This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Since the continuation of a partnership involves the power of each partner to make contracts within the scope of the partnership business which will bind the other partners,1 and since the continuance of a partnership between partners who have become alien enemies would therefore involve the continuation of a mutual agency so that each would be in effect trailing with the enemy through his partner, a partnership is dissolved as far us concerns the power of each partner to make future contracts on behalf of the other partner, by the outbreak of a war between the countries in which the partners are respectively domiciled.1 One of the chief reasons originally assigned for holding that war between the countries in which two or more partners are domiciled, and of which they are citizens, operates as a dissolution of the partnership, is said to be the fact that each partner owes allegiance to his own government, and that accordingly there must be a relation of mutual hostility in theory at least, between the partners; which is inconsistent with the continuance of the partnership.3 It has also been suggested that a partnership is dissolved by a war because of the incompatability between the duties of the partners to one another as partners, and their duties to one another as subjects of hostile belligerent powers.4 The true reason for holding that the partnership is dissolved by war as suggested in earlier cases.5 and as held in later ones,6 is that the continuance of the partnership involves dealing with the enemy, and that accordingly war operates as a dissolution of such a partnership. A partner who is a citizen of one belligerent and a resident therein, can not incur obligations in the name of the firm during war which, can be enforced after the war against a partner who is a citizen of the other belligerent and who is domiciled therein.7 A partner who is domiciled in the territory of one of the belligerents, can not incur liability on behalf of the partnership as an indorser, so as to impose liability upon the partner who is domiciled in the territory of the other belligerent.8 For similar reasons, a partner who leaves the partnership property in the hands of his partner in enemy country, during the war, can not object to the capture and confiscation of such property in time of war as enemy property.9
20 Darling v Lewis. 58 Tenn 111 Heisk.) 125.
21 Hubbard v. Matthews, 54 N. Y, 43, 13 Am Rep 562.
1 See Sec. 1700 et seq.
2 Stevenson v. Aktiengesellschaft for Carton-Negen-lndustrie , A C. 230 affirming (1917). 1 K. B. 842]; Rodriguez v Speyer , A. C 59 Griswold v. Waddington. 16 Johns (N. Y ) 438: Woods v. Wilder. 43 N. Y. 164, 3 Am Rep. 684; Taylor v. Hutchison, 66 Va. (25 Gratt ) 536, 18 Am Rep 699.
3 Griswold v Waddington, 16 Johns. (N. Y.) 438.
"But how ran the partners have any unity of interest, or any joint object that is lawful, when their pursuits, in consequence of the war, and in conse-queuee of the seperate allegiance' which must be mutually hostile?" Griswold v. Waddington, 16. Johns. (N. Y.) 438.. 4 Partnership with a foreigner is dissolved by the same event which makes him an alien enemy, because there is in that case an utter incom-patibility created by operation of law between the partners as to their re-spective rights, duties and obligation-. both public and private, which nece-sarily dissolved the relation, independ-ent of the will or acts of the parties." Hanger v Abbott, 73 U. S. (6 Wall.] 532, 18 L. cd. 939.
5 "It appears to me that the declaration of war did of itself work a dissolution of all commercial partnerships existing at the time between British subjects and American citizens.
"By dealing with either party, no third person could acquire a legal right against the other, because one alien enemy can not. in that capacity, make a private contract binding upon the other. This conclusion would seem to be an inevitable result from the new relations created by the war. It is a necessary consequence of the other proposition, that it is unlawful to have communication or trade with an enemy. To suppose a commercial partnership (such as this was) to be continued, and recognized by law as subsisting, when the same law has severed the subjects of the two countries, and declared them enemies to each other, is to suppose the law chargeable with inconsistency and absurdity. For what use or purpose could the law uphold such a connection, when all further intercourse, communication, negotiation or dealing between the partners was prohibited as unlawful? Why preserve the skeleton of the firm when the sense and spirit of it has fled, and when the execution of any one article of it by either would be a breach of his allegiance to his country? In short, it must be obvious to every one that a state of war creates disabilities, imposes restraints and exacts duties altogether inconsistent with the continuance of that relation. Why does war dissolve a charter-party, or a commercial contract for a particular voyage? Because, says Valin (torn. 1, p. 6261, the war interposes an insurmountable obstacle to the accomplishment of the contract; and this obstacle arising from a cause beyond the control of the party, it is very natural, he observes, that the charter-party should be dissolved, as of course. Why should the contract of partnership continue by law when equally invincible obstacles are created by law to defeat it? If one alien enemy can go and bind his hostlie partner by contracts in time of war, when the other can have no agency, consultation or control concerning them, the law would be as unjust as it would be extravagant. The good sense of the thing as applicable to this subject is the rule prescribed by the Roman law, that a copartnership in any business ceased when there was an end put to the business itself. Item si alicujus rei societas sit, et finis negotio impositus est, finitur societas (Inst 3. 26. 6)" Griswold v. Wad-dington. 16. Johns. (N. Y ) 438.
6. Stevenson v. Aktiengesellschaft for Cartonnagen-lndustrie , 1KB. 842 [affirmed (1918). A. C 2391
7 Griswold v. Waddington, 16 Johns. (N. Y ) 438.
Since the true reason for holding that war dissolves a partnership between alien enemies, is, at modern law, the desire to stop unlawful trading with the enemy, it follows that if commercial intercourse between the two belligerents is licensed either expressly or impliedly, the courts of the government which has given such license will not regard the war as discharging the partnership.10 If commercial intercourse was authorized between the states which adhered to the Union and the seceding states either expressly or impliedly, the outbreak of the Civil War did not dissolve a partnership between a citizen of a state which adhered to the Union, and a citizen of a state which seceded.11
Notice of dishonor of a negotiable instrument may be given to a resident partner, so as to bind the partnership, including the partner who is an alien enemy domiciled in the enemy's country.12