Asked by Chloe Guida on May 14, 2024
Verified
Dean, a partner in Equipment Sales, applies for a loan with Farmers Bank allegedly on Equipment's behalf but without the authorization of the other partners. The bank knows that Dean is not authorized to take out the loan. Liability in the event of default will be imposed on
A) none of the choices.
B) Dean.
C) Equipment.
D) Farmers Bank.
Authorization
Official permission or power granted to an individual or entity to carry out certain actions.
Liability
Refers to the state of being legally responsible for something, particularly in terms of debts or financial obligations.
Default Imposed
A consequence or penalty set forth due to non-compliance with established rules or failure to meet certain expectations.
- Comprehend the responsibilities held by partners in a fiduciary capacity and the consequences of failing to fulfill these obligations.
Verified Answer
AC
ashley chinnMay 18, 2024
Final Answer :
B
Explanation :
Dean will be held liable because he acted without the authorization of the other partners, and the bank was aware of this lack of authorization. In partnership law, actions taken by a partner without the necessary authority that bind the partnership require that the partner acting unilaterally be held responsible, especially when the third party (in this case, the bank) is aware of the lack of authority.
Learning Objectives
- Comprehend the responsibilities held by partners in a fiduciary capacity and the consequences of failing to fulfill these obligations.
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