CHAPTER IX.

PARTNERSHIP DEEDS.

I. PRELIMINARY OBSERVATIONS.

II. PRACTICAL DIRECTIONS FOR PREPARING THE PARTNERSHIP DEED,

III. How DEED SHOULD BE PREPARED WHERE A THIRD PARTY IS ADMITTED TO A PARTNERSHIP FIRM.

IV. EXTENSION OF A TERM OF PARTNERSHIP.

V. DISSOLUTION OF PARTNERSHIP.

VI. ASSIGNMENTS OF PARTNERSHIP EFFECTS UPON DISSOLUTION OF PARTNERSHIP.

VII. SECURITIES AND INDEMNITIES.

VIII. NOTICES RELATING TO PARTNERSHIPS.

I. PRELIMINARY OBSERVATIONS.

PARTNERSHIP deeds, like marriage settlements, are sometimes preceded by articles containing the general heads of the terms of the partnership, which are afterwards intended to be set out more fully in the partnership deed. In penning the articles, the terms upon which the partnership is to be carried on should be stated in a clear and concise manner; nothing ought to be omitted which the partnership deed is intended to embrace; and every expression which can possibly bear an equivocal construction ought most studiously to be avoided.

Usual terms contained in a partnership deed.]—The usual terms of a partnership deed consist of the agreement to enter

into partnership; the period for which such partnership is to be carried on; the style of the firm, nature of the business, and the place or places at which it is to be transacted; the capital employed, and the proportions in which it is to be advanced; how the profits and losses are to be shared and borne between the parties; the mode in which the business is to be conducted; allowances for private expenses; how the partners are to conduct themselves in the management of the concern; how the accounts are to be kept and adjusted; how the partnership is to be dissolved; the grounds on which any partner may be expelled from the partnership; and the general winding up and adjustment of the accounts upon the determination of the partnership.

Instruments containing terms of partnership.]-The mere articles which contain the heads of minutes that are intended to be afterwards reduced into proper technical form, are usually entered into by an agreement under hand only, upon a common agreement stamp ; but the instrument which contains the formal concluded terms of the partnership, should be a deed under the hands and seals of all the parties, and duly stamped accordingly with a common deed stamp: (see ante, p. 625.)

II. PRACTICAL DIRECTIONS FOR PREPARING A PARTNERSHIP

DEED.

As to the date and parties.]—A partnership deed, like other deeds of settlement, commences with the date and names and description of the parties, and every one of the partners ought to concur therein: (see the forms 3 Con. Prec., Part XI., Nos. I. to XI. inclusive, pp. 162, et seq., 2nd edit.)

Recitals.]-Recitals are often omittted altogether from partnership deeds, and lengthy recitals are rarely inserted. It is, however, a common practice to insert a short recital that the parties have agreed to become partners together: (see the form 3 Con. Prec., Part. XI., Ño. II., clause 2, p. 180, 2nd edit.); as also for the purpose of showing the nature of the business, the time it has existed, or the manner in which it had been previously conducted: (id. ib. clause A, in notis, p. 180.) Sometimes, also, recitals are inserted for the purpose of showing the title to the premises in which the business is intended to be carried on; as where one of the parties holds such premises either under a lease, or as the absolute owner; as also for the purpose of

showing that he has expended money upon such premises; or to show that money has been expended in erecting machinery or other improvements. So where a partnership is entered into between two brewers, who are generally also the proprietors of public-houses, it will be proper to state those facts in the recitals: (see the form 3 Con. Prec., Part XI., No. III., clause A, in notis, p. 194, 2nd edit.) Again, also, where partnership is entered into for the purpose of working a patent, it will be correct to recite when, how, and where such patent has been obtained (see the forms 3 Con. Prec., Part XI., No. X. clauses 2, and A, B, and C, in notis, pp. 230, 240, 2nd edit.), as also at whose expense such patent has been procured: (id. ib. clause 4, p. 241.) So, where implements and machinery, the property of some one or more of the partners only, are intended to be brought into the partnership concern, it is the common practice to show by the recitals of what they consist; and if, as it ought always to be, their value has been previously ascertained and determined, the amount of such valuation ought also to be set forth (see the form 3 Con. Prec., Part XI., No., III., clause 4, pp. 194, 195, 2nd edit.)

Agreement for partnership.]—In the testatum clause or agreement for partnership, it is usually witnessed that the parties, in consideration of the mutual trust and confidence they repose in each other, mutually bind themselves and their representatives to enter into partnership upon the terms thereinafter specified and set forth: (see the form 3 Con. Prec., Part XI., No. I., clause 2, p. 163, 2nd edit.) If a premium is paid as a consideration for the partnership, the amount of such premium should be set out in the testatum clause, and the payment and receipt duly acknowledged in the same manner as in an ordinary purchase deed: (see the clause 3 Con. Prec., Part XI., No. II., clause C, in notis, p. 181, 2nd edit.; ib. No. VIII., clause 3, p. 227.)

