lations may be destroyed. Another group of problems concerns the question: What acts will operate as a dissolution of the partnership relation? The term "dissolution" has a technical meaning. As there used, it indicates that something has occurred which has materially changed the legal relations between the partners and as between the partners and third parties. This question divides into two parts: What facts will operate as a dissolution, and to what extent are the partnership relations changed? A new member comes into the firm; an old member withdraws; one of the partners dies; what effect is thereby produced upon the partnership relations?

The principal problems of the law of partnership are therefore: (1) What facts will create a partnership? (2) What legal relations arise therefrom (a) as between the partners; (b) as between the partners and third parties? (3) What facts will cause a dissolution? (4) What is the legal effect of a dissolution (a) as between the partners; (b) as between the partners and third parties?

The Uniform Partnership Act, approved by the National Conference of Commissioners on Uniform State Laws in 1914, has been adopted in Idaho, Illinois, Maryland, Michigan, Minnesota, New Jersey, New York, Pennsylvania, Tennessee, Utah, Wisconsin, Wyoming, and Alaska.

The Uniform Limited Partnership Act, approved in 1916, has been adopted in Idaho, Illinois, Iowa, Maryland, Minnesota, New Jersey, Pennsylvania, Tennessee, Utah, Wisconsin, and Alaska.'

1 The notes appended to the various sections of the acts are the work of Professor William Draper Lewis, the able draftsman of the Partnership Acts. See texts of the Acts issued by the National Conference of Commissioners on Uniform State Laws.

B.& B.BUS.LAW-77

Section

CHAPTER I

WHAT CONSTITUTES A PARTNERSHIP

1. Partnership the Result of Intention.

2. Partnership by Estoppel.

3. Partnership by Operation of Law as to Third Persons.

4. Partnerships Distinguished from Trusts for Business Purposes.

SECTION 1.—PARTNERSHIP THE RESULT OF

INTENTION

Uniform Partnership Act, Section 6. (1) A partnership is an association of two or more persons to carry on as co-owners a business for profit.

2 Lewis' Note to Section 6 (1).—The first inquiry is, Why say a partnership is "an association of two or more persons"? In view of the fact that the word "association" itself implies the acting together of two or more persons. why not merely say that a partnership is an association to carry on business in which the members are co-owners of the business? The word "person" includes, as stated in section 2, supra, "individuals, partnerships, corporations, and other associations." The definition as worded thus asserts, what would be doubtful if the words "of two or more persons" were omitted, namely, that any one of these associations may become members of a partnership. It is true that if two or more corporations attempt to form a partnership the contract may be ultra vires as to both (Boyd v. American Carbon Black Co., 182 Pa. 206, 37 Atl. 937 [1897]); but the capacity of corporations to contract is a question of corporation law. Under the present law it appears that a partnership can, as such, be a member of another partnership. if that was the intent of the parties. Raymond v. Putnam, 44 N. H. 160 (1862); Cheap v. Cramond, 4 Barn. & Ald. 663 (1821); In re Hamilton (D. C.) 1 Fed. 800 (1880); Riddle v. Whitehill, 135 U. S. 621, 10 Sup. Ct. 924, 34 L. Ed. 282 (1890).

The words "to carry on as co-owners a business" remove any doubt in the following case: A. and B. sign partnership. articles and make their agreed contributions to the common fund. A. refuses to carry on business as agreed. Is there a partnership to be wound up in accordance with the provisions of Part VI, "Dissolution and Winding up"? The words quoted require an affirmative answer to this question. If the words "carrying on business" had been used, in the case given, no partnership would exist, and Part VI would not apply.

The definition asserts that the associates are "co-owners" of the business. This distinguishes a partnership from an agency-an association of principal and agent. A business is a series of acts directed toward an end. Ownership involves the power of ultimate control. To state that partners are co-owners of a business is to state that they each have the power of ultimate control.

Lastly, the definition asserts that the business is for profit. Partnership is a branch of our commercial law; it has developed in connection with a particular business association, and it is, therefore, essential that the operation of the act should be confined to associations organized for profit.

In view of the many definitions of a partnership which have been proposed, it is desirable to note the reasons for the omission of certain ideas expressed in some of the definitions cited by Lindley in his work on Partnership, pp. 11, 12.

It is not indicated that the association must be a voluntary one. In the domain of private law the term association necessarily involves the idea that the association is voluntary.

To say that the association must be created by contract is not only unnec essary, but in view of the varied use of the word "contract" in our law, if the word is used an explanation would have to be made as to whether the

(2) But any association formed under any other statute of this state, or any statute adopted by authority, other than the authority of this state, is not a partnership under this act, unless such association would have been a partnership in this state prior to the adoption of this act; but this act shall apply to limited partnerships except in so far as the statutes relating to such partnerships are inconsistent herewith.3

Section 7. In determining whether a partnership exists, these rules shall apply:

(2) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property.

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner;

(d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of the good will of a business or other property by installments or otherwise.

contract could be implied, and, if so, whether it could be implied in law or only implied as a fact. By merely saying that it is an association these difficulties are avoided.

Again, it is not said that the business must be a lawful business. The effect of the unlawfulness of the business is dealt with under Part VI, "Dissolution and Winding Up." Section 31 (3), infra, provides that dissolution is produced "by any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership." If the business is wholly unlawful, then the partnership is dissolved the moment it is created. The omission of the word "lawful" in the definition does not prevent this result. Very often, however, a business may be in part lawful and in part unlawful. Hotel keepers may run a "dive." Placing the word "lawful" before the word "business" in the definition would tend to throw a doubt on the propriety of the orderly winding up of such a business as a partnership.

