NOTES ON LAW ON PARTNERSHIP

> It is a CONTRACT whereby two or more persons (1) bind themselves to CONTRIBUTE money, property, or industry to a
COMMON FUND (2) with the intention of dividing the PROFITS among themselves or in order to EXERCISE a PROFESSION

CHARACTERISTICS OF THE CONTRACT OF PARTNERSHIP

1. CONSENSUAL
> perfected by mere consent
2. CONTRIBUTION of money, property or industry to a COMMON FUND
3. object must be a LAWFUL one
4. INTENTION of DIVIDING the PROFIT among the PARTNERS
5. “AFFECTIO SOCIETATIS”
> the desire to formulate an ACTIVE UNION, with people among whom there exist a mutual CONFIDENCE and TRUSTS
6. NEW PERSONALITY
> the object must be for profit and not merely for the common enjoyment otherwise only a co-ownership has been
formed. HOWEVER, pecuniary profit need not be the only aim, it is enough that it is the principal purpose

RULES ON CAPACITY TO BECOME A PARTNER

1. a person capacitated to enter into contractual relations may become a partner

2. an UNEMANCIPATED MINOR CANNOT become a partner UNLESS his parent or guardian consents

3. a MARRIED WOMAN, cannot contribute conjugal funds as her contribution to the partnership UNLESS she is permitted
to do so by her husband OR UNLESS she is the administrator of the conjugal partnership, in which the COURT must give
its consent authority

4. a PARTNERSHIP being a juridical person by itself can form another partnership

5. a CORPORATION cannot become a partner on grounds of public policy

> a partner shares not only in profits but also in the losses of the firm

RULE:
> the partnership has a PERSONALITY SEPARATE and DISTINCT from that of each partner

CONSEQUENCES OF THE PARTNERSHIP BEING A JURIDICAL ENTITY

1. its juridical personality is SEPARATE and DISTINCT from that of each partner

2. the partnership CAN in GENERAL:

A) acquire and possess property of all kinds
B) incur obligations
C) bring civil and criminal actions
D) can be adjudged insolvent even if the individual members be each financially solvent

3. unless he is generally sued, a partner has no right to make a separate appearance in court, if the partnership being sued
is already represented

REQUISITES FOR EXISTENCE OF PARTNERSHIP [I, CF, JI]

1. INTENTION to create a partnership
2. COMMON FUND obtained from contributions
3. JOINT INTERESTS in the PROFITS

WHAT DO NOT ESTABLISH A PARTNERSHIP

1. mere co-ownership or co-possession
> even with profit sharing
2. mere sharing of GROSS returns
> even with joint ownership of the properties involved

RULES TO DETERMINE THE EXISTENCE OF A PARTNERSHIP

1. persons who are not partners to each other are not partners as to third persons
EXCEPTION:
 > PARTNERSHIP BY ESTOPPEL

2. CO-OWNERSHIP of a property does not itself establish a partnership, even though the co-owners share in the profits
derived from the incident of joint ownership

3. SHARING OF GROSS RETURNS ALONE does not indicate a partnership whether or not the persons sharing them have a
joint or common right or interest in any property from which the returns are derived

4. the receipt of the share in the profits is a strong presumptive evidence of partnership HOWEVER, no such inference will
be drawn if such profits were received in payment
A) as a DEBT by installments or otherwise
B) as WAGES of an employee
C) as RENT to a landlord
D) as an ANNUITY to a widow or representative of a deceased partner
E) as INTEREST on a LOAN, though the amount of payment vary with the profits of the business
F) as the CONSIDERATION for the sale of a GOOD WILL of a business or other property or otherwise
> creditors are not partners, for their only interest in the sharing of profits is the receipt or payment of their credits

> in a partnership, the partners are supposed to trust and have confidence in all the partners

