Partnership

Chapter 2: OBLIGATIONS OF THE PARTNERS

Section 1: Obligation of the partners among themselves
Section 2: Property Rights of a Partner
Section 3: Obligations of the Partners with regard to 3rd Person
Section 1: Obligation of the partners among
themselves
Art. 1784. A partnership begins from the moment of the execution of the contract, unless it is
otherwise stipulated.

Art. 1785. When a contract for a fixed term or particular undertaking is continued after the
termination of such term or particular undertaking without any express agreement, the rights and
duties of the partners remains the same as they were at such termination, so far as is consistent
with a partnership at will.

A continuation of the business by the partners or such of them as habitually acted therein during
the term, without any settlement or liquidation of the partnership affairs, is prima facie evidence of a
continuation of the partnership. Partnership at will is one in which no term of existence has been fixed and
which may be terminated at the will of any partners.
Section 1: Obligation of the partners among
themselves
Art. 1786. Every partner is a debtor of the partnership for whatever he may have promised to
contribute thereto.
Obligations of partners to contribute:
He shall also be bound for warranty
in case of eviction with regard to
1. Shall deliver at the beginning of the partnership or, if a different
specific and determinate things
date has been agreed upon, at the stipulated time the properties
which he may have contributed to
he agreed to contribute;
the partnership, in the same cases
2. Shall answer for eviction, in case the partnership is deprived of the
and in the same manner as the
ownership of any specific property he contributed;
vendor is bound with respect to the
3. Shall answer to the partnership for the fruits of the properties
vendee. He shall also be liable for
whose delivery he delayed from the date he should have
the fruits thereof from the time they
contributed it up to actual delivery without necessity of any
should have been delivered,
demand;
without the need of any demand.
4. Shall preserve said properties with the diligence of a good father of
a family pending their delivery to the partnership;
5. And shall indemnify the partnership for any damage caused it by
the retention of said properties or by the delay in their contribution.
Section 1: Obligation of the partners among
themselves
Art. 1787. When the capital or part thereof which a partner is bound to contribute consists of goods,
their appraisal must be made in the manner prescribed in the contract of partnership, and in the
absence of stipulation, it shall be made by experts chosen by the partners, and according to current
prices, the subsequent changes thereof being for the account of the partnership.

Art. 1788. A partner who has undertaken to contribute a sum of money and fails to do so becomes a
debtor for the interest and damages from the time he should have complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers, and his liability
shall begin from the time he converted the amount to is own use.

Liability of partner for estafa

Failure to return the money taken, there is the element of fraudulent appropriation of the money
delivered to a partner with specific instructions for the use of the partnership, then estafa is
committed under the Revised Penal Code.
Section 1: Obligation of the partners among
themselves
Art. 1789. An industrial partner cannot engage in any business for himself, UNLESS the partnership
expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him
from the firm or avail themselves of the benefits which he may have obtained in violation of this
provision, with a right to damages in either case.

Industrial partner is one who contributes his industry or labor in the partnership.

Industrial partner barred from engaging in business

To prevent any conflict of interest between the industrial and the partnership, and to insure faithful
compliance by said partner with his prestation.
Section 1: Obligation of the partners among
themselves
Art. 1790. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to
the capital of the partnership.

Obligations with respect to contribution to partnership capital:

Partners must contribute equal shares to the capital of the partnership unless there is stipulation to
contrary.

Partners (capitalist) must contribute additional capital In case of imminent loss to the business of the
partnership and there is no stipulation otherwise; refusal to do so shall create an obligation on his part to
sell his interest to the other partners.

Requisites:
• There is an imminent loss of the business of the partnership
• The majority of the capitalist partners are of the opinion that an additional contribution to the
common fund would save the business
• The capitalist partner refuses deliberately to contribute (not due to financiali ability)
• There is no agreement to the contrary
 Section 1: Obligation of the partners among
themselves
Art. 1791. If there is no agreement to the contrary, in case of an imminent loss of the business of the
partnership, any partner who refuses to contribute an additional share to the capital, except an industrial
partner, to save the venture, shall be obliged to sell his interest to the other partners.

Art. 1792. If a partner authorized to manage collects a demandable sum, which was owed to him in his
own name, from a person who owned the partnership another sum also demandable, the sum thus
collected shall be applied to the two credits in proportion to their amounts, even though he may have
given a receipt for his own credit only; but should he have given it for the account of the partnership
credit, the amount shall be fully applied to the latter.

Obligation of managing partners who collects Requisites:

debt from person who also owed the partnership
• There exists at least 2 debts, one where the collecting
Apply sum collected to 2 credits in proportion to partner is creditor and the other, where the
their amounts. partnership is the creditor
If he received it for the account of partnership, the • Both debts are demandable
whole sum shall be applied to partnership credit • The partner who collects is authorized to manage and
actually manages the partnership
Section 1: Obligation of the partners among
themselves
Art. 1793. A partner who has received, in whole or in part, his share of a partnership credit, when the
other partners have not collected theirs, shall be obliged, if the debtor should thereafter become
insolvent, to bring to the partnership capital what he received even though he may have given
receipt for his share only.

Obligation of partner who receives share of partnership credit

Obliged to bring to the partnership capital what he has received even though he may have given receipt
for his share only.

Requisites:
a. A partner has received in whole or in part, his share of the partnership credit
b. The other partners have not collected their shares
c. The partnership debtor has become insolvent
Section 1: Obligation of the partners among
themselves
Art. 1794. Every partner is responsible to the partnership for damages suffered by it through his fault,
and he cannot compensate them with the profits and benefits which he may have earned for the
partnership by his industry. However, the courts may equitably lessen this responsibility if through the
partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.

Partner liable for damages caused the partnership

Art. 1794 follows the general rule of contracts that where a person is at fault in the fulfillment of his
obligations he shall be liable for the payment of damages. The partner’s fault, however, must be determined
in accordance with the circumstances of person, time and place.

