BUSINESS LAWS AND REGULATIONS

LAW ON PARTNERSHIP
1. Contract of Partnership is a contract of two or more persons who bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits
among themselves. It may also be formed by two or more persons for the exercise of a common
profession.

2. Characteristics of a contract of partnership

a. Consensual – It is generally perfected by mere consent except if real property is
contributed wherein it becomes a formal or solemn contract that requires the contract of
partnership to be notarized and inventory of real property must be attached to the said
public instrument.
b. Principal – It does not depend upon any other contract for its validity or existence.
c. Bilateral or Multilateral – It is entered into by two or more persons whose rights and
obligations are reciprocal.
d. Nominate – It has a special name given to it by law.
e. Preparatory – It is a means by which other contracts will be entered into as the
partnership pursues its business.
f. Onerous – The partners contribute money, property or industry to a common fund with
the intention of dividing the profits among themselves except in case of universal
partnership which is actually considered an indirect donation classified as gratuitous
contract.

3. Essential requisites of partnership as form of business organization

a. It must have a valid partnership contract.
b. It must have a lawful object or purpose.
c. It must have a mutual contribution of money, property or industry to a common fund.
d. It must be established for the common benefit or interest of the partners which is to
obtain profits and then to divide the profits among the partners.

4. Delectus Personae means that a partner has a right to choose those whom he wants to be
associated with the partnership because it is based on trust and confidence. Admission of a third
person as a partner requires unanimous consent of all the partners because being a partner is
purely personal. Thus, a purchaser or assignee of an interest of an existing partner does not
automatically become a partner in an existing partnership without the unanimous consent of all the
partners. As a consequence, partnership as a form of business organization has no right of
succession.

5. Formality of contract of partnership

a. As a general rule, it may be in any form because it is perfected by mere consent.
b. If immovable or real property is contributed, the contract of partnership must be notarized
and inventory of the said real property must be attached to the notarized contract of
partnership for the contract to be valid. It must also be registered to SEC to affect and bind
third persons.
c. If the contributed capital is at least P3,000 in money or personal property, the contract of
partnership must be notarized and registered for SEC in order to prejudice and affect
third persons but not for validity of the contract. Noncompliance with this formality will not
affect the liability of the partners to third persons as to the obligations of the partnership.
d. If the partnership is a limited partnership, a certificate of limited co-partnership must be
signed under oath by the partners and must be recorded with the SEC, otherwise the
partnership will be considered as a general partnership. Noncompliance with this formality
will make the limited partners as general partners to partnership creditors but they will
remain to be limited partners to the partners themselves.
6. Cases that do not establish a partnership
a. Persons who are not partners to each other.
b. Co-ownership whether such co-owners do or do not share any profits made by the use of
the property.
c. Co-possession whether co-possessors do or do not share any profits made by the use of
the property.
d. Sharing of gross returns, whether or not the persons sharing them have a joint or
common right or interest in any property from which the returns are derived.

7. Generally, receipt by a person of share of the profits of a business is a prima facie evidence
that he is a partner. However, these are exceptional instances when the receipt by a person of
a share of the profits of a business shall not be considered a prima facie evidence that he is a
partner in a business:
a. As a debt by installment or otherwise
b. As wages of an employee
c. As rent to a landlord.
d. As an annuity to a widow or representative of a deceased partner.
e. As interest on a loan, though the amounts of payment vary with the profits of the
business.
f. As the consideration for the sale of a goodwill of a business or other property by
installment or otherwise.

8. Universal partnership of all present property is a type of universal partnership wherein all
the partners contribute all the property which actually belonged to them to the common fund, with
the intention of dividing the same among themselves, as well as the profits which they acquire
therewith.

9. Properties that shall belong to the common fund in a universal partnership of all
present property
a. Property belonging to the partners at the time of the constitution or perfection of the
partnership.
b. Profits that may be acquired from the present property.
c. Property acquired by each partner after the formation of the partnership if stipulated.
d. Profits and fruits from property acquired by each partner, even those from property
acquired by inheritance, legacy or donation after the formation of the partnership if
stipulated.

10. Universal partnership of profits is a type of universal partnership whereby the common fund
comprises all that the partners may acquire by their work or industry during the existence of the
partnership.

11. Properties that shall belong to the common fund in a universal partnership of profits
a. Profits obtained by the partners by their work or industry during the existence of the
partnership.
b. The usufruct or use of the property belonging to each partner at the time of the
constitution of the partnership.
c. The profits and fruits from the properties mentioned in letter a and b.
d. The profits and fruits, if stipulated, of the property acquired by each partner after the
constitution of the partnership.

