ever, escape observation, that the test here proposed is in some respects as difficult of application as its predecessors; that agency is often as much a result as a proof of the partnership contract; and that many cases may be figured, in which agency, so far from leading to the inference of partnership obligations, can only be inferred after that contract has been established from other considerations. Persons may also incur the liabilities of partnership by what is Holding out. termed holding out.' Here persons who are not partners, and who may not be entitled to share profits, or to exercise any of the other rights of the partnership relation, render themselves liable to creditors of a company or firm, by reason of their having, prior to the contraction of the debt for which they are responsible, held themselves out as partners, that is to say, done or permitted something to be done, which naturally led to the conclusion that their credit was pledged to the concern-that they were its guarantees, or that it was their agent. This doctrine is indeed a necessary consequence of the law of principal and agent, whereby if any man hold out another as his agent, he is bound by that other's acts within the sphere of the agency. It is also a consequence of the principle, that the partners are guarantees for the company obligations. The public, in the case of unregistered companies, have no means of knowing who are de facto partners-that is to say, whose credit is pledged to the company-except by judging from appearances; and they are therefore entitled to assume those to be partners whose conduct plainly leads to that conclusion. The doctrine in question is thus a necessary consequence of the theory of private partnerships and common law companies, in which the credit of the concern depends on implied agency and implied guarantee, as opposed to the property of a corporation or the guarantee of a registered company. It would consequently seem, that while it is essential to the existence of common law partnerships, it is inapplicable in the case of such associations as are formed by registration, by charter, or by special act. The leading case in support of the doctrine of liability by hold- Waugh v. ing out is Waugh v. Carver (a). In this case the law is very clearly (a) 2 H. Blackstone 235; 3 Ross L. C. 426; ex parte Watson, 19 Ves. 461; ex parte Matthews, 3 V. and B. 125; Ed- Carver. Use of a party's name. Party's name must have been the ground of credit. stated by C. J. Eyre, and it has always been regarded as an authority in this country as well as in England. In the late case of Cox v. Hickman, already referred to, the House of Lords took occasion to revert to the grounds of the decision in Waugh v. Carver, and the judgment of Lord Cranworth may be read with great advantage (a). It is of no importance to the question of liability on this ground, whether the party, holding himself out as a partner, does or does not share profits and losses; for the point is not whether he is de facto a partner, but whether he has so acted as to lead others to that conclusion (b), or in other words, whether he is by his conduct estopped from pleading that he is not a partner (c). It has therefore been held sufficient that the party has allowed his name to be kept on bills of parcels, or invoices, or to remain over the door (d). If a party's name has been introduced into a firm without his consent, he ought to take immediate steps to get it withdrawn, or otherwise to certiorate the public that he is not a partner; for if he remain silent, and it can be proved that he knew that his name was used in this manner, he may be found responsible as a partner (e). But inasmuch as the ground of liability is, that credit has been obtained by means of the party's name, it is necessary that the holding out shall have taken place, and that the creditor shall have been in the knowledge thereof prior to his entering into the contract sued upon, otherwise it could not be said that he had been misled by the conduct of the supposed partner. See the judgment of Mr Justice Park in Dickenson v. Valpy (ƒ), Vice v. Anson (g), and the other cases quoted below. It is the more necessary to attend to this important element by which the liability of alleged partners is ascertained and limited, inasmuch as it is apparently ignored in many treatises on partnership law. By parity of reasoning, it should seem that where a party's name appears in a firm as a partner, but when 564; Kirkwood v. Cheetham, 10 W. R. (a) 8 House of Lords Cases 309. (d) Williams v. Keats, 2 Starkie 290. (e) Gardner, 1862, 24 D. 315. (f) 10 B. and C. 140; 3 Ross L. C. 570. (g) 7 B. and C. 409. Baird v. Planque, 1 Fos. and Fin. 344; For v. Clifton, 6 Bing. 776; Pott v. Eyton, 3 C. B. 32; Newsome v. Coles, 2 Camp. 617, 3 Ross L. C. 634. by a private stipulation he is declared not to be liable as such in a question inter socios, he does not incur liability to third parties who, when the debt was contracted, were aware of this stipulation ; and it appears to have been so held in the case of Alderson v. Pope (a). But there are good reasons to doubt the soundness of this principle, both as giving facilities to the establishment of false credit, and because such a stipulation would after all amount to nothing more than