CHAPTER I. THE LAW OF PARTNERSHIP. SECTION 1. PARTNERSHIP DEFINED. A partnership is a legal relation existing between two or more persons, arising from a contract express or implied, under which a business is conducted for and in behalf of the members of the firm, by mutual agency or through an agency agreed upon. SECTION 2. PRESUMPTIONS. As to third parties the law presumes mutual agency unless these parties have notice of the terms of the contract providing for some other agency. Within the scope of the business of the partnership one partner may contract in the name of the firm and bind the firm by his contract, if the party with whom he deals has the right to assume that the contracting partner has the authority of the firm. Third parties are not interested in the division of the profits, but the law presumes an equal division unless the contract provides otherwise, notwithstanding shares of capital are unequal. On the dissolution of a solvent firm, partners are entitled by law, nothing in the contract to the contrary, to a division of the assets remaining after debts and profits are paid, in proportion to the capital advanced. In this connection skill or experience, though considered as capital, has no return in such division. The idea being that it has not been diminished or impaired. If there are no losses the full capital will be returned. If there are losses, these are to be made good by charging them against each partner equally, if the profits were to be shared equally, or otherwise in proportion to share in profits, or according to the partnership contract. Each partner then would receive back his capital minus his share of the loss; and the fact that one partner contributed his skill or experience as his advancement to the business and that there were more than sufficient assets to pay the debts would not relieve him from this obligation to share in the losses, the capital in money or property advanced being a liability to be met on dissolution by the firm members. In other words, in the final accounting between partners, each partner is charged with his share of the losses and given credit for his capital advanced. On firm contracts the firm only is liable to suit and not the individual members, that is, the members of the firm jointly and not severally; but on a judgment against the firm the levy of execution may be against the individual property of one or more members or against the property of the firm at the option of the judgment creditor. And a judgment against all the members jointly as a firm is a lien upon the real estate of each individual member of the firm. Of course, if necessary to satisfaction, the execution could be against both the firm property and the individual property of each member. The doctrine of priority of individual and firm claims in bankruptcy will be treated hereafter. While no contract between the members can affect the rights of judgment creditors on execution, there may be provisions in a partnership contract for indemnity against losses binding upon the members themselves, and any member forced to pay a debt of the firm by process of law, of course, has his right of contribution against the other members of the firm. Other presumptions and obligations of law will be treated hereafter, such as those in relation to the termination of the partnership relation; but it is sufficient to say now that the powers, duties, liabilities, shares and profits of the members during the existence and at the dissolution of the partnership should be carefully stated in the articles of co-partnership, having in view the law of partnership. SECTION 3. POWERS OF MEMBERS GOVERNED BY CONTRACT. The business of a firm is to be conducted for and in behalf of the members of the firm; but the members may agree that some one member or a third party shall conduct the business and fix his powers and duties and may restrict the common law powers of any member, inasmuch as a partnership has the right to conduct its business through any agency it chooses, as fully and completely, as an individual might. Nevertheless the firm may be bound by the unauthorized act of a member, the formation of a partnership and its existence proclaimed to the world, being, prima facie, a declaration to the world of a mutual agency within the scope of the business. SECTION 4. IMPORTANCE OF THE CONTRACT RELATION. A partnership is a legal relation arising from a contract, express or implied. The relation is a question of law and fact, not a question of name. The court will look at the relation created by the contract, although the contract itself expressly denies the relationship and expressly denies the responsibility therein created. To be sure, the evident intention of the parties to a contract is an important element in determining its construction, but the parties may intend all the legal elements of a partnership relation and not know the legal consequences thereof, and may futilely intend to avoid them. On the other hand, a person may be interested in the financial success of a firm, may even have a share in its profits, and yet not be a member of the firm or liable as such. The most that can be said as to profits is that no one can be an actual member of a firm who has no share in the profits, since in such case the business would not be conducted for him and in his behalf. One not a member of a firm may, however, be liable to the same extent as an actual member if he holds himself out to the world as a member, his liability resting on the ground of estoppel, or on the ground that credit has been given to the firm on the strength of his apparent membership arising through his fault. In other words if he lends his name to a firm his property is thereby bound to pay its debts. And vice versa, and this is more pertinent to the present question, if he conceals his connection with the firm, he is yet on discovery liable as a member when his relationship to the firm based on his contract with it constitutes him an actual member. SECTION 5. WHO IS NOT A MEMBER. A person who is not one of the mutual agents of the firm and has not controlled, determined, fixed or limited the agency through which the business is conducted, and has no power to do so, is not a member of the firm. For it is a necessary element of a partner ship that the business be conducted through an agency which the members have created. The converse of the proposition, however, is not true. A person may put money into a business by way of loan, and share in its profits as a return for such use, and besides stipulate for his own safety and security that a certain person or persons only shall manage the business, and do this without becoming a member of the partnership. But the stipulation must be simply in the nature of a guaranty for security as shown by all the terms of the contract and the situation of the parties. Any right reserved to direct or control the agency might be fatal to non-responsibility. The stipulation in effect would amount only to this: On condition of certain persons being in control of the business, a certain amount of money is loaned to the firm for a certain limited time and for a certain consideration not amounting to any permanent interest in the firm. SECTION 6. CASES AND JUDICIAL OPINIONS PERTAINING TO THE NATURE OF A PARTNERSHIP. The owner of a two hundred acre tract of land near a city entered into a written agreement with four other persons, part of whom were real estate brokers, whereby the latter, at their own expense, were to lay out and plat the land into lots and blocks, advertise and sell the same, and pay the first party the sum of $50,000, after which the balance derived from the sale of the lots was to be divided equally among the parties, each taking one-fifth: Held, that by the contract the parties created a partnership in the enterprise of platting, advertising and selling the land, and that the court, on bill filed by one of |