The contract signed by Newberg on behalf of the partnership may not be binding upon the partnership because the partnership agreement stipulates that any partnership contract worth 100 000 and above will only be signed by Vusa. Therefore, it can be argued that Newberg exceeded his authority in signing the contract with LXX Xhoung.
This principle is established in agency law where an agent can only act within the scope of their authority. If they exceed their authority, the principal (partnership) may not be bound by the agent's actions. In this case, the partnership agreement limits the authority of Newberg to sign contracts worth 100 000 and above, and he cannot unilaterally exceed that limit by entering into a contract worth 20 000 boxes of matchsticks.
Furthermore, the contract signed by Newberg may also be deemed voidable if LXX Xhoung was aware of the partnership agreement and still proceeded to enter into the contract with Newberg. This is because LXX Xhoung would have knowingly contracted with an agent who did not have the full authority to bind the partnership, and this could be construed as bad faith or fraud on their part.
In summary, the contract signed by Newberg on behalf of the partnership may not be binding upon the partnership due to the limitations on his authority stipulated in the partnership agreement.
Themba, Vusa and Newberg are partners in a venture whose sole business is to manufacturing matchstick for profit. Their partnership agreement provides that any partnership contract worth 100 000 and above will be signed by Vusa only. In May 2023, Newberg entered a contract on behalf of the partnership in terms of which the partnership was to sell 20 000 boxes of matchsticks to a Malaysian Company, LXX Xhoung for 1000 rands per box.
Based on case law and other legal authority, discuss whether the contract signed by Newberg is binding upon the partnership.
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