2.

Acts Not Apparently for Carrying on in the Usual

OCTOBER 27, 2020  Way of Business
● The partnership is not bound, unless authorized
LEGEND: by all the other partners
A in red, bold, italics: Atty’s question
A in red, non-bold, italics: Atty’s discussion A: We said it is very important that before a
S in blue italics non-bold: Student’s answer partner is admitted as a partner in a partnership,
TN: Maker’s notes and comments everybody is supposed to know who he is, isn’t it?
Texts in black are taken from the textbooks and discussed during class S: Yes, Atty.
Texts in purple are not discussed (PLEASE TAKE NOTE OF THIS)
A: Any reason why?
S: Because in forming partnerships, there is a trust
I. PRESUMPTION OF AUTHORITY TO ACT & ITS EXCEPTIONS  reposed between partners, therefore it is important
that they know that person because of the said trust
ART. 1818. Every partner is an agent of the partnership for the between them.
purpose of its business, and the act of every partner, including the
execution in the partnership name of any instrument, for apparently A: And trust is important, why?
carrying on in the usual way the business of the partnership of
which he is a member binds the partnership, unless the partner so
S: Trust is important because an act of a partner binds
acting has in fact no authority to act for the partnership in the the partnership and the other partners.
particular matter, and the person with whom he is dealing has
knowledge of the fact that he has no such authority. A: That is why nobody becomes a partner unless
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 all of the other partners would conform or agree to
partnership unless authorized by the other partners. his being admitted as a partner. Because
Except when authorized by the other partners or unless they have
abandoned the business, one or more but less than all the partners remember a partner is an agent of the partnership
have no authority to: and therefore he can bind the partnership so that
(1) Assign the partnership property in trust for creditors or on the
assignee's promise to pay the debts of the partnership; if he binds the partnership and such transaction
(2) Dispose of the good-will of the business; would turn out to be disadvantageous to the
(3) Do any other act which would make it impossible to carry on
the ordinary business of a partnership;
partnership, do you think the partnership had to
(4) Confess a judgment; bear the loss or any liability created by that
(5) Enter into a compromise concerning a partnership claim or disadvantageous transaction?
liability;
(6) Submit a partnership claim or liability to arbitration; S: Yes. Because an act of an agent is an act of the
(7) Renounce a claim of the partnership. partnership.
No act of a partner in contravention of a restriction on authority
shall bind the partnership to persons having knowledge of the
restriction. A: Exactly and that’s the danger, so unless you
trust the guy he should never be admitted as a
TN: In the absence of an agreement to the contrary, all partner otherwise the other partners will suffer for
partners have equal rights in the management and any liability that he might incur on behalf of the
conduct of the partnership business (ART. 1803) partnership. However, while that may be a general
rule when we said that every partner is an agent of
WHEN AN ACT OF THE PARTNER BINDS THE the partnership, what are the specific rules? Under
PARTNERSHIP what circumstances may a partner bind the
1. Acts for Apparently Carrying on in the Usual Way partnership?
of Business S: A partner may bind the partnership under two
instances:
● Every partner is an agent and may execute such
acts with binding effect on the partnership even 1.) Partner must have the authority to do the act
if he has in fact no authority unless the third 2.) Such act is done in the usual course of the
person has knowledge of such lack of authority. business
● The partnership is liable if:
○ The transaction is in the usually way of A: If the business of the partnership is on a car
business; and dealership, may a partner sell the parcel of land
owned by that partnership?
○ Even if the partners has no authority but
S: No, because it is not within the usual course of the
the third person has no knowledge of business of the partnership.
such lack of authority

