Partner using credit for private purposes - PA 1890 s. 7
If a partner uses the firm's credit for a purpose outside ordinary business, the firm is not bound unless authorised. The partner remains personally liable.
Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound, unless he is in fact specially authorised by the other partners; but this section does not affect any personal liability incurred by an individual partner.
Text in force at .
Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.
What it actually says
This section says that when one partner uses the firm's credit or name for something that is not part of the firm's normal business, the firm is not responsible for that debt. The other partners do not have to pay unless they gave that partner specific permission to do that.
However, the partner who made the deal is still personally responsible. The creditor can still sue that partner individually. This section does not protect the partner from their own actions.
The key question is whether the purpose was 'apparently not connected with the firm's ordinary course of business.' That depends on what the firm normally does. For example, if a partner in a law firm buys a car using the firm's credit, that is likely outside the ordinary business of the firm.
When it applies
- A partner in a bakery uses the firm's credit to buy a personal computer for home use.
- A partner in a construction company uses the firm's account to pay for a family holiday.
- A partner in a retail shop orders goods for a side business that is not related to the shop.
- A partner in a law firm signs a lease for a private apartment using the firm's name.
- A partner in a restaurant uses the firm's credit card to buy stock for a separate catering business.
What this section does not say
- It does not cover situations where the partner was acting within the ordinary course of the firm's business (those are covered by sections 5 and 6).
- It does not mean the firm is never liable for a partner's actions; if the partner had actual authority from the other partners, the firm is bound.
- It does not affect the personal liability of the partner who acted; they remain personally responsible.
- It does not apply to sole traders or companies, only to partnerships.
That's the law. Now let's settle your problem.
Say what is happening. A neutral mediator hears your side and the other party's, and walks you both to a written agreement. In the advanced settings you can ask for the decision to be reasoned on the Acts of Parliament that apply in England and Wales.
Or open a session directly and invite the other party.
We copy this text from the official publisher and re-check it against that source on every page load, but we cannot guarantee it is complete, current or free of error, and we accept no liability for any reliance on it. An amendment can take effect before a consolidation catches up. The publisher's own copy is linked below; where the two differ, it is the official one that counts.
This page reproduces the text of PA 1890 s. 7 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.