de facto receive the entire benefit of the transaction, the creditor would seem to have no recourse except against the partner on whose individual credit he had contracted (a).

3. If a partner contract avowedly on behalf of the firm, and it afterwards turns out that the firm is not liable, in respect that he had no authority, either express or implied, to bind it by such a transaction, he will be liable to indemnify the creditor for whatever loss may have been sustained, whether it may be attributable to fraud or an innocent mistake (b).

of fact.

Such appear to be the principles which the law will apply in Questions cases of the kind under consideration. But it may be observed, that the question, whether a man transacted as an individual or as a partner, and whether he disclosed or concealed the names of his copartners, and the like, are questions of fact, are aided (at least in modern practice) by no presumptions of law, and are properly within the province of a jury or its equivalents to determine (c).

difference.

strangers.

In the common case of principal and agent, the powers of the Occasional latter are in general express; but in the case of partnerships the powers of the partners are for the most part left to be implied from the nature of the business. This circumstance gives rise to specialties, which it will be necessary to examine somewhat in detail. In the absence of notice to the contrary, the public are entitled As regards to deal with every known partner of a firm on the assumption that he is vested with such powers as are necessary or usual in carrying on the business in the usual way. The consequences of this may be stated as follows (d): If a stranger bona fide contracts with a partner acting ostensibly for the firm, in a matter which may fairly be presumed to be within the implied agency, the company will be bound, though in point of fact the partner may have had no such authority, or may have been expressly prohibited from transacting for the company in the matter in question (e). But if, on the other

(a) Emly v. Lye, 15 East 6, 3 Ross L. C. 552; Crum and Co. v. M‘Lean, 1858, 20 D. 751; Tupper and Carr v. Rowell, 1858, 20 D. 758.

(b) Finlayson v. Braidbar Quarry Co., 1864, Macph. 1297; ex parte Agace, 2 Cox 312; Lloyd v. Freshfield, 9 Dowl. and Ry. 19.

(c) Millar v. Mitchell, 1860, 22 D. 833.

(d) See Powers of Partners.

(e) M'Nair and Co. v. Gray, etc., 1803, Hume 753; Kennedy, 1814, 18 F. C. 122; Miller v. Douglas, 1811, 16 F. C. 154; Blair v. Bryson, 1835, 13 S. 901; M'Leod v. Tosh, 1836, 14 S. 1058.

Effects of

notice.

Powers never presumed.

Fraud.

hand, the stranger knows, or by ordinary reflection might know, that the partner was overstepping his powers, the firm will incur no liability (a). The partners may indeed, by arrangement among themselves, limit the sphere of this implied agency in any way they choose; and such provisions or regulations will receive effect inter socios, so as to found indemnity against the partner who transgresses them (b); but they will have no effect whatever in a question with the public, unless it can be shown that they were within the knowledge of the person who transacted with the partner by whom they were infringed (c).

If, however, it can be shown that the party had notice of the restriction, then the firm will not be bound (d). This notice may be by circular-letters to the correspondents of the firm (e), or by advertisement in the public prints; but in the last case there must be evidence that the notice reached the creditor (ƒ). It is not necessary, however, that notice shall be proved scripto. If knowledge of the restriction can in any way be fixed against the creditor, it puts him in malá fide, and estops him from proceeding against the firm (g).

There are some powers which, from the nature of the company business, the law will not presume to appertain to the partners, and which a little consideration might satisfy any one the partners were not likely to possess, e.g. power to guarantee strangers (h), to sell real property (i), to submit to arbitration (k), etc. If a third party contract with a partner in matters of this kind he will have no claim against the firm, unless he can prove that such power actually existed, or that by former acts and deeds of the firm he had been led to believe in its existence.

Cases of gross fraud too often occur, in which it cannot be said that a partner has exceeded the limits of his agency, but rather

purposes

for which it was never intended.

that he has exercised it for
Thus a partner may order goods on the credit of the firm, and when
received apply them to his own private purposes (a).
He may
accept a bill in the company's name, and having discounted it put
the proceeds in his own pocket (b). In these and similar cases the
company is liable; for the acts done were plainly within the implied
agency, and the party with whom the transaction took place was
under no obligation to see that its proceeds were properly applied.

There are, however, some transactions which, though they fall obvious fraud. within the limits of implied agency, are of such a nature that they carry fraud, or at least grave suspicion, on their very face. Thus, if a partner grants a note or accepts a bill in the company name, and afterwards tenders it in payment of his private debt, the creditor may fairly presume fraud, if he is aware that the signature of the firm is in the handwriting of his debtor. And accordingly, in such circumstances, the creditor has been found not entitled to recover against the firm. But as a partner may be a creditor of the firm, the mere fact of his tendering a bill accepted in the company name, in payment of his own debt, does not, in the absence of other circumstances, establish fraud; and therefore the firm will in such a case be bound, if the creditor can prove that he acted in perfect bona fide (c).

remarks.

