Professional Documents
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Dissolution Of A Partnership:
CASE 3:
Howard Fogle, John Church and Robert Curdy had been partners
in the grain business, known as the firm of Fogle and Company.
On January 1, 1914, Curdy ceased to be a member of the firm
and the other two continued as Fogle & Company. Curdy
published a notice of the dissolution in the local newspaper, but
did not send actual notice to those who had had prior dealings
with the firm. James Nally had done business with the firm, before
the year 1914, and, in February of that year, accepted a
promissory note from Fogle signed by the firm name. This note
was not paid at maturity and Nally brought suit against Fogle,
Church and Curdy. Nally contended that, although he had seen
the newspaper announcement of the dissolution, Curdy was,
nevertheless, bound on the note because actual notice of the
dissolution was not sent to Nally; that this was necessary, since
Nally had dealt with the firm before Curdy stepped out. Is this a
correct statement of the law?
Ruling Law. Story Case Answer
Assuming that a partnership has been engaged in business for a
considerable length of time, if it could dissolve the firm secretly or
at least without making any efforts to give notice to the public and
to those with whom it has dealt, and to those who have dealt with
it, great fraud and injustice might be wrought. Thus, it is not
surprising to find that it is required that notice should be given
upon the dissolution of a firm. Only by giving this proper notice
can one member of the firm be relieved from further liability as a
partner.
As regards those who have never dealt with the firm, it is
generally held sufficient to make a general publication in some
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paper at the place where the business has been carried on. As to
those who have dealt with the firm, and as to those with whom the
firm has dealt, generally, actual notice must be impressed upon
them. The method of receiving this notice, whether directly from
the firm or members thereof, or from a general publication, or
from some third person is not significant. Nally, in the Story Case,
had read the news paper announcement of the dissolution. He
could not, thereafter, hold Curdy, although Curdy had not sent
actual notice to those who had dealt with the firm.
PARTNERSHIP
Non-Trading Partnership:
CASE 4:
Robert Smiley and Richard Yates were partners in the law
practice, conducting business as Smiley & Yates. Yates
purchased an automobile in the name of the firm, without the
authority or consent of Smiley, who later refused to pay any part
of the purchase price. The automobile dealer, therefore, brought
suit against both members of the firm. Smiley maintained that
since this was not a trading partnership, Yates had no implied or
apparent authority to make purchases in the name of the firm, and
therefore he - Smiley - was not liable for the purchase of the
automobile. Is this a good defense?
Ruling Law. Story Case Answer
A non-trading partnership is one in which buying and selling is not
the principal part of the partnership business. In case of a nontrading partnership, the transactions, but such are only an incident
to the main business. In case of a non-trading partnership the
doctrine of general agency does not apply. One partner has no
implied power to bind the firm by general contracts; and, in
order to charge his co-partners, it must be shown that he had
authority, or that it was customary in the particular business for
one partner to exercise such power.
A law partnership is not a trading partnership, because it is not
engaged in buying and selling, therefore, in the Story Case, Yates
had no implied or apparent authority to purchase the automobile,
and Smiley is not liable.
PARTNERSHIP
Limited Partnership:
CASE 5:
he State of Maryland permitted the organization of partnerships,
in which one member would not be liable for more than the
amount he actually furnished the firm, provided the statute under
which such a firm was organized was strictly followed. The law
was such that, if the conditions were not absolutely followed, the
partnership should be a general one. One of the requirements of
this law was to the effect that the articles of partnership must be
recorded with the recorder of the county in which the firm was
doing business. James Pope entered a partnership with the
agreement to become a limited member, but the manager of the
firm failed to record the contract under which Pope assumed the
relation of a member. Later, when the firm became insolvent,
creditors assumed Pope to be a general partner, because the
articles of partnership were not recorded. Can they recover
against him?
Ruling Law. Story Case Answer
In the ordinary common law partnership, each partner was said to
be a general partner with general liability. By this is meant, that
each partner is liable for all the debts of the partnership, even
though he may have fully paid his share of the capital stock. In
many instances this rule of general liability worked a hardship
upon persons who wished to invest money in a partnership, take
no active part in the management of the business, and not be
liable beyond the amount they contributed.
Accordingly, in many states, statutes have been passed which
make provisions for the formation of limited partnerships. These
statutes generally provide that there shall be two or more general
partners with general liability; and that there may be one or more
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John Simpson and nine others entered into a contract for the
formation of a company to transact a real estate business. It was
agreed that there should be a capital of$10,000 and that each
man should subscribe for ten shares at $100 each. It was also
agreed that any one might sell his interest to a stranger. The
company was formed in accordance with this contract, officers
were elected and by-laws adopted. It was called The
Northwestern Realty Syndicate. Later, the company became
insolvent and the business was closed up with a number of
obligations standing unpaid. Of the group, only Simpson was
financially responsible, and the creditors brought suit against him
personally on the ground that, as a partner, he was individually
liable for the total amounts. The decision in the case depends
upon whether or not this was a partnership.
Ruling Law. Story Case Answer
Between a normal partnership and a duly organized corporation
there are many prominent distinguishing features. On the one
hand, partnership is a voluntary relation which depends upon an
express or implied contract between the parties to the relation.
On the other hand, a corporation is an organization, the existence
of which depends entirely upon some statutory provisions,
general or special, authorizing such a corporation.
In the second place, a partnership is but a collection of
individuals; they act as individuals; they must sue and are sued as
individuals; the death of one partner usually terminates the
relation ;the transfer by one partner of his interest dissolves the
relation, and does not make his transferee a partner, unless the
old members consent to the new partnership. On the other hand,
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when the judgment has been recovered, the third person may
then get satisfaction from the separate property of any individual
member, and is not restricted to partnership property alone for
satisfaction.
In the Story Case, Rowe secured a judgment against both
Noonan and Linderman. His judgment is properly a joint
judgment.
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