silk lace-maker, and that B should manage the business and receive half the profits as soon as any accrued, and should, in the meantime, be paid 27. a week. It was held that so long as the 27. per week continued payable, there was no partnership. (e) articles to be On the other hand, where two persons agreed to become partners from a subsequent day, upon certain terms to be em- Partnership bodied in a deed to be executed on that day, it was drawn up. held that the partnership began on the day mentioned, although the deed was not executed until afterwards, and although alterations were made in it immediately before its execution. (f) In this case, however, the parties did in fact commence business as partners on the day named, and it was wholly immaterial (as regarded the question before the Coùrt) what the terms of the partnership were. *31 companies not on Holmes v. Higgins; and contra. Lucas v. Beach, *(b) Application of the principle to joint-stock companies. Promoters of companies are not partners; they are, it is true, engaged in a common object, and that object is ulti- Promoters of mately to share profits; but their immediate object is partners. the formation of a company, and they are only in the position of persons who intend to become partners after the company is formed.' It was indeed said, in Holmes v. Higgins (9), that the Observations projectors of a railway were partners, they being associated for the purpose of procuring the act of Parliament necessary to form the company, and subscribing money for that purpose; and, in Lucas v. Beach (h), the Court held that persons associated for the purpose of passing a turnpike act, and who had subscribed for shares in the proposed road, were partners. But in each of these cases the real question was, whether the plaintiff was entitled to recover from the defendants by virtue of any implied contract, any remuneration for services rendered by him for the joint benefit of himself and them, It was held that he was not; and if the Court had likened the case to one of partnership, instead of saying that the plaintiff and the defendants were partners, there would be no room for criticism. As it is, however, the cases are apt to be considered, and are sometimes cited, as authori(g) 1 B. & C. 74. (e) See, too, Ex parte Hickin, 3 De G. & S. 662. (f) Battley v. Lewis, 1 Man. & Gr. 155; and see Wilson v. Lewis, 2 Ib. 197. 1See ante, p. 4, note. (h) 1 Man. & Gr. 417. Barnett v. Lambert, 15 M. & W. 489, was a similar case. ties for the proposition that persons engaged in passing through Parliament, bills to authorize the establishment of a company, are partners. In Lucas v. Beach it was asked in argument, "What is there to prevent a number of individuals from entering into a partnership with the limited object, in the first instance, of procuring an act of Parliament, and with an ulterior object in view when the act has passed?" (2) The answer is, that to call persons so associ ated partners is to ignore the difference between a contract of partnership and an agreement to enter into such a contract, to confound an agreement with its result, and to hold persons to be partners although they have not yet acquired any right to share profits. It cannot be contended that the right to share profits would, *under such an agreement as is supposed, accrue before the passing of the act, and if not, how can the parties to such. an agreement be partners at an earlier period? *32 ties. For these reasons it is conceived that Holmes v. Higgins and Lncas v. Beach, cannot be relied upon as authorities on the question of Later authori- partnership or no partnership. (k) Nor are they on this point reconcilable with later decisions. In Reynell v. Lewis (7), and Wyld v. Hopkins (7), in which the question was much discussed, it was held that no partnership subsisted between persons who had subscribed for the purposes of forming a railway company and of procuring the necessary act of Parliament; and this, which is the correct doctrine, was also distinctly stated by Lord Cranworth, in Capper's case (m), and has been recognized on many other occasions. (n) Subscribers to It is a necessary result of the principles established above that persons associated for the purpose of forming a jointpanies not part stock company are not partners. (o)' They clearly are inchoate com ners. (i) See, too, Lord Brougham in Hutton v. Upfill, 2 H. L. C. 691. (k) They are authorities for the point actually decided, viz., that a person doing work for the joint benefit of himself and others, cannot recover compensation from them by virtue of any implied promise to pay him. (7) 15 M. & W. 517. (n) e. g. Batard v. Hawes, and Batard v. Douglas, 2 E. & B. 287; Walstab v. Spottiswoode, 15 M. & W. 501; For rester v. Bell, 10 Ir. Law R. 555; Hutton v. Thompson, 3 H. L. C. 161; Bright v. Hutton, 3 H. L. C. 368; Hamilton v. Smith, 5 Jur. N. S. 32; Norris v. Cottle, 2 H. L. C. 647; Besley's case, 3 Mac. & G. 287; Tanner's case, 5 De G. & S. 182. (0) Wood v. Argyll, 6 Man. & Gr. 928; Hamilton v. Smith, 5 Jur. N. S. 32; Hutton v. Thompson, 3 H. L. C. 161; Bright v. Hutton, Ib. 368. 