Explain ‘Mutual Agency’ as a feature of partnership. (Class 11 commerce )
Answers
Definition :- Mutual agency is the legal relationship between partners in a partnership where each partner has authorization powers and the ability enter the partnership into business contracts. In other words, each partner in the partnership is an agent in the business and the authority to make business decisions that commit or bind the partnership, as a whole, to a business agreement with a third party or entity.
What Does Mutual Agency Mean? :- Mutual agency only exists for partners acting within the scope of normal business operations and dealings. For example, a retailer apparel partner with agency would not be able to contract the other partners into a deal to purchase a piece of investment real estate because this would be outside the normal operations of the business.
One of the retail partners can, on the other hand, purchase goods from a vendor and require the partnership pay for the goods. This transaction is within the normal course of operations of the business.
Example :-
Mutual agency has several advantages and disadvantages for the partnership. It’s advantageous to have multiple partners with agency because they are authorized to make deals and transactions for the partnership. This arrangement splits up the duties and responsibilities among multiple partners, so the company can expand and grow.
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