A dormant partner is one who not only takes no active part in the partnership business, but whose name does not appear in the title of the firm, and who is not known to be a partner by those who deal with it and give credit to it. A dormant partner combines the characteristics of both a secret and a silent partner. The terms secret, silent, and dormant are frequently confounded, and in ordinary language are generally used as synonymous. But there is a clear distinction, as indicated above, and this should be observed. In order that a partner may be dormant, however, it is necessary that the firm name should be such as to indicate that the ostensible partner or partners alone are conducting the business. If the firm name do not contain the name of any of the partners, none of them can claim to be considered dormant, since, in such a case, one who gives credit to the firm does not give it to the empty name, but to the individuals who compose the firm, whoever they may be. This is, also, the case where the words "and company" are added to the firm name, and there is but one other partner. But where there are several partners whose names do not appear, the words "and company" do not give notice to the world that they are all partners, and some one or more of them may be dormant." 30 A dormant partner may become an ostensible partner as to some of those who deal with the firm, by their learning of his connection with it, while still remaining dormant as to the rest of the world. However, he will not become an ostensible partner by merely participating in the firm. business. He may act as a clerk or agent for the firm, without thereby disclosing his true relation to it." The only practical advantage gained by a dormant partner is that, when the firm is dissolved, or he withdraws, he does not have to give notice of the dissolution or of his withdrawal, in order to relieve himself from liability for debts subsequently contracted. In all other respects, he is a partner and is subject to all the liabilities of such." On the 30 96 Pa. 416 (1880); 83 Pa. 148 (1876). 31 37 Ill. 76 (1865). 32 20 Ohio 132 (1851). 33 83 Pa. 148 (1876). other hand, the property of the firm is liable to be seized by the individual creditors of the ostensible partner, and the dormant partners cannot assert the existence of the partnership against them." A dormant partner is entitled to all the rights and privileges of a partner, and can exercise all the powers of one. On the death of the active partner, he may wind up the business."5 A retiring, or outgoing, partner is one who withdraws from a partnership while it still continues in business. An incoming partner is one who comes into a partnership, either to take the place of a retiring partner or as an additional member. A liquidating partner is one who settles up the affairs of the partnership upon its dissolution. A general partner is one of those members of a limited partnership, in whose name or names and by whom the business is conducted. A special partner is one who takes no active part in the business of a limited partnership, but merely makes a certain. contribution to the capital, and is not liable for its debts beyond that contribution. A subpartner is a third person, not a member of the firm, who enters into a contract with a partner by which he is to share the profits, or the profits and losses, of the latter. in the firm business." 36 A subpartner is not a member of the original firm, but is a partner of the one with whom he contracts." In some states, he is liable as a partner to creditors of the firm; in others, he is not so liable." The Massachusetts rule, which would seem to be the most reasonable one, is as follows: "An agreement between one copartner and a third person, that he shall participate in the profits of the firm, as profits, renders him liable as a partner to the creditors of the firm, although as between himself and the members of the firm, he is not their copartner; but if such third person, by his 34 96 Pa. 454 (1880). 35 10 Ohio 455 (1841). 36 81 N. Y. 550 (1880). 37 13 Gray (Mass.) 468 (1859). 38 81 N. Y. 550 (1880). agreement with one member of the firm, is to receive compensation for his labor, services, etc., in proportion to the profits of the business of the firm, without having any specific lien in the profits, to the exclusion of the creditors, he is not liable for the debts of the firm.' ARTICLES OF PARTNERSHIP 24. As has been shown above, a partnership may be constituted by a mere verbal agreement, with nothing definitely settled except the fact of the partnership; but, in order to avoid disputes and misunderstandings, it is always preferable to draw up a written agreement, signed by the parties, setting out the nature, purpose, and scope of the partnership in full detail. This agreement is called the articles of partnership, and is presumed to embody all the terms and conditions of the contract. It should contain (1) the names of the contracting parties, severally mentioned; (2) the fact that they do, by the contract, constitute themselves a partnership; (3) the time of the commencement of the partnership; (4) its duration; (5) the nature of the business; (6) the place where it shall be carried on; (7) the name of the firm as agreed upon; (8) the parties to whom the management of the business is to be entrusted, if any; and (9) the proportions in which the profits and losses are to be shared. Besides the foregoing, it is usual to provide in the articles when the profits are to be divided, when the accounts are to be settled, for final settlement at the end of the term, as well as the manner of settlement. PARTNERSHIP PROPERTY 25. The property of a partnership, or its assets, as they are usually called, consists of the capital originally contributed by the various partners, and any additions that may be made to it in the course of its business, including fresh additions of capital, the profits made out of the business, 39 13 Gray (Mass.) 468 (1859). and the property purchased for partnership purposes with the capital or profits. It includes bills, notes, debts, and all other choses in action belonging to the partnership. When we speak of the property and assets of a copartnership, or of an estate, the choses in action are always included, and such is the legal signification of the words property and assets. Property includes everything that is the subject of ownership; the word assets, though generally used to denote everything which comes to the representatives of a deceased person, yet, is by no means confined to that use, but has come to signify everything which can be made available for the payment of debts, whether belonging to the estate of a deceased person or not. Hence, we speak of the assets of a bank or other moneyed corporation, the assets of an insolvent debtor, and the assets of an individual or private copartnership; and we always use this word when we speak of the means which a party has, as compared with his liabilities or debts.' THE CAPITAL 26. The capital of a partnership is the total of the contributions made by each partner for the purpose of beginning or carrying on the business of the firm. These contributions may be either in cash, or in goods or other property suitable for the purposes of the business. Contributions in time, labor, skill, or experience, only, are not properly capital. The question whether or not property becomes partnership property or remains or becomes that of individual partners, is one of great importance, and gives rise to more litigation than any other that concerns partnership. So far as original contributions are concerned, the question is mainly one of intention; but, as a general rule, if the property contributed be used for partnership purposes, it will be considered as partnership property. In an ordinary partnership, when property is contributed as capital, it becomes at once the property of the firm, and the partner who contributed it 126 Conn. 444 (1857). 2 36 N. J. Eq. 569 (1883). From the neces ceases to have any separate interest in it." sity of the case, the capital of a partnership, like the capital of a corporation, becomes firm property, though it was once the property of an individual partner, and was contributed in kind. There may, however, be a partnership in profits only, in which case the use of the property only is contributed and not the property itself, which remains the property of the contributor. This happens most frequently when the entire capital is contributed by one partner, and the other contributes labor or services only." When property is purchased with partnership funds and used for partnership purposes, it becomes partnership property, though purchased in the name of one partner only.' But if the purchase be made by agreement for the benefit of some of the partners only, the property will be theirs individually. Property purchased with partnership profits is partnership property, no matter how the original contributions were regarded,' unless, by agreement, the purchase were made for the individual benefit of one or more of the partners. As a general rule, an invention made by one of the partners during the existence of the partnership is the private property of the partner who makes it, though in making and perfecting it, he used time, labor, and materials belonging to the partnership; also letters patent obtained for such an invention will also be the sole property of the inventor, if procured at his expense, in his name, and for his benefit." Even when the cost of procuring the patent and of an experimental trial of the invention are paid by the firm, yet, if it be fully repaid by the use of the patented machine in the firm's business, the patent, if taken out in the name of the inventor, is his property on dissolution, and other partners cannot claim an implied license to use it. But, when an invention is put in as a contribution to capital, a patent 80 I11. 289 (1875). 4 36 N. J. Eq. 569 (1883). 576 Ind. 157 (1881). 6 129 U. S. 512 (1889). 772 Pa. 142 (1872). |