partners as dissolve. Though in general a discharge to the company is a release to Claims between the partners, yet this applies only to company obligations; and individuals. therefore an agreement between partners to grant 'full and competent discharges to each other, in full of all bonds, etc., as individuals or partners,' was held not to embrace a bond by one partner to another relating to a private transaction between themselves (a). It is often of great importance to partners that they should Right to have the power of dissolving the company when they find that it is not working profitably, that a further continuance may involve them in heavy liabilities, or that the realization and division of the property is of importance for their individual interests. Hence, in all partnerships at will, every partner may operate a dissolution when he thinks fit; and in partnerships for a term, there are certain cases in which, for the common good of all, the Court will interfere to wind up the concern (b). When, as is frequently the case, the contract of formation provides that a joint-stock company shall be dissolved on the occurrence of certain circumstances, such as loss of a certain amount of capital, any partner is entitled to raise an action of declarator for this purpose, when the contemplated event has taken place (c). A partner may lose the power of insisting in his rights by Loss of rights. delay amounting to acquiescence, or by doing something which involves ratification of the acts of his copartners. Thus when a contract of copartnery provided that, on balances being struck and subscribed at certain times, they should be 'probative,' it was held in an action between representatives of partners, raised nearly thirty years after the last doquet, that as the subscriptions were admitted, though not adhibited at the times fixed, the balances were obligatory (d). But the right of claiming an accounting between partners will not readily be held to have been passed from; so an executor of a deceased partner was held entitled, fifteen years after the company accounts had been adjusted and settled, to prove that a certain heritable bond which had not been included in the accounting had belonged to the copartnery, and to claim a share (a) Crawford v. M'Cormick, 1827, 2 W. and S. 569. (b) See Dissolution. (c) North British Bank v. Collins, 1850, 13 D. 349; aff. 1852, 15 D. (d) Maclaren or Law, etc., v. Lid- Compensation therein (a). It is very doubtful whether any other than the long prescription applies to questions of accounting inter socios (b). A partner may lose his right to share profits by having disclaimed the transaction out of which they arose (c). Acquiescence, when clearly established, will prevent partners from availing themselves of the provisions even of a special act. Thus where the partners of a canal company authorized a committee to raise money on the security of the rates, which the committee did, and expended the money on the canal, they were afterwards held barred by acquiescence from insisting that the rates should be applied primo loco in extending the canal in terms of their special act (d). In one case, where a partner was found liable in interest on unpaid instalments, no interest was allowed him on dividends which he had allowed to lie over without claiming them (e). The principle of this decision, apart from the special circumstances, admits however of grave doubts. Partners may plead compensation in mutual claims between and retention. themselves and their companies, and in some cases also in questions with the public. They have also a right of retention or lien on the partnership property, for the purpose of having it applied in payment of the debts of the firm; and also on the free assets, for having them applied in payment of what may be due the partners respectively, after deduction of what is due by them to the firm. Both these subjects will be afterwards fully considered (ƒ). Liability for company obligations. II. IN QUESTIONS WITH THE PUBLIC. Partners and shareholders are liable to the public for obligations constituted against the company; and where this liability is not limited by public authority, it extends to their whole means and estate (g). But it applies to company obligations only, and has of copartners. therefore nothing to do with the private debts of the copartners. Not for debts (a) Lister v. Sutor, 1811, aff. 1815, 6 Pat. App. 78. (b) See M'Inlay and Co. v. M‘Inlay and Co., 1851, 14 D. 162. (c) Pollock's Representatives v. Buchanan, 1824, 2 S. 581, and 1825, 4 S. 39; aff. 1826, 2 W. and S. 143. (d) Houston v. Lady Montgomerie, 1821, 1 S. 179. See also Dizons v. Monkland Canal Co., 1830, 8 S. 826: aff. 1831, 5 W. and S. 445. (e) Ballandene v. Glasgow Union Bank, 1839, 1 D. 1170. (f) P. 415 et seq.; p. 424 et seq. (g) See antea, pp. 286 et seq. Thus, when two parties engaged in a joint adventure for the purchase of real property, the title of which was taken to them jointly as pro indiviso proprietors, while the profits and burdens were to be shared equally between them, it was held that one of the partners who had made a super advance was preferable on the price of part of the property, which was sold to personal creditors of the other, although they had used inhibition (a). A person, however, cannot take advantage of this principle so as to escape from liability for debts already contracted, by entering into a partnership with conjunct and confident persons. In such cases the partnership is a mere blind. Thus, in a question with the poinding creditors of a husband, it was held that a contract of copartnery between his daughter, wife, and father-in-law, to carry on the business of a tavern formerly belonging to and carried on by himself, and an assignation by the father-in-law to the partners of an execution of poinding twenty years previously of the partnership effects, did not divest the husband of these effects in a question with creditors (b). When an obligation is undertaken by a company jointly with other persons, whether companies or individuals, the company, in a question with its co-obligants, is liable only for its individual pro rata share, and hence the liability of the individual partners is limited to that extent. Thus, when a bond for a cash-credit was signed by a company firm and the two individual partners, and also by another party and the principal for whose behoof the credit was granted, it was held, in a question of relief, that there were only two cautioners, and that the individual partners and the company were not liable each in a separate share, but together only in one share (c). In their dealings with the world, partners must conduct themselves with truthfulness and fairness. They must not represent the state of the concern as other than it really is, so as to induce strangers to become members (d), or to transact with it under (a) Keith v. Penn, 1840, 2 D. 633. See also Lockhartv. Ferrier, 1842,4D.1253; Pearson, Wilson, and Co. v. Brock, 1842, 4D. 1509; Lusk v. Elder, 1843, 5 D. 1279. (b) Breichan v. Muirhead, 1810, Hume 215. (c) Christie v. Reid, 1826, 4 S. 372; and see Erskine v. Cormack, 1842, 4 D. 1478. (d) Dobell v. Stevens, 3 B. and C. 623; Gerhard v. Bates, 2 E. and B. 476; Denton v. Great Nor. Ra. Co., 5 erroneous notions of its credit or prospects (a); neither must they represent their agency as more extensive than it really is, so as to lead the public to enter into transactions with them which are not binding on the firm, or which it will not ratify or adopt (b). Such proceedings render them justly liable in reparation and damages. What partners undertake to do, they must to the best of their ability perform; and therefore, if they assign their shares to third parties, neither they nor others in their right can treat the assignation as a nullity, because some of the conditions of transfer which might have been required in a question with the company have not been complied with (c). On the other hand, if On the other hand, if persons hold themselves out as being partners, by statements, by acts, or even in some instances by significant silence, and thereby lead the public to contract with the company on the faith of their credit, they become liable for its obligations, whether they be actually partners or not (d). E. and B. 860; Watson v. Charlemont, 12 Q. B. 856. and 332. (a) See p. 334. (b) See p. 331. (c) See Hill v. Lindsay, 1847, 10 D. 78; Macandrew v. Robertson, 1828, 6 S. 950; Drummond v. Hunter, 1834, 12 S. 620. See antea, pp. 142-3. (d) See pp. 57, 52-3-4. CHAPTER III RIGHTS AND OBLIGATIONS OF COMPANIES. observations. ACCORDING to the laws both of Scotland and England, corpora- General RIGHTS AND OBLIGATIONS IN RELATION TO FORMATION. an agreement to enter into When two or more persons have agreed to enter into partner- Enforcement of ship, or where a firm already existing has agreed to receive a stranger as a new partner, an action ad factum præstandum would not lie in Scotland, nor, unless in some exceptional cases, would a (a) See 'Actions between Partners and the Company.' partnership is generally incompetent. |