are touched in the following sections dealing with an outgoing partner. § 320. Under the Uniform Partnership Act.-The Uniform Partnership Act proposes a radical change in the existing law. It provides that "A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership before his admission as though he had been a partner when such obligations were incurred, except that this liability shall be satisfied only out of partnership property." 42 It will be observed that this does not, like the contractual assumption, impose upon the incoming partner a general and individual liability which could be satisfied out of his separate estate. It presumptively does not preclude a contractual assumption with its ordinary consequences. The purpose of the provision is to enable the creditors of the first firm more effectually to secure payment out of its assets notwithstanding their transfer to the succeeding firm.43 § 321. Of an outgoing partner.-A person who retires from a firm which thereafter continues is said to be an outgoing or retiring partner. His withdrawal is, of course, in law ordinarily a dissolution of the firm,-though in practice the firm is frequently spoken of as continuing, and his liability for future acts is governed by the general rules governing dissolution. He is, as will be seen,44 in general liable for acts done until he has not only withdrawn from the firm but has also given due notice of his withdrawal.45 His liability to creditors for the existing debts and obligations of the partnership is, of course, not terminated by his withdrawal, but continues with all of the ordinary incidents, such as liability to action, joinder as a party, and the like, until he has in some way been discharged. No arrangement made between the continuing partners and himself can, of itself, re 42 Sec. 17. The same provision is repeated, in slightly different language, in section 41 of the act. 43 See post, § 462. 44 See post, § 398. lease him from his liability to the existing creditors unless the latter in some way assent to it, although, as will be seen, such arrangements are sometimes held to create a relation of principal and surety between the continuing and the retiring partners, which, when brought to the attention of the creditor, he may not ignore.46 The creditor may also, as will be seen, expressly or tacitly so assent to the arrangement as to work a novation and the consequent release of the outgoing partner.47 § 322. The outgoing partner whom the continuing partners have undertaken to protect has his remedy against them according to the nature of their undertaking.48 If their agreement was to pay the debts when due, there will be a breach of that agreement if they fail to do so, even though the outgoing partner has not paid or been compelled to pay the debts himself. That fact affects only the measure of damages, not the 46 See post, § 428. 47 See post, § 429. 48 See Meyer v. Parsons (1900), 129 Cal. 653, 62 Pac. 216; Alexander v. McPeck (1904), 189 Mass. 34, 75 N. E. 88; Robinson v. Roos (1891), 138 Ill. 550, 28 N. E. 821; Griffin v. Orman (1860), 9. Fla. 22; Berridge v. Slawson (1893), 94 Mich. 484, 54 N. W. 278; Bunton v. Dunn (1866), 54 Me. 152; Edwards v. Remington (1881), 51 Wis. 336, 8 N. W. 193, Mechem's Cas. 907. Where one partner sells out to a third person, who agrees to assume his share of the debts, and the purchaser and the other partner form a new partnership and continue the business, there is held to be an implied undertaking on the part of the continuing partner to save the retiring partner harmless to the extent of the assets only and not absolutely: Peyton v. Lewis (1851), 51 Ky. (12 B. Mon.) 356, Mechem's Cas. 1028. Compare La Montagne v. Bank of N. Y. (1905), 183 N. Y. 173, 76 N. E. 33; Sheppard v. Bridges (1911), 137 Ga. 615, 74 S. E. 245. Retired partners held not liable to contribute to the members of the continuing partnership who have paid the existing debts; Savage v. Putnam (1865), 32 N. Y. 501. In a joint stock company or partnership with transferable shares, members who retire leaving the assets and business to the others and their successors are held entitled to be indemnified by the latter against the existing debts: Tyrell v. Washburn (1863), 88 Mass. (6 Allen) 466. Where partner sells out to his copartners who continue the business, held implied agreement on their part to indemnify him against existing debts: Cobb v. Benedict (1900), 27 Colo. 342, 62 Pac. 222, Mechem's Cas. 557. breach. If the agreement were to indemnify him against loss, he ordinarily could not complain until he had paid or been compelled to pay the debts or any of them. He would have an action at law for damages, or, in many cases, in equity to compel performance of the agreement to indemnify. § 323. In general. The general subject of actions by and against the partnership obviously suggests a great variety of questions, such as process, parties, pleading, evidence, defences, and the like, many of which are too extensive or technical for consideration in such a book as this. The question, however, of who are the proper parties to such actions is one of rather fundamental interest, and so are some matters of defense like set-off, and to these subjects this chapter will be chiefly confined. The question of who should be the parties to actions by the partnership involves somewhat different considerations from those raised when the action is against the partnership. Each subject will therefore be separately considered. What is here said has reference to actions brought during the continuance of the partnership. The rules applicable where the partnership is dissolved by death or otherwise will be considered later when dealing with the effect of dissolution.1 I. PARTIES TO ACTIONS BY THE PARTNERSHIP. § 324. Who should sue in actions by the firm.-The question who should join as parties plaintiff may arise when the action is (1) in contract, or (2) in tort. In the former case the contract may have been made (a) in the name of the firm, or (b) in the name of one partner for the benefit of the firm. 1. In Contract. § 325. a. Contracts made in firm name.—In actions upon contracts made in the name of the firm, the action should be brought in the individual names of all the persons who were the actual and ostensible partners at the time the debt or contract sued upon was made or incurred. If some of those partners have since retired from the firm, the action must still be in the names of those who were the partners at the time, and cannot be maintained in the names of the present partners, except in those cases in which the outgoing partners have assigned their interests to the remaining partners, and the statutes permit such assignees to sue in their own names, or in which there has been a promise to pay to the new firm. If one has been admitted as a partner who was not such at the time the contract was made, he cannot join in the action, although it were agreed as between the partners themselves that he should become equally interested with the others in all the 1 See post, § 402 et seq. |