Third Parties Relation (Sections 39-44): Partnership liable to third parties for authorized acts. Agency principle applies: Each partner is agent for partnership. Third party protection: Third parties dealing with partner can assume authority unless notice of limitation. Partnership liability: Firm liable for partner's wrongful act/omission in ordinary course. Joint liability: All partners jointly liable; third party can sue all or individual partners. Firm property: Third party creditors have priority over partner's personal creditors. Case law: Scrivener v. Wickham establishes partnership liability to third parties. Notice to partner: Notice given to one partner binds partnership. New partner liability: New partner not liable for pre-existing debts unless they agree. Retiring partner: Remains liable unless third parties release; firm must notify of retirement. For accountants, understanding third-party liability critical when assessing partnership risks and creditor claims. Partnership insurance requirements based on third-party exposure. Exam tip: Identify partner act; assess authority; determine firm/individual liability; assess third-party rights.