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Review Your SQE 1 Practice Records

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You act on behalf of a partnership that sells furniture. There are two partners, Alice and her daughter Sophie. Sophie handles administration and marketing, while Alice manages purchasing supplies. Recently, Alice ordered a bespoke, expensive desk for office use from one of the partnership's regular suppliers. 

The partnership has received the invoice, and Sophie wants to know if the partnership is bound by the order.

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The partnership is bound by the order because Alice had apparent authority to place it. Apparent authority arises where a person dealing with a partner is entitled to assume that the partner has authority to bind the firm. This occurs when the principal represents, by words or conduct, that the agent (partner) has authority to bind the firm, or when the partner appears to have such authority. Section 5 of the Partnership Act 1890 states that for there to be apparent authority, the transaction must be connected with the business, carried out in the usual way of business, and the outsider must know or believe they are dealing with a partner in the firm. Alice purchased the desk from a regular supplier, and it is likely that the supplier assumed she had authority to bind the partnership.

Key Point: Apparent authority allows a partner to bind the partnership if the transaction is typical of the business and the third party reasonably believes the partner has authority.

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