Question

1. Thomas, a young entrepreneur, started a construction business. Ari, who owned and operated a radio station, agreed to run some advertisements for him. Unfortunately, Thomas was unable to pay Ari for the services. In the hopes of making the business profitable so that he could get paid under the broadcasting contract, Ari, without remuneration, assisted Thomas in his business. In fact, on behalf of Thomas, Ari signed a contract with Lopez for plumbing and heating supplies. When payment for the supplies was not forthcoming, Lopez sued Ari, claiming that Ari was Thomas’s partner and therefore was responsible for the debt. Ari claimed that, when he signed the contract, he was acting as Thomas’s agent.

What difference and consequences does it make whether Ari is considered to be Thomas’s agent or his partner pursuant to the Partnership Act of Ontario?

Answer 1

In case when Ari is regarded as an agent then his actions that are in due course of Thomas’ business will make Thomas liable for all of Ari’s actions. This is because Thomas here is the principal and as per the law of agency a principal is liable for contracts made by the agent on behalf of the principal. Thus here Lopez cannot sue Ari and will have to take legal action for payment of supplies against Thomas.

In case where Ari is regarded as Thomas’ partner then the situation will change. This is because the Partnership Act of Ontario states that ‘every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm incurred while the person is a partner’. Hence as a partner of the firm Ari will be liable to clear all dues to Lopez for the plumbing and heating supplies that she provided to the construction business.