Liquidation necessary to ascertain damages

It is first necessary that a liquidation of the business thereof be made to the end that the profits and losses
may be known and the causes of the latter and the responsibility of the defendant as well as the damages
which each partner may have suffered, may be determined.
Section 1: Obligation of the partners among themselves
Art. 1795. The risk of specific and determinate things, which are not fungible, contributed to the
partnership so that only their use and fruits may be for the common benefit, shall be borne by the
partner who owns them.
Things fungible or perishable
If the things contributed are fungible, or cannot be kept If the things contributed are fungible or cannot be
without deteriorating, or if they were contributed to be kept without deteriorating(perishable) like wine, oil,
sold, the risk shall be borne by the partnership. In the etc., even if they are contributed only for the use of
absence of stipulation, the risk of things brought and the partnership, the risk of loss shall be for the
appraised in the inventory, shall also be borne by the account of the partnership for the latter cannot make
partnership, and in such case the claim shall be limited use of them without their getting consumed or
to the value at which they were appraised. presumed.
Things contributed to be sold
Risk of Specific and determinate things If the things contributed are to be sold, the partnership
The risk of specific and determinate things which are bears the risk of loss, for obviously the partnership is
not fungible, like a boat, only the use of which is the intended owner; otherwise, the firm cannot make
contributed, shall be borne by the partner as the the sale.
ownership thereof is not transferred to the partnership. Things brought and appraised in inventory
This follows the general rule that the thing perished with The partnership bears the risk of loss of things brought
the owner. and appraised in the inventory as this has the effect
of an implied sale thus making the partnership the
owner of said things.
Section 1: Obligation of the partners among
themselves
BEARING THE RISK OF LOSS OF THINGS CONTRIBUTED

Specific and determinate things which are not Risk is borne by partner
fungible where only the use is contributed
Specific and determinate things the Risk is borne by partnership
ownership of which is transferred to the
partnership
Fungible things (consumables)
Things contributed to be sold Risk is borne by partnership

Things brought and appraised in the inventory Risk is borne by partnership

Specific and determinate things which are not Risk is borne by partner
fungible where only the use is contributed
Section 1: Obligation of the partners among
themselves
Art. 1796. The partnership shall be responsible to every partner for the amounts he may have disbursed
on behalf of the partnership and for the corresponding interest, from the time the expenses are made; it
shall also answer to each partner for the obligations he may have contracted in good faith in the interest
of the partnership business, and for the risk inconsequence of its management.

Responsibility of the partnership to a partner

If a partner has advanced funds for the partnership, he is entitled to recover the amounts advanced by him
with interest. This must be so for the reason that a partner is a mere agent of the partnership and under the
rules of agency, an agent who advances funds for his principal may recover the same interest.
 Section 1: Obligation of the partners among
themselves
Art. 1797. The profits and losses shall be distributed in conformity with the agreement. If only the share
of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same
proportion.
Rules in profit sharing:
In the absence of stipulation, the
share of each partner in the profits 1. The partners share the profits in accordance with the ratio
and losses shall be in proportion to established by their contract.
what he may have contributed, but 2. If there is no such stipulation in the partnership contract, then:
the industrial partner shall not be 1. If all are capitalist partners they have the profits in
liable for the losses. As for the proportion to their capital contributions;
profits, the industrial partner shall 2. If there are capitalist as well as industrial partners, the
receive such share as may be just industrial partner get a share each that is just and equitable
and equitable under the while the capitalist partners divide the remainder in
circumstances. If besides his proportion to their capital contributions; and
services he has contributed 3. If there is a capitalist-industrial partner, he gets a share in
capital, he shall also receive a the profits as an industrial partner and an additional share in
share in the profits in proportion to proportion to his capital contribution to be determined as in
his capital. (b), above.
Section 1: Obligation of the partners among
themselves
Rules in loss sharing: Share of industrial partner in profits and losses

1. The stipulation in the partnership agreement Unless agreed upon, the industrial partner shall
regarding loss sharing must be followed. receive such share in the profits as may be just
2. If there is no such agreement, but the contract and equitable under the circumstances. As for the
provides for a profit sharing ration, the profit losses, the industrial partner is not liable.
sharing ratio shall also be the loss sharing However, under Art. 1816, if the partnership has a
ration. contractual debt and it cannot pay, the industrial
3. In the absence of loss sharing and profit partner equally with the capitalist partners, can
sharing stipulations in the contract, then the be compelled by the creditor to pay his pro rata
loss shall be borne by the partners in share out of his own property or assets.
proportion to their capital contributions; but a
purely industrial partner is exempted from
participation in the loss.
Section 1: Obligation of the partners among
themselves
Art. 1797. The profits and losses shall be distributed in conformity with the agreement. If only the share
of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same
proportion.
PROFITS LOSSES
With agreement According to agreement

Without agreement Share of capitalist partner is in If sharing of profits is stipulated - apply

proportion to his capital to sharing of losses
contribution
If no profit sharing stipulated – losses shall be
Share of industrial partner is borne according to capital contribution
not fixed - as may be just and
equitable under the Purely industrial partner not liable for
circumstances losses
Section 1: Obligation of the partners among
themselves
Art. 1799. A stipulation which excludes one or more partners from any share in the profits or losses
is void.

Stipulation to exclude a partner from

Reason for exclusion of industrial partner
profits and losses is void
An industrial partner is not liable for losses
The law does not allow a provision in the
because if the partnership fails to realize any
contract of partnership excluding one or
profits, the industrial partner would have
more partners from sharing in the profits
contributed his labor in vain. Furthermore, the
and losses. The reason is that a
industrial partner cannot withdraw the work
partnership is organized for the common
already done by him for the partnership.
benefit or interest of the partners.
Section 1: Obligation of the partners among
themselves
Art. 1798. If the partners have agreed to entrust to a third person the designation of the share of each
one in the profits and losses, such designation may be impugned only when it is manifestly
inequitable. In no case may a partner who has begun to execute the decision of the third person, or
who has not impugned the same within a period of three months from the time he had knowledge
thereof, complain of such decision. The designation of profits and losses cannot be entrusted to one
of the partners.

Reason for the provision

Admittedly, the designation of profits and losses cannot be entrusted to one of the partners as the
fulfillment of a contract cannot be left to one of the contracting parties. It may, however, be entrusted to a
third person by common interest.

