CHAPTER X. POWERS OF PARTNERS. Private partand transact by nerships act their partners. Scottish trasted. PRIVATE partnerships act and transact with the public or their own members as individuals; but being artificial persons, their intercourse is carried on by the intervention of agents. These agents are the partners. In England, where the separate persona of the English and firm is not recognised, the individual partners are regarded as the theories conagents of each other in matters relating to the common undertaking. Hence it follows, that whatever is done by the individual partners as partners, is in Scotland said to be done by them as agents for the company; but in England as agents for each other. In the great majority of cases this theoretical difference has no Practical practical effect, but instances do occur where its consequences are discernible. When any such require notice, they will be pointed out in the course of this inquiry. effects. Since the partnership acts and transacts by means of its part- Agency. ners, the law which regulates the powers of partners must be taken to be a branch of the law of principal and agent,—a proposition which holds true not only in Scotland, but in every other country where commercial jurisprudence has assumed a systematic form (a). According to the civilians, the partnership contract did not Civil law. ipso jure invest all the partners with the power of agency; but it was restricted to those of their number upon whom it was specially conferred, though its possession by the others might be inferred from facts and circumstances (). But in the English, Scottish, (a) Pothier Pand. lib. xvii. t. 2, art. 26 to 29; 1 Domat. B. i. t. 8, s. 4, art. 16; Dig. lib. xvii. t. 2, 1, 68; Story on Part. sec. 109; Story on Agency, s. 124, note (1); Pothier, de Société, n. 96; opinions of Lords Cranworth (b) Pothier, Domat., and Dig., ut antea. Agency is express or implied. Hence powers American, and modern French systems of jurisprudence, the partners are held to be præpositi negotiis societatis, without any express stipulation, and by the mere fact of entering into the partnership relation (a). Agency is either implied or express. If a man appoint another his agent to represent him in some line of trade, all such powers as are necessary to carry on the business in the ordinary way are presumed to be conferred; and the public are safe to deal with the agent within that sphere of action as if he were the principal. But beyond this there are many things which the principal may, for reasons of his own, choose to do, though they are neither necessary nor usual in his line of business. As to these, an agent has no implied powers, and the public are only in safety to transact with him when they are satisfied that he has express authority from his principal (b). This doctrine of agency forms part of the law of partnership, either implied and divides the powers of partners into two classes: 1. Implied or of partners are or express. common powers; and 2. Special or express powers;—the former being such as arise out of the mere fact of partnership; the latter being such as are specially conferred by the company. In the words of Mr Justice Story (c), each partner may enter into any contracts or engagements on behalf of the firm in the ordinary trade or business thereof; as, e.g., by buying or selling or pledg ing goods, or by paying or receiving or borrowing monies, or by drawing or negotiating or indorsing or accepting bills of exchange, promissory-notes, and cheques, and other negotiable securities, or by procuring insurances for the firm, or by doing any other acts which are incident or appropriate to such trade or business, according to the common course and usages thereof. So each partner may consign goods to an agent or factor for sale on account of the firm, and give instructions and orders relating to the sale.' (a) Lindley 192; Bisset 66; Stair i. 16, 4; Bankt. i. 22, 5 et seq.; Ersk. iii. 3, 25; Story on Part. ch. vii.; Code Civil, Act 1859; Pothier, de Société, No. 90 to No. 100; Pothier on Oblig. n. 83, 89. (b) Rawson and Co. v. Johnstone, 1833, 11 S. 1011; Steel and Co. v. Hoome and Co., 1834, 12 S. 810; Hampton v. Adam, 1839, 1 D. 500; Ferm v. Harrison, 1 Ross Le. Ca. 350, 3 T. R. 757; Whitehead v. Tuckett, 15 East 399, 3 Ross Le. Ca. 140; Robinsons v. Middleton, 1859, 21 D. 1089. (c) Part. sec. 102. In considering, therefore, whether any given power is implied or not, the real question is, Whether it is necessary for carrying on the business of the firm, whatever that may be, in the ordinary way, and in ordinary circumstances? Hence there is no implied power to do what, though not necessary, is convenient or beneficial, or what, though unusual, may be defended on the head of urgency. To do such things requires the authority of the principal, that is, in the case of partnership, of the whole or at least a working majority of the partners (a). arrangements. It is by no means uncommon for the members of a firm or co- Private partnery to make a private arrangement among themselves, whereby the institorial power is limited or apportioned among their number. A firm of five may, e.g., agree that two only shall have the power of management, or that three shall have the sole charge of one department and two of the other. Such private arrangements, though binding inter socios, are powerless in a question with the public while in ignorance of their existence, to avoid the operation of the implied agency (b). Thus a company of horse-dealers, who have agreed never to warrant a horse, are still effectually bound by the warranty of one of their number, because it is the general practice of the trade to give warranty (c). So a private arrangement by a mercantile