Authority of Partners: A Comprehensive Guide for Law Students

Question 1

What is the effect of a partner's apparent authority on third parties who reasonably rely on it?

Accepted Answer

Third parties can hold the partnership liable even if the partner exceeded their actual authority.

Answer

Third parties can only hold the partnership liable if they knew the partner was acting beyond their authority.

Answer

Third parties cannot hold the partnership liable if the partner exceeded their actual authority.

Answer

Third parties can hold the partnership liable only if the partnership ratified the partner's actions.

Question 2

Which of the following factors would NOT affect the scope of a partner's authority?

Accepted Answer

The partner's personal relationship with the third party

Answer

The nature of the partnership business

Answer

The partner's position within the partnership

Answer

The partnership agreement

Question 3

What is the key difference between actual authority and apparent authority?

Accepted Answer

Actual authority is based on the partnership agreement, while apparent authority is based on the partner's conduct.

Answer

Apparent authority is based on the partnership agreement, while actual authority is based on the partner's conduct.

Answer

Actual authority and apparent authority are the same.

Answer

Actual authority is broader than apparent authority.

Question 4

Can a partner's authority be limited?

Accepted Answer

Yes, by the partnership agreement or by notice to third parties.

Answer

No, partners always have unlimited authority.

Answer

Yes, only by the partnership agreement.

Answer

Yes, only by notice to third parties.

Question 5

What is the liability of a partnership for the torts (civil wrongs) committed by its partners acting within the scope of the partnership business?

Accepted Answer

The partnership is jointly and severally liable for all torts committed within the scope of the partnership business.

Answer

The partnership is liable only for torts authorized by all the partners.

Answer

The partnership is liable only for torts committed by its managing partners.

Answer

The partnership is not liable for the torts of its partners.

Question 6

Which of the following is NOT a type of partner in a partnership?

Accepted Answer

Silent partner

Answer

General partner

Answer

Limited partner

Answer

Managing partner

Question 7

What is the liability of a limited partner?

Accepted Answer

Limited to the amount of their investment

Answer

Jointly and severally liable with the general partners

Answer

Liable only for their own torts

Answer

Not liable for any partnership debts

Question 8

Which of the following best describes the scope of authority that partners have in a partnership?

Accepted Answer

Partners have the authority to bind the partnership in agreements and conduct business transactions.

Answer

Partners can only bind the partnership if they have specific permission from all other partners.

Answer

Partners have no authority to bind the partnership without the consent of all other partners.

Answer

Partners' authority is limited to the specific responsibilities assigned to them in the partnership agreement.

Question 9

Under which circumstance would a partner NOT have the authority to bind the partnership?

Accepted Answer

When the partner is acting fraudulently.

Answer

When the partner is acting within the ordinary course of the partnership's business.

Answer

When the partner appears to have the authority to act on behalf of the partnership based on past conduct.

Answer

When the partner has express permission from all other partners.

Question 10

Which of the following accurately describes the liability of partners in a partnership?

Accepted Answer

Partners are jointly and severally liable for the partnership's debts and obligations.

Answer

Partners are only responsible for the debts and obligations they personally incur.

Answer

Partners can avoid liability for partnership debts if they do not actively participate in decision-making.

Answer

Partners are only liable for partnership debts up to the amount of their capital contributions.

Question 11

True or False: Partners can be held legally responsible for harmful actions committed by other partners within the scope of partnership business.

Accepted Answer

True

Answer

False

Question 12

How does the authority of limited partners differ from that of general partners?

Accepted Answer

Limited partners have limited authority to bind the partnership.

Answer

Limited partners have the same authority as general partners.

Answer

Limited partners have no authority to bind the partnership.

Answer

Limited partners have unlimited authority to bind the partnership.

Question 13

Ratification is the process by which:

Accepted Answer

Unauthorized acts of a partner are made binding on the partnership

Answer

Partners unanimously agree to dissolve the partnership

Answer

A third party waives their right to enforce a contract

Answer

The court orders a partner to perform their duties

Question 14

Which of the following is NOT a limitation on implied partner authority?

Accepted Answer

Acts that require a majority vote

Answer

The nature of the partnership business

Answer

Custom and usage in the industry

Answer

Emergency situations

Question 15

In a general partnership with two partners, what percentage of partner consent is required to bind the partnership?

Accepted Answer

50%

Answer

25%

Answer

75%

Answer

100%

Question 16

Which of the following actions by a partner is most likely to result in personal liability?

Accepted Answer

Transferring partnership property without authorization

Answer

Entering into a contract in the partnership's name

Answer

Borrowing money on behalf of the partnership

Answer

Representing the partnership in a lawsuit

Question 17

True or False: A retiring partner is automatically released from all partnership liabilities.

