321 



PARTNERSHIP. 



PARTNERSHIP. 



322 



beyond the legal period of dissolution in the hands of his children or 

 other third parties ; but this is properly an agreement for a new 

 partnership. Partners cannot be relieved from future liabilities to 

 third parties without notice to them and to the world in general that 

 the partnership has ceased ; but in the case of a dormant partner, if 

 none of the creditors know that he is a partner, no notice of his retire- 

 ment from the firm is necessary ; and if it be known to some, notice to 

 such only will be sufficient. On the death of a partner, notice of the 

 dissolution to third parties is unnecessary. 



Partners are joint tenants in the stock and all effects ; yet there is 

 no survivorship in equity, or, as it has been said, at law, in such part 

 of the stock as is moveable. Upon the decease of a partner, his per- 

 sonal representatives become entitled to his share of the moveable stock 

 and effects, and they thereupon become in equity, and, as it has been 

 said, at law, tenants in common with the surviving partners. If, as is 

 generally the case in the purchase of lands for the purposes of a partner- 

 ship, they are conveyed to the partners as tenants in common, and one 

 of the partners should die intestate, the legal estate in his share will 

 descend to his hen-, who will be tenant in common with the other 

 partners. If the lands were conveyed to them as joint tenants, there 

 will be no survivorship in equity ; and it becomes then a question 

 whether, upon the death of a joint trader, who, with his partners, has 

 so purchased lands for the purpose of the trade, his share will descend 

 for the benefit of his heir or his next of kin ; and the better opinion 

 seems to be (see Darby v. Darby, 3 Drew, 499), that although 

 the legal estate in freehold property purchased by partners for the 

 purposes of their trade will go in the ordinary course of descent, yet 

 the equitable interest will be held to be part of the partnership stock, 

 and distributable as personal estate. It is scarcely necessary to observe, 

 that upon the purchase of lands, they may be expressly conveyed so as 

 to be always held as real estate, and descend to the heirs of the several 

 partners. 



It sometimes happens that one person supplies goods for an adven- 

 ture, and another only his time, trouble, and credit ; yet if in the 

 agreement between the parties there are words which imply a joint 

 undertaking, those words are evidence of an intention to share jointly 

 the goods and also the profits of them. 



There is an implied obligation, in the absence of express stipulation, 

 among partners to use the property for the benefit of all of them : 

 and any fraud on the part of one partner, either by misapplication of 

 the partnership fund or in any other way, is a matter of which a 

 court of equity will take cognisance. No partner has a right to engage 

 in any business or speculation which must necessarily deprive the 

 partnership of his time, skill, and labour, because it is the duty of 

 each to devote himself to the interest of the firm. It is the duty of each 

 partner to keep precise accounts, and to have them always ready for the 

 inspection of his co-partner. Each partner is liable to the performance 

 of all contracts of his co-partners, in the same manner as if entered 

 into personally by himself, provided they relate to matters which are 

 within the objects and purposes of the partnership. If the parties to 

 the contract of partnership do not regulate it by express stipulation 

 amongst themselves, the contract, with its duties and obligations, will 

 be implied and enforced by the rules of law applicable to persona in 

 such relative situations ; and where the contract does not reach all the 

 duties and obligations, such omissions will be supplied by the nine 

 rules of law. Though partners may have entered into a written agree- 

 ment which specifies the terms on which the joint concern is to be 

 carried on, yet, if there be such a course of dealing as leads to the 

 conclusion that they have agreed to change the terms of the original 

 written agreement, they will be considered to have done so. For 

 instance, if the agreement be that no partner shall draw or accept a bill 

 of exchange in his own name, without the concurrence of all the others, 

 yet, if they afterwards adopt a practice of permitting one of them to 

 draw or accept bills without the concurrence of the others it will be 

 held that they have so far varied the terms of the original agreement. 

 The transactions of partners are always to be looked to in order to 

 determine between them, even against the written articles, what 

 clauses hi those articles will not bind them. It is impossible to state 

 all the varieties of stipulation which are introduced into partnership 

 articles ; it will be sufficient to repeat that within the limits before 

 laid down, the parties may enter into such stipulations as they please. 



One partner may maintain an action of covenant against his co- 

 partner, whether the covenant be for the payment of money or the 

 performance of any act for commencing or establishing the partner- 

 ship, or for the performance of any of the articles after the partnership 

 has commenced ; and if adequate compensation for the breach cannot 

 be had at law, a court of equity will enforce a specific performance of 

 the covenant itself. Courts of law do not allow actions of debt by one 

 partner against another for money due upon simple contract, as for 

 money laid out by one partner for the purposes of the partnership. 

