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Control of Partnership

The decision of the majority of partners will control as far as the day-to-day operations of the partnership.  For example, a majority of the partners of a business can decide to increase the business’s advertising and enter into a contract to increase the advertising.  This contract will bind the partnership and all of the partners, individually.

 When there is an even number of partners, there is a possibility of a partnership deadlock.  If the decision is of a nature that it would be impossible to continue the business, and the partners continue to be deadlocked, any one of the partners may petition the Court to order the dissolution of the partnership.

 An individual partner can have express authority to perform certain acts.  This authority either comes from the partnership agreement or because a sufficient number of partners have agreed to this authority.  A partner has the authority to do the acts that are customary for a member of the partnership who conducts the particular business of the partnership, whether it be a law partner­ship, medical partnership, accounting partnership, etc.

 The partners may agree to limit the normal powers of each partner.  However, if a partner negotiates a contract for the partnership with a third person which exceeds the powers of the partner, the partnership is still bound if the third person was unaware of the agreement limiting the partner’s powers.  Of course the partner would be liable to the other partners for any loss caused by his breach of the agreement to limit his powers.  If the third person knew of the agreement, the partnership would not be bound.  A third person would be bound by any limitation on the partner’s powers if there is any fact present that would put a reasonable person on notice that the partner’s powers are limited.

A partner cannot bind the partnership to a third person in a transaction which is not within the scope of the partnership’s business unless the partner has express authority to bind the partnership.  Suppose a partner in a dental partnership begins to speculate financially in land.  In such a situation, a third person dealing with the partner cannot hold the other partners liable on such a contract.  If the partner states that he has authority to bind the partnership in such a transaction, the buyer or seller of the land would want to get written evidence of the authority of the partners, such as a resolution signed by all of the partners authorizing this particular partner to enter into the land contract.

Inside Control of Partnership