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books.

The books of the firm or company have always been regarded as Company the writ of the concern in questions of this kind; and entries found in them will bind the company, unless forgery can be established (a). The writ or oath of a surviving partner is in general to be taken as that of the copartnery (b).

prescription.

The currency of all prescriptions may be interrupted by action; Interruption of but in the case of partnership, it would seem that the proceedings must be taken against the company as such, and not merely against a partner individually. In the case of Grant v. The Creditors of the York Buildings Company (c), a claim having been lodged on the company's estate, it was objected to on the ground that it had undergone the long negative prescription, and that a summons, decree, and horning which were relied on as interrupting prescription were inept, because these had been directed not against the company in the corporate name, under which by its special act it was entitled to sue and be sued, nor even against the directors, who subscribed the contract, but against the governor and directors at the date of the action, some of whom had ceased to hold office before the horning was given. The Court of Session held, by a majority, that the intimation thereby given to one or more of the partners was effectual to save the debt from prescription. On appeal, however, the House of Lords remitted to reconsider the question, but the matter was finally compromised without being judicially determined (d).

In this department of partnership law, little assistance can be English law. obtained from the law of England,—the late Mercantile Law Amendment Act, 19 and 20 Vict. c. 97, which does not apply to Scotland, having introduced certain special provisions by which the old rules as to 'limitations' have been greatly modified. The previous law was, however, in principle at least, not materially different from our own. It may be seen by referring to Collyer, p. 282; Lindley, p. 370; and Story on Partnership, sec. 324.

Lockhart, 1843, 5 D. 1020; Smith v.
Falconer, 1831, 9 S. 474. See also
Gow v. Macdonald, 1827, 5 S. 445.

(a) Leslie v. Magistrates of Brechin, 1808, 15 F. C. 2; Muirhead v. Town of Haddington, 1748, M. 2507 ; Buchanan v. Magistrates of Dunfermline, 1828, 7 S. 35; Ker v.

Magistrates of Kirkwall, 1827, 5 S.
802. See Admissions; Dickson on
Evidence, 509 et seq. and 1465.

(b) Fyfe v. Carfrae, 1841, 4 D.

152.

(c) 1784, M. 11283.

(d) 3 Paton's App. 17 (1785). See M. 11285.

CHAPTER XV.

Advantages

of a correct theory.

English theory.

LIABILITIES OF PARTNERS AND SHAREHOLDERS FOR THE
COMPANY OBLIGATIONS.

THE numerous and important questions which present themselves in this branch of partnership law render it extremely desirable that some consistent and easily intelligible theory should be adopted by which they might be solved, and to which all the principles found in operation might be referred. Many difficulties, however, beset the evolution of such a theory. The partnership relation embraces the elements and principles of many other contracts; the legal notion of the firm presents important differences in different systems of law; and it cannot be said that the decisions of the courts have been characterized by unbroken uniformity. It is therefore very doubtful whether, in the absence of a code, any theory of partnership liabilities can be constructed which shall in all cases afford a safe and unerring guide. At the same time, much will have been gained if a theory can be formed which harmonizes with the genius of the legal system to which it is applied, explains the authorities consistently with each other, and thus serves to indicate what is likely to be the view which the courts will adopt in dealing with questions not hitherto determined.

According to the theory of the law of England, in so far as any consistent theory can yet be taken as evolved in that system, the liabilities of partners for the company debts and obligations is said to arise out of the doctrine, that they are agents and sureties mutually for each other within the company's sphere of action; so that as each may bind all, each is liable for the debts and obligations of all. Such a theory is the only one perhaps that can be adopted in a system which ignores the quasi persona of the firm;

but although it is capable of being reasoned out to equitable results, it labours under the great disadvantage of being cumbrous and embarrassing in practical operation.

theory.

The law of Scotland in all probability adopts the same prin- Scottish ciples of agency and suretyship; but inasmuch as it recognises the separate quasi persona of the firm, it is capable of finding expression in a theory less cumbrous and more easy of application. According to our system, the partners are agents and sureties, not of each other, but of the firm; and the obligations which it contracts by means of their agency bind them individually as its sureties.

The Scottish theory is that applicable to incorporate associations in both systems, with this qualification, that in incorporated associations the guarantee of the shareholders is generally, though not always, restricted within definite limits.

larity of prac

tical results.

But whichever of the two theories be adopted, the practical General simiresults appear to be the same; and therefore the English decisions on the subject of the liabilities of partners, though not to be taken. as decisive, ought to receive great weight in discussing such questions as have not yet received an authoritative solution by our tribunals.

