Question

A characteristic feature of partnerships is the principle of mutual agency, i.e., every partner is an agent for every other partner and will hence be able to bind them by his act, within the business of partnership.
Fact Situation: Ram and Shyam are partners of M/s R & S Trading Company which trades in rice varieties. Ram agrees to purchase ten tons of rice from Govind. Ram dies after the rice is delivered to the premises of M/s R & S Trading Company but before the payment of price is made. Is the agreement binding on Shyam?
Which of the following statements is the most appropriate in relation to the legal principle stated above?

• A. Being partners, Ram’s agreement to purchase rice for their partnership, is not binding on Shyam.
• B. Since Ram is no more, the agreement is not binding on Shyam.
• C. Being partners, Ram’s agreement to purchase rice for their partnership, is binding on Shyam.
• D. The agreement is binding on Ram and not on Shyam since the rice is delivered only to M/s R & S Trading Company and not to Shyam.

Hint:

In partnerships, any contract made by one partner in the course of business binds all partners, even if one partner dies before the contract is fully executed.

Answer 1

The Correct Option is C

Step 1: Understanding the legal principle
- The principle of mutual agency in a partnership means that each partner is both an agent and principal for the others in the course of business.
- Any act done by one partner, within the scope of the partnership business, binds all other partners.
Step 2: Application to the given facts
- Ram’s agreement to purchase rice was within the scope of the business of M/s R & S Trading Company.
- Even though Ram died before payment, the agreement was already entered into and the rice was delivered.
- Therefore, the obligation to pay remains binding on the partnership, and thus on Shyam as a surviving partner.
Step 3: Elimination of incorrect options
- Option (1) is incorrect — the principle of mutual agency ensures binding liability.
- Option (2) is incorrect — death of a partner after forming the contract does not void the obligation already undertaken.
- Option (4) is incorrect — in partnerships, liability is joint for business acts.
Step 4: Conclusion
- The correct answer is Option (3) because Shyam is bound by Ram’s agreement under mutual agency principles.
\[ \boxed{\text{Ram’s agreement binds Shyam under the law of partnership.}} \]