firm not to grant bills or notes in the company name has been found no defence against the act of a partner who has transgressed the rule, in the case of a stranger who was not aware of its existence (d). So also a firm was (a) M Nair and Co. v. Gray, etc., 1803, Hume 753; Kennedy, 1814, 18 F. C. 122; Mattheson v. Fraser, 1820, Hume 758; Clarke v. Shepherd, 1821, 1 S. 179; Turnbull v. M'Kie, 1822, 1 S. 331; Johnston and Co. v. Phillips, 1822, 1 S. App. 244; Royal Bank of Scotland v. Greenock Bank, 1794, aff. 1797, 3 Paton's App. 595; Tupper v. Rowell and Co., 1858, 20 D. 758; Balfour's Trs. v. Edin. and Nor. Ra. Co., 1848, 10 D. 1240; Brettel v. Williams, 4 Ex. 630; Hawtayne v. Bourne, 7 M. and W. 595; ex parte Chippendale, 4 De G. M. and G. 19; Dickinson v. Valpy, 10 B. and C. 128, 3 Ross Le. Ca. 561; Crellin v. Brook, 14 M. and (b) See per Lord Tenterden in (c) 2 Barn. and Ald. 679. (d) Turnbull v. Mackie, 1822, 1 S. 331; Bruce and Co. v. Beat, Dec. 10, 1765, F. C., M. 4056, House of Lords, Effect of notice. Ratification. Questions inter socios. Peculiar doctrine of English law. held bound by the act of a partner who chose to interfere in a department of the business from which by arrangement he was excluded (a). But the partnership will not be bound when the creditor had express notice that the agency of the partner with whom he transacted was limited by private arrangement (b). And in like manner, a disclaimer by one partner of liability for future acts of his copartners has been held to constitute a withdrawal of agency in a question with those who received such notice (c). It must be observed, however, that even though a partner plainly exceed his authority, his acts may be rendered binding by ratification. And this does not require any formal procedure, but may be inferred from facts and circumstances (d)—e.g. subsequent knowledge of the act without repudiation (e). The consequences of unauthorized acts, when the question arises between the company and its own partners, are very different. If a partner transact with another of several partners, in relation to a matter as to which the agency of that partner has been withdrawn, the transaction is simply null as regards the company, because all the partners ought to know the rules of their own concern. If, however, it could be shown that the particular partner had been kept in ignorance of a rule which had been adopted by his copartners, the case might be different. Of course, any partner transgressing a known rule of the company is always liable to indemnify his fellows. It may here be proper to advert to a peculiarity in the law of England, which, in so far as we are aware, has never been recognised in this country. It appears to be settled law in England that 3 Dow 318 (1768); South Carolina (a) Morans v. Armstrong, Arm. (b) Miller v. Douglas, 1811, 16 F. C. 154; Minnet v. Whitsey, 5 Bro. P. C. 489; Vice v. Fleming, 1 Younge and Jerv. 227; ex parte Harris, 1 Mudd. 583; Hope v. Cust, 1 East 51; Sheriff v. Wilkes, 1 East 48; Ridley v. Taylor, 13 East 175, 3 Ross Le. Ca. 486-507; Swan v. Steele, 7 East 209, 3 Ross Le. Ca. 459. (c) Wyllis v. Dyson, 1 Stark. 164; Booth v. Quin, 7 Price 193; Galway v. Matthew, 1 Camp. 438, 3 Ross Le. Ca. 507. (d) Crellin v. Brook, 14 M. and W. 11; ex parte Bonbonus, 8 Ves. 540, 3 Ross Le. Ca. 470. (e) Bo'ness Canal Proprietors v. M'Alpine, 1791, Hume 751, M. 14572. one partner has no authority to bind his copartners by deed, unless he be expressly empowered to do so by another deed (a). And it has accordingly been held, that a bond for payment of duties on goods belonging to the partnership does not bind the firm, but only the partner by whom it has been executed in name of the firm (b). This peculiarity in the law of England has led to much practical inconvenience, and has in America been put an end to by an Act of Congress (c). The technical reason for its existence is the rule that all deeds. must be under seal; and as unincorporate companies have no common seal, nothing short of the adhibition of all the partners' seals, either to the deed itself or to another deed authorizing its execution, will satisfy the requirements of law. It has also been equitably defended on grounds of public policy, as being a safeguard against the exercise of too great power by individual partners. But, in truth, it seems to be one of the consequences of the nonrecognition of the quasi person of the company firm. If this were recognised, the company would either have its own seal, or each partner would be entitled to make use of his private seal, so as to bind the firm under his implied agency. So far as we are aware, the question has never been raised in Scotland, whether a deed-that is to say, a formal document in contradistinction to a bill or note-can be executed by one partner in the social name, so as to bind the firm. This mode of execution appears, however, to be not unusual in practice; and it would probably be held effectual, if the deed were in the line of the company business (d). obligation Where from the form of the instrument creating the obligation Onus of fixing it is doubtful whether the credit of the company, or merely that of against comthe signing partner as an individual, was intended to be pledged, pany. the onus of showing that the contract is binding on the company will in general lie on the party seeking to make it effectual. Thus, where the name of a firm was the name of a partner, and the business was carried on in his name only, the holder of a bill granted (c) Story on Partnership, sec. 119, (a) Harrison v. Jackson, 7 T. R. 207, 3 Ross Le. Ca. 557. (b) Metcalf v. Rycroft, 6 Maule and Selwyn 75; Story, Part. sec. 119; Lind. 223. note 1. (d) See Christie v. Reid, 1826, 4 S. 372. |