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.
Rules
1.
2.

Pursuant to contractual liabilities, the partnership will be primarily liable

With respect to these contractual liabilities, it would be the general and industrial
partners who would be liable to the extent of their personal liabilities
-limited partnership has limited liability so we will focus on the general
partners

3.

There are certain limitations to rule number 2. There are contractual agreement which
might apply that are provided in article 1817

Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void,
except as among the partners.
Example:
A,B, C are general partners while D is your industrial partner. They entered into a
transaction with Z in the amount of 200 thousand. They only managed to pay 160K, leaving
a balance of 40k. The partnership assets amounts only to 160K. Because of the first rule,
since it is a contractual obligation, the partnership will be liable. The partnership assets
would be used for payment. Once the assets have exhausted, because of the unlimited
liability of a partnership, we will therefore go to their personal assets. Creditors can run after
your personal assets. This is the first rule.
To where should the 40k come from? Z can collect from A,B,C and D. How do they pay it? Z
can collect from any of them subject to the right of reimbursement to those who did not pay
pursuant to the solidary liability of each of them.
If Z goes after them one- by- one, the partners would be liable for 10K each either pro rata
or if there is an agreement, the agreement would be followed. Let us say that there is no
agreement so they will pay 10K each. Now, applying, however Article 1797, the industrial
partner shall not be liable for the losses. D, as the industrial partner, can claim from A,B,
and C pro rata for the amount of 10K which he paid to Z for the payment of the liability.
Now applying the third rule, for example, there is a stipulation that D will be exempt from
liability, will Z now run after D despite such stipulation? Yes. It will be void as against third
persons. But as far as the partners are concerned, such stipulation will be valid.
Suppose, there is an agreement of 40-40-30-30 sharing of the liability. There is a stipulation
that A is exempt from liabilities. With respect to third persons, this will be void so Z can still

run against A. But as to the partners, it is valid. So since A paid, A can claim from B and C
only pursuant to the agreement since D will not be liable pursuant to Article 1797. This is
with regards to the 10K subject to the reimbursement paid by D as stated in 1797.
Let us say A contributed 30k, can he not say that he is already exempted because of such
contribution? This contribution comprise of his share in the partnership asset. Therefore, he
can claim from B and C his liability beyond what he contributed. Let us say that A
contributed 100k, B and C contributed 30K each. A cannot say that he will not already pay
because of his contribution of 100k since their contribution comprised of the partnership
assets which were used in paying the 160K. But A would be exempt from the 40k remaining
balance because of their stipulation.
Obligation of Non- Partner/ Partnership by Estoppel
Article 1825 talks about the instance when a partnership by estoppel is created.
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.

What are the two instances when a partnership by estoppel be created?

1.
2.

When the persons represents that he is a partner

When some consents to his representation as a partner

*there must be no objection as to the representation

How can liability arise?

1.
2.

3.

Since all of them did not object, whatever liability that may arise would be considered
as partnership liability, the partners would be liable including the partner by estoppel
When some of the partners did not consent, no partnership by estoppel is created. But
since they are already representing themselves as partners, as to them who
consented, there is a partnership by estoppel created as to those who consented only.
Thus, their liability will be either pro rata or joint.
When there is no partnership to talk about, but they represented themselves. Those
who represented as partners would be considered as partners by estoppel. But what
would be their liability? Separate liability. The third person cannot go against only one
partner and ask for the payment of the whole liability

partner when the liability was created. However, it is provided that the capital contribution of D
can be used for the payment of the liability. So D cannot be made liable for the remaining
balance unless there is a stipulation that the newly admitted partner will still be made liable of the
old obligation. In such case, Z can run after D. but if there is no stipulation, the liability of D as
provided by article 1826 is already to the extent of his contribution.
Right of Creditors
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.
Rules:

Who has the burden to prove the existence of partnership by estoppel? The one who alleges
must prove that there is a partnership by estoppel

1.

How can representation be made? Orally and by their acts(implied)

2.

Obligations of subsequently admitted partners

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.
Generally, when there is a change in the partnership, the partnership is automatically dissolved.
However, there may be creditors who would not be paid. That is why in these instances Article
1840 will apply. It allows the old creditors to be the creditors of the new partnership and the
partnership asset of the new partnership must be made available to the old creditors.

Example
A, B and C incurred obligation with Z in the amount of 200K. Later on, they accepted D who gave
a contribution of 20K which was included to the original 150K contribution of A, B and C making it
170k. Which one would be applied? 150K partnership asset before the admission of D or the
170K? 170K, leaving a balance of 30k. To whom should Z run after the remaining balance? As a
general rule, Z can run after A, B and C. D should not be included because he was not still a

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 creditors would be preferred always. If the partnership assets are not sufficient, go
to the personal assets.
Example
A, B and C are partners in X company. X company is indebted to Z. B has a personal creditor E.
Let us say they have 250K as assets. If they have a debt of 200k, the remaining 50K will be
distributed. E now runs after B. Where will B get the payment? From his share in the remaining
50K. But such share is already his personal property which amounts to 18K. if Bs debt is 20K, E
has preference over the 18K.
What if they only have an asset of 170K and their debt is 200K. There is a deficiency of 30K. So
A, B and C need to pay 10K each. However, in the second rule, in this instance, the personal
creditor will first be paid. The 10K outstanding debt of B will follow after paying his personal
creditor.