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 One of the Greatest Legal Works of the Day. 
 
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 ENCYCLOPAEDIA 
 
 OF 
 
 FORMS & PRECEDENTS 
 
 BY SOME OF 
 
 The most Eminent Conveyancing and Commercial Counsel. 
 
 UNDER THE GENERAL EDITORSHIP OF 
 
 ARTHUR UNDERHILL, M.A., LL.D., 
 
 One of the Conveyancing Ccjunsel to the Court, 
 Author of " Tlir Law of Truxtx." and "J. Treatise on the Settled Land Aclsy etc.: 
 Editor of " Fisher on Mortgage." 
 
 ASSISTANT Editors : 
 HAROLD B. BOMPAS, of the Inner Temple, and 
 
 HUMPHREY H. KING, B.A., LL.B., of Lincoln's Inn, 
 Barristers-at-La\v. 
 
 Witli tlie Assistance of tlie following CONSULTING EDITORS, wlio Lave consented lo give tlieir 
 Advice on any Points of i>itliculty tliat may arise. 
 
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 Author of -The Hpeaflc rerformavce of „f T.incoln'sinn, Barrister-at-Law, 
 
 Contracts, 1S99. , „ ^ „„ ^ \. -r ,, , ,™ 
 
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 Editor of" Lnmleij-s FuUic Health." J. BRADLEY DYNE, 
 
 T H CARSON K C *^"® "^ "^''^ Conveyancing Counsel to the Court. 
 
 Editor of "Tudor^s Leading Cases on ^^ ^ COPINGER, LL.D., 
 
 Conveyancing, etc. ' -^'-'■^■f 
 
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 Of the Jliddle Temple, Barrister-at-Law, Conveyancing," etc. 
 Author of "Tlie Law of Settlements." 
 
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 ( 2 )
 
 PEINCIPLES OF THE LAW 
 OF PARTNEKSHIP.
 
 PRINCIPLES OF THE 
 
 LAW OF PAKTNEESHIP. 
 
 BY 
 
 AETHUR UNDERHILL, M.A., LL.D., 
 
 OF Lincoln's inn, barrister-at-law ; 
 
 ONE OF THE CONVEYANCINO COUNSEL OF THE HIGH COURT OF JUSTICE ; 
 
 Sometime Reader of the Law of Property and Conveyancing in the Inns of Cov/rt ; Author 
 
 of a "Treatise on the Law of Private Trusts," etc. ; Joint Author of a "Treatise 
 
 on the Principles of the Interpretation of Wills and Settlements " ; 
 
 and Editor of the 5th Edition of "Fisher on Mortgage," and 
 
 of the " Encyclopcedia of Forms and Precedents." 
 
 SECOND EDITION. 
 
 LONDON: 
 
 BUTTERWOETH & CO., 11 & 12, Bell Yard, Temple Bar. 
 Xaw ffi>ubl(6ber0. 
 
 1906.
 
 BRADBURY, AGNEW, & CO. LD., PRINTERS, 
 LONDON AND TONBRIDGE 

 
 PREFACE. 
 
 This Treatise makes no pretence to the position of a 
 text book. It is merely a broad sketch giving the salient 
 features of the subject. For the finished picture, with its 
 wealth of detail, the reader must turn to the elaborate work 
 of Lord LiNDLEY. But although a sketch is necessarily a 
 humble work, like other humble things it has its uses. By 
 excluding complex details, it accentuates and brings into 
 greater relief those principal features of the landscape upon 
 which its character depends. So in students' law books, if 
 one can generalise the "wilderness of single instances" 
 embalmed in the reports, and extract therefrom i.ome broad 
 principles — if one can, as Bacon puts it, rather excite the 
 judgment briefly than inform it tediously — the work will 
 not be altogether useless. For these reasons it is hoped 
 that law students and commercial men may find in this 
 little book a readable and concise, and it is believed 
 an accurate view of the main principles of the law of 
 partnerships. 
 
 For the convenience of practitioners an Appendix has 
 been added to this Edition, containing a print of the 
 Partnerships Act, 1890. 
 
 Need I make acknowledgment of my indebtedness to 
 Lord LiNDLEY? It goes without saying. No one who
 
 VI PREFACE. 
 
 ventures to express any opinion on partnership law can 
 be otherwise than grateful for his monumental work. 
 Also, I wish to say how much assistance I have derived 
 from Sir Fkedbrick Pollock's book on the subject, and 
 from the very able and concise article of His Honour 
 Judge LiNDLEY in that excellent compendium, the 
 EncyclopaBdia of English Law. 
 
 A. U. 
 
 5, New Square, Lincoln's Inn. 
 January, 1906.
 
 CONTENTS. 
 
 CHAPTEE I. 
 The Essential Elements of Partnership. 
 
 PAGE 
 
 (1.) Introductory 1 
 
 (2.) Definition of Partner 2 
 
 (3.) There must be a Business 3 
 
 (4.) The Business must be Camed on with a View of Profit .... 6 
 
 (5.) And by or on Behalf of the Alleged Partners 6 
 
 (6.) General Result of the Decisions on Profit Sharing 21 
 
 CHAPTER II. 
 
 The Creation of a Partnership. 
 
 (1.) Illegal Partnerships 25 
 
 (2.) Personal Capacity 30 
 
 (3.) How far a Written Agreement is Required 36 
 
 (4.) What Matters should be Settled by the Agreement 38 
 
 CHAPTER in. 
 
 The Relation of Partners to Persons Dealing with 
 Them. 
 
 (1.) Test of Liability is the Apparent as Distinguished from the 
 
 Actual Authority of each Partner 53 
 
 (2.) What Acts are within the Apparent Authority of a Partner 56 
 
 (3.) LiabiHty for Torts . . 60 
 
 (4.) When Liability Joint and when Joint and Several 69 
 
 (5.) Duration of the Liability 71 
 
 (6.) Doctrine of " Holding Out" 74 
 
 (7.) Continuance of the Agency after Dissolution 76
 
 viii CONTENTS. 
 
 PAGE 
 
 CHAPTER IV. 
 
 The Eelation of Partners to One Another. 
 
 (1.) Utmost Good Faith between Partners is an Implied Term of 
 
 every Partnership Agreement 78 
 
 (2.) Terms as to Management implied where not Expressly 
 
 Negatived or Modified 81 
 
 (3.) Terms as to Capital, Profits and Losses implied where not 
 
 Expressly Negatived or Modified 84 
 
 (4.) Implied Terms as to Indemnification of Partners 88 
 
 (5.) Partnership Property as Distinguished from Property of the 
 
 Individual Partners 89 
 
 (6.) Devolution of Partnership Property 97 
 
 (7.) Voluntary and Involuntary Alienations of a Partner's Share 
 
 in Profits and Assets 98 
 
 CHAPTER V. 
 
 The Dissolution of the Firm. 
 
 (1.) Dissolution without having Recourse to the Court 101 
 
 (2.) Judicial Dissolution 102 
 
 (3.) Comments on Both Methods of Dissolution 103 
 
 (4.) Return of Premium on Dissolution 108 
 
 (5.) Points after Dissolution 109 
 
 (6.) Realisation of the Assets 113 
 
 (7.) Final Settlement of Accounts and Distribution of Assets 117 
 
 CHAPTER VI. 
 The Insolvency of All or Some of the Partners. 
 
 (1.) Proofs Against the Joint and Separate Estates where all the 
 
 Partners are Insolvent 125 
 
 (2.) Proofs of Solvent Partners Against the Estate of a Bankrupt 
 
 Co-Partner 134 
 
 APPENDIX 
 
 The Partnership Act, 1890 141
 
 TABLE OF STATUTES. 
 
 PAGE 
 
 29 C. '. 2, c. 3 (Statute of Frauds) o3 
 
 8 ^, 9 Vict. c. 109 (Gciming Act, 1845) 27 
 
 16 & 17 Vict. c. 119 (Betting Act, 1853) I'l 29 
 
 s. 1 28 
 
 17 & 18 Vict. c. 113 (Locke King's Act, 1854) 88 
 
 20 & 21 Vict. c. 85 (Matrimonial Causes Act, 1857)— 
 
 s. 25 32 
 
 s. 26 32 
 
 21 & 22 Vict. c. 108 (Matrimonial Causes Act, ''358). ss. 6-10 32 
 
 25 & 26 Vict. e. 89 (Companies Act, 1862), s. 4 25 
 
 28 & 29 Vict. c. 86 (Bovill's Act) 8, 9, 10, 11 :'8, 20, 45 
 
 s. 1 8 14 15 
 
 s. 5 139, 40 
 
 38 & 39 Vict. c. 77 (Supreme Court of Judicature Act. 1875), s. 10 127 
 
 45 & 46 Vict. c. 75 (Mr.rried Women's Property Act, 1882) ...30, 32, 106, 107 
 
 s. 1 (2) .0 
 
 (5) 31 
 
 46 & 47 Vict. c. 52 (Bankruptcy Act, 1883) — 
 
 s. 37 (1) 128, 129 
 
 s. 40 (3) 126, 127 
 
 Schedule 2, Article 18 131 
 
 53 & 54 Vict. c. 5 (Lunacy Act, 1890)— 
 
 s. 116 (4) 106 
 
 s. 119 106 
 
 s. 341 106 
 
 c. 39 (Partnership Act, 1890) 2, 7, 18, 19, 21, 89, 109 
 
 s. 1 1, 141 
 
 s. 2 7, 18, 21, 93, 141 
 
 (1) 4, 93, 94 
 
 (2) 6 
 
 (3) 18, 19, 20 
 
 s. 3 138, 142 
 
 s. 4 143 
 
 s. 5 53, 55, 57, 143 
 
 s. 6 60, 143 
 
 s, 7 57, 143 
 
 s. 8 54, 143 
 
 s. 9 144 
 
 s. 10 61, 62, 144 
 
 s. 11 61, 144 
 
 s. 12 144 
 
 s. 13 144 
 
 s. 14 144 
 
 s. 15 145 
 
 s. 16 145
 
 TABLE OF STATUTES. 
 
 PAGE 
 
 63 & 54 Vict. c. 39 (Partnership Act, 1890)— 
 
 s. 17 145 
 
 s. 18 145 
 
 s. 19 81, 145 
 
 s. 20 89, 91, 146 
 
 (2) 93, 98 
 
 (3) 95, 96 
 
 s. 21 89, 90, 146 
 
 s. 22 89, 97, 146 
 
 s. 23 89, 100, 146 
 
 s. 24 81, 83, 147 
 
 (1) 85 
 
 (2) 88 
 
 (3) 87 
 
 (5) 81 
 
 (6) 81 
 
 (7) 83, 99 
 
 (8) 83 
 
 (9) ^ 84 
 
 s. 25 83, 148 
 
 s. 26 40, 148 
 
 s. 27 40, 148 
 
 s. 28 148 
 
 s. 29 148 
 
 s. 30 148 
 
 s. 31 83, 149 
 
 (1) 99 
 
 s. 32 41, 101, 105, 149 
 
 (2) 102 
 
 s, 33 149 
 
 (1) 101, 102 
 
 s. 34 102, 149 
 
 s. 35 36, 102, 149 
 
 s. 36 150 
 
 s. 37 no, 150 
 
 s. 38 151 
 
 s. 39 113, 151 
 
 s. 40 109, 151 
 
 s. 41 108, 151 
 
 s. 42 152 
 
 (1) 120 
 
 (2) 120 
 
 s. 43 121, 152 
 
 s. 44 86, 152 
 
 s. 45 5, 153 
 
 s. 46 153 
 
 s. 47 153 
 
 s. 48 153 
 
 s. 49 153 
 
 s. 50 153 
 
 56 & 57 Vict. c. 63 (Married Women's Property Act, 1893) 30, 32 
 
 s. 1 31 
 
 60 & 61 Vict. c. 65 (Land Transfer Act, 1897) 98
 
 TABLE OF CASES CITED. 
 
 A. 
 
 PAGE 
 
 Aas?;. Benham, [1891] 2 Ch. 244; 65 L. T. 25 79, 80, 81 
 
 Abbott V. Smith, 2 W. Bl. 947 71 
 
 Adam v. Newbigging, 13 A. C. 308 ; 57 L. J. Ch. 1066 ; 59 L. T. 267 ; 
 
 37 W. R. 97 22, 108 
 
 Adams v. Baiikait, 1 C. M. & R. 681 ; 5 Tyr. 425 ; 1 Gale 48 ; 4 L. J. 
 
 Ex. 69: 40 R. R. 670 59 
 
 Adamsou, Ux parte, 8 Ch. D. 807 ; 47 L. J. Bk. 106 ; 38 L. T. 920 ; 26 
 
 W. R. 892 129 
 
 V. Jarvis, 4 Bing. 66 ; 5 L. J. (o.s.) C. P. 68 88 
 
 Airey v. Borham, 29 Beav. 620 ; 4 L. T. 391 82 
 
 Albion Life Assurance Society, He, 16 Ch. D. 83 ; 43 L. T. 524 ; 29 
 
 W. R. 109 86 
 
 Aldridge, Ee, [1894] 2 Ch. 97 ; 63 L. J. Ch. 465 ; 8 R. 189 ; 70 L. T. 
 
 724 ; 42 \V. R. 409 82 
 
 Allen t;. Kilbre, 4 Madd. 464 Ill 
 
 Arbuckle V. Taylor, 3 Dowl. P. C. 160 65 
 
 Arundell v. Befl, 52 L. J. Ch. 537 ; 49 L. T. 345 ; 31 W. R. 477 116 
 
 Atkins, JEx parte. Buck. 479 138 
 
 Atwood u. Maude, 3 Ch. Ajip. 369; 16 W. R. 665 109, 110 
 
 Austen v. Boys, 2 De G. & J. 626 ; 27 L. J. Ch. 714 ; 4 Jur. (N.s.) 719 ; 
 
 6 W. R. 729 116 
 
 Austin V. Jackson, 11 Ch. D. 942, n 122 
 
 B. 
 
 Badelev v. Consolidated Bank, 38 Ch. D. 238 ; 57 L. J. Ch. 468 ; 59 
 
 L.'T. 419 ; 36 W. R. 745 17, 19, 24, 139 
 
 Badham v. Williams, 86 L. T. 191 , 48, 49 
 
 Baker's Case, 1 Dr. & Sm. 55 89 
 
 Bank of Australasia i;. Breillat, 6 Moo. P. C. 152; 12 Jur. 189 58 
 
 Barber, Ex parte, 5 Ch. App. 687 ; 23 L. T. 230 ; 18 W. R. 940 119 
 
 Barden v. Keverberg, 2 M. & W. 61 ; 2 Gale 201 ; 6 L. J. Ex. 66 32 
 
 Barfield v. Loughborough, 8 Ch. App. 1 ; 42 L. J. Ch. 179 ; 27 L. T. 
 
 499 ; 21 W. R. 86 ^ 87 
 
 Barnes v. Youngs, [18981 1 Ch. 414; 67 L. J Ch. 263; 46 W. R. 
 
 332 '. 79, 105 
 
 Barnett v. Howard, [1900] 2 Q. B. 784 ; 69 L. J. Q. B. 955 ; 83 L. T. 
 
 301 31 
 
 Bate u Robbins, 32 Beav. 73 87 
 
 Beard v. Webb, 2 B. & P. 93 32 
 
 Beckham v. Drake, 9 M. & W. 79 ; 11 L. J. Ex. 201 ; 60 R. R. 678 ... 58 
 Belfield v. Bourne, [1894] 1 Ch. 521 ; 63 L. J. Ch. 104 ; 8 R. 61 ; 69 
 
 L. T. 786; 42 W. R. 189 105, 10»
 
 XU TABLE OF CASES CITED. 
 
 PAGE 
 
 Beningfield v. Baxtei 12 i^. C. 167 ; 56 L. J. P. C. 13 ; 56 L. T. 127... 120 
 Berkeley v. Hrrdv, 5 E. ft C. 35'. ; ?9 li. R. ",6 1 ; 8 D. & R. 102 ; 4 L. J. 
 
 (o.s.) IT. B. lt.4 59 
 
 Betjemaun ,,. BetjemaiiD [1395J 2 Cb. 474; 64 L. J. Ch. 641 • i2 R. 
 
 455; /o L. T. 2- 44 *V. R. ^C^ 121 
 
 Bevan v. We'ob, r'QOn • Ch. 7"4 • :0 L. J. Ch. 536 ; 8<1 L. T. 609 ; 49 
 
 W. n. 548 84 
 
 V. ri905] 1 Ch. 620 ; 93 L. T. 298 : 74 L. J. Ch. 300 ; 53 
 
 W. R. 651 80 
 
 BisnolcL k'n parte. 22 Beiv. 143 89 
 
 Bilborou',h v. Holmes 5 C:?. D. 255 : 46 L. J. Ch. 4-16 ; ;^3 L. T. 75 ; 
 
 25 V. R. 297 73 
 
 Blyih V. Fladgate, [1891] ? Ch. 337 ; 00 L. i. Ch. 66 ; 63 L. T. 546 ; 39 
 
 W. R. 422 65 
 
 Bolitho & Co. V. Gidlev, []905] ii. C. 98 : 74 L. j. K. B. 430 • 92 L. T. 
 
 369 ; 53 W. R. 408 31 
 
 Bonbonus Ex parte. 8 Yes. 5^0 58 
 
 Bond V. Gibson, 1 Canap. N. P. 185 ; 10 R. R. 665 58 
 
 Bows V. Fenwick, L. R. 9 C. P. 339 ; -"S L. J. M. G. 107 ; 30 L.T. 524 ; 
 
 22W. R. 804 29 
 
 Brettel v. Williams, '' Ex. 623 ; 19 L. i. Er. i21 59 
 
 Brinsmead v. Brinsroead, 13 T. L. R. D 44 
 
 British Homes Assurance Corporation ". Paterson [1902] 2 Ch. 404 ; 71 
 
 L. J. Ch. 872 ; 86 L. T. 826 ; 50 W. R. 612 72 
 
 Brooks V. Brooks. 85 L. T. 453 41 
 
 Brown v. De Tastet, Jac. 234 ; 23 R. R. 59 82, 120 
 
 V. Dimbleby, [1904] 1 K. B. 28 ; 73 L. J. K, B. 35 ; 89 L. T. 424 ; 
 
 52 W.R. 53 31 
 
 Brown, Jansen & Co. v. Hutchinson ;- Co. (No. 2). [1895] 2 Q. B. 126 ; 
 
 64 L. J. Q. B. 619 ; 14 R. 485 ; 73 L. T. 8 ; 43 W. R. 545 100 
 
 BuUen u. Sharpe L. R. 1 C. P. 86 : 35 L. J. C. P. 105 ; 12 Jur. (n.s.) 
 
 247 ; 14 L. T. 72 ; 14 W. R. 338 ; 1 H. & R. 117 23 
 
 Burchell v. Wilde, [1900] 1 Ch. 551 ; 69 L. J. Ch. 314 : 82 L. T. 576 ; 
 
 48 W. R. 491 117 
 
 Burden v. Burden. 1 V. & B. 170 ; 12 R. R. 210 82 
 
 Burdon v. Barkus.' 4 De G. F. & J. 42 ; 31 L. J. Ch. 521 ; 8 Jm. (n.s.) 
 
 656 ; 7 L. T. 116 37, 89 
 
 Burgess v. Burgess, 3 De G. M. & G. 896 ; 22 L. J. Ch. 675 • 17 Jur. 
 
 292 44 
 
 Burt V. Bull. [1895] 1 Q. B. 276 ; 64 L. J. Q. B. 232 ; 14 R. 65 ; 7' L. T. 
 
 810 ; 43 W. R. 180 : 2 Manson 94 113 
 
 Bury V. Allen, 1 Coll. 580 ; 66 R. R. 200 136 
 
 Butchart v. Dresser. 4 De G. M. & G. 542 ; 10 Hare 453 58, 77 
 
 Byrne v. Reid, [1902] 2 Ch. 735 ; 71 L. J. Ch. 830 ; 87 L. T. 507 ; 51 
 
 W. R. 52 99 
 
 C. 
 
 Caddick v. Skidmore, 2 De G. & J. 52 ; 27 L. J. Ch. 153 ; 3 Jur. (n.s.) 
 
 1185: 6 W. R. 119 37 
 
 Carmichael v. Evans, [1904] 1 Ch. 480 ; 73 L. J. Ch. 329 ; 90 L. T. 573 : 
 
 20 T. L. R. 267 102 
 
 Carpenter, Ex parte, Mont. & McA. 1 135 
 
 Central Bank of London, Ex parte, [1892] 2 Q. B. 633 ; 67 L. T. 401 ; 
 
 9 Morrell 256 75, 76
 
 TABLE OF CASES CITED. XIU 
 
 PAGE 
 
 Chillingworth v. Chambei's [1896] 1 Ch. 685 • 6> L.J. Ch. 343 ; 74 L. T. 
 
 34; 44 W. R. 388 88 
 
 Chippendale, Ex parte, d De G. M. & G. <? ; 18 -mr. 710 87, 89 
 
 Cleather v. Twisden. 28 Cli. D. 340 ; 62 L. •'. 330 67 
 
 Clegg V. Edmoudsou, 8 De G. M. & C. 787 80 
 
 V. Fish wick, 1 M. & G. 294 • i H. C; Tw. 390 ; 19 L. J. Ch. ^-g : 
 
 10 Jur. 993 80 
 
 Clough, He, 31 Ch. D. 324 ; 55 L. J. Ch. 77 ; 53 L. T. 7^.6 ; V W. R. 
 
 96 58, 77 
 
 Collins V. Barker, 11893] 1 Ch. 578 ; 62 L. J. Ch. 316 • -i R. 23/ • 6C 
 
 L. T. 572 • 41 VV. K. 442 112 
 
 Colman v. Dry Doclc Co., 24 Sickels IT. Y. Reps. ^^O 63 
 
 Const V. Harris, T. & R. 514 : 24 R. R. 108 112 
 
 Cook, Ex parte, Mont. 228 133 
 
 Cooke V. Benbow, 3 De G. J. & S. i • 6 ISi. R. 'SJ 88 
 
 Court V. Berlin, [1897] 2 Q. B. 396 ; 6o L. J. Q. 8. 714 • 77 L. T. 293 ; 
 
 46 W. R. 55 59 
 
 Coventry v. Barclay, 3 De G. J. & fe. 320 t d IT. E. 224 ; 9 Jur. (n.s.) 
 
 1331 ; 9 L. T.'406 ; 12 W. R. 000 81 
 
 Cox V. Hickman, 8 H. L. C. 268 ; 9 C. B. (n.s.) 47 ; 30 L. J. C. ?. 125 ; 
 
 7 Jur.(N..s.) 105; 8 W. R. 75^1 7, 16 
 
 Crawley v. O'Sullivan. [1900] 2 Ir. 478 b7 
 
 Crawshay t). Maule, 1 Sw. 495 ; i VVils. 18' : 18 R. R. 126 £9- 105 
 
 Croft i>. Day, 7 Beav. 84; 64 R. R. 18 43 
 
 Cruttwell V. Lye, 17 Ves. 335 ; 7 R. R. 210 115 
 
 D. 
 
 Dagnall, Be, [1896] 2 Q. B. 407 ; 65 L. J. Q. E. 666 ; 75 L. T. 142 • 45 
 
 W. R. 79; 3Manson218 31 
 
 Dale V. Hamilton, 5 Hare 369 ; 16 L. J. Ch. 126 • , « Jur. 163 • 7 ■ R. R. 
 
 127 ; on appeal, 2 Ph. 266 ; 16 L. J. Ch. 397; t' Jur. 574 37 
 
 Darby v. Darby, 3 Drew. 495 ; 25 L. J. Ch. o71 • 2 Ja:. (n.s.) 271 ; 4 
 
 W. R. 413 94 
 
 David and Matthews, Be, [1899] 1 Ch. 378 • o3 L. J. Oh. 185 • GO L. T. 
 
 75 ; 47 W. R. 313 114. 116 
 
 Davies-y. Games, 12 Ch. D. 813 ; 28 W. R. 16 94, 06 
 
 V. Vale of Evesham Preseives, 43 W. R. 646 ; 73 L. T. 150 113 
 
 Davis V. Davis, [1894] 1 Ch. 393 ; 63 L. J. Ch. 219 ; 8 E, 133 ; 70 L. T. 
 
 265 ; 42 W. R. S02 7, 19, 93, 96 
 
 V. Hynian, [1903] 1 K. B. 854 ; 72 L. J. K. B. 426 ; 88 L. T. 284 • 
 
 51 W. R. 598 47 
 
 Daw V. Herring, [1892] 1 Ch. 284 ; 61 L. J. Cb. 5 ; 65 L. T. 782 ; 40 
 
 W. R. 61 114 
 
 Delhasse, Ex parte, 7 Ch. D. 511 ; 33 L. T. 106 ; 26 W. R. 338 14, 23 
 
 Derry v. Peake, 14 A. C. 337 ; 58 L. J. Ch. 864 : 61 L. T. 265 ; 38 
 
 W. R. 33; 54 J. P. 148; 1 Mag. 292 108 
 
 Dodson V. Downey, [1901] 2 Ch. 620 ; 70 L. J. Ch. 854 ; 85 L. T. 273 : 
 
 50 W. R. 57 100 
 
 Doggett V. Catterns, 19 C. B. (n.s.) 765 ; 34 L. J. 0. P. 159 ; 11 Jur. 
 
 (n.s.) 243; 12 L. T. 3.55 ; 13 W. R. 390 27 
 
 Doran v. Doran, 89 L. T. 272 113 
 
 Dore w. Wilkin.son, 2 Stark 287 58 
 
 Downs V. Collins, 6 Hare 418 114
 
 XIV TABLE OF CASES CITED. 
 
 PAGE 
 Dundonald v. Masterman, 7 Eq. 504 ; 38 L. J. Ch. 350 ; 20 L. T. 271 ; 
 
 17 W. R. 548 66, 67 
 
 Dunne v. English, 18 Eq. 524 ; 31 L. T. 75 80 
 
 E. 
 
 Elton, Ex parte, 3 Ves. 238 ; 3 R. E. 84 128 
 
 Evans v. Coventry, 8 De G. M. & G. 835 ; 26 L. J. Ch. 400 ; 5 W. R. 
 
 436 88 
 
 F. 
 
 Farhall v. Farhall, 7 Ch. App. 123 ; 41 L. J. Ch. 146 ; 25 L. T. 685 ; 20 
 
 W. R. 157 76 
 
 Farr v. Pearce, 3 Modd. 74 116 
 
 Fawcett v. Whitehouse, 1 R. & M. 132 ; 4 L. J. (o. s.) Ch. 64 ; 8 L. J. 
 
 (o. s.) Ch. 50 88 
 
 Featherstonhaugh v. Fenwick, 17 Ves. 298 ; 11 R. R. 77 114 
 
 Fergusson v. Fytie, 8 CI. & F. 121 87 
 
 Ferns v. Carr, 28 Ch. D. 409 ; 54 L. J. Ch. 478 ; 52 L. T. 348 : 33 
 
 W. R. 363 ; 49 J. P. 503 109 
 
 Fordyce's Case, 1 Cooke B. L. 562 132 
 
 Forster v. Hale, 5 Ves. 308 ; 4 R. R. 128 37 
 
 V. Mackreth, L. R. 2 Ex. 163 ; 36 L. J. Ex. 94 ; 16 L. T. 23 ; 
 
 15 W. R. 747 59 
 
 Fort, Re, [1897] 2 Q. B. 495 ; 66 L. J. Q. B. 824 ; 77 L. T. 274 ; 46 W. R.' 
 
 147 ; 4 Manson 239 21, 139 
 
 Fox -y. Hanbuiy, Cowp. 445 77, 111 
 
 Foxwell V. Van Grutten, [1897] A. C. 658 ; 66 L. J. Q. B. 745 ; 77 L.T. 
 
 170 ; 46 W. R. 426 1 
 
 de Francesco v. Barnum, 43 Ch. D. 165 ; 59 L. J.Ch. 151 ; 62 L. T. 40 ; 
 
 38 W. K. 187 ; 54 J. P. 420 31 
 
 Frances Handford & Co., Re, Times, 13th February, 1899 32 
 
 Franks, Ex parte, 7 Bing. 762 ; 1 M. & S. 1 32 
 
 Fremont v. Coupland, 2 Bing. 170 ; 9 Moore 319 ; 1 Car. & P, 275 ; 3 
 
 L. J. (o. a.) C. P. 237 ; 27 R. R. 575 93 
 
 G. 
 
 Gardner v. London, Chatham, and Dover Rail. Co., 2 Ch. App. 201 ; 36 
 
 L. J. Ch. 323 ; 15 L. T. 552 ; 15 W. R. 324 112 
 
 Garner v. Murray, [1904] 1 Ch. 57 ; 73 L. J, Ch. 66 ; 89 L. T. 665 ; 52 
 
 W. R. 208 86 
 
 Garwood v. Paynter, [1903] 1 Ch. 236 ; 72 L. J. Ch. 208 ; 51 W. R. 185 100 
 GiUingham v. Beddow, [1900] 2 Ch. 242 ; 69 L. J. Ch. 527 ; 82 L. T. 
 
 791; 64 J. P. 617 116 
 
 Ginesi v. Cooper, 14 Ch. D. 596 ; 49 L. J. Ch. 601 ; 42 L. T. 751 115 
 
 Goode V. Harrison, 5 B. & A. 147 ; 24 R. R. 307 34 
 
 Graham v. Hope, 1 Pea 154 ; 3 R. R. 671 74 
 
 Gray v. Smith, 43 Ch. D. 208 ; 59 L. J. Ch. 145 ; 62 L. T. 335 ; 38 
 
 W. R. 310 76 
 
 Greenslade v. Dower, 7 B. & C. 635 ; 31 R. R. 272 ; 1 M. & Ry. 640 ; 6 
 
 L. J. (0. s.) K. B. 155 ; 31 R. R. 272 59 
 
 Greenwood's Case, 3 De G. M. & G. 459 ; 23 L. J. Ch. 966 ; 18 Jur. 387 ; 
 
 2 W. R. 322 25
 
 TABLE OF CASES CITED. XV 
 H. 
 
 PAGE 
 
 Hamil v. Stokes, 4 Pr. 161 ; 18 R. R. 730 136 
 
 Hamilton v. Vaughan-Sherrin, etc. Co., [1894] 3 Ch. 589 ; 63 L. J. Ch. 
 
 795 ; 8 R. 750 ; 71 L. T. 325 ; 43 W. R. 126 34 
 
 Hamlyn v. Houston & Co., [1903] 1 K. B. 81 ; 72 L. J. K. B. 72 ; 87 
 
 L. T. 500 ; 51 W. R. 99 65 
 
 Handyside v. Campbell, 17 T. L. R. 623 103 
 
 Harman v. Johnson, 2 E. & B. 61 ; 3 Car. & K. 272 ; 22 L. J. Q. B. 297 ; 
 
 17 Jur. 1096 66, 67 
 
 Harris, £x parte, 2 V. & B. 210 ; 1 Rose 129, 437 ; 13 R. R. 65 136 
 
 V. Mansbridge, 17 T. L. R. 21 117 
 
 V. Sleep, [1897] 2 Ch. 80 ; 66 L. J. Ch. 511 ; 76 L. T. 458 ; 45 
 
 W. R. 536 82 
 
 Harrison v. Jackson, 7 T. R. 207 ; 4 R. R. 422 59 
 
 Hawksley v. Outram, [1892] 3 Ch. 359 ; 62 L. J. Ch. 215 ; 2 R. 60 ; 67 
 
 L. T. 804 20 
 
 Hayman. Ex parte, 8 Ch. D. 11 ; 47 L. J. Bk. 54 ; 38 L. T. 238 ; 26 
 
 W. R. 597 138 
 
 Head, JRe, [1893] 3 Ch. 426 ; 63 L. J. Ch. 35 ; 3 R. 712; V9 L. T. "753 ; 
 
 42 W. R.55 74 
 
 , He, [1894] 1 Q. B. 638 ; 63 L. J. Q. B. 206 ; 10 R. 115 ; 70 L. T. 
 
 35 ; 1 Manson 38 135 
 
 Hedley v. Bainbridge, 3 Q. B. 316 : 2 G. & D. 483 ; 11 L. J. Q. B. 293 59 
 
 Helsby, Re, 63 L. J. Q. B. 261 ; 10 R. 49 ; 69 L. T. 864 ; 1 Manson 12 31 
 Hewett, Be, [1895] 1 Q. B. 328 ; 64 L.J. Q. B. 185 ; 72 L. T. 60 ; 43 
 
 W. R. 237; 15 R. 162 32 
 
 Hill V. Fearis, [1905] 1 Ch. 466 ; 74 L. J. Ch. 239 ; 53 W. R. 457... 115, 116 
 
 Holme V. Hammond, L. R. 7 Ex. 218 ; 41 L. J. Ex. 157 ; 20 W. R. 747 23 
 
 Holroyd v. Griffiths, 3 Drew. 428 114 
 
 Honey, Ex parte, 7 Ch. App. 178 ; 41 L. J. Bk. 9 ; 25 L. T. 728 ; 20 
 
 W. R. 223 131 
 
 Hulton, Ee, 62 L. T. 200 95, 96 
 
 Imperial Loan Co. v. Stone, [1892] 1 Q. B. 599 ; 61 L. J. Q. B. 449 ; 66 
 
 L.T. 556; 56 J. P. 436 35 
 
 Isaacs V. Evans, 16 T. L. R. 113 37 
 
 J. 
 
 J. V. S., [1894] 3 Ch. 72 ; 63 L. J. Ch. 615 ; 8 R. 436 ; 70 L. T. 757 ; 42 
 
 W. R. 617 36 
 
 Jaegers, etc. Co. v. Walker, 77 L. T. 180 73 
 
 Jennings v. Hammond, 9 Q. B. D. 225 ; 51 L. J. Q. B. 493 ; 31 W. R. 40 4 
 
 V. Jennings, [1898] 1 Ch. 378 ; 67 L. J. Ch. 190 ; 77 L. T. 786 ; 
 
 46 W. R. 344 116, 117 
 
 Jones, Ex parte, Young, Ee, [1896] 2 Q. B. 484 ; 65 L. J. Q. B. 681 ; 75 
 
 L. T. 278 ; 45 W. R. 96 ; 3 Manson, 2]3 21, 139 
 
 , Ex parte, Jones, Ee, 18 Ch. D. 109 ; 50 L. J. Ch. 673 ; 45 L. T. 
 
 193; 29 W. R. 747 33 
 
 V. Lloyd, 18 Eq. 265 ; 43 L. J. Ch. 826 ; 30 L. T. 487 ; 22 W. R. 
 
 785 104, 105, 106 
 
 V. Noy, 2 M. & K. 125 ; 3 L. J. Ch. 14 ; 39 R. R. 160 35
 
 XVI TABLE OF CASES CITED. 
 
 K. 
 
 PAGE 
 
 Kendall v. Hamilton, 4 A. C. 504 ; 48 L. J. C. P. 705 ; 41 L. T, 418 ; 28 
 
 W. R. 97 70 
 
 Kilshaw v. Jukes, 3 B. & S. 847 ; 32 L. J. Q. B. 217 ; 9 Jui. (n. s.) 1231 ; 
 
 8L. T. 387; 11 W. R. 690 23 
 
 L. 
 
 Lane v. Williams, 2 Vern. 277 58 
 
 Langmead, He, 7 De G. M. & G. 353 ; 24 L. J. Cli. 589 ; 2 Jur. (n. s.) 
 
 1058 ; 3 W. R. 602 114 
 
 Law V. Law, [1905] 1 Ch. 140 ; 74 L. J. Ch. 169 : 92 L. T. 1 : 53 W. R. 
 
 227 .... JJ3 
 
 Laws V. Rand, 3 C. B. (N. s.) 442 ; 2', L. J. C. P. 76 ■ 4 Jai. (v s.) 74 ; 
 
 6 W. R. 127 59 
 
 Letts and Steer, Ex parte, 26 L. J. Cb. 455 : 5 W. R. 397 88 
 
 Levey, He, 4 De G. J. & S. 551 ; 34 L. o . B':. 13 ; "> ■ Jur. (n. s.) 210 ; 12 
 
 L. T. 3; 13W. R. 445 135 
 
 Levy V. Walker, 10 Ch. D. 436 ; 48 L. J. Ch. 273 ; 39 L. T. 654 : 2/ 
 
 W. R. 370 42 44, 117 
 
 Lewis V. Lewis, 45 Ch. D. 281 ; 59 L. J. Ch. 712 • o3 L. T. 34 ; S9 
 
 W. R. 75 44 
 
 Limpus V. General Omnibus Co.. 11 W. R. 149 ; 32 L. J. Ex. 34; 1 
 
 H. & C. 526 ; 9 Jur. (n. s.) 333 : 7 L. T. 641 64 
 
 Lodge and Feudal, Ex parte, 1 Ves. 166 • 1 R. R. 96 136 
 
 Lodge V. Prichard, 1 De G. J. & S. 610 : 32 L. ). Ch. 775 ; 9 Jur. (n.s.) 
 
 982 ; 9 L. T. 137 ; 11 W. R. 1086 127 
 
 Longton v. Wilsby, 76 L. T. 770 80 
 
 Lovell and Christmas v. Beauchamp. [18941 A. C. 607 ; 63 L. J. Q. B. 
 
 802 : 11 R. 45 ; 71 L. T. 587 ; 43 W. R. 129 : 1 Man.on 467 33 
 
 Lynes, Be, [1893] 2 Q. B. 113 ; 62 L.J. Q. B. 3,2; 4 R. 416 ; 08 L. T. 
 
 739 ; 41 W. R. 488 ; 10 Morrell 124 : 58 J. 2. o 31, 32 
 
 Lyon V. Knowles, 3 B. & S. 556 ; 32 L. J. Q. B. /I ; 9 Jur. (n.s.) 774 : 
 
 7 L. T. 670 : 11 W. R. 266 6 
 
 V. Tweddell, 17 Ch. D. 529 ; 50 L. J. Ch. 571 : <'4 L. T. 785 ; 29 
 
 W. R. 689 ; 45 J. P. 680 109 
 
 M. 
 
 Magdelena Steam Navigation Co., Ee, Johns. 690 ; 29 L. J. Ch. 617 ; 
 
 6 Jur. (n.s.) 975 ; 8 W. R. 329 87 
 
 Manchester and Milford Rail Co., Be, 14 Ch. D. 645 : 49 L. J. Ch. 365 ; 
 
 42 L. T. 714 112 
 
 Mara v. Browne, [1896] 1 Ch. 199 ; 65 L. J. Ch. 225 ; 73 L. T. 638 ; 
 
 44 W. R. 330 65 
 
 Marchant v. Morton Down & Co., [1901] 2 K. B. 829 ; 70 L. J. K. B. 
 
 820 ; 85 L. T. 169 59 
 
 Marsh v. Joseph, [1897] 1 Ch. 213 ; 66 L. J. Ch. 128 ; 75 L. T. 558 , 
 
 45 W. R. 209 60, 65 
 
 Martyn v. Gray, 14 C. B. (n.s.) 824 75 
 
 Maude, Ex parte, 2 Ch. App. 550 ; 16 L. T. 577 ; 15 W. R. 856 134 
 
 McClean v. Kennard, 9 Ch. App. 336 ; 43 L. J. Ch. 323 ; 30 L. T. 186 ; 
 
 22 W. R. 382 41 
 
 Mellerschr. Keen, 27 Beav. 236 82, 120
 
 TABLE OF CASES CITED. XVll 
 
 PAGE 
 
 Merchaut Banking Co. of London v. Merchant Joint Stock Bank, 9 Ch. 
 
 D. 560; 47 L. J. Ch. 828 ; 26 W. R. 847 42 
 
 Meymott v. Meymott, 31 Beav. 445 ; 32 L. J. Ch. 218 ; 9 Jur. (x.s.) 
 
 426 88 
 
 Moore v. Knight, [1891] 1 Ch. 547 ; 60 L. J. Ch. 271 ; 63 L. T. 831 ; 
 
 39 W. R. 312 61, 129 
 
 Morley, Bx parte, 8 Ch. Ajip. 1026 ; 29 L. T. 442 ; 21 W. R. 940 114 
 
 Morris v. Barrett, 3 Y. & J. 384 ; 53 R. R. 246 94, 96 
 
 Mott V. Consumers' Ice Co., 28 Sickels N. Y. Reps. 543 63 
 
 Mycock V. Beatson, 13 Ch. D. 384 ; 49 L. J. Ch. 127 ; 42 L. T. 141 ; 
 
 28 W. R. 319 108 
 
 N. 
 
 Neilson c. The Mossend Co., 11 A. C. 298 41 
 
 Newhigging i;. Adam, 34 Ch. D. 582 108 
 
 Newsome v. Coles, 2 Camp. N. P. 617 ; 12 R. R. 756 76 
 
 Niemann v. Niemann, 43 Ch. D. 198 ; 59 L. J. Ch. 220 ; 62 L. T. 339 ; 
 
 38 W. R. 258 59 
 
 North Chesliire and Manchester Brewery Co. v. Manchester Brewery 
 
 Co., [1899] A. C. 83 ; 68 L. J. Ch. 74 ; 79 L. T. 645 43, 44 
 
 0. 
 
 Olympia, Limited, Ee, [1898] 2 Ch. 153 ; 67 L. J. Ch. 433 ; 78 L. T. 
 
 629; 5 Manson 139 80 
 
 Owen V. Cronk, [1895] 1 Q. B. 265 ; 64 L. J. Q. B. 288 ; 14 R. 229 ; 2 
 
 Manson 115 113 
 
 P. 
 
 Padstow, etc. Association, Be, 20 Ch. D. 137; 51 L. J. Ch. 344 ; 15 
 
 L. T. 774; 30W. R.326 4 
 
 Paget'. Ratcliffe, 75 L. T. 371 82 
 
 V. 76L. T. 63 114 
 
 Pawsey v. Armstrong, 18 Ch. D. 698 ; 50 L. J. Ch. 683 ; 30 W. R. 469 114 
 
 Payne v. Hornby, 25 Beav. 280 114 
 
 Phillips v. Alhambra Palace Co., [1901] 1 Q. B. 59 ; 70 L. J. K. B. 26 ; 
 
 83 L. T. 431; 49 W. R. 223 73 
 
 Pinet et Cie v. Maison Louis Pinet, [1898] 1 Ch. 179 ; 67 L. J. Ch. 41 ; 
 
 77 L. T, 613 ; 46 W. B. 506 44 
 
 Pini V. Roncoroni, [1892] 1 Ch. 633 ; 61 L. J. Ch. 218 ; 66 L. T. 255 ; 
 
 40 W. R. 297 105, 112 
 
 Plowden, Ex parte, 3 M. & A. 402 135 
 
 Pooley V. Driver, 5 Ch. D. 458 ; 46 L. J. Ch. 466 ; 36 L. T. 79 ; 25 
 
 W. R. 162 11, 14 
 
 Poppleton, Ex parte, 14 Q. B. D. 379 ; 54 L. J. Q. B. 336 ; 51 L. T. 
 
 602; 33 W. R. 583 4 
 
 Porter u Taylor, 6 M. & S. 156 ; 18 R. R. 338 ; 2 Stark 60 58 
 
 Poulton V. London and South-Western Rail. Co., L. R. 2 Q. B. 534 ; 8 
 
 B. & S. 616 ; 36 L. J. Q. B. 294 ; 17 L. T. 11 ; 16 W. K. 309 64 
 
 Powell, Exparte, 75 L. T. 143 ; 3 Manson 312 135 
 
 R. 
 
 Rawlins v. Wickham, 3 De G.& J. 304 ; 28 L. J. Ch. 188 ; 5 Jur. N. S. 
 
 278;7W. R. 145 108 
 
 V. 1 Giff. 355 108 
 
 L.P. b
 
 XVIU TABLE OF CASES CITED. 
 
 PAGE 
 
 Read v. Bailey, 3 A. C. 94 ; 47 L. J. Ch. 161 ; 26 W. R. 223 125, 126, 
 
 129 132 
 Reid V. Explosives Co., 19 Q. B. D. 264 : 56 L. J. Q. B. 388 ; 57 L. T. ' 
 
 439; 35 W. R. 509 112 
 
 Rhodes r. Monies, [1895] 1 Ch. 236 ; 64 L. J. Ch. 122 ; 12 R. 6 ; 71 L.T. 
 
