"Phoenix brand." Upon the dissolution of the firm Hoopes bought the business. Thereafter Merry brought action to restrain him from the use of the above-named trade-marks, nothing having been said about them in the bill of sale. Held, that the exclusive right to use the trade-marks belonging to the firm passed to the defendant. Merry v. Hoopes, 111 N. Y. 415.

Good Faith. The first duty of each of the partners to the others is that of exercising the utmost good faith toward them. The reason for this is apparent when we realize how completely each partner is at the mercy of the others. Each partner really acts as agent in the transaction of the business for the firm and for the other partners.

If one partner is the active agent of the firm, and as such receives a salary beyond what comes to him from his interest as a partner, he is clothed with a double trust in his relations with the other partners, which imposes upon him the duty of exercising the utmost good faith in his dealings; and if he obtains anything for his own benefit in disregard of that trust, a court of equity will compel him to account to the other partners for it.

Kimberly v. Arms, 129 U. S. 512.

Individual Liability. Each partner is chargeable with any loss to the firm which arises from his own breach of duty, whether through fraud, negligence, or ignorance, but he is not liable to the firm for loss arising from an honest mistake of judgment.

Although a partner may act unwisely in incurring liabilities for the firm, the resulting loss cannot properly be charged to him personally upon a dissolution, when it is not shown that his acts were wanton or fraudulent. Charlton v. Sloan, 76 Iowa 288.

If one partner takes a secret advantage of the partnership, whereby he makes a profit for himself at the expense of the firm, he can be required to restore it, the courts holding that he acted for the partnership and it will be entitled to the benefits. If the lease of a building occupied by a firm expires, one member cannot secretly take out a new lease in his own name and seek to sublet to the firm at an increased rate. The new lease taken in the name of one member of the firm will be declared by the courts as held by him for the benefit and use of the firm.

Hodge and Holden are partners engaged in the lumber business. Holden, while away on his vacation, purchased a quantity of select lumber on his own account. When he returned, he sold the lumber he had purchased to his firm at an advance in price and took the profit for himself. Hodge can require Holden to account to the firm for all profit resulting from this transaction.

Records of Transaction. The firm must keep books of account upon which each member is bound to enter, or have entered, all of his transactions for the firm, as each partner has a right to know of all the transactions in the business.

A member of a firm whose duty it is to keep the accounts, and who claims that he has omitted to enter credits to which he is entitled, will be required to furnish satisfactory proof of the mistake he asks to have corrected. — Van Ness v. Van Ness, 32 N. J. Equity 669.

Compensation. compensation for his expressly provided for.

One partner is not entitled to any special services in the partnership unless it is Each partner is supposed to do all that he can for the good of the partnership, and whatever he does gives him no claim for extra compensation beyond his share of the profits of the business unless he has the consent of the other partners.

In the absence of an agreement to that effect, one partner is not entitled to charge his copartners for his services because he has done more than his just proportion of the work. Burgess v. Badger, 124 Ill. 288.

The claim of the surviving partner of a firm for compensation for his services in closing up the partnership business was not allowed. The court held that a surviving partner is not entitled to any compensation for such services. Gregory v. Menefee, 83 Mo. 413.

The sickness of a partner is one of the risks incident to a partnership, and does not give another partner any claim for personal services in conducting the entire business unless the articles of copartnership provide for such compensation. Heath v. Waters, 40 Mich. 457.

Partners may Sign Negotiable Paper. It is the general rule that one member can bind the firm by signing the firm name as maker, indorser, or acceptor of negotiable paper if it is done in connection with the firm business and not for a private debt

or account.

The Simmons brothers were partners in the business of buying and selling cattle and produce. The court held that each member had the right to draw, accept, or indorse bills of exchange in the firm name, and bind the partnership as to third persons, dealing fairly and in good faith, regarding matters usually incident to the business. It is immaterial in such a case, as to persons thus dealing with one of the partners, that the other partner was not informed of the transaction and repudiated it as soon as it came to his knowledge. Wagner v. Simmons, 61 Ala. 143.

The power of any partner to use the firm name on negotiable paper is presumed, and a stipulation between the partners that

certain members of the firm shall not so use it will not affect third persons having no knowledge of such agreement. But this rule does not apply if it is obvious that the instrument is signed, not for the firm, but for the individual benefit of a partner.

Power of Majority. We have discussed the power of one partner, and turning now to the question of what a majority of the partners can do, we find that they may control the ordinary conduct of the firm's business, and have power to act in all matters within the scope of the partnership affairs, but they have no power to change the nature of the business, the location of the business, or the firm name.

Five persons had agreed to cut and pack a quantity of ice for sale, and after deducting all expenses to divide the proceeds equally. One of the members, with the consent and approval of two others, sold a large quantity of the ice. The remaining two brought suit to charge the others for damages in selling the ice at what they claimed was too low a price. Held, that the agreement constituted a partnership, and if there be no fraud the majority of a firm can make a valid sale of property belonging to the firm without the consent of the minority. - Staples v. Sprague, 75 Maine 458.