PARTNERSHIP BY ESTOPPEL
> IF 2 persons not partners represent themselves as partners to strangers, a partnership by estoppel results
> WHEN 2 persons, who are partners, in connivance with a friend who is not a partner inform a stranger that said friend
is their partner, a partnership by estoppel also result to the end that the stranger should not be prejudiced

RULE: LAWFUL OBJECT or PURPOSE

> a partnership must have LAWFUL OBJECT or PURPOSE, and must be established for the common benefit or interest of
the partners

> it must be within the commence of man, possible and not contrary to law, morals, good customs, public order or
public policy

> IF a partnership has SEVERAL PURPOSES, one of which is UNLAWFUL, the partnership can still validly exist so long as
the illegal purpose can be separated from the legal purposes

> NO need for JUDICIAL DECREE to dissolve an unlawful partnership

> VOID AB INITIO

> one of the causes for the dissolution of a partnership is “any event which makes it unlawful for the business of the
partnership to be carried on”

RULE:
> when an UNLAWFUL PARTNERSHIP is dissolved by a judicial decree, the PROFITS shall be CONFISCATED in FAVOR of the STATE

G. R.
> a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is contributed
2. REAL RIGHTS are contributed

* need for INVENTORY of IMMOVABLES

** for EFFECTIVITY of the partnership contract insofar as innocent third persons are concerned the same must be
REGISTERED if REAL PROPERTIES are INVOLVED

> a partnership contract is NOT CONVERED by the STATUTE of FRAUDS

> an AGREEMENT TO FORM a partnership does not itself create a partnership

> when there are conditions to be fulfilled or when a certain period is to lapse, the partnership is not created till after the
fulfillment of the conditions or the arrival of the term and this is true even if one of the parties has already advanced his agreed
share of the capital

RULE: if CAPITAL is P3,000 or more

REQUIRED:
1. PUBLIC INSTRUMENT
2. RECORDED – S.E.C.
* > FAILURE TO COMPLY – shall not effect the liability of the partnership and its members to third persons

** > IF REAL PROPERTIES have been contributed, REGARDLESS of the VALUE, a public instrument is needed for the attainment of
legal personality

REQUIREMENTS WHERE IMMOVABLE / REAL PROPERTY IS CONTRIBUTED

1. PUBLIC INSTRUMENT
2. INVENTORY – signed and attached to the P.I.
* > applies regardless of the value of the real property
* > applies even if only real rights over the real property are
contributed
* > applies if aside from real property, cash or personal property is
contributed

> TRANSFER of land to the partnership must be duly “recorded” in the ROD to make the transfer effective insofar as third persons
are concerned

RULE:
> any immovable property or an interest therein maybe acquired in the partnership name
> title so acquired can be conveyed only in the partnership name

>IF the partnership has ALIENS, it CANNOT OWN LANDS, whether public or private or whether agricultural or commercial EXCEPT
through HEREDITARY SUCCESSION

RULES IF A) articles are kept secret among the members

B) any one of the members may contract in his “own” name with third persons
1. NOT a partnership – NOT a LEGAL PERSON
2. it may be sued by third person under the common name it uses
3. it cannot sue as such and cannot be ordinarily be a party to a civil action
4. insofar as innocent third parties are concerned
> the parities can be considered as members of a partnership
5. as between themselves or insofar as third persons are prejudiced
> only the rules of co-ownership must apply

EFFECT OF CERTAIN TRANSACTIONS

1. contracts entered into by a “partner” in his own name may be sued upon still by him in his individual capacity, not
withstanding the absence of a partnership
2. when two or more individuals, having a common interests in a business bring a court action, it should be presumed that
they prosecute the same in their individual capacity as co-owners and not in behalf of a partnership which does not exist
in legal contemplation

