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is known is not of itself the property of the firm." A firm name, however, is an asset of the firm and a thing which the law will protect. "One firm is not at liberty to mislead the public by so using the name of another firm as to pass off themselves or their goods for that other or for the goods of that other." Moreover, upon the dissolution of the firm by the death of a partner the surviving partner has the right to continue the use of the firm name in settling up the firm business. After this is done, however, it does not inure to the surviving partner. A continuing partner, however, who has purchased the good-will of the business, thereby acquires the use of the firm name.

398. Good-will.-The good-will of a trading firm is a partnership asset. This is not true, however, in the case of a non-trading partnership, as has been said by Judge Story: "It seems that good-will can constitute a part of the partnership effects or interests only in cases of mere commercial business or trade, and not in cases of professional business, which is almost necessarily connected with personal skill and confidence in the particular partner."

399. Firm capital.-The capital of a firm consists of the aggregate of the amounts which the partners have agreed to contribute to the business. The firm capital is not synonymous with the firm property. The former is a fixed sum, while the latter varies from time to time and may be greater or less than the capital.

Firm capital may be either money, real or personal property, or the use of property. Some authors say that it may consist of labor, skill or whatever the parties may agree to receive as such. Labor or skill, however, can be considered capital only in a restricted sense, for, upon a dissolution of the firm a partner who has con

tributed only labor or skill is not entitled to share in the ultimate distribution of the capital of the firm. When a firm is dissolved and the firm debts are all paid the capital remaining is returned to the partners in the proportion in which they contributed.

When the amount of the capital is fixed by the articles of agreement, the increase or decrease of this amount requires the consent of all the partners.

A partner who contributes only labor or skill is liable for his share of a loss of capital, notwithstanding the fact that he is not entitled upon dissolution of the firm to share in the capital.

In the absence of evidence to the contrary, the capital of the firm is presumed to have been contributed equally and in settling up the partnership business a distribution will be made upon this basis.

400. Partnership actions.-Actions by and against the partnership may be either in contract or in tort.

1. In contract: Actions upon contracts made in the firm name should be brought in the individual names of the ostensible partners. Nominal partners, whose names are not expressly stated in the contract sued upon, need not be joined; and dormant partners are proper, but not necessary parties. The same rule obtains where the contract is in the name of one partner for the benefit of the firm. But where it is made expressly with one partner the action may be brought in his name alone. Where the contract is under seal and in the name of one of the partners the action must be brought in his name.

Actions by and against a firm may not, as a rule, be brought in the firm name. In many states, however, this rule has been changed by statute.

2. In tort: In the case of a tort committed by the firm the liability of the partners is joint and several.

It follows, therefore, that the injured party may bring his action against any number of the partners. But in the case of a tort committed against the firm, since the injury is to the firm collectively, the action must be brought in the names of at least all the ostensible partNominal and dormant partners are proper, but

ners.

not necessary parties.

401. Dissolution of firm.-There are two general modes by which a firm may be dissolved; it may be dissolved by the act of the parties themselves, or by operation of law.

402. By act of the parties.-The articles of partnership may provide for the dissolution of the firm, either by lapse of time or by the accomplishment of the object. The partnership may also be dissolved at any time by the mutual consent of the partners.

In the case of a partnership at will, one of the partners may terminate it at any time against the consent of the other members, but in the case of a partnership created for a definite term, although a partner has the power to dissolve it at any time he has not the right to do so. This doctrine was upheld in a leading case:1

Even where partners covenant with each other that the partnership shall continue seven years, either partner may (can) dissolve it the next day by proclaiming his determination for that purpose; the only consequence being that he thereby subjects himself to a claim for damages for a breach of his cove

nant.

It has been held, however, that where a dissolution by one partner would work irreparable injury a court of equity will enjoin it. On this subject Justice Story writes as follows: 2

1 Skinner v. Dayton, 19 Johns. (N. Y.) 513, 10 Am. Dec. 286.

2 Story on Partnership, sec. 275.

Whenever a stipulation is positively made that the partnership shall endure for a fixed period, or for a particular adventure or voyage, it would seem to be at once inequitable and injurious to permit any partner, at his mere pleasure, to violate his engagement and thereby to jeopard, if not sacrifice, the whole objects of the partnership; for the success of the whole undertaking may depend upon the due accomplishment or voyage, or the entire time be required to put the partnership into beneficial operation. It is no answer to say that such a violation of the engagement may entitle the injured partners to compensation in damages; for, independently of the delay and uncertainty attendant upon any such mode of redress, it is obvious that the remedy may be, nay, must be, in many cases utterly inadequate and unsatisfactory.

403. By operation of law. There are two general ways by which a partnership may be dissolved by operation of law; it may be dissolved by the happening of a certain event, or by a decree of the court.

The death of a partner dissolves the firm at once; and the bankruptcy of a partner has the same effect. At common law the marriage of a female partner to a non-partner dissolved the firm, but under modern statutes the rule is otherwise. The insanity of a partner is a ground for a decree of the dissolution of the firm, but it does not dissolve it ipso facto.

A court of equity may decree a dissolution on the ground of fraud, gross misconduct of a partner, impossibility of success of the business, etc.1

1 For specimen Articles of Co-partnership see Appendix II.

CHAPTER XXV

RIGHTS, POWERS AND OBLIGATIONS OF PARTNERS

404. Management of business.-Usually the articles of partnership provide what the powers of each partner are. In the absence of an express agreement, however, each partner is presumed to have equal power in the management of the business. This is true even when the shares of each are unequal. Partners may agree that one or more of them shall have no active management in the affairs of the firm. A third person, however, who deals with such partners without notice of such limitation upon their authority may hold the firm liable; and the partners who thus exceed their authority are liable to their co-partners for loss sustained by them as the result of unauthorized acts.

405. Duty to observe good faith. The partnership relation is a fiduciary one, and each partner must observe the utmost good faith toward the other. This was held by the court in an Illinois case:

1

In cases of partnerships, which usually involve also the relations of joint-ownership, trust, and agency, the utmost good faith is due from every member of the partnership toward every other member; and if any dispute arises between partners touching any transaction by which one seeks to benefit himself at the expense of the firm he will be required to show, not only that he has the law on his side, but that his conduct will bear to be tried by the highest standard of honor.

1 Roby v. Colehour, 135 Ill. 300, 338, 25 N. E. R. 777.

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