B-162273, NOV. 6, 1967

B-162273: Nov 6, 1967

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WHO PROTESTS AWARD OF STAR ROUTE CONTRACT FOR TRANSPORTATION OF MAIL TO PARTNERSHIP NOT ENGAGED IN SUCH SERVICES AND WITH ONE MEMBER NOT A RESIDENT IN COUNTY WHERE SERVICES ARE TO BE PERFORMED. AWARD OF STAR ROUTE CONTRACT TO LOW BIDDER A PARTNERSHIP WHEN ONE OF THE TWO PARTNERS WAS NOT A RESIDENT OF THE COUNTY AS REQUIRED BY 39 U.S.C. 6420 (A) AND THE PARTNERSHIP WAS NOT "ENGAGED IN BUSINESS" AT THE TIME OF BID SUBMISSION IS NOT CONTRARY TO LAW SINCE RESIDENCE RESTRICTION WOULD NOT BE THWARTED WHERE A MEMBER OF PARTNERSHIP HAS UNLIMITED PERSONAL LIABILITY FOR CONTRACTURAL OBLIGATIONS AND IS A RESIDENT OF THE COUNTY TO BE SERVED. WHILE STATUTORY REQUIREMENT USES TERM "INDIVIDUAL BIDDER" A CONSTRUCTION TO PERMIT PARTNERSHIPS IS NOT INCONSISTENT WITH GENERAL CONGRESSIONAL INTENT.

B-162273, NOV. 6, 1967

BIDDERS - QUALIFICATION - PARTNERSHIP - STAR ROUTE CONTRACT DECISION TO SECOND LOW BIDDER, DONALD C. AUCLAIR, WHO PROTESTS AWARD OF STAR ROUTE CONTRACT FOR TRANSPORTATION OF MAIL TO PARTNERSHIP NOT ENGAGED IN SUCH SERVICES AND WITH ONE MEMBER NOT A RESIDENT IN COUNTY WHERE SERVICES ARE TO BE PERFORMED. AWARD OF STAR ROUTE CONTRACT TO LOW BIDDER A PARTNERSHIP WHEN ONE OF THE TWO PARTNERS WAS NOT A RESIDENT OF THE COUNTY AS REQUIRED BY 39 U.S.C. 6420 (A) AND THE PARTNERSHIP WAS NOT "ENGAGED IN BUSINESS" AT THE TIME OF BID SUBMISSION IS NOT CONTRARY TO LAW SINCE RESIDENCE RESTRICTION WOULD NOT BE THWARTED WHERE A MEMBER OF PARTNERSHIP HAS UNLIMITED PERSONAL LIABILITY FOR CONTRACTURAL OBLIGATIONS AND IS A RESIDENT OF THE COUNTY TO BE SERVED. WHILE STATUTORY REQUIREMENT USES TERM "INDIVIDUAL BIDDER" A CONSTRUCTION TO PERMIT PARTNERSHIPS IS NOT INCONSISTENT WITH GENERAL CONGRESSIONAL INTENT. FURTHERMORE PARTNERSHIP HAS COMPLIED WITH THE STATE (TEXAS) LAW ON PARTNERSHIPS. WITH RESPECT TO INCAPACITY OF ONE PARTNER BECAUSE OF HER COMMON LAW CONTRACTUAL DISABILITY AS A MARRIED WOMAN, TEXAS SINCE 1963 HAS REMOVED PREVIOUS IMPEDIMENTS TO CONTRACTUAL POWERS OF MARRIED WOMEN. FURTHER, PARTNERSHIP HAS BEEN DETERMINED TO HAVE EQUIPMENT AND EXPERIENCE TO PERFORM.