Commencement and duration of partnership.]—The time of the commencement and duration of the partnership ought always to be stated in express terms; if the commencement is omitted to be stated, it will be construed to begin from the date of the articles, and parol evidence is inadmissible to show that it was intended to commence at any future period; and unless the time of duration is fixed, it will be in the power of either of the partners to dissolve the partnership at any time: (Henry v. Birch, 9 Ves. 537.) Still, it is by no means unusual to provide that either

party may determine the partnership upon giving the other some previous reasonable notice (as six calendar months for instance) of his intention to dissolve the same: (see the form 3 Con. Prec., Part X., No. I., clause 22, p. 171, 2nd edit.) It is also a common practice to qualify the duration of the term of partnership to the lifetime of the parties (see the form 3 Con. Prec., Part X., No. II., clause 4, p. 181, 2nd edit.), although this is not necessary to produce that effect, because, where no precise time is fixed, the partnership will be dissolved by the death of any of the partners, and will therefore be determined by that event in all cases where there is no express stipulation to the contrary: (Coll. on Partnership, 114.)

Style of firm.]-The style of the firm should be set out in the articles of partnership deed in precisely the same terms it is intended to be described in all transactions connected with the partnership affairs, and the partners must be careful to act accordingly; for where members of a partnership covenant that the firm shall be carried on under a specified style; as that the style shall be A. B. & Co., it will be a breach of covenant for A. to sign those instruments to which the covenant refers in the name of A. & Co.; nor will it be a less breach of that covenant for B. to sign his own name, adding for self and partners: (Coll. Part. 114; and see 1 Jac. & Walk. 268.)

Nature of the business.-The nature of the trade, business, or profession should be accurately set forth, and this is particularly important where any of the partners carry on any other kind of trade or business besides that which is intended to be embraced by the partnership.

Place of business.]-It is generally the practice to state the place where the partnership business is to be carried on; and, in addition to this, it is very common to stipulate that the business shall be carried on upon some particular premises: but generally with a qualification, limiting the period it shall be so carried on there to so long a time as the parties shall mutually agree upon, or that it shall be carried on at the appointed place, or at such other place or places, as the said partners shall from time to time mutually agree upon (see the form 3 Con. Prec., Part X., No. III., clause 7, p. 195, 2nd edit.), and where the premises belong to any one or more of the partners individually, it is also common to provide that upon the determination of the

partnership, the possession shall be delivered up to such partners or other persons to whom the same shall so belong accordingly: (see the form 3 Con. Prec., Part XI., No. II., clause 5, p. 181, 2nd edit.)

Common practice to associate style of firm and place of business together in the same clause.]-It is a common practice to associate the style of the firm, and the place where the business is to be carried on both together in the same clause (see the forms 3 Con. Prec., Part XI., No. I., clause 4, p. 163, 2nd edit.; ib. No. II., clause 5, p. 181; ib. No. III., clause 7, p. 195), but sometimes they are set out in distinct and separate clauses: (see 3 Con. Prec., Part XI., No. IX., clauses 4 and 5 p. 233, 2nd edit.)

Capital.]-The manner and proportions in which the capital is to be advanced should be distinctly set out; and it should also be stated that each of the partners shall stand possessed of the capital stock of the partnership, in proportion to the amount of capital he has so advanced; and be considered as a creditor to that amount, and be allowed interest thereon accordingly: (see the form 3 Con. Prec., Part XI., No. I., clause 5, pp. 163, 164, 2nd edit.) In addition to this, it is a very common practice to stipulate that if either of the partners shall at any time advance any sums of money for the benefit of the partnership beyond the proportion he is bound to contribute, then the joint stock of the partnership should be liable to repay the same and interest before any other division of the profits shall be made : (see the form 3 Con. Prec., Part XI., No. II., clause 8, p. 182, 2nd edit.)

Where stock in trade, machinery, &c., form part of the capital.]-Where stock in trade, machinery, or the goodwill of a business are to form part of the capital, the value must be previously ascertained and determined, and the amount of such valuation be treated as so much amount of capital: (see the form 3 Con. Prec., Part XI., No. III., clause 8, pp. 195, 196, 2nd edit.; ib. No. IV., clause 4, p. 206.)

As to payment of capital into bankers hands.]—It is also common to provide that the capital brought into the partnership shall be paid into the hands of the bankers of the partnership, to the credit of the partnership firm; from whence no portion of it is to be afterwards withdrawn with