PARTNERSHIP.

rally neglected the enforcement of publicity; the best security to the public against any danger which might arise from this description of partnerships; and a security quite as much required in the case of those associations of the kind in question, which, by an exception from their general practice, they suffered to exist. Even in the instance of the Bank of England, which holds a monopoly from the legislature, and has had partial control over a matter of so much public interest as the state of the circulating medium, it is only within these few years that any publicity has been enForced; and the publicity was at first of an extremely incomplete character, though now, for most practical purposes, probably at length sufficient.

limited responsibility, they have gene-existence of commandite; since the amount subscribed by commanditaires is all of it available to creditors, the commanditaires losing their whole investment before any creditor can lose anything; while, if instead of becoming partners to that amount, they had lent the sum at an interest equal to the profit they derived from it, they would have shared with the other creditors in the residue of the estate, diminishing pro rata the dividend obtained by all. While the practice of commandite thus conduces to the interest of creditors, it is often highly desirable for the contracting parties themselves. The managers are enabled to obtain the aid of a much greater amount of capital than they could borrow on their own security; and persons are induced to aid useful undertakings, by embarking limited portions of capital in them, when they would not, and often could not prudently, have risked their whole fortunes on the chances of the enterprise.

§ 7. The other kind of limited partnership which demands our attention, is that in which the managing partner or partners are responsible with their whole fortunes for the engagements of the concern, but have others associated with them who contribute only definite sums, and are not liable for anything beyond, though they participate in the profits according to any rule which This is called may be agreed on. partnership in commandite: and the partners with limited liability (to whom, by the French law, all interference in the management of the concern is interdicted) are known by the name commanditaires. Such partnerships are not allowed by English law: in all private partnerships, whoever shares in the profits is liable for the debts, to as plenary an extent as the Inanaging partner.

For such prohibition no satisfactory defence has ever, so far as I am aware, been made. Even the insufficient reason given against limiting the responsibility of shareholders in a jointstock company, does not apply here; there being no diminution of the motives to circumspect management, since all who take any part in the direction of the concern are liable with their whole fortunes. To third parties, again, the security is improved by the

P.E.

It may perhaps be thought that where due facilities are afforded to companies, commandite But joint-stock partnerships are not required. there are classes of cases to which the commandite principle must always be better adapted than the jointSuppose," says M. stock principle. Coquelin, "an inventor seeking for a capital to carry his invention into practice. To obtain the aid of capitalists, he must offer them a share of the anticipated benefit; they must associate themselves with him in the chances of its success. In such a case, which of the forms would he select? Not a common partnership, certainly;" for various reasons, and especially the extreme difficulty of finding a partner with capital, willing to risk his whole fortune on the success of the invention. "Neither would he select the

"There has been a great deal of commiseration professed," says Mr. Duncan, solicitor, "towards the poor inventor; he has been oppressed by the high cost of patents; but his chief oppression has been the partnership law, which prevents his getting any one to help him to develop his invention. He is a poor man, and therefore cannot give security to a creditor; no one will lend him money; the rate of interest

N N

Anonymous Society," or any other form of joint-stock company, in which he might be superseded as manager. He would stand, in such an association, on no better footing than any other shareholder, and he might be lost in the crowd; whereas, the association existing, as it were, by and for him, the management would appear to belong to him as a matter of right. Cases occur in which a merchant or a manufacturer, without being precisely an inventor, has undeniable claims to the management of an undertaking, from the possession of qualities peculiarly calculated to promote its success. So great, indeed," continues M. Coquelin, "is the necessity, in many cases, for the limited partnership, that it is diffi cult to conceive how we could dispense with or replace it:" and in reference to his own country he is probably in the right.

