ARTICLE I: ON SOCIETY (Partnership)

1013. • Definition. It is the agreement of two or several persons to contribute something for profit to be received from it, with profit and loss communicated pro rata. - Something, as money, merchandise, industry, labor. - To contribute, and not to transfer into the associate; for society is not converted with co-ownership (joint property). Wherefore between brothers and sisters society does not exist for this reason (i.e. by a precise pact), because they have an undivided patrimony and live from a common table. - With profit and loss, etc. Hence of himself he is not an associate for whom, as minister or broker, a certain quota of profit is constituted in compensation for labor, nor he who gives money by loan to a merchant, so that he may receive a fixed part from the commercial profit.

Conditions: 1. that there be equality, i.e. a right to profit pro rata of the thing contributed; 2. that, unless from a pact the loss and the principal are common, the peril of the principal regard the owner of the principal; 3. that each one undergo the burden of losses and expenses which come on account of the society; yet he who has been made liable to creditors by the fault of the associate is not held in conscience to pay before sentence. - But he who has a small portion, for example a sixteenth, although in most States he is held for the whole debt of the society, satisfies in conscience if he pays according to the pro rata part of his portion. - Whenever a society is entered by the sanction of a public charter (incorporated), the goods of the individual associates, unless the contrary is established in the Charter, are not liable to creditors, but only those things which are of the group (i.e. the capital stock);² 4. that each one apply the same diligence in the society as in private negotiation.³ It is clear that, by defect of the conditions under 1. and 3, the Leonine society is unjust (so called from the fable of the lion sharing in the hunting of the other beasts without danger to himself), by which one communicates profit without contributing anything, or one feels only profit, the other loss.

1014. You will resolve: - Associates sin and are held to restitution: 1° By using common things for their own private advantage, with the others unwilling. 2° By attending to private profit, while they ought to devote themselves to the common profit. 3° By wasting common things. 4° By not contributing into the common treasury whatever they have acquired by negotiation. 5° By neglecting to fulfill their parts. 6° By rashly entangling themselves in business which will scarcely have a happy outcome,¹ the associates being unaware or unwilling. 7° By withdrawing from the society before the time, with the associate unwilling and without a cause certainly excusing.

Note. - That faithful persons proposing cases concerning the contract of society may be rightly understood, I have judged it not useless to explain certain terms of law pertaining to the matter. - 1. Limited partnerships consist of one or more persons jointly (in solidum) and severally (pro rata) responsible, who are called general partners, and one or more, whose liability extends no farther than the fund furnished, and who are called special partners. 2. A dormant partner is one who participates in the profits, but does not appear to the world as a partner. When discovered; he is responsible for the engagements of the firm as if his name had appeared therein. 3. A nominal partner is one who has no actual interest in the trade or its profits, but lends his name and credit to a firm, or in any manner holds himself out as a partner therein. He incurs the liabilities of a partner, not as between himself and the firm, but as between himself and third persons dealing with the firm, if such holding out has come to the knowledge of such third persons. A nominal partner, however, is to be distinguished from a person receiving by way of annuity or otherwise a portion of the profits of any business, in consideration of the sale by him of the good-will of such business, i. e. of the sale of the right to use the name of the firm. Such seller is not deemed to be a partner, nor to be subjected to any liabilities incurred by the buyer. 4. Articles of association are the rules by which the partnership is to be governed. 5. Joint-stock company. This name usually designates a partnership in which the capital is distributed by shares among a large number of partners. Legally they possess none of the peculiar attributes or powers of corporations, except as conferred by statute.¹