CHAPTER VI

OF SOME INCIDENTS OF

PARTNERSHIP-PARTNERSHIP ARTICLES, FIRM NAME, GOOD WILL, PARTNERSHIP PROPERTY.

§ 145. Extent of each partner's interest.

146, 147. The transfer of shares. 148, 149. Seizure of partner's share by his individual creditor.

2. Of the Title to Personal Property.

150. May be held in firm name. 151. May be held in name of one partner for the firm.

152. Title is in partners collectively.

3. Of the Title to Real Estate. 153. Older rule-Legal title to real property cannot ordinarily be taken in firm

name.

154. But the equitable title is in the firm.

§ 112. In general.-A partnership having been formed, a number of subjects incident to its existence become important, and though they may not all be similar in their character they may appropriately be grouped together in one chapter for consideration.

I. OF ARTICLES OF PARTNERSHIP.

§ 113. Of the necessity of articles.-As has been stated, it is desirable, but not usually indispensable, to have written evidence of the agreement between the parties as to the creation, continuance, terms and conditions of their partnership. The formal written instruments prepared in such cases are spoken of as the partnership articles. As between themselves, it is, in general, possible for the parties to fix their rights, duties and liabilities, as well as the circumstances of the commencement, continuance and termination of the partnership, by their agreement; and though, in the absence of such an agreement, the law will usually determine these matters for them, it is not by any means certain that the legal conclusions will be the same that the parties

contemplated, and it is in any event desirable that the opportunity for controversy be removed by express stipulation.

§ 114. Of the scope of articles. It is not, however, usually feasible, by even the most carefully-drawn articles; to provide beforehand for every possible contingency, or to define all the rights, duties or liabilities of the partners. Much must of.necessity be understood; custom or usage may be tacitly recognized; and conduct or practice may add to or modify that which is expressed. It may thus happen that, in a given case, the body' of law or rules which are to govern the relations of the partners as between themselves is to be gathered from a variety of sources. As was said in one case: 1 "The duties and obligations arising from the relation between the parties are regulated by the express contract between them so far as the express contract extends and continues in force; but if the express contract, or so much of it as continues in force, does not reach to all those duties and obligations, they are implied and enforced by the law; and it is often matter to be collected and inferred from the conduct and practice of the parties whether they have held themselves, or ought or ought not to be held, bound by the particular provisions contained in their express agreement."

In another case,2 in which the question was whether the defendant was entitled to draw a salary in half years when there were no net profits, the court said: "This question is open to doubt if the partnership articles alone are looked at, but its determination does not depend merely upon the construction which would be given to the partnership articles, taken by themselves alone. It is a general rule for the construction of written instruments, including statutes, deeds and contracts, that when the language is open to doubt, and parties whose interests are diverse have from the outset adopted and acted upon a particular construction, such construction will be of great weight with the court, and will usually be adopted by it. This rule

1 Smith v. Jeyes (1841), 4 Beavan (Eng. Ch.) 505.

2 Winchester v. Glazier (1890), 152 Mass. 316, 25 N. E. 728, 9 L. R. A. 424.

3 Citing Stone v. Clark, 1 Metc. 378; Stevenson v. Erskine, 99 Mass. 367; Lovejoy v. Lovett, 124 Mass. 270, 274; Chicago v. Sheldon, 9 Wall. 50, 54.

has full force in the construction of partnership articles, and a practical construction given for several years by the partners themselves to language which would otherwise be open to doubt will usually be accepted by the court as conclusive.”

8115. Of the construction of articles.-In endeavoring to determine what the parties intended by their express provisions, certain rules of construction have been laid down by the courts. Among these, the most important is that which gives prominence to the general purpose and object of the partnership. If certain of the provisions of the articles are capable of two constructions, one of which would promote while the other would retard or defeat that general purpose or object, the former construction is to be preferred; so if powers claimed would, by their exercise, advance the general object, their existence will be more readily inferred than if they are obstructive to it. In the same line are the other rules of construction, that a power conferred is to be deemed to have been so conferred with a view to the benefit of all concerned, and hence that an exercise of it for the benefit of one to the detriment of the others was not really intended, though the words used might, upon their face, bear such a construction; and that any provision, however worded, is, if possible, to be so construed as to prevent one partner from defrauding another in reliance upon its letter, but in violation of its spirit.*

§ 116. Of waiving or enlarging express provisions by conduct.-Any written stipulation, however express, is capable of being modified, superseded or abandoned by the consent of all of the partners; and this consent may be shown not only by express words, but by conduct or the established practice of the parties. But the unanimous consent of all is necessary, for a portion cannot alter, modify or enlarge the contract of all. In an English case it was said by Lord Eldon: "In ordi

4 See Blissett v. Daniel (1853), 10 Hare (Eng. Ch.) 493; Pettyt v. Janeson (1819), 6 Maddock (Eng. Ch.) 146.

5 See McCall v. Moss (1885), 112 Ill. 493.

6 Const v. Harris (1824), 1 Tur. & Rus. 496. So in England v. Curling

nary partnerships nothing is more clear than this: that, although partners enter into a written agreement, stating the terms upon which the joint concern is to be carried on, yet if there be a long course of dealing, or a course of dealing not long, but still so long as to demonstrate that they have all agreed to change the terms of the original written agreement, they may be held to have changed those terms by conduct. For instance, if in a common partnership the parties agree that no one of them shall draw or accept bills of exchange in his own name without the concurrence of the others, yet, if they afterwards slide into a habit of permitting one of them to draw or accept bills without the concurrence of the others, this court will hold that they have varied the terms of the original agreement in that respect."

§ 117. Of continuing partnership under former articles.— When a partnership has existed under articles providing for a definite term, there may be an oral agreement to extend it; 7 bu. if, upon the expiration of that term, the partnership is continued without any new agreement, the original articles will in general continue to regulate the rights and obligations of

(1844), 8 Beavan 129,, it was said by Lord Langdale: "With respect to a partnership agreement, it is to be observed that, all parties being competent to act as they please, they may put an end to or vary it at any moment; a partnership agreement is therefore open to variation from day to day, and the terms of such variations may not only be evidenced by writing, but also by the conduct of the parties in relation to the agreement and to their mode of conducting their business: when, therefore, there is a variation and alteration of the terms of a partnership, it does not follow that there was not a binding agreement at first. Partners, if they please, may, in the course of the partnership, daily come to a new arrangement for the pur

pose of having some addition or alteration in the terms on which they carry on business, provided those additions or alterations be made with the unanimous concurrence of all the partners. See, also, Boardman v. Adams (1857), 5 Iowa 224, Mechem's Cas. 339; Scudder V. Ames (1886), 89 Mo. 496, 14 S. W. Gammon v. Huse (1881), 100 Ill. 234; Gage v. Parmlee (1877), 87 Ill. 329; Thrall v. Seward (1865), 37 Vt. 573; Gregg v. Hord (1889), 129 Ill. 613, 22 N. E. 528; McCall v. Moss (1885), 112 Ill. 493; Thomas v. Lines (1880), 83 N. Car. 191.

525;

Compare Eady v. Newton Coal Co. (1905), 123 Ga. 557, 51 S. E. 661, 1 L. R. A. (N. S.) 650.

7 See Dickinson v. Bold (1816), 3 Desaus. Eq. (S. Car.) 501.