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 A: So clearly even if third persons are concerned A: Compromise agreement?
where they feel that it was a legitimate transaction, still S:This is where two parties agree to put a stop to a
it is very clear to him that it is not the usual business litigation that is pending and parties agree to settle.
of the partnership. (Diba truck ramay baligya ninyo The parties themselves decide as to the nature,
do? Nganong namaligya naman kag yuta do?) So that extent, and perhaps an amount to be compromised.
will really trigger an investigation and if you are a
careful buyer, you will have to know under what
circumstances is he selling under the partnership. II. CONVEYANCE OF REAL PROPERTY
BELONGING TO THE PARTNERSHIP
A: Stated otherwise, when may a partner be
unable to bind the partnership? Art. 1819. Where title to real property is in the partnership name,
any partner may convey title to such property by a conveyance
S: 1.) The partner so acting has in fact no authority; executed in the partnership name; but the partnership may recover
2.) The third person knows that the acting partner such property unless the partner’s act binds the partnership under
has no authority; the provisions of the first paragraph of article 1818, or unless such
3.) Such transaction is not the usual course of property has been conveyed by the grantee or a person claiming
through such grantee to a holder for value without knowledge that
business of the partnership; and the partner, in making the conveyance, has exceeded his authority.
4.) His lack of authority is known to the other party.
Where title to real property is in the name of the partnership, a
conveyance executed by a partner, in his own name, passes the
A: Because even if he has no authority, yet his lack of equitable interest of the partnership, provided the act is one within
authority is not known to the other party then there is a the authority of the partner under the provisions of the first
possibility that it might bind the partnership. 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
1.1 INSTANCES/ TRANSACTIONS WHERE  property if the partners’ act does not bind the partnership under the
provisions of the first paragraph of article 1818, unless the
CONSENT OF ALL PARTIES ARE REQUIRED  purchaser or his assignee, is a holder for value, without knowledge.

GENERAL RULE: Any partner may bind the partnership 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
either by himself or with others because there is conveyance executed by a partner in the partnership name, or in his
presumed authority. own name, passes the equitable interest of the partnership,
provided the act is one within the authority of the partner under the
EXCEPTION: There can be no presumed authority in provisions of the first paragraph of article 1818.
acts which require unanimous consent of all Where the title to real property is in the names of all the partners a
partners. conveyance executed by all the partners passes all their rights in
such property.

The acts are: (ART. 1818, 3rd par.)

(1) Assign the partnership property in trust for creditors or
on the assignee's promise to pay the debts of the 1.1 INSTANCES/ TRANSACTIONS WHERE 
partnership; CONSENT OF ALL PARTIES ARE REQUIRED 
(2) Dispose of the good-will of the business;
(3) Do any other act which would make it impossible to 1. TITLE IN PARTNERSHIP NAME, CONVEYANCE BY
carry on the ordinary business of a partnership; A PARTNER IN THE PARTNERSHIP NAME (par. 1)
(4) Confess a judgment; ● Legal title passes to the buyer if:
(5) Enter into a compromise concerning a partnership ○ The transaction is the usual way of
claim;
business of the partnership; and
(6) Submit a partnership claim or liability to arbitration;
(7) Renounce a claim of the partnership. ○ Although the partner lacks authority the
buyer has no knowledge of such lack of
A: What is Arbitration? authority
S: It is abiding by the judgment of a selected person to ● Otherwise, the partnership may recover
act as the arbitrator to decide for the parties in dispute ● However, the partner can no longer recover if it
and settle the issue; binding between the parties. It is has been conveyed to a holder for value without
the arbitrator who makes the decision. knowledge of the lack of authority