TO MR. DONALD C. AUCLAIR:

REFERENCE IS MADE TO YOUR LETTERS OF AUGUST 14, SEPTEMBER 6, AND OCTOBER 13, 1967, IN WHICH YOU PROTEST AN AWARD MADE BY THE POST OFFICE DEPARTMENT TO MRS. CLOVA HARRISON AND MR. JOHN H. THOMPSON, JR., FOR THE TRANSPORTATION OF MAIL FROM DALLAS TO EL PASO, TEXAS, FOR THE PERIOD JULY 29, 1967, TO JUNE 30, 1971. ON MAY 17, 1967, THE DEPARTMENT ISSUED AN ADVERTISEMENT FOR STAR ROUTE DELIVERY SERVICE BETWEEN THESE CITIES AND ADVISED THAT BIDS WOULD BE RECEIVED UNTIL JUNE 19, 1967. ON JUNE 3, 1967, MRS. HARRISON, A RESIDENT OF TARRANT COUNTY, TEXAS, ENTERED INTO A PARTNERSHIP AGREEMENT WITH MR. THOMPSON FOR THE PURPOSE OF SUBMITTING A BID UNDER THE REFERENCED ADVERTISEMENT AND TO OPERATE THE REQUIRED SERVICE IF AWARDED THE CONTRACT. THE PARTNERSHIP AGREEMENT PROVIDED THAT MRS. HARRISON WOULD "RETAIN OR OWN 51 PERCENT OF CONTRACT WITH THE UNDERSTANDING THAT SHE WILL PERSONALLY SUPERVISE AND OVERSEE SAME, ALONG WITH THE HELP OF JOHN H. THOMPSON, JR.' OF THE 25 BIDS RECEIVED, THE PARTNERSHIP SUBMITTED THE LOWEST OFFER, $181,836 PER YEAR, WITH YOUR BID OF $182,336.35, THE SECOND LOWEST.

AN AWARD WAS MADE TO THE PARTNERSHIP DESPITE YOUR OBJECTIONS THAT IT FAILED TO MEET THE REQUIREMENTS IMPOSED BY SECTION 3 OF THE ACT OF MAY 31, 1940, 39 U.S.C. 6420 (A), WHICH PROVIDES AS FOLLOWS:

"A 6420. QUALIFICATIONS OF BIDDER.

"SEC. 6420. QUALIFICATIONS OF BIDDER.

"/A) THE POSTMASTER GENERAL MAY NOT CONSIDER THE BID OF AN INDIVIDUAL FOR A STAR ROUTE CONTRACT UNLESS THE BIDDER IS A LEGAL RESIDENT OF THE COUNTY IN WHICH PART OF THE ROUTE LIES OR OF AN ADJOINING COUNTY. HE MAY NOT CONSIDER THE BID OF A FIRM, COMPANY OR CORPORATION FOR SUCH A CONTRACT UNLESS IT IS ACTUALLY ENGAGED IN BUSINESS WITHIN THE COUNTY IN WHICH PART OF THE ROUTE LIES OR IN AN ADJOINING COUNTY.' YOU MAINTAIN THAT A LITERAL READING OF THE STATUTORY PROVISION IN QUESTION REVEALS TWO MUTUALLY EXCLUSIVE CLASSES OF BIDDERS AND THE MEANS OF THEIR QUALIFICATION: NATURAL PERSONS BY MEANS OF THEIR RESIDENCE IN THE AREA THROUGH WHICH THE ROUTE PASSES, AND ALL BUSINESS ENTITIES BY REASON OF THEIR OPERATIONS IN THE SAME TERRITORY. ACCORDINGLY, YOU ADMIT THAT MRS. HARRISON, BIDDING ON HER OWN BEHALF, COULD QUALIFY AS AN INDIVIDUAL BIDDER BY REASON OF HER RESIDENCE IN TARRANT COUNTY, THROUGH WHICH THE DELIVERY SERVICE PASSES; HOWEVER, ONCE MRS. HARRISON SUBMITTED A BID AS A MEMBER OF A PARTNERSHIP, YOU CONTEND THAT SHE LOST HER PERSONAL ELIGIBILITY AND COULD NOT AFFECT THE INABILITY OF THE PARTNERSHIP TO QUALIFY UNLESS IT WAS ,ENGAGED IN BUSINESS" AT THE TIME OF BID SUBMISSION. SINCE THE PARTNERSHIP WAS NOT ENGAGED IN BUSINESS AT THAT TIME YOU MAINTAIN ITS BID SHOULD HAVE BEEN REJECTED.