 599; 43 W. R. 99 67 
 
 Ridgwayi'. Clare, 19 Beav. Ill 127 
 
 Ritsou, Ee ; Ritsou v. Ritson, [1899] 1 Ch. 128 : 68 L. J. Ch. 77 : 79 
 
 L. T. 455 ; 47 W, R. 213 88 
 
 Robinson v. Ashton, L. R. 20 Eq. 25 ; 44 L. J. Ch. 542 ; 33 L. T. 88 : 
 
 23 W. R. 674 90, 91 
 
 V. Harldn, [1896] 2 Ch. 415 ; 65 L. J. Ch. 773 ; 74 L. T. 777; 
 
 44W. R. 702 88 
 
 Rolfe V. Flower, L. R. 1 P. C.27 ; 35 L. J. P. C. 13 : 12 Jur. (n.s.) 345 ; 
 
 14 L. T. 144; 14 W. R. 773 73 
 
 Rosher v. Young, 17 T. L. R. 347 117 
 
 Ross V. Parkyns, L. R. 20 Eq. 331 ; 44 L. J. Ch. 610 ; 30 L. T. 331 ; 24 
 
 W. R. 5 20 2S 
 
 Ross V. wiiite, [1894] 3 Ch. 326 ; 64 L. J. Ch. 48 ; 7 R. 420 ; 71 L. T. 
 
 277 122 
 
 Russell t;. Austwick, 1 Simon 52 : 27 R. R. 157 80 
 
 S. 
 
 Sargant v. Read, 1 Ch. D. 600 ; 45 L. J. Ch. 206 112 
 
 Sargood's Claim, 15 Eq. 43 87 
 
 Saunders v. Sun, etc. Co., [1894] 1 Ch. 637 ; 63 L.J. Ch. 247 ; 8R.125 ; 
 
 69 L. T. 755; 42 W. R. 315 44 
 
 Scarf V. Jardine, 7 A. C. 345 ; 51 L. J. Q. B. 612 ; 47 L. T. 258 ; 30 
 
 W. R. 893 73 
 
 Scott V. Biown-Doering, McNab & Co. [1892] 2 Q. B. 724 ; 61 L. J. Q. B. 
 
 738; 4 R. 42; 67 L. T. 782 ; 41 W. R. 116 ; 57 J. P. 213 26 
 
 Scott V. Scott, 89 L. T. 582 114 
 
 Sheen, JEx parte, 6 Ch. D. 235 ; 37 L. T. 451 ; 26 W. R. 195 135, 138 
 
 Shell, Ex parte, 4 Ch. D. 789 ; 36 L. T. 270 139 
 
 Sillitoe, Ex parte, 1 Gly. & J. 374 ; 2 L. J. Ch. 137 ; 26 R. R. 204 133 
 
 SimsD. Bruttou, 5 Ex.802; 20 L.J. Ex. 41 69 
 
 Singleton v. Knight, 13 A. C. 788 ; 57 L. J. P. C. 106 ; 59 L. T. 738... 59 
 Smith r. Anderson, 15 Ch. D. 247 ; 50 L. J. Ch. 39 ; 43 L. T. 329 ; 29 
 
 W.R. 21 3 
 
 - — -V. Mules, 9 Haie 556; 21 L. J. Ch. 803 ; 16 Jur. 261 117 
 
 V. Nelson, 92 L. T. 313 120 
 
 V. Smith, 5 Ves. 189 ; 5 R. R. 22 91 
 
 iJ. Winter, 4 M. & W. 454; 8 L.J. Ex. 34; 51 R. R. 678 72 
 
 Stead V. Salt, 3 Bing. 101 ; 10 Moore 389 ; 3 L. J. (o. s.) C. P. 175 ; 28 
 
 R. R. 602 58, 59 
 
 Steuart v. Gladstone, 10 Ch. D. 626 ; 40 L. T. 145 ; 27 W. R. 512 49, 119 
 
 Steward v. Blakeway, 4 Ch. App. 603 94, 98 
 
 Stewart 1'. Buchanan, 6 F. (Court of Session Cases) 15 23 
 
 Stocken v. Dawson. 6 Beav. 371 ; 17 L. J. Ch. 282 : 63 R. R. 116 ... 82, 120 
 Strapp V. Bull, [1895] 2 Ch. 1 ; 64 L. J. Ch. 658 ; 12 R. 387 ; 72 L. T. 
 
 514; 43 W. P. 641 ; 2 Hanson, 441 113 
 
 Swift V. Jewsbury, L. R. 9 Q. B. 301 ; 43 L. J. Q. B. 56 ; 30 L. T. 31 ; 
 
 22 W. R 319 66 
 
 Swire v. Redman, 1 Q. B. D. 536 ; 35 L. T. 470 ; 24 W. R. 1069 74 
 
 Syers v. Syers, 1 A. C. 174 ; 35 L. T. 101 ; 24 W. R. 970 10, 11
 
 TABLE OF OASES CITED. XIX 
 
 T. 
 
 PAGE 
 
 Taylor v. Neate, 39 Ch. D. 538 ; 57 L. J. Ch. 1044 ; 60 L. T. 179 ; 37 
 
 W. R. 190 112, 114 
 
 Tendring Hundred Waterworks Co. v. Jones, [1903] 2 Ch. 615 ; 73 
 
 L. J. Ch. 41 ; 52 W. R. 61 68 
 
 Tennant, Ex parte, 6 Ch. D. 303 ; 37 L. T. 284 ; 25 W. R. 854 14 
 
 Thicknesse v. Bromilow, 2 Cr. & J. 425 59 
 
 Thomas v. Atherton, 10 Ch. D. 185 ; 48 L. J. Ch. 370 ; 40 L. T. 77 ... 88 
 Thompson v. Percival, 5 B. & Ad. 925 ; 3 K & M. 167 ; 3 L. J. K. B. 98 ; 
 
 53 R. R. 187 73 
 
 Thwaites v. Coulthwaite, [1896] 1 Ch. 496 ; 65 L. J. Ch. 238 ; 74 L. T. 
 
 164 ; 44 W. R. 295 ; 60 J. P. 218 26, 106 
 
 Thynne v. Shove, 45 Ch. D. 577 ; 59 L. J. Ch. 509 ; 62 L. T. 803 ; 38 
 
 W. R. 667 76 
 
 Tomlinson v. Broadsmith, [1896] 1 Q. B. 386 ; 65 L. J. Q. B. 308 ; 74 
 
 L. T. 265; 44 W. R. 471 59 
 
 Townsend v. Jarman, [1900] 2 Ch. 698; 69 L. J. Ch. 823; 83 L. T. 
 
 366 ; 49 W. R. 158 117 
 
 Trego V. Hunt, [1896] A. C. 7 ; 65 L. J. Ch. 1 ; 73 L. T. 514 ; 44 W. R. 
 
 225 115, 116, 117 
 
 Tumell ■y. Sanderson, 64 L. T. 654; 60 L. J. Ch. 703 105 
 
 Turton v. Turton, 42 Ch. D. 128 ; 61 L. T. 571 ; 38 W. R. 22 44 
 
 Tussaud V. Tussaud, 44 Ch. D. 678 ; 59 L. J. Ch. 631 ; 62 L. T. 633 ; 38 
 
 W. R. 503 ; 2 Mag. 120 44 
 
 U. 
 
 Underwood v. Lewis, [1894] 2 Q. B. 306 ; 64 L. -J. Q. B. 60 ; 9 R. 440 ; 
 
 70 L. T. 883; 42 W. R. 517 59 
 
 V. 
 
 Vawdrey v. Simpson, [1896] 1 Ch. 166 ; 65 L. J. Ch. 369 ; 44 W. R. 123 105 
 Vince, Re, [1892] 2 Q. B. 478 ; 61 L. J. Q. B. 836 ; 67 L. T. 70 ; 41 
 
 W. R. 138 ; 9 Morrell 222 139 
 
 W. 
 
 Walker v. Hirsch, 27 Ch. D. 460 ; 54 L. J. Ch. 315 ; 51 L. T. 581 ; 32 
 
 W. R. 992 114 
 
 Walker r. Mottram, 19 Ch. D. 355 ; 51 L. J. Ch. 108 ; 45 L. T. 659 ; 30 
 
 W. R. 165 116 
 
 Waterer v. Waterer, L. R. 15 Eq. 402 ; 21 W. R. 508 91, 92, 94, 96, 97 
 
 Watney v. Wells, 2 Ch. App. 250 ; 36 L. J. Ch. 861 ; 16 L. T. 248 ; 15 
 
 W. R. 621 87 
 
 Watson, Ex parte, 4 Mad. 477; Buck. 449; 20 R. R. 319 135 
 
 Watteau v. Fenwick, [189-3] 1 Q. B. 346 ; 5 R. 143 ; 67 L. T. 831 ; 41 
 
 W. R.222; 56 J. P. 839 55 
 
 Watts V. DriscoU, [1901] 1 Ch. 294 ; 70 L. J. Ch. 157 ; 84 L. T. 97 ; 49 
 
 W. R. 146 100 
 
 Waugh V. Carver, 2 H. Bi. 235 7 
 
 Wedderburn v. Wedderburn, 2 Keen 722 ; 4 M. & C. 41 ; 8 L. J. Ch. 
 
 177; 3 Jur. 596; 48 R. R. 7 120
 
 XX TABLE OF CASES CITED. 
 
 PAOE 
 
 West of England Bank >: Miirch, 23 C. D. 138 ; 52 L. J. Ch. 784; 48 
 
 L. T. 417; 31 W. R. 467 Ill 
 
 Wild V. Milne, 26 Beav. 504 114 
 
 WiUiams v. Jones, 5 B. & G. 108 ; 29 R. R. 181 ; 7 D. & R. 549 26 
 
 Wilson, ]{e, [1893] 2 Ch. 340; 62 L. J. Ch. 781 ; 3 R. 525; 68 L. T. 
 
 785; 41 W. R. 684 98 
 
 Wilson & Co. V. Balcarres, etc. Co., [1893] 1 Q. B. 422; 62 L. J. Q. B. 
 
 245 ; 4 R. 286 ; 68 L. T. 312 ; 41 W. R. 48 ; 7 Asp. M. C. 321 ... 70 
 
 Wood V. Dodgson, 2 M. & S. 195 ; 2 Rose 47 ; 14 R. R. 628 135 
 
 Wood V. Scoles, 1 Ch. App. 369 ; 35 L. J. Ch. 547 ; 12 Jur. (n. s.)555 ; 
 
 14 W. R. 621 121
 
 PRINCIPLES OF 
 THE LAW OF PAKTNERSHIP. 
 
 CHAPTER I. 
 
 THE ESSENTIAL ELEMENTS OF PAETNEESHIP. 
 
 (1.) Introductory. 
 
 Partnership, in the language of the first section of the 
 Partnership Act, 1890 (by which the main principles of the 
 law on this subject were codified), is the relation which sub- 
 sists between persons carrying on a business in common 
 with a view of profit. 
 
 This definition is neat and epigrammatic, and, no doubt, 
 puts the matter in a nutshell ; but it is easier to concoct an 
 epigram than to interpret it, and, as a witty and learned 
 lord of appeal has remarked, it is one thing to put a case 
 in a nutshell and another to keep it there (a) . In fact an 
 entire chapter is necessary for the adequate consideration 
 of the question — What is a partner? It is a question of 
 no mere academic interest, because if the relation of 
 private partnership (h) exists in point of law, then whatever 
 
 (a) Per Lord Macnaghten in Foxioell v. Van Qrutten, [1897] A. C. 
 658. 
 
 (ft) This treatise does not relate to public companies, in which the 
 liability of the shareholders is limited. Such companies are, no doubt, 
 partnerships, but they are partnerships of a very special nature, 
 
 L.P. I?
 
 2 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 may be the arrangements between the partners intei^ se as 
 to how the losses are to be borne, and however much they 
 may have repudiated the notion of partnership, each 
 partner will, as between himself and the creditors of the 
 firm, be liable to the last farthing of his fortune. 
 
 As that great partnership lawyer, Lord Lindley, puts it, 
 each individual partner constitutes the others his agents for 
 the purpose of entering into all contracts for him within the 
 scope of the partnership concern, and consequently is liable 
 to the performance of all such contracts in the same manner 
 as if entered into personally by himself. Therefore, if 
 once the relation of partners is established between one 
 who actively carries on a business and another who pas- 
 sively participates in the profits, the latter will become 
 equally liable with the former for the debts and liabilities of 
 the firm. Bearing this in mind, the immense importance 
 of the question whether persons are partners or not is 
 obvious. 
 
 (2.) Definition of Partnek. 
 
 There is a well-known definition of an archdeacon as a 
 person who performs archidiaconal functions ; and an 
 analogous definition must be given of the word partner. 
 Lord Lindley gives fifteen definitions, and the Partnership 
 Act carefully abstains from giving one ; but it would appear 
 that the only safe definition is that a partner is a person 
 who has entered into the relation of partnership, i.e., 
 
 governed, by the provisions of special statutes, and expressly excluded 
 from the provisions of the Partnership Act, 1890. Moreover, they 
 have been already fully discussed far more ably than I could pretend 
 to discuss them by my friend, Mr. Palmer. They are, therefore, not 
 touched upon in this work.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 3 
 
 (referring once more to the statutory definition of partner- 
 ship,) the relation which subsists between persons carrying 
 on a business with a view of profit. Whether he has done so 
 is a question of fact (and often a very difficult one), depend- 
 ing in each case upon the substance of the agreement 
 between the parties, ascertained from the contents of the 
 written instruments (if any) and from their conduct. 
 
 Let us examine the definition a little more closely. There 
 are three essential facts, without which no partnership can 
 exist according to our law. There must be (1) a business 
 (2) carried on with a view of profit (3) by or on behalf of 
 the alleged partners. 
 
 (3.) There must be a " Business." 
 
 It is not every occupation which can be called a business. 
 For instance, a landowner does not carry on a business, 
 although the management of his estate and the collection 
 of his rents may be his only serious occupation, and 
 may cause him to be an extremely busy man. So two 
 Joint owners of an estate, or even of a chattel, such as a 
 ship, are not (as such) partners, although they may use 
 their best endeavours to develop the land and let or use the 
 Joint property for their mutual profit, unless they go further 
 and carry on a business with respect to it. On similar 
 principles, the members of a society formed to purchase 
 investments for the common benefit of the members (some- 
 times called trust companies) are not partners, because, as 
 was pointed out by James, L.J., in Smith v. Anderson (c), 
 nothing to be done by such societies " comes within the 
 ordinary meaning of ' business,' any more than what is done 
 by the trustees of a marriage settlement, who have large 
 
 (c) (18S0) 15 C. D. 247. 
 
 B 2
 
 4 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 properties vested in them, and who have very extensive 
 powers of disposing of the investments, changing the invest- 
 ments and selling them, and reinvesting in other investments 
 according to their discretion and judgment." If, however, 
 the owners of a ship not only let it, but use it in the busi- 
 ness of carriers of goods and passengers, they become 
 partners, at all events, qtid that business. And so, if a 
 society were formed to speculate in investments, with a view 
 to make profits by selling and buying again securities when- 
 ever, in the opinion of the management, the turn of the 
 market should make it advisable to do so, then, no doubt 
 (as was pointed out by Cotton, L.J,, in the case just cited), 
 a partnership would exist, because that would be a business, 
 — a buying and selling of property with a view of profit 
 as distinguished from joint or common ownership. 
 
 This view of the law has now received statutory sanction 
 by sect. 2, sub-sect. (1), of the Act of 1890, by which it 
 is enacted that " joint tenancy, tenancy in common, joint 
 property, common property, or part ownership does not of 
 itself create a partnership as to anything so held or owned, 
 whether the tenants or owners do or do not share any 
 profits made by the use thereof "(rf)- 
 
 The refusal by our law to recognise as "partnerships" 
 any community in property or the profits thereof, unless it 
 be community in the carrying on of a " business," is 
 peculiar, and is not followed by the laws of France and 
 those othfir continental states whose laws are founded on 
 
 {(l) On the other hand, mutual insurance clubs or mutual loan 
 societies may constitute partnerships if their object is one which is 
 recognised in commercial life as "business," notwithstanding that 
 their dealings are limited to their own members. See and consider 
 Be l'adstow,etc. Association, (1882) 20 C. D. 137; Jennings v. Hammowl, 
 (1882) 9 Q. B. D. 225; and exf. Poppleton, (1884) 14 Q. B. D. 379.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 5 
 
 the Code Napoleon. By that code, partnership is defined as 
 a contract hy which two or more persons agree to bring or 
 put something in common with a view to share in the 
 resulting profit. By Arts. 1837 to 1842, these partnerships 
 are divided into societes universelles and socieies particuUeres. 
 SociHes universelles (which have no counterpart in our law) 
 are partnerships in which the partners bring into commu- 
 nity all their existing property real and personal, and make 
 themselves, as it were, tenants in common of it, or else 
 bring into community all the proceeds of their industry 
 {societes universelles cle gains). Even societes particuUeres 
 are not restricted to businesses, for they may be formed for 
 the purpose of bringing into community a particular pro- 
 perty, or the profits of it, or even for the purpose of using a 
 particular thing in common, none of which purposes would 
 be recognised by our law as the subject of partnership. In 
 short the only branch of partnership in the continental sense 
 which we regard as such, is that kind of societe particaliere 
 which is formed (in the words of the code) " to carry out a 
 particular enterprise, or to exercise a particular trade or 
 profession." 
 
 Business, then, being essential to partnership, what is 
 it ? The Act of 1890, s. 45, defines it rather vaguely as 
 " including every trade, occupation, or profession." It is 
 clear, however, that we must take this with a grain of 
 salt. For instance, it could not apply to the profession 
 of a barrister, in which partnership is forbidden ; nor 
 (unless the former cases were intended to be overruled, 
 which is not likely) to the occupation of a landowner, as 
 distinguished from a farmer or a market gardener or the 
 like. In fact, it is apprehended that it must be limited to 
 what are recognised among business men as commercial 
 and professional businesses, i.e., callings in which men
 
 6 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 hold themselves out as willing to sell to all comers, goods 
 or skilled assistance or other service. 
 
 (4.) The Business must be caeeied on foe Profit. 
 
 Let us now proceed to the consideration of the second 
 essential to partnership, viz., that the business must be 
 one which is carried on " with a view of profit." By profit 
 is meant net profit, — that is to say, the difference between 
 the gross returns and the outgoings of the business. Thus 
 where a publisher agrees to pay an author one-third of the 
 gross sales of his book, that is not such a sharing of profits 
 as would even iJiimd facie raise a presumption of partner- 
 ship ; and the same remark applies to the letting of a 
 theatre upon the terms of the owner receiving half the 
 amount paid by the audience for their seats (^). Here, 
 again, the legislature has confirmed the previous view of the 
 courts by enacting (e) that " the sharing of gross returns 
 does not of itself create a partnership, whether the 
 persons sharing such returns have, or have not, a joint or 
 common mterest in any property from which the returns 
 are derived." 
 
 (5.) The Business must be caeeied on by, oe on 
 
 BEHALF OF THE ALLEGED PaETNEES. 
 
 But even where we find that a business is being carried 
 on with a view of profit, and that two or more persons 
 share the net profits, it does not necessarily follow that 
 they are partners, unless the business is carried on by, or 
 on behalf of both or all of them. 
 
 {d) Lyon. v. Kuowles, (1863) 3 B. «&; S. 556. 
 (e) Partnership Act, 1890, s. 2 (2).
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 7 
 
 This was by no means always the view of the courts. It 
 was at one time considered that the mere participation in 
 the profits of a business, ipso facto made the participant 
 liable as a partner to third parties. That rule was laid 
 down positively in Waugh v. Carver (J), on the principle that, 
 by taking a part of the profits, a man withdraws from the 
 creditors a part of the fund which is the proper security for 
 the payment of their debts. 
 
 The rule, however, was an unsound one, and after being 
 whittled away by several fine distinctions, was at last practi- 
 cally reversed by the House of Lords^in the leading case of 
 Cox v. Hickman (g). By that case it was decided that, 
 although a right to participate in profits is a strong test of 
 partnership, and that there may be;jCases where from such 
 perception alone it will be inferred, yet whether that relation 
 does or does not exist, must depend on the real intention 
 and contract of the parties, and not upon that one term of 
 it which provides for the participation in profits. 
 
 The rule in Cox v. Hickman is probably still the 
 law (/?). But the legislature has so muddled the question 
 by the language used in sect. 2 of the Partnership 
 Act, 1890, that until the matter has been thoroughly 
 threshed out, it is impossible to be quite certain. In order 
 to throw some light on the meaning of the provisions of 
 the 1890 Act with regard to this, it is necessary to trace 
 the history of the question from the date of the decision 
 in Cox V. Hickman. 
 
 It would seem, then, that the effect of that decision was 
 not fully appreciated by the profession ; for Mr. (afterwards 
 Chief) Justice Bovill, in the year 1865, introduced a Bill 
 
 (/) (1793) 2 H. Bl. 235. 
 
 \<j) (1860) 8 H. L. Gas. 268. 
 
 (A) See jiyer North, J., Davis v. Davis, [1894] 1 Ch. 393.
 
 8 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 into Parliament, which subsequently became law as the 
 Both chapter of 28 & 29 Vict., but is better known to the 
 profession as Bovill's Act. By the first section of this Act, 
 it was enacted, that the advance of money by way of loan 
 to a person engaged or about to engage in any trade or 
 undertaking, upon a contract in writing with such person 
 that the lender shall receive a rate of interest varying with 
 the profits, or shall receive a share of the profits from 
 carrying on such trade or undertaking, shall not of itself 
 constitute the lender a partner, or render him responsible 
 as such. The second, third and fourth sections, contain 
 similar provisions with regard to the remuneration of agents 
 by a share of the profits, the payment of annuities to the 
 widows and children of deceased partners, and the receipt 
 of a share of profits by one who has sold the goodwill of 
 a business. The fifth section provided for the postpone- 
 ment of a lender or vendor of goodwill to the other creditors 
 of the business, in the event of the owner of the business 
 becoming insolvent. 
 
 This Act made but little difference to the common law, 
 except so far as it postponed a lender or a vendor of good- 
 will to the ordinary trade creditors. It has, however, been 
 suggested that it had this effect, viz., that whereas at 
 common law participation in profits was not conclusive 
 evidence of partnership, Bovill's Act made it not even 
 pi'imd facie evidence, if the contract were one of those 
 enumerated in the Act. But that was not the view taken 
 by the commercial community, or by many of those who 
 advised them. The Act was popularly (but inaccu- 
 rately) called the " Limited Partnership Act." The notion 
 spread abroad that it legalised a new species of statutory 
 partnership similar to that which prevails in France, 
 Belgium, Germany, Italy, Russia, and other continental
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 9 
 
 states, under the name of Societes en Commandite, or 
 fiduciary partnerships, in which there are active and 
 dormant partners, the names of the former alone appearing 
 before the public, and they alone being responsible for the 
 debts and liabilities of the business, while the dormant 
 partner provides capital, to the loss of which his liability 
 is limited. 
 
 It is strange and, perhaps, regrettable that this form of 
 partnership has never been adopted by us, as it has been 
 in the United States of America. Probably it would 
 have been, but for the fact that with us, the same results 
 can be attained by the formation of a small limited 
 company. Anyhow, having regard to the prevalence of 
 such limited partnerships abroad, the popular view of the 
 effect of Bovill's Act was, perhaps, natural enough. 
 
 But however natural this view of the Act may have been, 
 it was erroneous ; for all that Bovill's Act did was to declare 
 that in certain cases the receipt of a share in the profits, 
 or of interest varying with the profits, should not of itself 
 constitute the receiver a partner. Consequently, it was 
 held that although an agreement was expressed to be an 
 agreement under that Act, and contained a declaration 
 tiiat the receiver of the 'profits should not he a partner, he 
 would nevertheless be a partner if the result of the agree- 
 ment, fairly construed as a whole, independently of the 
 reference to the Act and the declaration, was to give him 
 the rights, and impose on him the ohligations of a partner : 
 i.e., if as between himself and the persons who carried 
 on the business, he got the rights and agreed to accept 
 the obligations usual in partnership agreements, then as 
 between him and third parties he must bear the liabilities. 
 In other words, you cannot enjoy the privileges incident 
 to the position of a partner, as between yourself and
 
 10 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 your co-partners, and at the same time get rid of the 
 liability to third parties which is inseparable from the 
 partnership relation. Qui sensit commodum debet sentirc 
 et onus. 
 
 However, that was not judicially decided for ten years, 
 viz., until the case of Syers v. Syers (i). The facts there 
 were, that A. borrowed 250Z. from B., and at the same time 
 signed a paper in the following words : — " In consideration 
 of 250/. this day paid to me, I hereby undertake to execute 
 a deed of co-partnership to you, for one-eighth share in the 
 profits of the Oxford Music Hall and Tavern, to be drawn 
 up under the Limited Partnership Act, of the 28 & 29 
 Viet. c. 86." It was held that notwithstanding the express 
 reference to the statute, it did not apply. In giving judg- 
 ment, Lord Chelmsford, after reading the agreement, with 
 the exception of the reference to the Act, said : "So far 
 the contract is perfectly clear in its terms ; but then it goes 
 on to provide that the deed, i.e., the deed of partnership, is 
 to be drawn up under the Limited Partnership Act. This 
 reference to the Limited Partnership Act shows that the 
 parties have misunderstood its provisions ; they appear to 
 have thought that there might be a deed of co-partnership 
 in terms, but, if expressed to be drawn up under the 
 Limited Partnership Act, that the person advancing the 
 money would not be completely a partner, nor be respon- 
 sible as such. But in order to bring a case within the Act, 
 there must be a contract in writing, and according to my 
 reading of the Act, the contract must on the face of it 
 show that the transaction is a loan. Now, this contract, so 
 far from stating that the agreement of the parties was 
 for a loan, states the direct contrary. Its terms are in 
 
 (0 (1875) 1 App. Cas. 174.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. ' 11 
 
 consideration of the sum of 250/. this day, not lent, but 
 paid to me, I undertake to execute a deed of co-partnership, 
 and the deed of co-partnership is to be drawn up under the 
 Limited Partnership Act. But such a deed could not be 
 so drawn, because the Act requires a contract in writing 
 upon the footing of a loan, and there is no such contract 
 between the parties." 
 
 Syers v. Syers {k) only incidentally decided the construc- 
 tion of the Act, but the question soon afterw^ards came 
 directly before the courts in the well-known and important 
 case of Pooley v. Driver (l). In that case a partnership 
 was entered into between two persons named Barrett and 
 Hagen for fourteen years. The capital of the business was 
 to consist of 30,000/., of which Barrett and Hagen were to 
 find 20,000L, and the remaining 10,000/. were to be raised 
 *' by way of loan, under the Partnership (Bovill's) Act, 
 1865, in sums of 500/. each from persons willing to advance 
 the same for the purposes of the partnership." The capital 
 of 30,000/. was to be considered divided into 60 shares of 
 500/. each, of which 40 shares were to belong to Barrett 
 and Hagen, and the remaining 20 were "to be appropriated 
 to the persons so advancing by way of loan," in proportion 
 to their advances. Consequently each advancer became 
 entitled to a share in the capital of the business. The 
 profits were to be similarly divided between Barrett and 
 Hagen, and the persons making the advances. On the 
 expiration or sooner determination of the partnership a 
 general account was to be taken, and the two partners were 
 first to repay the sums advanced by way of loan, and were 
 then to divide the residue between them. In pursuance of 
 this deed, several persons advanced money to Barrett and 
 
 (/.;) (187.3) 1 App. Cas. 174. (l) (1876) 5 C. D. 4o«.
 
 12 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 Hagen, and deeds were executed between Barrett and Hagen 
 and the persons respectively making the advances. Such 
 deeds were all in the same form, and recited the partnership 
 articles, and the fact that the lender had agreed to advance 
 a sum of money by way of loan to enable Barrett and 
 Hagen to carry on the business. They certainly contained 
 a covenant by Barrett and Hagen to repay the amount 
 advanced at the expiration or sooner determination of the 
 partnership, but on the other hand, they also contained a 
 covenant that Barrett and Hagen would in all things con- 
 form to the provisions of the partnership deed, and would 
 allow the lender to inspect the accounts, and would pay 
 him the proportion of the profits which his advance bore 
 to the whole capital for the time being employed in the 
 business. They also provided that on the expiration or 
 sooner determination of the partnership, a final account 
 should be taten and the lender paid his advance, together 
 with a share of the profits, according to the above propor- 
 tion ; but, if on taking the balance of profit and loss on 
 the entire term it should appear that he had been overpaid 
 profits during the continuance of the loan, he should 
 refund them. 
 
 Barrett and Hagen failed, and the lenders were sued by 
 the creditors of the firm. The late Sir George Jessel, M.R., 
 gave a most elaborate and instructive judgment. After 
 commenting on various definitions of partnership, his lord- 
 ship said : "What is the efi"ect of the Act? The Act is 
 this, that the advance of money must be by way of loan. 
 Now what does that mean ? I take it to mean this, that 
 the person advancing must be a real lender, that the advance 
 must not only profess to be by way of loan, but must be a 
 real loan ; and consequently you come back to the question 
 whether the persons who enter into the contract of association
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 13 
 
 are really in the position of creditor and debtor, or in 
 the position of partners, or in the only third position which 
 I think could be suggested, that of master and servant. 
 But the Act does not decide that for you. You must 
 decide that without the Act, and when you have decided 
 that the relation is that of creditor and debtor, then all the 
 Act does is this, it says that the creditor may take a share 
 of the profits. But as I understand the law, as laid down 
 by the higher authorities to which I have referred, if you 
 have once decided that the parties are in the position of 
 creditor and debtor you do not want the Act at all, because 
 the inference of partnership derived from the mere taking 
 a share of profits, not being irrebuttable, is rebutted by your 
 having come to the conclusion that they are in the position 
 of debtor and creditor." His lordship then pointed out that, 
 having regard to the facts (1) that Barrett and Hagen 
 covenanted with the lender to observe the partnership deed 
 in every particular (which would have been superfluous if the 
 lenders were not partners) ; (2) that the loan was to form part 
 of the capital of the business ; (3) that the lender became 
 entitled to insist upon the capital being employed in the 
 trade ; (4) that the lenders' proportion of profit was not a 
 fixed proportion, but a proportion varying with the capital 
 for the time being employed in the concern ; (5) that the 
 deed provided for payment off of the loan if the creditor 
 became bankrupt ; (6) that there was a proviso for refund- 
 ing to the firm any profits drawn out by the lender exceed- 
 ing his proper share ; (7) that the deed contained an 
 arbitration clause (which is usual in partnership articles, 
 but not usual in a mere loan agreement) ; the inference 
 was irresistible that the true relation of the parties was 
 that of dormant and active partners, and not of mere 
 creditors and debtors, lie did not rely on one provision
 
 14 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 or tivo provisions, hut on the whole character of the trans- 
 action from beginning to end, which he characterised as an 
 elaborate device and ingenious contrivance which failed to 
 effect the purpose for which it was designed. 
 
 Pooley V. Driver was soon followed by the case of Ex 
 parte Tennantim). In that case the arrangement was a 
 very special one between a father and a son, who was about 
 to become an underwriter at Lloyd's, by which, in con- 
 sideration of the father making the deposit and giving the 
 guarantee required by Lloyd's, the son covenanted to 
 employ a particular agent, and to pay half the net proj&ts 
 to the father. The court considered that this was a simple 
 case of debtor and creditor, and held that the father was 
 not liable. The reader will not fail to perceive that in this 
 ease there were no provisions such as those in Pooley v. 
 Driver usual in partnership deeds, but unusual in loan 
 agreements ; and perhaps it may also be added that having 
 regard to the fact of the lender being the father of the 
 borrower, a bond fide loan, without any idea of partnership, 
 was a natural and by no means extraordinary transaction. 
 
 This case was shortly afterwards followed by Ex imrte 
 Delhasse (71) . In that case an agreement was entered into 
 between one Megevand of the first part, Schoeppi of the 
 second and Delhasse of the third, by which it was recited 
 that Megevand and Schoeppi had agreed to become partners 
 upon the terms, conditions, and stipulations with each 
 other and with Delhasse therein contained. It then set 
 out the provisions of the first section of Bovill's Act, and 
 recited that in order to form and carry on the said partner- 
 ship business, Megevand and Schoeppi had requested 
 Delhasse to lend them the sum of 10,000Z. for the purpose 
 
 (to) (1877) 6 G. D.303. (/i) (1878) 7 0. D. 511.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 15 
 
 of investing the same in the business, which Delhasse had 
 agreed to do upon the terms thereinafter contained. The 
 agreement then contained various stipulations, the most 
 important of which was that Megcvand and Schocppi ivere 
 not to he personally liable to Delhasse for the 10,000Z. 
 which was to be hable for the debts of the firm. In fact 
 Delhasse's only right would have been to have the partner- 
 ship accounts taken, to have the business wound up, the 
 debts paid, and then to have his 10,000/. paid out of the 
 remaining assets. 
 
 James, L.J., in giving judgment, after reading the 
 agreement, and pointing out that apart from the declara- 
 tions as to the application of the statute, the relation of 
 the parties was that Megevand and Schceppi were active 
 partners, each of them having the power of signing the 
 name of the firm, and that Delhasse was the dormant 
 moneyed partner who was to have all the rights against 
 the other members of the firm which a dormant moneyed 
 partner would have in respect of the capital of the business, 
 proceeded as follows: — " But it is said that there are other 
 provisions in the contract which prevent its having this 
 operation, and which show clearly that the parties meant 
 the relation of lender and borrower, and not the relation of 
 partners, to subsist between them. And for that purpose 
 reliance is placed on the recital of sect. 1 of the Act — 
 the recital of the agreement for a loan, and the declaration 
 in clause 4, that the 10,000/. is advanced by Delhasse to 
 the other two by way of loan under that section, and that 
 such advance does not and shall not be considered to 
 render Delhasse a partner in the business. Can those 
 words really control the rest of the agreement "? Do they 
 really show that the intention was not in truth that which 
 it appears to be by all the other stipulations ? To my
 
 16 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 mind it is quite clear that they do not. When you come 
 to look at all the other stipulations, they are utterly incon- 
 sistent with the notion of a loan by the one to the other, so 
 as to make the two personally liable in respect of it in any 
 event, or under any circumstance whatever. The loan is 
 said to be made to the two, but when you read the whole of 
 the agreement together, it is impossible not to see that it 
 was not a loan to the tivo upon their ijersonal responsibility, 
 by the person who is said to be the lender, but that it was 
 a loan to the business which was to be carried on by the 
 two for the benefit of themselves and him, and was to be 
 repaid out of the business, and out of the business only, 
 except in the case of loss, when the loss would have to be 
 borne by the three in the proportions mentioned in the 
 agreement. The use of the word ' lend,' and the reference 
 to the Act, are, in my opinion, a mere sham — a mere con- 
 trivance to evade the law of partnership ; and I am of 
 opinion that the agreement was in truth and in substance 
 an agreement for a r^al partnership between all the 
 parties." 
 
 Lord Justice Thesiger added : " Apart from the Act, the 
 law applicable to the case has been laid down in tolerably 
 distinct terms by the House of Lords in Cox v. Hickman ,• 
 and it is perfectly true that the House of Lords in that case 
 laid it down that the proposition that a participation in 
 profits constitutes an invariable test of partnership, is not 
 one that can be maintained. Lord Cranworth gives as the 
 test, that which no doubt must now be taken as the proper 
 test to be applied in all these cases, viz., that the real 
 ground of liability as a partner is that the trade has been 
 carried on by persons acting on behalf of the person whom 
 it is attempted to make liable as partner. But on the very 
 same page in which these words occur, Lord Crannorth
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 17 
 
 says that the participation in profits is, in general, a 
 sufficiently accurate test, and that the right of participation 
 in profits affords cogent, often conclusive, evidence of a 
 partnership. If that be so, it follows, as a logical conse- 
 quence, that if in addition to participation in profits, the 
 arrangement provides for a participation in losses, and also 
 contains stipulations tantamount to the ordinary stipula- 
 tions which one would expect to find in the case of a 
 dormant partner, it is an a fortiori reasoning in such a case 
 in favour of a partnership." His lordship then went on to 
 show that this conclusion was not negatived by the statute, 
 because the statute only provides that an advance of money by 
 way of loan on the terms of sharing profits shall not of itself 
 constitute a partnership, whereas here the advance was not 
 by way of loan, and, moreover, did not stand by itself. 
 
 The next case is Badeley v. The Consolidated Banh{o). 
 The facts of that case were very complicated, and it is 
 only necessary to quote a few lines from the judgment of 
 Lord Justice Cotton, who said : " What we have to consider 
 is, whether the business in respect of which the question 
 arises is or is not the business of the two persons alleged 
 to be partners. . . . It is said that there are dicta of 
 various judges, in various cases, that the participation in 
 the profits may decide the question, or that it is prima facie 
 evidence of partnership. Undoubtedly, if one found that 
 two persons were participating in the profits made by a 
 business, and knew nothing more, one would say, how is 
 this? If they participate in the profits as being jointly 
 entitled to the profits, that, unless explained, would lead 
 to the conclusion that the business is the joint business of 
 the two, and this would be partnership. But when the 
 
 (o) (1888) 38 C. D. 238. 
 L.P. C
 
 18 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 participation in profits arises from a clause in an agreement 
 entered into between the parties, it is wrong to say that 
 this is prima facie evidence of partnership, because you 
 must look not only to that stipulation, but to all the other 
 stipulations in the contract, and determine whether, on the 
 stipulations of the contract taken as a whole, you can come 
 to the conclusion that there is a partnership — that there 
 is a joint business carried on by the two ; or whether the 
 transaction is one of loan between debtor and creditor — a 
 loan secured by giving a certain interest in the profits." 
 His lordship then proceeded to comment on the facts, and 
 came to the conclusion that, looking at the whole trans- 
 action, the true nature of the relation between the parties 
 was that of creditor and debtor. 
 
 Thus the matter stood down to 1890, when the Partner- 
 ship Act was passed, which is intituled "An Act to declare 
 and amend the law of partnership." The main idea of the 
 Act is, undoubtedly, to declare or codify the main principles 
 of the pre-existing law, but at the same time the opportu- 
 nity was used to alter and amend the law in several respects. 
 As already stated, the Act defines partnership as the 
 relation which exists between persons carrying on business 
 in common with a view of profit, excluding public com- 
 panies and companies formed for mining in the Stannaries. 
 It then proceeds, in sect. 2, to give certain rules for 
 ascertaining whether or not a partnership exists, the first 
 and second of which, as to joint or common ownership and 
 as to the participation in gross profits, has been already 
 commented on. The 3rd sub-section, however, containing 
 five rules, is a paraphrase, with additions, of Bovill's Act, 
 which is repealed. 
 
 Put shortly, the provisions of sub-sect. (3) are as follows : — 
 (3.) " The receipt by a person of a share of the profits of
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 19 
 
 a business is prima facie evidence that he is a 
 partner in the business, but the receipt of such a 
 share, or of a payment contingent on or varying 
 with the proJSts of a business, does not of itself 
 make him a partner in the business." 
 Stopping here for a moment, we have what seems some- 
 what of a contradiction. How can a fact be prima facie 
 evidence of partnership and yet be insufficient of itself to 
 prove a partnership? In Davis v. Davis {p), Mr. Justice 
 North, taking a kindly view of the matter, said : " These 
 phrases appear somewhat conflicting, but I do not think 
 there is any real difficulty in understanding them, because 
 the matter was clearly explained by the Court of Appeal in 
 Badeley v. The Consolidated Bank (q). It is true that that 
 case was decided before the Act of 1890 was passed, but 
 the Act seems to give effect to what was there laid down." 
 He then read the judgment of Cotton, L.J., in Badeley 
 v. The Consolidated Bank (q), and continued: "Adopt- 
 ing then the rule of law which was laid down before the 
 Act, and which seems to me to be precisely what is intended 
 by sect. 2 (3) of the Act, the receipt by a person of a 
 share of the profits of a business is prima facie evidence 
 that he is a partner in it, and if the matter stops there it 
 is evidence upon which the court must act. But if there 
 are other circumstances to be considered, they ought to be 
 considered fairly together, not holding that a partnership 
 is proved by the receipt of a share of profits unless it is 
 rebutted by something else, but taking all the circum- 
 stances together, not attaching undue weight to any of 
 them, but drawing an inference from the whole." It 
 
 {p) [1894] 1 Ch. 393. 
 (?) (1888) 38 0. I). 238. 
 
 c 2
 
 20 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 appears, therefore, that the effect of sub-sect. (3) is 
 merely to declare the pre-existing law, viz., that sharing 
 of profits without more, implies partnership ; but if it is 
 only one of several facts, then all the facts must be con- 
 sidered together, and no special weight be given to the fact 
 of profit sharing. It seems strange, however, that the 
 collective wisdom of the learned and eminent persons who 
 considered the Bill in the committee stage in both Houses, 
 should have so wrapped up this simple proposition of law 
 that it requires a knowledge of the cases previouslj' decided 
 on the subject to bring it to light. 
 
 But sub-sect. (3) of sect. 2 of the Act does not end here, 
 neither do its difficulties, for it goes on (following the 
 terms of Bovill's Act) to declare that in particular, the 
 following facts (for convenience parajohrased, and put in a 
 different order to that adopted in the Act), shall not of 
 themselves constitute partnership, viz. : 
 
 (a.) The receipt of a debt out of accruing profits. 
 
 (b.) The receipt by a servant of a share of the profits by 
 
 way of remuneration (q). 
 (c.) The receipt by the widow or child of a deceased 
 partner of a portion of the profits by way of an 
 annuity, 
 (d.) The receipt of a portion of the profits by the vendor 
 
 of the goodwill of the business (r). 
 (e.) Last, and most important of all, the receipt of a 
 share of profits, or of interest the rate of which 
 varies with the profits, by a person who has 
 advanced money to a person engaged or about 
 to engage in any business under a contract 
 
 (g) See Boss v. Farkyns, (1875) 20 Eq. 33L 
 (r) See JIawksley v. Outram, [1892] 3 Ch. 359.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 21 
 
 in writing signed by or on behalf of all 
 
 parties (s). 
 Now here we come to another difficulty, viz., did the 
 authors of the Act intend by the proviso " provided that 
 the contract is in writing, and signed by or on behalf of all 
 parties thereto," to enact or imply that where there is no 
 written and signed contract, a lender who lends on the 
 terms of receiving a share of the profits, or of receiving 
 interest varying with the profits, is to be deemed a partner ? 
 Lord Justice Smith, in the recent case of Re Fort (t) , seemed 
 to assume that this was the result of the Act, saying "if the 
 benefit of the section is desired by the lender, then, under 
 the proviso, the contract must be in writing." That obser- 
 vation was, however, only a dictum, and with great respect 
 to the learned lord justice, cannot, it is conceived, be sup- 
 ported. No doubt it is difficult to give any meaning to the 
 proviso unless its effect is such as that indicated by the 
 learned lord justice, but if he be correct, it would follow 
 that a person who never was a partner, but only a creditor, 
 and with regard to whom the only scintilla of evidence 
 of partnership is participation in profits, is, in the absence 
 of a written and signed contract to be deemed a partner 
 notwithstanding the express words of sect. 2 that the receipt 
 of profits is not of itself sufficient. That, it is submitted, 
 cannot possibly be the correct interpretation. What is the 
 correct meaning to be given to the proviso as to the necessity 
 of a written and signed contract, still, however, remains 
 wrapped in obscurity. 
 
 (6.) General Result of the Decisions on Profit Sharing. 
 
 Can we then deduce from the statutes and decisions, any 
 practical rules for advising persons who desire to finance a 
 
 («) See exp. Jonts, re Young, [1896] 2 Q. B. 484. (t) [1897] 2 Q. B. 496.
 
 22 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 business, and to receive a share of profits, without thereby 
 becoming liable for the debts. 
 
 In the first place, it is quite clear that in each ease we must 
 put to ourselves the question — Do these persons honestly 
 mean that this advance is to be a true loan, or do they mean 
 that it is to be a contribution to a joint adventure? To such 
 a question honestly put the answer will generally not be very 
 doubtful. For although the judges warily decline to bind 
 themselves to any authoritative definition of what will 
 render two or more persons partners, yet the broad distinc- 
 tion between a loan and a contribution to a joint speculation 
 is sufficiently marked. In the one case the lender is like a 
 debenture holder in a company, he has no voice in the 
 management of the business. No doubt he is interested in 
 its well-being just as a debenture holder is mterested in the 
 well-being of the company whose bonds he holds, because 
 its prosperity is his security ; but the interest is the interest 
 of a mortgagee, and not of a joint owner. In the other case 
 a contributor to a joint speculation is like a shareholder in 
 a company. Even if he has no direct control over details, 
 he has a right to prevent misuse of the business assets in 
 which he has a joint property, and not merely a property 
 in the profits. The question is a crucial one, because, as 
 Lord Halshury, in language both compendious and graceful, 
 said in the case of Adam v. Neivhigging (u), "it a partner- 
 ship in fact exists, a community of interest in the adventure 
 being carried on in fact, no concealment of name, no verbal 
 equivalent for the ordinary phrases of profit and loss, no 
 indirect expedient for enforcing control over the adventure, 
 will prevent the substance and realty of the transaction 
 being adjudged a partnership . . . and no phrasmg 
 of it by dexterous draftsmen will avail to avert the legal 
 
 {u) (1888) 13 App. Cas. 315.
 
