I. 2. But where the contract of the creditor is in fact made with the firm, and not with the individual partner only, there, by force of the contract, the creditor has a clear legal remedy against the firm, although, as a collateral security for his debt, he may have taken the separate bond or bill of one partner, under which he could only sue that partner separately. In Ex parte Brown (a), two partners agreed to borrow a sum of money for the use of the partnership; but one of them only gave a bond for securing the payment, and the other was a witness to it. This money was afterwards entered in the cash-book of the partnership. A joint commission was afterwards taken out against them, and the obligee was denied by the commissioners to be admitted a creditor; but Lord King was of opinion that he ought to be admitted, and directed accordingly.

The case of Denton v. Rodie (b) must be referred to the same principles. There, the house of Clough, Wilkes, & Clough, was established at Liverpool; but J. B. Clough, one of the partners, was resident at New York, with a view to form connexions and to procure consignments for the house at Liverpool. For the purpose of raising money, he was in the habit of drawing bills in his own name upon the house at Liverpool. These bills he sold at New York, for cash or promissory notes at short dates, according to the current rate of exchange. The money thus raised he applied in the purchase of homeward investments for the house at Liverpool. That house regularly accepted and paid the bills so drawn, till they stopped payment. At the time they stopped payment, the house of Denton & Co. were holders of several of these bills, in consequence of having advanced money upon them to J. B. Clough, according to the rate of exchange. One of these bills had been accepted, but not paid; the others were unaccepted, not having been presented. The question was, whether Denton & Co. could prove these bills on the joint estate of the three bankrupts, or only upon the separate estate of the drawer; and an issue having been directed to try this question, a verdict was found for the plaintiffs, Denton & Co., under the direction of Lord Ellenborough. "I think," said his Lordship," this case is distinguishable from Emly v. Lye. Here, I conceive the partner in America had authority from

(a) 1 Atk. 225, cited. See Ex parte Bonbonus, 8 Ves. 542.

(b) 3 Camp. 493; Ex parte Boli

tho, Buck, 109; South Carolina Bank v. Case, 8 Barn. & Cres. 427; and see ante, p. 276.

4

the two others to raise money for the use of the firm; and money was accordingly raised from the plaintiffs upon these bills, in pursuance of such authority. The transaction is a loan rather than a discount. J. B. Clough was sent out to America to manage the business of the house there, and to procure homeward investments. The shipments from this country did not form an adequate fund for that purpose. He says himself, that he had a carte blanche as to the means he should adopt. He accordingly raises money, for which he gives, as a security, bills of exchange drawn in his own name upon the house. They know and recognise this mode of dealing. They regularly accept and pay the bills so drawn, till the time of their failure. Therefore, although I cannot say they are jointly liable upon the unaccepted bills, I think they are jointly indebted to the same amount, as for money lent, or money had and received."

The transactions in the preceding case seem to have been of the same nature, and conducted by nearly the same parties, as those in The South Carolina Bank case, which has been already cited. It should seem, therefore, on the authority of the latter decision, that the plaintiffs, Denton & Co., might have recovered against the defendants, as drawers of the bills, supposing the name of J. B. Clough to have been in fact the name of the firm for the purposes of the business in America (a).

II. Again, if a person contract with an individual partner in a matter unconnected with the partnership business, the firm will not be bound. In Ex parte Agace (b), Prothero and Spraggon were partners. Scollick, the brother-in-law of Prothero, was indebted to one Owen by bond. Scollick applied to Prothero to lend him £100, which he did. It was then agreed between Prothero, Scollick, and Owen, that the latter should assign Scollick's bond to Prothero & Spraggon, and that in lieu thereof Owen should take five acceptances of Prothero & Spraggon, as a security for Scollick's debt to him. This was done but while Prothero was putting the names of himself and Spraggon to the five bills, Owen asked him whether Spraggon was acquainted with the transaction, and Prothero assured

(a) Ante, pp. 260, 276.

(b) 2 Cox, 312. See Williams

v. Thomas, ante, p. 296, in notis; Anon. Ca. Ch. 38.

him that it was done with Spraggon's consent. In fact, Spraggon was a total stranger to the transaction at the time, and was not acquainted with it until some time afterwards, when he immediately expressed his disapprobation of it in the strongest terms, and insisted upon an immediate dissolution of the partnership between himself and Prothero. Owen afterwards indorsed the bills to Agace, who had notice of the circumstances under which the bills were given. Upon the bankruptcy of Spraggon & Prothero, the question was, whether Agace could prove the amount of the bills as the joint debt of Spraggon and Prothero; which question depended on another, namely, whether Owen himself could have so proved. The Court were of opinion that he could not; for that the debt due from Scollick to Owen had nothing to do with the partnership of Prothero and Spraggon; and at the time the bills were given, Owen himself asked Prothero the question, whether Spraggon knew of it, and he took Prothero's word for this; that this was a transaction with an individual partner, in a matter not relating to the partnership, and that therefore the partnership could not be bound by it without their subsequent concurrence; and that, where a man takes a security from one partner in the name of the partnership, in a transaction not in the usual course of dealing, he takes such a security at his peril.