THE DEPARTMENT DOES NOT CONSIDER THE CLASSES OF BIDDERS AND THEIR MEANS OF QUALIFICATION UNDER THE CITED STATUTE TO BE MUTUALLY EXCLUSIVE. MAINTAINS THAT A PARTNERSHIP MAY QUALIFY AS AN INDIVIDUAL BIDDER IF A BONA FIDE PARTNERSHIP EXISTED AT THE TIME ITS BID WAS SUBMITTED AND IF ONE OF THE PARTNERS WAS A RESIDENT OF THE COUNTY THROUGH WHICH THE MAIL DELIVERY ROUTE PASSED. SINCE THE DEPARTMENT JUDGED THE PARTNERSHIP TO BE VALID UNDER TEXAS LAW AND AS MRS. HARRISON WAS A RESIDENT IN THE AREA OF THE ROUTE, IT CONSIDERED THE PARTNERSHIP QUALIFIED UNDER THE STATUTE.

IN A DECISION INVOLVING THE INTERPRETATION OF THE "ENGAGED IN BUSINESS" REQUIREMENT CONTAINED IN THE SECTION PREVIOUSLY CITED, WE MADE THE FOLLOWING COMMENTS:

"THE STATUTORY PROVISION HERE IN QUESTION IS A LIMITATION OR RESTRICTION ON THE ELIGIBILITY OF BIDDERS TO COMPETE FOR CERTAIN TYPESOF MAIL-CARRYING CONTRACTS. PRIOR TO ITS ENACTMENT IT HAD BEEN THE LONG-ESTABLISHED RULE, DECLARED BY EXPRESS STATUTORY MANDATE, THAT ALL CONTRACTS FOR CARRYING THE MAIL SHOULD BE AWARDED TO THE LOWEST BIDDER TENDERING SUFFICIENT GUARANTEES FOR FAITHFUL PERFORMANCE, AFTER PUBLIC ADVERTISING. ACT OF JUNE 8, 1872, SECS. 243, 249, 17 STAT. 13; REVISED STATUTES, SEC. 3949. WHILE ADVERTISING WAS NOT REQUIRED BEYOND THE TERRITORIAL AREA AFFECTED, THERE WAS NO LIMITATION OF BIDDERS AS TO RESIDENCE OR LOCAL CONNECTION, AND THE SPIRIT AND INTENT OF THE LAW WAS CLEARLY IDENTICAL WITH THAT WHICH HAD ALWAYS GOVERNED IN THE PROCUREMENT BY THE GOVERNMENT OF SUPPLIES AND SERVICES GENERALLY, UNDER SECTION 3709 OF THE REVISED STATUTES, SECTIONS 2 AND 3 OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21, AND SECTIONS 302 AND 303 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 66 STAT. 594.

"AGAINST THIS BACKGROUND, WE FEEL THAT THE EXCEPTIONS TO THE PRINCIPLE OF MAXIMUM COMPETITION AND FREE AND UNRESTRICTED BIDDING SET UP BY SECTION 3 OF THE ACT OF MAY 31, 1940, SHOULD BE CONSTRUED AND APPLIED ONLY SO FAR AS REASONABLY NECESSARY TO CORRECT THE EVILS WHICH IT WAS INTENDED TO PREVENT.

