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Effects of agency and guarantee

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).

(a) Doubleday v. Muskett, 7 Bing.
110; Braithwaite v. Skofield, 9 B. and
C. 401; Burls v. Smith, 7 Bing. 705.
(b) Pothier, Part. sec. 91.

(c) See Bell's Mer. Law ii. 654;
Lindley 52; Ersk. iii. 3, 21; Fair-

holm v. Marjoribanks, M. 14558, and Ross's Le. Ca. 697; ex parte Barrow, 2 Rose 252, per Lord Eldon; ex parte Dodgson, Mont. and M‘Ar. 445; Bray v. Fromont, 6 Madd. 5; Killock v. Greg, 4 Russ. 285.

CHAPTER VII.

DIFFERENCE BETWEEN A FORMED AND A CONTEMPLATED
PARTNERSHIP.

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.

Condition must be purified.

Condition must be essential.

Specified purposes a condition of the

contract.

the company as shareholders as soon as the special act is obtained, not only without their knowledge, but even against their express desire.

But, e converso, it is equally fixed law, that until the condition is purified, no partnership is constituted. Thus where persons associate with the view of forming a company in a particular manner, as by signing articles of association, or obtaining charter or special act, they are not held to be partners until the company has been formed in the manner contemplated. Many illustrations of this will be found under the head of Promoters (a). In like manner, when it plainly appears that the company was not to commence operations until a certain amount of capital had been subscribed, the subscribers will not be held bound as partners if the company start before obtaining subscriptions to the stipulated amount (b). Nor will it make any difference that the subscribers had paid deposits, and even calls, on the shares allotted to them; but for these they will be entitled to an action of repetition (c). In such cases, however, it must clearly appear that the condition was of the essence of the contract—a condition precedent to the formation of the company. If this is not so, the non-purification will be disregarded, and the subscribers held partners (d). The same result will follow where it appears that the defender has expressly or by implication waived the non-implement of the condition (e).

Again, when persons agree to become members of a company to be formed for certain specific purposes, and subject to certain regulations, they are not bound to take shares in a concern formed for different purposes or with a different system of management. In such a case an important condition of their contract has not been

(a) See Reynell v. Lewis, and Wyld v. Hopkins, 15 M. and W. 517; Wood v. Argyll, 6 Man. and Gr. 928; Batard v. Hawes, and Batard v. Douglas, 2 E. and B. 287; Forrester v. Bell, 10 Ir. Law R. 555; Hutton v. Thompson, 3 House of Lords Cases 161.

(b) Brown v. Fruth, 9 B. and C. 632; Vice v. Anson, 7 B. and C. 409.

(c) Fox v. Clifton, 6 Bing. 776, overruling Perring v. Hone, 4 Bing. 28; Pitchford v. Davis, 5 M. and W. 2.

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purified (a). And it is no answer that deposits have been paid on the allotted shares, unless it can be shown that the defender was at the time aware of the alteration (b).

formalities

It frequently forms a part of the articles of copartnery or other Prescribed document by which the partnership is regulated, that certain conditions must be fulfilled, or certain formalities must be complied with, before a person can be made a partner either originally or by transfer of shares.

observed.

In such cases the general rule of course requires that the regu- must be lations shall be observed; but when they have been overlooked, the Court will not give effect to their non-observance so as to avoid the contract of partnership, unless it is pleaded at the instance of the party for whose interest and behoof they had been framed (c).

When, again, the party interested in the observance of the Waiver. stipulated conditions or formalities has waived them per expressum or by implication, or in other words, where such party has homologated the irregularity, the objection cannot afterwards be taken (d). But such conditions or formalities will be very strictly enforced when they are pleaded by the party for whose benefit they were framed, and whose interest is affected by their non-observance (e).

(a) Ward v. Matheson, 13 Feb. 1829, 7 S. 409; Learmonth v. Adams and Co., 23 June 1831, 9 S. 787; Blackburn's case, 3 Drew 409.

(b) Ex parte Rye, 3 E. Jur. N. S. 460; and Fox v. Clifton, 6 Bing. 776; Galvanized Iron Co. v. Westoby, 8 Exch. 17.

(c) Weatherly v. Turnbull, 3 June 1824, 3 S. 61; and East Lothian Bank v. Turnbull, ibid. 63; Macandrew v.

Robertson, 11 June 1828, 6 S. 950;
Thomson v. Fullarton, 23 Dec. 1842, 5
D. 379; Robertson v. Thom, 29 Dec.
1848, 11 D. 353.

(d) Turnbull v. Allan and Son, 1
March 1833, 11 S. 487, aff. 8 April
1834, 7 W. and S. 281; Drummond
v. Thomson's Trustees, 22 May 1834,
12 S. 620.

(e) Sir James Gibson Craig v. Aitken, 3 Feb. 1848, 10 D. 576.

1

Distinction between evi

dence of proper and quasi partnership.

CHAPTER VIII.

EVIDENCE OF PARTNERSHIP.

WE have already endeavoured to show what in law will be deemed sufficient to establish partnership and its liabilities. It is now necessary to consider briefly the kind of evidence which is admissible.

Partnership is a consensual contract, and may be proved prout de jure; that is to say, if the statements averred be relevant, they may be proved in any way which the law allows to prove facts and circumstances.

In considering what is necessary or relevant to be averred, regard must be had as to whether the action is brought with the view of establishing actual partnership on behalf of the pursuer, or whether the object be to fix responsibility against the defender at the instance of some third party; in other words, whether actual or merely quasi partnership is sought to be made out. If actual partnership is sought to be established, this must be averred, and the proof must amount either to a distinct contract to that effect, or at least to an agreement to share profit and loss in some specified business or sphere of action. If, again, quasi partnership, or in other words, responsibility to third parties, is all that is endeavoured to be made out, it does not seem necessary in every case to libel or prove actual partnership, but such facts and circumstances as plainly infer the required responsibility. The reason of this difference will appear when it is remembered that liability to third parties arises not only from actual partnership, but from such a line of conduct on the part of the defender as affects the fund available to creditors, or leads them to contract on the faith of his credit being pledged to the concern-e.g. sharing of profits, agency, or holding out. No doubt there are cases in which a latent partner who has not as yet shared profits, and whose existence was not known at the date of

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