X, Y and Z are partners in a firm named M/s XYZ & Co. Timber is used in the business of firm in the ordinary course of business. Y with…

CA Foundation · Business Laws · MTP · September 2025
X, Y and Z are partners in a firm named M/s XYZ & Co. Timber is used in the business of firm in the ordinary course of business. Y with intention to deceive W, a timber dealer, purchased timber on behalf of M/s XYZ & Co. Y uses the timber for construction of his own building. W has no idea that Y purchased the timber for his own use and claims the payment from M/s XYZ & Co. M/s XYZ & Co. refuses the payment as the timber was never received by it. State: (i) Whether firm is liable to pay the price of Timber? (ii) Whether the answer be different in case part of timber so purchased was delivered to firm and rest was used by Y for his personal use which was not in the knowledge of firm and W.

Suggested Answer and Working Notes:

(a) The act to be done in the name of the firm or in any other manner expressing or implying an intention to bind the firm. Thus, a partner has implied authority to bind the firm by all acts done by him in all matters connected with the partnership business and which are done in the usual way and are not in their nature beyond the scope of partnership. You must remember that an implied authority of a partner may differ in different kinds of business. In the instant case, X, Y and Z are partners in a firm named M/s XYZ & Co. Y purchased timber from W in the name of firm but uses the timber for construction of his own building of which W was unaware. When W claims the payment from M/s XYZ & Co. it refuses the payment. Therefore, the answers are (a) as timber is of the ordinary use of business of firm, firm has to pay the price of timber to W. (b) The answer will be same part of timber so purchased was delivered to firm and rest was used by Y for his personal use which was not in the knowledge of firm and W.

Topics: The Indian Partnership Act, 1932

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