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Section 251: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 75 All 266 Sections of Indian Contract Act Section 77

Legal Commentary & Landmark Judgments: Section 251

Section 251 historically codified the principle of mutual agency and the implied authority of a partner to bind the firm by acts done in the ordinary course of the business of the kind carried on by the firm, now reenacted across Sections 18, 19, and 22 of the Indian Partnership Act, 1932.

  • Bedrock Principle of Mutual Agency: Every partner is in contemplation of law both a principal and an agent of the firm and of his co-partners for the purposes of the business of the partnership.
  • Scope of Implied Authority: Acts done and instruments executed in the firm's name in the usual way of carrying on business of the kind conducted by the firm bind all partners automatically.
  • Modern Statutory Evolution in IPA 1932: Repealed by Act 9 of 1932 and expanded into Section 18 (partner as agent), Section 19 (implied authority), and Section 22 (mode of doing act to bind firm), with statutory restrictions codified in Section 19(2).
Key Landmark Precedents:
  • Cox v. Hickman (1860) 8 HLC 268: The definitive House of Lords judgment establishing mutual agency as the indispensable test of partnership, codified in Section 251 and later Sections 18-19 of the 1932 Act.
  • Mercantile Credit Co. Ltd. v. Garrod [1962] 3 All ER 1103: Held that a partner in a garage business who fraudulently sold a car without title bound his innocent co-partner because selling cars was within the apparent scope of a garage business.
  • Dulichand Laxminarayan v. CIT AIR 1956 SC 354: The Supreme Court analyzed the nature of mutual agency under the Contract Act and Partnership Act, confirming that partners derive authority from each other as reciprocal agents.
Courtroom Practice & Strategic Litigation Guidance:

In transactional practice with partnerships, note that under modern Section 19(2) of IPA 1932, implied authority does NOT extend to submitting disputes to arbitration, opening bank accounts in personal names, or acquiring/transferring immovable property; demand a unanimous authorization resolution for such matters.

Section 75 All 266 Sections of Indian Contract Act Section 77