of business, and the receiver of the guarantee was ignorant of its being a private transaction of the partner's. In such a case, the firm, it is thought, would be bound, but of course with indemnity against the offending member (a). A letter of guarantee by the managing partner of a company for behoof of one of the partners, 'to the extent of the value of the stock which he may have in our house, subject to the liquidation of our debts and engagements,' has been held valid pro tanto against the company (b). tion. Of course every guarantee irregularly or improperly granted by Homologapartners may be rendered binding by homologation on the part of the company (c). And it has been thought that power to guarantee in a particular instance may be safely inferred, where in a previous course of dealing similar guarantees had been given in the partnership name with the privity of all the partners (d). between Proper guarantee must, in relation to this question, be distin- Difference guished from granting, accepting, or indorsing bills and notes. guaranteeing and accepting Thus it has been held in England, that though a partner has no bills, etc. implied power to bind the firm by guaranteeing bills, except by drawing and indorsing them (e), a promise made by a partner that the firm will put a party in funds to meet a partnership bill when due, in order to induce him to accept it, is not a guarantee transaction, and will be given effect to (f). And it has been held that a letter of guarantee by a managing partner under the company firm, of the bill of a partner to the extent of his share in the stock, was binding on the firm (g). A person carrying on business under an ostensible firm, of Sole partner. which he is the sole partner, binds himself by a guarantee in the company name (h). Directors, managers, and other officials of joint-stock companies, Directors, etc. being special agents, their powers to bind the company cannot be (a) See Sh. Bell's Com. 219. (b) Buchanan v. Dennistoun, 1835, 13 S. 841. (c) Robertson and Co. v. Galloway and Reid, 1821, 1 S. 196; Sandilands v. Marsh, 2 B. and A. 673; Buchanan Dennistoun and Co., 1831, 9 S. V. 557; Paterson v. Calder, 1808, 14 F. C. 235. (d) Per Lord Ellenborough in Dun- (e) Duncan v. Lowndes, supra. (h) Rose v. Moore, 1833, 11 S. 344. Personal liability. stretched by mere implication. It has accordingly been held in England, that directors have no implied power to bind the company by granting indemnities (bonds of relief) (a). But it must be observed, that directors as well as partners giving guarantees or indemnities as on behalf of the company, are held personally bound, where their acts do not bind the company (b). LENDING. In companies established for the express purpose of lending money, as e.g. pawnbroking companies, every partner is necessarily presumed to have this power; and the same will also hold true in the case of banking and insurance companies, when their business is known to be carried on in this manner. But in partnerships, where lending money does not fall under the scope of the ordinary business, it is probable that such a power would not be held to be implied. In no case would a partner be entitled to lend partnership funds as a favour to the borrower, and on the understanding that no interest was to be paid. It has never been decided, so far as the author is aware, either in this country or in England, whether a partner is entitled to lend the partnership funds in such a way as to prevent them being immediately available for the requirements of the business; as, for example, to invest them for a term on heritable security, on debentures, or the like. Reasoning from analogy, it should seem that no such power is implied in ordinary partnerships; for, if it were, the whole purposes of the copartnery might at any time be defeated. Besides, this would be an application of the company funds never contemplated, and probably entirely at variance with the objects of the contract; nor could it be defended on the ground of urgency. Letting. LETTING AND HIRING. As in the preceding case of loan, this power of letting will be implied where such transactions form part of the ordinary business (a) Ridley v. Plymouth Grinding Co., 2 Exch. 711; Kirk v. Bell, 16 Q. B. 290. (b) Haddon v. Ayers, 5 E. Jur. N. S. 408, Q. B.; Barker v. Allan, 5 H. and N. 61. of the firm e.g. in the case of a firm of horse-jobbers or liverystable men. But it is very doubtful whether such a power would be implied, when letting for hire forms no part of the company business (a). Hiring would seem to stand in a different position. It must Hiring. often be of essential importance to the business of the firm to obtain the assistance of professional persons, of skilled artisans, or even of ordinary servants, and in like manner to secure the use of ships, conveyances, or articles of machinery. Nor are the public in a position to judge of when such assistance or use is necessary. It would therefore seem that, except in extreme cases, every partner must be held to have the implied power of hiring for the firm. Thus it has been decided that one partner may hire servants for partnership purposes (U), and the same power was held to exist in the committee of a trading association (c), and one partner may bind the firm by chartering a ship on its behalf (d). Where, however, a coach office was taken by a partner on his own credit, and was not used entirely for company purposes, the firm was not held liable for the rent (e). Though a trading firm should be reduced by death or otherwise to one partner, a contract of service entered into with the firm does not terminate, provided the surviving partner carries on the business (ƒ). INSURANCE. Mercantile agency by itself does not imply the power of binding the principal by insurance, nor has a co-owner, as such, power to bind the other co-owners by effecting an insurance in their name (g). Yet it has been held in England that a partner, as distinguished from a part-owner, may, without special authority from the others, bind them by insurances ordered in the name and on account of the firm (a). If one partner insures for the company, he would seem to have the power of abandonment for the company (6). From the reason of the thing, the same rule would seem to apply to managers and boards of directors. In the cases referred to, the insurance was effected for behoof of the company or firm; but it may be asked whether partnership property may be insured for behoof of and in the name of one partner. As to this, Kent, C. J., said: "There can be no doubt that a partner has such interest in the entirety of the cargo (belonging to the firm) as to enable him separately to insure it, and that an averment that he had an interest in the property to the amount of the insurance is supported by proof of a partnership interest to that amount' (c). It has been doubted whether a partner in a particular adventure could insure the whole property in his own name. Obvious reasons might be suggested against the policy of conceding such a power. CHAPTER XIII. CONSTITUTION OF COMPANY OBLIGATIONS. company COMPANIES, partnerships, and firms, being according to the law Nature of of Scotland quasi persons, are capable of incurring obligations both obligations. to the public and their own members; and these must be regarded as the proper obligations of the association, viewed as a separate person, and not as the joint and several obligations of the partners. Such obligations, when validly contracted, do indeed infer liability against the partners individually; but, according to the theory of Scotch law, this arises not from the partners being direct obligants, but by reason of their being bound singuli in solidum as sureties for the company. The company being, however, an artificial and not a natural person, incurs obligations by means of its agents, who are either the partners of a firm, or the managers or other officials of a company. In considering, therefore, the law applicable to the constitution of company obligations, regard must always be had to the doctrines of agency, of which the principles now about to be considered are merely a particular adaptation. Peculiarities arising from element of agency. obligations. Obligations, viewed in reference to their origin or constitution, Origin of were divided by the civilians into two great classes: 1. Obligations arising ex contractu, or quasi ex contractu; and 2. Obligations arising ex delicto, or quasi ex delicto. This division may with advantage be followed in discussing this branch of the subject. I. OBLIGATIONS ARISING FROM CONTRACT AND QUASI CONTRACT. Contract and quasi contract. principles. An obligation arising from contract or quasi contract is an General engagement or undertaking to do or refrain from doing something, and vests in the obligee a right to demand performance. To a Q |