CHAPTER 8. RIGHTS OF THIRD PERSONS AGAINST INCOMING, OUTGOING AND SECRET PARTNERS. Sec. 51. LIABILITY OF INCOMING PARTNER. By the common law an incoming partner assumes no liability for firm debts, unless that is his affirmative undertaking. By the Uniform Act it is provided that he is liable except the liability shall be satisfied only out of partnership property. One entering a partnership does not thereby incur a liability for existing indebtedness unless he assumes it. This has always been the common law based upon the nonentity idea and the fact that the indebtedness was not incurred at a time when the incoming partner was a member, and there was therefore no reliance upon his existence in the firm when the credit was extended. The Uniform Act departs from the former view to the extent indicated as follows: "A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising 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." 55 If a partner assumes liability as a part of his contract, creditors can hold him upon it on the theory of a contract made for their benefit. 55. Sec. 17. Sec. 52. LIABILITY OF OUTGOING PARTNER. A partner will be liable for debts incurred during his membership in the firm, whether or not he retires before suit is brought. For debts incurred after his retirement he will be liable to those who have no notice of his withdrawal and contract on the faith of his continued liability. (1) Liability of outgoing partner for debts incurred while a member. A partner who withdraws remains liable to the creditor for debts incurred during his membership in the firm even though he has an agreement with the remaining partners whereby they assume the existing indebtedness. He cannot by withdrawal take from creditors their rights. against him, for he may have been the only financially strong member. If the remaining partners assume the indebtedness, a creditor need not consent to that assumption, as he would thereby be deprived of the benefit of those to whom he had been willing to extend credit. He may, however, consent to the assumption, and that consent may be express, or may be inferred from the course of dealing between such creditor and the person or persons continuing the business. (2) Liability of outgoing partner for debts incurred by the other partners after his retirement. (a) The partner is liable after withdrawal for debts incurred by the remaining members in the partner ship name unless there is notice of withdrawal. Upon withdrawal, the withdrawing partner should be careful to see that due notice is brought to all who may continue to deal with the concern under the impression that he is still a partner. Good faith requires he should take steps to bring notice home to such parties. The rule is that those who deal with the firm after the withdrawal of a member thereof and who have no notice of his withdrawal, may hold him. Example 12. The members of a partnership concluded to incorporate. They formed a corporation which took over the business, but which continued in the same name. This amounted of course to a withdrawal of all the partners from the partnership. A creditor who had dealt with the partners as such, continued to deal with the firm after incorporation. He sued the members of the partnership upon a claim arising after incorporation. It was held he could have a personal judgment because he dealt with the firm without notice of the cessation of the partnership relation.56 (b) Sufficiency of notice of withdrawal. In order to protect himself against liability for future indebtedness, the partner must bring home notice of his withdrawal to those who may deal with the concern upon the assumption that he is still a member. If anyone has actual knowledge of the retirement of the partner, he cannot object that he received no formal notice; and anyone dealing under such conditions that would advise any reasonable person of the fact of the withdrawal will be chargeable with notice, as for instance, where his name had been eliminated from a partnership name consisting in the names of individuals. It is also a fact to be remembered that in many instances where a partner withdraws from a perfectly solvent and reputable concern, he scarcely need worry about being held for future indebtedness; but 56. Weiss v. Gray's Harbor Com'l Co., 111 Ill. Ap. 647. from the legal standpoint, and to be perfectly protected, he must give notice. To all those who have actually dealt with the firm as its customers, or in other ways, he must give actual notice; to all others it is sufficient if he give a constructive notice that is, by publication. The Partnership Act may be consulted for a statement of the rule. It provides: 57 "After dissolution, a partner can bind the partnership * * *by any transaction which would bind the partnership if dissolution had not taken place, provided the other party to the transaction. (1) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of the dissolution; or (2) Though he had not so extended credit, had nevertheless known of the partnership prior to dissolution, and having no notice or knowledge of dissolution the fact of dissolution had not been advertised in a newspaper of general circulation in the place (or in each place if more than one) at which the partnership business was regularly carried on.' Sec. 53. LIABILITY OF SECRET PARTNER TO THIRD PERSONS. A secret partner is responsible to third persons upon those claims arising during his membership in the firm and such others as he may assume. No notice of withdrawal is necessary. A secret partner, being a real party in interest, and therefore is in fact, if not in name, a party to contracts made with the firm. He enjoys the benefits of such contracts and therefore ought to be liable upon them. Upon 57. Sec. 35. |