LIABILITIES of ACTUAL and NOMINAL PARTNERS to THIRD PARTIES upon SIMPLE CONTRACTS. Of the power of any one or more of the partners to bind the firm by SIMPLE CONTRACT.-But as regards simple contracts the case is different. Every one of the partners, in a general trading partnership, is, in contemplation of law, in the absence of any known controlling stipulation between them, clothed with an implied authority to enter into simple contracts, on behalf of the firm in furtherance of the ordinary business of the co-partnership, and to use the trading name of the firm in all such contracts and in all dealings and transactions in respect of which partners in such trade usually have authority to bind one another, and each of the partners is individually liable for the performance of such contracts in the same manner as if they had been entered into personally by himself. "This is a consequence not confined to the law of this country, but extending generally throughout Europe; and it is founded partly with the object of favouring commerce that merchants in partnership may obtain more credit in the world."(ƒ) "We are considered," observes Pothier, in his Treatise on the Law of Obligations, "to have contracted through the medium of our partners, when they contract, or are regarded as contracting for the affairs of the partnership. For by entering into partnership with them, and permitting them to transact the business of such partnership, we are deemed to have adopted and approved beforehand of all the contracts which they may make in discharging the functions of the co-partnership, just as if we ourselves had contracted conjointly with them." (g) But this implied general authority is confined to general partnerships in trade, where the partners are jointly interested in the capital stock of the business, as well as in the profits accruing therefrom, and does not extend to partnerships in particular transactions and to limited partnerships in profits where the partner has no interest in the capital and joint stock of the concern. Thus where an author and publisher agree to publish a work for their mutual profit, upon the understanding that the author is to write the book, and the publisher to print and publish it at his own expense, there is no implied authority from the author to the publisher to contract for the supply of paper, or for the printing, or for (f) Tindal, C. J., Fox v. Clifton, 4 M. & P. 712. Helsby v. Mears, 5 B. & C. 504. (g) Pothier, Traité des Obligations, No. 83, ed. Dupin, p. 47. any other matter necessary for the publication of the work, and the author cannot consequently be made responsible for the price of the paper, or printing, or advertisements, or anything else ordered by the publisher for the purposes of the publication. (h) So where several coach proprietors agree to undertake the carriage of passengers and parcels on a certain line of road for their mutual profit, and divide the road into districts, and each proprietor horses and conveys the coach over his own district, finding his own horses, harness, and servants, stables, hay, straw, and horsekeepers for the execution of his share of the undertaking, the one has no authority to bind another by contracts for the employment of servants, or for the purchase of horses, hay, straw, or any other thing necessary for the carriage of the passengers. If, therefore, hay and corn are furnished to one of the partners for the use of the horses drawing the coach along his part of the line, the other partners cannot be made responsible for the payment of the price of them. (i) But they are each clothed with an implied authority to enter into all customary and reasonable contracts with the passengers for their conveyance, and all consequently may be bound thereby, (k) and if one of them, whose business it is to hire coaches, contracts with a coachmaker for the supply of coaches along the whole line of road, and not merely for his particular district, this is a contract with the whole, and all are jointly responsible upon it. (7) The partnership also, in the case of general trading partnerships, where there is a joint interest in the stock in trade as well as in the accruing profits, and where this implied general authority from one partner to contract on behalf of the firm has been held to exist, must be completely formed and established and set in motion before the implied power or authority can arise. If, for example, several persons agree to unite together in partnership and to raise a joint stock, and one borrows money, and another procures goods to make up his share of the joint contribution, the one is not liable for the debt contracted by the other, as the partnership is not fully formed, and the partner is not acting in discharge of the ordinary functions of the co-partnership, but on his own private account. "Suppose several persons agreed to open a banker's shop, and it was agreed that each partner should bring into the house a certain sum of money as his share, it could not be contended that if one of them were (h) Wilson v. Whitehead, 10 M. & W. 503. (1) Arthur v. Dale, Collyer on Partnership, 330. to borrow money for his share, all the others would be liable for it." (m) But as soon as the partnership is in actual operation, and has begun business on the joint account, all those of the intended partners who assent to the commencement of the trading operations for their common benefit, or take an active part in promoting them, become, as we have before seen, present and complete partners in the undertaking, and impliedly accord to each other all such powers and authorities as are usual and reasonably necessary to enable them to discharge the functions of the co-partnership, and carry the common object into effect. Any restriction which, by agreement amongst the partners, is attempted to be imposed upon the authority which one possesses as a general agent for the other is operative only as between themselves, and does not limit the authority as to third persons, who acquire rights by its exercise, unless they know that such restriction has been made. (n) "Be the reciprocal rights and liabilities of partners what they may," observes Mr. Bell in his Commentaries on the Laws of Scotland, "in respect to each other, they each, in their relation to the public, hold an authority which no force of private stipulation can alter or restrain; and by means of which, in the face of the most express injunctions or prohibitions of their contract, the several partners, or even those perhaps who may long have left the partnership, may, by the act of any one of the members, be made responsible to third parties to the whole extent of their private fortune." (o) Every one of the partners is responsible for things done within the scope of this implied authority, although they be done in fraud of the partnership, unless the plaintiff who seeks to charge the co-partnership upon the fraudulent dealing of the single partner was himself a party, or in any way privy, to the fraud. Agreements inter partes.