CLASSIFICATION OF PARTNERSHIPS
A) ACCORDING TO MANNER OF CREATION
1. ORALLY constituted
2. constituted in a PRIVATE INSTRUMENT
3. constituted in a PUBLIC INSTRUMENT
4. REGISTERED – S.E.C.
B) ACCORDING TO OBJECT
1. UNIVERSAL
2. PARTICULAR
C) ACCORDING TO LIABILITY
1. LIMITED PARTNERSHIP
2. GENERAL PARTNERSHIP
D) ACCORDING TO LEGALITY
1. LAWFUL OR LEGAL
2. UNLAWFUL OR ILLEGAL
E) ACCORDING TO DURATION
1. for a SPECIFIC PEIOD or FIXED PERIOD
2. PARTNERSHIP AT WILL
F) ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP
2. PARTNERSHIP BY ETOPPEL
G) AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1. SECRET PARTNERSHIP
 2. NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
2. PROFESSIONAL / NON-TRADING

GENERAL PARTNERSHIP
> one where all the partners are general partners
> they are LIABLE even with respect to their individual properties, after the assets of the partnership has been exhausted

LIMITED PATNERSHIP
> one where at least one partner is a general partner and the others are limited partners
> one whose liability is limited only up to the extent of his contribution

> a partnership where all the partners are limited partners cannot exist as a limited partnership
> REFUSED REGISTRATION
> IF it continuous as such, it will be considered as a general partnership and all the partners will be general partners

KINDS OF UNIVERSAL PARTNERSHIP

1. PARTNERSHIP OF ALL PRESENT PROPERTY
2. PARTNERSHIP OF ALL PROFITS

*UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY

> CONTRIBUTION of
1. ALL the properties actually belonging to the partners
2. the PROFITS acquired with said property
> BECOMES COMMON PROPERTY
> EXCEPT all FUTURE PROPERTY
> FRUITS of FUTURE PROPERTY – INCLUDED IF STIPULATED UPON

*UNIVERSAL PARTNERSHIP OF PROFITS

> comprises all that the partners may acquire by the INDUSTRY or WORK of the partners become common property regardless of
within said profits were obtained through the usufruct contributed
> EXCEPT PRIZES and GIFTS

RULE:
> articles of universal partnership, entered without specification of its nature, only constitute a universal partnership of PROFITS

RULE:
> persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership
WHO:
1. HUSBAND and WIFE
2. those guilty of ADULTERY or CONCUBINAGE
3. those guilty of the same criminal offense if the partnership was entered into in consideration of the same

> while spouses cannot enter into a universal partnership, they can enter into a particular partnership or be members thereof

> a universal partnership is virtually a donation to each other of the partners properties or at least their usufruct

PARTICULAR PARTNERSHIP
> a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS – their use or fruits
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION

OBLIGATIONS OF THE PARTNERS

RULE:
> a PARTNERSHIP BEGINS from the moment of the EXECUTION of the CONTRACT

* > even if contributions have not yet been made the firm already exists, for partnership is a consensual contract

DURATION OF PARTNERSHIP
> UNLIMITED
* > MAY BE AGREED UPON
1. EXPRESSLY – definite period
 2. IMPLIEDLY – upon achievement of its purpose

PARTNERSHIP AT WILL
> a partnership wherein its continued existence really depends upon the will of the partners or even on the will of any of them
2 KINDS:
1. when there is no term, express or implied
2. when it is continued by the habitual managers although the period has ended or the purpose has been accomplished

3 IMPORTANT DUTIES OF EVERY PARTNER [C, D-F, W]

1. duty to CONTRIBUTE what had been promised
2. duty to DELIVER the FRUITS of what should have been delivered
3. duty to WARRANT

RIULES ON THE DUTY TO CONTRIBUTE

1. the contribution must be made at the time the partnership is entered into UNLESS a different period is stipulated

2. no demand is needed to put the partner in default

3. the partner must exercise due diligence in preserving the property to be contributed before he actually contributes the
same

4. a partner who promises to contribute to the partnership becomes a promissory debtor of the partnership

RULES ON THE DUTY TO DELIVER THE FRUITS

1. IF property has been promised, the fruits thereof should also be given

2. the fruits referred to are those arising from the time they should have been delivered, without a need of any demand

