Essentials of the Law ...: Elementary law ... with notes and references for the use of students at law

toppel." The rule is, in fact, nothing else than a special application of the much wider principle of estoppel, which is that, if any man has induced another, whether by assertion or by conduct, to believe in and to act upon the existence of a particular state of facts, he cannot be heard, as against that other, to deny the truth of those facts. It is therefore immaterial whether there is or is not in fact, or to the knowledge of the creditor, any sharing of profits. And it makes no difference even if the creditor knows of the existence of an agreement between the apparent partners that the party lending his name to the firm shall not have the rights or incur the liabilities of a partner. For his name, if lent upon a private indemnity as between the lender and borrower, is still lent for the very purpose of obtaining credit for the firm on the faith of his being responsible; and the duty of the other partners to indemnify him, so far from being inconsistent with his liability to third persons, is founded on it and assumes it as unqualified.5

What amounts to "holding out."

To constitute "holding out" there must be a real lending of the party's credit to the partnership. The use of a man's name without his knowledge cannot make him a partner by estoppel. Also the use of his name must have been made known to the person who seeks to make him liable; otherwise there is no duty towards that person. There may be a “holding out" without any direct communication, by words or conduct, between the parties. One who makes an assertion intending it to be repeated and acted upon, or even under such curcumstances that it is likely to be repeated and acted upon, by third persons, will be liable to those who afterwards hear of it and act upon it. "If the defendant informs A B that he is a partner in a commercial establishment, and A B informs the plaintiff, and the plaintiff, believing the defendant to be a member of the firm, supplies goods to them, the defendant is liable for the price." If the party is not named, or even if his name is refused, but at the same time such a description is given as sufficiently identifies the person the result is the same as if his name had been given as a partner.

Doctrine of "holding out" applies to administration in Bank

ruptcy.

The rule as to "holding out" extends to administration in bankruptcy.

3. Per Cur., Mollwo, March & Co. v. Court of Wards, L. R. 4 P. C. at P. 435.

4. For fuller and more exact statements see Carr v. London & Northwestern Railway Co., L. R. 10 C. P. at pp. 316, 317; Stephens' Digest of the Law of Evidence, 105 (Art. 102).

5. Lindley, i. (3d ed.), 48.

6. Lindley, i. (3d ed.), 50; Fox. v. Clifton, 6 Bing. 777, 496.

7. 1 Lind. Part. (Ewell's ed.), 42 et seq.; Gilm. Part. 279; Martyn v. Gray, 14 C. B. (N. S.) 824.

8. Per Williams, J., Martyn v. Gray, 14 C. B. (N. S.) 841.

If two persons trade as partners, and buy goods on their credit as partners, and afterwards both become bankrupt, then, whatever the nature of the real agreement between themselves, the assets of the business must be administered as joint estate for the benefit of the creditors of the supposed firm.'

It does not apply to bind a Deceased Partner's Estate.

The doctrine of "holding out" does not extend to bind the estate of a deceased partner where, after his death, the business of the firm is continued in the old name; and whether creditors of the firm know of his death or not is immaterial. "The executor of the deceased incurs no liability by the continued use of the old name." 1

Liability of Retired Partners.

A partner who has retired from the firm may be liable, on the principle of "holding out," for debts of the firm contracted afterwards, if he has omitted to give notice of his retirement to the creditors.1a But he cannot be thus liable to a creditor of the firm who did not know him to be a member while he was such in fact, and therefore cannot be supposed to have dealt with the firm on the faith of having his credit to look to.2 This is the meaning of the saying that a dormant partner may retire from firm without giving notice to the world." 3

CHAPTER IV.

OF THE LIABILITY OF PARTNERS FOR PARTNERSHIP DEBTS, AND THE AUTHORITY OF PARTNERS TO BIND THE FIRM.

ARTICLE 15.

LIABILITY OF PARTNERS FOR DEBTS OF FIRM.

Every partner is liable jointly with the other partners, and in the case of mercantile contracts [at all events] is also severally liable for all debts and obligations incurred

9. Re Rowland and Crankshaw, 1 Ch. 421. As to reported ownership, see Gilm. Part. 435, 436.

1. Lindley, i. 52, 53, 418.

1a. Gilm. Part. 265 et seq.

2. Carter v. Whaley, 1 B. & Ad. 11.

3. Heath v. Sansom, 4 B. & Ad. 172, 177, per Patterson, J. On the subjects of this and of the preceding paragraph, see further Art. 53, below, and Gilm. Part. 111, 272.

while he is a partner and in the usual course of the partnership business by or on behalf of the firm.1

The individual partner's liability for the dealings of the firm, whether he has himself taken an active part in them or not, is of the same nature as the liability of a principal for the acts of his agent, and is often treated as a species of it? Each individual partner constitutes the others his agents for the purpose of entering into all contracts for him within the scope of the partnership concern, and consequently is liable to the performance of all such contracts in the same manner as if entered into personally by himself.”3

The limitation of the liability to things done in the usual course of business will be presently spoken of under the correlative head of the partner's authority to bind the firm.

Whether joint or joint and several.