-If, therefore, a simple contract inter partes concerning the partnership affairs and business is entered into by one or more of several partners in the trading name of the firm, or is expressed to be made by them on behalf of the firm, or in their own names, without mention of the co-partnership, all the partners are individually liable upon such contracts, and may be sued thereon, whether their names do or do not appear upon the face of the written instrument. They stand in the same position as an undisclosed principal who has entered into a simple contract in writing inter partes in the name of an agent, and who may, as we have already seen, sue and be sued upon such contract, al (m) Kenyon, C. J., Saville v. Robertson, 4 T. R. 726. Smith v. Craven, 1 Cr. & J. 500. Greenslade v. Dower, 7 B. & C. 638. (n) Hawken v. Bourne, 8 M. & W. 710. (o) Bell's Comm. 611, ed. 1826. though he is not mentioned therein, and does not appear upon the face of it to be the really contracting party. (p) But this liability is confined to contracts made by such partner in the execution of the ordinary business of the co-partnership, and for the benefit of the firm at large, as one partner is not of course liable upon the private and particular contracts and engagements of another partner made out of the scope of his ordinary authority, or made by him for his own individual benefit alone, and known by the plaintiff at the time not to be a partnership transaction. (q) The same rule prevails in the French law, "The signature and company,'" observes Pothier, "does not oblige my partners, if it appears by the very nature of the contract that it does not concern the affairs of the partnership, as if I have placed that signature at the end of a lease of an estate which belongs to me, and not to the partnership. When the partner has not signed and company,' he is deemed to have contracted about his own private affairs, and does not bind his partners, unless the creditor can bring forward evidence to show that he contracted in reality on account of the partnership, and that the contract actually related to the business of the co-partnership." (r) Bills of exchange and promissory notes.—A partner in a mercantile or trading firm may draw, (s) accept, (t) or indorse (u) bills of exchange and promissory notes in the trading name of the firm so as to bind the partnership, because the drawing, accepting, and negociating bills and notes is usual and necessary for the purpose of carrying on the trade and business of a mercantile firm. "It would be a strange and novel doctrine,” observes Lord Ellenborough, " to hold it necessary for a person receiving a bill of exchange, indorsed by one of several partners, to apply to each of the other parties to know whether he has assented to such an indorsement; or otherwise that it should be void. There is no doubt that in the absence of all fraud on the part of the indorsee such indorsement would bind all the partners." (x) Every one of the partners, therefore, is liable upon such bills or notes, whether his individual name is or is not used in the collective name of the firm, and whether it does or does not appear upon the face of the instrument, and whether such partner is a dormant and secret, or a known and active member of the co-partnership; and whether the proceeds of such bill or note are dedicated and applied to (p) Ante, 374-376. Beckham v. Knight, 1 Sc. N. R. 143. Trueman v. Loder, 11 Ad. (s) Pinkney v. Hall, 1 Raym. 175, Salk. Baker v. Charlton, 1 Peake, 111. (t) Anon. Styles, 370. Sutton v. Gregory, 2 Peake, 151. (u) Swan v. Steele, 7 East, 210. Thicknesse v. Bromilow, 2 Cr. & J. 425. (x) Swan v. Steele, 7 East, 212. partnership purposes, or to the private use of the individual partner. (y) Thus where one of the acting partners of a firm, in order to obtain a loan of money from a banker, accepted a bill in the name of the firm, and then applied the money to his own private use, it was held that a secret partner, not known at the time of the acceptance to be a partner in the firm, might be sued upon the bill. (z) So where a bill was indorsed by a partner in the trading name of the firm, it was held that a person not known to be a partner at the time of the indorsement might be sued upon the instrument. (a) "There is no doubt," observes Lord Ellenborough," that in the absence of all fraud on the part of the indorsee, such an indorsement would bind all the partners. There may be partnerships where none of the existing partners have their names in the firm. Third persons may not know who they are; and yet they are all bound by the acts of any partners in the name of the firm or partnership." (b) But if the taker or holder thereof knew at the time he received the bill or note that the transaction was not a partnership transaction, but the private affair and dealing of the single partner, the other members of the firm would not of course be liable thereon. (c) But the bill, or note, in order to bind the partnership, must be made, accepted, or indorsed in the trading name, style, or description of the firm, or in some adopted name, recognized and used by the partnership in its dealings and ordinary course of business; or if made, accepted, or in dorsed by the one partner in his own name, the drawing, acceptance, or indorsement must be expressed to be made by him for, and as the act of, the firm at large. If it appears upon the face of the contract that it is a partnership contract, all the partners are responsible upon it. Thus, where one of two partners in trade made his promissory note in writing, and promised for himself and James Baily, his partner, to pay a sum of money to the plaintiff for value received, and then signed the note in his own name, it was held that the promise for himself and partner to pay the money showed sufficiently that he had signed the note for himself and partner, and that both consequently were liable to be sued thereon. (d) So where a promissory note, signed by a member of a firm in partnership was (y) Bayley, B., 1 Cr. Ashby, 2 B. & Ad. 23. & J. 318. Lloyd v. 1 Cr. & J. 316; 1 Tyr. 216, s. c. Vere v. (2) Wintle v. Crowther, 1 Cr. & J. 316; 1 Tyr. 216, s. c. (a) Vere v. Ashby, 10 B. & C. 288. (e) 10 B. & C. 296-298. Wells v. Masterman, 2 Esp. 731. (d) Smith v. Jarvis and Baily, 2 Raym. 1484; 11 Mod. 401. |