If partnership deed provides that only one partner can sign agreement then it would be valid
2) they cannot claim ignorance of penalty clause
Validity of agreement signed by only one partner
In 2018, my parents lent money to a partnership firm where my wife was a partner with two others. The loan was due in 2021. Funds were transferred to the firm's account. A loan agreement was executed on stamp paper but not registered. My wife signed the agreement for the firm, and we received a blank security cheque signed by another partner. Interest was paid as agreed until my wife left the partnership in 2021. Since then, the surviving partners have made false excuses for non-payment. Interest has been paid only for FY 2022-23, that too at a reduced rate. No late payment or penal interest has been paid. However, we did receive an email from the firm in March 2023 acknowledging the outstanding amount, including late payment penalties. Questions: - Is a loan agreement enforceable if only one partner signed it? - Can the surviving partners claim ignorance of the penalty clause for late payment?
Asked 3 months ago in Business Law
First answer received in 30 minutes.
Lawyers are available now to answer your questions.
6 Answers
The loan agreement is enforceable because the partner signed on behalf of the firm.
It is a loan availed by the firm hence the partners cannot claim exemption so long as they are the partners of the firm, you can sue the partnership firm
1. Yes if the agreement was part of usual business of the firm.
2. No.
- Since, the fund was transferred in the firms account , then your wife being one of the partner signed the agreement on behalf of the firm and even the said cheque was issued by and on behalf of the firm.
- Hence, the said agreement is enforceable as the agreement was singed on behalf of the firm i.e. the receiver of the fund.
- The surviving partner cannot claim ignorance , specially when the cheque was issued by another partner.
Dear Client,
- Enforceability of the loan agreement: A partnership firm is not a separate legal entity from its partners; it operates through its partners. Therefore, a loan agreement executed on behalf of the firm is binding if it is signed by an authorized partner. If your wife signed the agreement as an authorized partner at the time of the loan, the agreement is enforceable against the firm, even if it was not registered. The fact that only one partner signed the agreement does not automatically invalidate it.
- Surviving partners claiming ignorance of penalty clause: The email acknowledgment from March 2023 indicates that the firm recognizes the outstanding amount, which includes late payment penalties. This acknowledgment can serve as evidence that the surviving partners are aware of the terms of the loan agreement, including the penalty clauses. Ignorance of the penalty clause cannot be a valid defense if the surviving partners have been properly informed and have acknowledged the debt. The acknowledgment indicates that they are bound by the agreed terms, including penalties.
Should you require any further clarification please do not hesitate to contact us.
1. If that partner has been authorised by all other partners for taking such loan by passing a resolution in a meeting held by them. then the said loan agreement is enforceable.
2. No. If the loan is admitted by them, the clauses shown in the loan agreement is also admitted by default by them.
