by a person of a debt or other fixed sum by instalments, or otherwise, out of the accruing profits of a business does not of itself make him a partner; and it re-enacts with some slight modification the repealed provisions of Bovill's Act (28 & 29 Vict. c. 86), which was passed to remove certain difficulties arising from the decision in Cox v. Hickman. Whenever the question of partnership or no partnership arises, it must not be forgotten (though this is not stated in the act) that partnership is a relation arising out of a contract; regard must be paid to the true contract and intention of the parties as appearing from the whole facts of the case. If a partnership be the legal consequence of the true agreement, the parties thereto will be partners, though they may have intended to avoid this consequence {Adam v. Ncwbigging, 1888, L.R. 13 App. Cas. 315). Partners are called collectively a "firm"; the name under which they carry on business is called the firm name. Under English law the firm is not a corporation, nor is it recognized as distinct from the members composing it; any change amongst them destroys the identity of the firm. In Scotland a firm is a legal person distinct from its members, but each partner can be compelled to pay its debts.
At common law there is no limit to the number of partners, but by the Companies Act 1862 (25 & 26 Vict. c. 89, § 4), not more than ten persons can carry on the business of bankers, and not more than twenty any other business, unless (with some exceptions) they conform to the provisions of the act. (See Company, and also Limited Partnerships below.)
II. Relations of Partners to Persons dealing with them.—Every partner is an agent of the firm and of his co-partners for the purpose of the partnership business; if a partner does an act for carrying on the partnership business in the usual way in which businesses of a like kind are carried on — in other words, if he acts within his apparent authority — he thereby prima facie binds his firm. The partners may by agreement between themselves restrict the power of any of their number to bind the firm. If there be such an agreement, no act done in contravention of it is binding on the firm with respect to persons who have notice of the agreement. Such an agreement does not affect persons who have no notice of it, unless indeed they do not know or believe the person with whom they are dealing to be a partner; in that case he has neither real, nor, so far as they are concerned, apparent authority to bind his firm, and his firm will not be bound. If a partner does an act, e.g. pledges the credit of the firm, for a purpose apparently not connected with the firm's ordinary course of business, he is not acting in pursuance of his apparent authority, and whatever liability he may personally incur, his partners will not be bound unless he had in fact authority from them.
Apart from any general rule of law relating to the execution of deeds or negotiable instruments, a firm and all the partners will be bound by any act relating to the business of the firm, and done in the firm name, or in any other manner showing an intention to bind the firm, by any person thereto authorized. An admission or representation by a partner, acting within his apparent authority, is evidence against his firm. Notice to an acting partner of any matter relating to the partnership affairs is, apart from fraud, notice to his firm.
A firm is liable for loss or injury caused to any person not a partner, or for any penalty incurred by any wrongful act or omission of a partner acting in the ordinary course of the partnership business, or with the authority of his co-partners; the extent of the firm's liability is the same as that of the individual partner. The firm is also liable to make good the loss (a) where one partner, acting within his apparent authority, receives 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 such money or property while in the custody of the firm is misapplied by a partner. It is not sufficient, in order to fix innocent partners with liability for the misapplication of money belonging to a third party, merely to show that such money was employed in the business of the partnership, otherwise all the members of a firm would in all cases be liable to those beneficially interested therein for trust money improperly employed in this manner by one partner. This is not the case. To fix the other partners with liability, notice of the breach of trust must be brought home to them individually.
The liability of partners for the debts and obligations of their firm arising ex contract, is joint, and in Scotland several also; the estate of a deceased partner is also severally liable in a due course of administration, but subject, in England or Ireland, to the prior payment of his separate debt. The liability of partners for the obligations of their firm arising ex delicto, is joint and several.:2 ^
The authority of a partner to bind his co-partners commences with the partnership. A person therefore who enters into a partnership does not thereby become liable to the creditors of his partners for anything done before he became a partner. But a partner who retires from a firm does not thereby cease to be liable for debts or obligations incurred before his retirement. He may be discharged from existing liabilities by an agreement to that effect between himself and the members of the firm as newly constituted and the creditors. This agreement may be either express or inferred as a fact from the course of dealing between the creditors and the new firm. The other ways in which a partner may be freed from partnership liabilities incurred before his retirement are not peculiar to partnership liabilities, and are not therefore dealt with by the Partnership Act.
A continuing guaranty given to a firm, or in respect of the transactions of a firm, is, in the absence of agreement to the contrary, revoked as to the future by a change in the firm. The reason is that such a change destroys its identity.
Any person, not a partner in the firm, who represents himself (or, as the phrase is, " holds himself out ), or knowingly sulTers himself to be represented, as a partner, is liable as a partner to any person who has given credit to the firm on the faith of the representation. The representation may be by words spoken or written, or by conduct. The liability will attach, although the person who makes the representation does not know that the person who has acted on it knew of it. The continued use of a deceased partner's name does not impose liability on his estate.
III. Relations of Partners to one another.—The mutual rights and duties of partners depend upon the agreement between them. Many of these rights and duties are stated in the Partnership Act; but, whether stated in the act or ascertained by agreement, they may be varied by the consent of all the partners; such consent may be express or inferred from conduct. Subject to any agreement, partners share equally in the capital and profits of their business, and must contribute equally to losses, whether of capital or otherwise: they are entitled to be indemnified by their firm against liabilities incurred in the proper and ordinary conduct of the partnership business, and for anything necessarily done for its preservation; they are entitled to interest at 5% on their advances to the firm, but not on their capital. Every partner may take part in the management of the partnership business, but no partner is entitled to remuneration for so doing. The majority can bind the minority in ordinary matters connected with the partnership business, but cannot change its nature nor expel a partner, unless expressly authorized so to do. No partner may be introduced into the firm without the consent of all the partners. The partnership books must be kept at the principal place of business, and every partner may inspect and copy them. Partners must render to each other true accounts and full information of all things afTecting the partnership. A partner may not make use of anything belonging to his firm for his private purposes, nor may he compete with it in business. If he does so he must account to his firm for any profit he may make.
Partners may agree what shall and what shall not be partnership property, and can by agreement convert partnership property into the separate property of the individual partners, and vice versa. Subject to any such agreement, all property originally brought into the partnership stock, or acquired on
