§ 171. Duty to devote himself to advancement of firm's interests. In a recent case wherein there was, in fact, an express agreement that each should reasonably devote his time. and attention to the partnership affairs, the court said that this fact did not materially alter the situation, "for undoubtedly in the absence of express agreement to the contrary a partner is impliedly bound thus reasonably to devote himself to the advancement of the co-partnership of which he has become a member." Persistent failure to do so would usually constitute a good reason for dissolving the partnership; it would usually furnish a ground for the recovery of damages; but, as will be seen in the following section, it would furnish no ground to claim an accounting for the profits which the recreant partner made in outside ventures while he was neglecting the partnership business, unless those ventures were such as ought to have been undertaken for the partnership because they were within the scope of its business.

Winstanley v. Gleyre (1893), 146 Ill. 27, 34 N. E. 628; that insurance of firm property, taken in the name of one partner, inures to the firm: Tebbetts v. Dearborn (1883), 74 Me. 392, Mechem's Cas. 871; that one partner may not apply firm property to his own uses: Morrison v. Blodgett (1836), 8 N. H. 238, 29 Am. Dec. 653; that one partner may not through a third person secretly purchase firm assets sold on dissolution: Jones v. Dexter (1881), 130 Mass. 380, 39 Am. Rep. 459, Mechem's Cas. 873, and note; whether one partner may avail himself of information acquired as a partner to aid him in carrying on another business in competition with the firm: Aas v. Benham (1891), 2 Ch. 244; Latta v. Kilbourn (1893), 150 U. S. 524, 14 S. Ct. 201, 37 L. ed. 1169, Mechem's Cas. 260, Burd. Cas. 503, Gilm. Cas. 425.

Products of partnership activity inure to the partnership: Whitney v. Dewey (1907), 86 C. C. A. 21, 158 Fed. 385; Jennings v. Rickard (1887), 10 Colo. 395, 15 Pac. 677, Gilm. Cas. 421; Hurst v. Brennen (1913), 239 Pa. 216, 86 Atl. 778, 34 Ann. Cas. 428; Burton v. Wookey (1822), 6 Madd. 367, Gilm. Cas. 418.

But defendant was not charged as a trustee where, after the termination of the partnership, he bought for himself the property which the partnership had been created to sell to others at a profit: Kayser v. Maugham (1885), 8 Colo. 232, 6 Pac. 803.

2 Barclay v. Barrie (1913), 209 N. Y. 40, 102 N. E. 602, 47 L. R. A. (N. S.) 839, 29 Ann. Cas. 1143.

§ 172. Duty not to carry on other business to prejudice of firm.-Express stipulations in the partnership articles respecting the right of all or any of the partners to engage in other business are common and often desirable. The partners may agree that a certain partner shall not, or that no partner shall, engage or be interested in any other business. Equally, they may agree in their articles or otherwise that one or more partners may carry on other business, or be relieved in whole or in part from giving their time and efforts to the firm business; but in the absence of such an agreement, a partner has no right to give his time, skill or efforts to another business or firm to the prejudice of his partners. If without such consent he carries on the same business as that of the firm and in competition with it, and thus makes profits which ought to have enured to the firm, he may be compelled to account to the firm for the profits which he makes, but he will not be compelled to account for the profits if the business is a different and non-competing one. In the latter case, an action for damages would ordinarily be the legal remedy.5 The violation of express covenants may also be enjoined.

3 See Goldsmith v. Eichold (1891), 94 Ala. 116, 10 So. 80, 33 Am. St. R. 97; Todd v. Rafferty (1878), 30 N. J. Eq. 254; Holmes v. Darling (1913), 213 Mass. 303, 100 N. E. 611; Hurst v. Brennen (1913), 239 Pa. 216, 86 Atl. 778, 34 Ann. Cas. 428; Wiggins v. Markham (1906), 131 Iowa 102, 108 N. W. 113.

