This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In order to estop one from denying his liability as a partner, the person in whose favor the estoppel is alleged must have acted in reliance upon the facts which are claimed to create the estoppel.1 First, to create estoppel such facts must be known to the party alleging the estoppel at the time at which he enters into the transaction with reference to which the estoppel is invoked. Thus where he did not then know that the person against whom he is seeking to enforce liability was held out as a partner, he cannot claim that by reason of a holding out as a partner to others, an estoppel exists in his favor.2 So one who knows that no partnership exists cannot enforce liability as partners against members of an alleged firm other than the person with whom he dealt.3 Second, to cause estoppel there must be an actual belief of third persons based on facts known to them when they deal with the partnership.* Where the representation was known to be untrue and not relied on, no estoppel can be claimed to exist.5 Thus if the powers of a partner are actually known to one who deals with him, the latter cannot claim that the partnership is bound by estoppel if such partner exceeds his powers.6 A partnership is therefore not liable on a contract made in excess both of the real and of the apparent scope of partnership.7
10 Hoaglin v. Henderson, 119 Ia. 720; 97 Am. St. Rep. 335; 61 L. R. A. 756; 94 N. W. 247.
1 Nofsinger v. Goldman, 122 Cal. 609; 55 Pac. 425; Munton v. Rutherford, 121 Mich. 418; 80 N. W. 112; Seabury v. Bolles, 52 N. J. L. 413; 51 X. J. L. 103; 11 L. R. A. 136; 21 Atl. 952.
2 People's Savings Bank v. Smith, 114 Ga. 185; 39 S. E. 920.
3 Vanderhurst v. De Witt, 95 Cal.
57; 20 L. R. A. 595; 30 Pac. 94; First National Bank v. Cody, 93 Ga. 127; 19 S. E. 831; Frisbie v. Felton, 65 Vt. 138; 26 Atl. 110; Commercial Bank v. Miller, 96 Va. 357; 31 S. E. 812.
4 Thompson v. Mallory, 108 Ga. 797; 33 S. E. 986.
5 Dodds v. Ragan Co., 110 Ga. 303; 34 S. E. 1004.
1 Nofsinger v. Goldman, 122 Cal. 609; 55 Pac. 425.