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The name given to an instrument of writing by which the parties enter into a partnership, upon the conditions therein mentioned. This instrument generally contains certain provisions which it is the object here to point out.
But before proceeding more particularly to the consideration of the subject, it will be proper to observe that sometimes preliminary agreements to enter into a partnership are formed, and that questions, not unfrequently, arise as to their effects. These are not partnerships, but agreements to enter into partnership at a future time. When such an agreement has been broken, the parties may apply for redress to a court of law, where damages will be given, as a compensation. Application is sometimes made to courts of equity for their more efficient aid to compel a specific performance. In general these courts will not entertain bills for specific performance of such preliminary contracts; but in order to suppress frauds, or manifestly mischievous consequences, they will compel such performance. When, however, the partnership may be immediately dissolved, it seems the contract cannot be specifically enforced.
It is proper to premise that under each particular head, it is intended briefly to examine the decisions which have been made in relation to it.
The principal parts of articles of partnership are here enumerated:
The Names Of The Contracting Parties. These should all be severally set out;
The agreement that the parties actually by the instrument enter into partnership, and care must be taken to distinguish this agreement from a covenant to enter into partnership at a future time;
The Commencement Of The Partnership. This ought always to be expressly provided for. When no other time is fixed by it, the commencement will take place from the date of the instrument;
The Duration Of The Partnership. This may be for life or for a specific period of time; partnerships may be conditional or indefinite in their duration, or for a single adventure or dealing, this period of duration is either express or implied, but it will not be presumed to be beyond life. When a term is fixed, it is presumed to endure until that period has elapsed; and, when no term is fixed, for the life of the parties, unless sooner dissolved by the acts of one of them, by mutual consent, or operation of law.
A stipulation may lawfully be introduced for the continuance of the partnership after the death of one of the parties, either by his executors or administrators, or for the admission of one or more of his children into the concern. Sometimes this clause provides, that the interest of the partner shall go to such persons, as be shall by his last will name and appoint, and for want of appointment to such persons as are there named. In these cases it seems that the executors or administrators have an option to continue the partnership or not.
When the duration of the partnership has been fixed by the articles, and the partnership expires by mere effluxion of time, and, after such determination it is carried on by the partners without any new agreement, in the absence of all circumstances which may lead as to the true intent of the partners, the partnership will not, in general, be deemed one for a definite period; but in other respects, the old articles of the expired partnership are to be deemed adopted, by implication as the basis of the new partnership during its continuance.
The business to be carried on and the place where it is to be conducted. This clause ought to be very particularly written, as courts of equity will grant an injunction when one or more of the partners attempt, against the wishes of one or more of them, to extend such busiress beyond the provision contained in the articles.
The name of the firm, as for example, John Doe and Company, ought to be ascertained. The members of the partnership are required to use the name thus agreed upon, and a departure from it will make them individually liable to third persons or to their partners, in particular cases.
A provision is not unfrequently inserted that the business shall be managed and administered by a particular partner, or that one of its departments shall be under his special care. In this case, courts of equity will protect such partner in his rights.
Sometimes a provision is introduced that a majority of the partners shall have the management of the affairs of the partnership. This is requisite, particularly when the associates are numerous.
A provision should be inserted as to the manner of furnishing the capital or stock of the partnership. When a partner is required to furnish his proportion of the stock at stated periods, or pay by installments, he will, where there are no stipulutions to the contrary, be considered a debtor to the firm. Sometimes a provision is inserted that real estate, and fixtures belonging to the firm shall be considered, as between the partners, not as partnership but as several property. In cases of bankruptcy this property will be treated as the separate property of the partners.
A provision for the apportionment of the profits a and losses among the partners should be introduced. In the absence of all proof, and controlling circumstances, the partners are to share in both equally, although one may have furnished all the capital, and the other only his skill.
Sometimes a stipulation for an annual account of the Property of the partnership whether in possession or in action, and of the debts due by partnership is inserted. These accounts when settled are at least prima facie evidence of the facts they contain.
A provision is frequently introduced forbidding any one partner to carry on any other business. This should be provided for, though there is an implied provision in every partnership that no partner shall carry. on any separate business inconsistent or contrary to the true interest of the partnership.
When the partners are numerous, a provision is often made for the expulsion of a partner for gross misconduct, for insolvency, bankruptcy, or other causes particularly enumerated. This provision will govern when the case occurs.
This instrument should always contain a provision for winding up the business. This is generally provided for in one of three modes: first, by turning all the assets into cash, and, after paying all the liabilities of the partnership, dividing such money in proportion to the several interests of the parties; secondly, by providing that one or more of the partners shall be entitled to purchase the shares of the others at a valuation; thirdly, that all the property of partnership shall be appraised, and that after paying the partnership debts, it shall be divided in the proper proportions. The first of these modes is adopted by courts of equity in the absence of express stipulations.
It is not unusual to insert in these articles, a provision that in case of disputes the matter shall be submitted to arbitration. This clause seems nugatory, for no action will lie for a breach of it, as that would deprive the courts of their jurisdiction, which the parties cannot do.
The articles should be dated, and executed by the parties. It is not requisite that the instrument, should be under seal.