For any violation of their agreement; II. TO THIRD PARTY, (I. If agency was AVOWED; For any act of agent in following cases: 2. Where APPARENT authority was given; or II. If agency was CONCEALED; 1. Expressly, or 59 2. By retaining benefit. For any act of agent in following cases: AN AGENT IS RESPONSIBLE I. TO PRINCIPAL, For any violation of their agreement, or for 2. Want of SKILL or CARE, or 3. Making his own interests ADVERSE. II. TO THIRD PARTY, in the following cases: 1. Where he EXCEEDS the authority, 4. Where he acts FRAUDULENTLY. RESPONSIBILITY TO THIRD PARTY. I. (1. Where agent acts as agent, but specially agrees to be responsible, 2. Where principal is concealed, by (1. Agent's pretending to be principal, or 3. Where agent acts fraudulently. Both agent and principal are responsible. II. Where agent acts as agent, but exceeds his real Į Agent alone is and apparent authority. III. In all other cases. responsible. › Principal alone PARTNERSHIP. CHAPTER XIII. RELATIONS OF THE PARTNERS TO EACH OTHER. 1. Definition.-Partnership is the relation established by an agreement between two or more persons to combine their money, property, labor, or skill in some lawful business, and share the profits in certain proportions. The partners collectively are in many respects considered as a single individual, and as such are often called a house, or firm, having partnership property, and a firm name, under which they do all their business. Copartnership means the same as partnership. 2. Sharing of Profits IS THE MOST IMPORTANT OF THE ELEMENTS GOING TO MAKE UP A PARTNERSHIP, and we may say that, in general, wherever profits are shared, the parties are partners. Thus, though one contributes all the money (called the capital), and the other does all the work, or if in a case where no capital is needed each contributes only his labor, still if they are to share the profits they are partners. But a clerk, who is paid by being given a share in the profits, even though he has no other salary, is not a partner. 3. Who May Be.-Any one who may do business alonei.e., any one who may make contracts, may become a member of a partnership.* But no one can be made a partner against his will, for it is wholly a matter of contract. For the same reason no new member can be introduced into a firm without the consent of each one. This should be so, for the relation is so close, and the power of a partner so great (p. 63), that it would be dangerous to allow it to be exercised over one without his own consent. Thus if A and B are partners, and B could introduce a third he might bring in some one whom A would never have trusted as a partner. 4. Formation.-A PARTNERSHIP IS FORMED SIMPLY AND ONLY BY AGREEMENT. This agreement may be simply a contract in so many words to be partners, or it may be very full and minute in its details. The form on page 285 will give an idea of some of the common clauses. It may be oral or written: if written it is called articles of copartnership. The proportion of the profits each one is to have is usually specified. Parties may engage in business together without any definite agreement, but in such case also they are partners, for one is implied. 5. Duration.—The agreement may specify a time at which the partnership shall terminate (such as in two years), or, as is generally the case, nothing may be said. In the former case neither party has the right to dissolve it until the time expires, but if one partner commits some fraud, or otherwise misbehaves, or becomes insane, a court may end it. In the latter case, WHERE NO TIME IS SPECIFIED ANY PARTNER MAY DISSOLVE A PARTNERSHIP AT WILL. He may do it for any reason, and however small his interest. It may seem strange that so many partnerships should continue year after year, while it is in the power of any partner to dissolve them at any time without making him 62 any loss. The reason is self responsible to the others for that in such cases it is almost always to the best interests of each one to continue. 6. Transfer of Interest.-If the partnership is for no definite time, a partner may sell his interest in the common property to any one at any time. This is probably true also where it was formed for a definite period, though having contracted not to do so he would be responsible to his partners for having broken his contract. But the person to whom he sells does not thereby become a partner in his place, without the consent of the other partners (sec. 3). 7. Effect of Transfer.-THE REAL EFFECT OF A TRANSFER OF INTEREST IS THE DISSOLUTION OF THE FIRM. If the new person is received by all the others, that constitutes a new firm. In the same way, whenever an old member retires from the firm, it is the formation of a new This is so whether the name changes or not. one. 8. Death.-THE DEATH OF ANY PARTNER DISSOLVES The legal representatives of the dead THE WHOLE FIRM. partner do not become partners themselves, but are simply entitled to his share of the partnership property; or, if it is sold, to his share of the proceeds. Thus we see that any change as to the members of a firm dissolves the old Such changes are continually firm, and makes a new one. occurring without any disturbance to the business. 9. Effect of Dissolution.-Upon a dissolution each partner is entitled to demand that there shall be an accounting of the affairs of the firm, that the common property be sold, and that he be paid his proportionate share of what remains after paying its debts. But to do this would not only take time, but in the case of a prosperous business it might cause much loss to all the partners, for the business itself, the trade, would be scattered and lost. 10. A Common Course.-Therefore it is quite common in such a case for the retiring partner to sell his interest as it is, for a given sum, to some of the old partners or to some one else whom they will receive as a new partner, and the business goes on as before. Such a transaction in legal effect, is simply a sale from the old firm to a new one of all the firm property and rights. 11. Rights and Duties.-Since a partnership is wholly a matter of contract, the partners have, as to each other, only such rights and duties as they agree upon. If any one acts contrary to that agreement, he breaks his contract, and is responsible to his partners for the injury. It is always an implied (if not expressed) part of the agreement, that each partner, who is to contribute his time or labor, shall exercise all skill, care, and diligence in the business, and without other compensation than his agreed share of the profits. (See sec. 1 of next chapter.) CHAPTER XIV. RELATIONS OF THE PARTNERS TO THIRD PARTIES. 1. Authority of Partner.-The most important rule connected with partnership is that EACH PARTNER HAS FULL AUTHORITY TO ACT FOR THE FIRM, in any matter connected with its appropriate business. Each is the agent for all, or in other words, for the firm. But as to matters outside of the business, he is not an agent, and if he attempts to bind the firm, it is the act of an agent without authority and only binds himself (p. 55). Thus in a house engaged in the cotton trade, each partner may buy and sell |