Will a partnership be bound by the act of an unauthorized partner if the third person was aware of the lack of authority?

In partnership law, a fundamental principle is that a partnership is bound by the acts of its partners when those acts are within the scope of the partner's authority. However, if a partner acts outside the scope of their authority, the partnership is generally not bound by those actions, specifically when a third party is aware of the lack of authority.

In this scenario, if the third person had knowledge of the unauthorized status of the partner, it indicates that the third party cannot reasonably rely on the supposed power of the partner. The law protects partnerships from being held liable for actions taken by a partner acting without authority, especially when the third party knows of this lack of authority. This principle allows partnerships to limit their liability and protects them from claims based on unauthorized actions.

Thus, the answer indicating that the partnership will not be bound by the act of an unauthorized partner when the third party is aware of the lack of authority is correct. This reflects the balance between protecting third parties’ interests and ensuring that partnerships are not unfairly held liable for actions that they did not authorize.