419 CHAPTER XVIII. CONTRACTS OF PARTNERSHIP-LIABILITIES RESULTING FROM ACTUAL AND REPUTED PARTNERSHIPS. SECTION I.-Contracts of partnership as between the parties to such contracts. Of the nature and creation of a partnership-Participation in profit and loss creating a Partnership-Participation in profits not making the participator a partner-Payments of wages out of profits-Payments of annuities and the interest of money out of profits-Communities of interest not constituting partnerships-Joint contracts and transactions not making the parties thereto partners-Joint purchasers of goods not being partners-Conditional agreements to contribute capital and divide profits not constituting present partnerships-Of a partnership in profits but not in the joint stock-Inability of one of the partners to introduce a stranger into the firm without the consent of all the rest. SECTION II.—Liabilities of partners inter se.—Of the common law maxim that one partner cannot maintain an action against the firm upon partnership contracts-Liabilities of partners inter se upon contracts made by them individually-Covenants and agreements between partners to contribute capital or labour to the joint stock, and not to trade on their own account-Contracts for the payment of services rendered, or goods supplied, or for the repayment of money advanced by one partner to the co-partnership-Of the inability of one or more of several partners to compel a distribution of the profits during the continuance of the co-partnership-Covenants and agreements to account and divide profits-Distinction between continuing trading partnerships and partnerships in particular adventures-Of the right of action of one partner for the admitted balance of a partnership account-Contribution between partners in respect of particular transactions not connected with the general account of profit and loss-Of the dissolution of a partnership-Partnerships at will -Partnerships for terms of years. SECTION III.-Partnerships as regards the PUBLIC and THIRD PARTIES.-Liabilities of partners to third parties upon contracts under seal-Of the inability of one partner to bind his co-partners by deed except by virtue of a special authority under seal-Liabilities of actual and nominal partners upon simple contracts-Of the nature and extent of the implied power of one partner to bind his co-partners by simple contract-Agreements, bills of exchange, and promissory notes, and guarantees made by one partner on behalf of the co-partnership-When the contract is the joint contract of the firm, and when it is the individual contract of the partner making it-Liability of the co-partnership in respect of goods sold, or money advanced to one of the partners on account of the firm Liabilities of dormant and secret partners-Of the distinction between a sub-contractor and sub-purchaser and a secret partner-Liabilities of nominal partners-Of the extent and duration of the general liability-Dissolution of the partnership-Notification of such dissolution to the public, and third parties. SECTION I. CONTRACTS OF PARTNERSHIP AS BETWEEN THE PARTIES TO SUCH CONTRACTS. Of the nature and creation of a contract of partnership.-The contract of partnership with its attendant obligations and responsibilities may be considered first as it effects the partners themselves inter se, and secondly as it affects their situation and position as regards the public. Any number of persons may constitute themselves partners by associating together and contributing in equal or unequal proportions money, labour, skill, care, attendance, or services, in the accomplishment of a common object, or the furtherance of a joint undertaking, upon the express or implied understanding that they are to share amongst themselves in certain proportions the profit and loss of the transaction. (a) The contract is founded on, and perfected and made binding by, the consent of the parties, and may be created and established by their acts and deeds, and their common partici pation in the profit and loss of a trade or business, or of a particular speculation or adventure, as well as through the medium of an express contract of copartnership. If there be no communion of profit, or of loss, there is no contract of partnership as between the partners themselves, whatever may be their apparent situation and position as regards the publick. If one man joins another in the furtherance of a particular undertaking and contributes work and labour, services and skill, towards the attainment of the common object, upon the understanding that the remuneration is to depend upon the realization of profits, so that if the business is a losing business he is to get nothing, he stands in the position of a partner in the undertaking, and not in that of a labourer or servant for hire. Thus where an agreement was entered into between the plaintiff and the defendant, whereby the plaintiff agreed to convey, by horse and cart, the mail from Northampton to Brackley and back again, and the defendant agreed to pay to the plaintiff the sum of 97. per mile per annum (rateable) at the expiration of each quarter of a year, and the plaintiff further agreed to pay to the defendant for one cart then in use the sum of 187., and also to pay in a fair proportion with (a) Contractus societatis est, quo duo pluresve inter se pecuniam, res, aut operas conferunt, eo fine, ut quod inde redit lucri inter singulos pro ratâ dividatur. Puff. Lex Nat., 1. 5, ch. 8, s. 1. the defendant all the repairs or replacing of carts so long as that agreement should be in force: and it was further agreed that the monies received for the conveyance of packages and parcels should be fairly and equally divided between the two parties, each bearing an equal portion of the Loss, if any, occasioned by the loss or damage of any such packages, &c., it was held that this agreement constituted and created a partnership between the parties thereto, as carriers, inasmuch as the payment to the plaintiff of 97. per mile per annum was to be subject to the general account of profit and loss of the whole concern. (b) Two ship agents at different ports entered into an agreement to share in certain proportions the profits of their respective commissions, and the discounts on tradesmen's bills employed by them in repairing the ships consigned to them, &c., and they were held liable as partners to all persons with whom either contracted as such agent, although the agreement expressly provided that neither should be answerable for the acts and losses of the other.(c) So where two houses in trade, the one established in London, and the other abroad, were in the habit of recommending consignments of goods to each other for sale and dividing the commission on all sales of goods effected by the one house on the recommendation of the other, it was held that they were partners with regard to the vendors and owners of such goods although they were not partners inter se.