Art. 1799. A stipulation which excludes one or more partners from any share in the profits or losses
is void.
Section 1: Obligation of the partners among
themselves RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT
Partner is appointed manager in Power of managing partner is Vote of partners representing
the articles of partnership irrevocable without just/lawful cause; controlling interest necessary to
Revocable only when in bad faith revoke power
Partner is appointed manager Power is revocable any time for any
after constitution of partnership. cause
2 or more persons entrusted with Each may execute all acts of In case of opposition, decision of
management of partnership administration majority shall prevail; In case of tie,
without specification of decision of partners owning
duties/stipulation that each shall controlling interest shall
not act w/o the other’s consent prevail
Stipulated that none of the Concurrence of all necessary for the Absence or disability of any one
managing partners shall act w/o validity of acts cannot be alleged unless there is
the consent of others imminent danger of grave or
irreparable injury to partnership
Manner of management not All partners are agents of the If refusal of partner is manifestly
agreed upon partnership prejudicial to interest of partnership,
Unanimous consent required for court's intervention may be sought
alteration of immovable property
Section 1: Obligation of the partners among themselves
Art. 1800. The partner who has been appointed manager in the articles of the partnership may execute all
acts of the administration despite the opposition of his partners, unless he should act in Bad faith., and his
powers is irrevocable without the just or lawful cause. The vote of the partners representing the controlling
interest shall be necessary for such revocation of power. A power granted after the partnership has
constituted may revoked at any time. Each partner has a right to an equal voice in the conduct of the
partnership business. This right is not dependent on the amount or size of the partner’s capital
contribution.
Appointed as manager after the constitution of the partnership
Partner appointed in arts of partnership may execute all acts of administration notwithstanding the opposition of
the other partners, unless he should act in bad faith. His power is revocable only upon just and lawful cause and
upon the vote of the partners representing the controlling interest.

Reason: revocation represents change in terms of contract.

In case of mismanagement: Usual remedies allowed by law including dissolution.
Appointment as manager after the constitution of the partnership
Appointment may be revoked at any time for any cause what so ever.

Reason: revocation not founded on a change of will on the part of the partners. Appointment not condition of
contract. It is merely a simple contract of agency, which may be revoking at any time. It is believe that the vote for
revocation must also represent the controlling interest.
Scope of the power of the managing partner
General rule: partner appointed as manager has all the powers of a general agent as well as all the incidental
powers necessary to carry out the object of the partnership in the transaction of its business.
Exception: When powers of manager is specifically restricted. A managing partner may not bind the partnership
by contract foreign to its business.
Compensation for service rendered Partner Generally not entitle to compensation, In the absence of an
agreement to the contrary, each member of the partnership assumes the duty to give his time, attention, and
skill to the management of its affairs, as may be reasonably necessary to the success of the common enterprise;
and for this service a share of the profits is his only compensation. In managing partnership affairs, a partner is
practically taking care of his own interest or managing his own business. In the absence of any prohibition in the
arts. Of partnership for the payment of salaries to general partners, there isnothing to prevent the partners to
enter into a collateral verbal agreement to that effect.
EXCEPTIONS: In proper cases, the law may imply a contract for compensation;
1. A partner engaged by his co-partners to perform services not required of him in fulfilment of the duties and in
capacity other than of a partner.
2. When there is extraordinary neglect on the part of one partner to perform his duties, imposing entire burden
on remaining partner.
3. One partner may employ the other to do work for him outside of and independent of the co-partnership.
4. Partners exempted by terms of partnership from rendering services may demand pay for services rendered.
5. Where one partner is entrusted with management and devotes his whole time and devotion at the instance of
the other partners who are attending to their individual business and giving no time or attention to the
partnership business.
Section 1: Obligation of the partners among
themselves
Scope of the power of the managing partner

General rule: partner appointed as manager has all the

powers of a general agent as well as all the incidental
powers necessary to carry out the object of the partnership
in the transaction of its business.

Exception: When powers of manager is specifically

restricted. A managing partner may not bind the partnership
by contract foreign to its business.
Section 1: Obligation of the partners among
themselves
Art. 1801. If two or more partners have been intrusted with the management of the partnership without the
specification of their respective duties or without the stipulation that one of them shall not act without the
consent of all others, each one separately execute all acts of administration, but if anyone of them should
oppose the act of each other, the decision of the majority shall prevail. In the case of tie the partners owning
the controlling interest shall decide the matter. Where respective duties of two or more managing partners
not specifies.

Each one may separately perform acts of

administration
REQUISITES FOR APPLICATION OF RULE
1. If one or more of the managing partners shall
oppose the acts of the others, then the decision 1. Two or more partners have been appointed
of the majority of the managing partners shall as managers;
prevail. Right to oppose can be exercise only by 2. There is no specification of their respective
those entrusted with management. duties;
3. There is no stipulation that one of them shall
2. In case of tie, matter shall be decided by the vote not act without the consent of all the others.
of the partners owning the controlling interest.
Section 1: Obligation of the partners among
themselves
ART. 1802 In case it should have been stipulated that none of the managing partner shall act without the
consent of the others, the concurrence of all shall be necessary for validity of the acts, and the absence
or disability of any one of them cannot alleged, unless there is imminent danger of grave or irreparable
injury to the partnership.

When unanimity of action stipulated

Consent of managing partners not
concurrence necessary for validity of acts The partners
necessary in routine transactions
may stipulate that none of the managing partners shall
act without the consent of the others. In such a case,
The requirement of written authority refers
the unanimous consent of all the managing partners
evidently to formal and unusual written
shall be necessary for the validity of their acts. This
contracts.
consent is so indispensable that neither absence nor
disability of any one of them may allege as excuse to
dispense with requirement.

Exception: When there is imminent danger of grave or

irreparable injury to the partnership then a partner may
act alone without consent of partner who is absent or
under disability.
Section 1: Obligation of the partners among
themselves
Art. 1803. When the manner of management has not agreed upon, the following rules shall observed:
1. All partners shall be considered agents and whatever any one of them may do alone shall bind the
partnership without prejudice to the provision of article 1801.
2. None of the partners may, without the consent of others, make any important alteration in the
immovable property of the partnership, even if it may be useful to the partnership, but if there ids
refusal of the consent by the other partners is manifestly prejudicial to the interest of the
partnership, the court’s intervention may be sought.
Rules when manner of the management that Unanimous consent required for alteration of immovable
has not agreed upon all partners considered property
as managers and agents The consent need not be express. It may presume from the fact of
All partners shall have equal rights in the mgmt. knowledge of the alteration without interposing any objection.
and conduct of partnership affairs. All of them Prohibition only applies to immovable property because of the
shall considered mgrs. And agents and greater importance of this kind of property, and the alteration
whatever any one of them may do alone shall thereof must be important. This would be an act of strict
bind the partnership. If there is timely dominion. If refusal to give consent is manifestly prejudicial to
opposition, however, the matter shall decided the interest of the partnership, court intervention maybe sought.
by majority vote. In case of tie, vote of partners Consent may presume from silence (lack of opposition despite
representing controlling interest. knowledge).If alteration is necessary for preservation of the
property, consent of the other partners not required.
Section 1: Obligation of the partners among
themselves
Art. 1804. Every partner may associate another person with him in his share, but the associates shall not
admitted into the partnership without the consent of all otherpartners, even of the partner having an
associate should be a manager of sub partnership nature
The partnership formed between a member of a partnership and a third
Person for a division of the profits coming to him from the partnership enterprise is termed sub partnership. It is a
partnership within a partnership and is distinct and separate from the main or principal partnership.

