The partners argue that Voeller had no such authority and that Hodge knew this. Who is correct? Explain.

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The partners argue that Voeller had no such authority and that Hodge knew this. Who is correct? Explain.

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Voeller, the managing partner of the Pay-Out Drive-In Theater, signed a contract to sell to Hodge a small parcel of land belonging to the partnership. Except for the last twenty feet, which were necessary for the theater’s driveway, the parcel was not used in theater operations. The agreement stated that it was between Hodge and the partnership, with Voeller signing for the partnership. Voeller claims that he told Hodge before signing that a plot plan would have to be approved by the other partners before the sale. Hodge denies this and sues for specific performance, claiming that Voeller had actual and apparent authority to bind the partnership. The partners argue that Voeller had no such authority and that Hodge knew this. Who is correct? Explain.

Explanation & AnswerSolution by a verified expert

Explanation

The UPA and RUPA both have same rule regarding the selling of property in which seller has no apparent authority to sell and purchaser has knowledge about the seller's authority. Under UPA, if a partner sells a property in the name of partnership, the partnership can recoup the property (unless sold in good faith), if:

Partner selling the property has no apparent authority to sell the property.
The purchaser of the property knew about the position of seller's authority.

 
In this case:

Partner V, selling the land adjacent to theatre, does not come under partnership, normal course of business. Thus, Partner V has no apparent authority to sell the land. Also, there is no evidence that Partner V has sold the land for or on behalf of the partnership.
Partner V claims that at the time of selling the land, Purchaser H was told that for selling a land, sign of all the partners is necessary.

 
So, from above arguments, it can be considered that the sale of land does not come under daily operations of partnership. The partnership is not involved in selling and purchasing of lands. So, Partner V does not have apparent and actual authority to sell the land. The claim of Purchaser H cannot be binding on the partnership.

Verified Answer

In this case, partners' claim can be considered correct that Partner V has no apparent authority to sell the land in the name of partnership and Purchaser H knew this already as Partner V, selling the land does not come under regular operational activity of partnership firm.

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