(d) PARTICIPATIONS in the PROFITS of a business or adventure NOT making. the participator a PARTNER.. Payments of the wages of labour out of profits.-But a person who merely receives out of the profits, the wages of labour as a hired servant, such as a foreman, clerk, or manager, and who has no interest or property in the capital stock of the business, is not a partner in the concern although his wages may be calculated according to a fluctuating standard, and may rise and fall with the accruing profits. Thus the captain of a vessel who has no interest in the ship or cargo is not a partner with the joint adventurers in the profit and loss of the voyage, although his wages are proportioned to the amount of profit realized. (e) The owner of a colliery employed a man as captain of one of his barges to carry out and sell coal, and allowed him, as a remuneration for his services, two-thirds of the price for which he sold the coals, after deducting the (b) Green v. Beesley, 2 Sc. 169; 2 Bing. N. s. 108, s. c. (c) Waugh v. Carver, 2 H. Bl. 235; 1 Smith's leadg. cas. (d) Cheap v. Cramond, 4 B. & Ald 670. (e) Dry v. Boswell, 1 Camph. 329; Mair v. Glennie, 4 M. & S. 244. price charged at the colliery and the wages and pay of the crew. The captain had no interest or right of property either in the boat or the coals, and it was held that he was merely a servant of the owner, and not a partner with him in the coal trade. "The mode of paying him for his labour," observes Le Blanc, J., in delivering the opinion of the majority of all the judges (the case being a crown case reserved) "by allowing him a fixed proportion of the profit made on the sale beyond the price charged at the colliery, did not vary the nature of his employment, nor make him less a servant, than if he had been paid a certain price per chaldron or per day. (f) The captain of a vessel engaged in the African trade having neither money nor credit, asked a sailor to go with him to a tradesman and order goods for shipment on board the vessel, telling him that he should have half the profit arising from the sale of the goods at the port of destination; and the sailor accordingly went and joined in the order, and the goods were sent on board, and the sailor and the captain were both made joint debtors for the goods in the tradesman's books; but it was held that there was no partnership between them in the things purchased, although they were jointly responsible for the price, and that the agreement as to the division of the profits of the sale was only a mode of compensating the sailor for his trouble and the loan of his credit. (g) By an indenture inter partes made between the plaintiff of the one "part, and the defendant of the other part, purporting to be an immediate sale and assignment of the practice of a surgeon and apothecary, and of the profits of the business, and of all the drugs and stock in trade, &c., the plaintiff covenanted that he would introduce the defendant to the patients, and would, during the space of one year from the date thereof, continue to reside on the premises where the profession or business was carried on, and carry on and attend to the practice as he had theretofore done; and the plaintiff, in consideration thereof, agreed to allow to the defendant during such period one moiety of the clear profits of the business to be paid at the expiration of the year, and it was held that this stipulation as to profits did not create a partnership during the year between the parties, but that it was merely a mode of paying the plaintiff for his services, and that the defendant, therefore, under a plea of set off, was entitled to give evidence of money received to his use by the plaintiff in the course of such busi ness. (h) (f) Hatley's case, Russ. & Ry., 141; Best. C. J.; Witherington v. Herring, 3 M. & P., 48, 49; Meyer v. Sharpe, 5 Taunt., 74; Dry v. Boswell, 1 Campb., 330, (g) Hesketh v. Blanchard, 4. T. R. 144. (h) Rawlinson v. Clarke, 15 Law, J. N. s. Exch. 171. The same distinction between a compensation for labour and services in the character of a servant or agent of the copartnership proportioned to the profits and payable therefrom, and a share or interest in such profits, and in the partnership speculations in the character of a principal and partner in the firm, prevails in the French and continental law, where it is provided that when a merchant, instead of a fixed salary, agrees to give his agent a certain proportion of the profits, the agent shall not be considered, on that account, to be a partner with the merchant and subject to the contracts and liabilities of the co-partnership; and that when one person consigns goods to another to be sold, under an agreement that the consignee shall have the whole or a portion of the proceeds of the sale that may be realized beyond a certain specified amount, the consignee shall not, on that account alone, be considered a partner. (i) When persons unite together for the purpose of carrying out a common undertaking for their mutual benefit, and some of them find the money, stock, and equipments necessary to carry it on, whilst others merely contribute labour in return for a share in the gross earnings, there is a community of interest, but no partnership as between the mere labourers in the undertaking, although there may be between those who furnish the capital and have an interest in the joint stock of the business. Thus where articles of agreement between the defendant, the master of a whaler, and the plaintiff, one of the sailors, stipulated that the produce of the voyage should be divided in certain proportions amongst the owners, the captain, and sailors, the proportion of a common sailor being a one hundred and nineteenth part, it was held that the sailors were not partners with the owners and captain in the whaling voyage.(k) Payment of annuities out of the profits not making the payee a partner. -A person who merely lends money to a firm in partnership, to be employed in the business, or who receives interest for money advanced, is not a partner or joint adventurer in the business, as the money is payable at all events, and the right to receive it does not depend upon the contingencies and fluctuations of the trade. (1) If a partner withdraws from the firm leaving a certain amount of capital in the concern for which he is to receive interest and a terminable annuity payable at all events, this arrangement will not amount to a perpetuation and continuation of the preceding partnership.(m) But if sums professed to be received by way of interest, or an annuity, rise and fall with the accruing profits and the fluctuations of trade, (i) Pardessus, Droit Commercial, No. 969. Duvergier, Droit civ. tom. 5, No. 48, 56. (k) Wilkinson v. Frasier, 4 Esp. 181; Evans v. Bennett, 1 Campb. 300. (1) Elgie v. Webster, 5 M. & W.518. |