If you will recall, in the last lesson we discussed the formation (organization) of partnerships according to halachah. In the prior lesson we saw that Maimonides was describing the halachah regarding the formation of a partnership as it exists in the Talmud, and as he saw it in the twelfth century of the common era in the Middle East. The Rabbis of northern Europe and later even in Spain were developing the halachah along different lines. This came in the twelfth and thirteenth centuries of the common era when the halachah began to recognize that a person could obligate himself to invest his money or things into the partnership. Or a person could obligate himself to work for the partnership and obligate himself to share in the future profits and losses of the partnership. Or a person could enter into contracts to sell things not yet in existence. All of these obligations and contracts could be entered into by a kinyan. (See prior lesson how the term "kinyan" applies to the formation of partnerships.)

This is the view of Rabbi Abraham b. David (Rabad, Spain, 1125-1198). Rabbi Shlomo b. Adret (Rashba, Barcelona, Spain. 1245-1310). Rabbi Asher b. Yechiel (Rosh or Asheri, Germany and then Toledo, Spain, 1250- 1327). And Rabbi Jacob Tur (son of Rabbi Asher, Spain, 1270-1340). The latter writes that even if a kinyan was not made, if the partners actually commenced the operation of the partnership, such as trading or manufacturing, then they are partners. According to this last opinion, the partnership is established without a kinyan only if both partners commence the business of the partnership. But if only one commences the business, the partnership is still not organized and either partner may rescind his agreement to commence a partnership.

There is an opinion that, according to this last view, a writing undertaking the obligations and witnessed by two witnesses will take the place of a kinyan for the past actions of the partners and they will be deemed to have been partners in the operation of a partnership. There is also an opinion that if the partners undertook by an oath to be partners, it is binding upon them. And similarly if they shook hands in those communities where a handshake is considered binding, they are partners. This is based on the concept of the community custom being binding in monetary matters.

There is the view of Rabbi Jacob Tam (Rabbeinu Tam, France, 1096-1171). Rabbi Isaac b. Abba Mari (Ittur. France. Spain, 1120- 1190), and Rabbi Meir of Rottenberg (Germany, 1215-1293), that a kinyan is not necessary to bind the partners to the partnership; mere words can bind the partners to the partnership, and they cannot rescind their words. This is based on the hanahah (contentment) that each receives when his promise is accepted by the other partner. Although the holding of Rabbeinu Tam is not based on community custom, it certainly is binding where there is such community custom.

There is also the view that the law of the land (as distinguished from community custom) must be followed and this will be controlling in most instances. Halachah recognizes that the law of the land is usually binding on parties to a commercial transaction. Thus when Reuven and Shimon sign and file a partnership certificate with governmental authorities, this will constitute an act binding the signatories to such certificate. In many governments, partners may do business under their own names and may be excused from filing a certificate of doing business as partners, since the public will know who the partners are. There are some govern- mental authorities that require the filing of a certificate even in such instances. Most governmental authorities will require a certificate to be filed when the partner- ship name does not disclose who the partners are. For example, if Reuven Cohen and Shimon Goldberg decided to go into partnership and to call the business Reuven Cohen and Shimon Goldberg Dry Goods Store, then it is obvious to the public with whom they do business, that the partners are Reuven Cohen and Shimon Goldberg. In most situations some governmental authorities may not, in such circumstances, require a business certificate to be filed with the government. Other governments may require a certificate since a person who wishes to start a law suit against them may want to have their home address, because most certificates require such information. It may also be required to show the date of commencement of the partnership. If they are doing business under the trade name Atlantic Dry Goods Store, then they will be required to file a trade name certificate so that the public will know who are the partners in the business.

The parties are best advised to organize a partnership by complying with the laws of the land by filing a certificate when required, and also halachically by making a kinyan. The only reason that I have suggested a kinyan is to keep the concept alive. Technically, it is not required, because the partners will be bound by the laws of the land. A kinyan can also bind the parties to the terms of a partnership agreement, which should be prepared by a competent attorney. The agreement is binding on the parties without a kinyan if its execution complies with the laws of the land. The kinyan can be executed by Reuven giving to Shimon, Reuven's handkerchief and Shimon giving to Reuven, Shimon's handkerchief, and each as he takes hold of the other's handkerchief stating that he agrees by the kinyan to the organization of the partnership and to be bound by the agreed-upon terms.

Most of the halachot stated in these lessons regarding a partnership are controlling absent an agreement by the parties specifically setting forth the terms that they wish to be controlling. However, the parties can agree to almost any terms they wish, the only exception being when it contravenes certain halachot that override any agreement. The agreement can specifically state that it is to be governed by halachah or any other set of laws, as, for example, by the laws of the State of Georgia. Their agreement may be oral or in writing; it may contain all of the terms or only some of the terms. It may or may not be witnessed by others. Even if the partnership agreement is in writing, it may be amended orally even if otherwise provided in the written agreement. (Many secular countries have laws that provide that if a written agreement states that it may not be amended orally, it may not be so amended.) The parties can even terminate the partnership by oral agreement before the termination date provided in a written agreement. The written agreement can be amended orally since an amendment to the agreement is similar to a release of its terms and in halachah, a person may always release another party with an oral declaration. Participation in the partnership entails a person giving up some of his rights in relation to the other partners. He has assumed an obligation to the other parties and the other partners may release such obligations orally.

Reuven and Shimon, both living in New York, wish to form a partnership that is to be in the business of selling merchandise at a fair in China. The goods are supplied by Reuven in New York and taken by Shimon on a ship to China to be sold there. They are to divide the profits evenly. While the goods are on the ship, the price of the merchandise falls. The entire loss in the value is to be borne by Reuven since the partnership will commence when the goods arrive in China, unless the parties agree otherwise in advance. Situations such as these are most often governed by the agreements of the parties or by the laws of the country where they reside. If the price rises before the goods arrive in China, the gain will be Reuven's.
If the partnership agreement provides that the partners will invest certain sums or will invest money as required, and if Reuven fails to so invest, Shimon may bring an action in Beth Din to compel Reuven to so invest, or terminate the partnership. The partnership agreement if drawn by competent attorneys will provide for such contingencies, since this is not an infrequent occurrence.

The subject matter of this lesson is more fully discussed in Volume VI Chapter 176 of "A Restatement of Rabbinic Civil Law" byE. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores.
Questions to quint@inter.net.il

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