Nathan Whitman, Winfield Sherman and Andrew Williams were partners in the lumber business, operating as "Whitman, Sherman & Williams." Whitman and Sherman desired to make a purchase of a car load of cedar which they thought advisable to use in the business. Williams objected, and when the other two insisted upon making the purchase notwithstanding, Williams told Amos Mead, the vendor of the cedar, that he should not sell the goods to the firm and should not consider him - Williams - liable as a partner. Nevertheless, the sale was made. A year later, Mead brought suit on the account against the firm. Williams maintained that he was not liable, because he had warned Mead. Is this a good defense?

Ruling Court Case. Johnson Vs. Button, Volume 27 Alabama Reports, Page 245

Johnson, Fogg and Vanderslice were partners, engaged in the business of running a sawmill. Fogg and Vanderslice were negotiating with Dutton concerning a purchase of necessary supplies to be used in carrying on the partnership business; in payment for these supplies, a note of the firm was to be given. Before the note was drawn or the supplies furnished, Johnson, the third partner, objected, and stated that he refused to be bound by the contract.

The contract was entered into, nevertheless, and the note given in payment for the supplies; this was an action by Dutton on the note. The question presented is whether, under the circumstances, Johnson is bound; or whether the majority of the partners, while acting for the partnership, can bind the minority.

Mr. Justice Goldthwaite delivered the opinion of the Court: " Whenever a partnership is formed by more than two persons, we think that, in the absence of any express provision to the contrary, there is always an implied understanding that the acts of the majority are to prevail over those of the minority as to all matters within the scope of the common business. * * * * The rule as laid down is certainly more reasonable and just than to allow the minority to stop the operations of the concern against the views of the majority.

Note: In case there are only two partners, one has as much right as the other; obviously, no difficulties as to the powers of the minority can occur then.

Ruling Law. Story Case Answer

It is the general rule, as will be seen later, in the absence of an agreement to the contrary, that each partner has an equal right with his co-partners to participate in conducting the business. But it is generally said, that there is always an implied understanding that the majority shall govern in the management of the business. A partner, who is unwilling to be bound by the acts of the majority, has the power, perhaps the right, to dissolve the partnership by withdrawing. But so long as he remains in the firm he is bound by the acts of the majority, even though he may have previously notified third persons that he did not intend to be so bound.

Of course, where there are only two partners in a firm, generally each has an equal right to participate in the business, and unless the two can agree upon some compromise, one partner may escape liability by notifying third persons that he does not intend to be bound by the acts of his co-partner.

"Williams did not free himself of liability, in the Story Case, by objecting to Mead. The only way he could free himself was to have exercised his power to remove himself from the firm before the cedar purchase was made.