The relation of partners inter se is that of principal and agent, and therefore each partner is liable for the acts of his fellows. Every partner is liable to make compensation to third persons in respect of loss or damage arising from the neglect or fraud of any partner in the management of the business of the firm. The neglect or fraud complained of must have been committed in the ordinary course of the partnership business; and while he is acting within the scope of his authority. The fact of the co-partner's complete innocence and non-participation in the fruits of the fraud is irrelevant. But if the transaction is unconnected with the firm's business, or if the fraud is committed while the partner is not acting as a member of the firm, the loss occasioned cannot be thrown upon the innocent members of the firm. Thus, if one partner by fraud induces a, person to join the firm, such fraud cannot be imputed to the firm, unless he had authority to find another partner. A fraud committed by a partner whilst acting on his own separate account is not imputable to the firm, although had he not been connected with the firm he might not have been in a position to commit the fraud.
A partnership is liable for the negligence of its servants acting in the course of their employment by the firm . A firm of coach-proprietors is answerable for the negligent driving of a partnership coach of one of the firm, the coach being driven for the firm in the ordinary course of business1); and two partners are liable for not keeping the shaft of a mine in proper order, although one of them only actually superintended it2); and all the members of a firm of solicitors are liable for the negligent advice given by one of them to a client of the firm3); or for a fraud committed by one of them in the ordinary conduct of their business4)
As a rule, the wilful tort of one partner is not imputable to the firm. For example, if one partner maliciously prosecutes a person for stealing partnership property, the firm is not answerable, unless all the members are, in fact, privy to the malicious prosecution.5) But a wilful tort committed by a partner in the course and for the purpose of transacting the business of the firm may make the firm responsible. A customer deposited a box containing various securities with his bankers for safe custody, and afterwards granted a loan of a portion of such securities to one of the other partners in the banking-house, for his own private purposes, upon his depositing in the box certain railway shares, to secure the replacing of the securities. This partner afterwards for his own purposes, and without the knowledge of the customer, subtracted the railway shares, and substituted others of a less value. It was held, that, as the proceeds of the railway shares were not applied to the use of the partnership, the banking firm were not answerable for this tortious act of their partner for his own benefit, nor for any loss occasioned by this subtraction of the shares, on the ground of negligence.
It is not every tort which, though committed by several persons acting together, is legally imputable to them all jointly; but supposing a tort to be imputable to a firm an action in respect of it may be brought against all or any of the partners. If some of them only are sued, they cannot insist upon the other partners being joined as defendants6), and this rule applies even where the tort in question is committed by an agent or servant of the firm, and not otherwise by the firm itself.7)
With respect to actions by partners founded on some tort, the general principle is that where a joint damage accrues to several persons from a tort, they ought all to join in an action founded upon it8); whilst on the other hand several persons ought not to join in an action ex delicto unless they can show a joint damage.
As partners may all be affected by the tort of one partner, so also a discharge or release of one, on account of the tort, will amount to a discharge or release of all the other partners.9)