4 See Aas v. Benham (1891), 2 Ch. 244; Latta v. Kilbourn (1893), 150 U. S. 524, 14 S. Ct. 201, 37 L. ed. 1169, Mechem's Cas. 260, Burd. Cas. 503, Gilm. Cas. 425; Metcalfe v. Bradshaw (1893), 145 Ill. 124, 33 N. E. 1116, 36 Am. St. R. 478, Mechem's Cas. 875.

As to the right of the partnership to claim the benefit of inventions made by one partner during the partnership, see Belcher v. Whitte

more (1883), 134 Mass. 330, Burd. Cas. 515; National Wire Bound Box Co. v. Healy (1911), 110 C. C. A. 613, 189 Fed. 49.

5 Thus in Dean v. MacDowell (1877), 8 Ch. Div. 345, where there was an express agreement that neither partner would engage in other business, and one partner did engage in other business of a different and non-competing sort, it was said that for this breach of contract there might be a dissolution or in some cases an injunction or an action for damages, but not a bill in equity to compel an accounting of the profits made in the other business. It was conceded that no actual damages could be proved.

6 See Levine v. Michel (1883), 35 La. Ann. 1121.

"If a member enter into a transaction in his own behalf, which is within the scope of the partnership business," said the court in one case, "his copartner may insist that it is a fraud upon him and claim the benefit resulting from it; yet this is a right which the partner can alone assert, and it is not available to third persons for the purpose of fixing a liability upon the partnership when such claim has not been asserted."7

Clearly, however, the fact that a partner makes profits in outside transactions is, of itself, a matter of no concern to his copartners if, in doing so, he violated no duty to the firm or contravened no partnership agreement. Equally, also, is it no breach of duty, in a partner who has not agreed to do so, not to admit his copartners into, or furnish them funds to join, his legitimate outside ventures.

§ 173. Duty to exercise care and skill.—It is the duty of each partner to his copartners and he impliedly if not expressly agrees, to transact the business of the firm with reasonable care, skill, diligence and economy; and if the firm sustains injury by reason of his failure to do so, he must bear the loss, though in matters of judgment he will not be liable for a loss caused by honest mistake or error of judgment not amounting to wantonness or fraud.10 The fact that he is the managing partner increases the scope of his duty but does not change the measure of his responsibility.11

Obviously, however, one partner has no just ground for put

7 Lockwood v. Beckwith (1858), 6 Mich. 168, 72 Am. Dec. 69.

8 See Latta v. Kilbourn, supra; Shrader V. Downing (1914), 79 Wash. 476, 140 Pac. 558, 52 L. R. A. (N. S.) 389; Dennis v. Gordon (1912), 163 Cal. 427, 125 Pac. 1063; Wheeler v. Sage (1863), 1 Wall. (68 U. S.) 518, 17 L. ed. 646. But compare Kyle v. Griffin (1915), 76 W. Va. 213, 85 S. E. 559.

9 See Yetzer v. Applegate (1891), 83 Iowa 726, 50 N. W. 66; Gordon v. Moore (1890), 134 Pa. 486, 19

Atl. 753; Carlin V. Donegan
(1875), 15 Kans. 495; Bohrer v.
Drake (1885), 33 Minn. 408, 23 N.
W. 840.

10 See Charlton v. Sloan (1888), 76 Iowa 288, 41 N. W. 303.

11 Exchange Bank V. Gardner (1897), 104 Iowa 176, 73 N. W. 591; Hall v. Sannoner (1884), 44 Ark. 34; Poole v. Koons (1911), 252 Ill. 49, 96 N. E. 556; Northen v. Tatum (1909), 164 Ala. 368, 51 So. 17.

ting a loss upon his copartner where the former was as much at fault as the latter,12 nor may he properly complain that his copartner did not do some act or take some precaution which the complaining partner was under equal duty and had equal power to do or take.13

Equally obviously, also, would the latter rule be modified where the partner complained of had the matter exclusively in his charge or was the managing partner, and the other had no knowledge or opportunity which would enable him to protect himself.