Right of the person associated with the partnership’s share

Sub partnership agreements do not affect the composition, existence, or operations of the firm.

The sub partners are partners interest, However, in the absence of the mutual assent of all the parties, a sub
partner does not become a member of the partnership, even if the other partners know about the agreement. Not
being a member of the partnership, he does not acquire the rights of a partner nor is he liable for its debts.
Reason for the rule

Partnership is based on mutual trust and confidence among the partners. Inclusion of new partner would be a
modification of the original contract of partnership requiring unanimous consent of all the partners. Prohibition
applies even if person associated is already a partner.
Section 1: Obligation of the partners among
themselves
Art. 1805. The partnership books shall be kept, subject to any agreement between the partners, at the
principal place of the business of the partnership, and every partner shall at any reasonable hour have
access to and may inspect and copy any of them.

Partner with duty to keep partnership books

The duty to keep true and correct books showing the firm’s accounts, such books being at all times open to
inspection of all members of the firm, primarily rests on the managing or active partner. It is presumed that the
partners have knowledge of the contents of the partnership books and that said books state accurately the
state of accounts, but errors can correct.

Rights with the respect to partnership books

Books should keep at the principal place of business as each partner has the right to free access to them and to
inspect or copy any of them at any reasonable time, even after dissolution. Inspection rights not absolute can
restrained from using info for other than partnership purpose.

Access to partnership books

Rights can exercise at any reasonable hour. This means reasonable hours on business days throughout the
year and not merely during some arbitrary period of a few days chosen by the managing partners.
Section 1: Obligation of the partners among
themselves
Art. 1806. Partners shall render on demand true and full information of all things affecting the
partnership to any partner or the legal representative of any deceased partner or of any partner
under legal disability. Duty to render information, there must be no concealment between partners
in all matters affecting the partnership. Information must use only for partnership purpose. Not just
on demand but partner also has duty of voluntary disclosure. However, duty to render info does
arise with respect to matters appearing in partnership books since each partner has the right to
inspect those. Good faith not only requires that a partner should not make a false statement but
also that he should abstain from any false concealment.

Art. 1807. Every partner must account the partnership for any benefit, and hold as trustee for it any
profits derived from him without the consent of the partners from any transaction connected with
the formation, conduct, or liquidation of the partnership or from any use by him of his property.

The relation between the partners is essentially fiduciary involving trust and confidence, each partner
considered in law, as he is, in fact, the confidential agent of the others. The duties of a partner are
analogous to those of a trustee.
Section 1: Obligation of the partners among
themselves Duty continues even after the
Duty to act for common benefit
dissolution of the partnership
Cannot use and apply exclusively
Duty of partner to act w/ utmost good
to own individual benefit
faith towards his co-partners continues
partnership assets or results of
throughout the entire life of the
knowledge and info gained in Duty to account for earnings
partnership even after dissolution for
character of partner. Managing accruing even after termination
whatever reason or whatever means,
partners particularly owe a of partnership
until the relationship is terminated, i.e.
fiduciary duty to inactive partners. If a partner uses info obtained by
the winding up of partnership affairs is
Duty begins during the formation completed. him from the partnership for his
of partnership own account w/o the consent of
Duty to account for secret and similar the other partners, he is liable to
Principle of good faith applies not
profits account for any benefit he might
only during partnership but during
The duty of a partner to account as a obtain.
the negotiations leading to the
fiduciary operates to prevent from making
formation of the partnership. Also,
a secret profit out of the operation of the
a person who agreed w/ another to
partnership and from carrying on the
form a partnership has the
business for his private advantage or a
obligation to account for
business in competition w/ the firm w/o
commissions and discounts
consent of other partners. Violation may
received in acquiring property for
be ground for dissolution.
the future partnership.
Section 1: Obligation of the partners among
themselves
Duty to make full disclosure of
Duty not to acquire interest or right adverse to
information belonging to partnership
partnership
A partner is also subject to the fiduciary
If partner does, he holds it in trust for the benefit
duty of undivided loyalty and complete
of the partnership and must account to the firm
disclosure of info of all things affecting
for the profits of the transaction, unless it
the partnership. By Information is meant
appears that the others consented
information, which can be used for the
purposes of the partnership. Info cannot
use for a partner’s private gain – even if
after termination.
Section 1: Obligation of the partners among
themselves
Art. 1808. The Capitalist partners cannot engage for their own account in any operation, which is of the
kind of business in which the partnership is engaged, unless there is a stipulation to the contrary. Any
capitalist partner violating this prohibition shall bring to the common funds any profit accruing to him
from his transactions, and shall personally bear all the losses.
Prohibition against partner VIOLATION – Obligation to bring to Reason for prohibition
engaging the business common fund any profits derived and in Fiduciary nature of relationship
case of losses, he shall bear them alone. imposes obligation of utmost
Prohibition relative – Prohibition Partners, however, by stipulation may good faith. Rule prevents use of
against capitalist partner to engage in permit it. The law permits him to carry on info obtained in course of
business is relative, unlike the a business not connected or competing transaction of partnership
industrial partner who is absolutely with that of the partnership. Law is silent business or because of
prohibited from engaging in any on whether he can engage in same line of connection w/ firm regarding
business for himself. Capitalist business for the account of another. business secrets and clientele
partner is only prohibited from of firm to its prejudice.
engaging for his own account in any Prohibition still applies because of
operation which is the same or fiduciary position imposing duties of
similar to the business in which the utmost good faith. He may not carry on
partnership is engaged and which is any other business in rivalry w/ the
competitive w/ said business partnership.
Section 1: Obligation of the partners among
themselves
Art. 1809. Any partner shall have the right to a formal account as partnership affairs:
1. If he is wrongfully excluded from the partnership business or possession of its property by his co-partner
2. If the right exists under the terms of any agreement;
3. Provided by article 1807;
4. Whenever other circumstances render it just and reasonable, Right of the partner to a formal account.