3. IF the partner is in BAD FAITH, he is liable not only for the fruits actually produced, BUT also for those that could have
been produced
4. IF MONEY HAS BEEN PROMISED, INTEREST and DAMAGES from the time he should have complied with his obligation
should be given

5. NO DEMAND is needed to put the partner in default

6. it is DELIVERY, actual or constructive that TRANSFERS OWNERSHIP

RULES ON THE DUTY TO WARRANT

1. the warranty in case of eviction refers to specific and determinate things already contributed

2. there is EVICTION whenever by a final judgment based on a right prior to the sale or an act imputable to the partner, the
partnership is deprived of the whole or a part of the thing purchased

RULE WHEN CONTRIBUTION CONSISTS OF GOODS

> APPRAISAL of VALUE is needed to determine how much was contributed

HOW APPRAISAL MADE

1. as PRESCRIBED in the CONTRACT
2. in default, by EXPERTS chosen by the partners, and at CURRENT PRICES
*> necessity of the INVENTORY – APPRAISAL

RULE on RISK of LOSS

> after goods have been contributed, the partnership bears the risk of subsequent changes in the value

RULE:
> 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

CAPITALIST PARTNER
> one who FURNISHES CAPITAL
*> NOT EXEMPTED from LOSSES
*> he can engage in other business PROVIDED there is no competition between the partnership and his business
*> share in the profits according to agreements

INDUSTRIAL PARTNER
> one who FURNISHES INDUSTRY or LABOR
*> he is EXEMPTED from LOSSES as between the partner BUT liable to strangers without prejudice to reimbursement from
the capitalist partner
*> he CANNOT engage in any other BUSINESS WITHOUT the express CONSENT of the other partners, OTHERWISE
 1. he can be EXCLUDED from the firm
- plus damages OR
2. the BENEFITS he obtains from the other businesses CAN BE AVAILED of by the other partners
- plus damages
> whether or not there is COMPETITION
*> in computing always look for -----> NET PROFITS
-----> NET LOSSES

CAPITALIST – INDUSTRIALIST PARTNER

> one who contributes BOTH CAPITAL and INDUSTRY

GENERAL PARTNER
> one who is liable “beyond” the extent of his contribution

LIMITED PARTNER
> one who is liable “only” to the extent of his contribution

***> an industrial partner can only be a general partner, never a limited partner

MANAGING PARTNER
> one who manages actively the firms affairs

SILENT PARTNER
> one who does not participate in the management, though he shares in the PROFITS or LOSSES

LIQUIDATING PARTNER
> one who winds up or liquidates the affairs of the firm after it has been dissolved

OSTENSIBLE PARTNER
> one whose connection with the firm is public and open

SECRET PARTNER
> one whose connection with the firm is concealed or kept secret

DORMANT PARTNER
> one who is both a secret (hidden) and silent (not managing) partner

NOMINAL PARTNER
> one who is not really a partner BUT who may become liable as such insofar as third persons are concerned

RULE:
> partners shall CONTRIBUTE EQUAL SHARES to the capital of the partnership

*> it is permissible to contribute UNEQUAL SHARES IF there is a stipulation to this effect

*> in the absence of proof, the shares are presumed to be equal

CONDITIONS before a capitalist partner is obliged to sell his shares / interest to the other partners [IL, RC, NA]

1. if there is IMMINENT LOSS of the BUSINESS of the partnership

2. he REFUSES to CONTRIBUTE an ADDITIONAL SHARE to the CAPITAL

3. there is no agreement to the contrary

*> INDUSTRIAL PARTNER IS EXEMPTED

*RULE if MANAGING PARTNER COLLECTS A CREDIT

REQUISITES:
1. existence of at least 2 debts ----> PARTNERSHIP
----> PARTNER
2. both sums are demandable
3. the collecting partner is the managing partner

