This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 479.— Is it necessary that a firm of solicitors should sign and register a certificate of partnership such as is required in case of a trading partnership, in order to hold them jointly and severally liable on paper endorsed by them in the firm's name, and discounted for the firm? Does section 23 (b) Bills of Exchange Act, cover this point?
Answer.—The registration of such a certificate is not requisite, nor would it alone, we think, have the effect of making the partners jointly and severally liable. If they desire to come under such liability, the partners should each sign a declaration to that effect and lodge it with the bank, although such a declaration made in any public way would doubtless be binding.
Section 23 (b) which in effect makes one member of the partnership the agent of the others to bind them by use of the firm's signature, would, we think, apply only where one member can bind his partners. Ordinarily this is not true of non-trading partnerships, such as solicitors, architects, and the like, but even in their case if the transaction were clearly necessary in connection with the firm's business the partners might be bound as, for instance, where a note is taken for solicitor's costs, and is discounted for the purposes of the firm.
Question (Submitted in continuation of the above).— As your meaning in first paragraph of answer is not clear to me, I will have to beg the favour of a further explanation. The case cited in my question is that of a firm of solicitors who are in the habit of discounting notes taken in payment of costs, just as a trading firm discounts notes taken for sales of goods. In second sentence of first paragraph you say: " If they desire to come under such liability, etc., they should sign a declaration to that, etc.," and in second sentence of second paragraph you say, "if the transactions were clearly necessary the partners might be bound, etc." I should like to know beyond a doubt, if the partners are jointly and severally liable in the premises cited.
Answer.—We do not think you can be certain, as you say " beyond a doubt" as to the liability of the parties, unless you have a clear proof that the partner signing had power from the others to make the firm liable for these obligations. Prima facie it would not, we think, be within the scope of the business of a firm of solicitors to discount paper, and the rule is that one partner binds the others only in connection with business within the scope of the partnership. Yet the question is one of fact, and if it were customary for the firm to discount paper, proof of such custom would bring the transaction within the scope of the business, and if it were proved that the firm got the benefit of the discount, as a firm, the other partners could not repudiate the liability, and at the same time retain the benefit.