General rule: During existence of partnership, a partner is not entitled to a formal account of
partnership affairs.

Reason: rights of partner amply protected in arts1805 and 1806. In addition, it would cause much
inconvenience and unnecessary waste of time.

Exception: In the special and unusual situations enumerated under art. 1809. Right of partner to
demand an accounting w/o bringing about dissolution is a necessary corollary to right to share in profits.
A formal account is a necessary incident to the dissolution of the partnership.
Section 2: Property Rights of a Partner
Art. 1810. The property rights of a partner are:
1. His rights in specific partnership property;
2. His interest in the partnership;
3. His right to participate in the management, extent of property rights of a partner.

PRINCIPAL RIGHTS

1. Rights in specific partner property;

2. Interest in partnership;
3. Right to participate in management.

RELATED RIGHTS

1. Right to reimbursement for amounts advanced to partnership and to indemnification for risks
inconsequence of management
2. Right of access and inspection of partnership books
3. Right to true and full information of all things affecting partnership
4. Right to formal account of partnership affairs under certain circumstances
5. . Right to have partnership dissolved also under certain conditions
Section 2: Property Rights of a Partner
Partnership property and partnership capital distinguished

Partnership property Partnership capital

Changes value Variable: its value may vary from day today Constant: it remains unchanged as the
w/ changes in market value partners amount is fix by agreement of the partners,
and is not affected by fluctuations in the
value of the partnership property, although it
may be increased and decreased by
unanimous consent of the partners.
Assets Included Includes not only the original capital The aggregate of the individual contributions
contribution but also all property made by the partners in establishing or
subsequently acquired because of the continuing the partnership.
partnership or w/ partnership funds,
including partnership name and goodwill.
Section 2: Property Rights of a Partner
Ownership of certain property Property acquired by a partner with
partnership funds – Unless a contrary intention
Property use by the partnership – Where appears, property acquired by a partner in his
there is no express agreement that property own name w/ partnership funds is partnership
used by a partnership constitutes property. However, if the property was acquired
partnership property, such use does not after dissolution but before the winding up of the
make it partnership property, and whether it partnership affairs, it would be his separate
is so depends on the intention of the property but he would be liable to account to the
parties, w/c may be shown by proving an partnership for the funds used in its acquisition.
express agreement or acts of particular
conduct. The intent of the parties is the
controlling factor.
Section 2: Property Rights of a Partner
Art. 1811. A partner is co-owner with his partners of specific partnership property. The incidents of this co-
ownership are such that;
1. A partner, subject to the provision of this title and any agreement between the partner, has an
equal right with his partners to possess specific partnership property for partnership purposes;
but he has no right to possess such property for any other purpose without the consent of his
partners;
2. A partner’s right in specific partnership property is not assignable except in connection with the
assignment of rights of all the partners in the same property;
3. A partner’s right in specific partnership property is not subject to attachment or execution, except
on a claim against the partnership;
4. A partner’s right in specific partnership property is not subject to legal support under art. 291
nature of a partner’s right in specific partnership property

Art. 1811 contemplates tangible property but not intangible things. A partner is a co-owner w/ his partners of
specific partnership property, but the rules on coownership do not necessarily apply. The legal incidents of
this tenancy in partnership are distinctively characteristic of the partnership relation. They are as follows:
Section 2: Property Rights of a Partner
Equal rights of possession - Ordinarily, a partner has an equal right to possess specific
partnership property for partnership purposes. None of the partner can possesses and uses the
specific partnership property other than for partnership purposes w/o the consent of the other
partners. Should any of them use the property for his own benefit, he must account, like a stranger,
to the others for the profits derived there from or the value of his wrongful possession or
occupation. A partner wrongfully excluded from possession of partnership property by a co-
partner has a right to formal account and may even apply for a judicial decree of dissolution. On
the death of a partner, his right in specific partnership property vests in the surviving partners. By
agreement, the right to possess specific partnership property may surrender. In the absence of
special agreement, however, neither partner separately owns, or has the exclusive right of
possession of any partnership property or any proportional part thereof. Each has dominion over
the entire partnership property. The possession of partnership property by one partner is the
possession of all until his possession becomes adverse. A partner cannot initiate title by adverse
possession until and unless he makes an adverse claim.
Section 2: Property Rights of a Partner
Right not assignable - A partner cannot separately assign his right to specific partnership property but all
of them can assign their rights in the same property. Reasons for non-assignability:

1. It prevents interference by outsiders in partnership affairs;

2. It protects the right of other partners and partnership creditors to have partnership assets applied
to firm debts;
3. It is often impossible to determine the extent of a partner’s beneficial interest in a particular
partnership asset. Reason for impossibility: Each partner, having a beneficial interest in the
partnership property considered as a whole, has a beneficial interest in each part. Where,
however, none of the above reasons apply, an authorized assignment by a partner of his right in
specific partnership property is void, but it may be regarded as a valid assignment of the partner’s
interest in the partnership. The law allows a retiring partner to assign his rights in partnership
property to the partner(s) continuing the business.
Section 2: Property Rights of a Partner
Right limited to share of what remains after partnership debts has been paid

Strictly speaking, no particular partnership property or any specific or an aliquot part thereof can be
considered the separate or individual property of any partner. The whole of partnership property belongs
to the partnership considered as a juridical person, and a partner has no interest in it but his share of
what remains after all partnership debts are paid. Consequently, specific partnership property is not
subject to attachment, execution, garnishment, or injunction, w/o the consent of all the partners except
on a claim against the partnership. For the same reason that the property belongs to the partnership, the
partners cannot claim any right under the homestead or exemption laws when it is attached for
partnership debts. However, a judgment creditor may levy upon a partner’s interest in the partnership
itself because it is actually his property, by means of a “charging order.” The right of the partners to
specific partnership property is not subject to legal support since the property belongs to the partnership
and not to the partners. However, their interest in the partnership is. The method of reaching a judgment
debtor’s interest in partnership property is specifically set forth in art.1814.
Section 2: Property Rights of a Partner
Art. 1812. A partner’s interest in the partnership is his share of the profits and surplus.