"THE LEGISLATIVE HISTORY OF THE STATUTE, INCLUDING THAT OF A PRIOR ENACTMENT CONTAINING A SIMILAR PROVISION WHICH WAS VETOED BY THE PRESIDENT IN 1939 (H.R. 4408, 75TH CONGRESS), SHOWS THAT THE RESTRICTION OF BIDDING TO RESIDENTS OF THE LOCALITITES AFFECTED WAS ADVOCATED BY THE POST OFFICE DEPARTMENT ON THE GROUND THAT DIFFICULTIES IN ADMINISTERING THE STAR ROUTE SYSTEM HAD BEEN EXPERIENCED BECAUSE OF THE PRACTICE OF NON-RESIDENT BIDDING. IT IS INDICATED BY DISCUSSION AND DEBATE CONCERNING THE BILLS BEFORE THE CONGRESS THAT A SITUATION HAD APPARENTLY DEVELOPED DURING THE DEPRESSION YEARS IN WHICH UNREASONABLY LOW BIDS WOULD BE SUBMITTED ON STAR ROUTE CONTRACTS BY PERSONS HAVING NO INTEREST IN OR CONNECTION WITH THE LOCALITY, WITH THE INTENTION AND EXPECTATION OF FINDING SOME LOCAL RESIDENT SO HARD-PRESSED THAT HE WOULD TAKE OVER THE WORK, EITHER AS A SUBCONTRACTOR OR AS AN EMPLOYEE, AT AN EVEN LOWER PRICE. THE NOMINAL CONTRACTOR WOULD THUS BE LEFT FREE TO ENJOY HIS PROFIT, WITHOUT STRONG INCENTIVE TO EXERCISE ANY SUPERVISORY CONTROL OVER THE OPERATION OF THE ROUTE BEYOND THAT NECESSARY TO ENSURE BARE COMPLIANCE WITH MINIMUM STANDARDS OF SERVICE AND EFFICIENCY, BEING INSULATED BY DISTANCE FROM LOCAL PRESSURES WHICH MIGHT BE BROUGHT TO BEAR UPON A CONTRACTOR LIVING AMONG THOSE AFFECTED BY HIS PERFORMANCE UNDER HIS CONTRACT. OBVIOUSLY UNDER SUCH CIRCUMSTANCES THE BURDEN OF THE DEPARTMENT IN MAINTAINING EFFICIENT SERVICE ON A ROUTE WOULD BE MATERIALLY GREATER.' 35 COMP. GEN. 411. CLEARLY, CONGRESS INTENDED INDIVIDUAL BIDDERS TO BE SUFFICIENTLY RESPONSIVE TO PRESSURES FOR EFFICIENT SERVICE BY REQUIRING THEM TO BE RESIDENTS OF THE AREA SERVED; WHAT IS NOT FREE FROM DOUBT IS WHETHER CONGRESS INTENDED THAT ONLY NATURAL PERSONS OPERATING ON THEIR SOLE RESPONSIBILITY COULD QUALIFY AS "INDIVIDUAL BIDDERS" UNDER THIS PROVISION. WE BELIEVE THIS QUESTION SHOULD NOT BE RESOLVED WITHOUT CONSIDERING CONGRESS' EVIDENT DETERMINATION TO PROVIDE EFFICIENT STAR ROUTE SERVICE FOR THE COMMUNITIES SERVED; ACCORDINGLY, WE BELIEVE THAT IF A MEMBER OF A VALID PARTNERSHIP WHOSE PERSONAL LIABILITY FOR THE OBLIGATIONS OF THE PARTNERSHIP IS UNLIMITED, IS A RESIDENT OF THE AREA TO BE SERVED AND POSSESSES A SUBSTANTIAL FINANCIAL INTEREST IN THE CONCERN, THE PARTNERSHIP WILL BE SUFFICIENTLY RESPONSIVE TO LOCAL PRESSURES FOR EFFICIENT SERVICE THROUGH COMPLAINTS ADDRESSED TO THE RESIDENT PARTNER. IN THESE CIRCUMSTANCES WE WOULD BE UNABLE TO MAINTAIN THAT THE PURPOSE OF THE RESIDENCE RESTRICTION WOULD BE THWARTED IF SUCH A PARTNERSHIP WERE ALLOWED TO BID AND THE RESIDENCE OF THE SUBSTANTIALLY INTERESTED LOCAL PARTNER WOULD BE DEEMED TO BE THE RESIDENCE OF THE CONTRACTOR FOR THE PURPOSES OF THE STATUTE. IN THIS PERSPECTIVE, TEXAS DECISIONS ON THE RESIDENCE OF A PARTNERSHIP WOULD NOT APPEAR TO CONTROL THE INTERPRETATION OF RESIDENCE AS USED HERE.