Where there is so great a readiness as in England, on the part of the public, to form joint-stock associations, even without the encouragement of a limitation of responsibility; commandite partnership, though its prohibition is in principle quite indefensible, cannot be deemed to be, in a merely eco

offered, however high it may be, is not an attraction. But if by the alteration of the

nomical point of view, of the imperative necessity which M. Coquelin ascribes to it. Yet the inconveniences are not small, which arise indirectly from those provisions of the law by which every one who shares in the profits of a cocern is subject to the full liabilities of an unlimited partnership. It is impos sible to say how many or what useful modes of combination are rendered impracticable by this state of the law. It is sufficient for its condemnation that, unless in some way relaxed, it is inconsistent with the payment of wages in part by a percentage on profits; in other words, the association of the operatives as virtual partners with the capitalist.*

It is, above all, with reference to the improvement and elevation of the working classes, that complete freedom in the conditions of partnership is indispensable. Combinations such as the associations of workpeople, described in a former chapter, are the mest powerful means of effecting the social emancipation of the labourers through their own moral qualities. Nor is the liberty of association important solely for its examples of success, but mily as much so for the sake of attempts which would not succeed; but by their failure would give instruction more im law he could allow capitalists to take an pressive than can be afforded by any interest with him and share the profits, while thing short of actual experience. Every the risk should be confined to the capital theory of social improvement, the worth they embarked, there is very little doubt at all that he would frequently get assistance of which is capable of being brought to from capitalists; whereas at the present an experimental test, should be permoment, with the law as it stands, he is committed, and even encouraged, to sub pletely destroyed, and his invention is useless mit itself to that test. From such to him; he struggles month after month; he applies again and again to the capitalist experiments the active portion of the without avail. I know it practically in two working classes would derive lessons or three cases of patented inventions; espe- which they would be slow to learn from cially one where parties with capital were desirous of entering into an undertaking of the teaching of persons supposed to great moment in Liverpool, but five or six have interests and prejudices advers different gentlemen were deterred from doing to their good; would obtain the means so, all feeling the strongest objection to what of correcting, at no cost to society, what each one called the cursed partnership law." -Report, p. 155. ever is now erroneous in their notions of the means of establishing their in dependence; and of discovering the co ditions, moral, intellectual, and indus

Mr. Fane says, "In the course of my professional life, as a Commissioner of the Court of Bankraptcy, I have learned that the most unfortunate man in the world is an inventor.

The difficulty which an inventor finds in getting at capital, involves him in all sorts of embarrassments, and he ultimately is for the most part a ruined man, and somebody else gets possession of his invention."-Ib. P. 82.

PARTNERSHIP.

trial, which are indispensably necessary | England States. According to Mr.
for effecting without injustice, or for
effecting at all, the social regeneration
they aspire to.*

The French law of partnership is
superior to the English in permitting
commandite; and superior, in having
no such unmanageable instrument as
the Court of Chancery, all cases arising
from commercial transactions being
adjudicated in a comparatively cheap
and expeditious manner by a tribunal
of merchants. In other respects the
French system is far worse than the
English. A joint-stock company with
limited responsibility cannot be formed
without the express authorization of
the department of government called
the Council of State, a body of admi-
nistrators, generally entire strangers to
industrial transactions, who have no
interest in promoting enterprises, and
are apt to think that the purpose of
their institution is to restrain them;
whose consent cannot in any case be
obtained without an amount of time
and labour which is a very serious
hindrance to the commencement of an
enterprise, while the extreme uncer-
tainty of obtaining that consent at all
is a great discouragement to capitalists
who would be willing to subscribe. In
regard to joint-stock companies with-
out limitation of responsibility, which
in England exist in such numbers and
are formed with such facility, these
associations cannot, in France, exist at
all; for, in cases of unlimited partner-
ship, the French law does not permit
the division of the capital into trans-
ferable shares.

The best existing laws of partnership appear to be those of the New

By an act of the year 1852, called the Industrial and Provident Societies Act, for which the nation is indebted to the publicspirited exertions of Mr. Slaney, industrial associations of working people are admitted to the statutory privileges of Friendly Societies. This not only exempts them from the formalities applicable to joint-stock companies, but provides for the settlement of disputes among the partners without recourse to the Court of Chancery. There are still some defects in the provisions of this Act, which hamper the proceedings of the Societies in several respects; as is pointed les in the Almanack of the Rochdale Equitobut Pioneers for 1861.