On the question whether the liability is joint only, or joint and several, It is stated by Mr. Justice Lindley that it is "in equity not only joint, but also several, except under special circumstances." 4

The Master of the Rolls, in a recent case where the doctrine was considered, declined to affirm this except as to the contracts of mercantile partnerships, but did not contradict it.5

ARTICLE 16.

LIABILITIES OF OUTGOING AND INCOMING PARTNERS.

A partner who retires from a firm, or the estate of a partner who dies, does not thereby cease to be liable for partnership debts contracted before his retirement or death, and a person who is admitted as a partner into an existing firm does not thereby become liable to the creditors

1. Slightly altered from I. C. A.

249.

1a. Unless modified by statute or doctrines of equity, the liability of partners with respect to partnership transactions, is joint and not several. Gilm. Part. 217 et seq.; 1 Lind. Part. (Ewell's ed.), *192, and notes.

2. See Cox v. Hickman, 8 H. L. C. at pp. 304, 312; Lindley, i. (3d ed.), 379-382.

3. Per Tindal, C. J.; Fox v. Clifton, 6 Bing. at p. 776.

4. Lindley, i. (3d ed.), 382. 5. Beresford v. Browning, 20 Eq. 564, 573, 577; and see per James, L. J., S. C. in C. A. 1 Ch. D. 30, 34.

6. Lindley i. (3d ed.), 451; Gilm. Part. 249. In some jurisdictions the retiring partner becomes, under cer tain circumstances, secondarily liable.

Id.

of the firm for anything done before he became a partner; but a retiring partner may be discharged from any existing liabilities, and an incoming partner may become subject thereto, by an agreement to that effect between the members of the new firm and the creditor.

Such agreement as last aforesaid may be either express or inferred as a fact from the course of dealing between the creditors and the new firm.8

ILLUSTRATIONS.

1. A, B, and C are partners. D is a creditor of the firm. A retires from the firm, and B and C, either alone or together with a new partner, E, take upon themselves the liabilities of the old firm. This alone does not affect D's right to obtain payment from A, B, and C, or A's liability to D.9 2. A partnership firm, consisting of A, B, and C, enters into a continuing contract with D, which is to run over a period of three years. After one year A retires from the firm, taking a covenant from B and C to indemnify him against all liabilities under the contract. D knows of A's retirement. A remains liable to D under the contract, and is bound by everything duly done under it by B and C after his retirement from the firm.1

3. A, B, and C are bankers in partnership. A dies, and B and C continue the business. D, E, and F, customers of the bank at the time of A's death, continue to deal with the bank in the usual way after they know of A's death. The firm afterwards becomes insolvent. A's estate remains liable to D, E, and F for the balances due to them respectively at the time of A's death, less any sum subsequently drawn out.2

In the case last put, one customer, D, discovers that securities held by the bank for him have been sold without his authority in A's lifetime. Here A's estate is not discharged from being liable to make good the loss, for the additional reason that D could not elect to discharge it from this particular liability before he knew of the wrongful sale.3

4. A and B are partners. F is a creditor of the firm. A and B take C into partnership. C brings in no capital. The assets and liabilities of the old firm are, by the consent of all the partners-but without any express provision in the new deed of partnership-transferred to and as

7. Lindley, i. (3d ed.), 404; I. C. A. 249; Gilm. Part. 242.

8. Lindley, i. (3d ed.), 450-465. See Gilm. Part. 242.

9. Lindley, i. (3d ed.), 451; Gilm. Part. 249.

1. Oakford v.

European and Amer

ican Steam Shipping Company, 1 H. & M. 182, 191. See, also, Swire v. Redman, 1 Q. B. D. 536.

2. Devaynes v. Noble, Sleech's case, 1 Mer. 539, 569; Clayton's Case, Ib. 572, 604.

3. Clayton's Case, Ib. 579.

while he is a partner and in the usual course of the partnership business by or on behalf of the firm.1

The individual partner's liability for the dealings of the firm, whether he has himself taken an active part in them or not, is of the same nature as the liability of a principal for the acts of his agent, and is often treated as a species of it.2 "Each individual partner constitutes the others his agents for the purpose of entering into all contracts for him within the scope of the partnership concern, and consequently is liable to the performance of all such contracts in the same manner as if entered into personally by himself."3

The limitation of the liability to things done in the usual course of business will be presently spoken of under the correlative head of the partner's authority to bind the firm.

Whether joint or joint and several.

The Master of the Rolls, in a recent case where the doctrine was considered, declined to affirm this except as to the contracts of mercantile partnerships, but did not contradict it.5

ARTICLE 16.

LIABILITIES OF OUTGOING AND INCOMING PARTNERS.

1. Slightly altered from I. C. A.

249.

2. See Cox v. Hickman, 8 H. L. C. at pp. 304, 312; Lindley, i. (3d ed.), 379-382.

3. Per Tindal, C. J.; Fox v. Clifton, 6 Bing. at p. 776.

4. Lindley, i. (3d ed.), 382.

5. Beresford v. Browning, 20 Eq. 564, 573, 577; and see per James, L. J., S. C. in C. A. 1 Ch. D. 30, 34.

6. Lindley i. (3d ed.), 451; Gilm. Part. 249. In. some jurisdictions the retiring partner becomes, under certain circumstances, secondarily liable. Id.

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Essentials of the Law ...: Elementary law ... with notes and references for ...