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7/29/2019 The Law on Partnership
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Section 3
Obligations of the Partners with
Regard to Third Persons
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Art. 1816
Industrial partners are exempted from losses,
but they are not exempted from liability to third
persons.
After exhausting the partnership property, allpartners (including the industrial partners) are
jointly liable for the excess debt.
The industrial partner(s) have the right of
reimbursement from the capitalist partners.
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Illustration (Art. 1816)
X, Y, W, Z, are capitalist partners each
contributing 20,000 each. B is an
industrial partner.
Creditor R is a supplier with a credit
against the partnership in the amount of
100,000. How will Creditor R be paid?
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Answer to Illustration
100,000 Debt
- 80,000 (capital of the partnership)
20,000 excess debt
(4,000 each)
X Y W Z B
will be reimbursed byX, Y, W, and Z (paying 1,000 each toB)
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Art. 1817
Any stipulation against the liability laid
down in the preceding article shall be void,
except as among the partners.
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Illustration
X, Y, W, Z, are capitalist partners each
contributing 20,000 each. Z, by
agreement with all other partners, is
exempted from liability.
Creditor R is a supplier with a credit
against the partnership in the amount of
104,000. How will Creditor R be paid?
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Answer to Illustration
104,000 Debt
- 80,000 (capital of the partnership)
24,000 excess debt(6,000 each)
X Y W Zreimbursed by X, Y, W by
paying Z 2,000 each.
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Firm Name (Art. 1815)
Firm name may or may not include the
name of the partners.
Liability of people who are not partners but
include their names in the firm name
(misrepresentation)
Liable as partners
But do not have the rights of partners.
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Illustration
A, B, C are partners. Total capital contribution is
50,000. Y allowed his name to be included in
the firm name thus A, B, C and Y partnership.
Mr. M, a partnership creditor, has a total credit of110,000.
Q1: How will Mr. Ms claim be satisfied?
Q2: Supposing the partnership as a surplus, willY be entitled to a share therein?
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Answer to Illustration
A1: The capital contribution shall first be
exhausted leaving an unpaid balance of
60,000. All the partners A, B, and C, and
the Y shall be liable with their separateproperty, and shall each pay 15,000.
A2: Y will not share in the surplus or
profits of the partnership.
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Mutual Agency (Art. 1818)
Partner can bind the partnership when:1) Partner acts in behalf and in the name of the
partnership AND
2) Partner is expressly or impliedly authorized by the
partnership.- Implied authority:
a) When the other partners do not object
when they know of the act of the partner; or
b) The partners act is for apparently carryingon in the usual way the business of thepartnership, provided the third party is ingood faith.
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Apparently carrying on in the usual way the
business of the partnership
Examples:
- Selling on credit
- Providing warranties- Making minor repairs
The meaning of the phrase would dependon the particular instances and nature of
the partnerships business.
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Paragraph 3 of Art. 1818
7 acts enumerated in Art. 1818 requires
the consent ofall the partners because
they are unusual and are not in the
ordinary course of doing business.
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Art. 1819: Conveyance of Real
Property
Title to real property of the partnership can
be conveyed (Art. 1819)
Equitable interest to real property of the
partnership can be conveyed (Art. 1819)
Provided, the partnership is in the real
estate business (buying and selling of real
estate, and the buyer is in good faith.
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Art. 1819 continuedConveyance made in the name of:
Thepartnership
A partner Partner(s) inwhose name
title stands
All of thepartners
Real property
registered in the
name of:
1) Partnership Title passes Only equitableinterest passes
2) All of the
partners
Title passes
3) One, some, or
not all of thepartners
Title passes
4) One, some or
not all of the
partners in trust for
the partnership
Only equitable
interest passes
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Partner representation and
admission
Admission by a partner
a) concerning partnership affairs
b) within the scope of his authority
is evidence against the partnership (Art.
1820).
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Notice to Partner
Notice to a partner is notice to the
partnership (which cannot claim
ignorance) when:
a) matter relates to partnership affairs;
and
b) notice was given while still a partner
(Art. 1821).
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Knowledge of Partner
The following are considered knowledge
of the partnership:
1) Knowledge of partner acting on a
particular matter;
2) Knowledge of any other partner who
reasonably could and should have
communicated the knowledge to the
acting partner (Art. 1821).
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Solidary Liability of Partnership for
Partners Acts (Art. 1824)
Torts by partners acting in the ordinary
course of the partnerships business (Art.
1822).
Torts by partners acting with the authority
of co-partners (Art. 1822).
Partner misapplies money received by the
partnership (Art. 1823).
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Art. 1825: Partner by Estoppel
Partner by Estoppel defined as:
A person 1) who represents himself as a partnerin a partnership without the knowledge or
consent of all the partners, AND 2) because ofsuch misrepresentation, a third person is misled.
Legal consequence Partnership is not liable to the third person.
Partner by estoppel has the obligations of a partner,but does not have the rights of a partner.
Partner by estoppel shall be liable with the partnerswho gave their consent to the representation.
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Art. 1825: Partnership by Estoppel
Partnership by Estoppel occurs when:
A person 1) who represents himself as a partner
in a partnership with the knowledge or consent
of all the partners, AND 2) because of suchmisrepresentation, a third person is misled.
Legal consequence
Partnership is liable to the third person.
Partner by estoppel and the other partners are liable
as partners.
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Illustration
A and B are partners in a business with a
capital of 5,000. C, with the consent of A
and B, represented to X that he was a
partner of A and B in the partnership. X,because of his confidence in C, loaned the
partnership money in the amount of
20,000. How will X be paid when theloan becomes due and demandable.
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Answer to Illustration
20,000 Debt
- 5,000 (capital of the partnership)
15,000 excess debt(5,000 each)
A B C
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Illustration
In the previous illustration, if A consents
to the representation of C, how will the
credit of X be paid once it becomes due
and demandable?
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Answer to Illustration
20,000 Debt
- 0 (no partnership liability)
20,000 excess debt(10,000 each)
A C
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Liability of Newly Admitted Partner
(Art. 1826)
Liability of newly admitted partner depends onthe time partnership obligation is incurred.
If partnership obligation is incurred before his
admission into the partnership. Newly admitted partners liability is limited to hiscapital contribution, unless otherwise agreed.
If partnership obligation is incurred after hisadmission into the partnership. Newly admitted partners liability extends to his
separate property after partnerships assets areexhausted.
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Illustration (Art. 1826)
X, Y, and Z formed a partnership on
January 1, 2010 with a capital of
100,000. In March, 2010, the
partnership incurred an obligation in favorof A in the amount of 160,000 payable in
December 2010. In May, 2010, B joined
the partnership with a contribution of30,000. How will A be paid on
December, 2010?
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Answer to Illustration (Art. 1826)
160,000 Debt
- 130,000 (capital of partnership)
30,000 excess debt(10,000 each)
X Y Z
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Illustration (Art. 1826)
If in the previous example, the partnership
obligation was incurred on June, 2010,
after B joined the partnership. How will
the partnership creditor be paid?
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Answer to Illustration (Art. 1826)
160,000 Debt
- 130,000 (capital of partnership)
30,000 excess debt(7,500 each)
X Y Z B
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Creditors of Partnerships
Creditors of Partners (Art. 1827)
The creditors of the partnership shall be
preferred to those of each partner as
regards partnership property (Art. 1827).
However, private creditors of each partner
may ask the attachment and public sale of
the share of the partner in the partnershipassets (Art. 1827).