Accepted Answer

False

Answer

True

Question 18

Which of the following is a fiduciary duty owed by a partner to the partnership?

Accepted Answer

To act in good faith

Answer

To contribute to the partnership

Answer

To share in profits and losses

Answer

To dissolve the partnership upon request

Question 19

Identify the type of partner authority that is created by the conduct or representations of the partnership.

Accepted Answer

Apparent authority

Answer

Actual authority

Answer

Inherent authority

Answer

Estoppel authority

Question 20

Which of the following is a consequence of an unauthorized act by a partner?

Accepted Answer

Both the partnership and the partner are jointly and severally liable for the act.

Answer

The partnership is solely liable for the act.

Answer

The partner who committed the act is solely liable for the act.

Answer

Neither the partnership nor the partner is liable for the act.

Question 21

True or False: Apparent authority can be created by either the actions of the partnership or by individual partners.

Accepted Answer

True

Answer

False

Question 22

Which of the following factors is NOT considered in determining whether a partner has inherent authority?

Accepted Answer

The personal financial status of the partner

Answer

The nature of the partnership business

Answer

The customs of the trade

Answer

The partnership agreement

Question 23

Which of the following is a key principle of agency law that applies to partners?

Accepted Answer

Partners have a fiduciary duty to the partnership and each other.

Answer

Partners are jointly and severally liable for the debts of the partnership.

Answer

Partners are not personally liable for the debts of the partnership.

Answer

Partners have unlimited authority to bind the partnership without the consent of the other partners.

Question 24

Which of the following is a key principle of apparent authority in the context of partnerships?

Accepted Answer

Apparent authority arises when a partner's actions reasonably lead a third party to believe they have authority to bind the partnership.

Answer

Apparent authority is always binding on the partnership, regardless of the third party's knowledge.

Answer

Apparent authority exists only in cases involving undisclosed partnerships.

Answer

Apparent authority can only be created through the express consent of all partners.

Question 25

Under what circumstances might a partner be held personally liable for partnership obligations?

Accepted Answer

Any of the above

Answer

When they exceed the scope of their authority

Answer

When they fail to disclose the partnership's existence

Answer

When they make fraudulent representations on behalf of the partnership

Question 26

What is the legal effect of providing notice to a third party that a partner lacks authority?

Accepted Answer

The partnership is bound by the partner's actions only if the third party knows that the partner lacks authority.

Answer

The partnership is not bound by the partner's actions, even if they are within the scope of the partnership's business.

Answer

The partnership is bound by the partner's actions, regardless of whether the third party is aware of the lack of authority.

Answer

The partnership is not bound by the partner's actions, even if the third party does not know that the partner lacks authority.

Question 27

Each partner in a partnership is considered:

Accepted Answer

An agent of the partnership.

Answer

An employee of the partnership.

Answer

An independent contractor for the partnership.

Question 28

Which of the following acts is beyond the scope of the partnership's business and therefore cannot be authorized by any one partner?

Accepted Answer

Selling the partnership's only asset.

Answer

Hiring a new employee.

Answer

Borrowing money on behalf of the partnership.

Answer

Entering into a contract for the purchase of goods.

Question 29

In which of the following situations will a partner be personally liable for the debts of the partnership?

Accepted Answer

When the partner acts without authority.

Answer

When the partnership has sufficient assets to cover its debts.

Answer

When the partner is a limited partner.

Question 30

Actual authority for a partner arises when:

Accepted Answer

Expressly granted in the partnership agreement or implied from the partnership's conduct.

Answer

A partner acts on behalf of the partnership without authorization.

Answer

A partnership ratifies an unauthorized act of a partner.

Question 31

Implied authority for a partner is limited to acts:

Accepted Answer

Necessary to carry out the partnership's business.

Answer

Beyond the scope of the partnership's business.

Answer

Authorized by a majority of the partners.

Question 32

A partnership may be liable for the unauthorized acts of a partner through:

Accepted Answer

Ratification or estoppel.

Answer

Only if the partnership has actual authority.

Answer

Only if the partnership has implied authority.

Question 33

The scope of a partner's agency authority encompasses:

Accepted Answer

Acts necessary to carry on the partnership's ordinary business.

Answer

Acts authorized by a majority of the partners.

Answer

Any acts that benefit the partnership.

Question 34

What is the primary consequence of a partner exceeding the scope of their authority?

Accepted Answer

The partnership is not liable for the unauthorized act.

Answer

The partner who exceeded their authority is automatically expelled from the partnership.

Answer

The partnership is always liable for the unauthorized act, regardless of whether it was beneficial.

Question 35

When is a partnership considered to have ratified an unauthorized act?

Accepted Answer

When all partners with full knowledge of the act expressly or impliedly approve it.

