PARTNERSHIP SETTLEMENTS.

ART. 183. The true basis of all partnership settlements is the original agreement or contract between the parties.

To avoid misapprehension and difficulty, such agreements should be explicit and comprehensive on all essential points; for, although the legal construction of such instruments aims at the "intent of the contracting parties," it is best to save the necessity of such construction, by putting the intent in the plainest possible English.

The following points should be embraced in a partnership

contract:

1. The amount, time of investment, and continuation of each partner's capital.

2. The proportionate amount to be drawn by each partner for his private use.

3. The basis of gain or loss, and each partner's proportion thereof.

4. The limitation of copartnership.

Other points may be added, according to the necessities of the case; but great care is necessary to avoid defeating the purposes of the contract by verbosity and ambiguity of terms. The object of a partnership settlement is to ascertain the relations in which the partners stand to the business and each other. Such settlements should be effected at least as often as once every year.

The dissolution of a copartnership may be effected by the expiration of the terms of copartnership-the decease of one of the partners the breaking out of a war between the two countries of which the partners are citizens-or the mutual consent of the partners themselves.

After a partnership has been dissolved, and proper notice given, one member of the firm can not bind the others by drawing or accepting drafts, or by making promissory notes,

even for previously existing debts of the firm; and although the partner drawing the same was authorized to settle the partnership affairs.

If a partnership be formed for a single purpose or transaction, it ceases as soon as the business is completed, and a settlement should be immediately effected between the partners.

Either partner may dissolve the partnership at any time, by giving notice to his copartners; even though it was understood and agreed at commencing, that the partnership should continue for a longer and definite period. But the partner thus dissolving his connection with the firm, will subject himself to a claim of damages for breach of contract.

When notice of dissolution is given, and also of the appointment of one of the partners to settle up the business, a settlement made by a debtor of the firm with one of the other partners, without the knowledge and consent of the partner so appointed, would be fraudulent and void.

The almost endless variety of conditions which affect partnership settlement, renders it extremely difficult to give general rules and illustrations, which will cover all cases. The following examples, however, will be found both practical and important.

CASE I.

ART. 184. The investment and the resources and liabilities at closing, being given to find the net gain or loss.

RULE.

Subtract the sum of the liabilities (including the investment) from the sum of the resources, and the difference will be the net gain; or (if the liabilities are the larger) subtract the sum of the resources from the sum of the liabilities, and the difference will be the net loss.

Ex. 1. A and B are partners. At the close of one year's business, an inventory is taken showing the condition of affairs to be as follows, viz.: Cash on hand $3278. Merchandise in store valued at $1500. Five shares City Bank Stock $500.

House and lot valued at $4000. The firm owe on their notes $2000, and to Wm. Brown on account, $1200. A invested $2426, B invested $2872. What is the net gain? Ans. $780.

Ex. 2. C, D, and E are partners. After conducting business one year they have the following resources and liabilities: Cash on hand $4860. Mill and fixtures valued at $6924. Bills Receivable $896. Brown & Co. owe $2000. Ten shares R. R. Stock $1000. The firm owe on notes outstanding $6400. C invested $4500. D invested $3800. E invested $3600. What is the net loss? Ans. $2620.

CASE II.

ART. 185. The investment, the resources and liabilities at closing, and the proportion in which the partners share the gains or losses being given to find each partner's interest in the concern at closing.

RULE.

Find the net gain or net loss by Rule under Case I. Then, if there is a gain, add each partner's share of gain to his investment and subtract the amount he owes the firm. Or, if there is a loss, find each partner's share of loss and subtract it from his investment; also subtract any amount that the partner owes the firm, as before.

Ex. 1. A and B are partners. A is to share of the gain or loss, and B. At the close of business the following is shown to be the condition of their affairs, viz.: Cash on hand $2680. Bills Receivable on hand $3620. Five shares United States Stock valued at $520. House and lot valued at $6000.

Sturgis & Co. owe on account $1800. The firm owe on notes outstanding $2840. They owe G. P. Carey on account $890.

A invested $4610. B invested $4860.
What is A's interest in the concern?

Ans. A $5178.

Note. In the following examples the resources are supposed to be brought in at their actual cash value. No interest is allowed on the partners' accounts unless so specified.

Ex. 2. C, D, and E are partners. To share the gains or losses each one third. The resources and liabilities at the close of the year are found to be as follows, viz.: Money doposited Copper Mine Stock valued at $10240.

in City Bank $8460.

Bills Receivable on hand $6420. Fulton Bank Stock on hand valued at $3826. Block of buildings and Lot valued at $35000. Hall & Co. owe on account $1344. L. M. Howard owes on account $960. The firm owe on their notes unredeemed $5680. To Mason & Austin on account $1700. C invested $18420. D invested $18460. E invested $18432. What is each partner's present interest in the concern?

Ans. C $19606, D $19646, E $19618.

Ex. 3. F, G, H, and I are partners. They share the gains or losses as follows, viz.: F and G each, Hand I At the close of business the resources are Cash $4628, Merchandise $12620, Real Estate $5000, Bank Stock $3000, Wheat and Corn $2800, Horses and Harness $500, Lumber $520, Money deposited in Globe Bank $8620. F has drawn from the business $450, H has drawn $180. The liabilities of the concern are, Notes unredeemed $4600, Due Simon Good on account $800, Due S. S. Packard on account $1200. F invested $6682. Ginvested $6682. H invested $8908. I invested $4454. What is each partner's interest in the concern?

Ans. F $7480, G $7930, H $10392, I $5286.

Ex. 4. J, K, L, M, and N are partners. The gain or loss is to be divided as follows: J, K, L, M, N 1', Upon examination the following is found to be the condition of affairs at the close of business, viz.: Notes on hand against other persons $12680, Ohio State Stocks $8420, New York State Stock $6000, City Bank Stock $2800, Bonds and Mortgages $9460, Deposit in Ocean Bank $6742, Attica Bank owes the firm $4286, Brown & Bros. owe $1520, Interest on Notes, and Bonds and Mortgages in the hands of the firm $688. Office Furniture on hand valued at $824. The liabilities of the concern are as follows, viz. : Notes and Acceptances outstanding $5486, Interest due on firm's Notes and Acceptances $280, Bal. favor Trader's Bank $2626, Bal. favor of Fulton Bank $1500, N invested $2287, M invested $4575, K invested $9150, L invested $6861, J invested $11455. What has been the Net Gain? What is J's interest in the concern? K's? L's? M's? N's ?