{"id":174074,"date":"2022-08-09T05:45:06","date_gmt":"2022-08-09T04:45:06","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=174074"},"modified":"2025-07-02T00:40:46","modified_gmt":"2025-07-01T23:40:46","slug":"non-partner-agency-law","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/business-structures\/non-partner-agency-law\/","title":{"rendered":"Can a Non-Partner Make Decisions for My Partnership in England?"},"content":{"rendered":"

Running a business under a <\/span>partnership structure<\/span><\/a> typically means you will discuss business decisions with your partner(s) alone. However, the law governing the ability of non-partners to enter agreements on behalf of the partnership is more complicated than you might expect. There are limited cases where a non-partner can bind the partnership to an agreement, even where the partnership does not consent. This article will explain how these circumstances arise.<\/span><\/p>\n

Partnerships and the Law of Agency\u00a0<\/span><\/h2>\n

Agency law governs the ability of one person (the agent) to act on behalf of another (the principal) and enter into agreements on the principal’s behalf.\u00a0<\/span><\/p>\n

\n

The law of agency plays an important role in business because a business frequently needs individuals to act on its behalf. In the context of a partnership, since the partnership is not its own <\/span>legal entity<\/span><\/a>, each partner acts on behalf of all the others as their agent.\u00a0<\/span><\/p>\n<\/div>\n

For instance, suppose your business partner Jimmy negotiates the purchase of a new IT system for the partnership. Here, Jimmy would be acting as an agent for you and the other partners. Jimmy’s decision thereby binds all the partners.\u00a0<\/span><\/p>\n

Non-Partners and the Law of Agency\u00a0<\/span><\/h2>\n

Actual Authority\u00a0<\/span><\/h3>\n

Generally, there is no automatic restriction on the ability of a non-partner to bind your partnership. This may strike you as surprising, but there are situations where a partnership might benefit from allowing a non-partner to act on its behalf.\u00a0<\/span><\/p>\n

For instance, you may hire a sales manager to manage a particular division of your business. Rather than require the sales manager to report to one of the partners every time they need to enter into a transaction, the partnership could authorise this person to use their discretion to agree to certain deals. For example, you might grant a sales manager to power to agree to any transaction valued at less than \u00a31,000.\u00a0<\/span><\/p>\n

This power is called actual authority. In this scenario, the principal (i.e. the partnership) gives the agent their consent to act on their behalf in a narrow sense.\u00a0<\/span><\/p>\n

Apparent Authority\u00a0<\/span><\/h3>\n

Using the above example, what if the sales manager authorised a sale for \u00a31,500? Have they exceeded their power, allowing you to void the transaction? The answer is not necessarily. In fact, in the present circumstances described, your partnership would have difficulty releasing itself from the agreement.<\/span><\/p>\n

\n

Importantly, the law of agency must strike a balance between the interests of the principal (your partnership) and enabling commercial certainty for the other contracting party. Notably, commercial activity would halt if every business had the right to rescind a transaction because someone with the appearance of authority entered into an agreement without actual authority.\u00a0<\/span><\/p>\n<\/div>\n

The crucial consideration is the <\/span>appearance of authority<\/span><\/i>. In the example, the other contracting party would reasonably believe that someone with the title of sales manager could feasibly enter into a \u00a31,500 transaction. Ultimately, the law would say that the agent has the apparent authority to authorise the transaction \u2014 apparent from the perspective of the counterparty.\u00a0<\/span><\/p>\n

Therefore, if an agent has apparent authority to enter the transaction on behalf of the partnership, the partnership is bound.\u00a0<\/span><\/p>\n

No Apparent Authority<\/span><\/h3>\n

If the counterparty of a transaction had no reason to believe that the agent had apparent authority, your partnership might be able to rescind the agreement. Ultimately, any disputed transaction involving the power of an agent to bind your partnership will depend on the facts of the transaction.\u00a0<\/span><\/p>\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

\n
\n Need legal advice?\n
\n \n Call 0808 196 8584<\/a> for urgent assistance.\n
\n Otherwise, complete this form, and we will contact you within one business day.\n <\/span>\n <\/div>\n\n \n\n
\n