 The partner who is aggrieved must therefore enforce his remedy by 

 action of account, or by an application to a court of equity, by filing a 

 bill for an account and a dissolution of the partnership. A partner 

 cannot maintain an action of debt against his co-partner for work and 

 labour performed, or money expended on account of the partnership ; 

 if therefore he has a claim upon his co-partner for a sum of money 

 due on account of the partnership, but not constituting the balance 

 of a separate account, or a general balance of all accounts, his only 



ABIS AKI) SCI. DIV. VOL. VI. 



mode of recovering the amount is by an action of account, or by a 

 bill in a court of equity praying for an account, and usually also 

 for a dissolution. If it turn out that an undertaking is impracti- 

 cable, as if a machine, for the working of which the partnership was 

 entered into, will not answer the purposes intended, and so the 

 object of the parties is frustrated, or if either party commit fraud, or 

 gross acts of carelessness or waste in the administration of the part- 

 nership, the party aggrieved has a right to a dissolution, and the same 

 will be decreed in equity. A partner is also entitled to an account 

 of the partnership assets against his co-partner, but it was formerly 

 held that he could not have it pending the partnership. If therefore 

 he filed his bill for an account, it was also necessary to pray for a 

 dissolution. It is now considered that a partner may have such an 

 account on stating a proper case, without asking for a dissolution; 

 but considering the circumstances under which a partner files a bill for 

 an account of partnership dealings, it will seldom happen that it will be 

 his interest not to pray for a dissolution of the partnership. Where 

 one partner has committed such breaches of duty as would warrant a 

 decree for a dissolution, a court of equity will interfere summarily by 

 injunction : as where one partner has involved the partnership in 

 debt, or has himself become insolvent, the court will restrain him 

 from drawing, accepting, or indorsing bills in the name of the 

 firm, from receiving the partnership debts, and from continuing to 

 carry on the business by entering into new contracts. It will also 

 restrain an action brought by one partner against his co-partner on a 

 separate and private account, upon payment by the latter of the money 

 iuto court. So it will restrain the application of the partnership pro- 

 perty to a use not warranted by the articles ; or an execution against 

 the partnership property for the separate debt of one partner. A 

 court of equity will appoint a receiver where one partner excludes 

 another from taking such part in the concern as he is entitled to take, 

 and will do this even with a view to the continuation of the co- 

 partnership, if it is for the benefit of the complaining partner, although 

 such a step is usually taken with a view to a dissolution and winding 

 up of the partnership affairs. Whether the party applying for a 

 receiver wish a continuance or dissolution of the partnership, he must 

 make out such a case to induce the court to interfere, as would 

 authorise a decree for a dissolution. 



Generally speaking one partner has an implied authority to bind the 

 firm by contracts relating to the partnership, and he can do thia by 

 mere verbal or written agreements, or by negotiable securities such as 

 bills of exchange and promissory notes. One partner may pledge the 

 credit of the firm to any amount ; but there are some exceptions to 

 this rule. A dormant partner is in all cases liable for the contracts of 

 the firm during the time that he is actually a partner ; and a nominal 

 partner is in the same manner liable during the time that he holds 

 himself out to the world as a partner. Partners can make no arrange- 

 ments among themselves which will limit or prevent their ordinary 

 responsibilities to third parties. The power of one partner, above 

 alluded to, to bind his co-partner, is implied in law, no express 

 authority from the latter being necessary for that purpose ; and in the 

 case of bills of exchange, it exists by custom which has been judicially 

 recognised. One partner may give a guarantee for himself and his 

 partners, and the firm will be bound by it, if it be made in a matter 

 relating to the partnership. The act and assurance of one partner, 

 made with reference to business transacted by the firm, will bind all 

 the partners. A partner will also be liable in respect of a fraud com- 

 mitted by his co-partner, if committed in the capacity of partner, in 

 contracts relating to the co-partnership, made with innocent third 

 persons. Thus, if a partner purchase goods such as are used in the 

 business, and fraudulently convert them to his own use, the innocent 

 partner, provided there be no collusion between the seller and the 

 buyer, is liable for the price of the articles. But partners are not 

 liable for the wrongs of each other, excepting where one partner acts 

 as the servant of the rest, in which caso the whole of the partners are 

 liable to the consequences of any wrong he may do ; and they may be 

 proceeded against altogether, or one may be sued alone for the whole 

 of the damage done. One partner has no implied authority to bind 

 his co-partner by deed, yet if he execute a deed on behalf of the 

 firm, in the presence of and with the consent of hid co-partners, 

 it will bind the firm. It seems that a release by one of several 

 partners to a debtor of the firm binds the firm ; but if such release 

 be fraudulent, it will be set aside by a court of equity ; and even a 

 court of law will interfere to prevent a fraudulent release from being 

 pleaded. 



Where no time is mentioned in the deed of partnership for its com- 

 mencement, the liabilities of the firm will commence from the date of 

 the deed ; but in adventures, unless the parties have previously held 

 themselves out as partners, the liabilities commence from the time 

 fixed by the contract. An in-coming partner is not liable for debts 

 contracted before he joined the firm, but if he pay any of the old 

 debts or interest upon them, or does other special acts, he may render 

 himself liable in equity. In an adventure an in-coming partner is not 

 liable for the price of the goods. When an infant partner comes of 

 age, and does not disaffirm the partnership, if he wish to avoid being 

 liable for the future debts, he must give the creditors notice of hia 

 disalfirmance : but for the past contracts he cannot be sued unless he 

 promise to pay, or his ratification of the debts contracted in infancy 



