The Express.
London, England, 1865-03-16 00:00:00

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LONDON, THURSDAY, MARCH 16.

A Bus for the amendment of the Law of Part-
nership ows point in which great need for amend-
ment exis4 has just been brought into the House
of Comrioni by Mr. MILNER GIBSON. Nearly a
hundred years ago a learned Chief Justice laid
down the principle that "every man who has a
" share of the profits of a trade ought also to bear
" • share of the loss." Nobody, of course, can
see any possible reason for such a universal prin-
ciple. The 'matter is one evidently capable of
assuming an
Infinite variety of shapes, and if
two parties to a contract choose to agree that one
shall have a share of the profits of the other, but
without taking any share of looses, it is hard
to see why the law should insist on making him,
against the will of both, bear also a proportion of
the debts. Such, nevertheless, was the rule which
the law, following on the dictum we have cited,
has maintained.for almost a century. The result
was that no one in trade could get an advance
from a friend, letting the interest depend on the
amount of his profits, without making him as to
all the world a partner. Even • servant could not
be reimbursed by receiving a share, however
minute, of the profits of his muter, without in-
curring the same liability for his mutern
debts. But successive judges, sensible of the
cruelty and absurdity of the rule, broke it down
by distinctions not less absurd. They declared
that there was a difference between groat profits
and net profits, and that an agreement to share
the former would not involve that liability for
debts which resulted from a compact to divide the
latter. They drew a line between a bargain for a
share of profits, and a stipulation for an annual
payment 'varying with the rate of profits. Besides
this, they settled that • payment of a fixed sum,
but contingent on the chance of profits being made,
did not create partnership. And last of all, the
House of Lords, reversing the decision of every
other court, decided a few years ago, that credi-
tors of • firm, carrying on the business under deed
of arrangement, by which it was stipulated that
the profits were to be applied to the paying off
of the debts, did not thereby constitute themselves
partners of the firm, so as to be liable for new debts
incurred daring the currency of the arrangement.
Unfortunately, however, the House, while thus
virtually overturning all the old principles, pro-
fessed to respect them, and left the old cases to
stand side by side, in equal authority, with the
new. The result was a state of the law in which
no man could tell what was safe or in what danger
consisted, and in which nothing was certain except
that a faulty rule of law existed, which might be
set at nought with impunity if anyone was lucky
enough to hit upon the right way of doing it.
The Board of Trade BM proposes to sweep
away this evil by abolishing its original source.
It declares that an advance of money to anyone
engaged in business, on the condition of receiving •
share of the profits, whether bearing also a part
of the losses or not, shall not of itself con-
stitute the lender • partner in the business.
If, however, the business is disastrous such •
lender is not to be entitled to rank equally with
the other creditors, and is not to receive payment
till they have been satisfied. Remuneration may
be granted to • clerk or servant, in the shape of •
definite share of profits, without making him ne-
cessarily • partner. And an annuity out of profits
to the widow or child of a deceased partner is not
to be held as of itself constituting them continuing
partners in the concern. These arrangements
seem to provide sufficiently against possible abuse.
They deal only with the inference to be drawn
from an arrangement strictly private, and on the
faith of which no one can have been seduced into
giving additional credit to the ostensible manager
of the business. They reserve full effect to
any other circumstances which in any case
may exist, and leave any one who is known to the
public or dealt with by an individual as a partner,
to bear the full responsibility incurred by so hold-
ing himself out. All that they will establish is
that a share of profits will not, without something
more, constitute the recipient • partner.
No inconsiderable advantage will, however, re-
sult from this modest change in • legal rule.
Besides the abatement of litigation on a confessedly
knotty point, and the clearing away of a mass of
incomprehensible and ensnaring decisions, there
will be • great convenience afforded to many per-
sons
in trade, and many who are dependent on
them. Men in business, however prudent sa well
as energetic they may be, if they desire to extend
their operations by the assistance of borrowed
capital, are placed under great hardships by the
existing rale. , They have no realised security to
offer; they mut, therefore, pay a very high rate
of interest, tad it must be paid whether they are
successful or not, for the lender would become a
partner if he ventured to take a share of the profits
for his remuneration. Now, it often happens that
the personal frieuds of a rising young man would
gladly trust him to this extent, and readily help
him on these terms, if the law would only permit
them to do it without involving their fortunes in
unlimited liability for his debts. So, again, there