 ESSENTIAL ELEMENTS OF PARTNERSHIP. 23 
 
 consequence of the contract" {a^. In fact, as the French 
 say, "plus ca change plus c'est la meme chose." 
 
 The practitioner must therefore first satisfy himself that 
 there is a bond fide loan; and in considering that, must 
 remember that a necessary consequence of a loan is a per- 
 sonal liability on the part of the borrower to pay it. An 
 arrangement (such as that in Ex parte Delhassc) (y) by 
 which the lender is only to be repaid out of the business, 
 can therefore never be a loan, but must be a partnership. 
 
 Again, the lender must not take an interest in, or share 
 of the capital in specie, because thereby he becomes jointly 
 interested in capital and profits, or in other words becomes 
 part owner of, i.e., partner in, the business itself. Nor must 
 his share of the profits be in the proportion which his loan 
 shall from time to time bear to the rest of the capital in 
 the business ; for that shows that he is not simply lending 
 his money on the security of a share, i.e., an aliquot and 
 definite share of the profits, but is contributing it to a joint 
 speculation in which he and the other speculators are to 
 take the profits ^ja?-* passu. A provision for the return by 
 the lender of a proportion of the profits received by him in 
 one year, in case of subsequent losses, would be almost 
 certainly a mark of partnership ; for no bond fide lender 
 would ever assent to such a provision. 
 
 Tried by these tests, it will generally not be found a very 
 difficult task to determine what is the real nature of the 
 
 {x) The reader is referred to the following cases as afEording 
 examples of participation in profits without partnership, viz., Bullen v. 
 Sharpe, (1866) L. E. 1 C. P. 86; Holme v. Hammond, (1872) L. E. 7 
 Ex. 218 ; Ross v. Parlcijns, (1875) 20 Eq. 331 ; Kihhaio v. Juhes, (1863) 
 3 B. & S. 847. 
 
 {y) (1878) 7 C. D. 511, commented on supra, p. 14, and see also the 
 Scottish case of Stewart v. Buchatian, [1904] 6 F. (Ct. of Session 
 Cases), 15.
 
 24 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 contemplated arrangement. But although one cannot by 
 any amount of dexterity prevent a transaction which is in 
 substance a partnership, having the consequences which 
 are incident to the partnership relation, it must never be 
 forgotten that by want of dexterity, a practitioner may make 
 a transaction which is really and bond fide a loan, appear 
 on the face of the document to be a partnership. Care 
 must be taken, therefore, in drafting such documents, to 
 avoid any reference to words usual in partnership agree- 
 ments, such as "capital," "concern," "partnership," or 
 the like. Moreover the draftsman should not be too 
 technical, and introduce clauses taken from partnership 
 precedents, which the parties themselves would never 
 dream of, but which he may think desirable, such as 
 arbitration clauses and the like. Again, except under excep- 
 tional circumstances (such as those in Badeley v. The 
 Consolidated Bank {z)), the borrower should not be bound 
 to employ the loan as part of the capital of the business. 
 Such a proviso is very dangerous, and although where it is 
 necessary in order to preserve the security, it will not of 
 itself constitute the transaction of a partnership, it is (just 
 as the mere fact of participation in profits is) a somewhat 
 cogent circumstance, which might, when taken along with 
 other circumstances, lead the court to conclude, as a matter 
 of fact, that a partnership inter se was intended, in which 
 event the liability to creditors of the firm would follow as a 
 legal consequence. 
 
 By bearing these cautions in mind, the draftsman will 
 avoid finding himself in the very mortifying position of having 
 landed a client, whose intention was to be a bond fide lender, 
 in the position of an apparently viald fide partner, with 
 all its consequent litigation, worry, and not improbable ruin. 
 
 (z) (1888) 38 C. D. 238.
 
 ( 25 ) 
 
 CHAPTER II. 
 THE CREATION OF A PARTNERSHIP. 
 
 (1.) Illegal Partnerships. 
 
 At common law there was no limit to the number of 
 persons who might carry on a business in partnership ; 
 but where partners are numerous, it is obviously impos- 
 sible that they should all be active participators in the 
 management of the concern. It was therefore usual in 
 such cases (long before the Companies Acts were passed) to 
 confide the management to a small body of directors, who 
 alone had the power of binding the firm. This was so, not 
 only as between the partners inter se, but also (contrary to 
 the ordinary rule) as against the creditors of the business, 
 whenever the members were " too numerous to act " (a) as 
 Joint participators in the management. The exact mean- 
 ing of " too numerous " remained undetermined ; but the 
 question is now practically obsolete, because, by sect, 4 of 
 the Companies Act, 1862, no partnership is to be formed 
 consisting of more than ten persons for the purpose of 
 carrying on the business of banking, or of more than 
 twenty persons for the purpose of carrying on any other 
 business having for its object the acquisition of gain, unless 
 it be registered as a company under that Act. As com- 
 panies so registered become corporations, and are governed 
 by a code of their own, it follows that in private partner- 
 ships (to which alone this work relates) the number of 
 
 (a) See Greenwood's Gate, (1854) o D. M. & G., at p. 477.
 
 26 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 partners is limited to ten in the case of banking firms, and 
 twenty in the case of other businesses ; and it seems pretty 
 clear that these numbers would not be considered too 
 numerous to rebut the ordinary presumption that each 
 partner (in the absence of express notice to the contrary) is 
 the agent of the firm. 
 
 Private partnerships being, then, limited to these com- 
 paratively small associations, they are absolutely illegal if 
 they exceed the statutory numbers. 
 
 Moreover, a partnership may be illegal if formed for a 
 purpose forbidden by law, or which is contra bonos mores, 
 or against public policy. For instance, by the Solicitors 
 Acts an unqualified person is forbidden to carry on business 
 as a solicitor, and consequently a partnership between a 
 solicitor and one who is not, to carry on such a business is 
 illegal (&). So a partnership formed for sharing the profits 
 of a gambling hell or a house of ill-fame, would clearly be 
 illegal. In all such cases the court simply refuses to 
 recognise that the partners have any rights against each 
 other — it will not direct accounts to be taken, nor will it 
 order one partner to contribute to the losses suffered by 
 the other (c) . Of course, however, this does not prevent 
 innocent creditors of the illegal firm bringing an action 
 against the members to recover a debt which is not tainted 
 with illegality to the creditors' knowledge. For instance, 
 a shipbuilder might sue them for the price of a ship which 
 was intended to be used in the Eed Sea slave trade, so long 
 as he was not aware of the illegal object. 
 
 An amusing and instructive case relating to illegal 
 partnerships, is Thwaites v. Coulihwaite (d). There two 
 
 (&) WilUams v. Jmes, (1826) 5 B. & C. 108. 
 
 (c) Scott V. Brown- Doering, McNab & Co., [1892] 2 Q. B. 724. 
 
 (d) [1896] 1 Ch. 496.
 
 CREATION OF A PARTNERSHIP. 27 
 
 " bookmakers " entered into partnership. One of them, 
 the plaintiff, claimed an account of profits from the other, 
 the defendant, who contended that having regard to the 
 nature of the business, the partnership was illegal, and 
 that no such relief could be obtained. Mr. Justice Chitty, 
 in giving judgment, said : — 
 
 " The second defence, and by far the most important 
 one, is that this partnership is an illegal one, being formed 
 for a purpose forbidden by statute, although independently 
 of the statute there would be no illegality. The statute 
 relied on is the Betting Act, 1853. The first question that 
 arises is this, — Is the business of bookmaking necessarily 
 illegal ? That is to say, must it necessarily be carried on 
 in such a manner as to fall within the provisions of this 
 statute ? The answer to this question appears to me to be 
 in the negative. The Gaming Act, 1845 (8 & 9 Vict, 
 c. 109), did not make betting illegal ; this statute, as is well 
 known, merely avoided the wagering contract. A man 
 may make a single bet or many bets, he may habitually 
 bet, he may carry on a betting or bookmaker's business 
 within this statute, provided the business as carried on by 
 him does not fall within the prohibition of the Betting Act, 
 1853. That a betting business may be carried on without 
 contravening the Betting Act, 1853, is, I think, shown from 
 Doggett v. Catterns (e), where the habitual use of a spot in 
 Hyde Park for the purpose of receiving deposits, to return 
 a larger sum on the contingency of a particular horse 
 winning a race, was held not to be the using of a ' place ' 
 for such purpose within the prohibition of the Betting Act, 
 1853. The next question, is whether the parties intended 
 or contemplated that this partnership business should be 
 carried on in a manner prohibited by the statute. If they 
 
 (e) (1865) 19 C. B. (n.s.) 765.
 
 28 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 did, the partnership was illegal, even though nothing 
 definite might have been said at the time the partnership 
 contract was entered into, as to the mode of carrying on 
 the business. As the partners were not the ' owners, 
 occupiers, or keepers ' of any ' house, oflSce, or room or 
 other place,' it is plain that the case is not within sect. 1 
 of the Betting Act, 1858, the case made by the defendant 
 turns on the third section, which prohibits the use of ' any 
 house, office, room, or other place ' for any of the purposes 
 there mentioned. The plaintiff's evidence came to this : 
 he said, that when he entered into the partnership, he 
 contemplated that the business would be carried on in the 
 ordinary way in which bookmakers usually carry on their 
 business in Tattersall's enclosure at race meetings. He has 
 been cross-examined for the purpose of showing that he had 
 seen bookmakers in the enclosure, standing on boxes, which 
 seem to be ingeniously contrived so as to collapse when the 
 keen eye of authority happens to fall on the bookmaker, 
 and he says he has not. The object of the box appears to 
 be to elevate the bookmaker above the heads of ordinary 
 persons, thus making him conspicuous, and also enabling 
 him to be heard in what the defendant and his clerk 
 described as the ' swells' enclosure.' On the plaintiff's 
 evidence, it also appears that, by the rules of Tattersall's 
 enclosures, boxes or stools are not permitted to be brought 
 in, and on this point there was no substantial controversy 
 between the plaintiff" and the defendant. It is practically 
 admitted, that at English race meetings, the rules are 
 against the bringing into the enclosure of these con- 
 trivances ; but the defendant says that there are many 
 bookmakers, who, by ' squaring ' — a euphemistic term for 
 bribing — the gate keeper, do manage to bring these con- 
 trivances into the enclosure, or, if this method fails, then
 
 CREATION OF A PARTNERSHIP. 29 
 
 they are smuggled in under a mackintosh, or some other 
 article of clothing. The result of the evidence is, that 
 though the defendant himself might in some instances have 
 smuggled in this box into the enclosure, and used it for the 
 purposes of betting, yet the plaintiff himself did not antici- 
 pate that this would be the mode of carrying on the 
 partnership business. The gist of the point made by the 
 defendant's counsel as to the use of the box is that it brings 
 up the question, so often mooted, as to what is a * place ' 
 within the meaning of the Betting Act, 1853." His lord- 
 ship then commented on the decisions as to this, ending 
 with Bows V. Femvick (e), where the use of a stool and 
 umbrella was held to be the use of a "place," and proceeded 
 as follows : — " Now, to come back to the question I have to 
 decide. Was it the intention of the parties that this betting 
 business was to be carried on at a ' place ' within the meaning 
 of the Betting Act, and did the plaintiff contemplate that it 
 would be carried on by means contravening the rules of 
 Tattersall's enclosure ? If the defence is to succeed, I must 
 find that the plaintiff did so intend. On this point the 
 materiality of the use of the box is now evident, and the 
 evidence of the plaintiff is important. I am satisfied on 
 the evidence that some of the larger bookmakers, the ' big 
 men ' as the defendant called them, do carry on a book- 
 making business in Tattersall's enclosure without violating 
 the statute, though in many cases some other cunning- 
 bookmakers carry on their business in the way described 
 by the defendant, so as to bring it within the cases that 
 I have been referred to. On the evidence I hold that it 
 has not been made out that the plaintiff did intend that 
 this business should be carried on illegally." 
 
 (e) (1874) L. R. 9 C. P. 339.
 
 30 PRINCIPLES OF THE LAW OP PARTNERSHIP. 
 
 (2.) Personal Capacity. 
 
 Supposing a partnership is formed for a legal purpose, 
 and with a legal number of partners, the next question 
 which arises is as to the personal capacity of the partners. 
 
 Broadly speaking, every one (unless he be a convict or an 
 alien enemy) is capable of being a partner. But there are, 
 nevertheless, certain classes of persons who, although 
 capable of being partners, are to some extent exceptions to 
 the general rule that each partner is liable for the debts 
 of the firm. Lawyers have, time out of mind, with brutal 
 frankness, treated of these persons under the one head of 
 "lunatics, infants, and married women." "Place aux 
 dames" let us invert this order, and consider the case of the 
 matrons first. 
 
 (a.) Married ivomen. — With regard to these, perhaps 
 some may think that they would be better employed 
 in giving their undivided attention to the domestic 
 partnership for which nature has eminently fitted them, 
 viz., the management of their homes, and the bringing up 
 of their offspring. However, the law is not so grand- 
 motherly as to restrict people to those callings for which 
 they are best fitted, and it is clear that every married 
 woman is capable of entering into partnership either with 
 her husband or with a stranger. This arises out of the 
 Joint operation of the Married Women's Property Acts, 
 1882 and 1893. By sect. 1 (2) of the Act of 1882 it 
 was enacted that a married woman (without any limitation 
 as to the date of her marriage) should be capable of 
 entering into and rendering herself liable to the extent of 
 her separate property on any contract ; but the courts held 
 that this only applied where she had some separate 
 property at the date of the contract. However, by the Act
 
 CREATION OF A PARTNERSHIP. 31 
 
 of 1893 (s. l),this capacity to contract is no longer con- 
 ditional upon her having some separate property at the 
 date of the contract. Contractual capacity, therefore, is 
 conferred on all married women ; but, at the same time, 
 their liability is strictly limited to their separate property, pre- 
 sent or future, including property to which they may become 
 possessed during widowhood. They are, in fact, under no 
 personal liability, and no judgment can be obtained against 
 a married woman personally, but only against her separate 
 property (/) ; and not even against that, if she be restrained 
 from anticipation (g) . To put the matter shortly, her property 
 and not herself is liable ; and it seems to follow (although 
 this has never been judicially decided) that an injunction 
 cannot be obtained to enforce even a negative agreement 
 entered into by a married woman (h). She may, however, 
 be made a bankrupt, if she carries on a trade separately 
 from her husband, in respect of her separate estate, under 
 sect. 1 (5) of the Act of 1882. This liability remains even 
 after the trade is abandoned, if the trade debts are not 
 paid (i). Note, however, that she does not carry on trade 
 " separately from her husband " (and therefore cannot be 
 made bankrupt), where she carries it on m partnership 
 with him (j). Note, also, that if a married woman is to be 
 made a bankrupt, it must be by some other form of 
 
 (/) Per Lord EsJier, M.E., Be Lynes, [1893] 2. Q. B. p. 115. 
 
 (</) Not even out of income subsequently accrued, Bolitlio & Co. v. 
 Gidley, [1905] A. C. 98, nor out of income accruing after the coverture 
 has ceased, Barnett v. Howard, [1900] 2 Q. B. 784 ; Broivn v. Dimblehy, 
 [1904] 1 K. B. 28. 
 
 (A) See de Francesco v. Barnnm, (1889) 4o Ch. D. 165, the case of 
 an infant who had broken her apprenticeship indentures. The 
 reasoning seems to be equally applicable to the case of a married 
 woman who is not personally liable. 
 
 (*) Be Dagnall, [1896] 2 Q. B. 407. 
 
 0) Be Hehhy, (1893) 63 L. J. Q. B. 261.
 
 32 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 procedure than a bankruptcy notice ; for the statutory form 
 of such a notice is not applicable to a judgment against 
 a married woman's separate estate (k). 
 
 In addition to the powers of contracting conferred upon 
 them by the Acts above referred to, there are a few 
 exceptional cases in which a married woman could previously 
 contract. Such cases occurred where the husband was a 
 convict (Z), or an alien enemy living abroad (m), or when, 
 being the wife of a freeman of the City of London (n), she 
 carried on trade there separately from him. In these 
 cases it would appear that a married woman could be 
 rendered personally liable. So in equity, where a married 
 woman had property settled to her separate use, she could 
 always enter into valid contracts with regard to it ; but such 
 contracts, like the statutory ones, were not enforceable 
 against her personally. On the other hand, after a judicial 
 separation, or after a protection order, a woman is regarded 
 as a feme sole so far as her capacity to contract is 
 concerned, and is therefore personally liable (o). 
 
 Generally it will be seen, that although a married woman 
 is capable of entering into partnership, she is not (unless 
 possessed of large separate estate) a very desirable member 
 of a trading firm ; for while her rights as a participator in 
 the profits are unlimited, her liability, both to her colleagues 
 and to the creditors, is strictly confined to her separate 
 estate which she is not restrained from anticipating. 
 
 (k) Be Lynes, uhi sup. ; Re Hetoett, [1895] 1 Q. B. 328. The same 
 objection applies where the married woman trades alone under a firm 
 name, and judgment is obtained against such fii'm {Re Frances Hand- 
 ford & Co., reported p. 3 of Times, 13th February, 1899). 
 
 (0 Exp. Franks, (1831) 7 Bing. 762. 
 
 (w) Barden v. Keverherg, (1836) 2 M. & W. 61. 
 
 («) Beard v. Webb, (1800) 2 B. & P. 93. 
 
 (o) 20 & 21 Vict. c. 85, ss. 25, 26, and 21 & 22 Vict. c. 108, 6S. 6—10.
 
 CREATION OF A PARTNERSHIP. 33 
 
 With regard to the effect of a partnership, where one 
 of the partners is a married woman, it is apprehended 
 that the rights of creditors, and of the other members of 
 the firm, to have the assets of the business applied in 
 payment of debts, is the same as in the case of an infant 
 partner, to which let us now pass on. 
 
 (b.) Infants. — Now there are infants and infants, and 
 although a child of tender years cannot, in the nature of 
 things, conduct a business, many legal infants of eighteen 
 to twenty-one are perfectly capable of doing so, and, as 
 a matter of fact, there are many such infant traders. 
 But although infants do often carry on trades, they are 
 dangerous people to trust, because they cannot be sued 
 for trade debts, nor be made bankrupt (p). That being so, 
 what is the effect of a partnership between an adult and 
 an infant ? That question was discussed in the House of 
 Lords in the case of Lovell and Christmas v. Beauchamp (q). 
 It is an important question, because, as Lord Ashbourne 
 dryly observed, "if the adult members of a partnership 
 could evade liability because one of the partners was a 
 minor, minors would be found in many partnerships " ; in 
 fact there would be a premium on minors if such a new 
 career of usefulness were thrown open to them. This, 
 however, is not so. Lord Herschcll, in giving judgment, 
 said, " I think it clear that there is nothing to prevent an 
 infant trading or becoming partner with a trader, and that 
 until his contract of partnership be disaffirmed he is a 
 member of the trading firm. But it is equally clear that 
 he cannot contract debts by such trading ; although goods 
 may be ordered for the firm he does not become a debtor 
 
 {p) Exp. Jones, Jones, re, (1881) IS Ch. D. 109. 
 (<7) [1894] A. C. 607. 
 L.P.
 
 34 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 in respect of them. The adult partner is, however, entitled 
 to insist that the partnership assets shall be applied in 
 payment of the liabilities of the partnership, and that 
 until these are provided for, no part of them shall be 
 received by the infant partner. And, if the proper steps are 
 taken, this right of the adult partner can be made available 
 for the benefit of the creditors. It is also clear, that, even 
 if there are circumstances under which an infant can be 
 adjudi(^ated bankrupt, or a receiving order may be lawfully 
 obtained as a step towards such adjudication, he cannot be 
 made subject to the bankrupt laws in respect of any debt 
 contracted by the firm of which he is a partner." His 
 lordship then proceeded to point out that, in such cases, 
 the judgment should be either against the adult partner 
 alone, or against the firm excepting the infant partner, 
 and that under a judgment in either of those forms a 
 receiving order might be obtained against the adult 
 partners, and in the proceedings in bankruptcy the 
 partnership assets might be made available for those who 
 may have given credit to the firm. 
 
 If, on attaining twenty-one, an infant partner wishes to 
 free himself from liability for future debts of the firm, he 
 must determine the partnership at once, otherwise, the 
 shield of infancy having been lost, his position as a 
 de facto partner will make him equally liable with his 
 co-partners. It will not, however, render him liable for 
 debts contracted during his infancy (r). In this respect 
 the Indian Contract Act is more severe on an infant than 
 
 (r) Goode v. Harrison, (1821) 5 B. & A. 147. As to an infant's right 
 to recover a premium where he has derived no benefit from the 
 partnership, and has repudiated it on coming of age, see judgment 
 of Stirling, J., in Hamilton v. Vaicghan-Sherrin , etc. Co., [18941 3 Ch. 
 589.
 
 CREATION OF A PARTNERSHIP. 35 
 
 our common law; for by sect. 248, it is enacted that 
 "a person who has been admitted to the benefit of a 
 partnership under the age of majority, becomes, on attain- 
 ing that age, liable for all obligations incurred by the 
 partnership since he was so admitted, unless he gives 
 public notice within a reasonable time of his repudiation 
 of the partnership." In other respects the English law 
 as to infant partners seems to be the same as the law of 
 India. 
 
 According to the French, and some other continental 
 codes, an infant of the age of eighteen is, with certain 
 consents, able to carry on a trade so as to bind himself 
 as if he were of age (s), and therefore it is apprehended 
 he may become a partner in such a trade with all its 
 liabilities. In other respects, the French law appears to 
 be substantially the same as our own (t). 
 
 (c.) Lunatics. — With regard to lunatics, when a person 
 enters into a contract (such as a contract of partnership) 
 and afterwards alleges that he was insane at the time, and 
 did not know what he was doing, and proves the allegation, 
 the contract is nevertheless as binding on him in every 
 respect (whether it is executory or executed), as if he had 
 been sane when he made it, unless he can prove further 
 that the person with whom he contracted knev/ him to be 
 so insane as not to be capable of understanding what he 
 was about (u). Lunacy is, therefore, not of itself a bar to 
 entry into partnership ; nor does the subsequent lunacy of 
 a partner operate, like death, as an immediate dissolution 
 of the partnership (x), although it is a ground for asking 
 
 (s) Code de Commerce, Art. 2. 
 
 (0 See Code Civil, Art. 1124, 1125. 
 
 (a) Imperial Loan Co. v. Stone; [1892] 1 U. B. 599. 
 
 (x) Jones V. Not/, (1833) 2 M. & K. 125. 
 
 D 2
 
 36 PKINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 the court to decree a dissolution iy). However, the court 
 will, pending the hearing of such an action, grant an 
 injunction, in a proper case, restraining the lunatic from 
 interfering in the business {z). How necessary this may be, 
 is obvious, from the consideration that a lunatic partner is 
 quite capable of binding his co-partners by contracts entered 
 into by him on their behalf, so long as the party with 
 whom he contracts is unaware of his unsoundness of mind. 
 
 (3.) How FAR A Written Agreement is Eequired. 
 
 Having now considered the questions of the number of 
 partners, and the exceptional privileges of infant, lunatic 
 and married women partners, let us consider the form of 
 the partnership agreement. 
 
 With some few exceptions, there is no statute which 
 requires such an agreement to be in writing. It is one of 
 the many anomalies of our law that, whereas a contract for 
 the sale of a cottage, or for a marriage portion, or for the 
 sale of goods above 10/. in value where no money passes, 
 must be in writing and signed by the party to be charged, 
 the agreement regulating a partnership in a business 
 employing 1,000 workmen, and having a capital of 100,000?., 
 may be merely verbal. Of course, in practice, such con- 
 tracts, where the business is large, are nearly always reduced 
 into writing, and very generally the terms are embodied in 
 a deed. The law, however, requires nothing of the kind, and 
 the terms of a partnership may be proved by parol evidence, 
 or even inferred from the course of dealing of the parties ; 
 and this notwithstanding that the partnership property 
 
 (//) Act of 1890, s. 35. See infra, chapter V. 
 \z) J. V. S., [1894] 3 Ch. 72.
 
 CREATION OF A PARTNERSHIP. 37 
 
 consists of land, or that the object of the partnership is to 
 deal with land (a). 
 
 There are two exceptions to this, viz., (1) where the 
 partnership is only to commence at a future date exceeding 
 a year ahead ; and (2) where the partnership is intended to 
 last for more than a year, and nothing has been done in 
 pursuance of the agreement. In both such cases, the 4th 
 section of the Statute of Frauds (which requires contracts 
 to be in writing and signed where they are not to be per- 
 formed within a year) applies. Note, however, that in the 
 case of a partnership exceeding a year in duration, the 
 statute does not apply where the agreement has been partly 
 performed (b). Consequently, when two or more persons 
 have actually carried on a business in partnership under a 
 mere verbal agreement, it is open to one of them to prove 
 that the terms were that it should last for a definite term, 
 notwithstanding that such term might exceed a year. The 
 onus of proof, in such cases, of course, lies in the party who 
 desires to prove the agreement, and where the evidence is 
 conflicting he will presumably be defeated. The point arose 
 in the case of Burdon v. Barkus (c) . In that case a colliery 
 lessee entered into partnership with his manager for working 
 certain seams of coal. Twelve years afterwards, the old pits 
 being useless, new pits were sunk at the partnership expense. 
 Shortly afterwards the parties quarrelled, and the plaintiff 
 (the lessee) gave notice to determine the partnership, 
 treating it as a partnership at will. To this the defendant 
 (the manager) objected, alleging that he entered into the 
 
 (a) Forster v. Hale, (1800) 5 Ves. 308; Dale v. Hamilton, (1846) 5 
 Ha. 369; (1847) 2 Ph. 266; Isaacs v. Evans, (1899) 16 T. L. R. 113; 
 Cf. Caddick v. Skidmore, (1859) 2 De G. & J. 52. 
 
 (6) See Crawley v. O'SulHvan, [1900] 2 Ir. 478. 
 
 (c) (1862) 4 D. F. & J. 42.
 
 38 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 partnership under a verbal agreement that it was to last 
 during the whole of the term of the lease. It was held that 
 verbal evidence of this was admissible, Lord Justice Turner 
 saying : " The Statute of Frauds is relied upon by the plaintiff 
 in answer to the defendant's case, but whatever the agree- 
 ment may have been, it has been part iierformed, and we are 
 bound therefore, as far as may be possible, to ascertain what 
 that agreement was. In considering that question, it is to 
 be observed that the onus •prohandixeQi^.xn^oii the defendant, 
 not only because the agreement is set up by him, but 
 because the plaintiff has the legal interest in these seams ; 
 and the effect of the agreement alleged being to constitute 
 the plaintiff a trustee for the defendant, it must, of course, 
 rest upon the defendant to prove that trust." The evidence 
 being conflicting, the court held that the defendant had not 
 proved his case, and that, consequently, the partnership 
 was one at will only. 
 
 It will be seen, therefore, that whatever latitude the law 
 may allow, no person having any business wisdom would be 
 content with a merely verbal arrangement, the onus of 
 proving which would lie on him ; and, therefore, partnership 
 agreements (or articles of partnership as they are usually 
 called) form a very important branch of conveyancing 
 practice. 
 
 (4.) What Mattees should be Settled by the 
 Agreement. 
 
 The nature of such a document is a mutual agreement 
 (or, if a deed, a mutual covenant) that the parties will carry 
 on business in co-partnership on the terms therein stated. 
 These terms are set forth in numbered paragraphs, or 
 articles as they are usually called, and no small amount of
 
 CREATION OF A PARTNERSHIP. 39 
 
 skill is required in the preparation of these articles when 
 they are (as they frequently are) complicated, Indeed, in 
 no branch of drafting (except perhaps wills) is the wise 
 saying of Solomon, that " without counsel purposes are 
 disappointed," more often justified. 
 
 Speaking broadly, the agreement_^'should provide for the 
 following matters : 
 
 1. The nature of the business, the duration of the 
 
 partnership, and the name of the';firm. 
 
 2. How the capital is to be provided. 
 
 3. The banking account of the firm, and who is to sign 
 
 cheques. 
 
 4. Outgoings and profits. 
 
 5. Management of business. 
 
 6. Accounts. 
 
 7. What is to happen on the death of a partner or the 
 
 dissolution of the firm. 
 
 8. Provisions for the family of a deceased partner. 
 
 9. Arbitration clause. 
 
 These several points, or some of them, will be referred to 
 in more detail in subsequent chapters, but it is convenient 
 at this point to give some reasons why they should be 
 expressly dealt with by the agreement. 
 
 In the first place, then, speaking generally, although 
 some of these points might be left to be dealt with by the 
 law, instead of being made the subject of express stipulation 
 between the parties, yet the latter is the better course to 
 adopt, even where the express agreement merely states that 
 which the law would imply. As Lord Lindley remarks (d) , 
 " In framing articles of partnership, it should always be 
 remembered that they are intended for the guidance of 
 
 (d) Lindley on Partnership, 7th ed., p. 446,
 
 40 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 persons who are not lawyers, and that it is therefore unwise 
 to insert only such provisions as are necessary to exclude 
 the operation of rules which apply when nothing to the 
 contrary is said. The articles should be so drawn as to be 
 a code of directions, to which the partners may refer as a 
 guide in all their transactions, and upon which they may 
 settle among themselves differences which may arise, with- 
 out having recourse to the court." 
 
 To descend from generalities to particulars, let us shortly 
 consider each of the usual clauses. 
 
 (a.) Nature of business. — In the JBrst place, the nature of 
 the partnership business should be stated, because it is 
 that business, and that only, which the partners agree to 
 carry on, and with regard to which each partner is 
 responsible for the acts of his co-partners. It is therefore 
 in the highest degree desirable that there should be no 
 possibility of dispute as to what constitutes the real business 
 of the firm. 
 
 (b.) Duration of 'partner sliip. — With regard to the duration 
 of the partnership, unless a definite term be named, the 
 general rule (subject to an exception to be presently men- 
 tioned) is that the partnership lasts only during the will of 
 the partners. That is an old rule of law, but it is now 
 formulated in sect. 26 of the Act of 1890. Moreover, 
 where a partnership entered into for a fixed term is con- 
 tinued after that term has expired, and without any express 
 new agreement, the rights and duties of the partners remain 
 the same as they were at the expiration of the term, so far 
 as is consistent with the incidents of a partnership at will. 
 This, again, is now declared by sect. 27 of the 1890 Act ; 
 but it was always the law, as may be seen from the case of
 
 CREATION OF A PARTNERSHIP. 41 
 
 Neilson v. The Mossend Co. (e), where Lord Watson said, 
 " When the members of a mercantile firm continue to trade 
 as partners after the expiry of their original contract, with- 
 out making any new agreement, that contract is held in 
 law to be prolonged or renewed by tacit consent. The rule 
 obtains in the case of many contracts besides that of 
 partnership, and its legal effect is that all the stipulations 
 and conditions of the original contract remain in force, in 
 so far as these are not inconsistent with any implied term 
 of the renewed contract. The main distinction between 
 the old contract and the new in this case is, that the latter 
 is a contract determinable at will. It is an implied term of 
 such a contract, that each partner has the right to instantly 
 dissolve the partnership whenever he thinks proper." 
 
 The exception to the rule that a partnership is a partner- 
 ship at will in the absence of express stipulation, is the 
 particular kind of partnership which is usually now called 
 a syndicate. A syndicate is a partnership formed to carry 
 out some one special financial or industrial project, as for 
 instance, to purchase, develop, and sell a particular estate, 
 or to erect and sell a particular building. Such partner- 
 ships (in the absence of express stipulation) are considered 
 by the court as intended to last until the termination of 
 the adventure which is the subject of the partnership (/). 
 
 In France, if there be no agreement as to the duration 
 of the partnership, it continues during the joint lives of 
 the partners, unless it is formed for a specific work, 
 
 (e) (1886) 11 A. C. 298. See also Brooks v. Brooks, (1901) 85 L. T. 
 453, as to the effect of continuing the business after the term has 
 expired where the articles gave a right of pre-emption to one of the 
 partners. 
 
 (/) See Act of 1890, s. 32, and McClean v. Kennurd, (1874) 9 Ch. 
 App. 336.
 
 42 PRINCIPLES OF THE LAW OF PAETNERSHIP. 
 
 when, like our syndicates, it ceases on the completion of 
 such work (g). 
 
 (c.) Firm name. — With regard to the name under which 
 the business is to be carried on and which is usually called 
 with us the " firm name," and abroad the " raison sociale," 
 partners may trade under any name they please, according 
 to our law, whether it be a combination of their own several 
 names or the names of others, or a name descriptive 
 merely of their business, so long as they do not thereby 
 fraudulently imply that their business is identical with 
 some other competing one. Thus any person may use his 
 own name for the purpose of trade, or may use any fancy 
 name. If a man's name is Brown or Jones he is not com- 
 pelled to carry on trade under the name of Brown or Jones, 
 but may carry it on under any fancy name he chooses. 
 He may trade as De Montmorentcy if it pleases him, or as 
 the London Egg and Butter Guild. Moreover the mere 
 fact of somebody else having the same name, and carrying 
 on trade under that name, does not prevent another person 
 from doing the same. If John Brown sells coals, another 
 John Brown may sell potatoes, and there is no law to 
 prevent him doing so. Again, nothing can be plainer than 
 that if the first John Brown carried on business under the 
 name not of John Brown, but of John Brown & Co., so 
 might the second (h). Nay, more, Brown may, if so dis- 
 posed, carry on business under the name, not his own, 
 borne by some other person so long as his doing so is not 
 calculated to deceive the customers of the other person. As 
 James, L.J., said, in Levy v. Walker (i) : " It should never 
 
 {<j) Code Civil, Art. 1844. 
 
 [h) Per Jessel, M.E., Merclmnt Banking Go. of London v. Merchant 
 Joint Stock Bank, (1878) 9 Ch. D. p. 563. 
 (»;) (1879) 10 C. D. p. 447.
 
 CREATION OF A PARTNERSHIP. 43 
 
 be forgotten in these cases that the sole right to restrain 
 anybody from using any name that he Ukes in the course 
 of any business that he chooses to carry on, is a right in 
 the nature of a trade mark, that is to say, a man has a 
 right to say you must not use a name, whether jBctitious 
 or real, you must not use a description, whether true or 
 not, which is intended to represent, or, even although not 
 intended, is calculated (k) to represent to the world that 
 your business is my business, and so by a misstatement 
 deprive me of the profits of the business which would 
 otherwise come to me. That is the principle, and the sole 
 principle, on which the court interferes. The court inter- 
 feres solely for the purpose of protecting the owner of a 
 trade or business from a wrongful invasion of that business 
 by somebody else. It does not interfere to prevent the 
 ivorld outside from being misled into anything." 
 
 Where such knavish intention is apparent, the court will 
 interfere to prevent persons trading even under their own 
 proper names. There is the well-known case of Croft v. 
 Day (l), the case of Day and Martin, the well-known 
 makers of blacking in Holborn, in which there was no 
 longer either a Day or a Martin, both being long since 
 dead. Yet the plaintiffs, who then carried on that business 
 deriving their title under the original firm, were held 
 entitled to restrain a real " Day " and a real " Martin " 
 from trading under the firm name of "Day and Martin " 
 as makers of blacking ; the reason for the injunction being 
 that the name of "Day and Martin " had been adopted by 
 the defendants for the fraudulent purpose of representing 
 
 (k) North Cheshire and Manchester Breivery Co. v. Manchester Brewery 
 Co., [1899] A. C. 83. 
 (l) (1843) 7 Bea. 84.
 
 44 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 and holding out to the public that they were the old and 
 well-known firm of that name. 
 
 The fact of a new trader carrying on business in the 
 name of an old trader (of a different name) in the same line, 
 is not, therefore, of itself illegal, unless he is doing it for the 
 fraudulent purpose of passing off his goods as the goods of 
 his rival, or unless (according to the recent decision of the 
 House of Lords in North Cheshire and Manchester Brewery 
 Co. V. Manchester Brewery Co.) (m), in the absence of fraudu- 
 lent intention, it is evident that the effect will probably be 
 that his goods will be purchased in mistake for the goods of 
 his rival. The fact that the newcomer is not using his 
 own name, of course, speaks for itself, and goes a long way 
 to prove that he is acting mala fide. But mala fides is not 
 essential in such a case if there is a high probability of the 
 two firms being confounded (n). 
 
 Where, however, a man is trading under his own name, 
 and it happens that the old trader has a similar name, then 
 the question becomes more difficult and the law more doubt- 
 ful. In any case, where the evidence shows that the new- 
 comer is deliberately making a false suggestion, an injunction 
 will be granted (o). But where the evidence shows that there 
 was no intention to deceive, although the effect will be in all 
 probability to cause customers to mistake the new man for 
 the old, it seems questionable whether the recent House of 
 Lords case above cited would apply so as to prevent the 
 second comer trading under his own name. 
 
 (m) [1899] A. C. 83. («) lb. 
 
 (o) Per Turner, L.J., in Burgess v. Burgess, (1853) 3 D. M. & G. 896 ; 
 affirmed in Turton v. Turton, (1889) 42 Ch. D. 128; and Tussaud v. 
 Tussuud, (1890) 44 ih. 678. See also Levij v. Walker, (1879) 10 Ch. D. 
 436; Leiois v. Leivis, (1890) 45 Ch. D. 281; Saunders v. Sun, etc. Co., 
 [1894] 1 Ch. 537 ; Pinet et Gie v. Maison Louis Pinet, [1898] 1 Ch. 179 ; 
 and Brinnmead, v. Brinsmead, (1896) 13 T. L. R. 3.
 
 CREATION OF A PARTNERSHIP. 45 
 
 Our law as to the freedom allowed in the choice of a 
 firm name, differs widely from that of most states. 
 In France the code de commerce recognises three distinct 
 kinds of partnerships, viz., la societe en nam collectif, la 
 societe en commandite and la societe anonyme. The first of 
 these {la societe en nom collectif ) most nearly approaches to 
 an ordinary English partnership, being defined by Art. 
 20 as a partnership in which two or more persons agree to 
 carry on business under a firm name (raison sociale). This 
 firm name, however, must, by Art. 21, be confined to the 
 names of the partners. This rule also prevails in Italy, 
 by sect. 105 of the Italian commercial code, while 
 sect. 71 of the Eussian commercial code renders it obli- 
 gatory that the names of all the partners must figure in 
 the firm name. La societe en commandite is a species of 
 partnership prevailing in every European country except 
 our own, being, in effect, a partnership between active and 
 dormant partners, in which the latter are only responsible 
 to creditors to the extent of the capital which they have 
 subscribed or agreed to subscribe. In fact, it is very 
 like the imaginary "limited partnerships" which (as 
 mentioned in chapter I.) commercial men erroneously 
 assumed were created by Bovill's Act. These limited 
 private partnerships, by the French, and most other 
 foreign codes, must have a firm name comprising 
 one or more of the active and responsible partners, and 
 excluding the names of the dormant and limited 
 partners. La societe anonyme is the equivalent of our 
 limited joint stock companies, and need not be further 
 mentioned. 
 
 The German law differs somewhat from the French in 
 this, that although it requires that no other names than 
 those of partners shall in the first instance figure in the
 
 46 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 firm name of a societe en nom collectif, yet a firm having 
 been once legally constituted, the fact that the partners 
 whose names form part of the firm may retire or die, or sell 
 the business and goodwill to strangers does not necessitate 
 any change in the name (p) . 
 
 (d.) Firm not a distinct legal entity. — But, although 
 partners are permitted to trade under a firm name, that 
 does not, according to our law, make the firm a separate 
 and distinct legal persona like a corporation. In Scotland, 
 France, Italy, Germany, Belgium, and Eussia, the firm is 
 a distinct persona ; but with us, the firm name is merely 
 recognised as a convenient symbol or shorthand form for 
 collectively designating all the partners regarded as joint 
 creditors or debtors, just as we use ** a " and "b" in 
 algebraic computations to designate known quantities which 
 it would be inconvenient to specify at length. Partners 
 may therefore contract in their firm name, and the contract 
 will be construed, and take effect, as if the individual names 
 of all the members of the firm were substituted throughout 
 for that firm name. 
 
 At one time this was the only purpose for which the law 
 recognised the firm name at all, so that a firm could not 
 either sue or be sued by it, but all the partners had to be 
 named in their proper names as plaintiffs or defendants (as 
 the case might be). By Order 48a of the Eules of the 
 Supreme Court, this has now been altered, and persons 
 carrying on business within the jurisdiction may sue or be 
 sued in the firm name at the date when the cause of action 
 occurred. Where, however, plaintiffs so sue, they must, 
 on demand in writing, furnish the defendants with the 
 names and addresses of the partners ; and where a firm is 
 
 {li) Handelgoetzbuch, 17, 23, 24.
 
 CREATION OF A PARTNERSHIP. 47 
 
 sued the partners must enter appearance in their individual 
 names. Judgment may also be given against the firm as 
 such, and in that case execution may issue against the 
 property of the partnership, or against the individual 
 partners (q) with the exception of any who were out of the 
 jurisdiction when the writ was issued, and who have not 
 appeared or been served with the writ within the juris- 
 diction, or made co-defendants in their own proper names. 
 
 These provisions also apply to actions between a firm and 
 one or more of its members, and to actions between firms 
 having one or more members in common, provided they 
 carry on business within the jurisdiction ; but no execution 
 is to be issued in such actions without special leave. 
 
 It will be seen, therefore, that, although, in theory, 
 our law still refuses to regard a firm as a distinct 
 legal persona, yet for the practical purposes of contracting, 
 suing, and being sued, the firm is now looked upon as a 
 quasi independent entity. 
 
 (e.) Capital and interest thereon. — The proportions in 
 which the capital is to be subscribed by the partners should 
 be stated in the agreement, and if it is not subscribed 
 equally, provision ought to be made for the payment of 
 interest on capital before the net profits are divided. In 
 the absence of such a stipulation interest on capital is not 
 allowed. The necessity of bearing in mind this question 
 of interest on capital is obvious when one considers that 
 there is no necessary inference that partners share profits 
 in proportion to their respective amounts of capital. 
 Suppose, for instance, that A. and B. agree to enter into 
 partnership, A. being a clever and experienced buyer of 
 
 (q) As to practice where there is an alleged secret partner, see Duvis 
 V. Hyman, [1903] 1 K. B. 854.
 
 48 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 foreign goods but having little capital, whereas B., although 
 destitute of technical experience, has the command of 
 money. Under these circumstances it may be quite fair 
 and proper that although A. brings in only 1,000L of 
 capital, while B. subscribes 5,000L, the net profits should 
 be divided equally. But nevertheless it is also just that 
 before those profits are ascertained, each partner should 
 receive interest on his capital, in other words that it should 
 be regarded as a loan to the firm. 
 
 (f.) Signature of cheques, etc. — With regard to the bank- 
 ing account, the articles usually specify the bank, and also 
 state that all cheques and moneys received on account of 
 the firm shall forthwith be paid into the banking account. 
 They generally, also, make some provision as to who is to 
 sign cheques. In the absence of any agreement each 
 partner can sign cheques on behalf of the firm. Where, 
 however, an elderly man takes a young partner, or, as often 
 happens, promotes a clerk or employee to a share in the 
 business, it is quite usual to stipulate that all cheques shall 
 be signed by the senior partner. 
 
 (g.) Division of profits. — Profits {i.e. net profits which are 
 alone divisible) are the moneys received minus the expenses. 
 The inference of law is that they are to be equally divided ; 
 and also that the net profits of each year must be ascer- 
 tained on the footing of the moneys actually received less 
 those actually paid in that year without reference to when 
 the work was done in respect of which the moneys were 
 received (r). Where, therefore, these inferences are not in 
 accordance with the intention of the parties it is very 
 necessary to specify that intention with regard to what is 
 
 (r) Badham v. Williams, (1902) 86 L. T. 191.
 
 CREATION OF A PARTNERSHIP. 49 
 
 to constitute profit. Moreover the inference of law is so 
 contrary to general practice that the question should always 
 be pointedly brought to the notice of intending partners. 
 The system of credit which prevails in all businesses pre- 
 vents the possibility of large cash returns in the first year of 
 a partnership. Yet at the end of the year the book debts, 
 representing work done, may be large ; and it is therefore 
 very customary to provide that book debts shall be taken into 
 consideration in ascertaining profits, subject to a deduction 
 of 10 per cent, for bad or doubtful ones. This enables the 
 partners to draw these as profits of the first year as and when 
 they are paid, instead of waiting until the expiration of the 
 year in which they are actually paid. Of course, it must be 
 understood that where a new partnership is formed to carry 
 on an old business the new partners do not share in the 
 existing book debts, unless there is some express stipulation 
 to that effect (s). It may also be remarked that in ascer- 
 taining profits, an increase in the value of the goodwill is 
 considered as an accretion to capital, and is not to be taken 
 into account in calculating profits (i). One more point has 
 to be remembered in this connection, viz., that as profits 
 are generally divided only once a year, or at most once 
 every half year, some provision should be made enabling 
 the partners to draw out monthly sums for their current 
 private expenses on account of future profits. 
 
