exist in this country.102 It is submitted that, while Thayer v. Humphrey is unsupportable and ought to be overruled, this Act, in declaring the liability to be joint, does not prevent a court which takes the same views as the Wisconsin court of the effect of the law of estoppel, from, as in that case, distributing the insolvent estate as if there had been a partnership. The law of estoppel still applies under this Act.103

104

Sec. 18 (h) empowers the majority to decide a question in the ordinary course of business as to which there is disagreement.' No provision is made for cases of even division, as where there are two partners. The decisions are in conflict on this point.105

While the word "lawful" is omitted from the definition of partnership,106 we are assured by the draftsman that because unlawfulness is a cause of dissolution,107 a partnership for a wholly unlawful purpose "is dissolved the moment it is created."108 While the unlawfulness of the agreement of partnership may well make it unenforceable as between the partners by any legal proceeding, yet it should be recognized in the interests of innocent third persons that a partnership has in fact been created, and such third persons should have the usual rights against the members of the partnership and its assets. 109 Suppose a partnership formed for an entirely unlawful business and one partner without authority from his co-partner orders goods, which might be used for a lawful purpose,

102 Harkness v. Russell, 118 U. S. 663, 669 (1886).

103 Sec. 4. (Rules of Construction.) (2) The law of estoppel shall apply under this act.

104 Sec. 18. (Rules Determining Rights and Duties of Partners.) (h) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all the partners. 105 That the act may be done although the third person knows of the disagreement: Johnson Clark & Co. v. Bernheim, 76 N. C. 139 (1887); Campbell & Jones v. Bowen & Bird, 49 Ga. 417 (1873). Contra, Dawson v. Elrod, 105 Ky. 624, 49 S. W. 465 (1899); Monroe v. Connor, 15 Me. 178 (1838).

106 Sec. 6. (Partnership Defined.) (1) A partnership is an association of two or more persons to carry on as co-owners a business for profit.

107 Sec. 31. (Causes of Dissolution.) Dissolution is caused: (3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership.

108 The Uniform Partnership Act, with explanatory notes, p. 16.

109 A corporation formed for a wholly unlawful purpose may make valid contracts with innocent third persons. WALD'S POLLOCK ON CONTRACTS, 3d ed. Williston

490, n. 5.

from an innocent third person. Is the latter without remedy save against the person he actually dealt with, and has he no priority over separate creditors in joint assets? Such would seem to be the unfortunate result if the attempted partnership is as a matter of law never in existence. The root of the difficulty is in the conception of the illegal contract as a nullity, instead of as an actual contract subject to a personal defense as between the parties to it.

Notice of dissolution is required in all cases except where the partnership is dissolved because it has become unlawful to carry on the business.110 It is a commendable change to require notice in case of dissolution by death or bankruptcy of a partner, but why not require it in case of dissolution because the business has become unlawful? No provision is made by the Act for such a case, and so the matter is left as at common law. It seems to be assumed that at common law notice is unnecessary in such a case, but the decisions to that effect are, so far as the writer has been able to ascertain, cases of dissolution by reason of war between the two countries wherein members of the firm are resident.111 One may well be bound to take notice of so public an event as war, but it seems an injustice in cases where the third person does not know of the foreign residence of a member of the firm with which he believes himself to be doing business, to refuse him a remedy against all members of the firm resident in his own country who might have given him notice. In many other cases of illegality there is no reason for presuming notice. Suppose a partnership is formed for engaging in the liquor business in a city where such a business is licensed. Later the city votes for 110 Sec. 35. (Power of Partner to Bind Partnership to Third Persons after Dissolution.) (1) If the partnership is not dissolved because it has become unlawful to carry on the business, a partner cannot, after dissolution, bind the partnership to third persons by any act which is not necessary to wind up the partnership affairs or to complete transactions then unfinished unless,

(a) Such third person, having had relations with the partnership by which a credit was extended upon the faith of the partnership, has had no knowledge or notice of the dissolution; or

(b) Such third person, not having had business relations with the partnership by which a credit was extended to the partnership, has no knowledge or notice of the dissolution, and the fact of dissolution has not been advertised in a newspaper of general circulation of the place (or of each place if more than one) at which the partnership business was regularly carried on.