Carey,+ "nowhere is association so
little trammelled by regulations as in
New England; the consequence of
which is, that it is carried to a greater
extent there, and particularly in Massa-
chusetts and Rhode Island, than in any
other part of the world. In these
states, the soil is covered with com-
pagnies anonymes-chartered compa-
for almost every conceivable
nies-
purpose. Every town is a corporation
for the management of its roads, bridges,
and schools; which are, therefore, under
the direct control of those who pay
for them, and are consequently well
managed. Academies and churches,
lyceums and libraries, saving-fund so-
cieties, and trust companies, exist in
numbers proportioned to the wants of
the people, and all are corporations.
Every district has its local bank, of a
size to suit its wants, the stock of which
is owned by the small capitalists of
the neighbourhood, and managed by
themselves; the consequence of which
is, that in no part of the world is the
system of banking so perfect-so little
liable to vibration in the amount of
loans-the necessary effect of which is,
that in none is the value of property
so little affected by changes in the
amount or value of the currency re-
sulting from the movements of their
own banking institutions. In the two
states to which we have particularly
referred, they are almost two hundred
in number.

Massachusetts, alone, offers to our view fifty-three insurance offices, of various forms, scattered through the state, and all incorporated. Factories are incorporated, and are owned in shares; and every one that has any part in the management of their concerns, from the purchase of the raw material to the sale of the manufactured article, is a part owner; while every one employed in them has a prospect of becoming one, by the use of prudence, exertion, and economy. Charitable associations exist in large numbers, and all are incorporated. Fishing vessels are owned in shares by those who navigate them; and the

In a note appended to his translation of M. Coquelin's paper.

§ 8. I proceed to the subject of Insolvency Laws.

sailors of a whaling ship depend in a great degree, if not altogether, upon the success of the voyage for their Good laws on this subject are imcompensation. Every master of a ves- portant, first and principally, on the sel trading in the Southern Ocean is a score of public morals; which are on part owner, and the interest he pos- no point more under the influence of sesses is a strong inducement to exer- the law, for good and evil, than in a tion and economy, by aid of which the matter belonging so pre-eminently to people of New England are rapidly the province of law as the preservation driving out the competition of other of pecuniary integrity. But the subnations for the trade of that part of ject is also, in a merely economical the world. Wherever settled, they ex- point of view, of great importance. hibit the same tendency to combination First, because the economical wellof action. In New York they are the being of a people, and of mankind, dechief owners of the lines of packet pends in an especial manner upon their ships, which are divided into shares, being able to trust each other's enowned by the shipbuilders, the mer-gagements. Secondly, because one of chants, the master, and the mates; the risks, or expenses, of industrial which last generally acquire the means operations is the risk or expense of of becoming themselves masters, and what are commonly called bad debts, to this is due their great success. The and every saving which can be effected system is the most perfectly democratic in this liability is a diminution of cost of any in the world. It affords to of production; by dispensing with an every labourer, every sailor, every ope. item of outlay which in no way conrative, male or female, the prospect of duces to the desired end, and which advancement; and its results are pre- must be paid for either by the concisely such as we should have reason sumer of the commodity, or from the to expect. In no part of the world are general profits of capital, according as talent, industry, and prudence, so cer- the burthen is peculiar or general. tain to be largely rewarded."

The cases of insolvency and fraud on the part of chartered companies in America, which have caused so much loss and so much scandal in Europe, did not occur in the part of the Union to which this extract refers, but in other States, in which the right of as sociation is much more fettered by legal restrictions, and in which, accordingly, joint-stock associations are not comparable in number or variety to those of New England. Mr. Carey adds, "A careful examination of the systems of the several states, can scarcely, we think, fail to convince the reader of the advantage resulting from permitting men to determine among themselves the terms upon which they will associate, and allowing the associations that may be formed to contract with the public as to the terms upon which they will trade together, whether of the limited or unlimited liability of the partners." This principle has been adopted as the foundation of all recent English legislation on the subject.

