Q.Which of the following best captures the principle of 'mutual agency' under Section 18 of the Indian Partnership Act, 1932?
(A) Only the managing partner can act as an agent of the firm; other partners are merely investors
(B) Every partner is simultaneously a principal (bound by the acts of others) and an agent (able to bind the firm) for the purposes of the firm's business
(C) Partners must appoint an outside professional agent to conduct the firm's business
(D) Mutual agency applies only to firms engaged in the business of agency work itself

Mutual agency is the two-way relationship at the heart of partnership: every partner can bind the firm, and every partner is bound by what the others do for the firm.

This rule applies to every partner in every kind of partnership business, not just to a managing partner or to agency-type businesses.

Why (B) is correct: Section 18 states that a partner is the agent of the firm for the purposes of the firm's business. Since this applies to every partner equally, each one is, at the same time, a principal bound by what the other partners do for the firm, and an agent capable of binding the firm by his own acts.

Why the distractors are wrong:

• (A) wrongly confines agency to a single 'managing partner' — Section 18 makes every partner an agent of the firm, not just one designated partner.
• (C) confuses partnership's internal mutual-agency structure with hiring an external agent, which is unrelated.
• (D) wrongly limits mutual agency to firms whose business happens to BE agency work — mutual agency is a general feature of every partnership, regardless of what business the firm carries on.

Students sometimes think only a formally 'appointed' managing partner has authority to bind the firm. In fact, every partner has this implied authority for acts usual to the firm's business (Section 19), which is exactly what makes mutual agency the defining test of partnership.