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2. TITLE IN PARTNERSHIP NAME, CONVEYANCE BY
A PARTNER IN HIS OWN NAME (par. 2) A: Can he vote in an election?
● Passes only the equitable interest of the S: No
partnership, provided that:
○ The transaction is the usual way of A: Why not? What kind of right is the right to
business of the partnership; and vote?
○ Although the partner lacks authority the S: Personal right, only available to natural persons.
buyer has no knowledge of such lack of
A: As distinguished from? What other rights do
authority you know? Under the Civil Code, what rights do
● Otherwise, even equitable interest will not pass you have? Let’s be more specific, Bill of Rights,
what rights do you have?
3. TITLE IN NAME OF ONE OR MORE BUT NOT ALL S: right to equal protection of the laws, right to due
PARTNERS, CONVEYANCE IN NAME OF PARTNER process, right against self-incrimination, right against
OR PARTNERS IN WHOSE NAME TITLE STANDS unreasonable search and seizure, right against
non-impairment of contracts.
(par. 3)
● Legal title passes only if: A: Under the COVID, is there a right of yours that
○ The transaction is the usual way of has been violated?
business of the partnership; and S: right to travel
○ Although the partner lacks authority the
buyer has no knowledge of such lack of A: That’s a violation of your bill of rights, why did
u not complain?
authority
S: For safety purposes
● Otherwise, the partnership may recover such
property A: The public health and sanitation is a higher
● However, the partnership can no longer recover right than the right to travel
if the property was already conveyed to a holder A: A partnership is a juridical person, which of
for value without knowledge these Bill of Rights may a partnership enjoy?
S: the right to own properties, the right to equal
protection, the right to due process, the right against
4. TITLE IN NAME OF ONE OR MORE OR ALL
self-incrimination, and right against unreasonable
PARTNERS OR A THIRD PERSON IN TRUST FOR search and seizure
PARTNERSHIP, CONVEYANCE BY A PARTNER IN
THE PARTNERSHIP NAME OR IN HIS OWN NAME A: As a person, do you have a right against illegal
(par. 4) detention?
● Passes only the equitable interest of the S: The right to liberty
partnership, provided that:
A: As a person, you cannot be sent to jail, unless
○ The transaction is the usual way of
of course if there are enough reasons. What about
business of the partnership; and
a partnership, does a partnership enjoy this right?
○ Although the partner lacks authority the S: No, the right to liberty is for natural persons only.
buyer has no knowledge of such lack of
authority A: Right to life/liberty, does a partnership enjoy
● Otherwise, even equitable interest will not pass that?
● Note: The trustee cannot convey the property S: No.
of the trustor
A: Would you know why a juridical person cannot
enjoy this right?
5. TITLE IN THE NAME OF ALL PARTNERS,
S: Because only the partners are sent to prison and
CONVEYANCE IN NAME OF ALL PARTNERS (par. 5) not the partnership.
● Legal title passes
● Passes all their rights in such property A: You cannot detain the partnership because
detaining a person simply means confining a person
to jail, so how could you send a juridical person to jail?
A: What are the rights of a juridical person? However, there are situations where a law imposes a
S: The right to sue and be sued, to enter into contract, penalty even if the violation is committed by the
own properties. partnership, by a juridical person. There are situations,

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laws which prescribed imprisonment to the officers of S: A person can become a full owner if he exercises
the juridical person. And that’s where imprisonment all the rights of ownership, such as the right to use,
may be imposed. dispose, fruits and possess.
A: The sum of all these will be full ownership or what
A: Can a juridical person enjoy the right to we may consider a title to the property. It’s important
property? therefore to be considered a full owner you enjoy all
S: Yes, they can enjoy the right to dispose, use, fruits, the four, otherwise you are only holding an equitable
possess interest. That may however ripen to full ownership.

A: Search and seizure, will a juridical person enjoy A: A title was in the name of the partnership but
this right? conveyed by only one partner although in the
name of the partnership, was that a perfect valid
S: Yes, because the bill of rights provided them this
transfer?
right.
S: Only the equitable interest is transferred to the
buyer.
A: May the BIR agent just rush inside the offices
A: Under that situation, may the partnership
of the partnership and search among themselves recover or get back the conveyed property?
the records just to be able to show that they have S: The partnership may still recover the property in
committed violations under the BIR code? instances where the transfer was not in the usual way
S: NO, the State cannot trespass on the properties of business of the partnership and the buyer had
owned by a juridical person. Rather, the BIR should knowledge of the partner’s lack of authority to convey
apply for the issuance of a search warrant. The search such property.
warrant should indicate the place to be searched, and A: If that happens the partnership can always require
records to be seized. the return of the property unless (1) the conveyance
was part of the usual business of the partnership; and
A: What are the rights of an owner again? (2) the buyer was in good faith, meaning he did not
S: right to possess, use, dispose, and the right know that the person conveying did not have the
pertaining to the fruits authority.