111 Griswold v. Waddington, 16 John. 439 (1819); 30 Cyc. 655, 671.

"no-license" and the liquor business becomes unlawful. One member of the partnership, without the knowledge of his partner, undertakes to continue the business unlawfully and orders goods in the firm name of a third person in a distant state who has dealt with the firm and who has no knowledge of the fact that in the city where the business is carried on the sale of liquor has been forbidden. If no notice of dissolution has been given he should be allowed to hold both partners. It is submitted that an innocent third person should be entitled to notice where the dissolution is due to illegality as much as in any other case, and that the qualification "if the partnership is not dissolved because it has become unlawful to carry on the business" should be stricken out.

In an indirect way, using a double negative, Sec. 35 112 makes a retired partner liable on a contract made after his retirement with a third person who has never had any previous dealings with the partnership, if he does not know of the dissolution and if no public notice has been given. The reason for such a rule is that the third person should be allowed to assume that the partner's connection with the firm and liability for its obligations continues unless he has some notice to the contrary. It is an estoppel. If the third person has never been informed of the partner's connection with the firm, no credit is extended in reliance upon his supposed liability, and the reason for holding him liable on a contract to which he is not a party disappears. Accordingly it is generally held that a dormant partner need not give notice of retirement.113 Some courts refuse to treat him as a dormant partner where the style of the firm name is such as to suggest other partners than those whose names are part of the firm name, e. g., "The X Company," or "A, B & Co." There is a conflict of authority on this point.114 But the cases are agreed upon the proposi

112 See n. 110.

113 Park v. Wooten's Ex'r, 35 Ala. 242 (1859) (semble); Hornaday v. Cowgill, 54 Ind. App. 631 (1913); Nuisbaumer v. Becker, 85 Ill. 287 (1877); Gorman v. Davis & Gregory Co., 118 N. C. 370, 24 S. E. 770 (1896); Kelley v. Hurlburt, 5 Cow. (N. Y.) 534 (1826); Baptist Book Concern v. Carswell, 46 S. W. 858 (Tex. Civ. App., 1898); Vaccaro v. Toof, 9 Heisk. (Tenn.) 194 (1872); Bigelow v. Elliot, 1 Cliff. 28 (1858) (semble); In re Stoddard Bros. Lumber Co., 169 Fed. 190 (1909).

114 That notice is necessary: Goddard v. Pratt, 16 Pick. (Mass.) 412, 428 (1835); Elkinton v. Booth, 143 Mass. 479, 10 N. E. 460 (1887); Shamburg v. Ruggles, 83 Pa. 148 (1876); and see Magill v. Merrie & Bullin, 5 B. Mon. (Ky.) 168 (1844); Edwards v. McFell, 5 La. Ann. 167 (1850); Deford v. Reynolds, 36 Pa. 325 (1860). Contra,

tion that one who has had no knowledge of the existence of the firm is not entitled to notice in any form.115

Under Sec. 35 it appears that a retired partner is liable on obligations incurred in the firm name after dissolution even though the third person never heard of the firm while he was a member. It is submitted that this change of the law is unwarranted. As no note is made of it in the annotations on this section, it is possibly inadvertent. The section ought to be reconstructed so as to dispense with some of the confusing negatives and affirmatively to impose liability in the absence of knowledge or notice; and in the case of third persons who have had no business relations with the partnership whereby credit was extended to it the necessity for notice should be limited to such third persons as had knowledge of the existence of the partnership.

Sec. 38 (1) 116 confers on each partner certain rights as to the application of partnership property after a dissolution. It should be expressly stated that such rights may be enforced by the representative of a deceased partner.

According to the English Bankruptcy Act,117 our Federal Bankruptcy Act,118 and the weight of authority among our states,119 partnership creditors cannot share in the insolvent estate of a partner until his separate creditors are paid in full. For a history of this rule, Re Wilcox 120 and Robinson v. Security Co.121 Grosvenor v. Lloyd, 1 Met. (Mass.) 19 (1840); Hornaday v. Cowgill, 54 Ind. App. 631, 101 N. E. 1030 (1913); Warren v. Ball, 37 Ill. 76 (1865); Kennedy v. Bohannon, 11 B. Mon. (Ky.) 118, 120 (1850).

