ART. 1815-1827 Summary PDF

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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 the liability of a partner. (n) What is firm? Firm – the name, title or style under which company transacts business.  Term implies partnership.  Synonymous with “Company” Importance having Firm name  Distinguish the partnership which has a distinct and separate juridical personality *Firm name must be registered with DTI former Bureau of Commerce Right of Partners to choose firm name - Partnership name could be any of the following with “Company” attached in the end. =partner individual name or surname =all partners surname - Partnership cannot adopt a name which is identical with or deceptively similar to a name that adopted previously of other entity.

- Supreme court formerly cannot allow to name the partnership with deceased partner, the name should be from living partners, or in case on non-partner must be living person on which liability can be subjected. *above ruling is considered abandoned or no longer applicable. Continued used of deceased partner’s name in partnership is permissible as long as the firm communicates that the partner which firm is named from is dead. -if a non-partner includes their name in the firm name does not acquire the rights in partnership but is subject to the liability of the partner, so far the third person liability is incurred does not have knowledge of such circumstances. *The case above does not cover third person who represents himself as partner, limited partner or a partner 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. 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. (n) - Partners are principal of each other and agent of the partnership and all is liable to the third person whose liability is incurred by a partner for the partnership name or account of partnership.

- Partner can also enter a contract in his name for the purpose of partnership to a third person but the liability will be carried by the partner , on whose name in the contract, solidarily even if the partnership solely gain benefits from such contract.

- the exemption of the industrial partner to the losses does not extend to the liability to a third person. ART. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as among the partners. (n)

Nature of individual liability of partners - All partner as well as the industrial partner is liable to the creditors of the partnership. - the liability to the creditors of the partnership is pro-rata and subsidiary to the partners.  Pro-rata – means equally or jointly and not proportionally  Based on the number of members and not on their contribution.  In case one partners cannot pay the creditor does not mean that the other partner increases their liability.  Subsidiary or secondary – personally liable if only after all the partnership property is exhausted, unless particular partner assumes a separate obligation.  Industrial partners are not liable to losses BUT is liable to the creditors, But then he can recover the amount he has paid to from the capitalist partner.

- Any stipulation exempting one partner about pro-rata and subsidiary bases in liability is void as to a third person but valid as to the partners Ex. A, B and C stipulated in the contract that C is only liable to the extent of his contribution. But, D can still sue A,B and C for the liability incurred by the partnership and has to pay pro-rata. But C, has the right to reimburse the expense he incurred to A & B. 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 authority. An act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.

Distinction of liability to losses - The inability of the partnership to pay the debts doesn’t mean that it operated at loss.

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;

- Authority is based on the doctrine of estoppel where every partner is a principal and agent of each other. As to third person – Relation of the partner to a third person is founded in the doctrine of mutual agency. - Limitation of the authority of one party does not affect the third person. Third person’s Right a.) No duty to make inquiries on to the partner’s authority.

(6) Submit a partnership claim or liability to arbitration; (7) Renounce a claim of the partnership. No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction. (n) Power of partner as agent of partnership - In absence of agreement all partners has equal rights in management. Among Themselves- If the partner perform an act within his scope then such act of the partner is agency of the partnership. - If no stipulation and is silent on the scope of power of each partner then all partners are agency of each other and has the right to carry out the ordinary business of the partnership

- Third person does not have the duty to investigate the partner’s authority or limitation in doing the contract. His knowledge is enough that he is a contracting partner. b.) Presumption that the acting partner has authority to bind the partnership. - Individual partners is presumed to be agent of the firm thus their authority is binding to the firm, and it is ok for the third person to presume that the contracting partner has the authority to bind the partnership. c.) No right to assume that acting partner has unlimited authority. -Third part should not assume that a partner has unlimited authority unless ratified by the partners.

Acts that a partners do not have authority of: (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. Liability of the partnership in acts of a partner 1. Acts for apparently carrying on in the usual way the business of the partnership. - Partners are agents of the partnership thus binding the firm in a contract even a partner don’t have authority unless the third person has knowledge that the partner don’t have authority for the performed act. REQUISITE THAT THE PARTNERSHIP IS NOT LIABLE 1.) The partner acting has no authority. 2.) Third person knew that the acting partner has no authority. *But if such transaction is within the ordinary way of the business then partners act is binding to the partnership. 2. Act of strict dominion or ownership.

- If such act is out of the ordinary way of the business then partnership is not liable, unless authorized by all partners or abandoned the partnership. 3.) Acts in contravention of a restriction authority. -Partnership is not liable to third person that has a prior knowledge of restriction, even it is within the ordinary way of the business. LIABILITY OF A PARTNER ACTING WITHOUT AUTHORITY Partner who acts to bind his co-partner in a contract without authority is himself personally liable on such contract. 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 the knowledge that the partner, in making the conveyance, has exceeded his authority. Where title to real property is in the name of the partnership, a conveyance executed by a partner, in his own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of the first paragraph of article 1818.