A: If you only have the rights to use as well as to A: The property is also in the name of the
partnership but this time conveyed by one partner
the fruits, could you say that you are a full owner?
in his own name. What is the effect?
S: No, you are only a beneficial owner, since these are S: What passes to the buyer is only the equitable title
beneficial rights. or interest.
A: What was conveyed was only the equitable
A: On the other hand, the other person who only interest, it was not a perfect conveyance, so long as
has the right to possess but no right to use and to the conveyance was part of the usual business of the
the fruits, what will you call him? partnership. So again we go back to the general
S: Naked owner requirements: (1) must be the usual business of the
partnership; and (2) he must have the authority.
A: Naked owner because no right to the fruits and no
right to use. A: Title is in the name of one or more but not all of
the partners. How may conveyance be made?
S: The conveyance must be made in the name of the
A: On the other hand when we call a beneficial
partner or partners in whose name the title stands.
owner we could also consider him what kind of
A: Here, the partnership is the real owner but the title
owner? What kind of interest does he have?
indicates the name as owner of only 1 or some but not
S: Equitable title or interest over the property.
all of the partners. The partner in whose name the title
is given may convey the property and he may be able
A: When we say equitable interest what would that
to convey the title because it’s in his name.
person have?
S: He is not a full owner, while he may have the right
A: However the law says the partnership may
to enjoy the fruits or the use, his ownership is not
recover because this was owned by the
really full because he might not have the right to
partnership, it can recover unless again?
possess at all.
S: The partnership may be able to recover unless the
conveyance was the usual business of the partnership
A: We would consider a person to be a full owner
and that the buyer was a buyer for value without
under what circumstance? So long as what rights
knowledge that the other partners did not agree.
should he enjoy?

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 partnership affairs and made within the scope of
A: Title is in the name of one or all, or in the name
of a third person in trust for the partnership. How his authority.
may this property be conveyed? ○ Requisites
S: The property may be conveyed in the name of the ■ Admission made during the
partnership or in the name of the third person who is existence of the partnership
in trust of the property. ■ Admission made while he is still
a partner
A: What is the effect of that sale?
■ Admission refers to matter
S: That sale will only convey the equitable interest of
the property. concerning partnership affairs
A: Only the equitable interest provided his conveyance ■ Admission made within the
was the usual business of the partnership. scope of his authority
● After dissolution, admission made by a partner
A: Can a trustee sell the property of the will bind the co-partners if connected with the
partnership which is entrusted to him?
winding up of partnership affairs.
S: As a general rule a trustee cannot convey the
property of the partnership unless the partners agreed
A: While we said that a partner is an agent of the
to the sale of the property.
A: The trustor precisely administered the property to partnership, yet because he is an agent, again
him, for the trustee just to manage, never to dispose. trust is necessary. So that Ms. Tanzo, If an agent
admits or makes some admission in evidence
A: The title of the property of the partnership is in against the partnership. What is the effect of that
the name of all the partners and all the partners admission?
signed the disposal or the sale. What is the effect S:When the partner makes admissions and
of that sale?
representations concerning partnership affairs within
S: The effect of the sale is that the legal title passes to
the buyer. the scope of his authority, such admission can be
A: In other words, this is a perfect sale. Legal title used against the partnership.
passes, unlike the other sales where only equitable
interest or title is passed on to the buyer. Here A: So that in a hearing in court where the
because the property is owned by the partnership, yet partnership was sued by the BIR for deficiency
registered in the name of all the partners and all the taxes and the partner admitted that it’s true that
partners agreed to the sale or signed the sale, then it
partnership did not pay the taxes due on the
is a perfect sale. Therefore, it is a valid sale.
partnership. What is the effect of that admission?
S:The admission will bind the partnership, subject to
III. ADMISSIONS OF A PARTNER the requirements.

Art. 1820 - An admission or representation made by any partner A: In other words, it is not necessarily true to say
concerning partnership affairs within the scope of his authority in that any admission made by a partner may be
accordance with this Title is evidence against the partnership
binding against the partnerships Because there
are situations when such admissions will not be
GENERAL RULE: A person is not bound by the act, binding. So what are these requirements?
admission, statement, or agreement of another of S:1) Still a partner while making the admission and the
which he has no knowledge or to which he has not admission refers to something that occurred while he
given his consent except by virtue of a particular was still a partner
relation between them (2) Acting within the scope of his authority
EXCEPTIONS: (3) Admission regarding partnership matters
● Admissions by a party as testified to by a third
person are admissible in evidence against him in A: So that Ms. Dumasig, if you are a partner and
litigation because you were content with the performance
● The admission of a partner made during the of the partnership. Instead you were receiving
existence of the partnership are binding against much less share in your partnership profits. So
the partnership (and co-partners) when such you withdraw from the partnership. Three months
admissions refer to a matter concerning after the partnership was investigated by the BIR
and you executed an affidavit stating that the