The measure of responsibility which the firm owes to third persons for a partner's acts or omissions in not necessarily the one which is to govern that partner's responsibility to his copartners; for it is entirely obvious that the firm may assume to third persons a responsibility which it was not the intention, as between themselves, that the partner in question should as

sume.

§ 174. Duty to conform to partnership agreements. It is also the duty of each partner to conform to all of the agreements, regulations and restrictions imposed by the partnership articles, and to confine his acts within the scope and limits fixed for the partnership business. If, by reason of his breach of duty in these respects, a loss happens to his partners, he must indemnify them.14

Thus, where the partners expressly agreed that no one of them should sign, accept or indorse negotiable paper except for

12 See Insley v. Shire (1895), 54 Kan. 793, 39 Pac. 713, 45 Am. St. R. 308, Mechem's Cas. 270.

13 See Lyons v. Lyons (1903), 207 Pa. 7, 56 Atl. 54, 99 Am. St. R. 779, Mechem's Cas. 880; Chalmers v. Chalmers (1889), 81 Cal. 81, 22 Pac. 395 (Cases wherein the partner who complained that the other had not collected debts, had equal opportunity to collect them himself).

14 See Murphy v. Crafts (1858), 13 La. Ann. 519, 71 Am. Dec. 519,

Mechem's Cas. 275, Gilm. Cas. 438; McCoy v. Crossfield (1909), 54 Ore. 591, 104 Pac. 423; Looney v. Gillenwaters (1872), 58 Tenn. (11 Heisk) 133; Haller v. Willamowicz (1861), 23 Ark. 566 (here the agreement was that one partner should not take part in the business, and caused loss by doing so).

Violation may be waived: Weeks v. McClintock (1887), 50 Ark. 193, 6 S. W. 734.

their own legitimate purposes, and one of them used the firm name for the accommodation of the third person in such a way that the firm was held liable, the offending partner was compelled to make good the loss to his partners.15 The same ruling was made where the partners had expressly agreed not to give firm credit to relatives, and one of them did so to the loss of the firm.16 And where one partner who had stipulated to render certain services for the firm refused without reasonable cause to do so, it was held that he was answerable to his partners for the value of the services.17

§ 175. Duty of partners to keep accounts-Right of inspection. It is the right of every partner to have true and proper accounts kept of the partnership transactions, and to have these accounts, at all reasonable times, open to his inspection at the place of business. The general duty of keeping the formal books of accounts may, by the articles or other agreement, be devolved upon one partner, or upon a clerk; but even in such a case, as well as when there is no agreement, it is the duty of each partner to make and keep, or furnish to the proper person to keep, correct accounts of such partner's own transactions for the firm. Where a partner fails in his duty in this regard, every reasonable presumption will be made against him upon the final accounting.18

15 Murphy v. Crafts, supra. 16 McCoy v. Crossfield, supra. 17 Marsh's Appeal (1871), 69 Pa. St. 30, 8 Am. Rep. 206.

18 See Kelly v. Greenleaf (1843), 3 Story (U. S. C. C.) 105; Webb v. Fordyce (1880), 55 Iowa 11, Mechem's Cas. 276; Holden v. Thurber (1909), 72 Atl. (R. I.) 720; Hall v. Clagett (1877), 48 Md. 223; Pierce v. Scott (1861), 37 Ark. 308; Pomeroy v. Benton (1882), 77 Mo. 64; Diamond v. Henderson (1879), 47 Wis. 172; Knapp v. Edwards (1883), 57 Wis. 191, 15 N. W. 140; Chandler v. Sherman (1877), 16 Fla.

99; Clarke v. Clarke (1919), Va.

99 S. E. 664.

It occasionally happens that the parties have been so negligent in the keeping of accounts that no just and reasonable conclusion can be reached by the court. In such a case the court will dismiss the bill. It will not grope its way in utter darkness, and undertake to create and establish a claim upon mere contingencies or the preponderance of mere possibilities or probabili ties.'' Ryman v. Ryman (1901), 100 Va. 20, 40 S. E. 96.