*> the sum thus collected shall be applied to the two credits in
proportion to their amounts
RULE:
*> where a partner receives his share in the partnership credit
CONDITIONS:
1. a partner has received his share in the partnership credit – in whole or in part
2. the other partners have not collected their part of the credit
3. the debtor subsequently becomes INSOLVENT

RULE: - the partner shall be obliged to bring to the partnership

capital what he received even though he may have given receipt for
his share only

*> DOES NOT APPLY when debt was collected after dissolution of the partnership

RULE:
*> every partner is responsible to the partnership for damages suffered by it through his fault

*> he cannot compensate them with the profits and benefits, which he may have earned for the partnership by his industry

*> the courts may equitably lessen his responsibility

RULES:
*HOW PROFITS ARE DISTRIBUTED
1. according to AGREEMENT
2. IF NONE, according to amount of CONTRIBUTION

*HOW LOSSES are DISTRIBUTED

1. according to AGREEMENT as to losses
2. IF NONE, according to agreement as to PROFITS
3. IF NONE, according to amount of CONTRIBUTION

*> an INDUSTRIAL PARTNER shall receive a JUST and EQUITABLE share in the profits

*RULE on INDUSTRIAL PARTNERS’ LIABILITIES

- may be held liable by third persons BUT he may recover what he has paid from the other capitalist partners

*RULE on DESIGNATION by THIRD PERSON of SHARES in PROFITS and LOSSES

*> third person is NOT a PARTNER --> appointed to only distribute shares

*> the designation of shares by third persons may be IMPUGNED, IF it is MANIFESTLY INEQUITABLE
*> the designation of shares by third persons CANNOT be IMPUGNED EVEN IF MANIFESTLY INEQUITABLE IF:
1. the aggrieved partner has already BEGUN to EXECUTE the decision
2. the aggrieved partner has not IMPUGNED the distribution within 3 months he had knowledge

*RULE IF APPOINTMENT OTHER THAN in the ARTICLES of PARTNERSHIP

1. power to act may be REVOKED at ANY TIME with or without just cause
> REMOVAL should be done by the controlling interest

2. EXTENT of POWER
> as long as he remains manager, he can perform all acts of administration
BUT – if others oppose and he persists, he can be removed

*RULE WHEN there are 2 or MORE MANAGERS

CONDITIONS:
1. 2 or more partners are managers
2. there is no specification of respective duties
3. there is no stipulation requiring UNANIMITY

SPECIFIC RULES:
1. each may separately execute all acts of administration
> UNLIMITED POWER to ADMINISTER

2. IF any of the managers OPPOSE

> MAJORITY RULE
> IN CASE OF A TIE
- persons owning controlling interest prevail provided they are also managers

*> right to oppose is not given to NON-MANAGERS

*> OPPOSITION should be done BEFORE the acts produce legal effects insofar as third persons are concerned
RULE WHEN UNANIMITY is REQUIRED
1. the CONCURRENCE of all shall be necessary for the validity of the acts

2. the ABSENCE or DISABILITY of ANYONE of them CANNOT BE ALLEGED UNLESS there is imminent danger of grave or
irreparable injury to the partnership

RULE ON DUTY of THIRD PERSONS

> third persons are not required to inquire as to whether or not a partner with whom he transacts has the consent of all the
managers

*RULES to be observed when the manner of management has not been agreed upon:
1. all the partners are considered AGENTS
> whatever any one of them may do alone shall not bind the partnership

2. IF the acts of one are opposed by the rest, the majority shall prevail

3. when a partner acts in his OWN NAME, he does not bind the partnership

4. authority to bind the firm does not apply if somebody else has been given authority to manage in the articles of
organization or through some other means

5. ALTERATIONS REQUIRE UNANIMITY

- IMMOVABLE partnership property
- BUT if the refusal to consent by the others is prejudicial to the interest of the partnership
- COURTS INTERVENTION may be sought