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 partnership committed some violations under the V. LIABILITIES OF THE PARTNERSHIPS AS TO
BIR Rules and Regulations . What will be the effect SOURCES OF OBLIGATIONS
of that affidavit?
S: The affidavit will not be used against the Art. 1822 - Where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or
partnership because at the time of the execution of the with the authority of copartners, loss or injury is caused to any
affidavit I was no longer a partner. Because the person, not being a partner in the partnership, or any penalty is
incurred, the partnership is liable therefor to the same extent as the
requirement is in order to bind the partnership such partner so acting or omitting to act.
admission should be done when I was still a partner.
Art. 1823 - The partnership is bound to make good the loss:

(1) Where one partner acting within the scope of his apparent
IV. NOTICE TO A PARTNER authority receives money or property of a third person and
misapplies it; and
(2) Where the partnership in the course of its business receives
Art. 1821 - Notice to any partner of any matter relating to money or property of a third person and the money or property so
partnership affairs, and the knowledge of the partner acting in the received is misapplied by any partner while it is in the custody of the
particular matter, acquired while a partner or then present to his partnership.
mind, and the knowledge of any other partner who reasonably could
and should have communicated it to the acting partner, operate as Art. 1824 - All partners are liable solidarily with the partnership for
notice to or knowledge of the partnership, except in the case of everything chargeable to the partnership under Articles 1822 and
fraud on the partnership, committed by or with the consent of that 1823.
partner.

A: How do we define crime?

S: it is any act or omission punishable by law

PRESUMPTION OF KNOWLEDGE OF THE A: If a partner is driving to a Karaoke bar and was

PARTNERSHIP able to hit a pedestrian using his own car the
GENERAL RULE: Notice or knowledge of any partners pedestrian died. Now the parents of the pedestrian
of any matter relating to partnership affairs operates sued the partnership because he committed a
crime. What is the crime here?
as notice or knowledge of the partnership
S: The crime reckless imprudence resulting to
EXCEPTION: In case of fraud on the partnership homicide. The crime is reckless imprudence.
committed by or with the consent of such partner
A: So what is punished in reckless imprudence is
the negligence of the accused. Even if there was
CASES OF KNOWLEDGE OF PARTNER
no intention to kill you will still be held liable for
● Knowledge of the partner acting in the particular your negligence. So in the situation above will the
matter acquired while a partner partnership be held liable?
● Knowledge of the partner acting in the particular S: No. The partnership can only be held liable for
matter then present to his mind damages arising from torts/quasi delicts if the partner
● Knowledge of any other partner who reasonably was acting within his authority or within the usual
could and should have communicated it to the course of business. In this situation the partner was on
his way to a karaoke bar and was not acting on behalf
acting partner
of the partnership.
A: Notices to partners, when would this be binding
to the partnership?
S: Knowledge of the partner in these 3 instances is 5.1 REQUISITES FOR LIABILITY UNDER ART. 1822 
considered knowledge to the partnership:
(1) Knowledge of the partner acting in the particular
matter acquired while a partner A: Under what circumstances may the partnership
(2) Knowledge of the partner acting in the particular be liable for the acts or omissions of any partner?
matter then present to his mind
For partnership liability to attach under art. 1822, the
(3) Knowledge of any other partner who reasonably
could and should have communicated it to the acting following requisites must be met:
partner 1. The partner must be guilty of a wrongful act or
omission; and
Except if there is fraud committed by or with the 2. He must be acting:
consent of the partner. ● in the ORDINARY COURSE OF BUSINESS, or