Share of profits and surplus – The partner’s interest in the partnership consists of his share in
the undistributed profits during the life of the partnership as a going concern and his share in
the undistributed surplus after its dissolution.

Profits: the excess of returns over expenditure in a transaction or series of transactions; or the
net income of the partnership for a given period.

Surplus: the assets of the partnership after partnership debts and liabilities are paid and
settled and the rights of the partners among themselves are adjusted. It is the excess of assets
over liabilities. If the liabilities are more than the assets, the difference represents the extent of
the loss.
Section 2: Property Rights of a Partner
Art.1813. A conveyance by a partner by his whole interest in the partnership does not of itself
dissolve the partnership, or, against the other partners in the absence of agreement, entitle the
assignee, during the continuance of the partnership, to interfere in the management or
administration of the partnership business or affairs, or to require any information or account of the
partnership transactions, or to inspect the partnership books; however, it merely entitles the
assignee to receive the accordance with his contract, the profits to which the assigning partner
would otherwise be entitled.

In case of fraud in the management of the partnership, the assignee may avail himself of the usual
remedies. In case of dissolution of the partnership, the assignee is entitle to receive his assignor’s
interest and may require an account from the date only of the last account agreed to by all partners.
Effect of assignment of partner’s whole interest in partnership. A partner’s right in specific partnership
property is not assignable but he may assign his interest in the partnership to any of his co-partners or
to a third Person irrespective of the consent of the other partners, in the absence of agreement to the
contrary.
Section 2: Property Rights of a Partner
Rights withheld from assignee Rights of assignee of partner’s interest

1. To interfere in the management. 1. To receive in accordance w/ his contract the

2. To require any information or account. profits accruing to the assigning partner;
3. To inspect any of the partnership books. 2. To avail himself of the usual remedies provided
by law in the event of fraud in the management;
Remedy of other partners 3. To receive the assignor’s interest in case of
• Dissolution of partnership not intended –Many dissolution;
partnership agreements are made merely as security for 4. To require an account of partnership affairs, but
loans, the assigning partner never intending to destroy only in case the partnership is dissolved, and
the partnership relation. If the assigning partner neglects such account shall cover the period from the
his duties after assignment, the other partners may date only of the last account agreed to by all
dissolve the partnership under art. 1830. partners. The purchaser of a partner’s interest
• Dissolution of partnership intended – A partner’s may apply to the court for dissolution after the
conveyance of his interest in the partnership operates as termination of the specified term or undertaking
dissolution of the partnership only when it is clear that or at any time if the partnership is one at will.
the parties contemplated and intended the entire
withdrawal from the partnership of such partner and the
termination of the partnership as between the partners.
Section 2: Property Rights of a Partner
Art. 1814. Without prejudice to the preferred rights of the partnership creditors on due application to a
competent court by any judgement creditor of the partner, the court which entered the interest of the
debtor partner with payment of the unsatisfied amount of such judgement debt with the interest thereon;
and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall
due to him in respect of the partnership, and make all other orders, directions and accounts and inquiries
which the debtor partner might have made, or which circumstances of the case may require. The interest
charged may redeem at any time before foreclosure, or in any case of a sale being directed by the court,
may be purchase without thereby causing dissolution:
1. With separate property, by any one or more of the partners;
2. With partnership property, by any one or more of the partners with the consent of all the partners a
whose interest are not so charged or sold, nothing in this title shall be held to deprive a partner of
his right, if any, under the exemption laws, as regards his interest in the partnership.
Redemption or purchase of interest charged

Redemptioner – The interest of the debtor partner so charged may be redeemed or purchased w/ the separate
property of any one or more of the partners, or w/ partnership property but w/ the consent of all the partners
whose interests are not so charged or sold.

Redemption Price – The value of the partner’s interest in the partnership has no bearing on the redemption
price w/c is likely to be lower since it will be dependent on the amount of the unsatisfied judgment debt.
Section 2: Property Rights of a Partner
Application for a charging order after securing
Availability of other remedies
judgement on his credit
Art. 1814 have made this an exclusive remedy so that a
While a separate creditor of a partner cannot attach
writ of execution will not be proper. However, if the
or levy upon specific partnership property for the
judgment debt remains unsatisfied, the court may
satisfaction of his credit because partnership assets
resort to other courses of action notwithstanding the
are reserved for partnership creditors, he can secure
issuance of the charging order.
a judgment on his credit and then apply to the proper
court for a “charging order”, subjecting the interest of
Redemption or purchase of interest charged
the debtor partner in the partnership w/ the payment
Redemptioner – The interest of the debtor partner so
of the unsatisfied amount of such judgment w/
charged may be redeemed or purchased w/ the
interest thereon w/ the least interference w/ the
separate property of any one or more of the partners, or
partnership business and the rights of the other
w/ partnership property but w/ the consent of all the
partners. By virtue of the charging order, any amount
partners whose interests are not so charged or sold.
or portion thereof w/c the partnership would
otherwise pay to the debtor-partner should instead
be given to the judgment creditor. This remedy,
however, is w/o prejudice to the preferred rights of
partnership creditors whose claims should be
satisfied first.
Section 2: Property Rights of a Partner
Redemption Price – The value of the Rights of partner under exemption laws
partner’s interest in the partnership has
no bearing on the redemption price w/c is A partner cannot claim any right under the
likely to be lower since it will be homestead laws or exemption laws when specific
dependent on the amount of the partnership property is attached for partnership
unsatisfied judgment debt. debt. W/ respect, however, to the partner’s
interest in the partnership as
Right of redeeming non-debtor partner – distinguished from his interest in specific
There deeming non-debtor partner does partnership property, the partner may avail
not acquire absolute ownership over the himself of the exemption laws after partnership
debtor-partner’s interest but holds it in debts have been paid. A partner’s interest or
trust for him consistent w/ principles of share in the partnership property is really his
fiduciary relationship. property.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1815. Every partnership shall operate under a firm name, which may or may not include the name of
one or more of the partners, those who, not being members of the partnership, include their names in
the firm name, shall be subject to liability of a partner

Requirement of the firm name

Meaning of word “firm” – The name, title, or style under which a company transacts business; a partnership of
two or more persons; a commercial house. In its common acceptation, the term implies a partnership. The
term is also used as synonymous with “company,” “house,” and “concern.”