RULES on ASSOCIATE of PARTNER

1. every partner may associate another person with him in his share

2. for a partner to have an associate in his share

> consent of all the other partners is NOT REQUIRED

3. for the associate to become a partner

> ALL MUST CONSENT

RULES on PARTNERSHIP BOOKS

1. kept at the principal place of business of the partnership

2. at any reasonable hour, every partner shall have access to and may inspect and copy any of them

DUTY of PARTNERS TO GIVE INFORMATION

> good faith not only requires that a partner should not make any FALSE CONCEALMENT, BUT he should abstain from all
concealment

DUTY to ACCOUNT [B, P, U-P]

> every partner must account to the partnership
1. any benefit acquired
2. any profits received
3. any use of partnership property

RIGHT TO DEMAND a FORMAL ACCOUNT

> any partner shall have the right to a formal account as to partnership affairs
1. if wrongfully excluded from partnership BUSINESS
2. if wrongfully excluded from partnership PROPERTY by his co-partners
3. if the right exists under the terms of agreement
4. if the other partner receives other benefits, profits or uses partnership property
5. whenever other circumstances render it just and reasonable

*> the right to demand an accounting exists as long as the partnership exists
*> prescription begins to run only upon the dissolution of the partnership when the final accounting is done

PROPERTY RIGHTS OF PARTNERS [P, I, M]

1. rights in specific PARTNERSHIP PROPERTIES
2. INTERESTS in the PARTNERSHIP
3. right to PARTICIPATE in the MANAGEMENT
RULE:
*> a partner is CO-OWNER with his partners of SPECIFIC PARTNERSHIP PROPERTY

*> RIGHTS of a PARTNER in SPECIFIC PARTNERSHIP PROPERTY

1. he has equal rights with his partners to POSSESS the property BUT only for PARTNERSHIP PURPOSES
> he may possess such property for other purposes PROVIDED the other partners expressly or impliedly gives their
CONSENT

2. he CANNOT ASSIGN his right to the property EXCEPT if all the other partners assign their rights in the same property

3. his right to the property is NOT SUBJECT to ATTACHMENT or EXECUTION, EXCEPT on a claim against partnership

4. his right to the property is NOT SUBJECT to LEGAL SUPPORT

*> if there is PARTNERSHIP DEBT, the specific property can be attached

RULE:
*> a PARTNERS INTEREST in the partnership is his SHARE of the PROFITS and SURPLUS
IT CAN BE: [A, A, LS]
1. ASSIGNED
2. ATTACHED
3. be subject to LEGAL SUPPORT

*EFFECTS of CONVEYANCE by PARTNER of his INTEREST in the PARTNERSHIP

1. IF he conveys his WHOLE INTEREST
A) partnership may still remain
B) partnership may be dissolved
*> mere conveyance does not dissolve the partnership

2. the ASSIGNEE does not necessarily become a partner

> the ASSIGNOR is still the partner, with a right to demand accounting and settlement

3. the ASSIGNEE CANNOT interfere in the MANAGEMENT or ADMINISTRATION of the firm

> the ASSIGNEE CANNOT also DEMAND [I, A, I]
A) INFORMATION
B) ACCOUNTING
C) INSPECTION of partnership books

***> while a partners INTEREST in the firm may be CHARGED or LEVIED upon, his INTEREST in a specific firm PROPERTY CANNOT
be attached.

