Babak and Cal are partners in a restaurant business.Their partnership agreement says that Babak does not have authority to sign contracts for supplies for the partnership business.Babak contracted with Doris for the supply of 10 kilograms of haddock for the partnership.Which of the following is TRUE?

Question

Quizplus · Accepted Answer

Babak's lack of authority to sign contracts for supplies does not necessarily mean that any contracts he signs are automatically invalid. If the other party (in this case Doris) reasonably believed that Babak had authority to sign the contract, the partnership will be bound by the contract. Therefore, the contract is binding on the partnership unless Doris knew or should have known that Babak did not have authority to contract.

Babak and Cal Are Partners in a Restaurant Business