What is the result if a partner acts outside their apparent authority in a transaction?

When a partner acts outside their apparent authority in a transaction, the result is that the partnership can still be bound if the third party is unaware of the limitations on that partner's authority. Apparent authority arises when a partner's actions lead a third party to reasonably believe that the partner has the authority to act on behalf of the partnership. If the third party relies on that apparent authority in good faith, then the partnership may be bound by the transaction, even if the partner was not authorized to act in that specific instance.

This principle is grounded in the concept of protecting third parties who enter into agreements believing they are dealing with an authorized representative of the partnership. As long as the third party cannot be expected to know of the limitations on the partner's authority, the partnership remains liable for the actions undertaken by its partner.

In contrast, if the third party is aware that the partner lacks authority, or if the partnership agreement explicitly limits that authority in a way that should have been known, then the partnership would generally not be bound by that transaction. This illustrates the importance of clear communication and transparency in partnership dealings.