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Summary Partnerships and Liability of Partners
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Detailed but concise exam-ready notes on the topic of partnerships and the liability of partners.
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PARTNERSHIPS | LIABILITY OF PARTNERSTransactions which may affect a partnership generally involve contracts. Such contracts can be made
collectively by all the partners (e.g. signing a lease of business premises) and others can be made by just
one partner. However, where an individual partner enters into a contract, other partners may attempt to
deny liability upon breach of said contract. In such cases, it is necessary to identify whether the firm is
liable and, if so, which partners are then liable for the breach.
These matters are governed by the following sections of the PA 1890:
When will the firm be liable?
It is notable that the firm will not be liable in all instances. For example, s5 PA 1890 operated in Hirst v
Etherington 1999. In this case, a debt incurred by an individual partner of a solicitors’ firm was the result
of him entering a contact that was not in the usual course of the firm’s business. Therefore, only he was
liable for the debt; his partner was not.
S5 PA 1890 deals with a partner’s authority only, which can be ascertained in one of two ways:
1) Actual Authority
2) Apparent (Ostensible) Authority
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