority to purchase the van on behalf of the partnership because …

Regarding apparent authority:

  •                  In purchasing the van, Maria (was/was not) carrying on business of the kind carried on by the firm because …
  •                  That business was being carried on by Maria in the usual way because …
  •                  Will knew or believed that Maria was a partner because …
  •                  Will did not know or suspect that Maria had no actual authority because …

If Johnny is liable for Maria’s actions, the extent of Johnny’s liability is …

 

Conclusion

Johnny (is/is not) personally liable for the debt incurred by Maria.

 

 

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