| 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 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 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? |
A) Being partners, Ram's agreement to purchase rice for their partnership, is not binding on Shyam.
B) Since Ram is no more, the agreement is not binding on Shyam.
C) Being partners. Ram's agreement to purchase rice for their partnership, is binding on Shyam.
D) 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.
Correct Answer: C
Solution :
Sol. As per the given Fact Situation, being partners. Ram's agreement to purchase rice for their partnership, is binding on Shyam because according to the 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 partnership.
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