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 ● with the AUTHORITY OF HIS CO-PARTNERS
the partnership.
even if the act is unconnected with the business.
A: Could you still recall the sources of
LIABILITY FOR MISAPPLICATION OF MONEY OR obligations?
PROPERTY OF A THIRD PERSON SOURCES OF OBLIGATIONS
-a partnership is also liable solidarily with the 1. Law
partners where: 2. Contracts
3. Quasi-contracts
● one partner acting within the scope of his
4. Delicts
apparent authority receives money or property of 5. Quasi-delicts
a third person and misapplies it; and
● the partnership in the course of its business A: How may obligations be extinguished?
receives money or property of a third person and (PaLoCoCoCoNo)
the money or property so received is misapplied (1) By payment or performance:
(2) By the loss of the thing due:
by any partner while it is in the custody of the
(3) By the condonation or remission of the debt;
partnership (4) By the confusion or merger of the rights of creditor
and debtor;
GENERAL RULE: the nature of the partnership liability (5) By compensation;
under art. 1822 and 1823 is SOLIDARY (6) By novation.
EXCEPTION: when the victim of such act or omission is
A: Earlier, your classmates attempted to discuss
a co-partner, such co-partner is not solidarily liable the 2 liabilities that the partnership may incur. The
(obvi) nature of the liabilities of the parties may be
○ IMPORTANT: A partner is solidarily liable solidary or joint. How do we distinguish joint
with the partnership if his liability arises from liability from solidary liability?
quasi-delict or tort. On the other hand, his JOINT LIABILITY- the liability of a joint debtor is only
liability is joint and subsidiary if his liability up to the extent of his share in the liability (ija ija aho
arises from contractual obligation. aho; to each his own)
● Joint debtors- can only be liable up to their
A: If a partner is guilty of misappropriation of respective shares
funds, how could this apply? ● Joint creditors- can demand only up to the
Situation: The debtor of the partnership happened extent of their share in the credit
to meet one partner and because the debtor still SOLIDARY LIABILITY- the rule should be each debtor
owes the partnership an amount which was should be liable for the entire obligation; (all for one,
already due, the debtor told the partner, “may ra one for all)
jud nagkita ta, di nako mu byahe didto sa inyong ● Solidary debtors- anyone of them can be held
opisina, I’ll just give you the payment. Is it okay liable for the entire obligation
with you?” The partner received and accepted the ● Solidary creditors- any one of the creditors
payment. He also signed the receipt on behalf of may demand for the payment of the entire
the partnership. However, months after, the debtor obligation
received a demand letter from the partnership only
to learn that the partner to whom he made the
payment did not remit the payment to the VI. PARTNER BY ESTOPPEL
partnership. Would the partnership still be liable
for the amount? Article 1825: When a person, by words spoken or written or by
S: The partnership would still be liable for the amount conduct, represents himself, or consents to another representing
if the partner who received the money acted within the him to anyone, as a partner in an existing partnership or with one or
scope of his apparent authority. Otherwise, the more persons not actual partners, he is liable to any such persons
to whom such representation has been made, who has, on the faith
partnership will not be liable. of such representation, given credit to the actual or apparent
A: In other words, again here is the importance of partnership, and if he has made such representation or consented
trust. The partner should be somebody who enjoys the to its being made in a public manner he is liable to such person,
whether the representation has or has not been made or
trust of all the other partners because here is another communicated to such person so giving credit by or with the
instance when a partner may be able to steal money knowledge of the apparent partner making the representation or
or to defraud the partnership. Here, the partnership, consenting to its being made:
so long as the debtor could prove that he made the (1) When a partnership liability results, he is liable as though
he were an actual member of the partnership;
payment to the partner, the partner is supposed to (2) When no partnership liability results, he is liable pro rata
remit any amount he may have received on behalf of with the other persons, if any, so consenting to the

