Which of the following characteristics is highlighted in the statement: "He can bind other partners by his acts and also is bound by the acts of other partners with regard to the business of the firm."
Which of the following characteristics is highlighted in the statement: "He can bind other partners by his acts and also is bound by the acts of other partners with regard to the business of the firm."
Solution
The statement describes a situation where:
- A partner can bind other partners through his actions
- The partner is also bound by the acts of other partners
- This applies to business matters of the firm
This is the defining feature of Mutual Agency.
In a partnership, every partner is an agent of the firm as well as of the other partners. When one partner enters into a contract or does an act related to the firm's business, it binds all other partners. Similarly, that partner is also bound by the acts done by other partners in the ordinary course of business.
Let's see why other options don't fit:
Agreement between Partners simply establishes the partnership relationship but doesn't explain this binding nature.
Liability of Partners refers to partners being liable for firm's debts (jointly and severally), not about binding each other through acts.
Sharing of Profit is about distributing profits and losses among partners, which has no connection to one partner binding others through their acts.
The principle of mutual agency is what allows partnerships to function efficiently - each partner can act on behalf of the firm and all partners, making business operations smooth without requiring all partners to be present for every transaction.
Correct Answer: Option 4 (Mutual Agency)
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