Story Case

Edward Reynolds and Simon Whiffen were doing a banking business as Reynolds & Company. Reynolds signed a note with the firm name for a large sum of money and then disappeared, leaving Whiffen to pay the bank obligations. Whiffen refused to pay the note in question. He contended, among other reasons, that his name did not appear on the note, and cites the rule in the law of negotiable instruments, that only parties whose names appear on a bill or note are bound thereby. Is this a good defense?

Ruling Court Case. Hashins Vs. D'Este, Volume 133 Massachusetts Reports, Page 356

This action was brought by the plaintiff, Haskins, against D'Este and McKenzie upon a certain note; the declaration described them as "late co-partners under the firm name and style of 'D'Este and Company,'" and it was further alleged that the note sued upon was signed in the firm name.

A certain statute in Massachusetts provides that any signature to a written instrument sued upon as a cause of action, should be taken as admitted, unless the party sought to be charged shall contest the signature within a certain time. In this case, McKenzie did not appear at all; D'Este appeared, but did not contest the signature. He merely denied the existence of the debt. Under the circumstances, the question was whether the signature was to be taken as admitted to bind D'Este, or whether it was only admitted as the signature of the co-partnership. If the latter were true, the plaintiff had still to prove that D'Este was a member of that firm before he would be entitled to recover.

Decision

The failure of D'Este to contest the signature in this case within the required time was an admission of the genuineness of the signature of the partnership; and the admission of the signature of the partnership was an admission of the signature of himself as a member of that partnership. A partnership itself as such cannot be sued; the suit must be brought against the persons constituting the partnership. The partnership name is but an abbreviation of those who constitute it. Mr. Justice Allen, in commenting upon the question, said: "The allegation of co-partnership amounts only to a statement that each of the defendants was authorized to sign that name for both, and that an agent might be authorized to sign for both. This is the whole significance of the firm name. It is the name which the partners adopted, by which each could, in certain matters, bind the other with himself, or another agent might bind both. It was simply a convenient abbreviation of their two names, and, when used, had the same effect as if no firm name had been adopted and the name of each partner had been signed in full as a partner; and it bound each, only because he had adopted it as his name and authorized its use for the purpose for which it was used."

Ruling Law. Story Case Answer

A partnership, unlike a corporation, is not a separate and distinct entity. It is but a collection of individuals acting together. A firm name is not a necessary element of the relation, but is adopted purely from a standpoint of convenience. Further, it has been seen that each partner is an agent for his co-partners. Thus, any act done, or contract made, in the firm name, if not beyond the scope of the partner's authority as agent for his co-partners, has the effect of binding all; it is equivalent to the several signatures of all the partners who compose the relation. Whiffen is bound to pay the note in the Story Case, because the name Reynolds & Company was his name for partnership purposes.