Once an obligation has been validly incurred by the company General rules. or firm, it may, after being constituted against the concern, be enforced against the members as guarantees bound conjunctly and severally with their principal. When the obligation is ad factum præstandum, and can be performed by another, specific performance may be decreed against all or some of the partners. When, again, the firm ought as a person to perform the act, or where performance becomes impossible, damages will be awarded instead of specific performance. An obligation to abstain from acting when that is the nature of the obligation, may be enforced by interdict, as in England, by injunction.

Whenever decree has been obtained against the firm, any one of the partners may, at the option of the creditor, be proceeded against for the whole amount of debt or damage decerned for, leaving him to find indemnity against his copartners as best he may (a). And any one of the partners may be charged on decree or diligence directed against the firm (b).

(a) See Contribution and Indemnity, and Diligence.

(b) See Diligence.

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UNLIMITED LIABILITY OF PARTNERS AND SHAREHOLDERS IN
FIRMS AND UNINCORPORATED ASSOCIATIONS.

No principle can be said to be better fixed in the laws both of Scotland and England, than the doctrine that every partner of a private firm, and every shareholder of an unincorporated association, incurs unlimited liability to the public for all the debts and obligations of the company.

It has sometimes been thought that the common law of Scotland was originally different from that of England in this respect, and that it recognised a power in trading associations other than such as were incorporate by charter or special act, to limit the liability of their members to the subscribed capital, or even to the amount of their respective shares, after the fashion of the sociétés en commandite of French law. This opinion does not appear to be altogether without foundation. The old Scotch law of society was borrowed more from continental than from English sources; and as it formerly gave great prominence to the quasi person of the company, it is not improbable that principles analogous to those of the foreign sociétés en commandite were finding their way into this country, and might ultimately have become settled law had it not been for the infiltration of rules and precedents of English growth.

This view receives countenance from the dictum of Lord Kilkerran, which has not a little embarrassed modern jurists, that the creditor of a company 'cannot pursue one of the partners for a company debt: his action lies against the company only' (a); and also from the circumstance that, in the case of Stevenson and Co. v. Macnair, where the defence was stated that the contract limited the responsibility of each partner to his own share, the Court waived deciding on that point, but sustained the other defences (b).

But be this as it may, there is no doubt that the English rule of unlimited liability has long been fixed as the law of Scotland. In the case of Douglas, Heron, and Co. v. Hair (c), where every available plea seems to have been stated to save from ruinous liability, the plea of limited responsibility was not again raised ; and (a) 1741, Kilk. 518. (b) 1757, 2 F. C. 92, M. 14560 and 14667.

(c) 1778, 8 F. C. 57, M. 14605.

since that period numerous cases have occurred in which such a plea, if tenable, would undoubtedly have been urged. It would seem therefore that the principles of sociétés en commandite, if they ever obtained a footing in this country, have long since been abandoned.

In England, it appears that unlimited liability was always the rule. So much was this the case, that, as far back as 1719, the celebrated Bubble Act (a) declares the holding out of an assurance. of limited liability to be a distinguishing mark of an illegal association. On many occasions the inflexible nature of this doctrine has been laid down from the bench, and the cases are numerous where it has formed the ratio decidendi (b).

attain limited

The extreme hardship which its application to large trading asso- Devices to ciations has entailed on the mercantile community, has eventually liability. led to the restrictive provisions of the Registration Acts. But long before the Legislature thought fit to interfere, numerous attempts were made to evade the common law, and reduce the liabilities of shareholders within stricter limits. Such devices, since the Act of 1862 has brought limited liability within the reach of all companies consisting of more than six persons, are of less importance; but they may here be briefly noticed, as, until the registration principle is extended to private firms, attempts will always continue to be made to escape from the unlimited liability of the common law.

These devices all depend for success on the principle that it is Principle of. competent for those dealing with a firm to release the partners from unlimited liability, in so far as the transactions of the firm with them are concerned. And the most common form in which this principle is sought to be rendered available, is that of stipulating with the creditor that he must look to the funds of the company only for payment, and shall have no claim beyond its subscribed capital. If an agreement of this kind can be satisfactorily established, limited liability as to such transactions as are covered by the agreement may be attained; yet the onus probandi will rest on the company or partner seeking to found on it as a defence.

But as it is evident that the

(a) 6 Geo. I. c. 18, s. 18.

(b) R. v. Dodd, 9 East 516; Keasley

success of such schemes to attain

v. Codd, 2 Car. and Pa. 408; Green-
wood, 3 De G. M. and G. 459.

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