A silent partner is one who takes no active part in the operation of the partnership business. His name may be known as a partner, or not. He is not necessarily a secret partner. He may be well known as a member of the partnership, but if he takes no active part in the management, he is said to be a silent partner. A silent partner is individually liable for the obligations of the partnership, the same as any partner.
An ostensible partner is one who permits himself to be held out or represented as a partner, when in fact he is not a partner. He is responsible as a partner to third persons who deal with the firm, and to whom he has been held out as a partner. For example, A and B trade as the Rodway Co., A in company with C, tries to buy goods of D. D knows C but does not know A and B. A with C's consent, tells D that C is a member of the Rodway Co. C is liable as an ostensible partner. More commonly the ostensible partner permits his name to be used as a part of the partnership name when in fact he is not a member of the partnership. If A and B form a partnership and with C's consent use the name, "A B and C Co.," C is liable on the partnership obligations, in spite of the fact that as between himself and A and B, he is not a partner. If a partner is advertised to third parties as such, without his knowledge or consent, he is an ostensible partner, but is not liable as a partner.
A nominal partner is one who permits his name to be used as a member of the partnership without being a member of the partnership. Ordinarily he is paid something for the use of his name, but does not have a share in the profits. A nominal partner is liable to third persons as a partner, but as to the other partners, he does not have the rights or liabilities of a partner.
The term, dormant partner, is sometimes used synonymously with secret partner. Technically, it means that the partner is both unknown and silent. It combines the elements of a secret and a silent partner.
The terms, general and special partner, are commonly used. By general partner, is meant the one who shares equally in the profits and losses of the partnership transactions. The term, special partner, means that the partner, as between the other partners, does not share equally in the profits, nor is he responsible to the other partners for an equal share of the losses. As to third persons, the terms general and special partners have no significance; for example, if A, B and C enter into a partnership, A and B each to furnish two fifths of the capital, and each to have two fifths of the profits, and C is to furnish one fifth of the capital, and receive one fifth of the profits, A and B are general partners and C is a special partner. As to third persons dealing with the partnership A, B and C, each are individually liable.
71. Partnership Agreements as between Partners. In considering the question as to whether a partnership exists, it must be regarded from two points. First, is there a partnership as between partners; second, is there a partnership as to third persons? A partnership may exist as between the partners themselves. When a partnership exists between the partners themselves, there can be no question about its existing as to third persons.
As between the partners themselves, a partnership cannot exist unless there is a contract express or implied, by which they mutually agree or consent to the partnership. If A and B agree, either orally or in writing, to engage in a partnership enterprise, and do so engage in a joint business, a partnership exists between them. If A trades alone as the "A Co." and, desiring to obtain credit from B, tells B that C is a member of the A Co., even though C ratifies the unauthorized act of A, by stating to B that he is a member of the A Co., this does not constitute him as a partner to A. As to B, however, he is a partner and is liable as such. As to A, he is not a partner, and is not entitled to a share in the profits. If the intent of the parties to form a partnership, is clear, from their express agreement, or from an agreement implied from their acts or conduct, a partnership, without question, exists between them. Many business arrangements are made by which property, skill, or labor is combined under peculiar arrangements, as to the division of profits and losses, making it difficult to tell whether a partnership exists. It is not essential that the word, "partnership," be used to have an agreement constitute a partnership. If it is the intent of the parties thereto to create a partnership, one exists regardless of the term used. An agreement to share losses, or to share profits in an enterprise, is some evidence of a partnership, but is not sufficient of itself to constitute a partnership. A and B may agree each to furnish his own tools in drilling an oil well, and if a profit is made, to divide the profits, and if a loss is sustained to bear the loss out of their individual funds. These facts, do not show an intent to form a partnership, and do not make A and B partners as to themselves. If, however, A and B contribute one hundred dollars ($100.00) each to a partnership fund, and combine the tools possessed by each toward a partnership fund, and agree to share equally the profits and losses, the intention is clear that a partnership is intended, and these facts constitute A and B partners.
72. Partnership as to Third Parties. Where a partnership exists as between the partners themselves there is no question about its existing as to third persons dealing with the partnership as such. A party cannot hold himself out to the world as a partner, and by means of a private arrangement with his apparent partners, evade liability as a partner. It is generally conceded that a secret arrangement made between partners that one shall not be liable as a partner, if made known to a third person dealing with the partnership, will relieve the apparent partner from liability to such third person. For example, if A and B are doing business as the "A B Co.," and A lends his name to the company for a fixed consideration, B receives all the profits and is liable for all the debts. If C deals with the "A B Co.," not knowing of the private contract between A and B, A is liable individually upon the contract. If, however, C at the time he deals with the "A B Co.," is informed of the actual connection of A with the company, he cannot hold A liable as a partner.
If a third person extends credit to one of the partners, knowing that the purchase is for the benefit of the partnership, he can hold liable, only the party to whom he extended credit. If, however, he sells to one of the partners, not knowing that he is a partner of a firm, and the firm gets the benefit of the purchase, the firm is liable for the debt.
A partnership, like a principal in agency, is liable for the torts or private wrongs of the individual partners, committed in the course of the partnership business. If A, a member of the A B Co. partnership, uses fraud in purchasing goods, the A B Co., is liable for the fraud. If A, a member of the A B Co., gas fitters, carelessly connect a gas burner, thereby causing an explosion, and injury to C, the A B Co., is liable for the injury.