After a partner dissociates, which authority may still bind the partnership if a third party reasonably believes the partner to be authorized?

After a partner dissociates, which authority may still bind the partnership if a third party reasonably believes the partner to be authorized?

• A. Actual authority
• B. Apparent authority
• C. Both actual and apparent authority
• D. None of the above.

Answer: (B)

Apparent authority governs when a third party is allowed to bind a partnership after a partner has dissociated. Once dissociation happens, the partner’s actual authority to bind the partnership ends. But if the partnership’s actions, representations, or the partner’s prior conduct lead a reasonable third party to believe the partner is still authorized, that third party can bind the partnership to the partner’s acts. This depends on reasonable reliance and typically requires that the reliance occurs before the dissociation is known or before notice of it is received. The result protects legitimate third parties who deal with the partnership in good faith based on appearances, even though the partner has left.

Apparent authority governs when a third party is allowed to bind a partnership after a partner has dissociated. Once dissociation happens, the partner’s actual authority to bind the partnership ends. But if the partnership’s actions, representations, or the partner’s prior conduct lead a reasonable third party to believe the partner is still authorized, that third party can bind the partnership to the partner’s acts. This depends on reasonable reliance and typically requires that the reliance occurs before the dissociation is known or before notice of it is received. The result protects legitimate third parties who deal with the partnership in good faith based on appearances, even though the partner has left.