Questions: Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves and Gage sought to enforce the contract. Gage will: A. Lose, because Locke's action was not authorized by the partnership agreement. B. Lose, because Locke was not an agent of the partnership. C. Win, because Locke had express authority to bind the partnership. D. Win, because Locke had apparent authority to bind the partnership.

Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves and Gage sought to enforce the contract. Gage will:
A. Lose, because Locke's action was not authorized by the partnership agreement.
B. Lose, because Locke was not an agent of the partnership.
C. Win, because Locke had express authority to bind the partnership.
D. Win, because Locke had apparent authority to bind the partnership.

Transcript text: Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves and Gage sought to enforce the contract. Gage will: A. Lose, because Locke's action was not authorized by the partnership agreement. B. Lose, because Locke was not an agent of the partnership. C. Win, because Locke had express authority to bind the partnership. D. Win, because Locke had apparent authority to bind the partnership.

Solution

The answer is D: Win, because Locke had apparent authority to bind the partnership.

Explanation for each option:

A. Lose, because Locke's action was not authorized by the partnership agreement.

This option is incorrect because, in partnership law, the internal agreement between partners does not affect third parties who are unaware of such limitations. Gage, as a third party, was not aware of the internal restriction on Locke's authority.

B. Lose, because Locke was not an agent of the partnership.

This option is incorrect because, in a general partnership, each partner is considered an agent of the partnership and can bind the partnership in transactions that are within the ordinary course of the business.

C. Win, because Locke had express authority to bind the partnership.

This option is incorrect because the scenario explicitly states that Locke was not authorized by the partnership agreement to make such contracts, meaning Locke did not have express authority.

D. Win, because Locke had apparent authority to bind the partnership.

This option is correct because apparent authority arises when a third party reasonably believes, based on the partnership's conduct, that a partner has the authority to act on behalf of the partnership. Since Gage was unaware of any restrictions and Locke acted within the ordinary course of business, Gage could reasonably assume Locke had the authority to make the purchase.

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