partnership is unlimited, that is to say, the partners are liable to creditors for firm debts, because in the theory of partnership, they are individual or personal debts. The arrangement of the partners, if any, with each other, limiting liability of some of them, cannot take away from creditors the right to hold them for firm debts.

(3) Joint stock companies.

The words "joint stock company" are used generally to describe a concern which has been organized upon the plan of a "stock company" or corporation, except that state charter is lacking. Many authors, however, use the words "joint stock company" to indicate a corporation. There are transferable shares, directors, and officers and by laws, and all the appearances of legal entity. There being, however, no charter, that is, no franchise from the state to exist as a corporation, the concern is in substance a partnership conducted after the likeness of a corporation. The liability of the members to pay in capital is limited to the number of shares held, but this limitation is not binding on creditors, and any member of such an association may have to pay its debts. "These associations, formed for business purposes, were at common law, and as a general rule still are considered merely as partnerships and their rights and liabilities are in the main governed by the same rules and principles which regulate commercial partnerships." 17

In some states, statutes are or have been in force permitting the organization of such companies, with limited liability. Such statutes are in the nature of limited part

17. People v. Rose, 219 Ill. 46, quoting 17 Amer. & Eng Ency. of Law, 2nd Ed., pp. 636, 637.

nership acts, and, comparatively speaking, have been little used, as incorporation has better served the purpose.

Sec. 11. KINDS OF PARTNERS. Partners are known as real, ostensible, active, silent, secret and dormant.

(1) In general.

To indicate the nature of a partner's participation in the firm business, or his right to actively participate the terms described below are used as indicated.

(2) Real partners.

One who is actually a partner, whether known to be one, or whether secret, or whether active, silent or dormant, is known as a real partner.

(3) Ostensible partners.

One who is represented to be a partner to outsiders, whether he is one or not, is known as an ostensible partner. In so far as he permits the representation, he is liable as a real partner to those who deal with the firm thinking him to be a partner. But his rights to participate in profits, or his liability to the other partners to bear his share of losses depends on the actual arrangement.

(4) Active partners.

An active partner is one who takes an active part in the firm's business.

(5) Silent partners.

Frequently a partner merely contributes capital and takes no part in the firm's business. He is known as a silent partner. He may be ostensible or secret.

(6) Secret partners.

One whose presence in the firm is concealed is known as a secret partner. He is liable to creditors in case they discover his existence. He may be active or silent.

(7) Dormant partners.

Such a partner is both secret and silent. This term is also frequently used to denote the secret partner; but the derivation of the term shows it more aptly applied to those who are both secret and silent.

Sec. 12. SUB PARTNERSHIPS. A sub-partnership is held to exist when one partner has an arrangement with some person to share with him the profits which that partner derives from the partnership. This does not make such person a member of the partnership and he cannot be held as a partner.

If A, B and C are partners, C may have some arrangement with D, whereby D is to share with C the profits made by C out of the partnership. This arrangement does not make D a member of the firm and he can have no voice in its management and cannot be made liable for its indebtedness. Dis known as a "sub-partner."

CHAPTER 2.

THE PARTNERSHIP AGREEMENT.

Sec. 13. AGREEMENT ESSENTIAL. to form a partnership is essential.

An agreement

It is generally true that partnership is strictly conventional. We have already seen that no one will be thrust into partnership with another against his consent, and that death and transfer of interest dissolves the partnership. Partnership by estoppel is no exception to the rule that agreement is necessary. One is in such case responsible for the situation that forbids him to assert the truth.

There are cases, however, in which a person may be held as a partner where he never intended to be so held. Thus, in case of association for purposes of incorporation, with failure to become either a de jure or de facto corporation, results in partnership liability according to many decisions.18 This results, however, because intending to be a co-owner in a business for profit, he does not become a corporation and therefore must be held as partner.

Sec. 14. FORM REQUIRED. No particular form is required. The contract of partnership may be oral or in writing, in the absence of special statutory provisions.

While it is highly desirable that a partnership agreement be in writing, the agreement may be oral, unless

18. Harril v. Davis, 168 Fed. 187, 22 L. R. A. (N. S.) 1152. As to what constitutes de facto incorporation, see Corporations in this series.

some particular state statute requires a writing for some purpose.

The English "Statute of Frauds," re-enacted in the various American states, requires that contracts which by their terms are not to be performed within a year are not enforceable in the courts, unless there are some written memoranda to prove them, signed by the party sought to be charged. This has been held to apply to contracts of partnership.

A partnership in real estate business may be proved, and an accounting obtained between partners, although the partnership agreement be oral.

Where the agreement is drawn up in a forma! way i is called "The Articles of Partnership."

Sec. 15. THE ARTICLES OF PARTNERSHIP. These constitute the evidence of the contract between the parties. They are not binding on third persons without notice of them, and their provisions may be modified or waived by subsequent agreement or conduct.

It is desirable in partnerships of any moment, that articles of partnership should be drawn with a good deal of care and considerable detail. These articles constitute the evidence of the contract as between the parties in reference to the manner of conducting the partnership, the interests of the partners, etc. But the adoption of such articles in no way affects the general duties of partners toward each other, as, for example, to act in the utmost good faith.

What the partnership articles contain is usually of small concern to parties dealing with the partnership so long as they have no notice of restrictions therein imposed. They can usually assume that each partner has authority to bind the firm for its proper purposes. The articles of partner