Name: Mansiguin, Jenmae D.

Subject: ACC 225

Section 3
“Obligations of the Partners with regards to Third Persons”

1. What is the effect of the inclusion in the firm name of the name of a
person who is not a partner?

A person who is not a partner and included in a firm’s name does not
acquire rights of a partner but he shall be subject to the liability of a person in
so far as 3rd persons without notice is concerned. Such persons becomes
partners by estoppel.

2. What is the nature of liability of partners to third persons for

partnership contract?

The nature of liability of partners to third persons for partnership

contract are (1) pro-rata, (2) subsidiary and (3) liability of industrial
partners. Pro-rata means equally or jointly and not proportionately. It is
because pro-rating is based on the number of partners and not in the amount
of their contribution subject to adjustment among them. On the other hand,
subsidiary means, partners are liable only after the partnership assets have
been exhausted. And lastly, the industrial partner is also liable to pay but he
can ask for reimbursement from the capitalist partners unless there is an
agreement to the contrary.

3. What about industrial partners? Are they liable for partnership’s

contractual liability?

According to Article 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. Additionally,
Article 1817 states that, “Any stipulation against the liability laid down in the
preceding article shall be void, except as among the partners.”

4. What about the partners' liability to third person for non-contractual

liability arising from their individual acts?

All partners are solidarily liable with the partnership for everything
chargeable to the partnership in the following cases:

a) Where by any wrongful act or omission of any partner by acting in the

ordinary course of business with the authority of his co partners, loss of
 injury is caused to any person, not being a partner in partnership or
penalty is incurred. (Article 1822)
b) Where one partner acting within the scope of of his apparent authority
receives money or property of a third person and misapplies it; and
c) Where a partnership in the course of its business receives money or
property misapplied by nay partner while it is in the custody of partnership.
(Article 1822)

5. What is the extent of the liability of a person admitted as partner into

an existing partnership?

There are two instances with regards to this situation:

1) As to partnership debts contracted before his admission. This means,
he only liable up to amount of of his contribution or his share in the
partnership property unless there is a stipulation to the contrary.
2) As to partnership debts contracted after his admission. This means that
he is liable with his separate property if partnership assets are not
sufficient.

6. What acts of a partner will be binding on a partnership with respect

to third persons pursuant to Article1818?

1) Acts for apparently carrying on in the usual way the business of the
partnership. Unless the partner has in fact no authority and the third
person has knowledge of that fact.
2) Acts not apparently carrying on in the usual way the business of the
partnership. When there is authorization of the partners.
3) Acts of strict dominion or ownership:
a. When authorized by other partners
b. When the other partner have abandoned the business; or
4) When acts contravention of a restriction on authority. Unless the third
person has knowledge such restriction whether or not the acts are
apparently carrying on in the usual way the business of the partnership.

7. Give examples/ instances of acts of strict dominion or ownership.

a) Assignment of partnership property in trust for creditors or in the

assignee’s promise to pay the debts of partnership.
b) Disposal of goodwill of business
c) Any act which would make it impossible to carry the ordinary business of
the partnership.
d) Confession of judgment
e) Compromise concerning a partnership claim or liability.
f) Submission of partnership claim of liability to arbitration.
g) Renunciation of a claim of partnership.
8. What are the instances where notice to or knowledge of a partner
constitutes notice to or knowledge of the partnership? Explain each.

1) Notice to any partner of any relating matter relating to partnership.

Example: Anna, Billy and Cristine are partners in partnership

Ylle &Co. The service of notice filed by Daisy, on Anne only, operates
as a notice to Ylle & Co.

2) Knowledge of the partner acting in the relating matter acquired while a

partner;
Example: Anna, acting for the partnership, bought a parcel of
land from Daisy. Anna acquired some knowledge that the land is
involved in a litigation in which Ella claims to be the owner. Anna did
not convey the information to the partnership . Anna’s knowledge is the
knowledge of partnership. If Ella covers the land, Daisy is not liable.

3) Knowledge of the partner acting in the particular matter then present

to his mind; and

Example: The knowledge of Anna may have been acquired

before he become a partner such knowledge was then present to his
mind.

4) Knowledge of any partner who reasonably could and should have

communication it to the acting partner.

Example: If Billy, who is not the acting partner, is the one who
received the information and it is reasonable to Anna, the acting
partner, Billy’s knowledge also operates as knowledge of partnership.
The knowledge of Billy must have been acquired while a partner and
not before he become a partner.

Note: But there is no notice to or knowledge of the partnership

in the case of fraud on the partnership committed by or with the
consent of the partner.

9. How may a person become a partner by estoppel?

1) By representing himself as a partner in an existing partnership or in a

non-existing partnership.
2) By consenting to another to another making such representation.

10. Who will be liable to third persons who acted in good faith when a
person is falsely represented by a partner in an actual or apparent
partnership?

a) Partner by estoppel
b) Partner who consented to such representation; and
 c) Partnership itself if all the actual partners consented to the
representation.This is the case of partnership by estoppel.

11. State the rule on the liability of the partners for partnership
obligations where a person is admitted as a partner in an existing
partnership.

According to Article 1826, “ If a person admitted as 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 a
partnership property, unless there is a stipulation to the contrary.”