Do Business Partners Have the Right to Enter a Contract On Behalf of the Entire Partnership?
When you enter a business partnership, you need to be sure that you have the right partner. Business partners in Florida must put a great deal of faith in each other’s hands. You may be wondering: Can one business partner enter into a contract on behalf of the entire partnership? The short answer is that “it depends”—the specific structure of the company and the nature of the contract both matter. In this article, our Miami partnership dispute lawyer explains the key things to know about a business partner’s ability to enter a contract on the right of the partnership.
One Partner Can Often Sign a Contract On Behalf of Partnership
As a starting point, it is important to emphasize that it is absolutely possible for a business partner—or other individual agent of a company—to enter into a contract on behalf of the larger business. Indeed, In many business partnerships, it is actually a common practice for one partner to enter into contracts on behalf of the entire partnership. A business partner—or other party who has been empowered to manage the company—may be an agent with contracting authority.
Florida Law: General Partners Often have Capacity, Limited Partners Typically Do Not
What is the overriding legal rule for partnerships and contracts in Florida? The key thing law differentiates between general partners and limited partners with regard to entering contracts on behalf of the entire partnership.
A general partner typically has the capacity and authority to bind the partnership in a contract. In other words, they act as agents of the partnership. They are presumed to have the legal capacity to enter into a contract on behalf of the business.
On the contrary, limited partners typically do not possess the same level of authority. Florida law usually restricts limited partners from entering into contracts on behalf of the partnership, unless they are explicitly given that authority based on their investment or managerial capacity.
A Partner May Bear Liability to Other Partners for Entering an Improper Contract
To be clear, general partners do not always have an unencumbered right to enter into a contract on behalf of their entire partnership. Indeed, they may have signed a partnership agreement that requires them to consult with their business partners before doing so. When a partner enters into a contract that may be considered improper outside the scope of the partnership’s business, they may bear liability towards the other partners. Such an action could be seen as a breach of their partnership agreement or a breach of their fiduciary duty.
Speak to a South Florida Partnership Dispute Lawyer Today
At Pike & Lustig, LLP, our Florida partnership dispute attorneys are standing by, ready to protect your rights and interests. Have questions about partnerships and contracts? We are here as a resource. Contact us now to arrange your confidential case evaluation. We provide business litigation services in Miami-Dade County, Broward County, Palm Beach County, and beyond.