CHAPTER XXXIX.

DISSOLUTION OF PARTNERSHIP.

464. Dissolution, How Effected.-A partnership may be dissolved in any of the following ways:

I. By Agreement.

II. By Act of One Party.
III. By Decree of Court.

IV. By Operation of Law.

465. Dissolution by Agreement. The contract of partnership being a voluntary one, it is perfectly proper that the partners should in like manner be able to terminate it at any time. The contract of partnership often specifies the length of its duration, and when it does so, the partnership terminates accordingly, unless by a further contract either express or implied, it is unanimously agreed to extend it. If no period is so fixed, it is presumed to exist at the pleasure of any partner. If the partnership be formed for a single transaction, or for a series of them, it will be terminated when its object is accomplished. The dissolution should be made with due notice to the other partner or partners, and at such time and in such a manner as not to cause unnecessary injury to them.

466. Dissolution by Act of One Partner.-A dissolution may take place when a partner refuses to act with the other partners, or when he engages in other business. A dissolution is also effected when one partner assigns his interest in a partnership. The partners are not obliged to accept the purchaser as a partner, for he may be objectionable to them. Neither is the purchaser obliged to become If, however, the partners consent to do so, their consent has the effect of dissolving the old and creating a new partnership.

one.

In this will be seen a distinction between a power to do a thing and a right to do it. While the partner has the power to assign his interest, he may have no right to do so, and is liable for any breach of contract with his partners, or for any loss resulting to them. therefor.

467. Dissolution by Decree of Court.-A court of equity will, for just and reasonable causes, decree a dissolution of a partnership. It must be understood, however, that such a court will not interfere for slight and trivial causes. When a court decrees a dissolution it usually appoints a receiver, who takes charge of the firm's business, collects all debts due the firm, pays all its obligations, converts its assets into cash, and divides the residue according to the interest of each.

468. Grounds for Decree.-When the business proves to be impracticable, a decree will be granted. This may result from the inability of one or more partners to fully carry out their part, or it may be on account of the undertaking itself being visionary. One of the partners may prove to be so grossly immoral or intemperate, or exhibit such a lack of good faith as to imperil the success of the venture. He may be careless and reckless in his conduct of the business. So, too, one partner may exclude the others from their share in the management of the business, or may deny them access to the books of account.

Long and continued absence of one of the partners, or his change of residence to another State, and his engagement in other lines of business, so that the interests of the other partners are prejudiced, have been deemed just grounds for a dissolution. Continued quarreling among the partners, and the inability or incapacity of one partner to attend to business, have likewise been held sufficient.

469. Dissolution by Operation of Law.-Whenever the state or condition of a partner is so changed that he is incapable of acting for himself, the partnership is said to be dissolved by operation of law. When a copartnership is formed, it is presumed not only that the parties are competent to contract, but that they will continue so. If for any reason the law makes a change in his legal status, the remaining partners will be relieved from their contract of copartnership, and this without any affirmative act on their part, but ipso facto.

If a partner becomes insane, or a spendthrift, or if for any reason he is placed under guardianship, he is thus incapacitated to act either for himself or the partnership. So, by the common law, the marriage of a female partner will dissolve the partnership, but doubtless this is not now the law in most States.

If the partner's interest be sold on execution against him, it works a dissolution, for the purchaser is not a partner. The bankruptcy

or insolvency of a partner dissolves the partnership, for his property passes into the hands of his assignee, who has no powers except to wind up his affairs.

As alien enemies cannot contract, neither can they continue as partners, for this continuance is but the fulfillment of a contract. Lastly, the death of a partner works a dissolution. This dissolution takes effect like the dissolution of an agency in case of the death of the agent, immediately, regardless of whether third persons have notice of it or not.

470. What Powers Cease.-When a dissolution occurs there is a change in the relations of the partners and in their rights and powers. They can no longer use the partnership property for the purposes of trade, but can only make such contracts as look to the settlement of the partnership affairs. One partner can neither make nor endorse negotiable paper in the firm name. He cannot create new obligations nor vary those already made.

471. What Powers Remain. On the dissolution each partner has the right to collect and receipt in the firm name for all debts due the firm. He has also the right to adjust and pay all unliquidated debts of the firm with the firm's money. Each may also sell firm property for cash and each may insist that all firm debts be paid before any division of assets is made between the partners.

