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 (V). 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 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. Mr Story Agency is inseparable from the partnership relation. 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). 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. It must be observed, however, that the presence of this element Not an unfailing test. does 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. D Co-owners not partners. Differences between. Important criteria. principal without being in any sense partners. Yet where, in any matter of gain or commerce, two or more persons stand mutually to each other in the relation of principal and agent,—that is to say, where each of them is capable of binding and being bound by the others, it is very difficult to escape from the conclusion that the partnership relation has been constituted. Much valuable learning may be obtained on this question by referring to the case already quoted of Cox v. Hickman, not only as reported in the House of Lords, but also in the Courts of Common Pleas and Exchequer Chamber, in which courts the case had been successively considered (a). Pro indiviso proprietors or co-owners are not necessarily partners, though in many cases they stand to each other in that relation. Co-ownership, as such, differs from partnership in some important particulars. There is no delectus persona; and therefore the shares are transferable at the will of the owner: the part owners have no lien over the common property for their outlays thereon, they do not share nett profits but gross returns, and there is no implied agency. It may also be observed, that partnership is always created by agreement; whereas co-ownership is seldom the consequence of special contract, but results from succession, bequest, joint purchase, or some other such accident (b). These differences are important, but it is far from easy to determine in a case of circumstances whether partnership or co-ownership is the actual state of matters. This arises from the fact that the two so often coexist, and also from their surrounding circumstances being generally so similar. The most important criteria where they can be made available are, that in co-ownership the gross returns and not the nett profits are shared, and that no implied agency exists. It must be admitted, however, that great practical difficulties arise in the application of these criteria. The decided cases in Scotland are few and unimportant. Such as they are, they will be found noted below (c). (a) Hickman v. Cox, 18 C. B. 617, 3 C. B. N. S. 523; Cox v. Hickman, 8 H. L. Ca. 268. (b) See 2 Bell's Com. 655; Lindley, vol. i. p. 32; and supra, p. 3; Stair i. 16, 1; Voet. xvii. 2, 2; Story on Partnership, s. 3; Dig. 1. xvii. t. 2, 1. 31 seq. (c) Gault v. M'Aulay, Jan. 13, 1821, F. C.; M Givan v. Blackburn, 1725, M. 14625. In England the cases have been much more numerous; and as English cases. the law of the two countries appears to be the same in this respect, it might be supposed that considerable advantage would be derived from consulting them. But the English courts appear to have done little else than reach the equity of the particular case, without establishing any clear rule by which in future the distinction might be determined. A note of the principal authorities is also subjoined (a). of skill and of money. There is a numerous class of cases in which one person contri- Contributions butes property, such as land, machinery, or money, and another contributions skill or business qualifications, and in which it is covenanted that one shall have the management of the property, and take the risk of the loss, while both shall have a share of the profits. The tendency in cases of this kind would be to hold that a partnership had been constituted, because the agreement to share profits is ex facie evidence of liability to the public; and this accordingly appears to have been the ratio of the decision in the English case of Gilpin v. Enderbey (b). But this presumption may be overcome by the nature and circumstances of the contract. The very common case of authors and publishers, in which it is agreed that the former shall contribute the manuscript and shall receive a share of the profits, while the latter shall defray the expense of publication and shall take the risk of loss, may here be adverted to. In England, such contracts are usually regarded as partnerships confined on the one side to profits only (c); but the law of this country, which holds that publishers and authors are not partners, appears to be more consonant to sound principle (d). (a) Lindley 31; Collyer 793; French v. Styring, 2 C. B. N. S. 357 ; Green v. Briggs, 6 Hare 395; Campbell v. Mullet, 2 Swanst. 551; Bentley v. Bates, 4 Y. and C. Ex. 182. (b) 5 B. and Al. 954. (d) Venables v. Wood, 23 March Quasi partnerships. Participation in profits. Dictum of De CHAPTER VI. OF QUASI PARTNERS, OR PERSONS WHO INCUR LIABILITY TO WE have already seen, that while liability for company obligations is inseparable from the partnership relation, many cases continually recur in which persons who have not constituted partnership amongst themselves are still liable to the world as though they had. Such cases are generally classed under the head of quasi partnerships, or partnerships as regards third parties. The use of such phrases is convenient, but it must always be borne in mind that the notion they appear to convey is inaccurate, inasmuch as no one can be called a partner who is not so inter socios; and that the cases under consideration involve liability not in virtue of the partnership relation, but in consequence of something which has taken place with the public, or in which the public creditor is concerned. The first class of cases may be stated to be those in which a person who has never contracted the partnership relation, has made himself liable to the public by participating in the profits of the concern. We have already observed, that sharing profits is an important criterion of partnership. It may now be added, that when it does not confer the privileges, it commonly involves the participant in the liabilities of that relation. The rule of law is generally stated to be, that a party who shares profits shall be liable to third parties as if he were a partner; or, to use the words of Professor Bell, 'Participation of profits will make one a partner to the world, although he should not be so in relation to the persons with whom he is so engaged' (a). The reason of this doctrine is stated by Chief Justice De Grey as follows: That every one who has a share in the profits of a (a) Bell's Com. ii. 623. |