BOOK III. RIGHTS AND OBLIGATIONS OF CHAPTER I. PRELIMINARY. rights and THE rights and obligations of partners or shareholders, and of firms Division of or public companies, are of two kinds—those inter socios, and those obligations. with the world. They are likewise distinguishable into two classes with reference to their nature and origin: one class arising out of the very nature of the partnership relation, and being recognised and enforced as such by the common law; the other emanating directly from public authority, destined for some special purpose, and attaching to some particular association. When men associate themselves into private firms or public companies for the acquisition of mercantile gain, their object is to obtain the largest possible return for their contributions, at the least possible risk of liability or loss. This principle infers the existence of certain rights and corresponding obligations inter socios, of which it forms at once the ground and the measure; and if steadily kept in view, it affords a ready means of ascertaining what these rights and obligations are, and in what manner they are to be exercised and enforced. Thus, to share in the management, and to have free access to the books of the company, to call his associates to account for their intromissions, to check their malversation, to terminate the partnership relation, and to apply for judicial aid to Y Principle of obligations rights and inter socios. In corporations. Rights and obligations in public. protect his interests if other measures fail, are rights so necessary to secure a partner in his due share of profits and to protect him against loss or absolute ruin, that it is very plain no partnership which did not confer these rights on its members in some form or other, would ever be entered into by a man of ordinary prudence. But since, on the other hand, the success of the common undertaking, and consequently the profits of each member, depend in a most important degree on the mode in which these rights are exercised, and since they are capable of being abused so as to defeat the very ends they were intended to serve, the same principle points out the mode of their exercise, and requires that they shall be used with discretion, conformably to the nature of the undertaking, in accordance with the provisions of the contract, and in such a way as not to injure or compromise the general welfare. In unincorporated associations these rights and obligations are regulated by the common law, which is the ordinary form in which the principle above enunciated finds expression; but independently of this, they generally form the subject of special provisions in the company contract, defining the manner in which they are to be exercised conformably with the nature, purpose, and constitution of the association. As we shall afterwards see, they are also sometimes limited both as to extent and mode of exercise; but when this is the case, the Courts will not enforce such limitations on the implied rights of a partner so as to afford a cover for fraud or to defeat the ends of the partnership. In corporations, the rights and obligations of the members are almost always regulated by the charter or special act; but where the incorporating instrument is silent, they fall to be determined in all respects as in unincorporated associations, except in regard to the power of dissolution. The rights and obligations of companies and their members in relation to the relation to the public are determined by the same principles and rules of the common law as regulate the dealings of individuals with each other; but in order to apply these properly, it must be borne in mind, that companies being possessed of a separate person, their rights and obligations are in many respects distinct from those of their members; and that certain rights and obligations attach to partners or shareholders as such, which but for this character they would not possess. No conventional provisions in the instrument of formation, extending, limiting, or modifying the rights and obligations of unincorporated companies or their members, are of the smallest avail in questions with the world; the publicity necessary to form the basis of a contract to that effect being wanting. To give effect to such provisions, they must be shown to have been known and assented to by the party who is sought to be brought under their operation. The privileges, however, of companies and their members may be extended, and their liabilities restricted in relation to the public, to any extent, by the action of the Legislature, and within certain limits by that of the Crown. Special acts, charters, and registration, are the familiar modes by which these ends are attained. But it must be observed, that as such privileges and exemptions are encroachments on the common law, and consequently on the general rights of the public, they will be strictly construed, and rather against than in favour of the corporation. privileges and powers. When a company is vested with special powers or privileges by Exclusive public authority, certain corresponding obligations are necessarily aggressive imposed upon it, either expressly or by implication; for as such powers and privileges are encroachments on the rights of the public at large, they are never conferred except for the purpose of benefiting the public in some special and important manner. and defend. In order to make good their rights, and to maintain their inte- Rights to sue rests, partners and companies have the right of appearing judicially, and of suing and defending, not only in questions with the public, but also in matters arising inter socios. In this respect the laws of England as applicable to private firms and unincorporated associations are highly defective, and often powerless to attain the ends of justice; but from the recognition of the separate person, difficulties of a similar kind seldom present themselves in this country, though they may occasionally be found. In both countries, the rights and privileges possessed by corporations either at common law or by special statute prevent the occurrence of such anomalies. In proceeding with the examination of the various matters which form the subject of the present book, we shall begin by treating generally of the rights and obligations of partners and shareholders in questions inter socios, and in relation to the world; we shall then consider the rights and obligations of companies in reference to their members and to the public; and having thus given a general Mode of treat ing the subject. view of the subject, we shall proceed to examine more particularly and in detail, such rights and obligations as well as such doctrines as from their importance demand special attention. In conclusion, we shall endeavour to explain the doctrines applicable to exclusive privileges and aggressive powers, and examine the statutory provi sions upon this subject furnished by the Consolidation Acts. The rights of companies and their members to sue and be sued, and the legal measures by which their rights and obligations may be enforced, will form the subject-matter of the following book. CHAPTER II. GENERAL VIEW OF THE RIGHTS AND OBLIGATIONS OF subject. As we have already seen, the rights and obligations of partners or Division of shareholders are twofold, viz. those inter socios, and those in a question with the public. We shall proceed to consider them in that order. I. INTER SOCIOS. The principle which lies at the root of all such rights and obligations, and which must in dubio regulate and define them, is, as we have already stated, the following: that as persons associating for the purpose of mercantile gain have for their object to obtain the largest possible return for their contributions, at the least possible risk of loss or liability, they must be held to possess, in relation to each other, all the rights, and to be subject to all the obligations, which the attainment of that object necessarily implies. The manner in which this principle finds expression in the rules of the common law, in statutory enactments, and in conventional arrangements or usages, will be explained and illustrated in the present chapter, and generally throughout the remainder of the present book. adherence to One of the most important rights which a partner can possess, Right to compel and one indeed which in itself may be said to embrace all the contract of others, is that of insisting that the agreed upon conditions and formation. provisions of the contract, whatever these may be, shall be rigidly adhered to and faithfully carried out. It consequently forms a |