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proposed.

endeavoured to meet the difficulty by fixing on certain elements, the presence or absence of which has been supposed to furnish a test of the partnership relation. Sharing of profits, contribution to Various tests losses, mutual agency, etc., have been all assumed as tests of this kind, and have been more or less in vogue at different periods. When judiciously applied, they are undoubtedly of excellent use in the interpretation of evidence; but their application is often accompanied with great embarrassment, and they cannot be taken as unfailing tests.

not a simple

contract.

The reason of this becomes apparent when the nature of part- Partnership nership is considered. It is not a simple contract, but one which combines in itself the principles of many contracts, e.g. agency, suretyship, guarantee, co-ownership, loan, etc., all of them forming elements which receive more or less prominence, according to the nature and purposes for which the society is formed. Now, sharing of profits, contribution to losses, agency express or implied, are elements which afford strong indications of the partnership relation, and in certain circumstances, and in the absence of proof to the contrary, often irresistibly lead to that conclusion. Yet, taken separately, they may frequently be nothing more than consequences of other contracts; e.g. loan, suretyship, simple mandate, and the like. In short, while they are consequences of partnership, they are also consequences of other contracts; and whether they evidence the one or the other, must be judged of from the extent to which they are in combination, and the complexion of the surrounding circumstances. We must not therefore be surprised, if, in reviewing the decisions on this important subject, we find dicta seemingly, and sometimes actually, at variance with each other; nor should we look so much for absolute rules, as for indications of how evidence is most likely to be dealt with.

In prosecuting our inquiries into this branch of the subject, we shall consider first, the constitution of partnership properly so called, i.e. of the contract whereby the parties to it are on the one hand entitled to the rights, and on the other incur the liabilities of partners. We shall then proceed to examine those cases in which they who are either not partners, or have not been proved to be such, are nevertheless subjected in liability to the public as though they were. And

lastly, we shall endeavour to point out the differences between formed and contemplated partnership.

Evidenced by

right to share

CONSTITUTION OF PARTNERSHIP PROPER.

The contract of partnership is usually said to infer a community profit and loss. of interest in the profits and losses, and in the capital of the concern, and also a community of right to share in the management. Cases, however (as we shall afterwards see), are of continual occurrence, in which all of those elements are not found in combination; but yet in which true partnership has been undoubtedly created. A more correct notion of the contract will be obtained if we take the following as a fundamental principle, that wherever persons agree to carry on a certain trade, business, or undertaking of a mercantile kind, on condition of sharing the profits and losses arising therefrom, they constitute amongst themselves the contract and relation of partnership, and that without the necessity of making use of the term partnership or its equivalents (a).

Right to share profits.

But when the fact of partnership is disputed, the evidence of a contract to share profit and loss is seldom so clear as this amounts to; and accordingly, if an agreement to share profits as such be established, this has for a long time been taken as ex facie evidence of the existence of partnership. A right to share profits is of the very essence of partnership. Any agreement by which a man is rendered liable for the smallest share of loss without the chance of profit, may indeed form a valid contract, but it is not the contract of partnership. This principle holds good in every system of European law, and is evident from the very definitions which are given of the contract; all of which, how much soever they may differ in other respects, agree in requiring the right to participate in profits (b). It is in virtue of this principle, that societies and clubs, whose object is not the sharing of profits, are not regarded as partnerships; as, for example, societies for the protection of trade (c), or clubs for political purposes, or for the convenience of their members (d). (b) See Appendix.

(a) Voet. Com. ad Pand. 1. xvii. t. 2, pro socio, s. 1; Ersk. iii. 3, 18; Green v. Beesley, 2 Bing. N. C. 108; Greesham v. Gray, 4 Irish Com. Law Rep. 501.

(c) Caldicott v. Griffiths, 8 Ex. 898. (d) Fleming v. Hector, 2 M. and W. 172; 3 Ross, L. C. 585; Thomson v. Shanks, 1840, 2 D. 699.

between nett

gross returns.

But it is only the right to share profits as such, that constitutes Difference evidence of the partnership relation. A right to participate in the profits and proceeds of an undertaking, adventure, or business, may exist quite independently of partnership. The distinction here indicated is that between sharing profits and participating in gross returns, and will require some explanation.

Gross returns or gross profits, as they are sometimes styled, is a phrase used among political economists to signify the whole actual proceeds of a transaction, or the income of a business without deduction of outlay, expenses, or liabilities; profits or nett profits mean what remains after such deductions have been made. This distinction is not at first very easily apprehended, and cases occur where it can hardly be drawn with all the clearness that could be desired. Yet it is of great importance in practice, as it affords a good test whereby in many instances the interest which agents, servants, etc., have in a partnership can be distinguished from that of the partners themselves, and whereby the contract itself can be distinguished from others of an analogous or kindred nature. The rule may be stated as follows: An agreement to share profits is prima facie evidence of partnership; an agreement to share gross returns is no proof of that relation.