 (h.) Management of business. — It is usual to specify, in 
 well-drawn articles, whether all or some only of the partners 
 are to have the management, and also that the partner or 
 partners who are to manage the business shall give their 
 whole time to it. In the absence of such stipulations, each 
 
 (s) Fer KeJcewich, J., ib. 
 (t) Steuart v. Oladstone, (1879) 10 C. D. 626. 
 L.P.
 
 50 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 partner is entitled to participate in the management, and 
 is bound to attend diligently to business. It is also desir- 
 able, in order to prevent disputes, to specify what amount 
 of holiday each shall be entitled to, and how each partner 
 shall be entitled to select the season of his holiday. It is 
 also usual in this part of the deed to insert a stipulation 
 that no partner shall enter into contracts exceeding a 
 specified amount without the consent of all the other 
 partners. 
 
 (i.) Accounts. — Well-drawn articles of partnership always 
 provide for the keeping of regular accounts, and for an 
 annual or sometimes semi-annual balance sheet. As to 
 such provisions Lord Lindley says {ii) : " The object of 
 taking partnership accounts is twofold, viz. (1) to show how 
 the firm stands as regards strangers, and (2) to show how 
 each partner stands toward the firm. The accounts, there- 
 fore, which the articles should require to be taken, should 
 be such as will accomplish this twofold object. The 
 articles should consequently provide not only for the 
 keeping of proper books of account, and for the due entry 
 therein of all receipts and payments, but also for the making 
 up yearly of a general account showing the then assets and 
 liabilities of the firm, and what is due to each partner in 
 respect of his capital and share of profits, or what is due 
 from him to the firm, as the case may be." 
 
 (j.) Death or retirement of a -partner. — In the absence of 
 special stipulation, the death of a partner operates as a 
 complete dissolution of the firm, and necessitates its winding 
 up. A moment's thought, however, will make it clear that 
 this is very undesirable in most businesses, and absolutely 
 
 [u) Lindley on Partnership, 7tli ed., p. 454.
 
 CREATION OF A PARTNERSHIP. 51 
 
 ruinous in many cases where a firm have got together a 
 large and valuable connection, and in which that intangible, 
 but very valuable asset called "goodwill," would vanish 
 into air if the firm were liquidated in the usual way. It 
 is usual and desirable therefore to make provisions for 
 continuing the firm notwithstanding the death of one or 
 more of the partners, by providing that the business shall not 
 be wound up, but that, instead, the surviving partner or 
 partners shall continue to carry it on as partners together ; 
 the share of the deceased in the assets being ascertained in 
 a specified way, and the amount being paid to his personal 
 representatives in a specified manner. By this means, the 
 continuity of the business is not disturbed, while the sub- 
 stantial interests of the representatives of the deceased 
 partner are safeguarded. 
 
 In framing these clauses, it is usual and convenient to 
 provide that the last balance sheet, if taken at the date 
 provided by the articles, shall be conclusive as to the 
 amount of the share of the deceased in the assets ; but that 
 if from any cause such balance sheet shall not have been 
 taken, then that the omission shall be remedied, the 
 personal representatives of the deceased joining with the 
 surviving partners in taking the necessary account. 
 
 It is also a convenient plan to provide that the personal 
 representatives of the deceased shall be entitled to some 
 fixed allowance, or a rate of interest on capital, in lieu of 
 current profits since the last balance sheet. If this be not 
 done, it will be necessary to take an account of profits from 
 the last balance sheet down to the death of the deceased. 
 
 The above is merely an outline of the simplest form 
 of arrangement in relation to the death of a member 
 of a firm. There are, however, many other forms. Some- 
 times the personal representatives succeed to the share of 
 
 E 2
 
 52 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 the deceased as dormant partners. Sometimes an annuity- 
 is made payable to his widow or personal representatives out 
 of the profits (which it will be remembered does not make 
 the recipients partners). Sometimes there are provisions 
 enabling the deceased to nominate a successor by his will, 
 but in that case the articles should provide that such suc- 
 cessor should be bound to execute a deed agreeing to be bound 
 by the articles. 
 
 What has been just said in relation to provisions pro- 
 viding for the death of a partner, equally applies to the case 
 of a partner who desires to retire from business. 
 
 (k.) Arbitration. — The final clause in articles of partner- 
 ship is almost invariably an arbitration clause. Put 
 shortly, the reason for such a clause is the proverbial one, 
 that it is better to wash dirty linen at home. Nothing 
 injures a business so much as the knowledge that the 
 partners are in a state of litigation, and it is, consequently, 
 well recognised that the tribunal of private arbitration is 
 much wiser in the interests of all parties than the public 
 courts. 
 
 On the continent they lay so much stress upon this, that, 
 by the French commercial code and others founded upon it, 
 partnership disputes must be always referred to arbitration ; 
 and if a party declines to name an arbitrator the Tribunal 
 of Commerce will nominate one on his behalf.
 
 ( 53 ) 
 
 CHAPTER III. 
 
 THE RELATION OF PARTNEES TO PERSONS 
 DEALING WITH THEM. 
 
 It is often said that the law of partnership is a branch of 
 the law of principal and agent. Certainly, so far as the 
 subject of this chapter is concerned, the statement is 
 correct ; for the reason why the partners collectively are 
 liable for the acts or defaults of each of them is that each 
 partner is prima facie the agent of the firm and of each of 
 his co-partners (a). 
 
 It must not be inferred, however, that a partner can 
 bind the firm to any engagement into which he may pur- 
 port to enter on its behalf, any more than an ordinary 
 agent can so bind his principal. In fact, like any other 
 agent, he can only bind his principal (the firm) to the extent 
 of his actual or apparent authority. 
 
 (1.) Test of Liability is Generally the Apparent as 
 Distinguished from the Actual Authority. 
 
 Actual authority does not necessarily mean express 
 authority. It no doubt includes all express authorities 
 in cases where there are any, but in every case it includes 
 that general authority (commonly called apparent or osten- 
 sible authority) with which, in the absence of express pro- 
 hibition, the law clothes every partner to do all acts necessary 
 or proper for carrying on the firm's business in the way 
 usual in businesses of a like nature. 
 
 (a) Act of 1890, s. 5.
 
 54 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 In many firms none of these acts are prohibited, and in 
 such cases the actual authority of each partner is, at least, 
 as great as his ostensible or apparent authority ; and of 
 course it may be even greater by express agreement. But 
 it is more usual to find provisions in partnership agree- 
 ments expressly prohibiting the individual partners or some 
 of them {e.g., junior partners) from doing certain acts. 
 For instance, nothing is more usual than to find a clause 
 prohibiting a partner from buying, ordering, or contracting 
 for any goods or articles for the use of the firm exceeding a 
 certain value without the consent in writing of the other 
 partners. In such cases the actual authority is less than 
 the ostensible or apparent authority ; and if a partner does 
 a prohibited act — exceeds his actual authority in fact — the 
 question at once arises whether what he has done was 
 within his ostensible or apparent authority or not. If it 
 was, then, although it was expressly forbidden by the 
 partnership agreement, the firm will be bound, unless the 
 person who dealt with the partner knew of the prohibition. 
 If he knew of the prohibition it goes without saying that 
 the firm will not be bound : for in that case, so far from 
 having apparent authority, it would be apparent that he had 
 none. Indeed, sect. 8 of the Act of 1890 is explicit on 
 this point. 
 
 What then is the principle on which this doctrine of 
 ostensible or apparent authority as distinguished from 
 actual authority depends? It would appear to be a 
 deduction from the doctrine of estoppel by conduct, viz., 
 that if a man so conducts his business as to mislead others 
 he must bear the consequences. Therefore if one employs 
 another to transact a particular class of business for him, 
 he is estopped from denying that the agent had authority to 
 do any acts ivliich are usually ancillary to the transaction of
 
 RELATION OF PARTNERS TO THIRD PARTIES. 55 
 
 that class of business. In short, a principal must not blow 
 hot and cold. He must not mislead innocent third parties 
 by holding out another as his agent in relation to the 
 conduct of a business, and then, when a particular 
 transaction does not suit him, repudiate the agency on the 
 ground that in details the agent had exceeded or disobeyed 
 his instructions. For instance, where a man employs an 
 agent to sell goods, he cannot repudiate a sale on the 
 ground that the agent has sold for less than a minimum 
 price in disobedience to his orders ; nor on the ground 
 that the sale was made for credit contrary to express 
 instructions. 
 
 If (as is submitted) the principle of the doctrine as to 
 ostensible authority depends on the third party having been 
 misled, it follows that where he was not misled (as, for 
 instance, in the case of sleeping partnerships, where the 
 third party thinks that the party with whom he deals is, 
 in fact, the sole principal, and therefore does not give 
 credit to the real principal) the latter will not be liable if 
 the ostensible partner has exceeded his actual authority. 
 That is believed to be a correct statement of the law of agency 
 generally, and certainly it is so now with regard to the 
 agency of partners. But the author is bound to say that it is 
 inconsistent with a decision of the Queen's Bench Division 
 in the case of Watteau v. Fenwick (b) in which Mr. Justice 
 Wills (with the concurrence of the late Lord Coleridge) laid 
 it down that in the case of a dormant partner no limitation 
 of authority as between the dormant and the active partner 
 will avail the dormant partner as to things within the 
 ordinary authority of a partner. His lordship's atten- 
 tion does not seem, however, to have been called to 
 
 {b) [1893] 1 Q. B. 346.
 
 56 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 sect. 5 of the Act of 1890, which, it is conceived, is 
 only declaratory of the previous law. By that section it is 
 declared that " Every partner is an agent of the firm and 
 his other partners for the purpose of the business of 
 the partnership ; and the acts of every partner who does 
 any act for carrying on, in the usual way, business of the 
 kind carried on by the firm of which he is a member, bind 
 the firm and his partners, unless the partner so acting has 
 in fact no authority to act for the firm in the particular 
 matter, and the person with whom he is dealing either 
 knows that he has no authority, or does not know or believe 
 him to he a •partner.'" The dictum of Mr. Justice Wills 
 seems to be quite inconsistent with this section, and, as the 
 decision is questioned by Lord Lindley, the present writer 
 ventures to think that it is erroneous. 
 
 (2.) What Acts are within the apparent Authority 
 OF A Partner. 
 
 The power of a partner to bind the firm being limited to 
 his actual or ostensible authority, the practical result is, 
 that whenever a dispute takes place as to whether the firm 
 is bound by the act of a partner, the question at once arises, 
 was the act one which, in the absence of notice to the con- 
 trary, a third person would be justified in regarding as 
 within the ostensible or apparent authority of each of the 
 partners ? If that question be answered in the affirmative, 
 then the question of actual authority is immaterial. Let 
 us then consider what acts are within the ostensible authority 
 of a partner, 
 
 (a.) The act must he done in relation to the partnership 
 business. — In the first place, in order to bind the firm, the
 
 RELATION OF PARTNERS TO THIRD PARTIES. 57 
 
 act must be one done in relation to the partnership busi- 
 ness. If A. and B. carry on business as butchers, a con- 
 tract signed by A. in the firm name to supply furniture 
 would not be binding on B. unless made with his express 
 authority. By the mere fact of taking him as a partner B. 
 never made A. his agent for such a purpose either actually 
 or ostensibly. For the business is actually and also osten- 
 sibly that of a butcher, not that of a furnisher, and a third 
 party cannot reasonably assume that in such a case a part- 
 ner has authority to pledge the firm to a transaction which 
 is altogether foreign to its ostensible object. This rule of 
 law is summed up in sect. 7 of the Act of 1890 as follows : 
 " Where one partner pledges the credit of the firm for a 
 purpose apparently not connected with the firm's ordinary 
 course of business, the firm is not bound, unless he is in 
 fact specially authorised by the other partners ; but this 
 section does not aflect any personal liability incurred by any 
 individual partner." It is apprehended that this last proviso 
 is intended to meet the case of A., one of several partners, 
 A., B., C, and D. having so acted as to mislead the third 
 party into the belief that B. had the authority of the firm 
 to enter into a contract on their behalf, or of A. having 
 given B. actual authority to bind him (A.). 
 
 (b.) Must be an act for carrying on business in the usual 
 way. — The matter is fairly simple where the act in question 
 is obviously one foreign to the usual business of the firm. 
 The difficulty arises when the act, although plainly done in 
 relation to the partnership business (for instance, referring 
 a dispute between the firm and the third party to arbitra- 
 tion), is alleged by the firm to be one which was not within 
 the ostensible authority of a single partner. 
 
 The 5th section of the Act of 1890 does not give one much
 
 58 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 assistance here, for it merely describes the acts which a 
 partner has ostensible authority to do, as acts " for carrying 
 on in the usual way business of the kind carried on by the 
 firm." It is therefore necessary still to examine the autho- 
 rities prior to 1890, to see whether they throw any light on 
 the question, what are acts for carrying on the business in 
 the usual way. The Privy Council case of Bank of Aus- 
 tralasia V. Breillat (c) is the leading authority as to this, 
 and it was there broadly laid down that in the absence of 
 express prohibition, the actual authority (and therefore, 
 in the absence of notice of any such prohibition, the 
 ostensible or apparent authority) of a partner in a general 
 commercial partnership, extends to pledging {d) and sell- 
 ing (c) the partnership goods, buying goods on account of 
 the firm (/), borrowing money {g), contracting debts, and 
 paying debts on its account, and drawing, making, signing, 
 indorsing, accepting, transferring, negotiating, and procur- 
 ing the discounting of negotiable instruments. In addition 
 to these acts, a partner may engage servants for the firm's 
 business {h) , may receive, and give good receipts for debts 
 due to the firm (i), and may (according to the best authori- 
 ties) probably create an equitable mortgage of the firm's 
 lands or buildings by a simple deposit of deeds {k). He may 
 also probably retain a solicitor to conduct an action for 
 
 (c) (1849) 6 Moo. P. C. p. 193. 
 
 \d) Exp. Bonbonus, (1803) 8 Ves. 540; Butcharty. Dresser, (1853) 4 
 De G. M. & G. 542. 
 
 (e) Dove v. Wilkinson, (1817) 2 Stark. 287. 
 
 (/) Bond V. Gihson, (1808) 1 Camp. N. P. 185. 
 
 (V) Lane v. Williams, (1692) 2 Vern. 277. 
 
 (A) Beckham v. Drake, (1841) 9 M. & W. 79. 
 
 {i) Porter v. Taylor, (1817) 6 M. & S. 156; Stead v. Salt, (1825) 3 
 Bing. p. 103. 
 
 {k) Lindley, 7th ed., 166; and see Be Clongh, (1886) 31 Ch. D. 324.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 59 
 
 recovering debts due to the firm (l). Where, however, the 
 business is not of a commercial nature, (e.g., where it is a 
 professional business (m), or even the business of a farmer (n), 
 or a quarry worker (o), where there is no buying and selling 
 of goods) he cannot accept, make, or issue negotiable instru- 
 ments (other than ordinary cheques (p) ), nor borrow or 
 pledge the partnership property. In no case, whether the 
 business be commercial or non-commercial, has a partner 
 ostensible authority to do any of the following acts : He 
 cannot execute a deed {q) (e.g., a legal mortgage) on behalf 
 of the firm ; for an agent cannot bind his principal by deed 
 unless his authority to do so is expressly conferred by 
 deed (r) ; nor can he give a guarantee in the firm name 
 (unless a trade custom be proved) (s) ; nor submit a dispute 
 to arbitration {t) ; nor accept property {e.g., fully paid up 
 shares in a company) (w) in lieu of money in liquidation of 
 a debt due to the partnership ; nor make his partners, 
 partners in another business {x) ; nor authorise a third 
 
 {I) Court V. Berlin, [1897] 2 Q. B. 396; and see, also, Underwood v. 
 Lewis, [1894] 2 Q,. B. 306; or for defending an action, Tomlinson y. 
 Broadsmith, [1896] 1 Q. B. 386. 
 
 (m) Hedley v. Bainbridge, (1842) 3 Q. B. 316. 
 
 (n) Greenslade v. Bower, (1828) 7 B. & C. 635. 
 
 (o) Thicknesse v. Bromilow, (1832) 2 Cr. & Jar. 425. 
 
 (p) Laws V. Band, (1845) 3 C. B. (n.S.) 442; Forster y. Mackreth, 
 (1866) L. E. 2 Ex. 163. 
 
 (q) Harrison v. Jackson, (1797) 7 T. E. 207. 
 
 (r) Berkeley v. Hardy, (1826) 5 B. & C. 355 ; Harrison v. Jackson, 
 iup. But in transactions where a deed is not necessary, a sealed 
 writing may be good as a writing, although useless as a deed, 
 Marchant v. Morton, Down & Co., [1901] 2 K. B. 829. 
 
 (8) Brettel v. Williams, (1849) 4 Ex. 623. 
 
 (t) Stead V. Salt, sup. ; Adams v. Bankart, (1835) 1 C. M. & E. 681. 
 
 \u) Niemann v. Niemann, (1890) 43 Ch. D. 198. 
 
 (x) Singleton v. Knight, (1888) 13 A. C. 788.
 
 60 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 person to make use of the name of the firm in legal or other 
 proceedings {y) . 
 
 (c.) M'list he an act done qua partner, and not qua indivi- 
 dual. — Assuming that a member of a firm has entered into 
 a contract with a third party, in relation to a matter which 
 is within the scope of the partnership business, and is 
 within the scope of his actual or ostensible authority, 
 does such a contract necessarily bind the firm ? The 
 answer is — No, not unless he entered into the contract in 
 his character of a partner. It is conceivable that he may 
 have entered into the contract as principal and not as an 
 agent for the firm, and in such case the firm will not be 
 liable. But, of course, if the partner entered into the con- 
 tract in the firm name, or in relation to the firm business, 
 no doubt could be entertained that he contracted as agent 
 for the firm. Indeed it is enacted by the 6th section of 
 the Act of 1890, that, " An act or instrument relating to the 
 business of the firm and done or executed in the firm name, 
 or in any other manner showing an intention to bind the 
 firm, by any person thereto authorised, whether a partner 
 or not, is binding on the firm and all the partners. Pro- 
 vided that this section shall not affect any general rule 
 of law relating to the execution of deeds or negotiable 
 instruments." 
 
 (3.) Liability for Torts. 
 
 So far we have been considering the liability of a firm for 
 the contracts or engagements entered into by one of its 
 partners on its behalf. However, the liability does not end 
 there, for a firm, and each of its members, is also liable for 
 the torts of one of the partners if committed in the 
 
 [y) Marsh v. Joseph, [1897] 1 Ch. p. 213.
 
 RELATION OF PARTNERS TO THIRD PARTIES. Gl 
 
 ordinary course of the firm's business, but not for torts 
 committed by him outside the scope of his apparent and 
 ostensible authority as partner. The law on this subject is 
 not perhaps very easy to understand, but it may perhaps be 
 made easier by pointing out that the liability of a firm for 
 the tortious acts of a partner rests on precisely the same 
 principles as the liability of a master for the tortious acts of 
 his servants, inasmuch as both are merely branches of the 
 law of principal and agent. 
 
 So far as partnership is concerned, the principle is now 
 stated authoritatively in the 10th and 11th sections of the 
 Act of 1890, in the following words : 
 
 " 10. Where, by any wrongful act or omission of any 
 partner acting in the ordinary course of the business of the 
 firm, or with the authority of his co-partners, loss or injury 
 is caused to any person not being a partner in the firm, or 
 any penalty is incurred, the firm is liable therefor to the 
 same extent as the partner so acting, or omitting to act (2;). 
 " 11. In the following cases ; namely — 
 *' (a.) Where one partner acting within the scope of his 
 apparent authority receives the money or property 
 of a third person and misapplies it ; and 
 " (b.) Where a firm in the course of its business receives 
 money or property of a third person, and the 
 money or property so received is misapplied by 
 one or more of the partners while it is in the 
 custody of the firm ; 
 " the firm is liable to make good the loss." 
 
 (a.) Liability for torts other than fraudulent niisappro- 
 priations. — Let us consider these in detail. It will be 
 perceived that sect. 10 refers to ordinary torts and sect. 11 
 
 («) See Moore v. Knight, [1891] 1 Ch. 547.
 
 62 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 to specific torts in the nature of fraudulent misappropria- 
 tions of property. With regard to sect. 10, in order to render 
 the firm liable, the tort must be a wrongful act or omission 
 of a partner — committed or made, either (1) with the 
 authority of his co-partners, or (2) in the ordinary course 
 of the firm's business. If, therefore, it was committed or 
 made without the actual authority of the co-partners, and 
 outside the scope of the partner's ostensible authority, the 
 firm will not be liable any more than it would be for a 
 contract entered into under similar circumstances. 
 
 Perhaps some may at first fail to understand how any 
 wrongful act, which is not authorised by the other members 
 of the firm, can fall within the scope of a partner's ostensible 
 authority. Can the law assume, in the absence of evidence, 
 that an individual partner had apparent or ostensible autho- 
 rity to commit a tort on behalf of the firm of which he is a 
 member, especially where (as sometimes happens) the tort 
 is also a crime ? The answer is, that although, no doubt, 
 the firm cannot be assumed to have given one of its mem- 
 bers authority to commit a wrong, yet, where it has given 
 him actual or ostensible authority to do a class of acts on 
 its behalf, it is liable for his tort either in the manner of doing 
 such acts, or in doing them under circumstances in ivhich they 
 ought not to have been done at all. Thus (to take the analogy 
 of the law of master and servant), a master is liable if his 
 coachman, in the course of his employment, carelessly 
 drives over a pedestrian; or if his workman negligently 
 drops a stone from a scaffold on to a bystander. But, on 
 the other hand, if the coachman, while his master is away 
 from town, takes his sweetheart for a drive in the park in 
 the master's carriage, and, owing to the charms of the lady, 
 fails to see some unfortunate wayfarer and breaks his leg, 
 the master is not liable, because the servant was certainly
 
 RELATION OF PARTNERS TO THIRD PARTIES. 63 
 
 not acting in the service for which he was engaged. The 
 fact that he has committed a tort against his master by 
 appropriating his carriage for amatory purposes does not 
 make the master liable for consequent torts to third parties. 
 As was well said in the Judgment of an American court in 
 Mott V. Consumers' Ice Co. (a) : " For the acts of a servant, 
 within the general scope of his employment, while engaged 
 in his master's business, the latter is responsible. Whether 
 the act be done negligently, wantonly, or even wilfully, the 
 quality of the act does not excuse. But if the servant, 
 without regard to his service or his duty therein, or solely 
 to accomplish some purpose of his own, acts maliciously or 
 wantonly, the master is not liable." And again, in Colman 
 v. Dry Dock Co.{h), the rule was thus laid down: "A 
 master is liable for the wrongful act of his servant to the 
 injury of a third person, where the servant is engaged at the 
 time in doing his master's business, and in acting within 
 the general scope of his authority, although he is reckless 
 in the performance of the duty, or through lack of judg- 
 ment or discretion, or from infirmity of purpose, or under 
 the influence of passion aroused by the circumstances, goes 
 beyond the strict line of his duty and inflicts unnecessary 
 and unjustifiable injury." 
 
 Thus, where the driver of an omnibus wilfully, and 
 contrary to express orders, pulled across the road in 
 order to obstruct a rival " bus," thereby causing a collision, 
 it was held that the master was liable, Willes, J., saying: 
 "Of course one may say that it is no part of the duty 
 of a servant to obstruct another omnibus ; and in this case 
 the servant had distinct orders not to obstruct the other 
 
 (a) (1878) 28 Sickels N. Y. Eeps. 543. 
 (6) (1877) 24 Sickels N. Y. Eeps. 170.
 
 64 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 omnibus. I beg to say that in my opinion these instruc- 
 tions were perfectly immaterial. If they were disregarded, 
 the law casts upon the master the liability for the acts of 
 his servants in the course of his employment, and the law 
 is not so futile as to allow the master, by giving secret 
 instructions to his servant, to set aside his own liability " (c). 
 
 The case of Poidton v. London and South-Western By. 
 Co. (d), seems at first sight to be inconsistent with the 
 above case. There a station-master, having demanded 
 payment for the carriage of a horse conveyed by the 
 defendants, arrested the plaintiff and detained him in 
 custody until it was ascertained by telegraph that all was 
 right. The railway company had no power whatever to 
 arrest a person for non-payment of carriage, and therefore 
 the station-master, in arresting the plaintiff, did an act 
 that was wholly illegal, not in the mode of doing it, but in 
 the doing of it at all. Under these circumstances, the 
 court held that the railway company were not responsible 
 for the act of the station-master ; and Blackburn, J., said : 
 " In Limpus v. General Omnibus Co., the act done by the 
 driver was within the scope of his authority, though no 
 doubt it was a wrongful and improper act, and, therefore, 
 his masters were responsible for it. In the present case, 
 an act was done by the station-master completely out of 
 the scope of his authority, which there can be no possible 
 ground for supposing the railway company authorised him 
 to do, and a thing which could never be right on the part 
 of the company to do. Having no power themselves they 
 cannot give the station-master any power to do the act." 
 
 Applying these principles to the case of partners, it will 
 at once be seen that a firm of solicitors would be liable for 
 
 (c) Limims v. Gen. Omnibus Co., (1862) 11 W. E. 149. 
 {d) (1866) L. R. 2 Q. B. 534.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 65 
 
 the professional negligence and unskilfulness of one of the 
 partners (e). A firm of surgeons would be liable for the 
 unskilful treatment of a patient by a member of the firm. 
 A firm of engineers would be liable for the negligence of a 
 partner in the design or construction of works. And 
 similarly a partner who unlawfully induces the clerk of a 
 competing trader to divulge the latter's business secrets, 
 will render his firm liable as well as himself (/). 
 
 But a firm will not be liable for a tort committed by a 
 partner outside the scope of his ostensible authority (g) ; as, 
 for instance, where he wrongfully commences a malicious 
 prosecution for an alleged theft of partnership property (h). 
 For such a proceeding is not within the scope of his 
 ostensible authority, as it has nothing to do with carrying 
 on the business of the firm in the ordinary way. Indeed, 
 it is difficult to imagine a case in which (without express 
 authority, or, what is the same thing, subsequent ratifica- 
 tion), a firm would be liable for the violent acts of a 
 member against the person or liberty of a third party. 
 
 On the other hand, it is of course quite easy to see that 
 a firm of newspaper proprietors would be liable for a libel 
 inserted by an editor partner, or that a firm of company 
 promoters would be liable for a fraudulent prospectus 
 issued in the course of business by an individual partner. 
 In all these cases the inquiry is simply whether the wrong- 
 ful act or omission was done or made in the course of the 
 partner's duty as such, or outside of it. 
 
 There is one tort from which the firm is specially 
 
 (e) Bhjth V. Flad(jate, [1891] 1 Ch. 337. See also Marak v. Joseph, 
 [1897] 1 Ch. 213. 
 
 (/) Hamlyn v. Houston & Co., [1903] 1 K. B. 81. 
 
 (.7) See Mara v. Browne, [1896] 1 Ch. 199. 
 
 {h) Arbuckh v. Taylor, (1815) 3 Dow 100. 
 
 L.P. F
 
 66 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 exempted from liability by statute (viz., 9 Geo. 4, c. 14, 
 s. 6), by which it is enacted, that the firm is not to be 
 liable for the false and fraudulent representation as to the 
 character or solvency of any person, unless the representa- 
 tion is in writing signed by all the partners. The signature 
 of the firm name is insufficient even although all the 
 partners were privy to the misrepresentation (i). 
 
 (b.) Liability for fraudulent misappropriations. — With 
 regard to the special torts referred to in sect. 11, viz., 
 the misapplication of money or property by a member of 
 the firm, the liability arises in two cases, (1) where a 
 partner acting within the scope of his apparent authority 
 receives the money and misapplies it, and (2) where the 
 firm receives the money in the course of its business and 
 one or more of the partners misapply it. Cases under this 
 section mostly occur in the case of solicitors and bankers, 
 and the question almost always resolves itself into this : Was 
 the acceptance of the money or property by the defaulting 
 partner within the scope of his apparent authority or 
 not? Now some of these cases have laid down certain 
 definite rules of law as to what acceptances are, and what 
 acceptances are not, within the ordinary scope of a solicitor 
 partner's authority; but others, although figuring in the 
 law reports, really turn on evidence of partnership usage 
 tending to prove actual as distinguished from ostensible 
 or apparent authority, and therefore decide no general 
 principles of law at all. 
 
 The leading cases in which principles of law as to this 
 question have been laid down are Harman v. Johnson (k) 
 and Earl of Dundonald v. Masterman {I). In the head- 
 
 (t) Swift Y. Jewsbnru, (1874) L. E. 9 Q. B. SOL 
 
 {h) (1853) 2 E. & b1 61. (/) (1869) 7 Eq. 504.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 67 
 
 note to Harman v. Johnson the law is stated as follows : 
 " The receipt of money by one of a firm of attorneys from 
 a client, professedly on behalf of the firm, for the general 
 purpose of investing it as soon as he can meet with a 
 good security, is not an act within the scope of the ordinary 
 business of an attorney, so as, ivithout further proof of 
 authority from his partners, to render them liable to 
 account for the money so deposited ; such a transaction 
 being part of the business of a scrivener, and attorneys, 
 as such, not necessarily being scriveners." But though 
 the law may be so stated, no one will deny that a course 
 of conduct may be pursued which may convert the act of 
 a partner for which the other members of the firm would 
 not be otherwise liable, into one for which they will be 
 responsible. In the other case (namely, Earl of Dundonald 
 v. Masterman), the head-note is as follows : " Money 
 received by one member of a firm of solicitors in the 
 course of the management and settlement of the affairs 
 of a client of the firm, is money paid to the firm in the 
 course of their professional business, and, consequently, 
 the members of the firm are liable to make good any loss 
 occasioned by the negligence or dishonesty of their partner 
 by whom such money was received." In that case the 
 plaintiff being under pecuniary pressure employed the firm 
 in reference to arranging his affairs, and the particular 
 sum received by the partner was received by him in per- 
 formance of the duties for which the firm was employed. 
 Two other cases, viz., Cleatherv. Tivisden (m) and Rhodes 
 V. Monies (n) are sometimes cited by text writers as decid- 
 ing, as a legal principle, that it is not within the ostensible 
 or apparent authority of a partner in a solicitor's business 
 
 (m) (1885) 28 Ch. D. 340. (%) [1895] 1 Oh. 236. 
 
 F 2
 
 68 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 to accept documents for safe custody, but that it is to 
 accept documents in connection with a mortgage trans- 
 action which he is carrying through. When carefully 
 examined, however, they decide no question of principle 
 at all, for in the first it was admitted by the plaintiffs that 
 such a transaction was beyond the ordinary scope of the 
 business of solicitors, and therefore any decision on that 
 point would have been superfluous; and the second case 
 turned on evidence of partnership usage from which the 
 court inferred actual authority. 
 
 It need scarcely be pointed out that a firm is not liable 
 for the act of a partner who happens to be a trustee, and, 
 who, without the knowledge of his co-partners, brings the 
 trust funds into the business as part of his capital. No 
 one could contend that such a transaction was one within 
 the scope of a partner's authority, and, indeed, out of 
 abundance of caution, Parliament has authoritatively 
 stated the law as to this in sect. 13 of the Act of 1890. 
 Of course, however, beneficiaries may follow the trust 
 fund into the trustee's share of the assets of the firm if 
 they can trace it, but that is a matter of trustee law and 
 has nothing to do with the law of partnership. 
 
 On the same grounds a firm of solicitors are not liable 
 for the fraud of one of the partners committed in his 
 capacity as secretary of a company (o). 
 
 So much for the first part of sect. 11. Let us now 
 turn to the second part, viz., the case where a firm, and 
 not merely a partner, receives money or property, and it is 
 afterwards misapplied by one or more of the partners. In 
 such cases no question of partnership authority to receive 
 the property arises, because, ex hypothesi, the firm, as a 
 
 (o) Tendrimi Hundred Waterworks Co. v. Jones, [1903] 2 Ch. 61o.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 69 
 
 firm, has accepted the bailment ; and the only question is, 
 whether, as a matter of fact, it has been misapplied by 
 one or more of the partners. Note, however, that in 
 order to bring a case within this sub-section, the mis- 
 application must be made while the original bailment 
 continues. Thus, where a firm of solicitors accepts from a 
 client money to be invested on a specific mortgage and it is 
 so invested, the subsequent fraud of one of the partners 
 who induces the mortgagor to repay the money to him and 
 absconds with it, will not render the firm liable ; for the 
 misapplication is not made while the money is in the custody 
 of the firm {p). 
 
 (4.) When Liability Joint, and when Joint and 
 Sevebal. 
 
 Having now discussed the liability of the firm for the acts 
 ex contractu and ex delicto of the individual partners, the 
 next question is how the members of the firm are liable. 
 The answer to this question is now contained in sects. 9 
 and 12 of the Act of 1890, and is, that every partner is 
 liable jointly with the other partners for all debts and 
 obligations (i.e., contracts) of the firm incurred while he is 
 a partner, and after his death his estate is also severally 
 liable, as will be shown in a subsequent chapter. But with 
 regard to torts, the partners are liable, not only jointly, but 
 also severally. The net results of this rule is, that with 
 regard to debts and contractual obligations, the plaintiff 
 can only bring one action, and not several actions, against 
 the members of the firm. He is not, however, bound to join 
 all the members of the firm ; but if he does not choose to do 
 so he loses his rights against those whom he has omitted. 
 
 (p) Sims V. Brutton, (1850) 5 Ex. 802.
 
 70 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 The court may, however, at the instance of any defendant, 
 order the omitted members of the firm to be added as co- 
 defendants. With regard to torts, on the other hand, the 
 plaintiff may issue separate writs against each partner, 
 either contemporaneously or successively ; so that if the 
 first one sued, becomes bankrupt, the fact of his having 
 sued him alone, would be no bar to a second action against 
 another of the partners. 
 
 At common law, where one of two joint contractors was 
 sued alone, the defendant had a right to compel the joinder 
 of the other by means of what was called a plea in abate- 
 ment. But by the statute 3 & 4 Will. 4, c. 42, s. 8, it was 
 provided that no such plea should be allowed unless the 
 person whose non-joinder was pleaded were stated in the 
 plea to be within the jurisdiction, and his place of residence 
 stated and proved. Then, by the Judicature Acts, pleas in 
 abatement were abolished altogether, but large discretionary 
 powers were given to the court as to ordering the joinder 
 of parties. Consequently, although a defendant can no 
 longer plead the absence of a joint debtor in abatement, he 
 can apply to the court to add him as a co-defendant ; but the 
 court will not do so where he is out of the jurisdiction, unless 
 it is quite clear that his joinder will not delay or harass 
 the plaintiff (g). 
 
 The rule as to the joint nature of the contractual claims 
 against a firm, sometimes leads to hardship. Thus, in the 
 leading case of Kendall v. Hamilton (r), a creditor sued the 
 ostensible members of a firm and got judgment, but was 
 unable to levy sufficient to satisfy his debt. He subse- 
 quently discovered that there was a wealthy sleeping 
 
 (q) Wilson Jc Go. v. Balcarrrs, etc. Co., [1893] 1 Q. B. 422. 
 (r) (1879) 4 A. C. 504 ; explained in WiUon^ Sons & Co. v. Balearrfs 
 Brock Steamship Co., [1893] 2 B. 422.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 71 
 
 partner, and forthwith commenced an action against him. 
 It was, however, held, that the debt was a joint and not a 
 several one, and that having already recovered judgment 
 against some of the members of the firm, the plaintiff 
 could not commence fresh proceedings against the sleeping 
 partner ; it being well settled that a judgment against some 
 of several joint contractors, is, even without satisfaction, a 
 bar to an action against another of them alone. 
 
 If, however, the claim had been for a tort instead of a 
 debt, the second action would have been maintainable. 
 This rather absurd distinction does not prevail in Scotland, 
 nor on the continent, where partnership debts and con- 
 tracts are several as well as joint. 
 
 With regard to the extent of a partner's liability, each is 
 liable for the whole of the debts and liabilities of the firm, 
 and even although judgment be obtained against all jointly, 
 it may be enforced against one only, leaving all questions 
 of contribution to be settled afterwards between the 
 partners (s). 
 
 (5.) Duration of the Liability. 
 
 We now come to the duration of a partner's liability for 
 the firm and his other partners. In other words, from 
 what date do the firm and his co-partners become his 
 agents, and at what date does that agency cease ? Speaking 
 broadly, the agency commences when he becomes a 
 partner, and ceases as to future acts, when either he 
 retires from the firm (the business being continued by the 
 other partner or partners) or in the event of a dissolution 
 and winding up of the business, at the date when the 
 liquidation is fully complete and ended (t). But after 
 
 (a) Abbott V. Smith, (1774) 2 W. BL 947. (<) Act of 1890, s. 38.
 
 72 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 dissolution the agency is limited to acts strictly necessary 
 for completing the liquidation (m). 
 
 (a.) New partner not liable for old debts. — Thus a new 
 partner, admitted into an old firm, is not liable for the 
 liabilities existing at the date when he joins(a:); for merely 
 joining an existing firm does not imply that the joining 
 partner adopts and takes over the existing liabilities. No 
 doubt he can do so, and make himself directly liable to the 
 old creditors, by a process called novation (which will be 
 presently considered) ; but novation implies an agreement 
 with the creditor, either express or inferred from conduct (?/). 
 
 Other countries do not follow our law in respect to debts 
 incurred before the admission of a new partner. For 
 instance, the Italian Commercial Code (s) renders a new 
 partner liable, equally with the old ones, for engagements 
 contracted by the firm before his admission. 
 
 (b.) Retiring 'partner not liable for future debts. — So, con- 
 versely, a partner who retires from a continuing firm does 
 not thereby cease to be liable for the existing liabilities. 
 As between himself and the continuing partners, there may 
 be (and very often is) an agreement that the existing 
 liabilities shall be borne by the continuing partners alone ; 
 but that cannot release the retiring partner from his 
 liabilities to third parties. In fact, here again, express 
 release or novation is the only way in which he can be 
 freed. 
 
 {(() Smith V. Winter, (1838) 4 M. & W. pp. 461, 462. 
 
 («) Act of 1890, s. 17 (1). 
 
 {y) See British Homes Ass. Corporation v. Paterson, [1902] 2 Ch. 
 404, where a solicitor was held not to be liable for defalcations of hie 
 partner committed prior to the partnership. 
 
 [z) Codice Commtrciale, Art. 78.
 
 RELATION OF PARTNERS TO THIRD PARTIE>S. 73 
 
 The same principle applies to the case of a partner who 
 dies and whose personal representatives continue to be 
 liable for executory engagements made in his lifetime by the 
 firm unless they were made with reference to the personality 
 of the deceased and have therefore become incapable of 
 performance by reason of his death (a). 
 
 (c.) Novation may negative above rules. — What, then, is 
 novation ? It is a tripartite agreement between the creditor, 
 the partner who is either joining or retiring, and the other 
 partners, by which a new agreement with the creditor is 
 substituted for the old one, either making a new partner 
 liable for old debts, or releasing a retiring partner, and 
 accepting in his place the credit of the continuing partners 
 either alone or plus any new partners {h). Such an agree- 
 ment may be express, or implied from a course of dealing 
 between the creditor and the firm as newly constituted (c). 
 The question is always one of fact, and, in the absence of 
 express novation, the court is very shy of inferring it from 
 the course of dealing; and the mere adoption by the 
 creditors, of the new firm as their debtor, does not of itself 
 discharge the retired partner. 
 
 On the other hand, a novation is not void for want of 
 consideration {d) ; and where the creditor knows of the 
 change in the constitution of the firm, and continues to 
 deal with the new firm, making no claim on the retiring 
 partner for a long period, a novation will be inferred (e) ; 
 
 (a) Phillips V. Alhambra Palace Co., [1901] 1 Q. B. 59. 
 
 (6) See Scarf V. Jardine, (1882) 7 A. C. at p. 351. 
 
 (c) Act of 1890, s. 17 (2). See Jaegers, etc. Co. v. Walker, (1897) 77 
 L. T. 180. 
 
 {d) Thompson v. Percival, (1834) 5 B. & Ad. 925. 
 
 (e) See liol/e v. Flower, (1865) L. E. 1 P. C. 27; Bilborouyh v. 
 Holmes, (1876) 5 Ch. D. 255.
 
 74 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 and the acceptance of a bill of exchange or other security 
 for the debt from the new firm, is strong, although not 
 conclusive, evidence of novation (/). The question is always 
 a difficult one, and the cases will be found elaborately dis- 
 cussed by Lord Lindley in his great work on partnership. 
 
 (d.) Necessity for retiring partner to notify his retirement. 
 — But although, in the absence of novation, a partner who 
 retires from a firm cannot rid himself from the liability for 
 past debts, he ceases to be liable for the future liabilities of 
 the new firm, because, by retiring, he cancels the agency. 
 But (and this is of the utmost importance) he must notify 
 that the agency is cancelled both, publicly, in the Gazette, 
 and also, privately, by actual notice to each of the 
 customers of the old firm {g). The justice of this require- 
 ment is obvious, for a person who deals with a firm is 
 entitled in common fairness to treat all apparent members 
 of the old firm as being still members until he has notice 
 of the change, or until any partner dies. This rule as to 
 the necessity of notice is now summed up in sect. 36 of 
 the Act of 1890. It does not apply to a dormant {i.e., a 
 secret) partner, except, of course, with regard to customers 
 who are in the secret : for cessante ratione cessat lex. 
 
 (6.) Doctrine of ** Holding out." 
 
 And this brings us to what is commonly called the 
 doctrine of " holding out." This doctrine is stated in 
 sect. 14 of the Act of 1890, as follows : 
 
 '* 14. — (1.) Every one who by words spoken or written, 
 or by conduct, represents himself, or who knowingly suffers 
 
 (/) Swire v. Redman, (1875) 1 Q. B. D. 536 ; Re Head, [1893] 3 Ch. 
 426. 
 
 ((7) Graham v. Sope, (1792) 1 Pea. 208.
 
 RELATION OF PARTNERS TO THIRD PARTIES. 75 
 
 himself to be represented, as a partner in a particular firm, 
 is liable as a partner to any one who has, on the faith of 
 any such representation, given credit to the firm, whether 
 the representation has or has not been made or com- 
 municated to the person so giving credit by or with the 
 knowledge of the apparent partner making the repre- 
 sentation or suffering it to be made. 
 
 " (2.) Provided that where after a partner's death the 
 partnership business is continued in the old-firm name, 
 the continued use of that name, or the deceased partner's 
 name as part thereof, shall not of itself make his executors 
 or administrators, estate or effects, liable for any partner- 
 ship debts contracted after his death." 
 
 The doctrine of "holding out" is a branch of the doctrine 
 of estoppel. If a man holds himself out as a partner in a 
 firm, and thereby induces another person to act upon that 
 representation, he is estopped as regards that person from 
 saying that he is not a partner. The representation may 
 be made either by acts or by words ; but the estoppel can 
 be relied upon only by the person to whom the repre- 
 sentation has been made in either way, and who has acted 
 upon the faith of it (h). It is immaterial that the holding 
 out was not communicated directly by the party holding out 
 to the creditor. It is equally fatal to the former if the news 
 was communicated to the latter by a third party (i). It is 
 really on this ground of " holding out" that a retiring partner 
 who does not give notice is liable for the future debts. 
 
 It is obvious that questions of " holding out " may occur 
 where a partner retires and still permits his late partners 
 to retain his name as part of the firm name. It would 
 
 (A) Per Lord Esher, M.R. : exp. Central Bank of London, [1892] 2 
 Q. B., at p. 637. 
 
 (j) Martyn v. Graij, (1863) 14 C. B. (n.s.) 824.
 
 76 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 seem, however, that where proper notices of the dissolution 
 are given, the mere fact that the retiring partner allows 
 the continuing partner to carry on busmess in the old firm 
 name, is not such a holding out of the former, as a partner, 
 as will render him liable for a debt of the firm contracted 
 after the dissolution, even with a person who had not dealt 
 with the old firm, and who had therefore no express notice 
 of the dissolution (A;). This appears to be so, although 
 the name of the retiring partner forms part of the firm 
 name, unless, perhaps, the retiring partner actually 
 authorises the use of his name {I) . But, nevertheless, he 
 could, in the absence of agreement, restrain his late 
 partners from using the name in such a manner as to 
 expose him to litigation ; although he is not bound to 
 do so (m). 
 