But, although it is not in the power of a partner to bind the firm, in matters wholly unconnected with the partnership, yet he may do so in matters out of their usual course of business, if those matters arise out of, and are connected with the regular transactions of the firm. Thus, the business of navy agents is, to receive the money due from the Navy Board to their customers, and likewise to receive their dividends in the public funds: and it is no part of the ordinary business of navy agents to deal in annuities: yet, where one of two partners, navy agents, purchased for a customer an annuity, and gave a guarantie in the name of the firm for the punctual payment of such annuity, it was held that this guarantie was binding on the other partner, although the letter in which it was contained was not entered in the partnership letter-books, and it did not appear that such other partner had personally any knowledge of the guarantie. Abbott, C. J.-" The question is, whether this defendant shall be held to be bound by the guarantie given without his knowledge by his partner Creed; and if the verdict of the jury, finding him to be so bound, be not

sustainable, it will be very dangerous hereafter to deal with a partnership; for the business in each department of a firm is generally transacted by one partner only. It has, undoubtedly, been held, that in a matter wholly unconnected with the partnership, one partner cannot bind the others. But the true construction of the rule is this, that the act and assurance of one partner, made with reference to business transacted by the firm, will bind all the partners (a)."

In this case, however, the Court took notice that from the state of the partnership accounts, not only the sale of the customers' stock, but the fact that the proceeds had been laid out in the purchase of an annuity, either was actually known, or ought to have been known by the other partner.

But the principles of the foregoing case are not to be extended to the act and assurance of one partner in the shape of a submission to arbitration. In the case of Stead v. Salt, which has been already referred to (b), that of Sandilands v. Marsh was cited in argument, but was not noticed by the Court; Best, C. J., merely observing, that joint contractors could only be made jointly responsible for transactions arising in the way of their business or employment; and that one could not bind the others by a submission to arbitration made without their knowledge, assent, or authority.

III. Again, a person, upon receiving a consideration, may assent to such private arrangements of the firm as shall deprive him of the benefit of his joint contract. If, for instance, in consideration of a pecuniary advantage to himself, he agrees to rely upon the credit of a part of the firm instead of the whole, he must be taken to have deserted his contract with the whole, and betaken himself to a contract with the part only.

This position is strongly illustrated by the celebrated case of Bolton v. Puller (c), in which there was a major firm including a minor, and upon the failure of both houses the assignees of the minor firm were allowed to retain, as against a creditor of the major firm, bills of exchange which had been indorsed by him to the major firm, and remitted by the major firm to the minor. The facts were shortly these:-Forbes & Gregory, traders in London, were also partners in the house of Caldwell & Co.,

(a) Sandilands v. Marsh, 2 Barn. & Ald. 673.

(b) Ante, p. 313.
(c) 1 Bos. & Pull. 539,

bankers in Liverpool. Bolton banked with Caldwell & Co., but he was permitted to have his bills payable at the house in London. Bolton's account was with the house in Liverpool only, that house keeping the account with the house in London; the payments on Bolton's bills, when made, being carried by the house in London to their account with the house in Liverpool, and by the house at Liverpool to their account with Bolton. In February, 1793, Bolton accepted bills payable at the house in London to a larger amount than usual, namely, to the value of £19,702; he then proposed to the house at Liverpool that they should procure these bills to be paid as they fell due by the house in London; and that, to enable the house at Liverpool to provide for such payments, he should deliver to them certain other bills of exchange with his indorsement thereon. To this proposal, the house at Liverpool agreed. In pursuance of this agreement, Bolton indorsed to the house at Liverpool several bills of exchange, amounting in the whole to the sum of 11,5837. 28. 9d.: among these was a bill for £4000, and another for 3981. 188. 3d. These two bills they remitted generally, with many others, to Forbes & Gregory, to whom they were considerably indebted. Both houses became bankrupt. The acceptances were payable before the indorsed bills; and Bolton was obliged to pay all his own acceptances. The assignees of Forbes & Gregory having refused to deliver up these bills, Bolton brought trover for them, but failed in his suit. Eyre, C. J.-"In some respects, an individual partner, or a particular partnership, consisting of two or more of those persons, who are partners in some larger partnership, may be considered as third persons in transactions in which the general partnership may happen to be engaged with their correspondent. On the other hand, it will be difficult, if not impossible, for individual partners, or for particular partnerships composed of individual partners, to shake off privity in all the transactions of the general partnership, or to avoid all the consequences of privity (a). Each partner is a party, as well as privy, to the transactions of the general partnership, though the general partnership is not a party to the separate transactions of, the individual partners. It must be admitted, therefore, that Forbes and Gregory were parties to the agreement which Caldwell and Smith entered into with Bolton. The

(a) See Lord Eldon's observations in Ex parte Pease, 19 Ves. 45.