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Question
Legal Principle: A characteristic feature of partnerships is the principle of mutual agency, i.e., every partner is an agent for every other partner and will hence be able to bind them by his act, within the business of the partnership.
Fact Situation: Ram and Shyam are partners of M/s R & S Trading Company which trades in rice varieties. Ram agrees to purchase ten tons of rice from Govind. Ram dies after the rice is delivered to the premises of M/s R & S Trading Company but before the payment of the price is made. Is the agreement binding on Shyam?
Which of the following statements is the most appropriate in relation to the legal principle stated above?
Options
Being partners, Ram’s agreement to purchase rice for their partnership is not binding on Shyam.
Since Ram is no more, the agreement is not binding on Shyam.
Being partners, Ram’s agreement to purchase rice for their partnership is binding on Shyam.
The agreement is binding on Ram and not on Shyam since the rice is delivered only to M/s R & S Trading Company and not to Shyam.
Solution
Being partners, Ram’s agreement to purchase rice for their partnership is binding on Shyam.
Explanation:
Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership; and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners unless the partner so acting has, in fact, no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner. The above discussion clearly explains that there is a mutual agency between partners acting within the authority for the purpose of the business of the partnership, thus option (3) is the most appropriate statement that is being partnered, Ram's agreement to purchase rice for their partnership is binding on Shyam.
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Decision:
Apply the legal principles to the facts given below and select the most appropriate answer.
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1. A contract comes into being from the acceptance of an offer, When the person to whom the offer is made signifies his assent thereto, the proposal is said to be accepted and the parties are at consensus and idem regarding the terms of the agreement.
2. Consideration is something that moves from the promise to the promisor, at the implied or express request of the latter, in return for his promise. The item that moves can be a right. interest, profit, loss, responsibility given or suffered, forbearance, or a benefit which is of some value in the eyes of law.
3. Contractual rights and liabilities are exclusive to the parties to contract.
4. There are few exceptions to the doctrine of privity of contracts like agency, trust, assignment, and third party beneficiary.
5. A quasi-contract is a contract that is created by the court when no such official contract exists between the parties to prevent a party from being unjustly enriched, or from benefitting from the situation when he/she does not deserve to do so.
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I. A promise is enforceable if there is some consideration for it and it is quite immaterial whether it moves from the promise or any other person.
II Only a person who is a party to a contract may demand the execution of that contract from other parties. But if there is a third-party beneficiary to the contract then it is enforced to the extent of his\her benefit.
III. The agreement is valid as both Reena and Subhashini agreed to it on the same thing in the same sense.
IV. There is no privity of contract as Subhashini has furnished no consideration. Reena had promised to Subhashini but consideration was furnished by Nandini.
