One of two partners seeking to acquire a property executed a brokerage agreement solely in his own name. Subsequently, the second partner purchased the property independently, without the other's knowledge. Upon becoming aware of the transaction, the realtor demanded that the purchaser pay the applicable brokerage fees under the agreement, notwithstanding the fact that the purchaser had not executed the brokerage agreement.
The Supreme Court accepted the realtor's contention based on the existence of a partnership relationship between the signatory and the purchaser. Pursuant to the Israeli Partnership Ordinance, each partner acts as an agent of the partnership and of the other partners; consequently, a partner's actions are binding upon them provided that the actions giving rise to the liability were performed in the ordinary course of business. An exception to this rule applies where the partner lacked authority and the third party was aware of such lack of authority. Here, entering into a brokerage agreement for the purpose of purchasing real estate constitutes an obligation incurred in the ordinary course of business and the conditions for the lack of authority exception were not met. Hence, the signature of the first partner personally binds the purchasing partner, even though the purchase was not made for the benefit of the partnership and the purchaser is liable to pay the brokerage fees.