Importance of having a firm name

A partnership must have a firm name under which it will operate. A firm name is necessary to distinguish the
partnership, which has a distinct and separate juridical personality from the individuals composing the
partnership and from other partnerships and entities.

Right of the partners to choose firm name

The partners enjoy the utmost freedom in the selection of the partnership name. As a general rule, they may
adopt any firm name desired.
Section 3: Obligations of the Partners with regard to 3rd Person

Use of misleading name – The partners cannot Liability inclusion of name in the firm name
use a name that is identical or deceptively
confusingly similar to that of any existing – Persons who, not being partners, include their names in
partnership or corporation or to any other name the firm name do not acquire the rights of a partner but
already protected by law or is patently deceptive, shall be subject to the liability of a partner insofar as 3rd
confusing or contrary to existing laws, as to Persons without notice are concerned. Such persons
mislead the public by passing itself off as another become partners by estoppel. Art.1815 does not cover
partnership or corporation, or its goods or the case of a limited partner who allows his name to be
services as those of such other company. included in the firm name, or of a person continuing the
business of a partnership after dissolution, who uses the
name of the dissolved partnership or the name of a
deceased partner as part thereof.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all
the partnership assets have been exhausted, for the contracts which may be entered into in the name and
for the account of the partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform a partnership contract.

Refers to partnership obligations

Article 1816 which refers to the payment of partnership obligations arising from contracts clearly imposes
subsidiary and joint (pro rata) liability for contractual debts owing to third persons upon all the partners,
including industrial partners who ordinarily are not liable for losses. The liability is subsidiary because the
partners cannot be made answerable with their separate property unless the partnership property has first
been exhausted.

Pro rata liability – Literally, pro rata liability means proportionate distribution of liability. In the law of
obligations, the concurrence of two or more debtors in one and the same obligation makes it prima facie a joint
(pro rata) obligation, and the debts is presumed divided into as many equal shares as there are debtors and
each one of them is bound to pay only his share.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except
as among the partners.

Industrial partner cannot exempt himself from liability to third persons. Each one of the industrial partners
is liable to third persons for the debts of the firm and if he has paid such debts out of his private property
during the life of the partnership, when its affairs are settled he is entitled to credit for the amount so paid,
and if its results that there is not enough property in the partnership to pay him, then the capitalist partners
must pay him. Our conclusion is that neither on principle nor on authority can the industrial partner be
relieved from liability to third persons for the debts of the partnership
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1818. Every partner is an agent of the partnership for the purpose of its business, and the act of
every partner, including the execution in the partnership name of any instrument, for apparently
carrying on in the usual way the business of the partnership of which he is a member binds the
partnership, unless the partner so acting has in fact no authority to act for the partnership in the
particular matter, and the person with whom he is dealing has knowledge of the fact that he has no
such liability.

Except when authorized by the other partners or unless they have abandoned the business, one or more
but less than all the partners have no authority to:

1. Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts
of the partnership.
2. Dispose of the goodwill of the business.
3. Do any other act which would make it impossible to carry on the ordinary business of a
partnership.
4. Confess a judgment.
5. Enter into a compromise concerning a partnership claim or liability.
6. Submit a partnership claim or liability to arbitration.
7. Renounce a claim of the partnership
Art. 1819. Where title to real property is in the partnership name, any partner may convey title to such
property by a conveyance executed in the partnership name; but the partnership may recover such
property unless the partner's act binds the partnership under the provisions of the first paragraph of
article 1818, or unless such property has been conveyed by the grantee or a person claiming through
such grantee to a holder for value without knowledge that the partner, in making the conveyance, has
exceeded his authority.

Where title to real property is in the name of the Where the title to real property is in the name of
partnership, a conveyance executed by a partner, in one or more or all the partners, or in a third
his own name, passes the equitable interest of the person in trust for the partnership, a conveyance
partnership, provided the act is one within the executed by a partner in the partnership name,
authority of the partner under the provisions of the or in his own name, passes the equitable
first paragraph of Article 1818. interest of the partnership, provided the act is
one within the authority of the partner under the
Where title to real property is in the name of one or provisions of the first paragraph of
more but not all the partners, and the record does Article 1818.
not disclose the right of the partnership, the partners
in whose name the title stands may convey title to Where the title to real property is in the name of
such property, but the partnership may recover such all the partners a conveyance executed by all
property if the partners’ act does not bind the the partners passes all their rights in such
partnership under the provisions of the first property.
paragraph of Article 1818, unless the purchaser or
his assignee, is a holder for value, without
knowledge.
 EFFECTS OF CONVEYANCE OF REAL PROPERTY BELONGING TO PARTNERSHIP

Title in partnership name, Conveyance in Conveyance passes title but partnership can recover if:
partnership name Conveyance was not in the usual way of business, or Buyer had
knowledge of lack of authority
Title in partnership name, Conveyance in Conveyance does not pass title but only equitable interest, unless:
partner's name Conveyance was not in the usual way of business, or Buyer had
knowledge of lack of authority
Title in name of 1/ more partners, Conveyance Conveyance passes title but partnership can recover if:
in name if partner/partners in whose name title Conveyance was not in the usual way of business, or Buyer had
stands knowledge of lack of authority
Title in name of 1/more/all partners or Conveyance will only pass equitable interest
3rdperson in trust for partnership, Conveyance
executed in partnership name if in name of
partners
Title in name of all partners, Conveyance in Conveyance will pass title
name of all partners
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1820. An admission or representation made by any partner concerning partnership affairs within the
scope of his authority in accordance with this Title is evidence against the partnership.

Art. 1821. Notice to any partner of any matter relating to partnership affairs, and the knowledge of the
partner acting in the particular matter, acquired while a partner or then present to his mind, and the
knowledge of any other partner who reasonably could and should have communicated it to the acting
partner, operate as notice to or knowledge of the partnership, except in the case of fraud on the
partnership, committed by or with the consent of that partner.

Notice to partner is notice to partnership

Clearly a third person desiring to give notice to a partnership of some matter pertaining to the partnership
business need not communicate with all of the partners. If notice is delivered to a partner, that is an effective
communication to the partnership.

