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June 1, 2022

OBLIGATIONS OF THE PARTNERS WITH REGARD TO THIRD PERSONS (PART I)

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Published — June 21, 2021

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

After reading OBLIGATIONS OF THE PARTNERS WITH REGARD TO THIRD PERSONS (PART I), read also: WHAT IS A CONTRACT OF PARTNERSHIP?

  • Every partnership shall operate under a firm name

  • Every partner is an agent of the partnership where the purpose of its business

  • No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction

W hat are the obligations of the partners with regard to third persons?
The law says:

Every partnership shall operate under a firm name. The firm name 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.

All partners, including industrial ones, shall be liable on the basis of their contribution 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. Take note that this liability cannot be subjected to any stipulation except if between and among the partners.

May a partner be considered an agent of the partnership?

The law says:

Yes.

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.

Also, 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.

Furthermore, any act of a partner which is in contravention of a restriction on authority shall bind the partnership to persons having knowledge of such restriction.


Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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