RIGHTS of the ASSIGNEE

1. to get whatever profits the assignor-partner would have obtained

2. to avail himself of the usual remedies in case of fraud in the management

3. to ask for ANNULMENT of the contract of assignment IF:

A) he was induced to enter into it through any of the vices of consent OR
B) he himself was incapacitated to give consent

4. to demand an accounting BUT only if the partnership is dissolved

PREFERENTIAL RIGHTS of PARTNERSHIP CREDITORS

*> partnership creditors are entitled to PRIORITY over partnership assets, including the partners interest in the profits

**> SEPARATE or INDIVIDUAL creditors have PREFERENCE in separate or individual properties

*> when the CHARGING ORDER is applied for and granted, the court may appoint a receiver of the partners share in the profits
> the receiver appointed is entitled to any relief necessary to conserve the partnership assets for partnership purposes
*> interest charged may be redeemed at any time before foreclosure

*> AFTER FORECLOSURE the interest may still be redeemed by (without causing dissolution)
1. with separate property, by any one or more of the partners OR

2. with partnership property, by any one or more partners with the consent of all the partners whose interests are not so charged
or sold
*> consent of the delinquent partner not needed

RULE:
> every partnership shall operate under a FIRM NAME
*> the firm name may or may not include the name of one or more of the partners

**> STRANGERS who include their names in the firm are liable as partners because of ESTOPPEL, BUT do NOT have the RIGHTS of
partners

**> IF a LIMITED PARTNER includes his name in the firm name, he has obligations BUT not the rights of a general partner

RULE on LIABILITY for CONTRACTUAL OBLIGATIONS

*> all partners, including industrial ones, shall be liable pro-rata with all their property and after all the partnership assets have
been exhausted

*> NOT APPLICABLE for TORTS or CRIMES -----> LOSS

-----> INJURY
-----> MISAPPROPRIATION

**> while an INDUSTRIAL PARTNER is exempted by law from LOSSES as between the partners, he is NOT EXEMPTED from liability
insofar as third persons are concerned
> he may recover what he has paid from the CAPITALIST partners

*> under the law the liability of the partners is subsidiary and joint NOT principal and solidary

*RULE on LIABILITY of a PARTNER who has WITHDRAWN

1. a partner who withdraws is not liable for liabilities contracted after he has withdrawn

2. if his interest has not yet been paid him

> his right to the same is that of a mere creditor

**> a stipulation exempting liability to third persons is VOID

*> any partner may enter into a separate obligation to perform a partnership contract

RULE:
*> every partner is an “agent” of the partnership for the purpose of its business

G.R.- the act of every partner for apparently carrying on in the USUAL WAY the business of the partnership of which he is
member binds the partnership
EXCEPT:
1. if he has NO AUTHORITY and
2. the person with whom he was dealing with HAS KNOWLEDGE of the fact that he has no such authority

RULE:
> an act of a partner which is not apparently for the carrying on of business of the partnership in the usual way does not bind the
partnership UNLESS authorized by the other partners

*> a partnership is a CONTARCT of MUTUAL AGENCY, each partner acting as a principal on his own behalf and as an agent for his
co-partners or the firm

REQUISITES on WHEN can a partner BIND the partnership

1. expressly or impliedly AUTHORIZED
2. when he acts in BEHALF AND IN THE NAME of the partnership

INSTANCES of IMPLIED AUTHORIZATION

1. when the other partners DO NOT OBJECT, although they have knowledge of the act
2. when the act is for “apparently carrying on in the usual way the business of the partnership
*> this is binding on the firm even if the partner was not really authorized PROVIDED that the third party is in GOOD
FAITH

RULE on UNUSUAL ACTS

> one or more but less than all the partners HAVE NO AUTHORITY TO:
[AP, DG, AI, CJ, EC, SA, RC]
1. ASSIGN the PARTNERS PROPERTY
2. DISPOSE of GOODWILL
3. do any other act which would make it impossible to carry on the ordinary business of the partnership
4. CONFESS a judgment
 5. ENTER into a COMPROMISE
6. SUBMIT to ARBITRATION
7. RENOUNCE to CLAIM

*RULES on CONVEYANCE of REAL PROPERTY

1. 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

*> PARTNERSHIP MAY RECOVER SUCH PROPERTY

EXCEPT:
1. if the firm is engaged in the buying and selling of land (USUAL BUSINESS)
2. if property was conveyed to a HOLDER for VALUE and who had NO KNOWLEDGE of the partners LACK of
AUTHORITY

