Obligations of the partners

with regard to third persons

SECTION 3
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.
Right of partners to choose firm name

The firm name of a partnership may be that of an

individual partner, the surnames of all the partners, or the
surname of one or the surnames of more of the members with
the addition of “and Company”, or it may consist of individual
names wholly distinct from the names of any of the members.
Right of partners to choose firm name

(1) Use of misleading name

(2) Use of names of deceased persons
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.
 Neither on principle of law or justice can the industrial
partner be relieved from liability to third persons for the debts
of the partnership. He can recover the amount he has paid from
the capitalist partners unless there is an agreement to the
contrary.
ART. 1817. Any stipulation against the liability
laid down in the preceding article shall be void,
except as among the partners.
 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.
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;
(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.
 Limitations upon the authority of any one of the partners
are not binding upon innocent third persons dealing with the
partnership (Art. 1818, par. 4.), who have the right to assume that
every general partner has power to bind the partnership
especially those partners acting with ostensible authority, by
whatever is proper for the transaction in the ordinary and usual
manner of the business of the partnership.
 There is a general presumption that each individual
partner is an agent of the fi rm and that he has authority to bind
the firm in carrying on the partnership transactions. The
presumption is sufficient to permit third persons to hold the firm
liable on transactions entered into by any one of the members of
the firm acting apparently in its behalf and within the scope of his
authority.
 However, third parties should not assume that a partner
has unlimited authority. Generally, a partner has no authority to
do the acts enumerated in the third paragraph of Article 1818.
When a third party deals with a partner who has no express,
implied, or apparent authority, the partnership is not liable for his
acts unless the other partners ratify his acts or are estopped
from asserting the partner’s lack of authority.
In other words, there are two requisites in order that
the partnership will not be liable:
(a)The partner so acting has in fact no authority; and
(b) The third person knows that the acting partner has
no authority.
 For acts which are not apparently for carrying on in the
usual way the business of the partnership, the partnership is not
bound, unless authorized by all the other partners or unless they
have abandoned the business. The general rule is that powers not
specifically delegated in a partnership agreement are presumed
to be withheld.
LIABILITY OF PARTNER ACTING WITHOUT
AUTHORITY

As a general rule, the particular partner who

undertakes to bind his co-partners by 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 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 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 names of
all the partners a conveyance executed by all the
partners passes all their rights in such property.
 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.
 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.
 A third person desiring to give notice to a partnership of
some matter pertaining communicate with all the partners. If
notice is delivered to a partner, that is an effective
communication to the partnership notwithstanding the failure of
the partner to communicate such notice or knowledge to his co-
partners.ng to the partnership business need not.
 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:
(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.
 The obligation is solidary because the law protects him
who, in good faith, relied upon the authority of a partner,
whether such authority is real or apparent. This is the reason
why under Article 1824 all partners, whether innocent or guilty,
as well as the legal entity which is the partnership, are solidarily
liable.
REQUISITES FOR LIABILITY

(a) The partner must be guilty of a wrongful act or omission; and

(b) He must be acting in the ordinary course of business, or with
the authority of his co-partners even if the act is unconnected
with the business.
MISAPPLICATION OF MONEY OR PROPERTY
OF A THIRD PERSON.

Under Article 1823, the partnership is liable for any losses

suffered by a third person whose money or property is
misappropriated by a partner who received it within the scope of
his authority or by any other partner after it was received by the
partnership in the ordinary course of business while in its
custody.
 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. (n)
 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. (n)
 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. (n)