Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?
A) The partner's authority must be derived from the partnership agreement.
B) The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation.
C) Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties.
D) A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so.
E) A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

Question

Quizplus · Accepted Answer

Mutual agency implies that each partner is an authorized agent of the partnership, and the partner's actions can legally bind the partnership even if the other partners are unaware of those actions. Therefore, option E is correct. Option A is incorrect because the partner's authority may also come from implied authority or customary practice. Option B is incorrect because third parties who are not aware of the limitation can still hold the partnership liable. Option C is incorrect because all partners have equal authority unless the partnership agreement specifies otherwise. Option D is incorrect because written permission is not required for a partner's authority to represent the partnership.

Mutual Agency Implies That Each Partner in a Partnership Is