2. where title is in the name of the partnership and partner sold in his OWN NAME

> IF DONE IN USUAL BUSINESS

> buyer does not become owner BUT ACQUIRES EQUITABLE INTEREST

> IF NOT DONE IN USUAL BUSINESS

> buyer does not become owner and is not even entitled to equitable interest

3. where title is in the name of one or more BUT not all the partners

> partners in whose name the title is named MAY CONVEY BUT the PARTNERSHIP may RECOVER such property IF done not
in its USUAL BUSINESS EXCEPT if he had transferred it to a Holder for value

4. when property “held in trust” by partner

> a sale only conveys EQUITABLE INTEREST

5. when title is in the name of all partners

> conveyance executed by all partners possess all rights of such property

EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED OWNERSHIP

*RULE on ADMISSION or REPRESENTATION MADE by a PARTNER

> an admission by a partner is an admission against the partnersip,under the following conditions:
1. the admissions must concern partnership affairs
2. must be within the scope of his authority

RESTRICTIONS ON THE RULE:

1. admissions made BEFORE DISSOLUTION are binding only when the partner has authority to act on the particular matter

2. admissions made AFTER DISSOLUTION are binding only if the admissions were necessary to WIND UP the business

3. an admission made by a former partner made after he has RETIRED from the partnership is not evidence against the firm

EFFECT of NOTICE to a PARTNER

® notice to a partner is notice to the partnership

*®notice to a partner, given while already a partner is a notice to the partnership PROVIDED it relates to partnership affairs

EFFECT of KNOWLEDGE ALTHOUGH NO NOTICE WAS GIVEN:

*® knowledge of the partner is also knowledge of the firm PROVIDED THAT:

1. the knowledge was acquired by a partner who is acting in the particular matter involved;and
2. the partner having knowledge, had reason to believe that the fact related to a matter which had some possibility of
being the subject of the partnership business AND he was so situated that he could communicate it to the partner
acting on that particular matter

*® SERVICE of PLEADINGS on the partner in a law firm is also service on the whole firm and the other partners
LOSS OR INJURY

RULE on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY LIABILITY)

*® the partnership is solidarily liable with the partner if the wrongful act or omission
1. the partner is acting in the ordinary course of business of the partnership OR
2. with authority of his co-partners

*® innocent partners have right to recover from the guilty partner

* When the firm and other partners not liable:

1. if the wrongful act or omission was NOT DONE
A) within scope of partnership business
B) with authority of the other co-partners

2. if the act or omission is NOT WRONGFUL

3. if the act or omission, although wrongful did not make the partner concern liable
- DAMNUN ABSQUE INSURIA

4. if the wrongful act or omission was committed after the firm had been dissolved and the same was not in connection
with the process of winding up.

PARTNER BY ESTOPPEL
® a person who represents himself or consents to another / others representing him to anyone as a partner either in an existing
partnership or in one that is fictitious or apparent

PARTNERSHIP BY ESTOPPEL
® when all the members of the existing partnership consent to such representation of a partner by estoppel

RULES AND SITUATIONS:

1. if a third person is misled and acts because of such misrepresentation
® the deceiver is a partner by estoppel

2. if the partnership consented to such misrepresentation

® partnership liability results

3. if the firm had not consented

® no partnership liability results BUT the deceiver is considered still as a “partner by estoppel” with all the obligations
but not the rights of a partner

4. when a person represents himself as a partner of a NON-EXISTENT partnership

® NO partnership liability results BUT the deceiver and all persons who may have aided him in the misrepresentation
are still liable
® liability would be JOINT or PRO-RATA

*® when although there is misrepresentation, if the third party is not deceived, the doctrine of estoppel does not apply

BURDEN of PROOF
® the creditor or whoever alleges the existence of a partner or partnership by estoppel has the burden of proving the existence
of the MISREPRESENTATION AND INNOCENT RELIANCE on it