12. Persons who cannot enter into a universal partnership but can enter into a particular
partnership
a. Husband and wife
b. Persons who were guilty of adultery or concubinage at the time of formation
c. Persons who were guilty of the same criminal offense
d. Public officer or his wife, descendants or ascendants and another person by reason of the
public officer’s position

13. In case Universal Partnership is entered into without specification of the type of
Universal Partnership, it shall be presumed to be a Universal Partnership of Profits.
Since Universal Partnership is a gratuitous contract of donation, the ambiguity shall be interpreted
in favor of least transmission of rights because Universal Partnership of Profits involves lesser
transmission of rights as compared to Universal Partnership of All Present Property.
14. Particular partnership is a partnership which has for its object determinate things, their use or
fruits, or a specified undertaking, or the exercise of a profession. Example of particular partnership
is General Professional Partnership.

15. Kinds of partnership

a. General partnership is a partnership where all the partners are liable up to the extent
of their separate property after the partnership assets have been exhausted.
b. Limited partnership is a partnership where there is at least one general partner who is
liable up to the extent of his separate property and at least one limited partner who is liable
up to the extent of his investment in the partnership.
c. Ordinary partnership is a partnership which actually exists among the partners as well
as to third persons.
d. Partnership by estoppel or nominal partnership is a partnership which in reality is
not partnership but is considered as one with respect to those who, by reason of their
conduct or admission, are precluded from denying its existence.
e. Partnership by prescription is a partnership which is established by the lapsing of time.
f. De jure partnership is a partnership that exists both in fact and in law.
g. De facto partnership is a partnership that exists in fact but not in law.
h. Partnership with a fixed term is one for which a period for its duration is fixed by the
partners.
i. Partnership for a particular undertaking is one which is organized for a certain
undertaking which, when attained, will cause the termination of the partnership.
j. Partnership at will is one where no period is fixed by the parties for its duration.
k. Commercial Partnership or Business Partnership is a partnership formed by two or
more persons who bind themselves to contribute money, property, or industry to a
common fund, with the intention of dividing the profits among themselves. It is a taxable
corporation in so far as Income Tax is concern.
l. General Professional Partnership is a partnership formed for the exercise of a common
profession. It is a tax exempt entity in so far as Income Tax is concern because it will be
the practitioner partners who will be liable to pay income tax in their separate income tax
returns for their share in net income of general professional partnership.

16. Kinds of partners

a. General partner is one who is liable for partnership debts to the extent of his separate
property after all the assets of the partnership have been exhausted. He is present in every
type of partnership.
b. Limited partner is one who is liable for partnership debts to the extent of his capital
contribution only. He may only contribute money and property but not industry.
c. General-limited partner is one who has all the rights and powers and is subject to all
the restrictions of a general partner, except that, in respect to his contribution, he shall
have the rights against the other members which he would have had if he were not also
a general partner.
d. Capitalist partner is one who contributes money or property to the common fund.
e. Industrial partner is one who contributes his services or industry to the partnership.
He is classified as a general partner.
f. Capitalist industrial partner is one who contributes not only money or property but
also his services to the partnership.
g. Managing partner manages the business or affairs of the partnership.
h. Liquidating partner takes charge of the winding up of the affairs of the partnership after
it is dissolved.
i. Nominal partner or partner by estoppel is not actually a partner but who may become
liable as such to third persons.
j. Ostensible partner is one who is active in management of partnership business and
known to the public as a partner, such as by allowing his name to be included in the firm
name.
k. Secret partner is one whose connection with the partnership is kept from the public.
l. Silent partner is one who has no voice in the management of the business.
m. Dormant partner is who does not participate in the management of the business and not
known to the public as a partner.
n. Quasi-partner is one who is no longer a partner of business but has left his capital in the
business as loan. He receives interest on such as long as the loan is not paid off.
 o. Retiring partner is one who decided to leave the partnership after reaching the age of
retirement.
p. Withdrawing partner is one who decided to leave the partnership before reaching the
age of retirement for whatever reason.
q. Newly admitted partner refers to a partner accepted by the present partners in an
existing partnership. He is a liable like a limited partner for liabilities of the existing
partnership prior to his admission but he is liable like a general partner for liabilities of the
existing partnership after his admission.
r. Substituted limited partner is a person admitted to all the rights of a limited partner
who has died or has assigned his interest in a partnership.

17. Commencement of Juridical Personality of a Partnership

a. From the date stipulated by the partners
b. In the absence of agreement, from the moment of the execution of the contract of
partnership

18. Rules on Division of partnership profits

a. It should be divided based on a valid profit agreement.
b. In the absence of a valid profit agreement:
i. The industrial partner shall first receive a just and equitable share in the profits
before distribution to capitalist partners. (Old Civil Code: Share of the least
capitalist partner)
ii. The remaining profits after distribution to industrial partners of his just and
reasonable share in profits shall be distributed to the capitalist partners based on
the following by order of priority:
1. Capital contribution ratio of capitalist partners
2. Equally on the presumption that the contribution of capitalist partners is
equal
iii. In case of capitalist-industrial partner, he shall receive a just and equitable share
in the profit for being an industrial partner and then he shall also share in the
remaining profits as a capitalist partner on the basis of (1) capital contribution ratio
of capitalist partners or (2) equally with the capitalist partners.

