Story Case

Harvey Cloud and Simon Lingree were working together under a partnership agreement in the retail grocery business. In their contract, they agreed to be partners for two years. At the end of the first year, Lingree desired to retire from the business and informed Cloud that he would not continue as a member of the firm. Cloud, however, refused to recognize that the partnership was dissolved and continued the grocery trade under the firm name of Cloud & Lingree Company. Two months later, after Lingree had ceased all active relations with the business, Cloud employed a careless boy to make grocery deliveries. The latter drove his horses recklessly, and thereby, did serious damage in a collision with Frank Hall's automobile. Hall brought an action against both Cloud and Lingree, on the ground that they were still partners under their contract.

Ruling Court Case. Solomon Vs. Kirkwood And Hollander, Volume 55 Michigan Reports, Page 256

Hollander and Kirkwood entered into a written agreement for a partnership for one year from the time of the agreement. They were to engage in the buying and selling of jewelry, clocks, watches, and similar goods at Ishpeming, Michigan. Business was begun under this agreement and continued until the latter part of that year. Then Kirkwood, becoming dissatisfied, locked up his stock in trade and excluded Hollander altogether from the business. He also caused to be published notice of a dissolution of the partnership. A few days later, Hollander went to Chicago and there bought, in the name of Hollander and Kirkwood, of the plaintiff, jewelry and such goods to the amount of $791. He gave to the plaintiff therefor, a note signed with the firm name, upon which the plaintiff brings this suit.

It was contended by Kirkwood that he could not be held upon this note, because he had dissolved the partnership and notice had been duly given. By the plaintiff it was contended, among other things, that one partner cannot voluntarily terminate a partnership, when the term has been fixed by agreement of the parties.

Mr. Chief Justice Cooley delivered the opinion of the Court: "We think the judge committed no error in his instructions, respecting the dissolution of a partnership. The rule on this subject is thus stated in an early New York case. The right of a partner to dissolve, it is said, 'is a right inseparably incident to every partnership.' There can be no such thing as an indissoluble partnership. Every partner has an indefeasible right to dissolve the partnership as to all future contracts by publishing his own volition to that effect; and after such publication the other members of the firm have no capacity to bind him by any contract. Even when partners covenant with each other that the partnership shall continue seven years, either partner may dissolve it the next day by proclaiming his determination for that purpose; the only consequence being that he thereby subjects himself to a claim for damages for a breach of his covenant to the other partners." It was therefore decided that Kirkwood had dissolved the partnership, and was not liable to Solomon.

Ruling Law. Story Case Answer

Where persons have entered into the relation of partners and have agreed that it shall continue for a fixed term or period, no member of the firm has any legal right to dissolve the same without the consent of the copartners. But, this does not mean that he has not the power to do so. He may at any time say that he will no longer continue a member. He may withdraw, or transfer his interests to a third person and these acts will dissolve the firm. But if, without the legal right, he does exercise this power, he is liable to the remaining partners for any damages which his wrongful dissolution of the firm may cause.

In the Story Case, Lingree was not a partner at the time the collision occurred between the grocery wagon and the automobile. Although, as between Lingree and Cloud, the former did not have the right to withdraw, he had, if he chose to use it, the power to dissolve the firm and stand losses for breach of contract toCloud. As to Hall, however, and other third parties, Lingree's withdrawal terminated the firm absolutely and he is not liable for the injury.