The force and application of this rule will be best understood by illustrations. In Wilson v. M'Dougal, 1682, where two men had contracted to purchase a quantity of grain, which the seller was taken bound to deliver to them equally, the Court held that there was no partnership, in respect that emptio rei facta a pluribus ementibus did not infer society where there was no contributio lucri et damni (a). Long afterwards, Lord Mansfield gave a similar decision in Hoare v. Dawes (b); and in Finckle v. Stacy (c), an agreement between workmen to divide their wages was held not to amount to a partnership. In these and similar cases, the contracting parties agree to share, not the profits of the transaction, but the gross produce. But, on the other hand, when a victualling society was constituted for the purpose of purchasing and thereby supplying its members and the public, it was held to be a partnerH. Blackstone 37. (3 Ross, L. C. 419, 407, 404.)

(a) M. 14551.

(b) Doug. 371. See also Gibson v. Lupton, 9 Bing. 297; Coope v. Eyre, 1

(c) Select Cases in Ch. 9.

The distinction important.

is delicate, but

Liability for losses;

not conclusive evidence.

ship. Here the element of sharing profits obviously resulted from trading with the public, and removed the association from the ordinary category of clubs which share the gross returns among their members (a).

Again, persons who receive remuneration for their services by payments out of the gross returns of a company, whether that remuneration be a fixed sum or a percentage on the gross returns, are not partners,-as, for example, teachers in proprietary schools, whose incomes in part depend on the number of their scholars; salesmen who receive a percentage on the price of the articles they dispose of in lieu of fixed salaries; sailors on whaling voyages, who are usually paid by obtaining a certain proportion of the produce of the oil obtained, and the like (b).

Liability for the debts and obligations due by a company or firm is strong presumptive, though by no means conclusive, evidence of partnership properly so called. Such liability may be the consequence of other contracts which, though they enter into, do not constitute, the partnership relation. A man may become surety or guarantee for a firm of which he is in no sense a member; and one may be bound by the acts of his agent without being his partner. Indeed, as we shall afterwards see, it is quite common for persons, by acts, representations, or conduct, to render themselves liable to the public for the obligations of a company in whose profits or management they have no right

to share.

On the other hand, it must be observed that liability to share losses is not, like the right to participate in profits, so essential to the partnership relation, that its absence is to be taken as conclusive evidence against the existence of partnership. No doubt it is impossible by any stipulation to eliminate that responsibility to the public, which is inseparable from all common law partnerships; but

(a) Sawers v. Tradestown Victualling Society, 24 Feb. 1815, 18 F. C. 233; Anderston Vict. Society, 1828, 6 S. 928. See also M'Kinlay v. Gillon, 30 Nov. 1830, 9 S. 90, aff. 5 W. and S. 468.

(b) Geddes v. Wallace, 1820, House of Lords, reversing judgment of the

Court of Session, 2 Bligh 270, and 6
Paton 643; Rawlinson v. Clarke, 15
M. and W. 292; Stocker v. Brockle-
bank, 3 M'N. and Gor. 250; Barklie
v. Scott, 1 Huds. and Br. 83; R. v.
M'Donald, 7 E. Jur. N. S. 1127;
Harrington v. Churchyard, 6 E. Jur.
N. S. 576.

it is quite competent for a partner to stipulate effectively with the others that he shall not be liable for a share of the loss. And this stipulation will receive full effect in a question inter socios. Now, in such a case, the partnership relation remains unimpaired, and neither his fellows nor the public could found upon this stipulation against loss (a) as evidence of no partnership.

Another very important criterion of the existence of the part- Agency. nership relation is the element of agency. The importance of this criterion has only been lately brought into notice; yet its consonance not only with legal principle, but also with equity, would seem to entitle it to great consideration.

Agency is inseparable from the partnership relation. Mr Story says: Every partner is an agent of the partnership; and his rights, powers, duties, and obligations are in many respects governed by the same rules and principles as those of an agent. A partner virtually embraces the character of both principal and agent' (b); and according to Pothier, Contractus societatis non secus ac contractus mandati' (c).

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It would seem, therefore, that in this we have a good negative criterion; for where the circumstances of a contract or relation are proved to be such as to exclude the notion of agency express or implied, under what category soever it may fall, it cannot be classed as partnership. It is quite possible, no doubt, that a copartnery may be so constituted, that some of the partners shall contribute merely capital, and shall not have the power of binding the firm; yet independently of the fact that such a stipulation would not avail with the public unless they had due notice, it is still obvious that the remaining partners continue to be agents, not only for themselves, but for all the others. So that in any view it is impossible to eliminate the element of agency from true partnership.

ing test.

It must be observed, however, that the presence of this element Not an unfaildoes not of itself afford a positive test of partnership; for it is quite possible that two parties may stand to each other as agent and

(a) Bond v. Pittard, 3 M. and W. 357; and see per Lord Cranworth on this case in Cox v. Hickman, 8 H. of L. Cas. 310; Ersk. iii. 3, 19.

(b) Story on Partnership, p. 1.
(c) Pand. lib. xvii. tit. 2, Introduc-
tion.

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