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 contract or representation as to incur liability, otherwise
separately. WHEN PARTNERSHIP LIABILITY RESULTS
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
-if ALL THE ACTUAL PARTNERS CONSENTED to
partners, he is an agent of the persons consenting to such the representation, they are solidarily liable for the acts
representation to bind them to the same extent and in the same of the non-partner
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 WHEN LIABILITY IS PRO RATA
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 -when there is no existing partnership and all those
representation. represented as partners consented to the
representation, or not all of the partners of an existing
partnership consented to the representation.
6.1 EFFECT OF ESTOPPEL 
WHEN LIABILITY SEPARATE
-estoppel is a bar which precludes a person from
-when there is no existing partnership and not all but
denying or asserting anything contrary to that which has
only some of those represented as partners consented
been established as the truth by his own deed or
to the representation, or none of the partners in an
representation, either express or implied.
existing partnership consented to such representation.
○ TAKE NOTE: Through estoppel, an
● TAKE NOTE: The doctrine of estoppel has no
admission or representation is rendered
application as between actual partners. Partners
conclusive upon the person making it and
become such by agreement and not by estoppel.
cannot be denied or disapproved as against
the person relying thereon.
A.Differentiate partnership by estoppel from
partners by estoppel.
GENERAL RULE: Persons who are not partners as to
Partner by estoppel - somebody represents himself
each other are not partners as to third person. to be a partner either of an existing partner or non
(Article 1709[1]). existing partnership.
EXCEPTION: Partnership by estoppel Partnership by estoppel - When one represents
himself to be partner to a partnership and the partners
of that existing partnership consented to his
6.2 ELEMENTS TO ESTABLISH LIABILITY AS A  representation.
PARTNER ON GROUNDS OF ESTOPPEL 
A.What is the effect?
It binds the partnership because they did not object.
(1) Proof by plaintiff that he was individually aware of the
Hence, the partnership is now liable.
defendant’s representations as to his being a partner
or that such representations were made by others and On the other hand, if the person represents himself to
not denied or refuted by the defendant a non existing partnership, the latter cannot be held
(2) Reliance on such representations by the plaintiff liable because there is no partnership in the first
(3) Lack of any denial or refutation of the statements by place. However, even if there is no existing
the defendant partnership, the person who represents himself to be
a partner to a non existing partnership is still
considered as a partner by estoppel.
6.3 LIABILITIES OF PARTIES UNDER A 
In other words, if such a partner by estoppel goes
PARTNERSHIP BY ESTOPPEL  to his supplier and tells his supplier “extends to
me some credit because I need construction
WHEN PERSON A PARTNER BY ESTOPPEL materials. I will pay you within 30 days.” Here the
-A person not a partner may become a partner by supplier agreed and extended credit within 30
estoppel and thus be held liable to third persons as if he days. The supplier then went to the address given
by the partner in estoppel and the supplier found
were a partner, when by words or by conduct he:
out that there was nothing in the address given.
1. Directly represents himself to anyone as a partner in
Do you think that the partnership is liable?
an existing partnership or in a non-existing
S. No
partnership; or
2. Indirectly represents himself by consenting to another
A.Is the person who went to the supplier be held
representing himself as a partner in an existing liable?
partnership or in a non-existing partnership S.Yes. And he cannot say that he cannot be held as a

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 55

partner because there is partnership to speak of. In A: A partnership incurred various debts to various
this case, he is already estopped from denying what creditors. These various creditors may now
he earlier represented or misrepresented. demand payment from partnership. Unfortunately,
the assets of the partnership may no longer be
enough to pay off all its creditors in which case it
VII. EXTENT OF LIABILITY OF NEW PARTNER will have to determine who among the creditors
should be paid first. It may happen also that these
Article 1826: A person admitted as a partner into an existing
creditors may be able to collect a portion of the
partnership is liable for all the obligations of the partnership arising debts due. On the other hand, because we said
before admission as though he had been a partner when such that partners may be held up to the extent of their
obligations were incurred, except that this liability shall be satisfied personal assets, then it may happen that the
only out of partnership property, unless there is a stipulation to the
contrary.
personal creditors of these partners may also be
going with the personal assets of these partners.
SUMMARY OF LIABILITIES OF INCOMING So it may happen that in the end creditors of the
partnership may be pursuing properties of either
PARTNERS
the partnership or the partner while the personal
● as to obligations incurred PRIOR to his
creditors of the partners may pursue their
admission — liable only up to his personal properties or their interest in the
CONTRIBUTION partnership. Who should be given preference to
● as to obligations incurred after his the property?
admission — liable up to his PERSONAL
ASSETS S:
○ NOTE: an incoming partner is liable for ● Partnership property = the partnership creditor
obligations subsequent to his admission
● Partner’s personal assets = the personal
although they may arise from a contract creditor
entered into before his admission
■ RATIONALE: Because the new Read until Article 1835
partner will still be benefited from
profits out of such transactions

VIII. PREFERENCE OF CREDITOR

Article 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 pirate creditors of each partner may ask
the attachment and public sale of the share of the latter in the
partnership assets

● Partnership Property — partnership creditors

are preferred
● Personal Property of Partner — personal
creditors of the partner are preferred

AGENCY, TRUST & PARTNERSHIP (MIDTERMS) | EH405 | ATTY. ESPEDIDO | 56