WHILE THIS INTERPRETATION CONFLICTS WITH THE MEANING OF "INDIVIDUAL BIDDER" WHICH YOU HAVE ADVANCED, WE BELIEVE OUR POSITION IS CONSISTENT WITH THE GENERAL CONGRESSIONAL INTENT, REASONABLY PROTECTS AGAINST THE EVILS FOR WHICH THE STATUTE WAS ENACTED AND IS IN ACCORD WITH GUIDELINES ISSUED BY THE FEDERAL COURTS. FOR EXAMPLE, IN LYNCH V. OVERHOLSER, 369 U.S. 705 (1962), THE COURT WARNED AGAINST THE DANGERS OF AN APPROACH TO STATUTORY CONSTRUCTION WHICH CONFINED ITSELF TO THE BARE WORDS OF THE STATUTE, FOR "LITERALNESS MAY STRANGLE MEANING.' IN LOS ANGELES MAILERS UNION NO. 9, INTERNATIONAL TYPOGRAPHICAL UNION V. NATIONAL LABOR RELATIONS BOARD, 311 F.2D 121 (1962), THE COURT APPROVED A NONLITERAL INTERPRETATION OF THE STATUTORY PASSAGE INVOLVED, SO LONG AS CONGRESSIONAL INTENT WAS NOT AVOIDED AND NOTED THAT IT HAD LESS RELUCTANCE TO EFFECT SUCH A RESULT WHEN THE INTERPRETATION IT APPROVED HAD BEEN ADOPTED BY THE AGENCY CHARGED WITH RESPONSIBILITY FOR ADMINISTERING THE STATUTE.

YOU ALSO QUESTION THE VALIDITY OF THE PARTNERSHIP UNDER APPLICABLE TEXAS LAW. ARTICLE 6132B, TITLE 105, SECTION 6 (1) OF THE TEXAS STATUTES DEFINES A PARTNERSHIP AS "AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY ON AS CO-OWNERS A BUSINESS FOR PROFIT.' THE TEXAS COURT OF CIVIL APPEALS CONSIDERS A PARTNERSHIP TO BE "THE LEGAL RELATION BETWEEN TWO PERSONS WHERE BY AGREEMENT THEY HAVE COMBINED THEIR PROPERTY, LABOR OR SKILL IN AN ENTERPRISE OR BUSINESS AS PRINCIPALS.' H. T. NOLEN V. RIG-TIME, INC., 392 S.W. 2D 754 (1965). IN THIS REGARD, THE DEPARTMENT HAS FURNISHED THE FOLLOWING INFORMATION CONCERNING THE PARTNERSHIP: EACH PARTNER HAS CONTRIBUTED $5,000 FOR THE ESTABLISHMENT OF A JOINT CHECKING ACCOUNT TO MEET OPERATIONAL COSTS OF THE SERVICE; MRS. HARRISON AND MR. THOMPSON HAVE JOINTLY LEASED EQUIPMENT TO OPERATE THE ROUTE; MRS. HARRISON PREPARES PAYROLLS AND REPLIES TO ALL CORRESPONDENCE SUBMITTED BY THE DEPARTMENT. THE PARTNERSHIP AGREEMENT PREVIOUSLY CITED AND THE ABOVE INFORMATION WOULD APPEAR TO INDICATE COMPLIANCE WITH THE REQUIREMENTS OF THE CITED TEXAS LAW CONCERNING THE VALIDITY OF PARTNERSHIPS WHETHER SUCH CONFORMITY IS EXAMINED PRIOR OR SUBSEQUENT TO BID SUBMISSION.

REGARDING THE ALLEGED INCAPACITY OF MRS. HARRISON TO ENTER A PARTNERSHIP AGREEMENT BECAUSE OF HER COMMON LAW CONTRACTUAL DISABILITY AS A MARRIED WOMAN, WE NOTE THAT THE TEXAS COURTS HAVE BROADLY CONSTRUED A STATUTE PASSED BY THE LEGISLATURE IN 1963 WHICH ENLARGED THE CONTRACTUAL RIGHTS OF MARRIED WOMEN IN TEXAS. BY THIS STATUTE "THE LEGISLATURE HAS REMOVED ALL IMPEDIMENTS PREVIOUSLY EXISTING TO THE POWER AND AUTHORITY OF A MARRIED WOMAN TO CONTRACT, TO BIND HER SEPARATE ESTATE AND TO SUE AND BE SUED BY REASON OF HER STATUS AS A MARRIED WOMAN.' KITTEN V. VAUGHN, 397 S.W. 2D 530 (1965); DIAMOND V. BORENSTEIN, 410 S.W. 2D 457 (1966). ACCORDINGLY, WE MUST CONCLUDE THAT MARRIED WOMEN HAVE THE CONTRACTUAL CAPACITY TO ENTER A PARTNERSHIP AGREEMENT IN TEXAS. FURTHERMORE, SINCE WE VIEW THE PARTNERSHIP AS VALID UNDER TEXAS LAW, AND AS MRS. HARRISON POSSESSES A SUBSTANTIAL FINANCIAL INTEREST IN THE OPERATION AND IS PERSONALLY RESPONSIBLE TO THE FULL EXTENT OF THE CONTRACT WE THINK THE AWARD WAS PROPER UNDER THE STATUTE. SINCE THE TEXAS PARTNERSHIP LAW (ART. 6132B, T. 105, SECT. 15) RETAINS THE COMMON LAW JOINT AND SEVERAL LIABILITY OF PARTNERS, THE RIGHTS, REMEDIES, AND OBLIGATIONS BETWEEN THE UNITED STATES AND MRS. HARRISON ARE IN EVERY RESPECT THE SAME AS THOUGH SHE HAD BID IN HER OWN INDIVIDUAL NAME AND RIGHT, AND WE SEE NO REASON WHY, BY ASSOCIATING A PARTNER WHO IS ALSO FULLY LIABLE FOR ALL OBLIGATIONS CREATED BY THE CONTRACT, SHE SHOULD BE HELD TO HAVE LOST HER ELIGIBILITY FOR SUCH A CONTRACT.

