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Question

Which feature of partnership binds all the partners to the agreement signed by one partner?

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Solution

Mutual agency
In a partnership, the partners are agents for the partnership. As such, one partner may legally bind the partnership to a contract or agreement that appears to be in line with the partnership's operations. As most partnerships create unlimited liability for its partners, it is important to know something about potential partners before beginning a partnership. Although partners may limit a partner's ability to enter into contracts on the company's behalf, this limit only applies if the third party entering into the contract is aware of the limitation. It is the partners' responsibility to notify third parties that a particular partner is limited in his or her ability to enter into contracts.

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