Moore, Miller, and Manning are partners in the hardware business. Moore and Miller favor putting in a stock of groceries and provisions. Manning is opposed. As this would mean a change in the nature of the business, it will be necessary for all the partners to consent, and unless they do consent, the power of any two partners to act in this instance is denied.

QUESTIONS

1. What rights has a partner as to the choice of associates?

2. Does the purchaser of a retiring partner's interest become a partner? Explain.

3. How does a change of partners affect the partnership?

4. What are the rights of a purchaser or inheritor of a partner's share?
5. Has one partner a right to sell partnership property? Explain.
6. Of what may the capital of a partnership consist?

7. What is the good will of a business?

8. What is the first duty of each partner?

9. What is the extent of the individual partner's liability for loss? 10. What is the liability of a partner who takes secret advantage of his firm?

II. What are the requirements with reference to records of transactions? 12. Has one partner a right to claim extra compensation for services to the partnership? Explain.

13. What is the rule as to one member of a firm signing negotiable paper? 14. What power has a majority of the partners?

15. What restrictions are imposed on the power of the majority?

3. LIABILITY OF PARTNERS TO THIRD PARTIES

Liability of Partners. Each partner is liable for all of the debts of the partnership, and this is so whether he is a secret, nominal, or general partner.

Farmer and Jopes had been doing business under the name of W. H. Jopes. It was shown that Farmer was a dormant or secret partner. Held, that while the credit was given to a general partner, because no other was known to the creditor, yet the creditor may also sue the secret partner when discovered, and the credit will not be presumed to have been given on the sole responsibility of the general partner. Richardson v. Farmer, 36 Mo. 35.

Effect of Notice.

But neither the firm nor individual partners will be liable for any particular acts of a partner if fair notice that such acts are forbidden is given to the person with whom the partner deals, prior to the transaction in question.

The partnership relation makes each partner the agent of the other when acting within the scope of his power, but when the agency is denied and the act forbidden by the copartner, with notice to the party assuming to deal with him as agent of the firm, the act is then his individual act, and not that of the firm. Yeager v. Wallace, 57 Pa. State 365.

Limit of Authority. The authority of a partner to bind the firm by contract is limited to transactions within the scope of the partnership business, and if he seeks to charge the firm with matters outside of the scope of the firm's usual business, he must show special authority from the other partners so to do. A partnership to work a farm would not therefore give one partner any implied authority to draw bills of exchange or borrow money, while a partner in a mercantile or manufacturing company would have such authority.

Harris and Drake were partners in the hay and grain business. Harris, without the knowledge or consent of Drake, purchased a building lot, in the name of the firm, which he contended they needed to increase their facilities. Harris had no authority to purchase this lot and Drake is not bound by this transaction which he did not authorize and was not a party to.

While the presumption is that a partner has no authority to use the goods or credit of the firm to pay his personal debts nor to buy goods for his personal use with the partnership funds, still he may have express authority so to do, and in that case the transaction is valid.

A partner indorsed a firm check in payment of his individual indebtedness without the knowledge, consent, or approval of his partner. It was held that such an arrangement was a fraud on the partnership and the creditor could not hold the check as he was not a bona fide holder under the circumstances. Nichols & Co. v. Thomas, 51 Okla. 212.

Name. A partnership should adopt some particular name under which to do business. This may be simply the name or names of one or more of the partners, either with or without the words "and company" added, or any other designation that the parties may adopt, but by statute in some states the term "and company" must not be used unless it actually represents a partner.

Fraud. The partners are held liable for the fraud and the false representations of one partner when they are made in the course of the firm business.

One partner is not liable for the wrongful acts of another partner unless they were done within the proper scope of the business of the partnership, or were authorized or adopted by him. — Taylor v. Jones, 42 N. H. 25.

Notice to One Partner is Notice to All. It is a wellestablished principle that notice to one partner in the course of the business is notice to all. An illustration of this is the case of partnership negotiable paper that has been dishonored, notice of which dishonor to one partner is notice to the firm.

Where timber is purchased by a firm, prior notice to one member of the firm that it was cut from land not belonging to the vendor is notice to all of the partners. Tucker v. Cole, 54 Wis. 539.

Where a partnership seeks to recover as a bona fide purchaser of a promissory note, fraudulently procured, the burden is upon it to show that all of the members of the partnership were ignorant of the fraud at the time of the purchase. Frank v. Blake, 58 Iowa 750.

QUESTIONS

1. Is a secret or dormant partner liable to third parties? Explain.

2. What is the effect of notice that the firm will not be liable for the acts of any particular partner?

3. What is a partner's limit of authority to bind the firm by a contract? 4. Have the partners a right to select a name under which to do business? Explain.

5. Is the firm liable for fraud practiced by one partner? Explain.
6. Explain the following: "Notice to one partner is notice to all."