 The use of the name of a deceased partner can in no case 
 expose his representatives to liability (n). 
 
 (7.) Continuance of the Agency after Dissolution. 
 
 Lastly, the mere fact of the dissolution of a partnership 
 does not cancel the agency of each of the partners for the 
 other or others of them, until the business is wound up. 
 The reason of this is obvious, for otherwise it would be 
 extremely inconvenient to wind up the concern at all. The 
 agency is, however, restricted to such acts as may be 
 necessary for winding up the affairs of the partnership. 
 
 [k) Exp. Central Bank, etc., vhi suj). 
 
 (1) Newsome v. Coles, (1811) 2 Camp. N. P. 617. 
 
 (m) Thynne v. Shove, (1890)45 Ch. D. 577; Gray v. Smith, {1890) 
 43 Ch. D. 208. 
 
 (n) Sect. 14, sub-sect. (2), of the Act of 1890, and see Farluxll v. 
 Farhall, (1871) 7 Ch. App. 123.
 
 RELATION OF PARTNERS TO THIRD PARTIES. n 
 
 and completing transactions begun but not finished at the 
 time of the dissolution (o). 
 
 To sum up the liability of partners for each other, the 
 broad general principle is this : If you authorise a man to 
 do a class of acts for you, you are liable for his contracts 
 and torts in carrying out your mandate. You are also liable 
 not only in respect of acts which you expressly authorised, 
 but in respect of all such subsidiary acts as would usually 
 be ancillary to the authorised ones, unless you have 
 expressly forbidden them, and the party injured either 
 knows that you have forbidden them, or does not know 
 that you are the principal. And when once you have 
 allowed the agency to be known, you remain liable until 
 you have notified that it is cancelled. 
 
 (o) Act of 1890, s. 38; and see Fox v. Hanhury, (1776) Cowp. 
 449 ; Butchart v. Dresser, (1853) 4 De Or. M. & G. 542 ; Ee Clough, (1876) 
 31 Ch. D. 324.
 
 ( 78 ) 
 
 CHAPTER IV. 
 
 THE RELATION OF PARTNERS TO ONE 
 ANOTHER. 
 
 The relation of partners to one another may, of course, 
 be wholly governed by the terms of the partnership agree- 
 ment. One may agree to do all the work in consideration 
 of the other finding the capital. One may reserve to him- 
 self the whole right of signing cheques and bills, or even of 
 expelling his partner if he thinks fit. One may take a 
 fixed sum out of the profits (like a preference shareholder 
 in a company), leaving the surplus, if any, to the other 
 partners ; or the business may ba ostensibly carried on by 
 one only, the other taking no active part in its administra- 
 tion, and the partnership being unknown to the public. In 
 such case the passive partner is called a sleeping or dormant 
 partner, but qua the creditors, he is as much a partner, 
 and as responsible, as if he took an equally active share iu 
 the administration of the concern with the person who 
 ostensibly carries it on. 
 
 (1.) Utmost Good Faith between Paktners is an Implied 
 Term of every Partnership Agreement. 
 
 However, whatever may be the terms of the agreement, 
 there is one stipulation which is imposed by law in every 
 such contract, viz., that each partner must observe the 
 utmost fairness and good faith towards his fellows. The 
 foundation stone of the partnership edifice is mutual con- 
 fidence, and where confidence is reposed equity insists that
 
 RELATION OF PARTNERS TO EACH OTHER. 79 
 
 it shall not be abused. Thus, even where a partnership 
 agreement provided that a partner might be expelled for 
 breach of certain specified acts, it was held by Rmner, J., 
 that the expelling partners were not entitled to spring a 
 notice of expulsion on a partner committing one of such 
 acts without giving him some preliminary warning of the 
 cause of complaint, and an opportunity of meeting the case 
 alleged against him (a). 
 
 It seems regrettable that the powers of the Act of 1890 
 did not affirm this broad general principle, and the omission 
 is the more remarkable because sect. 257 of the Indian 
 Contract Act provides that the partners are " to carry on 
 the business of the partnership for the greatest common 
 advantage, to be just and faithful to each other, and to 
 render accounts," etc. A broad general principle of this 
 kind is just what one would expect to find in a code, but it 
 is not to be found in the English Act, which treats the 
 subject-matter inadequately, by reference to particular 
 circumstances in sects. 28 — 30 in the following words : 
 
 "28. Partners are bound to render true accounts and 
 full information of all things affecting the partnership to 
 any partner or his legal representatives. 
 
 " 29. — (1.) Every partner must account to the firm for 
 any benefit derived by him, without the consent of the 
 other partners, from any transaction concerning the partner- 
 ship, or from any use by him of the partnership property, 
 name or business connexion {h). 
 
 " (2.) This section applies also to transactions undertaken 
 after a partnership has been dissolved by the death of a 
 partner, and before the affairs thereof have been completely 
 
 (a) Barnes v. Youwjs, [1898] 1 Ch. 414. 
 
 [h) Merely declaratory. Aus v. Benham, [1891] 2 Ch. 244, 245.
 
 80 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 wound up, either by any surviving partner or by the 
 representatives of the deceased partner. 
 
 " 30. If a partner, without the consent of the other 
 partners, carries on any business of the same nature as 
 and competing with that of the firm, he must account for 
 and pay over to the firm all profits made by him in that 
 business" (c). 
 
 In other words, a partner, like a trustee, must not make 
 a private gain by reason of his membership of the firm. 
 Thus he must account to the firm for all commissions on 
 sales or purchases of the firm's property. He must not, 
 without full disclosure to his co-partners, take an interest, 
 as part purchaser, in a sale of the partnership property (d), 
 nor, as part vendor, in a sale of property to the firm. So 
 where a partner uses his position to get a private agreement 
 with a customer of the firm, in relation to goods dealt in 
 by the firm, beneficial to himself only, he will have to 
 share the profits with his co-partners ; for he is abusing his 
 position for his own selfish ends and to the detriment of 
 the joint business (e). 
 
 On similar principles, a partner, like a trustee, cannot 
 retain the benefit of the renewal of a renewable lease to 
 himself only, of property leased to the firm (/), whether he 
 obtains the renewal secretly or openly (g): 
 
 At the same time, unless expressly restricted by the agree- 
 ment, a partner may carry on another business privately, 
 
 (c) Of. Indian Oonti-act Act, 259; see also_2'er Lindley, L.J., [1891] 
 2 Oh. at p. 255. 
 
 {d) Dunne v. English, (1874) 18 Eq. 524; Be Olympia, Limited, 
 [1898] 2 Ch. 153. 
 
 (e) See Russell v. Austwick, (1826) 1 Sim. 52. 
 
 (/) ^^^99 V. Fishwick, (1849) 1 M. & G. 294 ; as modified hjBevun v. 
 Webb, (1905) 1 Ch. 620, ioUowmgLongtonv. WiUhy, (1897)76 L. T. 770. 
 
 {9) Clc99 V. Edmondson, (1857) 8 D, M. & G. 787.
 
 RELATION OF PARTNERS TO EACH OTHER. 81 
 
 SO long as it does not compete with the business of the firm, 
 and so long as he does not represent it to be the business 
 of the firm. In such cases he is not bound to account for 
 the profits of a non-competing business (/t), although he may 
 be enabled to push the private trade better than would other- 
 wise be the case, by reason of his connection with the firm. 
 
 (2.) Term as to Management Implied where not 
 Expressly Negatived or Modified. 
 
 The partners can arrange their respective rights and 
 duties as they may think fit ; and what follows only relates 
 to the legal rights of the partners inter se, so far as these 
 rights are not modified or negatived by express stipulation ; 
 or (what amounts to the same thing) by a long course of 
 dealing, amounting to evidence of an implied agreement (i). 
 
 This subject is mainly governed by sect. 24 of the Act 
 of 1890, by which it is enacted that " the interest of 
 partners in the partnership property, and their rights and 
 duties in relation to the partnership, shall be determined, 
 subject to any agreement express or implied between the 
 partners, by " certain rules therein set forth. It will be 
 convenient to take these rules in a different order to that 
 in which they appear in the Act. 
 
 First, then, "Every partner may take part in the 
 management of the partnership business " (k), but he is 
 not entitled to any remuneration for his work (l). The Act 
 does not add (but the law implies) that each partner shall 
 attend to, and work in the business ; and if he fails to do 
 80 it is ground for a dissolution, and the court may order 
 
 {h) Aas V. Benham, [1891] 2 Ch. 244. 
 
 {i) Sect. 19 of Act of 1890. Coventry v. Barclay, (1864) 3 De G. J 
 & S. 320. 
 
 (A) Sect. 24 (5). (0^^-(6). 
 
 L.P. G
 
 82 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 him to make compensation to the industrious partner for 
 the extra trouble caused by his idleness {m). 
 
 Moreover, the rule as to the'gratuitous nature of a partner's 
 services, being founded on the theory that all the partners 
 will work, does not apply during a winding-up where one 
 of the partners is dead, or retires, or becomes a lunatic. 
 In such cases, all the work being thrown on the other 
 partner or partners, he or they are entitled to some com- 
 pensation for their trouble out of the profits, if profits 
 there be, but not otherwise (n). This right has even been 
 conceded to a partner who has been appointed receiver and 
 manager without salary in a dissolution action, where he 
 has voluntarily, and with benefit to the assets, done work 
 {e.g., as a skilled mechanic) outside his duties as receiver 
 and manager (o). No remuneration will, however, be 
 allowed to partners after the death of a co-partner, where 
 they are also his executors, as it is their duty qua executors 
 to work gratuitously (p). 
 
 But although the law infers that the partners must 
 attend to business, and that in the absence of agreement 
 or of idle misconduct on the part of one of the partners, 
 no remuneration will be allowed for work, or even for 
 overtime, yet nothing is commoner than to find the rule 
 negatived by express stipulation. A junior partner is very 
 generally bound by the terms of the contract to attend 
 diligently and exclusively to the business. A senior partner, 
 on the other hand, generally insists on the right of consoling 
 
 (m) Airey v. Borham, (1861) 29 Bea. 620. 
 
 (n) See Re Aldridge, [1894] 2 Ch. 97 ; Brown v. De Tastet, (1821) 
 Jac. 284 ; MeUersh v. Keen, (1859) 27 Bea. 236 ; and Page v. Ratliffe, 
 (1897) 75 L. T. 371. 
 
 (o) Harris v. Sleep, [1897] 2 Ch. 80. 
 
 {X>) Burden v. Burden, (1813) 1 V. «& B. 170; Stochen v. Davjson, 
 (1843) 6 Bea. 371.
 
 RELATION OF PARTNERS TO EACH OTHER. 83 
 
 his declining years by indulgence in leisured ease, merely 
 reserving the right, but not conceding any obligation, of 
 attending to business. Moreover, a clause is very common 
 (and, indeed, highly desirable) in partnership articles, 
 authorising each working partner to take a salary as 
 manager of his department in addition to his share of 
 profits ; such salary being paid, like clerks' salaries, before 
 the net profits are computed, and being, in fact, treated as 
 an outgoing of the firm. 
 
 Supposing that the partnership articles, or the partnership 
 course of dealing, makes no provision for differences of 
 opinion as to the conduct of the business (and, of course, 
 dijfferences of opinion are almost certain to occur), how are 
 these differences to be settled? The answer is, that if such 
 differences relate to an alteration of the partnership con- 
 stitution — for instance, to a proposed change in, or addition 
 to the nature of the business, or the introduction of a new 
 partner (q) , or the expulsion of a partner (r) , or the sub- 
 stitution of a new partner for one who desires to retire and 
 sell his share (s), then, in the absence of express stipulation, 
 no such alterations can be made without the unanimous 
 consent of all the partners, other than one whose expul- 
 sion is proposed. But if the difference relates merely 
 to the details of the business — " ordinary matters connected 
 with the partnership business," as sect. 24 of the Act of 1890 
 puts it — then the question may be decided by the majority (t). 
 Where the voting is equal (as, for instance, it would neces- 
 sarily be where there are only two partners), it is conceived 
 (although the Act is silent as to this) that those who 
 negatived the disputed proposition would be entitled to have 
 their view respected, in accordance with the general principle 
 
 iq) Act of 1890, s. 24 (7). (s) lb. sect. 31. 
 
 (r) lb. sect. 25. [t) lb. sect. 24 (8). 
 
 Q 2
 
 84 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 applicable to all voting, viz., that the onus lies on those who 
 affirm a proposition, and not on those who oppose it. 
 
 The statutory power of a majority to bind a dissentient 
 minority in matters of detail, was practically a new 
 departure in point of law, whatever it may have been in 
 point of commercial practice, and is founded on the precedent 
 of sect. 253 of the Indian Contract Act. It must, however, 
 be exercised subject to that general over-riding principle (to 
 which reference has already been made) that every partner 
 must act with the utmost good faith. Therefore, a majority 
 cannot bind a minority without notice to them, and without 
 giving them the opportunity of discussion. If this were 
 not so, it would practically put the entire management in 
 the hands of a high-handed majority, and would be in 
 conflict with the rule that every partner is entitled to take 
 part in the administration of the business. 
 
 It is, of course, incidental to this last-mentioned right, 
 that each partner should have access to the books of 
 account. Consequently, sub-sect. (9) of sect. 24 declares 
 that " the partnership books are to be kept at the place 
 of business of the partnership (or the principal place, 
 if there is more than one), and every partner may, when 
 he thinks fit, have access to and inspect and copy any of 
 them." This right may be exercised not merely in person, 
 but also through an agent, provided he be a person to whom 
 the other partners can have no reasonable objection (w). 
 
 (3.) Terms, as to Capital Profits and Losses, implied 
 where not expressly negatived or modified. 
 
 Let US now turn from the rules as to management to the 
 rules which (in the absence of stipulation to the contrary, 
 or evidence from which such stipulation can be inferred) 
 
 (m) Bevan v. Webb, [1901] 1 Ch. 724.
 
 RELATION OF PARTNERS TO EACH OTHER. 85 
 
 govern the relations of the partners with regard to capital 
 and profits and losses. 
 
 The general rule, then, is that *' all the partners are 
 entitled to share equally in the capital and profits of the 
 business, and must contribute equally towards the losses, 
 whether of capital or otherwise, sustained by the firm " (x). 
 This broad statutory statement requires some explanation. 
 There are many partnerships, perhaps the majority, in 
 which the capital is not contributed equally, — nay, is 
 perhaps contributed by one alone. For, although, as the 
 French Code Civil has it {y), every partner must contribute 
 either money or goods or industry to the undertaking, yet 
 " capital " in the legal sense only embraces property, and 
 not mere skill or industry. Consequently, the section does 
 not mean that where of two partners one contributes, say, 
 6,000^. as capital, and the other contributes no money, but 
 merely great technical skill and knowledge, the assets into 
 which the 5,000Z. has been converted are (on the winding 
 up of the concern) to be divided equally as one common 
 fund. That is not so, as will be seen later on when we 
 come to deal with the dissolution of a partnership; for 
 the facts negative the idea that the capital was equal, and 
 the section only applies in the absence of a contrary agree- 
 ment, express or implied. What the section does mean is 
 this, that in such a case the jprofiU would be divided equally ; 
 because, in the absence of express agreement, the inference 
 is that the 5,000^. of the moneyed partner was considered 
 to be the equivalent for the skill or knowledge of the othei 
 partner. But, ])er contra, if they divide the profits equally, 
 they must likewise equally bear the losses; and losses 
 include not only the liabilities of the firm to third parties, 
 
 (cc) Act of 1890, s. 24 (1). {ij) Art. 1833.
 
 86 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 but also losses of capital. Therefore, assuming that the 
 5,000L were lost, the partner who brought no capital into 
 the concern, would nevertheless have to bear half that loss 
 in favour of the moneyed partner ; the 5,000L being, in 
 fact, treated as a deferred debt due from the firm to him {z). 
 In short, all that the rule means is that there is no necessary 
 connection between the proportion in which capital is con- 
 tributed and that of profit and loss, and that, therefore, 
 prima facie, partners share profits and bear losses equally, 
 notwithstanding that the capital contributed by each may 
 not be equal. In other words, profit and loss are not 
 shared and borne in proportion to the capital contributed 
 by each partner. 
 
 On the other hand, there is an inference that losses are 
 to be borne in the same proportion as profits are shared ; 
 and therefore an agreement to share profits in certain 
 proportions, is, by sect. 44 of the Act, made prima facie 
 evidence that it was intended that losses should be borne 
 in the same proportions and not equally (a). 
 
 It is a corollary of the rule as to the equality of profit and 
 loss (notwithstanding inequality in contribution of capital), 
 that, in the absence of agreement to the contrary, no partner 
 is entitled to receive interest on the capital contributed by him. 
 For if he is unwilling to find the necessary capital without 
 receiving interest, he should make it an express condition 
 of his bargain with his co-partner, whose skill has prima, 
 facie been accepted by the moneyed partner as an equivalent 
 for the latter's capital. At the same time, nothing is more 
 usual in practice than to find partnership agreements 
 pro\'iding that, before the profits are ascertained, each 
 
 (2;) Garner v. Murray, [1904] 1 Ch. 57. 
 
 (a) Declaratory of the former law; see ^e Albion Life Assurance 
 Sodettj, (1880) 16 Ch. D. 83.
 
 EELATION OF PARTNERS TO EACH OTHER. 87 
 
 partner shall be entitled to receive interest at the rate of 
 five per cent, per annum on the amount of capital standing 
 to his credit, as an outgoing, and in priority to any division 
 of profits. Indeed, in the majority of cases, the omission 
 of such a clause would be most unreasonable. For instance, 
 where the old and experienced members of a firm take in 
 the son of a member, who brings little or no capital, and a 
 minimum of skill and experience, there is really no reason 
 why he should have the use of the senior partners' capital 
 for nothing. 
 
 It may be added that even where there is a provision for 
 interest on capital, such interest ceases to be payable directly 
 the partnership is dissolved, although months or years 
 may elapse before the assets are completely realised and 
 the capital repaid (b). 
 
 But although, in the absence of stipulation, a partner is 
 not entitled to interest on capital contributed by him under 
 the partnership agreement, yet if a partner makes, for the 
 purpose of the partnership, any actual payment or advance 
 beyond the amount of capital which he has agreed to 
 subscribe, he is entitled to interest (primd facie at the rate 
 of five per cent, per annum) from the date of the payment 
 or advance (c). 
 
 The reason of this is stated by Lord Lindley to be that 
 such advances are not treated as an increase of capital, but 
 rather as a loan on which interest ought to be paid, and, 
 by commercial usage, is payable. It should, however, be 
 
 (6) Watneij v. Wells, (1867) 2 Ch. App. 250 ; Barfiehl v. Loughborough, 
 (1872) 8 Ch. App. 1. 
 
 (c) Exp. Chippendale, (1854) 4 D. M. & G. 19, last note; Sargood's 
 Claim, (1872) 15 Eq. 43 ; Lindley, 7th ed. 424. As to rate, seeFergusson 
 V. Fyffe, (1840) 8 CI. & Fin. 121 ; Bate v. Bobbins, (1863) 32 Bea. 73, and 
 Be Magdelena Steam Nav. Co., (1860) Johns. 690, and Partnership Act, 
 1890, sect. 24 (3).
 
 88 PRINCIPLES OF THE LAW OP PARTNERSHIP. 
 
 added that, although the firm pays interest to a partner 
 on his advances, the converse does not hold good ; and in 
 the absence of fraud or express agreement, a partner, who 
 is indebted to the firm, pays no interest (d). 
 
 (4.) Implied Terms as to Indemnification of Partners. 
 
 Another rule of law is, that, as each partner is the 
 agent of the firm, the latter, in its character of his principal, 
 "must indemnify every partner in respect of payments 
 made and personal liabilities incurred by him in the 
 ordinary and proper conduct of the business of the firm "(e). 
 Thus, where a partner mortgages his separate real property 
 to secure a debt due from the firm, the debt must be paid 
 by the assets in exoneration of the partner's land, and 
 Locke King's Act (17 & 18 Vict. e. 113) has no application 
 in such a case (/). 
 
 As a rule the right to indemnity is not lost by reason of 
 the partner being more in fault than the other members 
 of the firm, unless he has been guilty of fraud or gross 
 negligence (g). But, in addition to the general right to 
 indemnity, sect. 24 also provides that the firm must 
 indemnify every partner in respect of payments made and 
 liabilities incurred in or about anything necessarily done for 
 the preservation of the business or property of the firm. This 
 
 (d) Cooke V. Benbow, (1865) 3 D. J. & S. I., and Meymott v. Meymott, 
 (1862) 31 Bea. 445 ; Fawcett v. Whitehoiise, C1829) 1 E. «& M. 132 ; 
 Evans v. Coventry, (1857) 8 De G. M. & G. 835. 
 
 (e) Act of 1890, s. 24 (2). As to contribution where a partner has 
 been sued for an illegal act, see Thomas v. Atherton, (1877) 10 Ch. D. 
 185 ; and, where all the partners have joined in an illegal act, Adamson 
 V. Jarvis, (1827) 4 Bing. 66; ChillingivorthY. Chambers, [1896] 1 Ch. 
 685, and Robinson v. Harhin, [1896] 2 Ch. 415. 
 
 (/) i?e Ritson, Ritson v. Ritson, [1899] 1 Ch. 128. 
 {g) Conf. exp. Letts and Steer, (1856) 26 L. J. Ch. 455, and Thomas v. 
 Atherton, (1877) 10 Ch. D. 185.
 
 RELATION OF PARTNERS TO EACH OTHER. 89 
 
 goes beyond the ordinary law of principal and agent (which 
 only authorises acts in the ordinary course of business), 
 and is analogous to the maritime law of contribution in 
 eases of general average or salvage. Note that it only 
 extends to necessary acts, and not to mere voluntary ones 
 •which the partner who undertakes the liability thinks may 
 be advantageous {g). Most of the cases on the subject 
 have occurred in relation to directors of public companies (/t), 
 but even before the Act of 1890 there was no doubt that 
 the rule equally applied to private partnerships. 
 
 (5.) Partnership Property as Distinguished from 
 Property of the Individual Partners. 
 
 We now come to the consideration of the partnership 
 property, which is the subject of sects. 20 to 23 inclusive 
 of the Act of 1890. Difficult questions frequently arise as 
 to whether property is the property of the firm, or whether 
 it is the property of individual partners ; for property may 
 be used for purposes of the partnership and yet may not be 
 part of the partnership property. For instance, the building 
 in which a business is carried on frequently belongs to one 
 partner only, and the firm pays him a rent for the use of 
 it. Moreover, persons may be mere co-owners of property 
 and may yet be partners in the profits made from its use. 
 Thus persons may be co-owners of a coal mine — take the 
 case of two brothers to whom it may have been devised by 
 the will of their father. The mere fact that they work the 
 mine in partnership as a colliery business, does not make 
 the mine part of the partnership property (i). 
 
 {g) See judgment of Turner, L.J., in Biirdon v. Barkus, (1862) 
 4D. F. & J. at p. 51. 
 
 {h) See exp. Chippendale, (1862) 4 D. M. & G. 19; exj). Bigmhl, 
 (1857) 22 Bea. 143; Baker's Case, (1862) 1 Dr. & Sm. 55. 
 
 (i) Crawshay v. Maule, (1818) 1 Sw. 495, 518.
 
 90 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 The point is often of great importance, (1) as between 
 the partners themselves ; because an increase in the value 
 of partnership property belongs to the firm, whereas if the 
 property be the property of an individual partner the 
 increased value belongs to him only (j) ; (2) as between the 
 creditors of the firm and the creditors of the individual 
 partners in the event of the firm becoming insolvent, as 
 will be shown in a subsequent chapter ; and (3) as between 
 the persons who take a deceased partner's real estate and 
 those who take his personal estate ; because his interest in 
 partnership land is personalty and not realty. 
 
 The first principle in relation to this question is, that 
 whether property is or is not partnership property, depends 
 on the agreement, express or implied, between the partners. 
 
 Where there is an express and unambiguous agreement 
 between them in relation to any item of property, no 
 difiiculty can arise. Thus, although the goodwill of the 
 business is prima facie partnership property, it is open to 
 one of the partners to prove that the goodwill was his 
 before the partnership, and that it was agreed that, although 
 the firm should have the benefit of it during the partnership, 
 it should revert to him on a dissolution. So office furniture 
 or tools may be used by the firm and yet remain the 
 property of one partner, by agreement. 
 
 In the absence, however, of express agreement, we have 
 to fall back on an implied one ; that is to say, giving both 
 partners credit for common sense and business capacity, 
 and taking all the known facts into consideration, we have 
 to draw a reasonable inference as to what was the exact 
 understanding between the partners. 
 
 Now, speaking broadly, when we find property bought 
 with partnership money (k) or brought into the common 
 
 (y) RoUnson v. AsUon, (1875) 20 Eq. 25. {k) Act of 1890, s. 21.
 
 RELATION OF PARTNERS TO EACH OTHER. 91 
 
 stock, and credited in the books as part of the capital of 
 one of the partners (l), or otherwise treated by the partners 
 as part or parcel of the partnership property (w), the 
 inference is that it is partnership property ; and none the 
 less so because the property happens to have been conveyed 
 to or taken in the name of one only of the partners (n), or 
 that it was originally devised to the partners as co-owners. 
 
 Section 20 of the Act of 1890 states the law thus : — 
 
 " (1.) All property, and rights and interest in property, 
 originally brought into the partnership stock, or acquired, 
 whether by purchase or otherwise, on account of the firm, 
 or for the purposes and in the course of the partnership 
 business, are called in this Act partnership property, and 
 must be held and applied by the partners exclusively for 
 the purposes of the partnership, and in accordance with 
 the partnership agreement. 
 
 " (2.) Provided that the legal estate or interest in any 
 land (o), or in Scotland the title to and interest in any 
 heritable estate which belongs to the partnership, shall 
 devolve according to the nature and tenure thereof, and 
 the general rules of law thereto applicable, but in trust, so 
 far as necessary, for the persons beneficially interested in 
 the land under this section. 
 
 " (3.) Where co-owners of an estate or interest in any 
 land, or in Scotland of any heritable estate, not being itself 
 partnership property, are partners as to profits made by the 
 use of that land or estate, and purchase other land or estate 
 out of the profits to be used in like manner, the land or 
 estate so purchased belongs to them, in the absence of an 
 
 (I) Rohinton v. Ashton, (1875) 20 Eq. 25. 
 (m) Waterer v. Waterer, (1873) 15 Eq. 402. 
 {n) Smith V. Smith, (1800) 5 Ves. 189. 
 
 (o) By the Interpretation Act, 1889, s. 3, land includes " messuages, 
 tenements, and hereditaments, houses and buildings of any tenure."
 
 92 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 agreement to the contrary, not as partners, but as co-owners, 
 for the same respective estates and interests as are held by 
 them in the land or estate first mentioned at the date of the 
 purchase." 
 
 Let us now consider a few illustrations of the principle 
 (which is frequently very difficult of application). Let us, 
 first, take the case of Waterer v. Waterer (p). There a 
 nurseryman carried on business on a piece of freehold land 
 belonging to him in fee simple. On his death, he devised 
 all his property to his three sons as tenants in common. 
 They continued the nursery business in partnership, and, 
 out of moneys belonging to the father's estate, completed 
 the purchase of adjacent land which the father had agreed 
 to buy, and employed such land also in the business. Two 
 of the sons then purchased the share of the third in land 
 and business at one price and continued the business ; and 
 the question ultimately arose on the death of one of them, 
 whether the land was partnership property or not. It was 
 held that it was, James, V.-C, saying : " I am of opinion 
 that this case is governed by that class of cases in which 
 Lord Eldon said, that where property became involved in 
 partnership dealings it must be regarded as partnership 
 property. It seems to me immaterial how it may have 
 been acquired by the surviving partners, whether by descent 
 or otherwise, if, in fact, it was substantially involved in the 
 business. They buy it, not as an undivided third only, but 
 for one lump sum, including the goodtvill ; therefore it was in 
 fact a purchase of land and business together by the con- 
 tinuing partners jointly for the purpose of the business. 
 Under these circumstances I think they must be deemed to 
 have irrevocably appropriated each of them his share in 
 the land to the partnership purposes. A nursery gardener's 
 
 (p) (1873) 15 Eq. 402.
 
 RELATION OF PARTNERS TO EACH OTHER. 93 
 
 business is probably one above all others where men would 
 act as these gentlemen appear to have done. They neces- 
 sarily appropriated the soil itself for gardening purposes, 
 which could not be carried on without it. It is, in fact, in 
 nursery gardening, practically impossible to separate the 
 use of the soil for the trees and shrubs, from the trees and 
 shrubs themselves, which are part of the freehold, and at 
 the same time constitute the substantial stock-in-trade." 
 
 On the other hand, as by sect. 2 of the Act, mere co- 
 ownership does not of itself create partnership in the thing 
 co-owned ; so the mere fact that the co-owners were co- 
 partners in a business carried on in connection with the 
 thing owned in common does not of itself make that thing 
 partnership property. Thus, in Davis v. Davis (q), partners 
 in a business borrowed money on the security of some house 
 property of which they were undoubtedly mere tenants in 
 common. This money they expended, partly in erecting on 
 a small part of the mortgaged property, workshops as an 
 addition to works in which they carried on the partnership 
 business, and which also originally, at all events, belonged 
 to them merely as co-owners. On these facts it was held, 
 by North, J., that sect. 20 (2), of the Act applied, and that 
 the addition to the workshops did not become partnership 
 property. The learned judge, in the course of his judgment, 
 said: " It is not the law that partners in business, who are 
 the owners of the property by means of which the business 
 is carried on, are necessarily partners as regards the pro- 
 perty. That conclusion is indeed expressly negatived by 
 sub-sect. (1) of sect. 2 of the Act of 1890, and there are 
 many cases before the Act to the same effect. There is the 
 well-known case of Fromontv. Coupland(r), in which two 
 
 (q) [1894] 1 Ch. 39;J. (r) (1824) 2 Bing. 170.
 
 94 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 persons horsed a coach, and shared the profits derived from 
 running it, and were held to be partners, though they were 
 not partners in the horses by which the work was done. 
 Take again the well-known case of ships owned in common. 
 Again, there is the case of Steiuard v. Blakeivay (s), in which 
 land belonging to co-owners as tenants in common was used 
 for the purpose of carrying on a quarrying business : but 
 that of itself was not considered sufficient to make the co- 
 owners partners in the land ; in fact, sub-sect. (1) of sect. 2 
 of the Act seems to me conclusive, unless there is something 
 else in the case, that the two were not partners in the land. 
 The land was vested in them as tenants in common, each, 
 that is to say, being owner of an undivided moiety ; and if 
 the land became partnership property, the question would 
 arise when and how it became so, and there is no evidence 
 that anything was done by agreement to make the land 
 partnership property, and the facts to which I have referred 
 as supporting the view that there was a partnership in the 
 business do not apply to the land." 
 
 His lordship then cited a case of Morris v. Barrett {t), 
 which was very like the case in hand, and after referring to 
 Water er v. Waterer (supra), and Davies v. Games (u), which 
 followed it, proceeded as follows : "I have looked at many 
 other cases upon this point, and I have found several other 
 instances in which lands have been held to be, to use the 
 words of Lord Justice James, involved in partnership deal- 
 ings, and therefore regarded as partnership property. The 
 well-known case of Darby v. Da7-hi/ (x), is one of them. 
 There, two persons purchased land on a joint speculation 
 with their joint moneys, for the purpose of laying it out in 
 
 (s) (1869) 4 Ch. App. 603. {u) (1879) 12 C. D. 813. 
 
 («) (1829) 3 Y. & J. 384. {x) (1856) 3 Drew, 495.
 
 RELATION OF PARTNERS TO EACH OTHER. 95 
 
 building plots and re-selling it at their joint profit or loss, 
 and it was held that the land was the very essence of the 
 thing to be dealt with, and was, therefore, converted ont 
 and out. In re Hulton (y), a solicitor and another person 
 entered into a similar land speculation. There was a good 
 deal of evidence in that case, and the view which I took in 
 that case was, that there was not enough to show that the 
 land was partnership property, but the Court of Appeal held 
 that there was. It was a complicated case ; and it is not 
 worth while referring to the details, but it is an illustration 
 of the principle. 
 
 "In my opinion, the mere fact that the two houses, 
 which, according to the special case, were not more fitted 
 than any others for the carrying on of the business, were 
 used for it, did not make them involved in the partnership 
 dealings in such a way as to become partnership property. 
 
 " They began for the first time to use No. 60, Sumner 
 Street, for the partnership purposes, in October, 1889, and 
 they spent some money in adapting it to their purposes, 
 and that money was the joint money of the two brothers. 
 But, in my opinion, that is not enough to indicate that 
 there was a partnership in the land. If the money which 
 they expended in adapting this additional piece of land, 
 had been spent in buying it, instead of improving it, it is 
 clear that it would not have become partnership property, 
 because, in that case, it would have been hit exactly by 
 sub-sect. (3) of sect. 20 of the Partnership Act, which says: 
 'Where co-owners of an estate or interest in any land 
 . . . not being itself partnership property, are partners as 
 to profits made by the use of that land or estate, and 
 purchase other land or estate out of the profits to be used 
 in like manner, the land or estate so purchased belongs to 
 
 [ij) (1889) 62 L. T. (n.s.) 200.
 
 96 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 them, in the absence of an agreement to the contrary, not 
 as partners, but as co-owners for the same respective estates 
 and interests as are held by them in the land or estate first 
 mentioned at the date of the purchase.' In the present 
 case, the money which was borrowed was not employed in 
 paying for the additional piece of land which was brought 
 into the business. If it had been the case, it would have 
 been exactly within that sub-section ; but the case seems 
 to me so like that, that, although it is not literally covered 
 by the sub-section, the same law applies to it. Under the 
 circumstances I come to the conclusion that there was a part- 
 nership in the business, but that none of the houses, Nos. 60, 
 62, and 64, Sumner Street, were partnership property." 
 
 The distinction between Waterer v. Waterer, and that 
 class of cases, and Davis v. Davis, and other cases of the 
 like kind, no doubt presents considerable dilfficulty even to 
 great lawyers, as is shown by the fact that Mr. Justice North 
 was himself overruled in Re Hiilfon, supra ; but it really 
 comes to this, that, prinid facie, the mere fact that partners 
 use a thing, of which they were originally only co-owners^ 
 for partnership purposes, does not convert it into partner- 
 ship property. There must, in fact, be some evidence of 
 intention to treat the property as part of the capital of the 
 business. In Davis v. Davis and Morris v. Barrett there 
 was no such evidence. On the other hand, in Waterer v. 
 Waterer, and Davies v. Games there was some evidence. 
 For instance in Waterer v. Waterer the two partners bought 
 the share of the retiring partner in the land and in the 
 undoubted partnership assets at one price, so that the land 
 did become undoubtedly involved in the partnership busi- 
 ness. So in Davies v. Games, in the words of the learned 
 Vice-Chancellor who tried it, '* it appeared that when his 
 (the retiring partner's) share was sold, there was a valuation
 
 RELATION OF PARTNERS TO EACH OTHER. 97 
 
 and ascertainment of the stock and so forth, and the 
 liabilities of the business, and that they were found to 
 balance one another, and that Benjamin and William took 
 to the retiring partner's share of the stock, and also took 
 upon themselves the whole of the business liabilities." 
 The transaction (like that in Water er v. Water er) was in 
 fact substantially the purchase of a share of a mixed 
 property, viz., the farm and stock as a going concern. 
 Moreover, there was parol evidence that the partners bought 
 the share in the land "just as they bought cattle, stock, 
 and other things for the farming business." 
 
 In short, the question whether property has become 
 partnership property or not, is always a question of fact, 
 and generally one of a very difficult nature, in which one 
 must endeavour to ascertain whether it has been treated 
 by the partners as part of the common stock, or merely 
 used either at a rent or by gratuitous licence, as ancillary 
 to the carrying on of the business. 
 
 (6.) Devolution of Pabtnership Property. 
 
 One result of real estate becoming part of the partnership 
 property, (although this is no part of the law of partnership, 
 but is rather an illustration of the general rule of equity 
 as to conversion) is important. In the words of sect. 22 of 
 the Act : " Where land, or any heritable interest therein, 
 has become partnership property, it shall, unless the con- 
 trary intention appears, be treated as between the partners 
 (including the representatives of a deceased partner), and 
 also as between the heirs of a deceased partner and his 
 executors or administrators, as personal or movable and 
 not real or heritable estate." 
 
 The principle of the rule is simply that p?-ima facie 
 
 L.P. H
 
 98 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 (i.e., in the absence of agreement to the contrary), all the 
 property of the firm, real and personal, has to be sold on 
 dissolution of the partnership. Consequently, in equity, 
 it is converted into personal estate, and therefore devolves 
 as such. If, however, on the true construction of partner- 
 ship articles, it appears to have been the intention that 
 the real estate of the firm should not be sold on dissolution, 
 but should be continued to be held in joint tenancy or 
 tenancy in common, then the presumption is rebutted, and 
 it will devolve as real estate (z). 
 
 Anyhow, the conversion, even where it exists, is only a 
 conversion in equity, and the legal estate or interest devolves 
 according to the nature and tenure of the land, and the 
 general rules of law applicable thereto, but in trust, so far 
 as necessary, for the persons beneficially entitled to the 
 proceeds (a). Since the Land Transfer Act, 1897, however, 
 this has become immaterial, except as to copyhold lands. 
 
 (7.) Voluntary and Involuntary Alienations of a 
 Partner's Share in the Profits and Assets. 
 
 We now come to quite a different question, viz., in the 
 absence of express stipulation, is the share of a partner in 
 the business and assets, or in the profits, capable of being 
 alienated either voluntarily or involuntarily ? The answer 
 is, that without the consent of all the partners (unless there 
 be some express stipulation), a partner cannot transfer his 
 share in the partnership so as to place another person in 
 his shoes with all the rights of a partner. Partnership is 
 
 (z) See Be Wilson, [1893] 2 Ch. 340 ; Steiuard v. BlaJceway, (1869) 4 
 Oh. App. 603. 
 (o) Sect. 20 (2).
 
 RELATION OF PARTNERS TO EACH OTHER. 99 
 
 founded on personal confidence, and the confidence which 
 one may feel in the partner of one's choice may not be 
 extended to the assignee of his. One might be very willing 
 to be the partner of the reasonable and industrious Jones, 
 but might recoil from entering into a like relation with his 
 assignee, the cantankerous and idle Brown. Therefore the 
 law is not so unreasonable as to allow Jones to foist Brown 
 on his partner as his substitute, and still less to allow 
 Jones's creditors to force themselves on Jones's partner in 
 place of Jones, for the purpose of liquidating the debts 
 due from him (b). On the other hand if the partnership 
 deed provides that one or more of the partners shall have 
 the option of introducing a new partner, either as his 
 successor or otherwise, the other partners will be bound to 
 accept his nominee ; for the consent required by the law 
 may be given in advance and without reference to any 
 particular individual (c). 
 
 Moreover, the law allows a partner to assign, either 
 absolutely or by way of mortgage, his share in the assets 
 and profits ; so that the assignee, although not entitled to 
 interfere in the management of the business, nor, during 
 the continuance of the partnership, to require any accounts 
 from the other partners, nor to inspect the partnership 
 books, nor otherwise to exercise any of the functions of a 
 partner, is entitled to receive the share of profits to which 
 the assigning partner would otherwise be entitled. He 
 must, however, accept the balance sheet as to profits, agreed 
 to between the partners, without question {d) ; and cannot 
 interfere nor claim to be consulted as to management. For 
 instance he cannot object to salaries paid by the firm to 
 individual partners for managing departments of the 
 
 (6) Sect. 24(7). (d) Sect. 31 (1). 
 
 (c) Byrne v. Meid, [1902] 2 Ch. 735. 
 
 H 2
 
 100 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 business, although his share of profits may be in consequence 
 considerably reduced {e). 
 
 In case of dissolution, the assignee is entitled to receive 
 the assigning partner's share of the assets, and for the pur- 
 pose of ascertaining that share he is entitled to an account, 
 but only as from the date of the dissolution (/). An 
 absolute assignee of a share is bound to indemnify his 
 assignor against losses (g). 
 
 With regard to involuntary alienations, the court is 
 empowered, by sect. 23, on the application of a judgment 
 creditor of one of the partners, to make an order charging 
 his interest in the assets and profits with payment of the judg- 
 ment debt and interest, and may appoint a receiver of the 
 partner's share of the profits. It would seem, however, that 
 the court cannot order accounts against the other partners, 
 any more than a voluntary assignee could demand them (h). 
 The other partners are empowered to redeem, or, in the 
 case of a sale being directed, to purchase the share of the 
 partner whose share is so charged. Moreover, sect. 23 
 recognises that a partner who allows his share to be so 
 charged is not a desirable one, by declaring that, in such 
 cases, the partnership may, at the option of the other 
 partners, be dissolved. There is, however, no similar pro- 
 vision with regard to voluntary assignments or mortgages 
 of a share, although partners might reasonably object to 
 one of their number depriving himself of all beneficial 
 interest in the business, and, therefore, of all incentive to 
 exertion for the common good. 
 
 (e) Garivood v. Paynter, [1903] 1 Ch. 236. 
 (/) Ih. (2). Watts V. Driscoll, [1901] 1 Ch. 294. 
 {g) Dodson v. Downey, [1901] 2 Oh. 620. 
 
 (h) Broivn, Jansen & Co. v. A. Hutchinson & Co. (No. 2), [1895] 2 
 Q. B. 126.
 
 ( 101 ) 
 
 CHAPTER V. 
 
 THE DISSOLUTION OF THE FIEM. 
 
 We have now disposed of the creation of partnerships, and 
 the relations of partners to each other, and to third parties 
 during the life of the firm. But all things have an end 
 (except corporations, which, according to authority, are per- 
 petual), and firms can no more claim immunity from the 
 common doom than individuals. 
 
 Now, as in the case of marriage, so in the case of partner- 
 ship, the tie may be severed either by death or dissolution ; 
 but, unlike marriage, the intervention of the court is not 
 necessary for the latter process, if the partners are willing 
 to dissolve without litigation. 
 
 (1.) Dissolution without having Kecoursb to the 
 Court. 
 
 A partnership is dissolved, without the intervention of a 
 court, by any of the following circumstances (a) : 
 
 (a.) If entered into for a fixed term, by the expiration of 
 that term (b). 
 
 (b.) If entered into for a single adventure or undertaking, 
 by the termination of that adventure or under- 
 taking (h). 
 
 (c.) If entered into for an undefined time, by any partner 
 giving notice to the other or others, of his inten- 
 tion to dissolve the partnership, unless the articles 
 provide for some other method (6). 
 
 (o) Act of 1890, 8. 32. (6) Ih. sect. 33 (1).
 
 102 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 (d.) By the death of any partner (c), unless the articles 
 provide (as they frequently do) for the continuance 
 of the business by the survivors, either alone, or 
 in partnership with the representatives of the 
 deceased. 
 (b.) By the bankruptcy of any partner (c). 
 (f.) By the happening of any event which makes it 
 unlawful for the business of the firm to be carried 
 on, or for the members of the firm to carry it on 
 in partnership (d). 
 (g.) At the option of the other partners, if one partner 
 suffers his share in the partnership property to 
 be judicially charged for his separate debt (e). 
 In none of these cases is there any occasion to have 
 recourse to the court. Moreover, by express agreement in 
 the articles, any other circumstances, such as lunacy, 
 physical incapacity, or even incompatibility of temper, or 
 dishonesty (even outside the business (f) ), may be made 
 a cause for dissolution without the intervention of the 
 court. 
 
 (2.) Judicial Dissolution. 
 
 In the absence, however, of any such agreement, it is 
 necessary to apply to the Chancery Division of the High 
 Court (by action and not by way of summons) in any of the 
 following cases (g). 
 
 (a.) When a partner is found lunatic by inquisition, or is 
 
 (c) Act of 1890, s. 33 (1). 
 
 {(I) lb. sect. 34. 
 
 (e) lb. sect. 32(2). 
 
 (/) See Carmichael v. Evans, [1904] 1 Oh. 486, where the dishonesty 
 consisted in an attempt to defraud a railway company by travelling in 
 a superior class. 
 
 (y) lb. sect. 35.
 
 DISSOLUTION OF THE FIRM. 103 
 
 shown to the satisfaction of the court to be 
 permanently of unsound mind. 
 
 (b.) When a partner, other than the partner suing, 
 becomes in any way permanently incapable of 
 performing his part of the partnership contract. 
 
 (c.) When a partner, other than the partner suing, has 
 been guilty of such conduct as, in the opinion of 
 the court, regard being had to the nature of the 
 business, is calculated to prejudicially affect the 
 carrying on of the business. 
 
