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Partners as Parties to Commercial Paper


PARTNERS AS PARTIES TO COMMERCIAL PAPER. The subject of Part nership has been treated in a previous number of the Home Law School Series, to which the student is referred at this time. The rights and liabilities of the partners to validly executed firm paper was fully dis cussed in the previous volume, and it is only neces sary at this time to again point out the fact that the partners only have implied power to make and negotiate commercial paper in case the firm is a trading partnership, or one whose business neces sitates the use of commercial paper. If it comes within the nature and scope of the firm's business to issue negotiable paper, any partner may bind the firm by making or accepting a note or bill, though the proceeds are for his own benefit if the holder of the paper was not a party to the fraud.

Where the business of the firm is not of the char acter to imply such authority, that is, where the firm is regarded as a non-trading firm, commercial paper issued in the name of the firm by one partner will not bind the other partner. (Dickenson v. Valpy, to B. S C., 128.) A partner cannot, however, under his implied powers, issue purely accommodation paper, or paper for his own private benefit, and for a purpose uncon nected with the business of the firm. If such paper is issued, it will not bind the other partners until it has passed into the hands of a bona fide holder, who has given value for it without notice of the fraud upon the other partners. (Atlantic St. Bank v. Savery, 82 N. Y., 294; Burke v. Wilbur, 42 Mich., 329.) This is the result of the rule of negotiability which applies when the indorsee shows that the paper bearing the firm name was taken by him without knowledge of its improper issue and for value. (Monroe v. Copper, 5 Pick., 412.) The proper form of signing the firm name to any contract made by a partner is to write the firm name and nothing else. It is permissible but unnecessary to write the name of the partner after the firm signa ture. It is held to be a good firm signature to write all the names of the partners without using the part nership name. (Maynard v. Fellows, 43 N. H., 255.) If there is a material variance in the firm name as used by the partner in signing the note or bill the firm will not be bound as where the firm name is that of an individual and the note is signed in the name of the individual with the addition of "& Co." (Kirk v. Blurton, g M. & W., 284.) And it must appear upon the face of the paper that it is a firm obliga tion if the firm is to be bound. (Gallway v. Mathew, to East, 264.) In case a bill is payable to the order of the firm and the partnership is subsequently dissolved the indorsement of an ex-partner in the firm name fers the property therein and authorizes the ment thereof (Benjamin's Chalmers, Article 80.)

firm, name, partner and business