YOU ALSO MAINTAIN THE PARTNERSHIP SHOULD NOT HAVE BEEN DETERMINED TO BE RESPONSIBLE BECAUSE OF THE CONCERN'S LACK OF OPERATING EXPERIENCE PRIOR TO SUBMISSION OF ITS BID AND MRS. HARRISON'S INEXPERIENCE IN THE TRANSPORTATION FIELD; ADDITIONALLY, YOU ALLEGE SEVERAL DEFICIENCIES IN MR. THOMPSON'S HANDLING OF A MAIL DELIVERY CONTRACT BETWEEN MEMPHIS AND DALLAS -FORT WORTH. WE HAVE CONSISTENTLY MAINTAINED THAT THE DETERMINATION OF A BIDDER'S RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE PROCUREMENT AGENCY, AND IN THE ABSENCE OF BAD FAITH OR A REASONABLE BASIS FOR SUCH DETERMINATION, WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE REQUIRING ACTIVITY. 37 COMP. GEN. 798. THE DEPARTMENT ADVISES THAT MR. THOMPSON WAS CONSIDERED TO BE A SATISFACTORY CONTRACTOR BASED ON HIS PERFORMANCE ON PRIOR MAIL DELIVERY CONTRACTS,INCLUDING THE ONE CITED BY YOU. REGARDING YOUR ALLEGATIONS CONCERNING MR. THOMPSON'S OPERATION OF THE MAIL DELIVERY SERVICE BETWEEN MEMPHIS AND DALLAS-FORT WORTH, THE DEPARTMENT ADVISES THAT HIS SERVICE IN GENERAL IS CONSIDERED MORE THAN ACCEPTABLE WITH RESPECT BOTH TO HIS SCHEDULES AND TO HIS EQUIPMENT, THE TRAILERS AND DIESEL TRACTORS WHICH ARE UTILIZED BEING IN ACCORD WITH CONTRACT REQUIREMENTS.

DESPITE MRS. HARRISON'S INEXPERIENCE IN TRANSPORTATION MATTERS, THE DEPARTMENT CONSIDERED HER TO BE A FINANCIALLY RESPONSIBLE PERSON AND ACCEPTED HER CAPABILITY TO TAKE AN ACTIVE PART IN THE SUPERVISION OF THE PARTNERSHIP'S GENERAL AFFAIRS. CONSIDERING THE DEPARTMENT'S ADVICE THAT SHE IS HANDLING THE CORRESPONDENCE AND PAYROLLS OF THE PARTNERSHIP, IT WOULD SEEM THAT SHE IS TAKING AN ACTIVE MANAGERIAL ROLE IN THE CONCERN. WEIGHING MR. THOMPSON'S PRIOR EXPERIENCE IN MAIL TRANSPORTATION AND THE DEPARTMENT'S FINDINGS MADE IN REGARD TO MRS. HARRISON WE CANNOT HOLD THAT THE AWARD OF A CONTRACT TO THE PARTNERSHIP WAS CONTRARY TO LAW.

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