In conclusion, it may be observed, that while the rules as to General what infers and what excludes company liability for the unauthorized acts of its partners or other agents are as above detailed, their practical application often depends on a mere balance of circumstances more fitted for the consideration of a jury than any other mode of decision (d). But in every case it is well for partners to

(a) Bond v. Gibson, 1 Camp. 185. (b) Lane v. Williams, 2 Vern. 277; Ridley v. Taylor, 13 East 175, 3 Ross L. C. 492.

(c) Wells v. Masterman, 2 Esp. N. P. Ca. 730; Miller v. Douglas, 1811, 16 F. C. 154, 3 Ross Lead. Ca. 500; Green v. Deakin, 2 Stark. 347. See also Hope v. Cust, 1 East 51, 3 Ross L. C. 486; ex parte Bonbonus, 8 Ves. jun. 540, 3 Ross L. C. 470; Johnston and Sharp v. Phillips, 1822, 1 S. App. 244; Wallace v. Campbell,

1821, 2 S. App. 467; Turnbull v.
Mackie, 1822, 1 S. 331; Willet v.
Chambers, 2 Cowp. 814, 3 Ross L.
C. 476. See an instance where a bill
granted in name of a company by a
manager and a majority of the part-
ners was found not binding on the
company, by reason of its having been
granted for a private debt, Proudfoot
v. Lindsay, 1825, 3 S. 310.

(d) Turnbull v. Mackie, 1822, 1 S.
331; Millar v. Mitchell, 1860, 22 D.
833.

Ratification.

bear in mind, that to entitle the company of which they are members to the protection which the law gives against unauthorized acts, it is always essential that it shall have acted with perfect fairness and good faith. Nothing must have been done which could deceive the contracting party into the belief that the transaction had been adopted by the company, or could induce him to delay proceeding against the partner by whom he had been misled. And in general it seems only fair, that as soon as the transaction comes to the knowledge of the company, intimation of its being unauthorized should be made to the opposite party (a).

When a contract is invalid against the company by reason of the transaction having been ultra vires of the partner with whom it was entered into, and its having been known to be so by the party with whom the contract was made, it may generally be validated by rei interventus, homologation, or adoption on the part of the company (b). But it must always be considered whether the particular transaction be one within the limits of the company's powers. If it be not, no ratification however formal by any number of partners less than the whole will validate the transaction; for what a majority could not do originally, they cannot ratify by any subsequent act (c). If the transaction lie within the scope of the company's sphere of action, it will be validated by the ratification of any partner possessing the necessary agency, express or implied, or by its proceeds being in rem versam of the company, whether this have taken place by a partner having the requisite agency or not; for the mere fact that the firm has allowed the proceeds of the transaction to be so applied, is the best proof of its ratification (d). If again the transaction is invalid, as being beyond the company's sphere of action, the company, if they have taken the benefit of it, will be liable to indemnify the opposite party, and to restore him as far as possible to the position he occupied before entering into the transaction (e).

As to ratification by companies of acts done by their directors or other officials, see 'Powers of Directors.'

Damages for Non-fulfilment of Contracts.

quasi contracts.

and conse

If a firm or company fail to fulfil an obligation arising from con- Contracts or tract or quasi contract, but without fraud or fault, it becomes liable in damages to the creditor for that which he has directly lost or has been prevented from gaining, coupled with the costs of the proceedings for obtaining reparation (a). The expression without fraud or Damage, direct fault' is here used to mark the distinction between liability for inno- quential. cent breach of contract and liability for delict. The first measures the reparation by the direct damage merely; the second by the highest advantage which, but for the delict, would have been enjoyed. It is sometimes difficult to determine what is exactly meant by the expression direct damage, as opposed to that which is collateral or consequential. A few observations on this subject may not be out of place. In pecuniary obligations the damages take the form of interest; Loss of and when failure to implement has not arisen from delict, the interest is not to be measured by what the creditor might have turned out of the principal by embarking it in his trade or in some fortunate speculation, but at the rate of 5 per cent., which is still regarded as in such cases the legal rate of interest (b). Where, however, a special contract has been made to deliver a sum of money against a particular day in order to be employed in a particular manner, it seems fair that the company should be held liable in interest commensurate with the damages which in similar circumstances would arise from the non-delivery of goods.

interest.

practice.

When a breach of contract takes place from the non-delivery English of goods, it has been the custom in England to award damages according to the price at or about the day when the goods were contracted to be delivered; while, when the breach of contract arises from failure to return stock lent, the damages have been assessed at a higher rate, because in this case the borrower has the lender's goods in his hands (c).

(a) Stair i. 17, 16; Ersk. iii. 75, 86. See Smith on Reparation. It is essential, however, in all such cases, that the stipulation for breach of which damage is claimed plainly appears ex facie of the contract. Walker

v. Caledonian Ra. Co., 1858, 20 D.
1102.

(b) See Smith, 1857, 19 D. 267.
(c) Leigh, 8 Taunt. 540, Bell's Ill.
42; Gainsford, 2 Barn. and Cress.
624, do. 42.