'See ante, page 4, note. not partners in the company to be formed; and for reasons already given they cannot be considered as members of a partnership formed to start the company. It also follows from the same principles, that if persons enter into an agreement to take shares in a company formed Conditional, for certain purposes and upon certain conditions, those contract. persons are not bound to take shares in a company formed for dif ferent purposes or upon other conditions; and are not partners in such a company, unless they have accepted shares therein and precluded themselves from objecting to the variation of their agreement. A leading case on this subject is Fox v. *Clifton (p), which, with other cases of the same class, will be adverted to hereafter, when the formation of companies, and the question who are contributories when companies are being wound up, are discussed. (2) *33 SECTION II.-OF QUASI-PARTNERSHIPS. Quasi- partner Having now examined the nature of those agreements, which are, properly speaking, contracts of partnership, it is necessary to advert to the doctrines by virtue of which per- ships. sons who are not partners at all, are nevertheless made subject to liabilities as if they were partners. In other words, it is necessary to explain what it is that creates a quasi-partnership, or, as it is usually called, a partnership as regards third persons.' This will. involve an examination of the liability which a person incurs 1. By sharing profits. 2. By holding himself out as a partner. 1. By sharing profits. In the year 1775, De Grey, C. J., laid down the proposition in (p) 6 Bing. 776. (4) See infra, book i. Chap. 5, § 1; and book iv., under the head Contributories. 'To charge a defendant as a partner, one of two things is necessary: either he must have permitted his name to be used as one of the firm, thereby holding it out as a security to the community, or he must have participated in the profit or loss. Osborne v. Brennan, 2 Nott & M. 427. Grace v. Smith (r), that "every man who has a share of the profits of a trade, ought also to bear his share of the loss." Eighteen years afterwards, viz., in 1793, this doctrine was discussed and approved in the celebrated case of Waugh v. Carver (8); and ever since that time until 1860 it was considered as clearly established, that by the law of England, all persons who shared the profits of a business incurred the liabilities of partners therein, although no partnership between themselves might have been contemplated. Subtle distinctions were drawn between sharing net (r) 2 Wm. Blacks. 998. See Rowland v. Long, 45 Md. 439, where the evidence showed that there was to be a division of profits, but did not disclose in what proportion; Manhattan Brass, &c. Co. v. Sears, 45 N. Y. 797, where the business was to be carried on in the name of one party, and the agreement was expressed not to be for any purpose of business, or manufacture or partnership; Pratt v. Langdon, 12 Allen, 544, where L. bought a stock of goods with fixtures and furniture, hired the building, and agreed with W. that W. should conduct the business in his own name, pay all the bills and a certain portion of the purchase-money, keep the stock good by new purchases, and, if anything was left after such disbursements, the residue of the proceeds was to be equally divided between them, L. to have the right to take possession at any time, and it was held that L. was liable as a partner for debts contracted by W. in conducting the business; Everett v. Chapman, 6 Conn. 347, where a stipulated division of the manufactured articles was considered equivalent to a participation in the profit and loss. Persons who jointly participate in the profits of trade or business, ostensibly carried on by another for his sole use and benefit, are equally liable, when discovered, with the ostensible and active owner to all creditors of the concern whose debts were contracted during the time of such participation, without knowledge of the same, or of the actual relations between the parties at the time the credit was given; and that liability exists notwithstanding the parties may have privately stipulated that they shall not be partners, and in contemplation of law really are not such as between themselves. Bigelow v. Elliott, 1 Cliff. 