Story Case

Adolph Mills and Herbert Anderson were partners, doing a wholesale plumbing business. Mills, who owned three-fourths of the business, was the general manager of the company. A disagreement arose between the partners, and Mills made a contract with John Burnett for disposing of all the fixtures in the store. Burnett agreed to buy these for cash, provided delivery was made on the first of the following month. When the time came for delivery, the partners had reconciled their differences and refused to deliver the fixtures, on the ground that Mills had no authority to sell them. What can Burnett do?

Ruling Court Case. Loivman Vs. Sheets, Volume 124 Indiana Reports, Page 417; Same Case, Volume 7 Lawyers' Reports Annotated, Page 784

Templeton and Sheets made a contract for the establishment of a stock farm, and acquired a herd of brood mares for that purpose. Without the knowledge or consent of Sheets, Templeton undertook to sell the entire herd to the plaintiff, Lowman. Sheets refused to deliver them to the plaintiff, and the latter brought this action to recover them from the defendant, Sheets.

Mr. Justice Coffey delivered the opinion of the Court: "It is contended by the plaintiff that Templeton and the defendant were partners and that, as such, either partner had the right to sell the property owned by the firm and confer a good title, and that by his purchase from Templeton he acquired the title to the whole of the property in controversy and has a right to its possession. We do not deem it necessary to decide whether the contract between the parties was one of partnership or not, as Templeton had no power to sell the entire property, whether it was held as partnership property or otherwise. The partnership, if one existed, was not one in which the parties contemplated a sale of the property here involved, but it was one in which this property was to be kept for the purpose of carrying on the particular business. * * * Mr. Bates, in his valuable work on partnerships, in treating the subject under consideration, says: 'But I have no doubt but that the power of sale must be confined to those things held for sale and that the scope of the business does not include the sale of the property held for the purpose of the business, and to make a profit out of it and that this only is the true rule.' " It was accordingly held, that the attempted sale by Templeton did not pass any title to the plaintiff.

Ruling Law. Story Case Answer

Each partner has implied power to purchase, on the credit of the firm, property, necessary for the efficient conducting of the business. The extent of this power will necessarily depend upon the nature of the business. In case of a trading partnership, obviously the power will be broader than in the case of a non-trading firm. But, in either case, the property purchased must be reasonably necessary for that particular business. A member of a partnership engaged in selling groceries would have implied power to buy sugar on the credit of a firm, but would have no such power to buy drugs and render the firm liable therefor.

Thus, also, each member of a partnership has implied power to sell the stock in trade of the firm; that is to say, he has implied power to sell all the property belonging to the firm, which is kept for sale and can pass good title to a purchaser thereof. But a partner has no implied power to sell property which is not kept for sale, but held for the purpose of carrying on the business. Therefore, a partner would have no power to sell the furniture of his firm. He would have no power to sell horses, vehicles, and the like, used in carrying on the business.

In the Story Case, Mills did not contract to sell the stock in trade, but the things with which the trade was conducted. He had no implied, or apparent authority to do this, and therefore, Burnett cannot recover on the contract. In the Law of Agency, we learned that an agent was liable for warranting his authority. Burnett might sue Mills personally for breach of warranty. This action is always possible in a case where a partner makes a contract he has no right to make. The man who is injured can bring suit against the partner, personally, for misrepresentation.