 (d.) When a partner, other than the partner suing, 
 wilfully or persistently commits a breach of the 
 partnership agreement, or otherwise so conducts 
 himself in matters relating to the partnership 
 business, that it is not reasonably practicable for 
 the other partner or partners to carry on the 
 business in partnership with him. 
 
 (e.) When the business of the partnership can only be 
 carried on at a loss (h). 
 
 (f.) Whenever, in any case, circumstances have arisen 
 which, in the opinion of the court, render it 
 just and equitable that the partnership be 
 dissolved. 
 
 (3.) Comments on Both Methods of Dissolution. 
 
 The law of France is curiously like ours in regard to 
 dissolution, providing for dissolution without the aid of the 
 courts in some events, and requiring that aid in others. 
 Thus, by Art. 1865 of the Code Civil, a societe comes to an 
 
 {h) I.e., through some inherent permanent defect; not merely a 
 temporary or special misadventure : Handyside v. Campbell, (1901) 17 
 T. L. E. 623.
 
 104 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 end automatically, (a) by the expiration of the agreed 
 term ; (b) by the completion of the business for which it 
 was constituted ; (c) by the death of one of the partners ; 
 (d) by the renunciation of one or more of the partners 
 where the partnership was constituted for an indefinite 
 period. In other cases, by Art. 1871, the dissolution can 
 only be demanded (in the words of the code translated into 
 English) "for just motives, as when another partner breaks 
 his engagements, or a chronic infirmity renders him unable 
 to attend to the business, or in the like cases, the legitimacy 
 and gravity of which are left to the judgment of the court." 
 There is, however, one clause (Art. 1869) which seems to 
 qualify the power of ending a partnership for an indeter- 
 minate time, viz., that the dissolving party must act in 
 good faith, and not dissolve " d contre temps," in plain 
 English, at an awkward moment, or, as Art. 1870 puts it, 
 "at a time when the capital is not intact, and it is 
 important to the partnership that the dissolution should 
 be postponed." 
 
 Now, of course, in the case of a partnership at will, i.e.; 
 for an undefined time, there is no necessity to invoke the 
 aid of the court to dissolve it, although there may be to 
 administer and liquidate the assets; for any partner can 
 dissolve the firm for himself by a simple notice in that 
 behalf, whether the other partner or partners be sane or of 
 unsound mind (i). The function of the court as a dis- 
 solving, as distinguished from an administering, authority, 
 is therefore practically necessary only where a partnership 
 is for life, for a fixed term, or for a single uncompleted 
 adventure ; and not even then if the agreement or the Act 
 provides for dissolution under the circumstances. 
 
 (»■) Jones T. Lloyd, (1874) 18 Eq. 265.
 
 DISSOLUTION OF THE FIRM. 105 
 
 Perhaps, it is convenient to mention here, that, if the 
 articles of partnership contain a clause referring all matters 
 in difference to arbitration, and the dispute involves a claim 
 for dissolution, the arbitrator is empowered to dissolve just 
 as the court might (7). Moreover, in such a case, if one 
 partner brings an action for dissolution, the court may, in 
 its discretion, stay all proceedings in the action, and refer 
 the matter to the arbitrator (k) ; or may refuse to do so (1), 
 or may appoint a receiver, or receiver and manager, and 
 refer all other matters to the arbitrator (m). 
 
 Let us consider in a little more detail the circumstances 
 which entitle a partner to dissolve without the aid of the 
 court. And, first, with regard to the dissolution of a part- 
 nership at will, no period of notice is required. It can be 
 dissolved at once, by notification in that behalf given by one 
 partner to the other or others; or as from the date 
 mentioned in the notice (w). 
 
 The notice once given cannot be withdrawn, except by 
 the consent of all (0). Upon such a notice being given, if no 
 date is named therein, the dissolution takes effect instanter, 
 the business being thenceforth carried on merely for the 
 purpose of winding it up. 
 
 With regard to the dissolution of a partnership by the 
 happening of any event which makes the business unlawful, 
 examples do not often occur. But if A. and B. became 
 partners in the business of a particular public-house, and 
 
 {j) Vawdreyv. Simpson, [1896] 1 Ch. 166; BeJJield v. Bourne, [1894] 
 1 Ch. 521. 
 
 {k) lb. 
 
 {I) Barnes v. Yoimgs, [1898] 1 Ch. 414; Turnell \. Sanderson, (1891) 
 64 L. T. (n.s.) 654. 
 
 (m) Piui V. Roncoroni, [1892] 1 Ch. 633. 
 
 (n) Act of 1890, s. 32; Crawshay v. Maale, (1818) 1 Sw. 495. 
 
 (0) Jones V. Lloyd, (1874) 18 Eq. 265.
 
 106 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 the licence were subsequently withdrawn by the magistrates, 
 so that they could no longer lawfully carry on business, 
 then, no doubt, the partnership would, ipso facto, be dis- 
 solved, even although they had agreed to carry it on 
 for a fixed term of which there might be many years 
 unexpired. 
 
 So, again, partnerships between " bookmakers " (I do not 
 mean authors, legal or otherwise) are common, and at the 
 present time are legal (p). But it is conceivable that a 
 decision of the House of Lords, or an Act of Parliament, 
 might at any time make such a business illegal ; and, in 
 that case, there would be an immediate and automatic 
 dissolution. 
 
 With regard to the circumstances under which the court 
 can decree a dissolution, the lunacy of a partner is not 
 merely a ground for dissolution at the suit of the sane 
 partners, but also at the suit of the lunatic partner, by his 
 next friend or committee (q). Moreover, a lunacy judge 
 has power to dissolve a partnership when a partner becomes 
 lunatic (r). The justice of this is obvious, for, by reason of 
 his lunacy, he is no longer capable of taking part in the 
 management, and keeping a check upon his co-partners ; so 
 that if he were obliged to remain a member of the firm, his 
 capital would, and his remaining fortune might, be exposed 
 to risks which neither he nor his friends and guardians 
 could control. 
 
 It seems to be a pretty question whether the marriage of 
 a female partner would enable the court to decree a dissolu- 
 tion at the request of her co-partners. Prior to the Married 
 Women's Property Act, 1882, it was well settled that such a 
 
 (p) Thwaites v. Coulthwaite, [1896] 1 Cli, 496. 
 
 (?) Jioies V. Lloyd, (1874) 18 Eq. 265. 
 
 (r) Lunacy Act, 1890, ss. 116(4), 119, 341.
 
 DISSOLUTION OF THE FIRM. 107 
 
 marriage dissolved the partnership. Sir Frederick Pollock 
 thinks that that Act made it clear that marriage would not 
 now dissolve such a partnership, but something may be 
 said against this view. 
 
 It is true that marriage is not an act which makes a lady 
 permanently incapable of performing her part of a partner- 
 ship contract, nor can it be considered such an act as, regard 
 being had to the nature of the business, is calculated, in 
 point of law (whatever it may be in point of fact), to pre- 
 judicially affect the carrying on of the concern. Neverthe- 
 less, it may be a circumstance which renders it " just and 
 equitable that the partnership be dissolved." For it must 
 be remembered that the status of a married woman is still 
 widely different from that of a spinster. It is true that she 
 can now contract, but she is not personally responsible ; the 
 only relief is against her separate property, and not against 
 that if she has taken the precaution to settle it " without 
 power of anticipation." Consequently, in case of losses, the 
 other partners would surely find their rights for contribution 
 and indemnity against her considerably modified to their 
 disadvantage. Moreover, common sense tells us that the 
 inevitable effect would be to introduce the husband as a 
 potential member of the firm. In the absence of judicial 
 decision, therefore, the case cannot be considered free from 
 doubt. 
 
 It is impossible to specify all the acts and circumstances 
 which would enable the court to decree a dissolution on the 
 wide ground that it is "just and equitable "; but, of 
 course, fraud or misrepresentation in the course of the 
 negotiations which resulted in the partnership, would be 
 sufficient (s). In that case, in addition to any claim for 
 
 (3) Lindley, 7tli ed. 525.
 
 108 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 damages in an action of deceit (t), the defrauded partner is 
 entitled : 
 
 (a.) to a lien on, or right of retention of, the surplus 
 of the partnership assets, after satisfying the 
 partnership liabilities, for any sum of money paid 
 by him for the purchase of a share in the partner- 
 ship, and for any capital contributed by him (u), 
 plus interest and costs (x) ; 
 
 (b.) to a personal order for payment of such sum, 
 together with his capital with interest, and 
 costs (y) ; 
 
 (c.) to stand, by way of subrogation, in the place of the 
 creditors of the firm for any payments made by 
 him in respect of the partnership liabilities (z) 
 with interest (a) ; 
 
 (d.) to be indemnified by the person guilty of the fraud, 
 or making the representation, against all the debts 
 and liabilities of the firm. 
 
 (4.) Return of Premium on Dissolution. 
 
 Somewhat analogous to this, is the case of a partner who 
 has paid a premium to another on entering into partner- 
 ship for a fixed term, which partnership is dissolved before 
 the expiration of the term. It would obviously be unjust, 
 in many cases, that the premium thus paid, should be 
 retained. On the other hand, the party who pays it must 
 
 {t) Derry v. Peek, (1889) 14 A. C. 337; Newhegging t. Adam, (1887) 
 34 Ch. D. 582 ; afi. (1888) 13 App. Cas. 308. 
 (u) Act of 1890, s. 41. 
 
 (x) Mycock V. Beatson, (1880) 13 Ch. D. 384. 
 (t/) Adam v. Newhegging, sup. 
 {z) Act of 1890, s. 41. 
 (a) Baidins v. Wickham, (1858) 1 Giff. 355; 3 De G. & J. 304.
 
 DISSOLUTION OF THE FIRM. 109 
 
 be taken to have contemplated that the term might be 
 shortened by death, and to have accepted that risk (b). 
 Consequently, the rule is (c), that if the partnership is 
 dissolved before the expiration of the term otherwise than by 
 death, the court may order the repayment of the premium, 
 or of such part thereof as it thinks just, having regard 
 to the terms of the partnership contract, and to the 
 length of time during which the partnership has continued, 
 unless : 
 
 (a.) the dissolution is, in the judgment of the court, 
 
 wholly or chiefly due to the misconduct of the 
 
 partner who paid the premium ; or 
 (b.) the partnership has been dissolved by an agreement 
 
 containing no provision for a return of any part of 
 
 the premium. 
 It is conceived, on the authority of cases decided before 
 the Act (d), that when part of a premium is ordered to be 
 recouped, it will be the same fraction of the entire premium 
 as the fraction which is still unexpired of the original term. 
 The amount is, however, discretionary and will seldom be 
 altered on appeal (e). 
 
 Where the articles contain the usual arbitration clause 
 the arbitrator has power to order the return of part of a 
 premium (/). 
 
 (5.) Points after Dissolution. 
 
 In the event of recourse being had to the court to decree 
 a dissolution, it is not unusual, directly the action is 
 
 (6) Ferns v. Carr, (1885) 28 Ch. D. 409. 
 (c) Act of 1890, s. 40. 
 
 (cZ) Atwood V. Maude, (1868) 3 Ch. App. 369. 
 (e) Lyon v. TxveddeU, (1881) 17 Ch. D. 529. 
 (/) Bel field v. Bourne, [1894] 1 Ch. 521.
 
 110 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 started, for the plaintiff to move for a receiver, or some- 
 times for a receiver and manager. On such a motion, the 
 judge generally asks whether, the parties being at arms 
 length and in a state of litigation, the partnership can 
 possibly go on ; and if counsel agree that it cannot do so, an 
 immediate decree for dissolution, with the usual accounts and 
 inquiries, is at once made, to the great saving of costs (g). 
 
 On dissolution, any partner may publicly notify the 
 same, and require the other partners to concur in all proper 
 acts for doing so (h). This latter provision was, no doubt, 
 inserted in the Act, to meet the fact that the publishers of 
 the Gazette refused to insert such notices unless signed by 
 all the partners ; but it is believed that this practice at the 
 Gazette office has now been discontinued. 
 
 After the dissolution of a partnership for any cause except 
 death or bankruptcy, the authority of each partner to bind 
 the firm, and the other rights and obligations of the partners, 
 continue, notwithstanding the dissolution, as far as may be 
 necessary to wind up the affairs of the partnership, and to 
 complete transactions began but unfinished at the time of 
 the dissolution, but not further. If the dissolution be 
 caused by death or bankruptcy of a partner, this authority 
 to wind up the concern (with the possible exception men- 
 tioned below) devolves on the surviving or solvent partners 
 alone, to the exclusion of the personal representatives, or 
 trustee in bankruptcy, of the deceased or bankrupt partner. 
 
 It seems, however, to be doubtful whether the surviving 
 partners can sell and convey partnership land without the 
 joinder of the personal representatives of the deceased. 
 Where the partners were tenants in common at law it 
 seems clear that the personal representative of the deceased 
 
 {g) Atwuod V. Maude, (1868) 3 Ch. App. ^69. 
 (/t) Act of 1890, 6. 37.
 
 DISSOLUTION OF THE FIRM. Ill 
 
 would have to join in a conveyance in order to pass the 
 legal estate to a purchaser. But where the land was vested 
 in the partners as joint tenants at law, the question is not 
 so clear because the legal estate would then be vested solely 
 in the survivors and there seems to be no reason why they 
 should not sell it like any other asset (i). Mr. Cyprian 
 Williams, however, in his work on vendors and pur- 
 chasers (k), considers that in the absence of any express 
 decision of the English Courts, it would be imprudent to 
 accept a title from surviving partners alone and ex abundanti 
 cautela, it would certainly seem to be better to press for 
 the joinder of the personal representative of the deceased 
 in all such cases. Of course, where a partner has become 
 bankrupt the trustee in bankruptcy must always join, if 
 for no other reason than to pass the legal estate. But it is 
 apprehended that he would hold it merely as a bare trustee 
 and would be bound to convey to a purchaser from the other 
 partners (l). 
 
 The sanctioned, but limited agency of partners after a 
 dissolution may nevertheless be taken away by the court if 
 the parties fall out, or if special grounds be shown by the 
 personal representatives of a deceased, — or the trustee in 
 bankruptcy of a bankrupt, — partner, either partially, by 
 the appointment of a receiver to get in the outstanding 
 assets, or wholly, by the appointment of a receiver and 
 manager, to conduct the entire winding up. A receiver 
 will generally (but not as a matter of course) be appointed, 
 on the application of any partner; even although the 
 
 (») 1 Dart. V. & P. 94, citing Fox v. Ilanhury, Cowp. 445, and 
 Lindley on Partnership, 7th ed. 379 ; and see West of England Bank 
 V. Murch, (1883) 23 Ch. D. 138. 
 
 {k) Vol. I. 413. 
 
 {I) See Allen v. Kilbre, (1819) 4 Madd. 464.
 
 112 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 disputes between the partners are referred to arbitration, 
 under a clause in that behalf in the articles (m). 
 
 The appointment of a manager, although more common 
 than formerly (n), requires a stronger case than the appoint- 
 ment of a receiver. A receiver merely takes the income and 
 pays the necessary outgoings. A manager takes over and 
 carries on the entire business. The appointment of a 
 receiver only, practically brings the trade to a dead stop (o). 
 Therefore, if it be desired to continue the trade at all, it is 
 necessary to appoint a manager, or a receiver and manager, 
 as he is generally called. 
 
 In partnership actions, the court will not, as a rule, appoint 
 a manager, and so take the control out of the hands of 
 the partners, except with the view of winding up the 
 concern (p) by carrying into effect existing contracts, and 
 entering into such new ones as are necessary for carrying 
 on the business in the ordinary way, but so as not to impose, 
 by speculative dealing or otherwise, onerous liabilities on 
 the partners (q). 
 
 Where one partner is insolvent, the other partner will be 
 entitled to be appointed receiver and manager (r) ; but, in 
 other cases, the court will, as a general rule, not appoint 
 any of the partners except by consent, unless the business is 
 a personal one, or other strong grounds exist for appointing 
 one of the partners (s). 
 
 (to) Fini V. Roncoroni, [1892] 1 Ch. 633. 
 
 (/i) Per Fry, L.J., Reid v. Exj^lnsivts Co., (1887) 19 Q. B. D. 269. 
 
 (o) Per Jessel, M.E., In re Manchester and Milford Ry. Co., (1880) 
 14 Ch. D. p. 653. 
 
 {p) Const. V. Harris, (1824) T. & R. p. 517 ; Gardner v. London 
 Chatham and Dover Ry. Co., (1867) 2 Ch. App. p. 212 ; Sargant v. 
 Read, (1875) 1 Ch. D. 600. 
 
 [q) Taylor v. Neate, (1888) 39 Ch. D. 538. 
 
 (r) Collins v. Barker, [1893] 1 Ch. 578. 
 
 (s) See Sargant v. Read, su}-).
 
 DISSOLUTION OF THE FIRM. 113 
 
 The court, in appointing a manager, usually orders that 
 he is not to act as such beyond a fixed date, without leave 
 of the court (t) ; and he is appointed on the terms that he 
 becomes personally liable on all contracts entered into by 
 him, but is entitled to be indemnified out of the assets of 
 the business (u). If necessary the court will by injunction 
 prevent either partner interfering with the manager to the 
 detriment of the business or the goodwill (x). 
 
 (6.) Ebalisation of the Assets. 
 
 A dissolution having begun, whether voluntarily or under 
 a decree of the court, and whether under the direction of 
 the partners or the surviving or solvent ones, or of a receiver 
 and manager, what happens next ? The answer is contained 
 in sect. 39 of the Act, in the following words : " On the 
 dissolution of a partnership every partner is entitled, as 
 against the other partners in the firm, and all persons 
 claiming through them in respect of their interests as 
 partners, to have the property of the partnership applied in 
 payment of the debts and liabilities of the firm, and to have 
 the surplus assets after such payment applied in payment 
 of what may be due to the partners respectively, after 
 deducting what may be due from them to the firm; and 
 for that purpose, any partner, or his representatives may 
 on the termination of the partnership, apply to the court 
 to wind up the business and affairs of the firm." 
 
 This right is said to be in the nature of an equitable lien 
 existing throughout the partnership, though it does not 
 become active until a dissolution, when it immediately 
 
 (t) Davies v. Vale of Evesham Preserves, (1886) 43 W. E. 646. 
 (m) Given v. Cronk, [1895] 1 Q. B. 265; Burt v. Bull, [1895] 1 Q. B. 
 276; and see Strapp v. Bull, [1895] 2 Ch. 1. 
 {x) Doran v. D<yran, (1904) 89 L. T. 272. 
 
 L.P. I
 
 114 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 attaches to what was partnership property at the date of the 
 dissolution {y). 
 
 It is, in fact, a kind of floating Ken, analogous to the 
 floating securities created by the debentures of joint stock 
 companies, and is lost by the conversion of assets into 
 the separate property of one of the partners {z). The lien 
 is enforceable, in the absence of agreement to the contrary, 
 by a sale of the whole of the assets (a). Generally, however, 
 where a winding up of the business is not contemplated on 
 the death or retirement of a partner, the partnership articles 
 provide that the share of the deceased or retiring partner, 
 shall be ascertained by reference to the last preceding 
 annual balance sheet, so as to avoid a sale. If, from any 
 cause, such an agreement cannot be substantially carried 
 out, the court will decree a sale {h). 
 
 The assets include not only the stock-in-trade and book 
 debts, furniture, tools, machinery, etc., but also an 
 intangible, but often very valuable, property, called good- 
 will ; and in the absence of agreement, and subject to one 
 exception, it must be sold (c). 
 
 The word goodwill is one very difficult to define. Lord 
 
 {y) Payne v. Hornby, (1858) 25 Beav. 280; Exp. Morley, (1873) 
 8 Ch. App. 1026. 
 
 (z) Re Langmead, (1855) 7 D. M. & G. 353; Holroyd v. Griffiths, 
 (1856) 3 Drew. 428. 
 
 (a) Featherstonhaugh v. Fenwick, (1811) 17Ves. 298; Wildy. Milne, 
 (1859) 26 Beav. 504; but see Walker v. Hirsch, (1884) 27 Ch. D. 460. 
 
 (i) Taylor v. Neate, (1888) 39 Ch. D. 538; Downs m. Collins, (1848) 
 6 Hare, 418. Such an agreement will be carried out even where the 
 original term has long expired and the partnership has been carried 
 on as a partnership at will {Daw v. Herring, [1892] 1 Ch. 284). 
 
 (c) Pawsey v. Armstrong, (1881) 18 Ch. D. 698; Page v. Ratliffe, 
 (1897) 76 L. T. 63 ; Re David and Matthews, [1899] 1 Ch. 378; but on 
 the true construction of the partnership articles it may be otherwise : 
 see Scott v. Scott, (1904) 89 L. T. 682.
 
 DISSOLUTION OF THE FIRM. 115 
 
 Eldon said that it was nothing more than the probability of 
 the old customers resorting to the old place (d). Clearly, 
 however, it means more than that ; for it often exists 
 quite independently of locality. Probably a good working 
 description of it would be, that it is the public approbation 
 which has been won by the business, and that, considered 
 as a marketable thing, it is the probability of the customers 
 or clientele of the firm resorting to the persons or person 
 who succeed to the business as a going concern (e). Appro- 
 bation was one of the original meanings of " goodwill " long 
 before it was used as commercial slang. ^Thus Shakespeare 
 says: "I hope I have your goodwill," and " Let me have 
 your goodwill." Probably this is the derivation of the term, 
 and commercial men may have gradually converted the 
 *' goodwill " which the public manifested towards the owners 
 of a business, into an asset of the business considered as a 
 figurative entity. In some cases this approbation may 
 depend on the situation of the trade premises {e.g., a public- 
 house). In others, on the quality or cheapness of the 
 goods sold under a firm name {e.g., Whiteley's business). 
 In others, on the reputation of the business for a particular 
 class of articles (as Humber & Co. for cycles, or Gunter's 
 for cooked articles). In others, partly on the personal 
 
 {d) CruUwelly. Lye, (1811) 17 Ves. 335. 
 
 (e) "A connection formed by years of work " {Jessel, M.R., Ginesi v. 
 Cooper (fe Co., (1880) 14 C. D. 599) ; " a benefit arising from connection 
 and reputation " (Lindley on Partnership, 7th ed., p. 476) ; " the whole 
 advantage, whatever it may be, of the reputation and connection of 
 the firm, which may have been built up by years of honest work or 
 gained by lavish expenditure of money" (Lord Maaiaghten, Trego v. 
 Hunt, [1896] A. C, at p. 23); "the advantage, whatever it may be, 
 which a person gets by continuing to carry on, and being entitled to 
 represent to the outside world that he is carrying on, a business which 
 has been carried on for some time previously " [Warrington, J., Hill v. 
 Fearis, [1905] 1 Ch., at p. 471). 
 
 l2
 
 116 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 introduction of the new man to the clientele by the vendor 
 of the business (as is the case with regard to a solicitor's or 
 surgeon's business). 
 
 As above stated, there is said to be an exception to the 
 rule that the goodwill of a partnership business must be 
 sold on dissolution, viz., in the case of businesses of a very 
 personal nature, such as those of solicitors and medical 
 practitioners. In such cases there is authority for the 
 proposition (/) that the goodwill forms no part of the 
 assets, and that on dissolution each partner (or the survivor 
 in case of dissolution by death) retains whatever benefit 
 may be derived from the goodwill. 
 
 The value of the goodwill of a dissolved partnership as a 
 saleable commodity is considerably decreased by the rule 
 laid down in the case of Trego v. Himt (g), namely, that the 
 sale of it does not prevent the partners from carrying on a 
 competing business with the purchaser. It is true that the 
 quondam partners may be restrained by injunction from 
 soliciting any person who was a customer of the old firm (h), 
 or from representing themselves as continuing the old 
 business. Still, the mere fact that they may compete is a 
 serious factor in the case, and cannot fail to affect the 
 saleable value (i). 
 
 It may be mentioned that this principle is equally 
 applicable to the case where a person has been taken into 
 
 (/) Farr v. Pearce, (1818) 3 Madd. 74; Aiisten v. Boys, (1858) 
 2 De G. & J. 626 ; ArnndeU v. Bell, (1883) 52 L. J. Ch. 537 ; but 
 comp. EiU V. Fearis, [1905] 1 Ch. 471. 
 
 ((/) [1896] A. C. 7, followed, Jennings v. Jennmgs, [1898] 1 Ch. 378 ; 
 and Re David and Matthews, [1899] 1 Ch. 378. 
 
 (A) Gillingham v. Beddow, [1900] 2 Ch. 242. Inapplicable where 
 the firm is bankrupt, and the sale of goodwill is made by the trustee 
 in the banki-uptcy {Walker v. Mottram, (1882) 19 Ch. D. 355). 
 
 («') Per Lord MacnagMen, [1896] A. C. at p. 23.
 
 DISSOLUTION OF THE FIRM. 117 
 
 partnership, on the terms that, on the expiration of the 
 partnership, the goodwill shall belong exclusively to the 
 other partner (k) ; and also to the case where, on the 
 dissolution, one partner purchases the assets from the 
 others (/). 
 
 If the goodwill be not sold, each partner may not only 
 canvass old customers, but (subject to any question as to 
 endangering the other partners under the doctrine of 
 " holding out ") may also (notwithstanding its obvious 
 inconvenience) use the firm name (m) . 
 
 It would seem that where (as in some professional 
 partnerships) one of the partners holds an appointment or 
 office, the emoluments of which have been treated as profits 
 of the firm, he must, on dissolution, in the absence of 
 agreement to the contrary, be debited with its value. For 
 although such an office cannot be sold for the benefit of the 
 firm, yet, if one of the partners retains it, he must account 
 for its value (n). 
 
 (7.) Final Settlement of Accounts and Distribution 
 OF Assets. 
 
 The partnership being dissolved, and the assets realised, 
 the next thing that requires notice is the final account and 
 distribution of the assets. 
 
 {k) Trego v. Hunt, [1896] A. C. 7. 
 
 (/) Jennings v. Jennings, [1898] 1 Ch. 378. But comp. and dist. 
 Harris v. Mansbridge, (1900) 17 T. L. R. 21, which turned on the 
 interpretation of the deed of dissolution. 
 
 (m) Levy v. Walker, ^1879) 10 Ch. D. 436. See also Townsend v. 
 Jarman, [1900] 2 Ch. 698; Burchell v. Wilde, [1900] 1 Ch. 651; 
 Bosher v. Young, (1901) 17 T. L. E. 347. 
 
 (n) SmitJi V. Muks, (1S52) 9 Ha. 556.
 
 118 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 Of course, where, by agreement, one or more members 
 of the firm continue the business on the terms of paying off 
 the share of the outgoing or deceased partner or partners, 
 ascertained on a certain agreed basis, no final account and 
 distribution is necessary, because the agreement is sub- 
 stituted for it(o). But where there is a true dissolution of 
 the firm, each partner going his own way and the part- 
 nership property being sold, then a general account is 
 necessary, and may be claimed, not only by living partners, 
 but by the representatives of deceased ones, and even by 
 the transferees of the shares of living ones. Such an 
 account will start from the last settled account, i.e., in 
 ordinary cases, on the footing that the last balance sheet 
 is correct ; for the court will never (unless for some proved 
 fraud or error) disturb a settled account. Of course there 
 are, occasionally, cases where a partnership has lasted for 
 years without any settled balance sheets, and in such 
 cases it is necessary to take the accounts from the very 
 beginning. 
 
 However, from whatever date the final account is to 
 begin, it must, in every case, be thence continued right 
 down to the date of the dissolution, and then must be kept 
 open so as to let in all transactions occurring in the actual 
 winding up. In taking the accounts, the uniform course 
 of practice of the firm with regard to previous accounts, 
 must (so far as applicable to the final account) be observed. 
 No doubt in complete dissolutions this is not often of much 
 importance ; but where an account is taken to ascertain 
 what is due to a partner who has died or retired on the 
 terms of his receiving the value of his share at the date 
 
 (o) Such an agreemeut demands the greatest good faith and candoui'. 
 In the absence of full disclosure of all material facts, it wiU be set 
 aside [Law v. Law, [1905] 1 Ch. 140).
 
 DISSOLUTION OF THE FIRM. 119 
 
 of death or retirement, it may be of the utmost import- 
 ance. The case of Ex parte Barber (p) shows this very 
 clearly. There, partnership articles provided for a 
 balance sheet being made out up to the 31st of December 
 in each year, which, after a certain time, was to be binding 
 on the partners, except that manifest errors, when dis- 
 covered, should be corrected. It was also provided, that a 
 like account should be made out on the 31st of December 
 next after the death of a partner, and that his executors 
 should be entitled to receive, by six instalments, from the 
 surviving partners, the value of his interest as appearing 
 from such balance sheet. The uniform practice of the 
 firm in making out their balance sheets, was to treat the 
 loss occasioned by any asset turning out bad, as attributable 
 to the year in which it was discovered to be bad. In the 
 year 1864 one of the partners died ; and after the balance 
 sheet had been made out, various assets which had been 
 treated as good were ascertained to be irrecoverable, owing 
 to the failure, since the 31st of December, of debtors to 
 the firm, and depreciation of consignments, which, when 
 the balance sheet was made out, had not been realised. 
 It was held that the executors of the deceased partner were 
 nevertheless entitled to receive the value of his share as 
 appearing by the balance sheet, without any deduction for 
 the losses subsequently ascertained. 
 
 Difficulties not infrequently arise where the executors of 
 a deceased partner are the same persons as the surviving 
 partners. In such cases it is extremely dangerous for them 
 to wind up the concern without the assistance of the court ; 
 for, unless they act in strict accordance with the law, their 
 settlement of the affairs of the firm is always liable to 
 
 {p) 5 Ch. App. 687. See also Steiiart v. Gladstone, (1879) 10 Oh. D., 
 at p. 660.
 
 120 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 be upset by the persons beneficially entitled to the estate 
 of the deceased partner (q). 
 
 Where, however, the surviving or continuing partners 
 have, by the partnership agreement, an option to purchase 
 the interest of a deceased or outgoing partner, sect. 42 (2) 
 of the Act declares, that if they exercise the option, and 
 comply with the terms thereof in all material respects, their 
 liability shall be that imposed upon them by the agreement ; 
 and they will not be liable to account for subsequent profits, 
 even although one or more of the partners is an executor 
 or trustee of the deceased partner (r). 
 
 On the other hand, if the surviving or continuing partners, 
 having such an option, either assume to exercise it, but do 
 not in all material respects comply with its terms, or, 
 having no such oj)tion, they neglect to come to a formal 
 settlement of accounts with the retired partner or the 
 executors of the deceased (as the case may be), the latter 
 have the option of claiming either five per cent, interest 
 on the amount of their share in the assets, or such a share 
 of profits, since the dissolution, as the court may consider 
 to be fairly attributable to the use of their share of the 
 assets (s). But, in arriving at this, some allowance ought 
 to be made to the surviving or continuing partners for 
 their services {t), unless they be the trustees or personal 
 representatives of the deceased (?0. 
 
 It may be mentioned here, that, under arrangements for 
 paying out the share of a deceased or outgoing partner, the 
 
 {q) See Wedderburn v. Wedderburn, (1836) 2 Keen, 722, and Bening- 
 field V. Baxter, (1887) 12 A. C. 167. 
 
 (r) See Smith v. Nelson, (1904) 92 L. T. 313. 
 
 (s) Act of 1890, s. 42 (1), (2). 
 
 {t) Broiun v. De Tastet, (1821) Jac. 284; Melkrsh v. Keen, (1859) 27 
 B. 236. 
 
 (w) Stocken v. Dawson, (1843) 6 Bea. 371.
 
 DISSOLUTION OF THE FIRM. 121 
 
 amount is a debt accruing at the date of the dissolution, 
 and the Statute of Limitations begins to run from then (r). 
 Upon a dissolution (in the strict sense of the term) the 
 following rules apply, unless modified by agreement (x) : 
 
 " (a.) Losses, including losses and deficiencies of capital, 
 shall be paid first out of profits, next out of capital, and 
 lastl}', if necessary, by the partners individually in the 
 proportion in which they were entitled to share in the 
 profits : 
 
 " (b.) The assets of the firm including the sums, if any, 
 contributed by the partners to make up losses or deficiencies 
 of capital, shall be applied in the following manner and 
 order : 
 
 " 1. In paying the debts and liabilities of the firm to 
 
 persons who are not partners therein : 
 " 2. In paying to each partner rateably what is due from 
 the firm to him for advances as distinguished 
 from capital : 
 "3. In paying to each partner rateably what is due from 
 
 the firm to him in respect of capital : 
 
 " 4. The ultimate residue, if any, shall be divided among 
 
 the partners in the proportion in which profits are 
 
 divisible." 
 
 When a partnership is being wound up by the court, it need 
 
 scarcely be mentioned that lawyers' bills are incurred, both 
 
 by the plaintiff and defendant ; and the question then arises 
 
 as to how these costs are to be borne. The answer is, that 
 
 they must be treated as a deferred liability of the business. 
 
 They are costs of administration ; and, just as the costs of 
 
 administering a trust fund come out of that fund after 
 
 (v) Act of 1890, 8. 43; Betjemann v. lietjemann, [1895] 2 Ch. 474. 
 [x) See Wood v. BcoUs, (1866) 1 Ch. App. 369.
 
 122 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 payment of debts, before either capital or income is 
 distributed among beneficiaries, so, in administering the 
 assets of a partnership, the costs of administration must 
 be discharged before either capital is repaid to, or profits 
 divided between, the partners. But, although it is a 
 liability of the business — a trade charge — it is a deferred 
 liability, and can only rank after the firm's debts ; for it 
 would be obviously unjust that the creditors of the firm 
 should be obliged to contribute to the cost of litigation 
 between the partners. 
 
 Moreover, one who has advanced money to the firm is 
 none the less a creditor for this purpose, because he also 
 happens to be a member of the firm. Consequently, where 
 one of the partners has made advances to the firm (as 
 distinguished from contributing capital for the joint 
 adventure), such advance must be repaid to him in 
 priority to any claims for costs ; for he claims such 
 advance qua creditor, and not qua partner {y) — quel debt, 
 and not qua capital. Per contra, where a partner owes 
 money to the firm {e.g., where he has overdrawn his share 
 of profits) he cannot claim his costs until he has made 
 good the debt due to the partnership estate {z), a principle 
 equally applicable in the administration of a trust. In 
 short, he has in his hands, what is really and truly a part 
 of the assets of the partnership ; and although it is quite 
 true that he is entitled to his costs, the other partner has a 
 right to say to him " pay your own costs out of that 
 portion of the assets which you have drawn out in excess 
 of my drawings, and which you have in your hands " {z). 
 
 Lastly, assuming that the assets, administered in the 
 
 {y) Austin v. Jackson, (1879) 11 Ch. D. 942 n. 
 (z) Ross V. White, [1894] 3 Ch. 326.
 
 DISSOLUTION OF THE FIRM. 123 
 
 order above named, are insufficient to pay the costs of the 
 action, or to pay them in full, what then ? In that case, 
 remembering that such costs are liabilities of the firm 
 (although deferred liabilities), it follows that they must 
 be borne, like all other liabilities which the assets are 
 insufficient to meet, by the partners, in the proportion in 
 which they have to bear the general losses. So that in the 
 result, the greater part of the solicitor's bill of a partner 
 who takes a small interest in the concern, may have to be 
 paid by the partner who vainly hoped to take a large 
 interest in the profits, and who, therefore, impliedly 
 undertook a correspondingly heavy responsibility for the 
 losses.
 
 ( 124 ) 
 
 CHAPTER YI. 
 
 THE INSOLVENCY OF ALL OE SOME OF 
 THE PARTNERS. 
 
 It has been hitherto assumed that where the assets of 
 the partnership are insufficient to meet the liabilities, yet, 
 all the individual partners are solvent. In that case no 
 questions can arise between the firm's creditors and the 
 private creditors of the partners ; they are all paid, and, 
 in taking the partnership accounts, the joint debts, thus 
 paid, will be adjusted in accordance with the terms of the 
 partnership in relation to the bearing of losses. 
 
 But where a partnership business fails, it not infre- 
 quently happens that the loss is greater than one or more, 
 or perhaps all of the individual members of the firm, can 
 bear. A partner too often puts all his eggs into the 
 partnership basket — stakes his fortune on the success of 
 the business — thinking, as Shakespeare puts it : 
 
 " If like an ill venttu'e it comes unluckily home, 
 I break, and you, my gentle creditors, lose." 
 
 Even where he still retains some property beyond that 
 which he has contributed to the capital of the firm, yet if 
 that private property proves insufficient to meet his share 
 of the losses and also his private debts, he will be insolvent. 
 
 Now, so far as an insolvent partner is personally concerned, 
 it is necessarily a matter of small moment to him how his 
 private property (as distinguished from his share in the 
 firm's assets) is administered. Vce victis : He, at least, will 
 be bereft of everything, and his only interest in the matter
 
 INSOLVENCY OF PARTNERS. 125 
 
 will be that of a captive watching with melancholy interest 
 the quarrels of his captors over the distribution of the spoils. 
 
 But although it may be a matter of indifference to him, 
 personally, how his estate is distributed between his private 
 creditors on the one hand, and, either the creditors of the 
 firm, or his solvent partners (who may have had to pay 
 more than their share of the losses), on the other, it is by 
 no means a matter of indifference to members of those 
 classes, whose interests are obviously conflicting. Upon 
 what principle, then, are these conflicting interests to be 
 adjusted? 
 
 For the sake of lucidity it is necessary to separate this 
 question, and to consider (1) the principle as between the 
 creditors of the firm and the creditors of the individual 
 partners, where all the partners are bankrupt ; and (2) the 
 principle as between the creditors of the individual 
 bankrupt partner and his solvent co-partners. 
 
 (1.) Peoofs against the Joint and Separate Estates 
 
 WHERE all the PARTNERS ARE INSOLVENT. 
 
 Apart from the actual law, many reasonable methods 
 might be suggested of distributing the joint and separate 
 estates where all the partners are insolvent. For instance, 
 it seems to have been considered, in Lord Hardwicke's time, 
 that, for this purpose, the firm and the individual partners 
 ought to be treated as separate persons altogether — that the 
 firm's creditors might prove against the estate of the 
 individual bankrupt, and that the separate creditors of the 
 individual partners might prove against the estate of the 
 firm (a). 
 
 (a) See judgment of Lord JJluckhurn, Bead y. Bailey, (1877) 3 A. 0. 
 102.
 
 126 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 Again, in Scotland, at the present day, each firm creditor 
 values the dividend which he considers he will get from the 
 firm's assets, and then proves against the partners' separate 
 estates for the balance. 
 
 In Switzerland, on the other hand, the firm's creditors 
 take the whole of the assets, and in addition are allowed to 
 prove for the deficit pari passu with the private creditors. 
 
 However, none of these methods of adjustment now pre- 
 vails in England ; for since 1770, at least, the rule has been 
 established that the creditors of a bankrupt firm cannot 
 prove against the separate estate of the individual partners 
 in competition with the private creditors of such partners, 
 nor can the creditors of a separate partner prove against the 
 joint estate of the firm in competition with the firm's 
 creditors; but that after 20s. in the £ have been paid to 
 either class of creditors, then (and not before) the other class 
 may so prove. The reason of the rule is obscure, but Lord 
 Blackburn, in Read v. Bailey (b), seemed to think that it 
 was adopted " not upon the ground that there was a right 
 in the private creditors to be paid out of the separate estate, 
 or a right in the joint creditors to be paid out of the joint 
 estate, for I do not think that there was any such rule ; but 
 it was said the rule was to be adopted, partly at least, on 
 the ground of convenience in administering the bankruptcy 
 law. It was thought that the administration of the bank- 
 ruptcy law could not be conveniently carried out if the 
 estates were to be mixed." 
 
 Anyhow, whatever the origin of the rule may have been, 
 it has not only been well settled for a long time, but is now 
 crystallized in sect. 40, sub-sect. (3), of the Bankruptcy Act, 
 1883, in the following words (c) : 
 
 (6) (1877) 3 App. Cas. 102. 
 
 (c) Cf. Indian Contract Law, s. 262, wkicli is to the same effect. 
 
 t
 
 INSOLVENCY OF PARTNERS. 127 
 
 "In the case of partners the joint estate shall be applicable 
 in the first instance in payment of their joint debts, and the 
 separate estate of each partner shall be applicable in the 
 first instance in payment of his separate debts. If there is 
 a surplus of the separate estates it shall be dealt with as 
 part of the joint estate. If there is a surplus of the joint 
 estate it shall be dealt with as part of the respective separate 
 estates in proportion to the right and interest of each 
 partner in the joint estate." 
 
 Moreover, the rule is not confined to cases of distribution 
 under a bankruptcy, but equally applies to the case of the 
 administration of the assets of deceased partners (d). 
 
 But although the broad general principle is that above 
 stated, it is subject, like most legal principles, to 
 exceptions, viz. : 
 
 (1.) Where there is no joint estate, the joint and separate 
 creditors prove against the separate estate pari 
 passu. 
 (2.) Where a person has been defrauded by the partners, 
 or by any of them under such circumstances as 
 render the firm liable, he may, at his election, 
 prove either against the separate estate of the part- 
 ners who were privy to the fraud, or against the 
 joint estate. 
 (3.) Where a creditor of the firm has also a distinct 
 contract for the same debt with the individual 
 partners, or some of them, he may prove both 
 against the firm estate and the separate estate. 
 (4.) Where a creditor of the firm has obtained an order 
 adjudicating one of the partners a bankrupt, there 
 is authority for saying that he may prove in 
 
 {d) Ridgwuyy. Clare, (1854) 19 Bea. Ill; Lodgtv. Prichard,{\mi) 
 1 De G. J. & S. 610 ; Judicature Act, 1875, s. 10.
 
 128 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 competition with the separate creditors of such 
 bankrupt. 
 (5.) Where a partner has fraudulently converted to his 
 own use part of the property of the firm, and his 
 fraud has not been ratified, the firm's trustee in 
 bankruptcy may prove for the value of such pro- 
 perty in competition with his separate creditors. 
 And, in the converse case, the trustee in bank- 
 ruptcy of the separate creditor may prove against 
 the joint estate. 
 (6.) "Where one or more partners have carried on a 
 distinct trade, with a distinct capital, in respect 
 of which they have become either debtors or 
 creditors to the firm in the ordinarj^ way of trade, 
 the respective trustees in bankruptcy can prove 
 as if the two concerns were composed of distinct 
 individuals. 
 (1.) With regard to the first of these exceptions, it is not 
 easy to see the reason for it. It would seem, however, 
 from the judgment of Lord Lovghhorougli in Ex parte 
 Elton (e), that the reason for the main rule being, that 
 where there are two funds available for distribution among 
 creditors, a creditor will not be allowed to attach himself to 
 one, to the prejudice of those who have no other fund, it 
 follows that where there is only one fund, the whole 
 foundation of the main rule is gone, and, consequently, 
 that all the creditors (whether joint or separate) can prove 
 pari passu against that fund. This reasoning, however, 
 does not seem to be very conclusive, particularly as it has 
 always been held that the existence of even a scintilla of 
 joint estate (such as ofiice furniture) is enough to negative 
 the exception. However it appears to be still law (/). 
 (e) (1796) 3 Ves. 240. (/) Bankruptcy Act, 1883, s. 37 (1).
 
 INSOLVENCY OF PARTNERS. 129 
 
 (2.) The second exception seems to rest on the principle 
 that the fraud is the fraud of the individual partners, who 
 concocted it, and that their several liability is not abridged 
 because the firm happens also to be responsible; a principle 
 which, it is apprehended, is also the foundation of the rule 
 that the ordinary liability of partners for torts is joint and 
 several. It is true, no doubt, that demands in the nature 
 of unliquidated damages, arising otherwise than by reason 
 of a contract, promise, or breach of trust, are not provable 
 in bankruptcy {g) ; but where a wrongdoer has cheated 
 another out of property which cannot be traced and 
 restored, Courts of Equity have, for a long period, allowed 
 the latter to prove for the value as an equitable debt (Ii). 
 As James, L.J., said, in Ex parte Adamson (i) : " Some 
 doubt was suggested in the course of the argument whether 
 proof could be made in bankruptcy for a fraud, any more 
 than for other torts. A great many cases — if cases were 
 necessary — show that proofs have been allowed in bank- 
 ruptcy for fraud, and on the ground of fraud only, where, 
 on a mere breach of contract, they would not have been 
 admitted. A notable instance of this is in the proof 
 allowed in Read v. Bailey {k), by the joint estate against 
 the separate estate, for moneys fraudulently abstracted 
 from the partnership assets, a decision which only 
 followed a whole line of recognised authorities. But, in 
 truth, the proof is not for the fraud or for the tort. The 
 Court of Chancery never entertained a suit for damages 
 occasioned by fraudulent conduct or a breach of trust. 
 The suit was always for an equitable debt, or liability in 
 
 {g) Bankruptcy Act, 1883, s. 37(1). 
 