28. An oral contract between S. (an army sutler), and D. was subsequently reduced to writing, which stated that “D agreed to furnish the capital and procure a stock of goods necessary to commence and carry on the business of sutler as contemplated, which he is hereby acknowledged to have done." S. was to give his personal attention and time to the business; and the profits, after re-paying D.'s advances, were to be divided between the parties: Held, that D. was merely to advance sufficient capital to procure the original stock, and purchases subsequent to the date of said written instrument were to be made from the proceeds of goods already sold; that S. having carried on the business in his own name and not as agent or employe of D. and being interested in the profits as such, was liable as a partner to persons of whom goods were subsequently purchased. Appleton v. Smith, 24 Wis. 331. See, also, to the point that participation in profits constitutes partnership as to third parties: Sheridan v. Medara, 10 N. J. Eq. 469; Bromley v. Elliot, 38 N. profits and gross returns; and between sharing net profits and payments varying with them; but it was taken for granted, both by judges and text writers, that where there was no statutory enactment to the *contrary, if net profits. were shared, it necessarily followed that liabilities were in H. 287; Cushman v. Bailey, 1 Hill, 526; Oakley v. Aspinwall, 2 Sandf. 7; Catskill Bank v. Gray, 14 Barb. 471; Motley v. Jones, 3 Ired. Eq. 144; Wood v. Vallette, 7 Ohio St. 172; Lengle r. Smith, 48 Mo. 276; Williams v. Gillies, 53 How. Pr. 429; Sager v. Tupper, 38 Mich. 258; Strader v. White, 2 Neb. 348; Taylor v. Terme, 3 H. & J. 505; Noyes v. Cushman, 25 Vt. 390; Craig v. Alverson, 6 J. J. Marsh, 609; Everett v. Coe, 5 Den. 180. See, however, post, p. 34, note. An agreement between one partner and a third person, that the latter shall participate in such partner's share of the profits of the firm, as profits, renders him liable as a partner to the creditors of the firm, although as regards the other members of the firm he is not their co-partner. Fitch v. Harrington, 13 Gray, 468. An agreement was made between several that certain of their number should be named as co-partners in partnership articles, and that the other should have a certain proportion of the interest of certain of those so named, which agreement was carried into effect: Held, it appearing that it was the mutual desire of all that those not named in the articles should be interested as partners, and that it was their common opinion that the interest of the firm would be best subserved by those not to be named in the articles, not appearing to the world as partners; and it also appearing that the above mode was adopted to accomplish the desired result; that it was the intent of all the parties, including Snyder, that he should, as between themselves, have the *34 interest of a partner; and that the form of the written contracts, drawn and executed, could not prevent the liability of a partner attaching to Snyder, as between him and third persons dealing with the firm while this relation existed. Burnett v. Snyder, 13 Jones & Sp. 577. But, although participation in the profits of a firm is enough, in most cases, to render a man a partner, yet it gives him no title to the capital stock, if his interest be merely in the profits. Bartlett v. Jones, 2 Strobh. 471. Where one who held a contract for the construction of a railway, assigned it to trustees to execute it and divide the profits among certain persons: Held, that the assignor, the trustees, and the persons receiving the profits, with notice of the trust, were personally liable as partners. It was not material that the cestuis que trust were described as the stockholders in a coporation, nor that the corporation guaranteed all persons from liability in the execution of the contract; nor that the corporation agreed to advance funds and receive a commission; nor that part of the work had been done by the corporation in the expectation that the contract would be transferred to it, and the contractor agreed with the railway company to pay the corporation for the work that had been done. These circumstances could not make the contract the property of the corporation, nor render the profits corporate property. Credit Mobilier v. Commonwealth, 67 Pa. St. 233. A contract for one to furnish factory and materials, and another to manufacture, and either to sell the product, and the proceeds to be divided, con |