a.

Other obligations of partners to the partnership

(1) Obligation of a managing partner

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 owed the partnership another sum also demandable, the sum thus collected shall be applied to the two credits in proportio n 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.

The provisions of this article are understood to be without prejudice to the right granted to the other debtor by Article 1252, but only
if the personal credit of the partner should be more onerous to him. (1684)

Requisites for application of the rule

1. there are at least two [2] debts;
2. both debts are demandable; and
3. the partner who collects is authorized to manage and actually manages the partnership

Rule
1. Receipt issued in payment for the credit of a partner: applied proportionately to the credits of both
the partner and the partnership
2. Receipt for the account of the partnership only: amount fully applied to the partnership

(2) Obligation of partner who has received his share of a partnership credit (Art. 1793)

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. (1685a)

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.

Ex. Partners A, B, C; Debtor Z

Partnership credit - P100,000.00, which the partners have agreed to divide among themselves
equally
Partner A has already received his P33,333.00, the rest have not yet received. In case Z becomes
insolvent, and can not pay the obligation, A is obliged to bring into the partnership capital the
P33,333.00 even if he (A) has already given a receipt therefor.

Rationale. The P67,000.00 has become a bad debt, and is equivalent to loss. A must share in the loss.

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. (1686a)

Ex. ABC Company with partners A, B, C engaged in catering business

A allowed his friend Z to borrow cooking paraphernalia which Z did not return
A is at fault, the fault of A caused damage to the partnership, is A liable? YES
 TN. Liability arises whenever there is fault, negligence, inadvertence and serious mistake
Loss is not equivalent to damage, and is a ground to compel a partner to become liable for damages, unless it is due
to fault, neglect, inadvertence or serious mistake. Eg. In case, partner A decided to accept a catering contract with a school
which he believes to be prompt in paying its obligation. Later, however, the school refused to pay its obligation, creating a
loss to the partnership. Is partner A liable? NO, it was undertaken in the course of conducting business.

NB.
GR. Damages is not set-off by the profits obtained by the guilty partner for the partnership.
EXC. Unusual profits through extra-ordinary efforts

(3) Partner is liable to the partnership in case of loss

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.

If the things contribute are fungible, or cannot be kept without deteriorating, or if they were contributed to be
sold, the risk shall be borne by the partnership. In the absence of stipulation, the risk of the things brought and
appraised in the inventory, shall also be borne by the partnership, and in such case the claim shall be limited to
the value at which they were appraised. (1687)

NB. Fungible is more appropriately refers to ‘consummable’

Risk of loss
1. If ownership remains in the partner: he is liable for the loss (res perit domini/owner bears the loss)
2. If ownership is vested in the partnership, partnership is liable
3. fungible things or things which cannot be kept without deteriorating even if they are contributed
only for the use of the partnership: partnership primarily because ownership has been vested upon
it
4. things contributed to be sold: partnership
5. things brought and appraised in the inventory: partnership

b. Obligation of the partnership to the partners [1796-97]

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 expense 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 risks in consequence of its management. (1688a)

Applies only when the partner has acted within the scope of authority

Liabilities
1. reimbursement/refund
2. interest
3. answer for obligations the partner may have contracted in good faith: partnership debt is
created
4. answer for risks in the consequence of its management
 Example: Authority is to purchase within the limit of P50,000.00, in excess, requires the consent
of all A, B, C. A purchased worth P70,000.00. Is he entitled to reimbursement? NO, he has
exceeded his authority

b. Obligation of the partners with regard to third persons [1815-1827]

1. Requirement of a firm name, obligation concomitant thereto [1815]

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.

2. Obligation for contractual obligations [1816-17]

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)

Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void, except as among
the partners.

Nature of liability:

a. As to third persons: equal

b. As to partners: pro-rata

In case industrial partners are liable to third persons for contractual obligations, they are entitled to
recover reimbursement from the capitalist partners for whatever amount they may have paid because, Art.
1797, industrial partners are exempt from losses. In other words, while Art. 1797 dictates that industrial
partners are exempt from losses, this only applies between and among the partners themselves. But insofar as
third persons are concerned, industrial partners are liable, but they can later on demand for reimbursement
from the capitalist partners, consistent with Art. 1797.

3. Liabilities of partnership for acts of partners [1818-1824]

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 business of the partnership in the
usual way does not bind the partnership unless authorized by the other partners.

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 good-will 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.

No act of a partner in contravention of a restriction on authority shall bind the partnership to persons
having knowledge of the restriction. (n)

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 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 first 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 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 the title to real property is in the name of all the partners a conveyance executed by all the
partners passes all their rights in such property. (n)

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)
 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. (n)

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 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:

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

(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)

Art. 1824. All partners are liable solidarily with the partnership for everything chargeable to the
partnership under Articles 1822 and 1823.

Nature of liability of partners: solidary

4. Liabilities of partners by estoppel [1825]

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.

Partner by estoppel is:

(a) a person who represents himself to be a partner in:

i. an existing partnership
 ii. a group of persons, not actual partners, but represent themselves as partners (in other words,
in a partnership by estoppel)

(b) a person who consents to another representing to anyone as a partner of:

i. an existing partnership
ii. a group of persons, not actual partners, but represent themselves as partners (in other words,
in a partnership by estoppel)

Liability of partner by estoppel:

1. In item (a)(i) and item (b)(i) above: liable as a partner, solidary with the partnership
2. In item (a)(ii) and item (b)(ii) above: pro rata

5. Liabilities of incoming partners [1826]

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.

Liability of an incoming partner is the same as with the other partners, except that his liability shall be only
up to the extent of his capital contributions. For future obligations, he shall be liable with his separate
properties, in case assets are not sufficient.

6. Liabilities to creditors [1827]

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.

Partnership assets shall be applied in payment of partnership credits.

7. Liability of partnership in case a partner is guilty of committing a crime

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 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.

Nature of liability: solidary between guilty partner and the partnership