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

partner the property is still partnership’s property unless the contrary the intent is shown. 2. Legal effect of conveyance -Legal effects of conveyance of property belonging to the partnership depending in whose name it are registered. PROPERTY OF THE PARTNERSHIP CAN BE NAMED: 1. Partnership 2. One or more but not all partners. 3. One or more or all partners or third person in which partnership in trust. 4. All the partners CONVEYANCE LEGAL

Where the title to real property is in the names of all the partners a conveyance executed by all the partners passes all their rights in such property. (n) Conveyance of a real property belonging to the partnership 1. Prima facie ownership of real partnership -Generally, the name written in the title is prima facie the owner of the property and partnership ordinarily but its firm’s name on the title for their properties, but there are times that the partners put their names on the title. - If the fund of acquiring such property is from the partnership whether the title is named after an individual

1.) Title in partnership name, conveyance in partnership name - Conveyance passes title to the third person, but partnership can recover the property if the transaction is not within the ordinary way of the business or if the third person knew that the acting partner has no authority on such act. -Partnership cannot recover the conveyance if the conveyance was made to a third person then passes to another third person who doesn’t have the knowledge of the lacking authority of the acting partner.

2.) Title in partnership name, conveyance in partner’s name - Third person right is only to the extent of the equitable interest of the acting partners. -But the partner does not have a right even the equitable interest if the acquisition of the title property is not for the ordinary way of the business such as selling land or if the third person has knowledge of the restriction of the acting partner.

-If the title is under the name of the trustee and conveyed it under the partnership name then conveyance of the title only passes the equitable interest. -But the partner does not have a right even the equitable interest if the acquisition of the title property is not for the ordinary way of the business such as selling land or if the third person has knowledge of the restriction of the acting partner. 5.) Title in name of all partners, Conveyance in name of all partners.

*Equitable interest is not recognized by the law but in the equity alone. It is imperfect and unenforceable in law but which under well- recognized equitable principles should and convertible into a legal right or title.

- Conveyance of all partners passes all their rights in such property. Protection of innocent purchaser’s for value

3.) Title in name of one or more of partners, conveyance in a name of the partners in whose name title stand -If the property is in fact property of the partnership but does not discloses the right of the partnership and an acting partner whose name is in title conveyed it under his name, conveyance passes the title to the third person. - But partnership can recover the property if the transaction is not within the ordinary way of the business or if the third person knew that the acting partner has no authority on such act. 4.) Title in name of one or more or all partners or a third person in trust of partnership, Conveyance executed in partnership name or of a partner

- If the conveyance of one partner with no authority does not mean that the innocent purchaser won’t be protected. 1.) Legal title to partnership property in partner making the conveyance. - Title of the partnership property is registered to the partner, Third person with no knowledge acquire valid title. 2.) Legal Title in Partnership name, Conveyed in partnership name. - Conveyance of a property by the partner under the partnership name even without authority are equal to passing the title thus, partnership cannot recover the property as long as the third person doesn’t have the

knowledge of the restriction of the authority of the acting partner. 3.) Authorization or ratification of conveyance - Partner even without authority can convey property without authority proven that his co-partner gives authority or ratified such actions.

3.) When a partner admission is for him only and not in acts for the partnership the admission is chargeable to his alone. 4.) After Dissolution, Admission of a partner will bind the partnership only if necessary to wind up partnership affairs. Necessity of proving existence of partnership. 1. Evidence other than the admission itself

- ratified in sense that such conveyance was made with the other partners or partners knows the transaction happened and knowingly taking the benefits arise. 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. (n) Admission by partner - as general rule a person is not bound by an act or admission which he has no knowledge or not consented except by virtue of a particular relation between them. 1.) Admission by a party, testified by a third party is admissible evidence against him in litigation. 2.) Admission by another are received against the party if the former is acting in the capacity of agent the latter - admission made during the existence of f the partnership is binding to the partnership as long as it concerns partnership affairs and made within the scope of his authority.

- The partnership relation must be shown and proof of that fact must be made by evidence other than the admission itself. 2.) Declaration made by partner acting for partnership - Once partnership relation was proved to be existed, statement or admission made by a partner within his scope of authority can be made evidence against the partnership. - but declaration made by a partner after he is no longer a partner of the partnership cannot be an evidence against partnership. 3.) Declaration made in the presence of a partner - Admissible to prove the existence of 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 a fraud on the partnership, committed by or with the consent of that partner. (n)

(1) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and

Notice to, or knowledge of, a partner of matter affecting partnership affairs.

(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. (n)

- Notice or knowledge on ANY partner of any matter relating to partnership affairs operates as a notice to or knowledge of the partnership except in fraud. - A third person desiring to give notice in partnership affairs is not required to communicate with all the partners Three cases of knowledge of a partner 1.) Knowledge of a partner acting in the particular matter acquired while a partner. 2.) Knowledge of a partner acting in the particular matter then present to his mind. ( Even the knowledge is acquired before he became a partner) 3.) Knowledge of any partner who reasonably could and should have communicated it to the acting partner. 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 his co-partners, 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. (n) ART. 1823. The partnership is bound to make good the loss:

ART. 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under articles 1822 and 1823. (n) Liability arising from partner’s wrongful act or omission or breach of trust. - The above three articles provide for the solidary liability of the partners and also the partnership to third persons (Art. 1824.) for the wrongful act or omission (Art. 1822.) or breach of trust (Art. 1823.) of a partner acting within the scope of the firm’s business or with the authority of his co-partners. - Whether Innocent or guilty all partners are solidarily liable with the partnership itself. Difference from liability in Art. 1816 - It is solidary while in art. 1816 it is jointly and subsidiary. - It is civil liability of the partnership arising from wrongful acts or omissions of any partner while in 1816 liability arise from partnership obligation.

*the act of omission is a quasi-delict or trot and does not constitute a crime or felony punishable by the law. REQUISITE OF THE LIABILITY 1. Partner must be guilty of wrongful act or omission

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 ...