The laws and practice of nations on this subject have almost always been in extremes. The ancient laws of most countries were all severity to the debtor. They invested the creditor with a power of coercion, more or less tyrannical, which he might use against his insolvent debtor, either to extort the surrender of hidden property, or to obtain satisfaction of a vindictive character, which might console him for the non-payment of the debt. This arbitrary power has extended, in some countries, to making the insolvent debtor serve the creditor as his slave: in which plan there were at least some grains of common sense, since it might possibly be regarded as a scheme for making him work out the debt by his labour. In England, the coercion assumed the milder form of ordinary imprisonment. The one and the other were the barbarous expedients of a rude age, repugnant to justice as well as to humanity. Unfortunately the reform of them, like that of the criminal law generally, has been taken in

:

hand as an affair of humanity only, not of justice and the modish humanity of the present time, which is essentially a thing of one idea, has in this as in other cases, gone into a violent reaction against the ancient severity, and might almost be supposed to see in the fact of having lost or squandered other people's property, a peculiar title to indulgence. Everything in the law which attached disagreeable consequences to that fact, was gradually relaxed, or entirely got rid of: until the demoralizing effects of this laxity became so evident as to determine, by more recent legislation, a salutary though very insufficient movement in the reverse direction.

the rightful owners; and that they shall not find it answer to make themselves unable to pay their just debts, by spending the money of their creditors in personal indulgence. It is admitted that what is technically called fraudulent bankruptcy, the false pretence of inability to pay, is, when detected, properly subject to punish ment. But does it follow that insol. vency is not the consequence of mis conduct because the inability to pay may be real? If a man has been a spendthrift, or a gambler, with property on which his creditors had a prior claim, shall he pass scot-free because the mischief is consummated and the money gone? Is there any very mateterial difference in point of morality between this conduct, and those other kinds of dishonesty which go by the names of fraud and embezzlement?

Such cases are not a minority, but a large majority among insolvencies. The statistics of bankruptcy prove the fact. By far the greater part of all insolvencies arise from notorious misconduct; the proceedings of the Insolvent Debtors Court and of the Bankruptcy Court will prove it. Er cessive and unjustifiable overtrading or most absurd speculation in com modities, merely because the poor spe culator thought they would get up, but why he thought so he cannot tell; speculation in hops, in tea, in silk, in corn-t -things with which he is alto

เ

The indulgence of the laws to those who have made themselves unable to pay their just debts, is usually defended, on the plea that the sole object of the law should be, in case of insolvency, not to coerce the person of the debtor, but to get at his property, and distribute it fairly among the creditors. Assuming that this is and ought to be the sole object, the mitigation of the law was in the first instance carried so far as to sacrifice that object. Imprisonment at the discretion of a creditor was really a powerful engine for extracting from the debtor any property which he had concealed or otherwise made away with and it remains to be shown by experience whether, in depriving creditors of this instrument, the law, even as last amended, has fur-gether unacquainted; wild and absurd nished them with a sufficient equivalent. But the doctrine, that the law has done all that ought to be expected from it, when it has put the creditors in possession of the property of an insolvent, is in itself a totally inadmissible piece of spurious humanity. It is the business of law to prevent wrongdoing, and not simply to patch up the consequences of it when it has been committed. The law is bound to take care that insolvency shall not be a good pecuniary speculation; that men shall not have the privilege of hazarding other people's property without their knowledge or consent, taking the profits of the enterprise if it is successful, and if it fails, throwing the loss upon

investments in foreign funds, or in joint-stocks; these are among the most innocent causes of bankruptcy."* The experienced and intelligent writer from whom I quote, corroborates his assertion by the testimony of several of the official assignees of the Bankruptcy Court. One of them says,

"As far as I can collect from the books and documents furnished by the bankrupts, it seems to me that' in the whole number of cases which occurred during a given time in the court to which he was attached, "fourteen have been ruined by spe

From a volume published in 1845, entitled Credit the Life of Commerce, by Mr.. J. H. Elliott.