Compensation and retention. 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. 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 Dixons 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, 4 D. 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 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. СНАРТЕR 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 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 to enter into partnership is stranger as a new partner, an action ad factum præstandum would generally not lie in Scotland, nor, unless in some exceptional cases, would a (a) See' Actions between Partners and the Company.' incompetent. suit for specific performance be competent in England (a). The reason of this is, that as partnership is a contract of exuberant trust, and can only be carried on successfully when the partners give their best and united exertions for the furtherance of the common good, nothing but disastrous results could be looked for from compelling persons to become partners against their will, however groundless or fanciful their objections might be. Besides, in many cases an enforced partnership would be practically a nullity if the agreement had been for a partnership at will, it would be dissolved by the recalcitrant partner as soon as formed; and even where it was for a term, he would generally have it in his power to make his copartners only too glad to be free of the connection. The remedy, therefore, in all cases of this kind is by action of damages, in which the jury will award such reparation for breach of agreement as, in the whole circumstances, appear to meet the equity of the case. : Some exceptions, however, appear to exist to this doctrine. The chief of these appears to be where parties have become bound to enter into a partnership, the effect of which, when formed, would be to produce important legal consequences to themselves or third parties, and without which these consequences could not be made to emerge (b). There is a class of cases where the existence of the partnership relation is a necessary preliminary to the enjoyment of certain rights or emoluments by one or more of the partners. Thus, where profits have been realized on a joint adventure, or on an established business, and a party claims his share in the one, or seeks to be found entitled to participate in the management and emoluments of the other, it is plain that the establishment of the partnership relation must generally form a condition precedent to such claims. In England, where the action of declarator is unknown, such cases, if they do not resolve into mere claims of damage, are made the subject of suits in Chancery, in which specific performance of an agreement to enter into a contract of copartnery is decreed, (a) Downs v. Collins, 6 Ha. 418; Hervey v. Birch, 9 Ves. 357; Maxwell v. the Port-Tenant Co., 24 Beav. 495; Sheffield Gas Co. v. Harrison, 17 Beav. 294; Stocker v. Wedderburn, 3 (b) Hill v. Wylie, 1865, 3 Macp. 541. See Warner v. Cunninghame, 1798, M. 14603; and Lindley 796. |