Answer

When the unauthorized act is beneficial to the partnership.

Answer

When the partnership accepts the benefits of the unauthorized act.

Question 36

Which of the following is a valid defense to a claim of estoppel against the partnership?

Accepted Answer

The third party knew or should have known of the partner's lack of authority.

Answer

The partner who exceeded their authority acted in good faith.

Answer

The partnership benefited from the unauthorized act.

Question 37

What is the most effective way to limit a partner's authority to bind the partnership?

Accepted Answer

Clearly define the partner's authority in the partnership agreement.

Answer

Inform third parties of the limitations on the partner's authority.

Answer

Obtain insurance to cover the partnership's liability for unauthorized acts.

Question 38

What is the scope of a partner's inherent authority?

Accepted Answer

To conduct transactions on behalf of the partnership that are within the ordinary course of its business.

Answer

To sell partnership property without the consent of the majority of the partners.

Answer

To make extraordinary contracts on behalf of the partnership without the consent of the other partners.

Question 39

Which of the following actions would be within the scope of a partner's implied authority?

Accepted Answer

Entering into contracts with suppliers on behalf of the partnership.

Answer

Hiring new employees for the partnership without the consent of the other partners.

Answer

Selling partnership property without the consent of the other partners.

Answer

Obtaining a loan for the partnership without the consent of the other partners.

Question 40

How is apparent authority different from express authority?

Accepted Answer

Apparent authority arises from the partnership's conduct, while express authority is granted directly by the partnership agreement.

Answer

Express authority is more limited in scope than apparent authority.

Question 41

What is a potential consequence of an unauthorized act by a partner?

Accepted Answer

The partnership may not be legally bound by the act.

Answer

The partnership is always bound by the act, even if it was unauthorized.

Answer

The other partners are automatically liable for the act, regardless of their involvement.

Answer

Only the unauthorized partner is liable for the act.

Question 42

Which of the following factors can affect the scope of a partner's implied authority?

Accepted Answer

The nature of the partnership business.

Answer

The experience of the partner.

Answer

The location of the partnership.

Answer

The size of the partnership.

Question 43

How does the concept of ratification apply to partner authority?

Accepted Answer

It allows the partnership to retroactively approve an unauthorized act, making it binding on the partnership.

Answer

Ratification is only possible if the unauthorized act was intended to benefit the partnership.

Question 44

Which of the following is a limitation on a partner's authority to bind the partnership in real estate transactions?

Accepted Answer

A partner cannot sell or mortgage partnership real estate without the consent of all other partners.

Answer

A partner can purchase real estate for the partnership without the consent of other partners.

Answer

A partner can lease partnership real estate for up to 5 years without the consent of other partners.

Question 45

What is the legal effect of a partnership agreement that attempts to limit a partner's inherent authority?

Accepted Answer

Such a provision is generally not binding on third parties who have no knowledge of it.

Answer

The provision is binding on third parties who have actual knowledge of it.

Answer

The provision is binding on all third parties, regardless of their knowledge.

Question 46

Which of the following actions is a partner most likely to need express authority from other partners to undertake?

Accepted Answer

Selling all the partnership's assets.

Answer

Entering into a contract with a supplier the partnership regularly deals with.

Answer

Purchasing inventory necessary for the partnership's business.

Answer

Hiring a new employee to assist with day-to-day operations.

Question 47

What is the legal principle that protects a third party who reasonably relies on a partner's apparent authority to bind the partnership, even if the partner lacked actual authority?

Accepted Answer

Estoppel

Answer

Implied Authority

Answer

Ratification

Question 48

A partner in a general partnership commits a tort while acting within the scope of the partnership's business. Which statement accurately reflects the liability of the partners?

Accepted Answer

All partners are jointly and severally liable for the tort.

Answer

Only the partner who committed the tort is liable.

Answer

The partnership is liable, but the individual partners are not.

Question 49

Partner A, without informing Partner B, uses partnership funds for a personal investment. The investment proves profitable. What is the legal consequence of Partner A's actions?

Accepted Answer

Partner A must account to the partnership for the profits earned from the investment.

Answer

Partner B can dissolve the partnership due to Partner A's breach of fiduciary duty.

Answer

Partner A is entitled to keep the profits because they used personal expertise.

Question 50

A partnership agreement is silent on the issue of management rights. What is the default rule governing partner management rights in a general partnership?

Accepted Answer

All partners have equal rights in the management and conduct of the partnership business.

Answer

Only the partners named in the partnership agreement have management rights.

Answer

Management rights are determined by the partners' capital contributions.

Question 51

What legal doctrine allows a partnership to continue its business even after a partner's withdrawal or death?

Accepted Answer

Continuation Agreement

Answer

Dissolution

Answer

Winding Up

Answer

Termination