Powers of a Majority of a Society; - of a Surviving Partner.
James Buchanan v. Michael Muirhead and Others
Date: 25 June 1799 Case No. No. 30.
A clause in the contract of a mercantile company constituted for twenty-one years, by which all disputes which should arise among the partners, or their representatives, relating to the affairs of the company, were submitted to the final determination of the chairman, deputy-chairman, and secretary of the Chamber of Commerce of Glasgow, or any two of them, for the time being, unless special arbiters should be agreed on, found not to be obligatory.
Click here to view a pdf copy of this documet : PDF Copy
Robert Corse, Micheal Muirhead, and others, entered into a contract of copartnership for foriegn trade and insurance, for twenty-one years, from May, 1795.
By a cluase in the contract, it was agreed, that all disputes relating to the affairs of the company, which should arise among the partners or their representatives, (“unless submitted to other arbiters named by the parties,”) shall be and are “hereby referred to the final determination of the chairman, deputy-chairman, and secretary, for the time being, of the Chamber of Commerce and Manufactures of the City of Glasgow, or any two of them.”
On the death of Robert Corse, a dispute, with regard to his share of the stock, arose between James Buchanan, his executor, and the surviving partners of the company; on account of which he brought an action against them before the Court of Session.
As a preliminary defence, they
Pleaded: The present action is precluded by the clause in the contract, which creates not merely an obligation to enter into a submission, but an actual reference to persons who, from their situations, must be the best judges of the questions likely to occur among the partners. Courts of justice frequently find it necessary to remit such questions to merchants; and while clauses like the present are highly expedient in themselves, there seems no principle for refusing effect to them more than to any other in the contract of copartnership.
Answered: Although, ex figura verborum, the contract contains an actual reference, it in reality resolves into a resolution or promise to enter into one. For a dispute cannot be referred till it occur. The reference in the contract was to take place only in case other arbiters were not named by the parties; and the officers of the Chamber of Commerce could not decide any existing dispute without a special submission. Such promises de futuro are often intered into without consideration, and are not sustained by the Court; 5th June, 1790, Gordon and Davidson against Keith, (not reported.) See Appendix.
As the office-bearers of the Chamber of Commerce are chosen annually, there could be no dilectus personæ in their appointment as arbiters. They may often be particularly connected with one of the parties. And as they may decline, it should likewise be optional to all concerned to pass from the reference when a particular dispute occurs.
It is even contra bonos mores for parties to tie themselves up from having recourse to the established courts of justice, which indeed, if such clauses are supported, might be in a great measure superseded by the Chamber of Commerce, and a new jurisdiction created, which would be neither constitutional nor expedient.
It was farther mentioned, as a specialty, that the secretary to the Chamber of Commerce, for the time, was trustee on a bankrupt estate, where a question similar to the present, on the merits, was in dependence.
The Lord Ordinary reported the cause on informations.
Observed on the Bench: The case does not hinge upon the supposed difference between an obligation to enter into submission and an actual reference. The difficulty in supporting the plea of the defender arises from the reference being not to an individual, but to a description of persons who, as well as the point to be decided, must necessarily have been indefinite at the date of the contract. The reference might as well have been to the whole Chamber of Commerce. Supporting such clauses would virtually create a new court. The specialty in the present case, or the like, must frequently occur, confirms the general objection; see case of Miln against Magistrates of Edinburgh, determined in the House of Lords, 15th February, 1770, (not reported.) See Appendix.
The Lords unanimously repelled the defence.
Lord Ordinary, Stonefield.Act. Davidson.Alt. Campbell.Clerk, Sinclair.
Fac. Coll. No. 134. p. 305.
