Monday, December 20, 2010, 5:11 PM

Supreme Court: Partner Executes Contract On Behalf of Partnership Unless There's No Authority or Ratification

Today the Supreme Court held that a partner in a licensed partnership signs contracts as an agent of the partnership unless the partner was not authorized to act on behalf of the partnership and the contract was not ratified by the partnership. The case is Medlin Construction v. Harris.

Medlin Construction, a partnership, built a house for the Harrises. The construction contract was signed only by Ron Medlin, a partner in Medlin Construction. Medlin was not a licensed contractor, but Medlin construction was. Medlin and Medlin Construction claimed that the Harrises failed to pay them for materials and labor in building the house, and the Harrises claimed that Medlin Construction/Medlin breached the construction contract and committed unfair and deceptive trade practices. On appeal, Medlin and Medlin Construction claimed that even though Medlin entered into an express construction contract, they could still recover in quantum meruit.

The Court disagreed. All parties agreed that Medlin Construction did not have a contractual relationship with defendants, but the Court found that one in fact did exist because Medlin was acting in his capacity as a partner and signed the contract on behalf of the partnership. Medlin Construction did not argue that Medlin lacked authority to enter into the contract on behalf of the partnership, and by getting materials, hiring subcontractors, and building the house, Medlin Construction acknowledged that Medlin was authorized to enter into the contract with the Harrises on behalf of the partnership. The Court concluded: "We hold that, as a matter of law, a contract for the construction of a home or building executed by a partner in a licensed partnership engaged in the construction business is the contract of the partnership unless the remaining partners can show that the partner was not authorized to act on behalf of the partnership and, if not so authorized, the partnership did not ratify the contract. Without this showing, a licensed construction contractor partnership cannot recover in quantum meruit."

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