115 Puritan Trust Co. v. Coffey, 180 Mass. 510, 62 N. E. 970 (1902); Swigert v. Aspden, 52 Minn. 565, 54 N. W. 738 (1893); Dowzelot v. Rawlings, 58 Mo. 75 (1874); Bank of Monongahela Valley v. Weston, 159 N. Y. 201, 211, 54 N. E. 40 (1899) (semble); Cook v. Slate Co., 36 Oh. St. 135 (1880); Benjamin v. Covert, 47 Wis. 375, 385, 2 N. W. 625 (1879) (semble); Pratt v. Page, 32 Vt. 13 (1859); EWART, ESTOPPEL, 518.

116 Sec. 38. (Rights of Partners to Application of Partnership Property.) (1) When dissolution is caused in any way, except in contravention of the partnership agreement, each partner, as against his co-partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise agreed, may have the partnership property applied to discharge its liabilities, and the surplus applied to pay in cash the net amount owing to the respective partners. . . 117 English Bankruptcy Act 1883, § 40 (3).

...

may be consulted. It is illogical under any theory of partnership, is contrary to the practice in civil law countries,122 and as was said from the first by English courts, has nothing to support it but precedent.123 Some of our states have a contrary rule at common law. 124 Others have, by statutes making joint obligations joint and several, overturned the conventional rule, at least so far as estates of deceased partners are concerned.125 It is to be hoped that eventually in all our courts of insolvency the liability of the partner to contribute to the payment of partnership liabilities, correctly described by this Act as a partnership asset,126 will be treated as on a parity with his other liabilities for purpose of distribution of his insolvent estate. Meanwhile it is not to be expected that a state such as Connecticut, whose highest court has so recently after the fullest consideration deliberately departed from the conventional rule, will return thereto in order to secure uniformity.

The Act substantially adopts the conventional rule 127 and provides for payment of claims against the separate estate in the 122 Brannan, "The Separate Estates of Non-bankrupt Partners," 20 HARV. L. REV. 588, 592.

123 Ex parte Clay, 6 Ves. 813 (1802); Dutton v. Morrison, 17 Ves. 193 (1810).

124 Robinson v. Security Co., 87 Conn. 268, 87 Atl. 879 (1913); Barton Nat. Bank v. Atkins, 72 Vt. 33, 45, 47 Atl. 176 (1900); Hutzler v. Phillips, 26 S. C. 136, 1 S. E. 502 (1887); Webb v. Gregory, 49 Tex. Civ. App. 282, 108 S. W. 478 (1908). This result is reached by statute in Louisiana. Flower v. Creditors, 3 La. Ann. 189 (1848). In Kentucky separate creditors share the separate assets until their rate of dividend equals that received by partnership creditors from partnership assets; thereafter both classes of creditors share pari passu. Southern Bank of Kentucky v. Keiser, 2 Duval, 169 (1865); Hill v. Cornwell, 95 Ky. 512, 26 S. W. 540 (1894). This rule is adopted by statute in Georgia. Johnson v. Gordon, 102 Ga. 350, 30 S. E. 507 (1897).

125 McLain & Blodgett v. Carson's Adm'r, 4 Ark. 164 (1842); Ashby's Adm'r v. Porter, 26 Gratt. (Va.) 455 (1875); Freeport Stone Co. v. Carey's Adm'r, 42 W. Va. 276, 26 S. E. 183 (1896). the rule of distribution. Farris' Adm'r, 103 Mo.

Similar statutes have been construed as not changing Smith v. Mallory's Ex'r, 24 Ala. 628 (1854); Hundley v. 78, 15 S. W. 312 (1890); Irby v. Graham, 45 Miss. 425 (1872); Williams Adm'r v. Bradley, 7 Oh. Cir. Ct. 227 (1892).

126 Sec. 40. (Rules for Distribution.) (a) The assets of the partnership are: I. The partnership property, II. The contributions of the partners necessary for the payment of all the liabilities specified in clause (b) of this paragraph.

127 Sec. 40. (i) Where a partner has become bankrupt or his estate is insolvent the claims against his separate property shall rank in the following order:

I. Those owing to separate creditors.

II. Those owing to partnership creditors.

III. Those owing to partners by way of contribution.