 {h) See Moore v. Kniyht, [1891] 1 Cli. 547. 
 
 (?) (1878) 8 Ch. D. 807, 820. 
 
 (k) (1877) 3 A. C. 94. 
 
 L.P. K
 
 130 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 the nature of debt. It was a suit for the restitution of 
 the actual money or thing, or value of the thing, of which 
 the cheated party has been cheated. If a man had been 
 defrauded of any money or property, and the cheater after- 
 wards became bankrupt, if the money could be earmarked, 
 or if the thing could be found in specie or traced, the 
 assignees, or trustees, were made to give it back ; or, if it 
 could not he earmarked or traced, then proof was allowed 
 against the estate. It is a mere accident, but a frequent 
 accident, that the fraud is connected with a partnership ; 
 but where it is, the result often is that the partnership, in 
 its joint character, is liable for it. . . . But this right to 
 go against the partnership assets did not relieve the guilty 
 party, or parties, of his or their personal and separate 
 liability by reason of his or their actual participation. If, 
 in a partnership of A., B., C, and D., and in a partnership 
 matter, A. and B. shared in a fraud upon a customer, they 
 would be severally liable, and the joint estate would be 
 liable to make restitution, but not the separate estates of 
 C. and D. ; and the rule about joint and several liability 
 must be read with this qualification. But, so qualified, the 
 rule is a well-established rule." The party defrauded is 
 not, however, entitled to go against the joint estate and 
 the separate estate, but has to make his election. 
 
 (3.) The third exception to the general rule (that the joint 
 creditors can only prove against the joint estate, and the 
 separate creditors against the separate estate) occurs where 
 a creditor has distinct contracts for the same debts, with the 
 firm as a firm, and with each of the partners individually. 
 In such cases (herein difl'ering from the last exception), he 
 can, now, prove against and receive dividends from both 
 estates, so long, of course, as he does not get more than 
 20s. in the £. This right is statutory, being given by
 
 INSOLVENCY OF PARTNERS. 131 
 
 Article 18 of Schedule 2 to the Bankruptcy Act, 1883 
 (which is merely a re-enactment of the former statute) in 
 the following words : 
 
 '' If a debtor was at the date of the receiving order liable 
 in respect of distinct contracts as a member of two or more 
 distinct firms, or as a sole contractor and also as a member 
 of a firm, the circumstance that the firms are in whole or in 
 part composed of the same individuals, or that the sole 
 contractor is also one of the joint contractors, shall not pre- 
 vent proof in respect of the contracts, against the properties 
 respectively liable on the contracts." 
 
 The case of Ex parte Honey (/) is a good instance of this 
 exception. There, a joint and several promissory note was 
 signed (1) by two members of a firm ; (2) by the firm as 
 such ; and (3) by several other persons. The firm having 
 become bankrupt, the holder of the note carried in proofs 
 against the joint estate of the firm, and also against the 
 separate estates of the two partners who had signed the note ; 
 and it was held that the holder was entitled to prove against, 
 and receive dividends from, all three estates. 
 
 In giving judgment, Mellish, L.J., said: "It appears to 
 me, that a joint and several promissory note, though it is 
 one instrument, contains both a joint contract, and distinct 
 separate contracts, by the several makers. It seems to me, 
 therefore, to be within the plain meaning of the words of 
 this section; and the only conclusion I can draw is, that it 
 was the intention of the legislature that, wherever there was 
 a joint and several contract, and joint and several estates 
 being administered in bankruptcy, the creditor should be 
 entitled to prove against both the joint and separate 
 estates." 
 
 (?) (1871) 7 Ch. App. 178. 
 
 K 2
 
 182 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 (4.) The next exception is somewhat peculiar, viz., that 
 where a joint creditor of the firm takes efifective proceedings 
 in bankruptcy against one of the partners, he is allowed to 
 prove against the separate estate of that partner in competi- 
 tion with the separate creditors. The reason given in the 
 authorities, is, that it would be inequitable for the separate 
 creditors to take advantage of the bankruptcy proceedings, 
 and yet to exclude the author of them. It is, however, 
 questionable whether this exception is not now obsolete (m). 
 
 (5.) The reason for the fifth exception to the rule is 
 stated very clearly, by Lord Blackburn, in Ready. Bailey (w), 
 as follows : " Upon that rule (that is, the main rule as to 
 joint and separate estates), there has been established an 
 exception. The first case, which has been cited in which 
 the exception is distinctly referred to, is Fordyces Case (o) in 
 1774, rather more than one hundred and thirty years ago. In 
 that case, the decision was, that where the firm was not a 
 creditor of a partner in consequence of a contract made 
 between the firm and the partner, but was so in consequence 
 of a fraudulent conversion by the partner, the firm might 
 prove against the separate estate in competition with the 
 creditors of the individual partner. Now, let us see what 
 the reason for thus departing from the rule was. The rule 
 was, I have no doubt, founded partly upon the notion that 
 otherwise there would have been a tendency to fraud, and 
 that pretended contracts would be made with a view to a 
 fraud upon the bankruptcy laws, if a firm were permitted to 
 prove against the separate estate of a partner. That reason, 
 of course, would not apply where there was no contract at 
 all, and where the right to claim arose not from a contract, 
 
 (m) Eobson's Bankruptcy, 7th ed. 723, note{l). 
 
 [n) (1877) 3 App. Cas. at p. 102. 
 
 (o) (1774) 1 Cooke, B. L. 662, before Lord Bathurst.
 
 INSOLVENCY OF PARTNERS. 133 
 
 but from a wrong — from a tort, a matter in which one of 
 parties was no sharer in the transaction at all. The other 
 reason, — the reason which seems to have been relied upon 
 by Lord Thurloiv, namely, that there would be difficulty in 
 following it out, and that there might be a practical incon- 
 venience in checking the accounts, — would probably not 
 apply in a case of that sort, which was a purely exceptional 
 case. However that might be, in 1774, there was this 
 exception brought in, that although the joint estate could 
 not prove against the separate estate in competition with 
 the separate creditors, nor the separate estate prove against 
 the joint estate in competition with the joint creditors in 
 cases where the liability ought to be proved arose from the 
 contract, yet where it did not so arise, it might." 
 
 (6.) The sixth exception is stated in the head note to the 
 case oi Ex parte Cook{p), as follows : "Where one member 
 of a firm who carries on business on his separate account, 
 supplies goods to the firm, and a commission issues against 
 the firm [i.e., the firm becomes bankrupt], the debt is 
 provable ; but not so for money advanced." The principle 
 on which the exception turns, seems to be that, as between 
 the creditors of two distinct trades, it is for the benefit of 
 commerce to consider the trades as distinct, and to neglect 
 the fact that some or one of the partners in one, may also 
 be partners in, or the sole owner of, the other. As Lord 
 Eldon, however, remarked in Ex parte Sillitoe (q), the 
 question what is a " dealing in a distinct trade," is always 
 to be looked at with great care. Thus, where a banker is 
 also partner in a firm of merchants who keep their current 
 account with him, his creditors cannot prove for the over- 
 draft of the mercantile firm in the latter's bankruptcy ; for 
 
 {p) (1831) Mont. 228. 
 
 Iq) (1824) 1 Gly. & J. 383.
 
 134 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 the true nature of such a case is not that of two distinct 
 trades, but of one partner financing the firm (r). 
 
 (2.) Proofs by Solvent Partners against the 
 Estate of Bankrupt Co-partner. 
 
 So much for the law with regard to the administration 
 of the joint and the separate estates of the partners, where 
 all the partners are bankrupt. Let us now turn to the 
 consideration of the case, where one or more of the partners 
 is solvent, so that, even although the assets of the partner- 
 ship may be insufficient to pay the liabilities, the firm is 
 saved from immediate bankruptcy at all events, by the 
 solvent partner personally keeping down current liabilities 
 — not necessarily paying them all off, because, having 
 regard to credit, and to the fact that there might be 
 unmatured negotiable instruments outstanding, that might 
 be unnecessary — but paying the current liabilities as they 
 arise. In such a case, what are the rights of such a 
 solvent partner against the separate estates of the bankrupt 
 partners ? Can he prove for the sum which they ought to 
 have contributed to the partnership losses (including losses 
 of capital), in competition with their separate creditors ; 
 or is he in the same position with the creditors of the firm, 
 for whose debts he is personally responsible, and who, 
 under the general rule which we have been considering, 
 are forbidden to prove in competition with the separate 
 creditors of his bankrupt co-partners ? 
 
 Now, there is a broad general rule, that a partner cannot 
 prove against either the joint estate, or the separate estate 
 of his co-partner, until all the partnership liabilities are 
 discharged. But this rule was not invented for the benefit 
 
 (r) Exp. Maude, (1867) 2 Ch. App. 550. 
 
 i
 
 INSOLVENCY OF PARTNERS. 135 
 
 of the separate creditors, to whom the solvent partner owes 
 no duty, but for the benefit of the joint creditors who have 
 not only a primary claim on the joint estate, but also a 
 contingent claim on the separate estates, in the event of 
 there being a surplus after the separate creditors have 
 received 20s. in the £. If, however, there are no joint 
 creditors — if, in other words, all the joint creditors have 
 been paid by the solvent partner, or, if the separate estate 
 is clearly insolvent (s), so that the joint creditors cannot 
 possibly resort to it, — then the reason of the rule is 
 inapplicable, and cessante ratione cessat lex. Therefore, in 
 such a case, the solvent partner (in addition to his lien on 
 the partnership assets (t) is allowed to rank as a creditor 
 against the separate estate of the insolvent, in competition 
 with the separate creditors, of whom he is in fact one (u). 
 At first sight, this seems open to criticism, for, if the joint 
 creditors cannot compete with the separate ones, why 
 should the solvent partner who pays them off, be in 
 any better position. Ought he not merely to stand in 
 their shoes by way of subrogation? Probably the true 
 answer to such criticism is, that the doctrine of subroga- 
 tion does not apply. There are no longer any joint 
 creditors. The true relation of the parties is that of 
 debtor and creditor, of a claim by a del credere agent 
 against his bankrupt principal, partly for moneys paid for 
 him, partly for moneys due to the agent under the contract 
 of agency. The rule, however, depends entirely on there 
 being no outstanding joint liabilities, or, in the alternative, 
 
 (5) jReZet^e?/, (1865)4 De G.J, &S.551; «a;j9.>S/ieen,(1877) 6 Ch. D. 235. 
 
 {t) Exp. Poiuell, (1896) 75 L. T. 143. 
 
 (m) Exp. Watson, (1819) 4 Mad. 477; exp. Carpeyiter, {182G) Mont. & 
 McA. 1 ; Wood v. Thdgaon, (1813) 2 M. & S. 196; exp. Plowden, (1837) 
 3 M. & A. 402 ; re Head, [1894] 1 Q. B. 638.
 
 136 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 on the separate estate being clearly insolvent ; and where 
 the firm's debts have not been fully paid, and it is doubtful 
 whether the separate estate will not pay 20s. in the £ to 
 the separate creditors, no partner can prove against the 
 separate estate of the bankrupt, except in three cases, viz. ; 
 (1.) Where the claim arises out of a fraud committed by 
 
 the bankrupt which has not been condoned. 
 (2.) Where the bankrupt, either alone or with others, 
 
 has carried on a distinct trade, which, in the 
 
 ordinary course of business, has become indebted 
 
 to the partnership ; and 
 (3.) Where a partner has been discharged from liability 
 
 for the joint debts, and has subsequently become 
 
 a creditor of the firm, in which case he may prove 
 
 against the firm's assets. 
 Let us examine these three exceptions a little more 
 closely. With regard to the first, if Smith fraudulently 
 induces Jones to enter into partnership with him, and to 
 pay him a premium for the privilege, then, upon Smith 
 becoming bankrupt, Jones may prove against his separate 
 estate for the return of the premium, notwithstanding that 
 the debts of the firm remain unpaid (x). It is not easy to 
 understand the principle of this exception, as the defrauded 
 partner is as much competing with his own creditors 
 {i.e., the creditors of the firm), as if his claim arose 
 ex contractu ; and as the creditors of the firm were no 
 parties to the fraud, it is difficult to see why they should 
 be made to sufi'er. However, the principle appears to be 
 that the equity which the partners owe to the joint creditors 
 not to compete with them, only applies to debts owing 
 
 (rr) Exp. Lodge dk Feudal, (1790) 1 Ves. Jim. 166; Hamil v. Stokes, 
 (1817) 4 Pr. 161; Bary v. Allen, (1844) 1 Coll. 589; exp. Harris, (1813) 
 2 Y. & B. 210.
 
 INSOLVENCY OF PARTNERS. 137 
 
 between the partners mter se, and not to claims in the 
 nature of fraud or breach of trust. 
 
 Indeed, the same principle applies where the claimant is 
 solvent, as where the claimant is insolvent, and the ques- 
 tion arises between his creditors and the firm's creditors. 
 And if, in the latter case (as I have already shown), it is 
 just that the separate creditors of a defrauded partner 
 should be able to prove against the separate estate of the 
 party guilty of the fraud, so as to restore to his separate 
 estate the amount which has been fraudulently withdrawn 
 from it, it is equally just where the defrauded one 
 remains solvent. 
 
 It is said that the case holds equally good where the 
 firm, as such, is bankrupt, in which case a defrauded 
 member of the firm may prove against the joint estate. 
 It is, however, difficult to see how a partner can remain 
 solvent when the firm is bankrupt, as the latter event seems 
 to presuppose that the partners cannot jointly and severally 
 meet the firm's liabilities. Such cases, therefore, always (or 
 nearly always) result in disputes between the respective 
 creditors of the joint estate and the several separate estates, 
 which were considered in the first part of this lecture. 
 
 With regard to the second exception, viz., that a solvent 
 partner may prove against the separate estate of a bank- 
 rupt partner, where the latter has carried on privately a 
 distinct and separate trade, and the debt has been incurred 
 in the ordinary course of the business of that trade, the 
 principle has already been discussed in considering the 
 respective rights of the creditors of such distinct firms 
 when both are bankrupt. 
 
 The third and last exception, viz., that where one of the 
 partners has been discharged from liability for the firm's 
 debts, he may prove for a debt which afterwards becomes
 
 138 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 due to him from the firm, is somewhat peculiar. For 
 instance, a partner in a bankrupt firm, obtains his dis- 
 charge, and afterwards becomes the indorsee of bills of 
 exchange on which the firm is liable. The fact that he 
 was a member of the firm, does not preclude him from 
 proving for the amount of the bills, his right to which 
 only accrued after his discharge {y). It would seem that 
 the same principle would, a fortiori, apply, where the bills 
 were accepted by another partner and not by the firm. 
 
 It need scarcely be pointed out, that where a person has 
 allowed himself to be " held out " as a partner, then, in 
 addition to becoming liable to the creditors of the concern, 
 he is also in the same position as an actual partner, with 
 regard to proving against the joint estate or separate 
 estates {z). 
 
 The rule that partners cannot prove either against the 
 joint or separate estates, so long as there are partnership 
 liabilities outstanding, has been extended to the case of a 
 person who lends money to a trade or a firm upon the 
 terms of receiving a share of the profits, or interest the rate 
 of which varies with the profits ; and also to the case of a 
 person who sells the goodwill of a business in consideration 
 of a share of the profits. In such cases, although the 
 lender or the vendor of the goodwill (as the case may be) is 
 not a partner, yet, by sect. 3 of the Act of 1890, he is not 
 to be entitled to recover anything in respect of his loan, 
 or his share of profits, in the event of the bankruptcy or 
 insolvency of the borrower, or purchaser of the goodwill, 
 until all the claims of the other creditors for valuable 
 
 [y) Exp. Atkins, (1820) Buck, 479. 
 
 (z) Exp. Hayman, (1878) 8 Ch. D. 11. But cf. exp. Sheen, (1877) 6 
 Cla. D. 235, where the "holding out" was onljqud particular creditors, 
 and the decision was contra.
 
 INSOLVENCY OF PARTNERS. 139 
 
 consideration in money, or money's worth, have been 
 satisfied (a). 
 
 At first sight, that section seems to make the lender's 
 security entirely dependent on the success of the business, 
 and thereby to practically make him liable for its losses to 
 the extent of his loan, and, in fact, to place him somewhat 
 in the position of a shareholder in a limited company. 
 However, that is not the true construction of the section. 
 All that it means is, that he cannot rank with the other 
 creditors as a mere creditor ; but if he has been wise 
 enough to get a collateral security for his loan, then 
 the section in no way prejudicially affects that collateral 
 security. For instance, in Badeley v. The Consolidated 
 Bank(b), the lender took, by way of collateral security for 
 his loan, certain shares and debentures belonging to the 
 borrower. It was urged that, even if there was no 
 partnership created between lender and borrower, yet, 
 under the 5th sect, of Bovill's Act, the lender could not 
 recover his loan until all the other creditors were paid, 
 even by realising the shares and debentures which he held 
 as security. The court were, however, clearly of opinion 
 that he could ; and Lord Lindley said: — "Supposing that 
 a person lends money upon mortgage of real estate, and 
 stipulates that he is to have a share in the profits of some 
 business, is it to be supposed that that mortgagee could 
 not bring an ejectment to recover his security because of 
 the 5th sect, of Bovill's Act ? It is too absurd. That is 
 not recovering his principal and interest. It is very true 
 that, unless he gets his security, he may lose the fund out 
 
 (a) Exp. Jones, Young re [1896] 2 Q. B. 484, and re Fort, [1897] 
 2 Q. B. 495 (where no agreement in writing). But c/. re Vinct, 
 [1892] 2 Q. B. 478. 
 
 (6) (1888) 38 Ch. D. 238 ; and Bee also exp. Sheil, (1877) 4 Ch. D. 789.
 
 140 PRINCIPLES OF THE LAW OF PARTNERSHIP. 
 
 of which it is to be repaid, but such a case as that is not 
 within the section at all." It appears, therefore, that all 
 that is meant by the 5th section is that the lender loses 
 his right of proof, but does not lose any security which 
 he may possess.
 
 APPENDIX. 
 
 THE PARTNBESHIP ACT, 1890. 
 
 An Act to declare and amend the Law of Partnership. 
 
 [14th August, 1890.] 
 
 Be it enacted by the Queen's most Excellent Majesty, by and 
 with the advice and consent of the Lords Spiritual and Temporal, 
 and Commons, in this present Parliament assembled, and by the 
 authority of the same, as follows : 
 
 Nature of Partnership. 
 
 1. Definition of partnership. — (1.) Partnership is the relation 
 which subsists between persons carrying on a business in common 
 with a view of profit. 
 
 (2.) But the relation between members of any company or 
 association which is — 
 
 {a.) Registered as a company under the Companies Act, 1862, 
 
 or any other Act of Parliament for the time being in 
 
 force and relating to the registration of joint stock 
 
 companies ; or 
 (J.) Formed or incorporated by or in pursuance of any other 
 
 Act of Parliament or letters patent, or Royal Charter ; or 
 (c.) A company engaged in working mines within and subject 
 
 to the jurisdiction of the Stannaries : 
 is not a partnership within the meaning of this Act. 
 
 2. Rules for determiimuj existence of partnership. — In deter- 
 mining whether a partnership does or does not exist, regard shall 
 be had to the following rules : 
 
 (1.) Joint tenancy, tenancy in common, joint property, com- 
 mon property, or part ownership does not of itself create 
 a partnership as to anything so held or owned, whether 
 the tenants or owners do or do not share any profits made 
 by the use thereof. 
 
 (2.) The sliaring of gross returns does not of itself create 
 a partnership, wliether the persons sharing such returns
 
 142 APPENDIX. 
 
 have or hare not a joint or common right or interest in 
 any property from wiiich or from the use of which the 
 returns are derived. 
 (3.) The receipt by a person of a share of the profits of a 
 business is prima facie evidence that he is a partner in 
 the business, but the receipt of such a share, or of a 
 payment contingent on or varying with the profits of 
 a business, does not of itself make him a partner in the 
 business ; and in particular — 
 
 (a.) The receipt by a person of a debt or other liqui- 
 dated amount by instalments or otherwise out of 
 the accruing profits of a business does not of 
 itself make him a partner in the business or 
 liable as such : 
 (Z*.) A contract for the remuneration of a servant or 
 agent of a person engaged in a business by a 
 share of the profits of the business does not of 
 itself make the servant or agent a partner in 
 the business or liable as such : 
 (c.) A person being the widow or child of a deceased 
 partner, and receiving by way of annuity a 
 portion of the profits made in the business in 
 which the deceased person was a partner, is not 
 by reason only of such receipt a partner in the 
 business or liable as such : 
 {d.) The advance of money by way of loan to a person 
 engaged or about to engage in any business on a 
 contract with that person that the lender shall 
 receive a rate of interest varying with the profits, 
 or shall receive a share of the })rofits arising from 
 carrying on the business, does not of itself make 
 the lender a partner with the person or persons 
 carrying on the business or liable as such. Pro- 
 vided that the contract is in writing, and signed 
 by or on behalf of all the parties thereto ; 
 (e.) A person receiving by way of annuity or other- 
 wise a portion of the profits of a business in 
 consideration of the sale by him of the goodwill 
 of the business is not by reason only of such 
 receipt a partner in the business or liable as such. 
 3. Postponement of rights of person lending or selling in con- 
 sideration of share of profits in case of insolvency. — In the event 
 of any person to whom money has been advanced by way of loan 
 upon such a contract as is mentioned in the last foregoing section, 
 or of any buyer of a goodwill in consideration of a share of the
 
 APPENDIX. 143 
 
 profits of the business, being adjudged a bankrupt, entering into 
 an arrangement to pay his creditors less than twenty shillings in 
 the pound, or dying in insolvent circumstances, the lender of the 
 loan shall not be entitled to recover anything in respect of his 
 loan, and the seller of the goodwill shall not be entitled to recover 
 anything in respect of the share of profits contracted for, until 
 the claims of the other creditors of the borrower or buyer for 
 valuable consideration in money or money's worth have been 
 satisfied. 
 
 4. Meaning of firm. — (1.) Persons who have entered into 
 partnership with one another are for the purposes of this Act 
 called collectively a firm, and the name under which their 
 business is carried on is called the firm-name. 
 
 (2.) In Scotland a firm is a legal person distinct from the 
 partners of whom it is composed, but an individual partner may 
 be charged on a decree or diligence directed against the firm, and 
 on payment of the debts is entitled to relief pro rata from the 
 firm and its other members. 
 
 Relations op Paetners to Persons dealing with them. 
 
 5. Poiver of partner to hind the firm. — Every partner is an 
 agent of the firm and his other partners for the purpose of the 
 business of the partnership ; and the acts of every partner who 
 does any act for carrying on in the usual way business of the kind 
 carried on by the firm of which he is a member bind the firm and 
 his partners, unless the partner so acting has in fact no authority 
 to act for the firm in the particular matter, and the person with 
 whom he is dealing either knows that he has no authority, or does 
 not know or believe him to be a partner. 
 
 6. Partners bound by acts on behalf of firm. — An act or 
 instrument relating to the business of the firm and done or 
 executed in the firm-name, or in any other manner showing an 
 intention to bind the firm, by any person thereto authorised, 
 whether a partner or not, is binding on the firm and all the 
 partners. 
 
 Provided that this section shall not aflFect any general rule of 
 law relating to the execution of deeds or negotiable instruments. 
 
 7. Partner using credit of firm for private purposes. — Where one 
 partner pledges the credit of the firm for a purpose apparently not 
 connected with the firm's ordinary course of business, the firm is 
 not bound, unless he is in fact specially authorised by the other 
 partners ; but this section does not affect any personal liability 
 incurred by an individual partner. 
 
 8. Effect of notice that firm will not be bound by acts of partner, 
 — If it has been agreed between the partners that any restriction
 
 144 APPENDIX. 
 
 shall be placed on the power of any one or more of them to bind 
 the firm, no act done in contravention of the agreement is 
 binding on the firm with respect to persons having notice of the 
 agreement. 
 
 9. Liabilibj of partners. — Every partner in a firm is liable 
 jointly with the other partners, and in Scotland severally also, 
 for all debts and obligations of the firm incurred while he is 
 a partner ; and after his death his estate is also severally liable 
 in a due course of administration for such debts and obligations, 
 so far as they remain unsatisfied, but subject in England or Ireland 
 to the prior payment of his separate debts. 
 
 10. Liabilify of the firm for tvrongs. — "Where, by any wrongful 
 act or omission of any partner acting in the ordinary course of 
 the business of the firm, or with the authority of his co-partners, 
 loss or injury is caused to any person not being a partner in the 
 firm, or any penalty is incurred, the firm is liable therefor to the 
 same extent as the partner so acting or omitting to act. 
 
 11. Misap'ptication of money or property received for or in 
 custody of the firm. — In the following cases ; namely — 
 
 (a.) Where one partner acting within the scope of his apparent 
 authority receives the money or property of a third person 
 and misapplies it ; and 
 
 (ft.) Where a firm in the course of its business receives money 
 or property of a third person, and the money or property 
 so received is misapplied by one or more of the partners 
 while it is in the custody of the firm ; 
 the firm is liable to make good the loss. 
 
 12. Liability for tvrongs joint and several. — Every partner is 
 liable jointly with his co-partners and also severally for every- 
 thing for which the firm while he is a partner therein becomes 
 liable under either of the two last preceding sections. 
 
 13. Improper employment of trust-property for partnership pur- 
 poses. — If a partner, being a trustee, improperly employs trnst- 
 property in the business or on the account of the partnership, 
 no other partner is liable for the trust-property to the persons 
 beneficially interested therein : 
 
 Provided as follows : — 
 
 (1.) This section shall not affect any liability incurred by any 
 
 partner by reason of his having notice of a breach of 
 
 trust ; and 
 (2.) Nothing in this section shall prevent trust money from 
 
 being followed and recovered from the firm if still in its 
 
 possession or under its control. 
 a. Perso7is liable by "■ holding out.'" — (1.) Every one who by 
 words spoken or written or by conduct represents himself, or who
 
 APPENDIX. 145 
 
 knowingly sufiPers himself to be represented, as a partner in a par- 
 ticular firm, is liable as a partner to anyone who has on the faith 
 of any such representation given credit to the firm, whether the 
 representation has or has not been made or communicated to the 
 person so giving credit by or with the knowledge of the apparent 
 partner making the representation or suffering it to be made. 
 
 (2.) Provided that where after a partner's death the partnership 
 business is continued in the old firm-name, the continued use of 
 that name or of the deceased partner's name as part thereof shall 
 not of itself make his executors or administrators' estate or effects 
 liable for any partnership debts contracted after his death. 
 
 15. Admissions and representations of partners, — An admission 
 or representation made by any partner concerning the partnership 
 affairs, and in the ordinary course of its business, is evidence 
 against the firm. 
 
 16. Notice to acting partner to le notice to the firm. — Notice to 
 any partner who habitually acts in the partnership business of any 
 matter relating to partnership affairs operates as notice to the 
 firm, except in the case of a fraud on the firm committed by or 
 with the consent of that partner. 
 
 17. Liabilities of incoming and outgoing partners. — (1.) A 
 person who is admitted as a partner into an existing firm does 
 not thereby become liable to the creditors of the firm for anything 
 done before he became a partner. 
 
 (2.) A partner who retires from a firm does not thereby cease 
 to be liable for partnership debts or obligations incurred before 
 his retirement. 
 
 (3.) A retiring partner may be discharged from any existing 
 liabilities, by an agreement to that effect between himself and the 
 members of the firm as newly constituted and the creditors, and 
 this agreement may be either express or inferred as a fact from 
 the course of dealing between the creditors and the firm as newly 
 constituted. 
 
 18. Revocation of continuing guaranty by change in firm. — A 
 continuing guaranty or cautionary obligation given either to a 
 firm or to a third person in respect of the transactions of a firm is, 
 in the absence of agreement to the contrary, revoked as to future 
 transactions by any change in the constitution of the firm to which, 
 or of the firm in respect of the transactions of which, the guaranty 
 or obligation was given. 
 
 Relations of Partners to one another. 
 
 19. Variation by consent of terms of partnership. — The mutual 
 rights and duties of partners, whether ascertained by agreement 
 or defined by this Act may be varied by the consent of all the 
 
 L.P. L
 
 146 APPENDIX. 
 
 partners, and such consent may be either express or inferred from 
 a course of dealing. 
 
 20. PartnersJdp property. — (1.) All property and rights and 
 interests in property originally brought into the partnership stock 
 or acquired, whether by purchase or otherwise, on account of the 
 firm, or for the purposes and in the course of the partnership 
 business, are called in this Act partnership property, and must be 
 held and applied by the partners exclusively for the purposes of 
 the partnership and in accordance with the partnership agreement. 
 
 (2.) Provided that the legal estate or interest in any land, or in 
 Scotland the title to and interest in any heritable estate, which 
 belongs to the partnership shall devolve according to the nature 
 and tenure thereof, and the general rules of law thereto applicable, 
 but in trust, so far as necessary, for the persons beneficially 
 interested in the land under this section. 
 
 (3.) Where co-owners of an estate or interest in any land, or in 
 Scotland of any heritable estate, not being itself partnership 
 property, are partners as to profits made by the use of that land 
 or estate, and purchase other land or estate out of the profits to 
 be used in like manner, the land or estate so purchased belongs to 
 them, in the absence of an agreement to the contrary, not as 
 partners, but as co-owners for the same respective estates and 
 interests as are held by them in the land or estate first mentioned 
 at the date of the purchase. 
 
 21. Property bought toith partnei'ship money. — Unless the con- 
 trary intention appears, property bought with money belonging 
 to the firm is deemed to have been bought on account of the firm. 
 
 22. Convermn into personal estate of land held as partnership 
 property. — Where land or any heritable interest therein has become 
 partnership property, it shall, unless the contrary intention appears, 
 be treated as between the partners (including the representatives 
 of a deceased partner), and also as between the heirs of a deceased 
 partner and his executors or administrators, as personal or 
 moveable and not real or heritable estate. 
 
 23. Procedure against partnership p'operty for apartner^s separate 
 judgment debt. — (1.) After the commencement of this Act a 
 writ of execution shall not issue against any partnership property 
 except on a judgment against the firm. 
 
 (2.) The High Court, or a judge thereof, or the Chancery Court 
 of the county palatine of Lancaster, or a county court, may, on 
 the application by summons of any judgment creditor of a partner, 
 make an order charging that partner's interest in the partnership 
 property and profits with payment of the amount of the judgment 
 debt and interest thereon, and may by the same or a subsequent 
 order appoint a receiver of that partner's share of profits (whether
 
 APPENDIX. 147 
 
 already declared or accruing), and of any other money which may 
 be coming to him in respect of the partnership, and direct all 
 accounts and inquiries, and give all other orders and directions 
 which might have been directed or given if the charge had been 
 made in favour of the judgment creditor by the partner, or which 
 the circumstances of the case may require. 
 
 (3.) The other partner or partners shall be at liberty at any 
 time to redeem the interest charged, or, in case of a sale being 
 directed, to purchase the same. 
 
 (4.) This section shall apply in the case of a cost-book company 
 as if the company were a partnership within the meaning of this 
 Act. 
 
 (5.) This section shall not apply to Scotland. 
 2i. Rides as to interests and duties of partners subject to special 
 agreement. — The interests of partners in the partnership property 
 and their rights and duties in relation to the partnership shall be 
 determined, subject to any agreement express or implied between 
 the partners, by the following rules : 
 
 (1.) All the partners are entitled to share equally in the capital 
 and profits of the business, and must contribute equally 
 towards the losses whether of capital or otherwise sustained 
 by the firm. 
 (2.) The firm must indemnify every partner in respect of pay- 
 ments made and personal liabilities incurred by him — 
 (a.) In the ordinary and proper conduct of the business 
 
 of the firm ; or, 
 (J.) In or about anything necessarily done for the 
 preservation of the business or property of the 
 firm. 
 (3.) A partner making, for the purpose of the partnership, any 
 actual payment or advance beyond the amount of capital 
 which he has agreed to subscribe, is entitled to interest at 
 the rate of five per cent, per annum from the date of the 
 payment or advance. 
 (4.) A partner is not entitled, before the ascertainment of profits, 
 
 to interest on the capital subscribed by him. 
 (5.) Every partner may take part in the management of the 
 
 partnership business. 
 (6.) No partner shall be entitled to remuneration for acting in 
 
 the partnership business. 
 (7.) No person may be introduced as a partner without the 
 
 consent of all existing partners. 
 (8.) Any difference arising as to ordinary matters connected 
 with the partnership business may be decided by a 
 majority of the partners, but no change may be made in 
 
 l2
 
 148 APPENDIX. 
 
 the nature of the partnership business without the consent 
 of all existing partners. 
 (9.) The partnership books are to be kept at the place of 
 business of the partnership (or the principal place, if 
 there is more than one), and every partner may, when he 
 thinks fit, have access to and inspect and copy any of them. 
 
 25. Expulsion of partner. — No majority of the partners can 
 expel any partner unless a power to do so has been conferred by 
 express agreement between the partners. 
 
 26. Retirement from partnership at ivill. — (1.) Where no fixed 
 term has been agreed upon for the duration of the partnership, any 
 partner may determine the partnership at any time on giving notice 
 of his intention so to do to all the other partners. 
 
 (2.) Where the partnership has originally been constituted by 
 deed, a notice in writing, signed by the partner giving it, shall be 
 sufficient for this purpose. 
 
 27. Where partnership for term is continued over, continu- 
 ance on old terms presumed. — (1.) Where a partnership entered 
 into for a fixed term is continued after the term has expired, and 
 without any express new agreement, the rights and duties of the 
 partners remain the same as they were at the expiration of the 
 term, so far as is consistent with the incidents of a partnership at 
 will. 
 
 (2.) A continuance of the business by the partners or such of 
 them as habitually acted therein during the term, without any 
 settlement or liquidation of the partnership affairs, is presumed to 
 be a continuance of the partnership. 
 
 28. Duty of partners to render accounts, ^c. — Partners are bound 
 to render true accounts and full information of all things affecting 
 the partnership to any partner or his legal representatives. 
 
 29. Accountability/ of partn&rs for private profits. — (1.) Every 
 partner must account to the firm for any benefit derived by him 
 without the consent of the other partners from any transaction 
 concerning the partnership, or from any use by him of the part- 
 nership property name or business connection. 
 
 (2.) This section applies also to transactions undertaken after 
 a partnership has been dissolved by the death of a partner, and 
 before the affairs thereof have been completely wound up, either 
 by any surviving partner or by the representatives of the deceased 
 partner. 
 
 30. Duty of partner not to compete ivith firm. — If a partner, 
 without the consent of the other partners, carries on any business 
 of the same nature as and competing with that of the firm, he 
 must account for and pay over to the firm all profits made by him 
 in that business.
 
 APPENDIX. 149 
 
 31. Rights of assignee of share in partnership. — (1.) An assign- 
 ment by any partner of his share in the partnership, either 
 absokite or by way of mortgage or redeemable charge, does not, 
 as against the other partners, entitle the assignee, during the 
 continuance of the partnership, to interfere in the management 
 or administration of the partnership business or affairs, or to 
 require any accounts of the partnership transactions, or to inspect 
 the partnership books, but entitles the assignee only to receive 
 the share of profits to which the assigning partner would other- 
 wise be entitled, and the assignee must accept the account of 
 profits agreed to by the partners. 
 
 (2.) In case of a dissolution of the partnership, whether as 
 respects all the partners or as respects the assigning partner, the 
 assignee is entitled to receive the share of the partnership assets 
 to which the assigning partner is entitled as between himself and 
 the other partners, and, for the purpose of ascertaining that 
 share, to an account as from the date of the dissolution. 
 
 Dissolution of Partnership, and its Consequences. 
 
 32. Dissolution hy expiration or notice. — Subject to any agree- 
 ment between the partners, a partnership is dissolved — 
 
 («.) If entered into for a fixed term, by the expiration of that 
 
 term : 
 (J.) If entered into for a single adventure or undertaking, by 
 
 the termination of that adventure or undertaking : 
 (c.) If entered into for an undefined time, by any partner 
 giving notice to the other or others of his intention to 
 dissolve the partnership. 
 In the last-mentioned case the partnership is dissolved as from 
 the date mentioned in the notice as the date of dissolution, or, if 
 no date is so mentioned, as from the date of the communication 
 of the notice. 
 
 83. Dissolution ly hanlcruptcy, death, or charge. — (1.) Subject 
 to any agreement between the partners, every partnership is 
 dissolved as regards all the partners by the death or bankruptcy 
 of any partner. 
 
 (2.) A partnership may, at the option of the other partners, 
 be dissolved if any partner suffers his share of the partnership 
 property to be charged under this Act for his separate debt. 
 
 34. Dissolution hy illegality of partnership. — A partnership is 
 in every case dissolved by the happening of any event which 
 makes it unlawful for the business of the firm to be carried on or 
 for the members of the firm to can-y it on in partnership, 
 
 35. Dissolution hy the Court. — On application by a partner the
 
 150 APPENDIX. 
 
 Court may decree a dissolution of the partnership in any of the 
 following; cases : 
 
 {a.) When a partner is found lunatic by inquisition, or in 
 Scotland by cognition, or is shown to the satisfaction of 
 the Court to be of permanently unsound mind, in either 
 of which cases the application may be made as well on 
 behalf of that partner by his committee or next friend or 
 person having title to intervene as by any other partner : 
 
 (p.) When a partner, other than the partner suing, becomes in 
 any other way permanently incapable of performing his 
 part of the partnership contract : 
 
 (c.) When a partner, other than the partner suing, has been 
 guilty of such conduct as, in the opinion of the Court, 
 regard being had to the nature of the business, is 
 calculated to prejudicially affect the carrying on of the 
 business : 
 
 {d.) When a partner, other than the partner suing, wilfully or 
 persistently commits a breach of the partnership agree- 
 ment, or otherwise so conducts himself in matters relating 
 to the partnership business that it is not reasonably 
 practicable for the other partner or partners to carry on 
 the business in partnership with him : 
 
 (e.) When the business of the partnership can only be carried 
 on at a loss : 
 
 (/•) Whenever in any case circumstances have arisen which, in 
 the opinion of the Court, render it just and equitable 
 that the partnership be dissolved. 
 
 36. Rights of jiemons dealing with firm against apparent 
 memhers of firm. — (1.) Where a person deals with a firm after a 
 change in its constitution he is entitled to treat all apparent 
 members of the old firm as still being members of the firm until 
 he has notice of the change. 
 
 (2.) An advertisement in the London Gazette as to a firm 
 whose principal place of business is in England or Wales, in the 
 Edinburgli Gazette as to a firm whose principal place of business 
 is in Scotland, and in the Dublin Gazette as to a firm whose 
 principal place of business is in Ireland, shall be notice as to 
 persons who had not dealings with the firm before the date of the 
 dissolution or change so advertised. 
 
 (3.) The estate of a partner who dies, or who becomes bank- 
 rupt, or of a partner who, not having been known to the person 
 dealing with the firm to be a partner, retires from the firm, is not 
 liable for partnership debts contracted after the date of the death, 
 bankruptcy, or retirement respectively. 
 
 37. Right of ^Mrtners to notify dissolution . — On the dissolution
 
 APPENDIX. 151 
 
 of a partnership or retirement of a partner any partner may 
 publicly notify the same, and may require the other partner 
 or partners to concur for that purpose in all necessary or 
 proper acts, if any, which cannot be done without his or their 
 concurrence. 
 
 38. Continuing authority of partners for purposes of winding up. 
 — After the dissolution of a partnership the authority of each 
 partner to bind the firm, and the other rights and obligations of 
 the partners, continue notwithstanding the dissolution so far as 
 may be necessary to wind up the affairs of the partnership, and 
 to complete transactions begun but unfinished at the time of the 
 dissolution, but not otherwise. 
 
 Provided that the firm is in no case bound by the acts of a 
 partner who has become bankrupt ; but this proviso does not 
 aftect the liability of any person who has after the bankruptcy 
 represented himself or knowingly suffered himself to be represented 
 as a partner of the bankrupt. 
 
 39. Rights of partners as to application of partnership property. 
 — On the dissolution of a partnership every partner is entitled, as 
 against the other partners in the firm, and all persons claiming 
 through them in respect of their interests as partners, to have 
 the property of the partnership applied in payment of the debts 
 and liabilities of the firm, and to have the surplus assets after 
 such payment applied in payment of what may be due to the 
 partners respectively after deducting what may be due from them 
 as partners to the firm ; and for that purpose any partner or his 
 representatives may on the termination of the partnership apply 
 to the Court to wind up the business and affairs of the firm. 
 
 40. Ap)portionment of premium ivhere partnership prematurely 
 dissolved. — Where one partner has paid a premium to another on 
 entering into a partnership for a fixed term, and the partnership 
 is dissolved before the expiration of that term otherwise than by 
 the death of a partner, the Court may order the repayment of the 
 premium, or of such part thereof as it thinks just, having regard 
 to the terms of the partnership contract and to the length of time 
 during which the partnership has continued ; unless 
 
 {a.) the dissolution is, in the judgment of the Court, wholly or 
 chiefly due to the misconduct of the partner who paid 
 the premium, or 
 
 {h.) the partnership has been dissolved by an agreement con- 
 taining no provision for a return of any part of the 
 premium. 
 
 41. Rights where partnership dissolved for fraud or misrepresenta- 
 tio?i. — Where a partnership contract is rescinded on the ground of 
 the fraud or misrepresentation of one of the parties thereto, the
 
 152 APPENDIX. 
 
 party entitled to rescind is, without prejudice to any other right, 
 entitled — 
 
 (a.) to a lien on, or right of retention of, the surplus of the 
 
 partnership assets, after satisfying the partnership 
 
 liabilities, for any sum of money paid by him for the 
 
 purchase of a share in the partnership and for any capital 
 
 contributed by him, and is 
 (b.) to stand in the place of the creditors of the firm for any 
 > payments made by him in respect of the partnership 
 
 liabilities, and 
 (c.) to be indemnified by the person guilty of the fraud or 
 
 making the representation against all the debts and 
 
 liabilities of the firm. 
 i2. Right of outgoing partner in certain cases to share p^ofits 
 made after dissolution. — (1.) "Where any member of a firm has 
 died or otherwise ceased to be a partner, and the surviving or 
 continuing partners carry on the business of the firm with its 
 capital or assets without any final settlement of accounts as 
 between the firm and the outgoing partner or his estate, then, in 
 the absence of any agreement to the contrary, the outgoing 
 partner or his estate is entitled at the option of himself or his 
 representatives to such share of the profits made since the dissolu- 
 tion as the Court may find to be attributable to the use of his 
 share of the partnership assets, or to interest at the rate of five 
 per cent, per annum on the amount of his share of the partnership 
 assets. 
 
 (2.) Provided that where by the partnership contract an 
 option is given to surviving or continuing partners to purchase 
 the interest of a deceased or outgoing partner, and that option is 
 duly exercised, the estate of the deceased partner, or the outgoing 
 partner or his estate, as the case may be, is not entitled to any 
 further or other share of profits ; but if any partner assuming 
 to act in exercise of the option does not in all material respects 
 comply with the terms thereof, he is liable to account under the 
 foregoing provisions of this section. 
 
 43. Retiring or deceased partner'' s share tote a debt. — Subject to 
 any agreement between the partners, the amount due from sur- 
 viving or continuing partners to an outgoing partner or the 
 representatives of a deceased partner in respect of the outgoing 
 or deceased partner's share is a debt accruing at the date of the 
 dissolution or death. 
 
 54. Rule for distribution of assets on final settlement of accounts. 
 — In settling accounts between the partners after a dissolution of 
 partnership, the following rules shall, subject to any agreement, 
 be observed :
 
 APPENDIX. 153 
 
 (a.) Losses, including losses and deficiencies of capital, shall 
 be paid first out of profits, next out of capital, and lastly, 
 if necessary, by the partners individually in the proportion 
 in which they were entitled to share profits : 
 
 (i.) The assets of the firm, including the sums, if any, contri- 
 buted by the partners to make up losses or deficiencies of 
 capital, shall be applied in the following manner and order : 
 
 1. In paying the debts and liabilities of the firm to 
 
 persons who are not partners therein : 
 
 2. In paying to each partner rateably what is due from 
 
 the firm to him for advances as distinguished 
 from capital : 
 
 3. In paying to each partner rateably what is due 
 
 from the firm to him in respect of capital : 
 
 4. The ultimate residue, if any, shall be divided 
 
 among the partners in the proportion in which 
 profits are divisible. 
 
 Supplemental. 
 
 is. Definitions of *■' court ''^ aiid ''business.''^ — In this Act, 
 unless the contrary intention appears, — 
 
 The expression " court " includes every court and judge having 
 jurisdiction in the case : 
 
 The expression " business " includes every trade, occupation, or 
 profession. 
 
 46. Saving for rules of equity and coimnon laio. — The rules of 
 equity and of common law applicable to partnership shall con- 
 tinue in force except so far as they are inconsistent with the 
 express provisions of this Act. 
 