a guarantee against loss in favour of one partner by the others. It is no defence against an action on the ground of liability from holding out, that the defender was induced so to do by the fraudulent representations of parties other than the pursuer (6). The doctrine of liability by holding out has never been understood so as to render the estate of a deceased partner liable for debts contracted subsequent to his death by the surviving members of the firm, even to old correspondents or customers, on the ground that his name was still allowed to remain in the concern. The reason of this is, that death, as we shall afterwards see, operates of itself as a dissolution of the partnership, and is a public fact requiring no intimation, and that the continuance of the name cannot be presumed to be the act either of the deceased or his representatives (c). If, however, the name of the deceased partner be continued in the firm by his executor, the estate will be bound, and the executor will render himself liable to the beneficiaries (d). As persons intimating an intention to become partners are not taken to be such until their intention has given place to performance, so neither do those who hold themselves out as intending partners incur the liability which would attach to them if they held themselves out as partners de facto. Thus, one who had signed the prospectus of a contemplated company was found not liable as though he had held himself out as a partner (e). (a) 1 Camp. 404, note. (b) Watson v. Smith, 17 Dec. 1806, Hume 756. See also the English cases of Ellis v. Smoeck, 5 Bing. 521; ex parte Broome, 1 Rose 69. (c) Webster v. Webster, 3 Swanst. 490; Devaynes v. Noble, 1 Mer. 616. See More's Stair, p. 102, Lect. ii. 207; Christie v. Royal Bank, 1841, (d) Vulliamy v. Noble, 3 Mer. 614. (e) Bourne v. Freeth, 9 B. and C. 632; Reynell v. Lewis, 15 M. and W. 517; Wyld v. Hopkins, ibid. Effects of agency and guarantee where no part As in proper partnership the liability of the individual partners for company debts rests upon the two principles of implied mandate nership exists. and suretyship existing between the socii in virtue of the contract itself, so in like manner a man may render himself liable for the acts of others by one or other of these principles, not only where he is not a partner, and where he has never held himself out as a partner, but where no partnership has yet come into existence. Thus, when 'promoters' of contemplated companies pass resolutions that work is to be done or goods are to be supplied, they become liable for all expenses that may thereby accrue, though they are not partners, and though the company should never have any being (a). And it is not to be doubted, that if a man becomes cautioner for a firm, he incurs liability though ex hypothesi he is not a partner, nor presumed to be such. Sub-partnerships. It is a principle of the law of partnership, that no one can be introduced into a copartnery without the consent of all the members. Yet there may be a contract formed with one of the partners by which a stranger is admitted to divide with him his share of the profits. The relation so created is termed a sub-partnership, and constitutes a binding obligation. But it does not make the stranger a partner with the other members of the concern, according to the maxim of the civil law, Socius mei socii, socius meus non est (b); neither does he by sharing profits become liable for the debts of the company (c). CHAPTER VII. DIFFERENCE BETWEEN A FORMED AND A CONTEMPLATED It is often difficult to determine whether a partnership really exists, or is only contemplated. In such cases, it is important to distinguish between the mere indication of intention to enter into partnership, and an agreement to form this contract on the emergence of a given condition. Mere intention complete the does not contract. Where nothing more is proved but intention, it is in the power of either party to resile before perfecting the contract (a); and in like manner, where a party agrees to enter into a partnership at a future period, but reserves to himself the option of departing from this agreement before elapse of the stipulated time, no partnership will be held to be created, if in the interim he declare that he has altered his intentions (b). Where the plaintiff agreed to enter into a partnership with the defendant, as to the working of a patent, provided he should be satisfied of its utility by the result of later experiments, which satisfaction he was to declare in writing, and he never expressed such satisfaction, it was held that no partnership had been constituted (c). Where, again, parties agree to enter into Agreement partnership on the emergence of a certain condition, and retain no option, the contract will be held perfected by the mere purification of the condition, because the necessary consent, which before is supposed to be suspended, is on that event held to be adhibited (d). It is in virtue of this principle that allottees of scrip in companies to be incorporated by parliamentary authority, may be registered by (a) Howell v. Brodie, 6 Bing. N. C. 44. (b) Gabriel v. Evill, 9 M. and W. 297; ex parte Turquand, 2 M. D. and De G. 339. (c) Osborne v. Jullion, 3 Drew 596. (d) Battley v. Lewis, 1 Man. and Gr. 155. sub conditione. |