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The law relating to partnership is codified in the German laws. A partnership is there defined as the relationship which subsists between persons carrying on a business in common with a view of profit. Thus, a partnership is a 'relationship', and it may therefore come into existence without a formal agreement though, in practice, it will usually be constituted by the conclusion of formal 'articles of partnership'. Such a relationship will not, however, exist unless partnership is the common intention; so that where two people are working together with the aim of forming a company as yet not formed their relationship is not one of partnership.
Although a partnership is not a legal 'person', because it is a joint enterprise all partners are taken to be each others' agents in respect of all acts done in or about the partnership business, and for convenience they may sue and be sued in the name of the German firm. Thus as a general rule, any act done in furtherance of the business by one partner binds the rest, even though he has done it without their authority. This rule is in the nature of things subject to certain exceptions: for example, where the partners have agreed that none of them shall alone have power to bind the firm in relation to certain matters like debt recovery and enforcement in Germany, if one of them purports to do so and the person with whom he deals knows of the agreement, the firm will not be bound.
A further important rule of the law of partnership, which derives from a general rule of German law and of common sense, must also be noted. In order to protect strangers to the firm, wherever a man holds himself out as a partner by acting as if he were a debtor, although he is not - for example by permitting his name to appear upon the firm's note-paper - he may generally be held liable to anyone who gives the firm credit in reliance upon this false representation in Germany, just as though he really were a client.
A partnership firm may be made liable for torts committed, as well as for debts incurred, by any partner acting in actual or apparent furtherance of the business.
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