 VI. Provision as to bankruptcy in Scotland. — (1.) In the 
 application of this Act to Scotland the bankruptcy of a firm or 
 of an individual shall mean sequestration under the Bankruptcy 
 (Scotland) Acts, and also in the case of an individual the issue 
 against him of a decree of cessio bonorum. 
 
 (2.) Nothing in this Act shall alter the rules of the law of 
 Scotland relating to the bankruptcy of a firm or of the individual 
 partners thereof. 
 
 48. Repeal. — The Acts mentioned in the schedule to this Act 
 are hereby repealed to the extent mentioned in the third column 
 of that schedule. 
 
 49. Commencement of Act. — This Act shall come into operation 
 on the first day of January one thousand eight hundred and 
 ninety-one. 
 
 50. Shm-t title. — This Act may be cited as the Partnership Act, 
 1890.
 
 154 
 
 APPENDIX. 
 
 SCHEDULE. 
 
 Enactments Eepealed. 
 
 Session and Chapter. 
 
 Title or Short Title. 
 
 Extent of Repeal. 
 
 19 & 20 Vict. c. 60 
 
 The Mercantile Law Amendment 
 (Scotland) Act, 1856. 
 
 Section seven. 
 
 19 & 20 Vict. c. 97 
 
 The Mercantile Law Amendment 
 Act, 1856. 
 
 Section four. 
 
 28 & 29 Vict. c. 86 
 
 An Act to amend the law of 
 partnership. 
 
 The whole Act.
 
 INDEX. 
 
 N.B. — The figures in blach type refer to the pages in tlie 
 Appendix where the Partnership Act, 1890, is set out in full. 
 
 ACCOUNT AND ACCOUNTS, 
 
 articles should provide for the keeping of proper, 50. 
 assignee of partner, or judgment creditor having judicial 
 charge on share of partner, has no right to demand, 
 99, 100. 
 in taking the final, the uniform practice of the firm must 
 
 be observed, 118. 
 on dissolution, must be taken from last settled, 118. 
 partner must furnish, of all his doings in relation to part- 
 nership transactions, 79, 148. 
 account to the firm for all profits made by 
 him in any competing business, and for 
 secret commissions, 80, 148. 
 
 ACTIONS 
 
 by and against partners in firm name. See Firm Name. 
 
 ADMINISTRATION 
 
 of partnership estates. See Dissolution and Bankkuptct. 
 
 ADMISSIONS 
 
 made by partners are evidence against firm, 145. 
 
 ADVANCE 
 
 by partner to firm carries interest, 87, 147. 
 
 by strangers to firm in consideration of share of profits or 
 interest varying v^^ith profits, does not create partner- 
 ship, 7 — 24. See Profit Sharing. 
 
 AGENCY 
 
 of the individual partners for the firm, 2. 
 
 See Liability of Partners for each other's acts. 
 
 AGREEMENT 
 
 between partners. See Articles of Partnership. 
 when writing necessary, 36 — 38. 
 
 ANNUITY 
 
 payable out of profits does not create partnership, 20. 
 
 APPOINTMENT, See Professional Appointment. 
 ( 1 )
 
 INDEX. 
 
 ARBITRATION, 
 
 clause in articles providing for, usual and proper, 52. 
 
 enables arbitrator to dissolve the partnership, 105. 
 order return of premium, 109. 
 court has discretion to order arbitration under, 105. 
 one partner has no authority to refer claims to, 59. 
 
 ARTICLES OF PARTNERSHIP, 
 form of, 38, et seq. 
 not required by law to be in writing, 36. 
 
 exceptions under Statute of Frauds, 37. 
 what they should provide for, 39, et seq. 
 nature of business, 89, 40. 
 duration of the partnership, 40. 
 firm name, 42 — 47. See Firm Name. 
 capital, 47. See Capital. 
 interest on capital, 47, 86. 
 banking account and cheques, 48. 
 profits, 48. See Profits. 
 
 drawings on accoimt of, 49. 
 management, 49. 
 holidays of partners, 50. 
 accounts, 50. 
 death or retirement of partner, 50. See Death of 
 
 Partner. 
 arbitration, 52. See Arbitration. 
 desirable to provide expressly even where the law would 
 
 infer the same terms, 39. 
 persistent breach of, ground for dissolution, 103. 
 may be varied by consent, either express, or implied from 
 usage, 145. 
 
 ASSETS. See Bankruptcy ; Dissolution ; Professional 
 Appointment ; and Goodwill. 
 
 ASSIGNMENT 
 
 of partner's share without consent of co-partners does not 
 
 entitle assignee to interfere in management, 99, 148. 
 
 nor to demand accounts mitil after dissolution, ih. 
 
 does not operate as a dissolution of the firm, ih., 100; 
 
 and see Charging Order. 
 
 assignee must in general indemnify the assignor against 
 
 losses, 100. 
 by consent of other partners the assignee may be admitted 
 to all rights of assignor, 98, 147- 
 this consent maj' be given in advance {e.g., in partner- 
 ship deed) and without reference to any particular 
 individual, 99. 
 
 AUTHORITY OF A PARTNER, 
 
 (1) As to management of business, 83 et seq., 147, 148. See 
 
 Business. 
 
 (2) On dissolution, 110 et seq., 150. See Dissolution. 
 
 ( 2 )
 
 INDEX. 
 
 AUTHORITY OF A FABTl^EB,— continued. 
 (3) To bind the firm, 53 et seq., 143. 
 
 partner using credit of firm for private purpose, 143. 
 true test is the apparent and not the actual authority, 53, 143. 
 what is meant by apparent authority, 53. 
 
 apparent authority negatived by express notice of its 
 
 limitation, 54, 143. 
 principle of apparent authority is estoppel by con- 
 duct, 55. 
 therefore where creditor is not misled (as in 
 case of a secret partnership) the secret 
 partner is only liable to extent of actual 
 authority given by him, 55, 143. 
 what acts are within a partner's apparent, 56, 143. 
 must be acts done in relation to the business, 56. 
 as partner, 60. 
 
 for carrying on the business in the 
 usual way, 57, 143- 
 what acts are usual in commercial businesses, 58. 
 pledging and selling goods, 58. 
 borrowing, ih, 
 contracting debts, ih. 
 paying debts, ih. 
 
 signing negotiable instruments, ih. 
 engaging servants, ih. 
 receiving money and giving receipts, ih. 
 creating mortgages, ih. 
 retaining solicitor, ih. 
 what acts are not usual, 59. 
 
 in non-commercial business negotiable instruments 
 cannot be signed, ih. 
 nor money be borrowed, ih. 
 in all business (commercial or non- commercial) the 
 following acts are outside apparent authority of 
 partner, ih. 
 execution of a deed, ih., 143. 
 giving guarantee, ih. 
 submitting a dispute to arbitration, ih. 
 accepting property in lieu of a debt, ih. 
 making the firm a partner in another business, ih. 
 authorizing use of firm name by third party, ih. 
 And see also Torts ; and Liability of Firm for Acts of 
 Partner. 
 
 B. 
 
 BANKRUPTCY, 
 
 (1) of firm, 124, et seq, 
 
 if any partner is solvent no question can arise between his 
 creditors and the creditors of the firm, 124. 
 
 but where a partner cannot pay both firm debts and private 
 debts in full, joint creditors prove against joint estate 
 and separate creditors against separate estate, 126. 
 
 ( 3 )
 
 INDEX. 
 
 BA^KRVVTCY— continued. 
 
 where one class has received 20s. in the £, the other 
 class can prove against the surplus, ib. 
 provisions of Bankruptcy Act as to, 127. 
 same rule applies where one partner has died insolvent, ib. 
 exceptions to rule, ib., et seq. 
 
 where no joint estate, 127, 128. 
 
 where creditor's claim is in respect of fraud, 127, 129. 
 
 where creditor has distinct contracts for same debt 
 
 with firm and individual partner?, 127, 130. 
 where creditor of firm has procured adjudication in 
 bankruptcy against individual partner, 127, 132. 
 where firm has defrauded partner or partners of firm, 
 
 128, 132. 
 where some or one of partners have carried on a 
 distinct trade, and debts have been incurred 
 between the two businesses, 128, 133. 
 (2) of individual partner, 134, ct seq. 
 ground for dissolution, 102. 
 
 firm or co-partners cannot prove against estate until all 
 joint debts ai-e paid or unless the separate estate is 
 clearly insolvent, 134, et seq. 
 
 rule not made for benefit of separate creditors, 134. 
 appUes to a person who has lent money on security of 
 a share of profits, 138. 
 but does not affect a security which he may hold, ii. 
 applies to one who " holds himself out " as a partner, 
 
 137. 
 subject to exceptions, 134, et seq. 
 
 where no joint creditors, 134. 
 
 claim arises out of bankrupt's fraud, 136. 
 bankrupt has carried on distinct trade and 
 debt incurred by that trade to firm, 
 136, 137. 
 partner has received discharge and subse- 
 quently becomes creditor of firm, 
 he can prove against firm's assets, 
 136, 137. 
 BOOKMAKEES, 
 
 partnership between, may be legal, 26, et seq. 
 
 BOOKS OF ACCOUNT, 
 
 rights of partners to inspect and copy the, 84, 148. 
 
 BOREOWING, 
 
 extent of partners authority as to, 58. 
 
 BOVILL'S ACT, 8, et seq. See Profit Sharing. 
 
 BUSINESS, 
 
 essential to partnership, 3. 
 
 definition under Act of 1890, 5. 
 
 meaning of, for purposes of partnership, 3 — 6. 
 
 ( 4)
 
 INDEX. 
 
 BU SINE S S— continued. 
 
 restricted to commercial and professional business, 5. 
 
 must be carried on with a view of profit, 6. 
 
 must be carried on by or on behalf ot alleged partners, 6. 
 
 nature of, should be defined in agreement, 40. 
 
 cannot be altered without unanimous consent of all the 
 
 partners, 40, 148. 
 management of the, rights of partners as to, should be 
 
 defined, 49. 
 when not defined, terms implied by law, 81, et seq., 147, 148, 
 
 151. 
 
 every partner may participate in, 81. 
 
 not entitled to remuneration for his work, ib. 
 
 minority when bound by decisions of majority, 83, 
 et seq, 
 
 all partners have access to the books of the, 84, 148. 
 assignee or judgment creditor, no right to interfere in, 99 
 
 100. 
 when carried on at a loss, ground for dissolution, 103. 
 
 CAPACITY PERSONAL, 30, et seq. See Partner, Infant 
 Married Women, and Lunatic. 
 
 CAPITAL, 
 
 proportions in which partners are entitled to ought to be 
 
 defined in agreement, 47. 
 prima facie partners are entitled to, in equal shares, 85, 
 
 147. 
 losses of, must be made good by partners in the proportion 
 
 in which they bear losses, 86, 147- 
 interest on not allowed unless by express agreement, 47, 86, 
 
 147. 
 interest ought generally to be provided for, 48, 87. 
 even where interest provided for, it ceases on dissolution, 87. 
 
 CHANGE, 
 
 in the business not allowed without unanimous consent of 
 
 partners, 40, 83, 148. 
 in the members of the firm not allowed without the 
 
 unanimous consent of the partners, 98, 147- 
 
 CHARGING ORDER 
 
 may be made by court charging a judgment debt due to a 
 
 creditor of one partner, on his share in the assets or 
 
 profits, 100, 146. 
 
 the other partners may redeem, ib. 
 is ground for a dissolution at the option of the other 
 
 partners, 100, 102, 146. 
 judgment creditor cannot interfere in management, 100 
 nor demand account, ib. 
 
 ( 5 )
 
 INDEX. 
 
 CHEQUES, 
 
 each partner may sign, in absence of contrary agreement, 
 48. 
 
 CHILD 
 
 of deceased partner, profit sharing by, not evidence of 
 partnership, 20, 142. 
 
 COMPETITION, 
 
 See Bankruptcy. 
 by partner having separate trade, with the firm not allow- 
 able, 80, 148. 
 by vendors of goodwill with purchaser thereof, 116. 
 
 CONTRIBUTION, 
 
 among partners, 88, 147. 
 
 right to not lost by partner more in fault than others, 88. 
 
 where one partner been sued for illegal act, ib. n. (e). 
 
 CONVERSION. See Partnership Property. 
 
 COSTS, 
 
 of liquidation on dissolution, how borne, 121, 123. 
 
 COURT. See Dissolution and Charging Order. 
 
 CREDITOR, 
 
 See Bankruptcy. 
 of individual partner, may obtain charging order on his 
 shares, 100, 146. 
 effect of such order, ib. 
 of firm, hability of individual partners to, 53 — 77, 143 — 145 
 
 See Liability of Partners for Each Other. 
 notice of dissolution to, 74, 110, 150. 
 
 under contract, by virtue of which he receives share of 
 profits or interest varying with profits, not necessarily 
 a partner, 7 — 21, 142. See Profit Sharing. 
 but is postponed tiU claims of other creditors are 
 satisfied, 138, 142. 
 aliter where he holds a collateral secvurity, 138. 
 
 CUSTOMERS, 
 
 notice to, of dissolution essential, 74, 110, 150. 
 except on death of a partner, 75, 76, 150. 
 
 D. 
 
 DEATH OF PARTNER, 
 
 dissolves the partnership, 50, 102, 149. 
 hquidation and winding up carried out exclusively by sur- 
 viving partners, 110. 
 executors of deceased not liable for future debts, 75, 76, 
 145, 150. 
 even when the death is not notified to creditors, 150. 
 
 ( 6 )
 
 INDEX. 
 
 DEATH OF FAnTlsEn— continued. 
 
 but liable for future breaches of contracts entered into 
 during life of deceased, 73. 
 unless personal to the deceased and therefore incapable 
 of being performed, 73. 
 provisions as to, should be inserted in articles, 50, et seq. 
 
 otherwise the business would have to be sold, 51. 
 best plan is to provide for acquisition of share of deceased 
 by survivors, 51. 
 also for interest to be paid to representatives in lieu of 
 profits since last balance sheet, 51. 
 sometimes advisable to give deceased power of nominating 
 a successor by will, 52. 
 or to place his personal representatives in his shoes, 
 51. 
 DEBT, 
 
 receipt of, out of accruing profits, does not make creditor a 
 partner, 20, 142. 
 
 DEBTS. See Liability of Partnebs for Each Other's 
 Acts. 
 
 DEED, 
 
 partner cannot execute, on behalf of firm, 59, 143. 
 
 but where a deed not necessary a writing sealed by one of 
 
 the parties may be good as a written document, 
 
 59, n.{z). 
 of partnership. See Articles of Partnership. 
 
 DISSOLUTION OF THE FIRM, 101, et seq. 
 (1) Without recourse to the court, 101, 149 et seq. 
 where agreed period has expired, ih. 
 
 if business nevertheless continued, the partnership 
 becomes one at will on old terms so far as 
 applicable, 40, 148. 
 in case of syndicates where the adventure is completed, 41, 
 
 101. 
 where no period agreed, firm dissolved by notice, 41, 101, 
 105, 148. 
 no period of notice required unless stipulated for, 105. 
 notice may take effect instanter or at a date named in 
 
 it, ih. 
 notice once given cannot be withdrawn, ih. 
 by death or bankruptcy of a partner, 102, 149. 
 
 in such cases the surviving or solvent partner has 
 exclusive authority to wind up the concern, 110. 
 See Bankruptcy. 
 by business becoming unlawful, 101, 105 49. 
 
 See Illegal Partnerships. 
 where one partner has allowed his share to be judicially 
 charged in execution of a judgment against him, 102, 
 149 ; and see Charging Order. 
 
 L.P. ( 7 ) M
 
 INDEX. 
 
 DISSOLUTION OF THE FlUM— continued. 
 
 wherever circumstances arise which are by the partnership 
 agreement to give rise to dissolution, 102. 
 
 (2) Judicial dissolution, 149. 
 
 only required where partnership for life, for fixed term or 
 
 for a single incomplete adventure, 102. 
 circumstances giving rise to claim for, 102, et seq., 150. 
 lunacy of a partner, 102, 150. 
 
 may be decreed at suit of lunatic or sane partner, 
 106, 150. 
 permanent incapacity of a partner, 103, 150. 
 
 only at suit of the other partners, ib. 
 where defendant partner acts prejudicially to business, 
 
 103, 150. 
 where defendant partner guilty of wilful or per- 
 sistent breaches of partnership agreement, ib., 
 150. 
 where business carried on at a loss, ib., 150. 
 wherever cu-cumstances make a dissolution just and 
 equitable, ib., 150. 
 what such circumstances are, 107. 
 questionable where marriage of female partner is 
 
 such a circumstance, 106. 
 fraud of a partner, 107, 151. 
 arbitrator under usual arbitration clause can order dissolu- 
 tion, 105. 
 and may order return of premium, 109. 
 court frequently makes decree for dissolution on motion for 
 
 a receiver, 109, 110. 
 court may remit matter to arbitrator either whoUy or 
 partially after appointing a receiver, 105. 
 
 (3) Points arising on dissolution, 108, et seq. 
 
 each living partner may and should pubUcly and privately 
 notify the dissolution, and force the others, where 
 necessary, to join in doing so, 74, 110, 150. 
 but not necessary for personal representative of 
 deceased partner or trustee of bankrupt partner 
 to give such notice, 110, 150. 
 interest on capital (where stipulated for) ceases immedi- 
 ately on dissolution, 87. 
 return of premium whollj' or partially on premature disso- 
 lution, 108, 151. 
 arbitrator may award, 109. '' 
 
 dissolution where partnership was induced by fraudulent 
 misrepresentation, 107, 151. 
 various remedies of defrauded partners, 108, 152. 
 authority of pai'tuers, unless dead or insolvent, to act m 
 Uquidating the assets, 110, 151. 
 may be displaced by appointment of receiver or 
 
 receiver and manager. 111. 
 grounds for appointment of receiver and manager, 111, 
 112 ; and see Receiver. 
 
 ( 8 )
 
 INDEX. 
 
 DISSOLUTION OF THE Fm^l— continued. 
 
 each partner, in absence of agreement, may insist on all 
 assets being sold, 113, et seq., 151. 
 assets include goodwill and firm name, 114, et seq. ; 
 and see Goodwill and Firm Name. 
 agreement by one to purchase the shares of the others, can 
 only be valid if absolute good faith and full disclosure 
 be made, 118, n. (o). 
 principles on which the assets are to be dealt with, and the 
 
 proceeds thereof applied, 121, 152, et seq. 
 final settlement of accounts, 117, et seq., 152 ; and see 
 Accounts. 
 in absence of, retiring partner or executors of deceased 
 partner may be entitled to share in profits or to 
 claim interest, 120, 152. 
 costs of liquidation, how borne, 121, 123, et seq. 
 
 DORMANT PARTNER 
 
 cannot limit his liability, 9—21. 
 
 aliter in other countries, 9, et seq. 
 but where partnership unknown to creditor, is only liable 
 to the extent of the actual (as distinguished from 
 apparent) authority conferred on active partner, 55. 
 practice where creditor beheves that a, exists, 47. 
 
 DRAWINGS 
 
 on account of accruing profits should be provided for, 49. 
 
 DURATION OF PARTNERSHIP. See Dissolution. 
 unless defined is at will, 40, 149. 
 in that case determinable by notice at any time, 101. 
 
 aliter in case of syndicates which expire on completion 
 of the adventure for which they are formed, 41, 
 149. 
 where term fixed and exceeded the partnership becomes 
 one at will on the old term so far as applicable, 40, 
 41, 148. 
 French law as to, 41. 
 
 Extent to which liability of partners exceeds, 71 — 77, 150. 
 See Liability of Partners. 
 
 DUTIES OF PARTNERS. See Partners. 
 
 E. 
 
 EXECUTION. See Charging Order. 
 
 against a partner's share, 100 — 102, 146. 
 against firm, in firm's name, 47. 
 
 EXECUTORS, 
 
 where surviving partners are, of deceased, difficult questions 
 often arise, 120. 
 but where partnership agreement authorises purchase 
 by them of the share of deceased, they may do 
 so if they strictly observe conditions, 120, 152. 
 
 ( 9 ) M 2
 
 INDEX. 
 
 EXPIRATION OF PARTNEESHIP. See Dissolution. 
 
 where the partners tacitly continue the business after time 
 fixed for, 40, 41, 148. 
 where, under partnership articles, one partner has 
 option to purchase shares of the others, 41, 
 n. (e), 115, n. {b). 
 
 EXPULSION 
 
 ■ of partner, 79, 83. 
 
 right of, must be exercised with utmost good faith, 79. 
 
 only exercisable after notice to explain, ib, 
 in absence of agreement majority cannot effect, 83, 
 148. 
 
 F. 
 
 FIRM. See Firm Name and Bankruptcy. 
 meaning of, 143. 
 not a legal entity, 46, 143. 
 
 aliter in Scotland and abroad, ^&., ih. 
 but may contract, sue, and be sued in firm name, ih., 47 
 admissions of one partner are evidence against, 145. 
 execution may issue against, in firm name, 47. 
 liability of, for acts of partners. See Liability. 
 change in, can only be made by mianimous consent of all 
 the partners, 83, 147, 148. 
 does not affect customers who have no notice of the 
 change, 74, 110, 150. 
 
 FIRM NAME, 
 
 what name may be adopted, 42, 143. 
 
 must not be calculated to mislead the customers of 
 another business, 43. 
 even where the partners trade under their own 
 names, 43, 44. 
 foreign laws very much stricter, 45. 
 what constitutes an infringement of the exclusive right to, 
 
 43, et seq. 
 use of, by partners after dissolution, 116, 117 ; and see 
 Goodwill. 
 
 FRAUD, 
 
 where partnership is the result of, the defrauded partner 
 
 ixiay sue for a dissolution, 107. 
 defrauded partners, various remedies in case of, 108. 
 how far firm liable for, of partners, 61, 66, 144, et seq. 
 
 FRAUDS, STATUTE OF, 36, et seq.; and see Written 
 Agreement. 
 
 ( 10 )
 
 INDEX. 
 
 G. 
 
 GAMBLING. See Illegal Partnership. 
 
 GAZETTE, 
 
 necessity for notifying dissolution in the, 74, 110, 150. 
 each partner may require others to concxu' in, 110, 150. 
 
 GOODS, 
 
 implied authority of partners to buy, sell and pledge, 58. 
 
 GOODWILL, 
 
 definition of, 114. 
 
 increase in value of, ought not to be taken into account in 
 
 calculating profits, 49. 
 is an asset of the firm on dissolution, 114. 
 
 unless partnership agreement reserves it in favour of 
 
 individual partner, ib. and n. (c). 
 exception in the case of professional partnerships, 116. 
 after sale partners may start competing business, 116. 
 but must not solicit old customers, ib. 
 
 aliter where sale made by their trustee in bank- 
 ruptcy, 116, n. (/i). 
 same principle applies where goodwill reserved or sold 
 to individual partner, 117. 
 vendor of, may receive share of profits %vithout becoming 
 partner, 20, 142. 
 
 GBOSS EETUBNS, 
 
 sharing of, does not constitute partnership, 6, 141. 
 
 GUAEANTEE, 
 
 one partner cannot give, on behalf of firm, 59. 
 
 by firm revoked by change in the members of the firm, 145. 
 
 H. 
 
 "HOLDING OUT," 
 doctrine of, 74, 144. 
 
 appUes to retired partner who does not notify retire- 
 ment, 75. 
 
 I. 
 
 ILLEGAL PARTNERSHIPS, 
 exceeding certain numbers, 25. 
 
 contra bonos mores, or formed for a forbidden purpose, 26. 
 how treated by the courts, ib. 
 
 persons carrying on " bookmaker's " business do not neces- 
 sarily constitute an, ib. 
 
 ( 11 )
 
 INDEX. 
 
 INDEMNIFICATION, 
 See Lien. 
 
 the firm must indemnify each partner for liabilities incmred 
 
 as its agent, 86, 147. 
 also for paj'ments made and habiUties incurred for pre- 
 serving firm's property or business, ib., ib. 
 where partner mortgages his freeholds to secure debt of 
 firm, the Hen must be indemnified by firm notwith- 
 standing Locke King's Act, 88. 
 ' absolute assignee of partner's share must indemnify hi m 
 against losses, 100. 
 
 INFANT PARTNER, 
 
 how far capable of being partner, 33. 
 
 cannot be sued as partner, 33, et seq. 
 
 position of adult who is partner with, 34. 
 
 must repudiate partnership within reasonable time after 
 
 majority, or else will be bound by future UabUities, 34. 
 may recover premiima where he has derived no benefit, 
 
 34, n. (r). 
 Indian law more stringent as to this than ours, 35. 
 French law as to, 35. 
 
 INSOLVENCY. See BANKRUPXci'. 
 
 INSPECTION, 
 
 of i^artnership books, etc., each partner entitled to, 84, 148. 
 
 INTEREST, 
 
 not allowed on capital unless expressly stipulated for, 47, 
 
 such stipulation should usually be inserted in Articles, 
 48, 87. 
 
 even when stipulated for interest ceases as from date of 
 dissolution, 87. 
 
 partner lending to firm entitled to, 87, 147. 
 indebted to firm does not pay, 88. 
 
 where business carried on by a partner after dissolution 
 without inducement he maj' be hable to pay to out- 
 going partner at 5 per cent., 120, 152. 
 
 share of profits payable to creditor in lieu of interest, or 
 stipvdation that interest shall vary with profits, does 
 not of itself make him a partner, 21, 142. 
 
 J. 
 
 JOINT AND SEPARATE ESTATES. See Bankruptcy. 
 
 JOINT AND SEVERAL LIABILITY, 
 
 partners jointly liable for matters ex contractu, 69 — 71, 
 144. 
 and severally for matters ex delicto, ib., ib. 
 
 ( 12 )
 
 INDEX. 
 
 JOINT TENANCY, 
 
 not partnership, 4, 141 ; and see Partnership Property. 
 
 JUDGMENT. See Charging Order. 
 
 LAND. See Partnership Property. 
 
 LEASE, 
 
 one partner cannot renew a renewable, for his exclusive 
 benefit, 80. 
 
 LIABILITY OF PARTNERS FOR EACH OTHER'S ACTS, 
 a branch of the law of agency, 53. 
 
 limited to acts within actual or apparent authority of 
 individual partners, tb., 143. 
 definition of actual authority, 53. 
 apparent authority, ib. 
 instances of apparent authority, 54, 58. 
 apparent authority negatived by express notice of limita- 
 tion, 54, 143. 
 no apparent authority in case of sleeping partner, unless 
 partnership known to party dealing with the active 
 partner, 55, et seq., 143. 
 but sleeping partner Uable to extent of actual authority, 
 56. 
 consideration of acts within apparent authority of a partner, 
 
 56—60. 
 firm not bound unless partner entered into engagement as 
 
 partner, 60, 143. 
 nor xmless the act was one within the business of the firm, 
 
 56, 143. 
 and done in relation to the carrying on of its business in 
 
 the usual way, 57, 143. 
 what acts are usual for carrying on a business, 58. 
 liabihty for torts, 60, et seq., 144. 
 ordinary torts, 61, et seq. 
 misappropriations of money, 66 — 69, 144. 
 not hable for breaches of trust unless they have notice of 
 
 them, 68, 144. 
 when liability joint and when joint and several, 69, et seq., 
 
 144. 
 commencement and duration of liabUity, 71. 
 
 new partner not liable for old debts, 72, 145. 
 novation, 72, 73, 145. 
 
 retiring partner not hable for future debts, 72, 145. 
 how far executors of deceased partner are liable, 73, 
 
 145. 
 notice on retirement essential to put an end to 
 liabUity, 74, 150. 
 
 ( 13 )
 
 i 
 
 INDEX. 
 
 LIABILITY OF PARTNERS FOR EACH OTHER'S 
 ACTS— continued. 
 
 doctrine of " holding out " in relation to, 74, 144. 
 continues after dissolution untU winding-up is completed, 
 
 72, 76, 150. 
 summary of the law as to, 77. 
 
 LIEN 
 
 of partners on firm's assets, 88, 113. 
 defrauded partner, 108, 152. 
 
 LOAN 
 
 by partner to firm carries interest, 87, 147. 
 
 by firm to partner does not carry interest unless stipulated 
 
 for, 88, 147. 
 by stranger to firm on terms of receiving share of profits or 
 
 interest varying with profits. See Profit Sharing. 
 authority of partner to effect a, on behalf of firm, 58. 
 aliter in professional partnerships, 58. 
 
 LOSS 
 
 divided in the same proportion as profits, 85, 86, 147. 
 
 when business carried on at a, ground for dissolution, 103, 
 150. 
 
 of capital must be borne by partners in the same propor- 
 tions as other losses, 85, 86, 153. 
 
 LUNACY 
 
 a ground for asking Court to dissolve partnership even at 
 suit of lunatic, 35, ct seq., 150- 
 
 LUNATICS 
 
 may be partners, and if so are liable to persons without 
 
 notice of Itmacy, 35. 
 injunction restraining, from interfering in management, 36. 
 
 M. 
 
 MANAGEMENT OF BUSINESS, 49. See Business. 
 
 MANAGER, 
 See Receiver. 
 
 when appointed. 111, et seq. 
 
 only with a view to a sale as a going concern, 112. 
 
 partners not usually appointed, 112. 
 
 usually only appointed for fixed period, 113. 
 
 personally liable to creditors, 113. 
 
 when minority of partners bound by the decision of, 83, 147. 
 
 MAJORITY. 
 
 MARRIAGE. See Married Woman. 
 
 ( 14 )
 
 INDEX. 
 
 MARRIED WOMAN, 
 
 capacity of, to be partner, 30, et seq. 
 
 question whether on spinster's becoming, it is ground for 
 
 dissolution, 106. 
 liability of not personal, but restricted to separate estate, 
 which she is not restricted from anticipating, 31. 
 even where she trades in a firm name, 32, n. 
 where restrained from anticipating an income subse- 
 quently accrued or accrued after cesser of 
 coverture, not liable, 31, n. (g). 
 may be made bankrupt if trading separately from husband, 
 ib. 
 aliter if in partnership with him, ib. 
 but questionable what the procedure is, 32. 
 not a desirable partner, 32. 
 
 rights of creditors against partnership assets where a, is 
 one of the partners, 33. 
 
 MISCONDUCT 
 
 of partner ground for dissolution, 103, 107, 160. 
 
 MISREPRESENTATION. See Fraud. 
 
 MONEY. See Feaud. 
 
 MORTGAGE, 
 
 authority of partner in commercial firm to give equitable. 
 58, 59. 
 aliter as to legal, 59. 
 of partner's share in the assets or profits, 129 — 131. 
 
 MUTUAL SOCIETIES 
 
 may constitute partnerships, 4, ii. (d). 
 
 N. 
 
 NAME. See Firm Name. 
 
 NEGLIGENCE, 
 
 liability of firm for, of partner, 60, et seq. 
 
 NEGOTIABLE INSTRUMENTS, 
 
 authority of partner to issue for firm, 58, 59. 
 
 NET PROFITS, 
 
 meaning of, 6, 48, 49. 
 
 NEW PARTNER, 
 
 liability of, for old debts, 73. See Novation. 
 can only be introduced into firm by consent of all the old 
 partners, 98, 147. 
 but this consent may be given in advance, and without 
 reference to any particular person, 99. 
 
 ( 15 )
 
 INDEX. 
 
 NOTICE 
 
 to acting partner is notice for the firm, 145. 
 of partner's want of authority, 54, 143. 
 of dissohition essential, 74, 150. 
 
 parties must join in giving, 110, 160. 
 
 NOVATION, 
 
 definition of, 73. 
 
 effect of in reheving retiring partner from existing liabili- 
 ties, ib., 145. 
 
 effect of in saddling new partner with past Uabilities, ib., 
 145. 
 
 may be express or implied, ih. 
 
 no consideration necessary, ib. 
 
 PARTNER AND PARTNERS. 
 
 See Business ; Dormant Partner ; Partnership ; Partner- 
 ship Property ; Expulsion. 
 definition of, 3. 
 
 can only exist in relation to a business carried on for gain 
 by or on behalf of aU the partners, 3, et seq. 
 meaning of business, 3 — 7. 
 meaning of carried on for gain, 7. 
 meaning of carried on by or on behalf of all the 
 
 partners, 7, et seq. 
 profit sharing possible without business being carried 
 
 on by or for all the shareholders, 7 — 24. 
 general result of decisions on profit sharing without 
 partnership, 21. 
 number of, in private partnership limited, 25. 
 capacity of persons to act as, 30, et seq. 
 married women, 30. 
 
 rights of creditors against, 31, et seq. 
 infants, 33. 
 lunatics, 35. 
 relation of, to one another, 78, 145, et seq. 
 
 (1) Must observe utmost good faith, 78. 
 
 must account for all property received and all benefits 
 derived from partnership transactions, including 
 secret commissions, 79, 148. 
 must not compete with the firm, 80, 148. 
 
 but unless expressly restricted may carry on a 
 non-competing business for his own benefit, 
 80. 
 must not use his position for selfish purposes, ib. 
 
 (2) As to management of business, 81, et seq. ; and see 
 
 Authority of Partners. 
 every partner may take part in, 147. 
 
 ( 16 )
 
 INDEX. 
 
 PARTNER AND PARTNERS— confmtte^. 
 
 every, must attend to business diligently and 
 gratuitously, 81, 147. 
 unless duty negatived by express agreement, 82. 
 if all work thrown on one, entitled to compensation, 81. 
 minority bound by decisions of majority, when, 83, 84, 
 
 147. 
 partnership books open to every, 84, 148. 
 (3) ^s to capital, -profits and losses. All prima facie 
 share equally in, 84, 147. 
 inequahty of shares of capital i-aises no inference of 
 inequality in sharing profits, 85, et seq. 
 but this may be negatived by agreement or by the 
 actual facts, 85. 
 losses borne in same proportion as profits, 86. 
 
 including losses of capital, 86, 147. 
 interest on capital not allowed, 86, 147. 
 aliter where stipulated for, 87. 
 even where stipulated for, it ceases immediately 
 
 on dissolution, 87. 
 should generally be stipulated for, 87. 
 where, lends money to finn, entitled to interest, 87, 
 147. 
 
 if, borrows from firm, pays no interest, 88. 
 
 each, indemnified against liabilities mcurred on account 
 of firm, or preservation of business or property, 
 88, et seq., 147. 
 
 cannot assign his right to participate in the manage- 
 ment except by consent, 98, 149. 
 
 a, can assign his share in profits and assets, and judg- 
 ment creditor can get charge on them, 99, 100, 
 147, 149 ; and see Charging Order. 
 
 charge under judgment gives other, right to redeem or 
 dissolve, 100, 147. 
 
 rights of, with regard to dissolution. See Dissolution 
 OF THE Firm. 
 
 relation of to third parties ; see Liability of Partners, 
 etc. 
 
 power of ostensible, to bind the firm, 53 — 77. See 
 Authority of a Partner. 
 
 liability of, for acts and defaults of co-partners, 2, 
 53 — 77. See Liability of Partners for Each 
 Other's Acts, and Dormant Partner. 
 
 PARTNERSHIP, 
 
 definition of, 1, 140. 
 illegal. See Illegal Partnerships. 
 duration of. See Duration. 
 dissolution of. See Dissolution. 
 
 essentials to creation of, are (1) a business (2) carried on 
 for gain (3) by or on behalf of alleged partners, 3. 
 (1) Businessnot syuon^-mous with " occupation or calling," 3, 
 
 ( 17 )
 
 INDEX. 
 
 PABTNERSHIP— conl!tnMe^. 
 
 landowners do not carry on a business, nor joint-owners or 
 co-owners, 3 — 5, 141. 
 
 business in fact confined to what are recognised as commer- 
 cial and professional businesses, 5. 
 
 French law regards all co-ownerships as partnerships, 4 — 5. 
 
 (2) Carried on for profit means for net profit, and not for 
 
 gross returns, 6, 141. 
 
 (3) By or on behalf of alleged jiartners, 6. 
 
 formerly mere sharmg of profits considered conclusive 
 evidence of partnership, 6 — 7. 
 aliter since Cox v. HicTitnan, 7. 
 
 participation in profits only primA facie evidence, 7, 19. 
 Bovill's Act, effect of as to profit sharing, 8. 
 history of law as to profit sharing since Cox v. Hick- 
 man, 1 — 21. 
 provisions of Act of 1890 as to, 20, 142. 
 construction of Act of 1890 as to, 19 — 21. 
 practical lessons to be learnt from cases as to profit 
 sharing, 21, 24. 
 
 PARTNERSHIP ARTICLES, 36, et seq. ; and see Articles 
 OF Partnership. 
 
 PARTNERSHIP BUSINESS 
 
 cannot be altered without the consent of all the partners, 
 40, 148. 
 
 PARTNERSHIP PROPERTY, 89, et seq., 146. 
 property used by firm not always, 89. 
 question whether property is partnership property often 
 
 important, 89. 
 whether property is or is not, depends on agreement, 90. 
 difficulty when agreement is implied, 90. 
 when credited in books as capital inferentially it is, 90. 
 
 or if involved in partnership dealings, 92. 
 provisions of Act of 1890 in relation to, 91, 146. 
 illustrative cases, 92, et seq. 
 real estate part of the, generally (in absence of contrary 
 
 agreement) is converted in equity into personal 
 
 estate for purposes of devolution, 97, 146. 
 apphcation of, on dissolution ; see Dissolution. 
 
 POWER 
 
 of partner to bind the firm. See Authority of Partner. 
 PREMIUM, 
 
 when ordered to be returned in case of premature dissolu- 
 tion, 108, 151. 
 
 power of arbitrator to order return of, 109. 
 
 PROFESSIONAL APPOINTMENTS, 
 held by partner, 117. 
 
 must be valued and brought into accomit if retained 
 by him after dissolution, ib. 
 
 ( 18 )
 
 INDEX. 
 
 PROFITS, 
 
 prima facie divisible equally and not in proportion to shares 
 
 of capital held by each partner, 48, 85, 147. 
 prima facie means money received less money paid during 
 
 the year, 48. 
 money earned but not received no part of profits of year 
 except by express agreement, 48, 49. 
 such agreement generally desirable, 49. 
 increased value of goodwill ought not to be taken into con- 
 sideration in arriving at, 49. 
 drawings on account of accruing, articles should provide 
 
 for, 49. 
 partner can assign his share in, and judgment creditor can 
 get charge on, 98—100, 147, 149. 
 
 PROFIT SHARING, 
 
 how far evidence of partnership, 7 — 24. 
 
 no evidence, where alleged partner only takes part of 
 gross returns, 6, 141. 
 author receiving royalty on every copy sold of hia 
 
 work, 6. 
 owner of theatre receiving proportion of price paid 
 for seats, 6. 
 to be evidence of partnership there must be sharing of 
 net profits, 6. 
 even then not sufficient unless business a joint 
 adventure, 6, et seq. 
 societes en covimandite, 9. 
 by dormant partners. See Dormant Partner. 
 cases relatuig to, 7 — 21. 
 provisions of Act of 1890 relatmg to, 19, 20, 142. 
 
 diffictdty of construing, 19, 21. 
 is prima facie evidence of partnership, 19. 
 exceptions, 20, 142. 
 
 share of profits in payment of a debt, ib., ih. 
 
 or in Ueu of interest, ih., ih. 
 interest varying with the 
 profits, ih., ib. 
 by way of rewarding servant, ib. ib. 
 by widow or child of deceased 
 
 partner, ib., ib. 
 by vendor of goodwill, ib., ih. 
 even in ordinary cases the whole of the circumstances 
 must be considered, 19. 
 lessons to be learnt from cases relatmg to loans, etc., in 
 consideration of share of profits, 21. 
 must be a real loan repayable in any event, 22. 
 lender must not take a share in the capital, 23. _ 
 borrower should not be obliged to use loan as capital , 23. 
 share of profits should not vary in proportion which 
 
 loan bears to the capital, 23. 
 provision should not be inserted for return of profits in 
 case of subsequent losses, 23. 
 
 ( 19 )
 
 INDEX. 
 
 PEOriT SHARING — lessons to be learnt, etc. — continued. 
 
 Avords "capital," '•concern," "partnership," etc., 
 
 should be avoided, 24. 
 clauses taken from partnership agreements should not 
 
 be used, 24, 
 qucere whether agreement for profit sharing without 
 
 partnership must be in writing, 21. 
 on bankruptcy of firm, lender is postponed until the 
 creditors fully paid, 138, 142. 
 but this does not affect any collateral security which 
 he may have, 139. 
 
 PROOF. See Bankruptcy. 
 
 PROPERTY. See Partnership Property. 
 
 E. 
 
 RATIFICATION, 
 
 equivalent to prior authorisation, 65. 
 
 RECEIPT, 
 
 authoritjf of partner to give on behalf of firm, 58. 
 of profits prima facie evidence of partnership, 18, 19, 142. 
 See Profit Sharing. 
 
 RECEIVER 
 
 when appointed. 111. 
 
 and manager when appointed, 112. 
 
 See Manager. 
 partner not usually appointed, 112. 
 manager usually only appointed for fixed period, 113. 
 on appointment of a, court frequently makes decree for 
 
 immediate dissolution, 110. 
 court sometimes appoints and remits all other questions to 
 
 an arbitrator, 105. 
 
 REMUNERATION, 
 
 share of profits taken by employee in lieu of, does not 
 
 make him a partner, 20, 142. 
 none allowed to partner unless stipulated for, 81, 147. 
 
 aliter in case of death, incapacity or bankruptcy of 
 
 co-partner, 82. 
 or where appointed by court manager or receiver, 82. 
 
 RETIREMENT OF PARTNER, 
 
 proper to provide for in articles, 50. 
 
 in partnership at will dissolves the firm, 40, 101, 104, 105, 
 148. 
 
 RETURNS, 
 
 sharing of gross, does not constitute partnership, 6. 
 
 1 20 )
 
 INDEX. 
 
 SALE, 
 
 authority of partner to effect, of partnership property, 58 
 
 SALVAGE. See Indemnification. 
 
 SECRET PARTNER, 
 
 practice where, is alleged to exist, 47, n. (q). 
 
 SECURITY, 
 
 right of realisation of, by a creditor who has lent money in 
 consideration of receiving share of profits or 
 interest varying with profits, 138, et seq. 
 
 on the share of a partner in the assets and profits, 129 — 
 131. See Assignment. 
 
 SEPARATE DEBTS 
 
 of insolvent partners. See Bankruptcy. 
 
 SEPARATE ESTATE. See Bankruptcy. 
 
 SERVANTS, 
 
 authority of partner to engage, 58. 
 
 receiving share of profits not thereby made partners, 20, 
 142. 
 
 SHARE, 
 
 assignment by partner of his, in business, 98, et seq. See 
 
 Assignment. 
 charging order on, in execution of judgment against a 
 partner, 100. See Charging Order. 
 is essential for dissolution, 102. 
 
 SLEEPING PARTNER. See Dormant Partner. 
 
 STATUTE OF FRAUDS, 36, et seq.; and see Written 
 Agreement. 
 
 T. 
 
 TENANTS IN COMMON, 
 
 not necessarily partners, 4, 141. 
 
 property held in by partners, not necessarily partnership 
 
 property, 89. 
 partnership property in equity belongs to partners as, 
 
 although at law it may be vested in them as joint 
 
 tenants, 91, 98, 146. ' 
 
 TERM, 
 
 expiration of agreed, where partners tacitly contLauo the 
 business, 40, 41, 148. 
 
 ( 21 )
 
 INDEX. 
 
 THIRD PARTIES, 
 
 liability of partners to. See Liability of PaPwTNERs. 
 
 TORTS, 
 
 liability of firm for, of partners, 60, et seq., 144. 
 contribution of partners to damages recovered against one 
 partner, 88, n. (e). 
 
 TRADE NAME. -SeeVimi Name. 
 
 TRUST, 
 
 firm not generally liable for breach of, by partner, 68, 144, 
 
 u. 
 
 UNLAWFUL. See Illegal Partnerships. 
 
 ' USAGE, 
 
 partnership is evidence of alteration of usual terms, 145. 
 
 w. 
 
 WIDOW 
 
 of deceased partner does not become a partner by reason 
 of receiving a share of profits, 20, 142. 
 
 WINDIXG UP. See Dissolution, Bankruptcy, Goodwill, 
 Duration of Liability. 
 
 WRITTEN AGREEMENT, 
 
 not usually essential, 36, et seq. 
 
 unless partnership is to commence more than a year 
 
 ahead, 37. • 
 or it is intended to last more than a year, and there 
 has been no part performance, 37. 
 where the partnership has been actually carried on no 
 
 written agreement is ever necessary, 37. 
 is generally desirable, 36, 38. 
 what it should provide for, 38, et seq. 
 And see Articles of Partnership. 
 
 WRONGS. See Torts. 
 
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