Knowledge before becoming partner

Where the knowledge or notice had been received by the partner before he became a partner, and his partners
are ignorant of this, and he is not the partner acting in the particular matter, there is no doubt that there has
been neither knowledge of nor notice to the partnership.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the
business of the partnership or with the authority of copartners, loss or injury is caused to any person,
not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to
the same extent as the partner so acting or omitting to act.

Partner liable for wrongful act of a partner

The partners are liable for the negligent operation of a vehicle by a partner, acting in the course of
business, which results in traffic accident. If he is driving a partnership-owned vehicle for purposes of
his own, the acting partner alone is liable it is not a partnership tort.

Partnership may proceed against negligent partner

Where a partnership is liable to a third person, there is a right of indemnity against the partner whose
negligence caused the injuries.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1823. The partnership is bound to make good the loss:
1. Where one partner acting within the scope of his apparent authority receives money or property
of a third person and misapplies it.
2. Where the partnership in the course of its business receives money or property of a third person
and the money or property so received is misapplied by any partner while it is in the custody of
the partnership.

Partnership bound by partner’s breach of trust

The partnership is liable for the conversion (misappropriation) of money or property entrusted to the
partnership by a third person. The effect under Article 1824 is the same whether by the partnership and
subsequently misappropriated by a partner.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1824. All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823.

Law imposes solidary liability

The law imposes solidary liability upon the partners and the partnership in cases of torts and acts of
conversion by a partner as provided in Art. 1824. It may be stated that the liability of a partner for a debt of
the partnership depends upon whether the debts is contractual, or it arises from tort or conversion. If it
arises from contract, the liability is subsidiary and pro rata; if it arises from tort or conversion, the liability is
solidary

Business partners solitarily liable

Arts. 1711 and 1712 of the New Civil Code and Sec. 2 of the Workmen’s Compensation Act reasonably
indicate that in compensation cases, the liability of business partners should be merely joint and not
solidary, and one of them happens to be insolvent, the amount awarded to the dependents of the deceased
employee would only be partially satisfied, which is evidently contrary to the intent and purpose of the law to
give full protection to the employee
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1825. When a person, by words spoken or written or by conduct, represents himself, or consents to
another representing him to anyone, as a partner in an existing partnership or with one or more persons not
actual partners, he is liable to any such persons to whom such representation has been made, who has, on
the faith of such representation, given credit to the actual or apparent partnership, and if he has made
such representation or consented to its being made in a public manner he is liable to such person, whether
the representation has or has not been made or communicated to such person so giving credit by or with
the knowledge of the apparent partner making the representation or consenting to its being made:
1. When a partnership liability results, he is liable as though he were an actual member of the
partnership.
2. When no partnership liability results, he is liable pro rata with the other persons, if any, so
consenting to the contract or representation as to incur liability, otherwise separately.

When a person has been thus represented to be a partner in an existing partnership, or with one or more
persons not actual partners, he is an agent of the persons consenting to such representation to bind them to
the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely
upon the representation. When all the members of the existing partnership consent to the representation, a
partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting
and the persons consenting to the representation.
Section 3: Obligations of the Partners with regard to 3rd Person

Estoppel – A preclusion, in law, which prevents a man from

alleging or denying a fact, in consequence of his own
previous act, allegation, or denial of a contrary tenor.

Person bound by his representation A person who hold

himself out as a partner in a business, or consents to his
being so held out, is liable on contracts made with third
persons who deal with the persons carrying on the business
on the faith of the representation. He is stopped to deny the
apparent agency.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1826. A person admitted as a partner into an existing partnership is liable for all the obligations of the
partnership arising before his admission as though he had been a partner when such obligations were
incurred, except that this liability shall be satisfied only out of partnership property, unless there is a
stipulation to the contrary.

Incoming partner liable for existing obligations

A newly admitted partner is liable for obligations of the partnership at the time of his admission. The
obligation of the incoming partner shall be satisfied only out of partnership property. This is not a harsh rule
because the incoming partner “partakes of the benefit of the partnership
property, and an established business. He has every means of obtaining full knowledge of protecting himself,
because he may insist on the liquidation or settlement of existing partnership debts. On the other hand, the
creditors have no means of protecting themselves.
Section 3: Obligations of the Partners with regard to 3rd Person
Art. 1827. The creditors of the partnership shall be preferred to those of each partner as regards the
partnership property. Without prejudice to this right, the private creditors of each partner may ask the
attachment and public sale of the share of the latter in the partnership assets.

PARTNER BY ESTOPPEL—by words or All partners consented to Partnership is liable

conduct, he does any of the following: representation
No existing partnership & all Person who represented
• Directly represents himself to anyone those represented consented; himself & all those who made
as a partner in an existing partnership Not all partners of existing representation liable prorata/
or in a non- existing partnership partnership consents to jointly
representation
• Indirectly represents himself by
consenting to another representing No existing partnership & not all Person who represented
him as a partner in an existing represented consented; himself liable & those who
partnership or in a non existing None of partners in existing made/consented to
partnership partnership consented representation separately liable
Section 3: Obligations of the Partners with regard to 3rd Person
ELEMENTS TO ESTABLISH LIABILITY AS A ASSIGNMENT OF INTEREST IN PARTNERSHIP (G-F-CO)
PARTNER ON GROUND OF ESTOPPEL:
Assignment is subject to three (3) conditions:
1. Defendant represented himself as 1. made in Good faith
partner/represented by others as 2. for Fair consideration
such and not denied/refuted by 3. after a fair and COmplete disclosure of all important
defendant information as to its value
2. Plaintiff relied on such RIGHTS OF AN ASSIGNEE:
representation 1. Get whatever assignor-partner would have obtained
3. Statement of defendant not 2. Avail usual remedies in case of fraud in the management
refuted 3. Ask for annulment of contract of assignment if he was induced to
Person bound by his representation join through any of the vices of consent
4. Demand an accounting (only in case of dissolution)
A person who hold himself out as a partner in RESPONSIBILITY OF PARTNERSHIP TO PARTNERS
a business, or consents to his being so held 1. To refund the amounts disbursed by partner in behalf of the
out, is liable on contracts made with third partnership + corresponding interest from the time the expenses
persons who deal with the persons carrying on are made (loans and advances made by a partner to the
the business on the faith of the partnership aside from capital contribution)
representation. He is stopped to deny the 2. To answer for obligations partner may have contracted in good
apparent agency. faith in the interest of the partnership business
3. To answer for risks in consequence of its management
End of Chapter 2