Chapter IV - Relations of Partners to Third Parties
Section 20
Section 20: Extension and restriction of partner's implied authority
The partners may change a partner’s implied authority by agreement, but a restriction may not bind a third party who deals without knowledge of it.
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Need advice on Section 20?
This article is for general information. Refer to the Indian Partnership Act, 1932 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
The partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner.
Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner.
Introduction
Partners may extend or restrict a partner’s implied authority by contract under Section 20.
An internal restriction will not by itself prevent the firm being bound by an act within implied authority when the counterparty lacks the knowledge specified in the section.
Key takeaways
Internal agreement
Partners can agree to enlarge or narrow implied authority.
Third-party knowledge
A restriction affects an ordinary-course third party only within the statutory knowledge conditions.
Two-stage authority check
Read the partnership deed and determine the partner’s implied authority for this type of transaction.
Establish whether the counterparty knew of the restriction or did not know or believe the actor to be a partner.
Illustration
A deed may prohibit one partner from placing routine orders. If a supplier does not know that limit and the order falls within implied authority, the firm may still be bound under Section 20.
Check deed and state law
Check the partnership deed, communication of any authority limit to the counterparty and any applicable state amendment before applying this central rule.
Practical checklist
Do
- Communicate material authority limits to relevant counterparties.
- Keep records of notices and acknowledgments.
Avoid
- Do not assume an undisclosed internal cap automatically defeats a third-party claim.
Frequently asked questions
Can the deed restrict a partner’s authority?
Yes, the partners can extend or restrict implied authority by contract.
Does every restriction bind suppliers?
No. Section 20 preserves firm liability in the stated circumstances unless the dealing person has the specified knowledge.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026