472. New Powers Created. When a partnership is dissolved the peculiar relation of partners as such ceases and they become at once tenants in common with all that relation implies.

When the dissolution is caused by the death of one partner, his personal representatives become tenants in common with the survivor with the right to demand an accounting but with no right to a part in the winding up of the business. This is a right belonging solely to the survivor or survivors.

473. Notice of Dissolution. When a partnership is dissolved notice should be sent to all with whom the firm has had dealings. This is for the protection of the retiring partner not that he may avoid liabilities already incurred but that he may avoid future obligations assumed by the remaining partners. For the dissolution as to third persons takes place when they have had notice of it. When the dissolution occurs by operation of law no notice is necessary. It is customary when notice is necessary, to send a circular letter to each

person with whom the firm has had dealings and in the case of those who have had no dealings with the firm a newspaper notice is held as sufficient.

474. Limited Partnership -This is a species of partnership unknown to the common law, but is in this country a creation of statute. It has been introduced into many States' of the Union, but is not now a common form of partnership.

The object is to enable one or more of the partners to be free from all personal liability beyond their investments.

While the statutes differ yet the following provisions are quite general:

1. There must be one or more general partners and one or more special partners.

2. The names of the special partners must not appear in the firm

name.

3. The word "Limited" must always follow the firm name.

4. Investments of the special partners must be actually paid in. 5. The partnership agreement must be in writing, acknowledged and recorded in the county records and in addition, must be advertised for a certain period in a newspaper of general circulation in the community. The provisions of the statute in any case must be strictly complied with or the special partner will lose his privilege.

1 Alabama, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Mass. achusetts, Michigan, Mississippi, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia.

PRACTICAL REVIEW.

I. A and B compose the firm of A & Co. B withdraws and C takes his place, the name remaining the same. How far is C liable for the firm debts? II. The firm of A is composed of A & B. C holds a note signed A. Whose note is it presumed to be?

III. A and B were partners as attorneys at law. A bought real estate for firm account, and gave a firm note without the knowledge of B. Is B liable on the note, and why?

IV. One partner transfers partnership property to pay his individual debt, the creditor having no knowledge that the property belongs to the firm. Does the creditor take a good title?

V. Two physicians are in partnership. One of them is guilty of intentional maltreatment of a patient. Is the other partner liable to the patient? VI. In the above case what would be your answer in case one physician was guilty of unintentional malpractice?

VII. A and B are partners and insolvent. There are firm creditors and creditors of each partner. If there are both firm and individual assets, how Iwill they be divided? How if no firm assets? How if firm assets but no individual assets of A?

VIII. A and B are partners. After dissolution one partner, without the knowledge of the other, gives a note in the firm name to a creditor of the firm. What are the rights and liabilities of the parties?

IX. A, who has property in business, employs B to take charge of and run the business; it being agreed that they should divide the profit and loss. What is their business relation, and why?

X. A, B and C are partners, with no agreement as to time the relation shall exist. If A and B collude to waste the assets, what can C do?

XI. A and B are partners, engaged in the iron business. A buys privately a large lot of iron, which he holds until the price rises. He then buys it on behalf of the firm. Are the other partners bound?

XII. A and B are partners under a verbal agreement to invest equally, and share gains and losses. B has private interests in another State, and goes there to attend to them, remaining for eight months. What remedy has A? Can he deduct the value of B's services from his share of the profits?

REVIEW QUESTIONS.

1. Define partnership. 2. What may be invested. 3. How does partnership resemble agency? 4. How is a partnership formed? 5. When is it formed by implication? 6. When the agreement is in writing why should it be full? 7. What should the contract contain? 8. How many kinds of partners are there? 9. Name them. 10. Name and define the most common kind. 11. What is a dormant partner? 12. Suppose he becomes known as a partner, what is his liability? 13. What is nominal partner? 14. Is he liable as a partner? 15. Who may become partners? 16. Are there any restrictions on the firm name? 17. For how long may a partnership continue? 18. How is partnership property held? 19. How does it differ from joint tenancy? 20. How does it differ from tenanoy in common? 21. What is the rule as to the holding of real estate by the partnership? 22. Has the widow of a partner dower in firm property? 23. How are losses and gains presumed to be shared? 24. Are all persons who share in the gain, partners?