3 Lewis' Note to Section 6(2).-The reason for not following the English Act, and attempting to enumerate the associations which are excluded because formed under special statutes, is because such an enumeration is unnecessary, and because the paragraph would have to be differently worded for each state. The paragraph as drawn makes any association formed under a statute a partnership, if it would have been a partnership in the state if the act had not been adopted. If the association would not have been a partnership had the act not been adopted, the adoption of the act does not make it a partnership. In short, the adoption of the act does not change the legal status in the state of any association formed under a statute.

ASH et al. v. GUIE.

(Supreme Court of Pennsylvania, 1881. 97 Pa. 493, 39 Am. Rep. 818.) The members of a Masonic lodge, an unincorporated body, appointed a committee to erect a building for the use of the lodge, authorizing them to borrow money for this purpose. The committee accordingly borrowed various sums, giving to the lenders certificates of indebtedness in the name of the lodge, signed by the officers thereof, and sealed with a seal, usually employed by the secretary for authenticating communications to other lodges, and which had never before been appended to a pecuniary obligation. In a suit brought upon one of said certificates, wherein all the members of the lodge were joined as defendants and alleged to be partners, verdict and judgment in the trial court were for the plaintiff. Defendants bring writ of error.

TRUNKEY, J. One of the defendants, called by plaintiffs, testified: "* * * The purposes of our lodge are charitable, benevolent and social." This is the evidence as to the objects for which the association was formed, and without proof of its constitution or rules respecting admission of members and the management of its affairs it was held to be a common partnership. A partnership has been defined to be a "combination by two or more persons of capital, or labor, or skill, for the purpose of business for their common benefit." It may be formed, not only for every kind of commercial business, but for manufacturing, hunting, and the like, as well as for carrying on the business of professional men, mechanics, laborers, and almost all other employments. It would seem that there must be a community of interest for business purposes. Hence, voluntary associations or clubs, for social and charitable purposes, and the like, are not proper partnerships, nor have their members the powers and responsibilities of partners. * * *

*

A benevolent and social society has rarely, if ever, been considered a partnership. * In Flemyng v. Hector, 2 M. & W. 172, Lord Abinger stated the difference between a body of gentlemen forming a club and meeting together for one common object, and a partnership where persons engage in a community of profit and loss, and each partner has the right of property for the whole, and in any ordinary transactions may bind the partnership by a credit. He held that a club and its committee must stand on the ground of principal and agent, and that the authority of the committee depends on the constitution of the club, which is to be found in its own rules. After noting the rules of the club, in the case before him, he says: "It therefore appears that the members in general intended to provide a fund for the committee to call upon. I cannot infer that they intended the committee to deal upon credit, and unless you infer that that was the intention, how are the defendants bound?" A mutual benefit society partakes more the character of a club than of a trading association. Every partner is agent for the partnership, and as concerns himself he is a principal, and he may bind the others by contract, though it be against an agreement between himself and his partners.

* * *

Here there is no evidence to warrant an inference that when a person joined the lodge he bound himself as a partner in the business of purchasing real estate and erecting buildings, or as a partner, so

that other members could borrow money on his credit. The proof fails to show that the officers or a committee, or any number of the members, had a right to contract debts for the building of a temple which would be valid against every member from the mere fact that he was a member of the lodge. But those who engaged in the enterprise are liable for the debts they contracted, and all are included in such liability who assented to the undertaking, or subsequently ratified it. Those who participated in the erection of the building, by voting for and advising it, are bound the same as the committee who had it in charge. And so with reference to borrowing money. A member who subsequently approved the erection or borrowing could be held on the ground of ratification of the agent's acts. We are of opinion that it was error to rule that all the members were liable as partners in their relation to third persons in the same manner as individuals associated for the purpose of carrying on a trade. * * *

Judgment reversed.

PHILLIPS v. PHILLIPS.

(Supreme Court of Illinois, 1863. 49 Ill. 437.)

John Phillips owned a business. His sons were not expressly given any interest in the business, but they worked with him in making a success of the enterprise, and received no salaries. The father paid them, from time to time, out of the profits of the business, such sums as they needed. One of the sons withdrew his services from the business, and filed a bill for an accounting as a partner.

CATON, C. J. The only question in this case is one of fact. Was there a copartnership between John Phillips and his four sons, or was he the sole proprietor of the business about which the controversy has arisen? It must be remembered in the outset that this is a controversy inter sese, and is not between third parties and the alleged members of the firm. Parties may so conduct themselves as to be liable to third persons as partners, when in fact no partnership exists as between themselves. The public are authorized to judge from appearances and professions, and are not absolutely bound to know the real facts, while the certain truth is positively known to the alleged parties of a firm. A partnership can only exist in pursuance of an express or implied agreement to which the minds of the parties have assented. The intention or even belief of one party alone cannot create a partnership without the assent of the others. If John S. Phillips designed and really believed that there was a partnership, but to which his father and brothers never assented, and in the existence of which they did not believe, then there was no partnership, unless, indeed, a copartnership could be formed and conducted without their knowledge or consent. This would be simply absurd. We cannot in this way surprise them into a partnership of which they never dreamed.

Over 20 years ago John Phillips emigrated from Scotland and settled in Chicago with his family, consisting of a wife and four sons and two daughters. He was then very poor. He was a wood turner by trade, and commenced that business in a very small way with a foot lathe. He was frugal, industrious, and honest, and-prospered as