the checks which his bank has to pay, he may receive a number of checks of the same depositor, and they are all received at precisely the same moment; if the bank cannot pay all checks of that depositor, it must pay none of them. The bank cannot regard their dates; for priority of presentment, not of date, secures priority of payment. It has no legal right to select or choose from among them certain ones which it will honor, or certain ones which it will dishonor; all or none must be paid; any other course would render the bank liable to the holders of the dishonored paper.'

222

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222 Morse B. & B., Sec. 354.

THE LAW OF PARTNERSHIP

(PART 1)

DEFINITION AND RELATION

1. Partnership Defined. A partnership, or, as it is sometimes called, a copartnership, in the popular sense of the word, is an association of two or more persons for the purpose of doing business together for gain, and of sharing the profits of that business. In a legal sense, the word denotes the relation between the members who compose the association. The English partnership act defines it as "the relation which subsists between persons carrying on business in common, with a view of profit.” Such an association is usually called a firm; but the latter word refers, in strictness, only to the name or names under which the business is conducted.' There are numerous partnerships which are not, in any sense, firms.

The persons who enter into a partnership are called partners or copartners. The capital of a partnership is the original stock upon which its business is based, whether contributed in money or other property, and such additions as may be made, by mutual consent, from time to time. The profits of a partnership are the income, in excess of the capital, resulting from the business conducted.'

2. The Partnership Relation. - The relation between the partners is purely contractual, arising from a voluntary contract, by which they agree to contribute their money, goods, labor, or skill, or any or all of them, to the prosecution of some lawful business, or enterprise, commercial or

17 W. R. (Eng.) 365 (1859).

22 R. I. 330 (1852).

For notice of copyright, see page immediately following the title page.

otherwise, with an understanding, either express or implied from the nature of the enterprise, that there shall be a communion of profit, and, generally, of loss, between them. The effect of the partnership relation is to make each partner the agent of the others for the transaction of the firm's business and liable for the entire debts and undertakings of the firm. As a general rule, what a partnership is is a question of law to be decided by the judge who presides at the trial in which the question arises; whether a partnership exist in a given instance is a question of fact, to be decided by the jury, under instructions from the judge; but, when the agreement between the parties is in writing, the question is usually determined by the proper interpretation of that agreement by the court.

When a partnership rests upon a written agreement, or formal articles of partnership, there can be but little doubt as to who are the partners of the firm; but, when there is no written agreement, or it is sought to show that one who is not named in the agreement is in fact a partner, and the proof of the relation rests upon inferences to be drawn from the acts of the parties, it is often difficult to establish the relation satisfactorily. As a general rule, whenever there is such a union of interest and action as the law deems sufficient to constitute a partnership, the parties have all the rights, and are subject to all the liabilities, of partners, and third persons dealing with them are entitled to all the rights and remedies which result from the partnership relation.

3. Status of a Partnership. -The status of a partnership, by which is meant its condition in a legal sense, or the relative position which the law assigns to it, is practically that of an individual. For most legal purposes, a partnership is regarded as having an existence of its own, and is, consequently, regarded and treated as being a distinct entity (that is, an existing thing, or being).

3 10 Me. 458 (1833).

61 Mich. 216 (1886); 58 Conn. 413 (1890).

Its property belongs

550 Vt. 676 (1878).

to it, and not to the partners, and its rights and liabilities are its own, and not those of its partners. But it is not a person distinct from its members, like a corporation; and its existence depends entirely on its members.'

4. Essential Elements. In order to constitute a partnership, the association must be intended for the acquisition of gain, and for the transaction of business, either commercial or professional. There must be a community of interest for business purposes. An association that does not present the features of a business enterprise, such as a cooperative institution formed for the purpose of supplying goods to its own members only, and not selling to outsiders, is not a partnership; and the same is the case with a mutual benefit association, and an association for the sharing of losses only. It is not essential to the creation of a partnership, however, that it should be intended to carry on any protracted business dealings. There may be a partnership for a single transaction."

5. Contribution. - The other essential elements of a partnership are the contribution to the common undertaking,' and the sharing of its profits. Contribution may be either by putting money or goods into the capital stock of the partnership, by furnishing real estate for the transaction of its business, either temporarily or by an absolute conveyance, or by furnishing services. Any cooperation in the prosecution of the partnership business is sufficient. Contribution, however, must go hand in hand with profit sharing." Contribution without a share in the profits is a mere gift to the firm and cannot create a partnership relation, while a share in the profits, without contribution, is a gift by the firm to the recipient. It is not essential that a new partner who is taken into the firm should contribute money or property; it is competent for the prior existing partners to give

him an interest in the property of the partnership, in consideration of his taking entire charge and control of the business.12

6. Sharing of Profits. - Mere participation in profits and losses does not necessarily constitute a partnership;" and loaning money to a partnership under an agreement that the lender shall receive interest and participate in the profits in a certain contingency does not make him liable as a partner. Mere compensation for services to be paid out of the profits, or contingent on the making of profits, is not such a sharing of profits as will constitute an employe a partner." There is a clear distinction between participating in profits as profits, and merely measuring compensation by profits. In the former case, the recipient shares in the profits as a principal; in the latter, he does not; it is participation as principal that constitutes a partner."

Sharing in losses has been held to be an incident of the partnership relation; but this is not universally true. There may be a partnership without any liability to share losses;" and, consequently, though it may be an incident of any ordinary partnership, it is certainly not an essential element of the relation.

7. Test of Partnership. -The chief test of a partnership was formerly held to be participation in profits, but that was discarded by high authority, and it was stated that the true test, at least so far as liability to third parties is concerned, was whether the person attempted to be charged as partner had authorized the managers of the business to carry it on in his behalf." This test, also, has proved unsatisfactory; the supreme court of the United States has recently said: "In the present state of the law upon the subject, it may perhaps be doubted whether any more precise general rule can be laid down than, as indicated at the beginning of

12 132 U. S. 549 (1889).

13 54 Mo. 325 (1873); 89 Mo. 192 (1886);

Pa. 374 (1869); 176 Pa. 361 (1896).

15 182 Pa. 624 (1897).

165 B. & Ald. (Eng.) 954 (1822). 178 H. L. Cas. (Eng.) 268 (1860).

14 76 N. Y. 58 (1879); 62 Pa. 374 (1869); 176 Pa. 361 (1896).