19. Rules on Division of partnership losses

a. It should be divided based on a valid loss agreement.
b. In the absence of a valid loss agreement:
i. The industrial partner shall be exempted from sharing in losses.
ii. The losses shall be distributed to the capitalist partners based on the following
by order of priority:
1. Profit agreement of capitalist partners
2. Capital contribution ratio of capitalist partners
3. Equally on the presumption that the contribution of capitalist partners is
equal
iii. In case of capitalist-industrial partner, for being an industrial partner, he shall
not share in losses but for being capitalist partner he shall share in the losses on
the basis of (1) profit ratio of capitalist partners; (2) capital contribution ratio of
capitalist partners; or (3) equally with the capitalist partners.

20. Rules on Designation of Profits or Losses of Partnership by the Partners

a. The agreement as to the division of profits or losses must be mutually agreed upon by all
partners.
b. The unilateral designation of profits or losses by a single partner without the consent or
approval by all the partners is void because it is violative of the concept of mutuality of
contract.

21. Status of Stipulation excluding a partner from share in partnership profit or

partnership loss
a. Stipulation excluding any partner from share in partnership profit is void.
b. Stipulation excluding a capitalist partner from share in partnership loss is void.
c. Stipulation excluding an industrial partner from share in partnership loss is valid.
22. Rules in case of designation of profits or losses by a third person as agreed by the
partners
a. If entrusted by the partners to a third person, it is binding upon the partners and may be
impugned only when it is manifestly inequitable.
b. If the designation by a third person is manifestly inequitable, it can no longer be impugned
by a partner who has begun to execute it.
c. If the designation by a third person is manifestly inequitable, it can no longer be impugned
by any partner if three months had already lapsed from the time he obtained knowledge
thereof.

23. Prescriptive period to file an action to impugn or question the manifestly inequitable
sharing of partnership profits or losses designated by a third person
a. Within 3 months from the knowledge of such designation but it must be before the said
partner executes it.

24. Rules on partnership management when a partner has been appointed manager in
the articles of co-partnership or at the time of execution of articles of co-partnership
a. The managing partner may execute all acts of administration despite the opposition of
his partners unless he acts in bad faith.
b. With just or lawful cause, the revocation of the power of the managing partner can be
made by the vote of the partners representing the controlling interest.
c. Without just or lawful cause, the revocation of the power of the managing partner can be
made only with the consent of all the partners including the managing partner.

25. Rules on partnership management when a partner has been appointed manager after
the partnership has been constituted or when the managing partners has been
appointed in a separate document other than articles of co-partnership
a. The managing partner may execute all acts of administration.
b. In case of opposition to the decision of the managing partner on acts of administration,
the partners representing the controlling interest may resort to voting for his removal as
manager.
c. He may be removed with or without just cause by the vote of the partners representing
the controlling interest.

26. Rules of management when two or more partners have been appointed as managers
a. When there is a specification of their respective duties, each managing partner shall
perform only the duties specified in his appointment.
b. When there is no specification of their respective duties and there is no stipulation that
one shall not act without the consent of the others, each one may separately execute all
acts of administration.
c. When there is no specification of their respective duties and there is no stipulation that
one shall not act without the consent of the others, the decision of the majority of the
managing partners shall prevail in case of opposition.
d. When there is no specification of their respective duties and there is no stipulation that
one shall not act without the consent of the others, the decision of the partner owning
the controlling interest (managing or nonmanaging) shall prevail in case of tie in voting.
e. When there is a stipulation that none of the managing partners shall act without the
consent of the others, the unanimous vote of all managing partners shall be necessary
for the validity of the acts. However, if there is imminent danger to the partnership
involving an act of administration, the absence of any of the managing partners may be
alleged by the present partners to justify the approval of act of administration despite the
absence of one of the managing partners.

27. Rules of management when the manner of management has not been agreed upon
a. All the partners shall be considered agents of the partnership or all of them are
managers.
b. Whatever any of the partners may do alone shall bind the partnership.
c. In case of opposition of the other partners, the decision of the majority shall prevail and
the decision of the partners owning the controlling interest shall prevail in case of tie.

28. Sale or alteration of real or immovable property not classified as inventory of the
partnership
 a. As a general rule the sale of real or immovable property not classified as inventory of the
partnership cannot be validly done by the managing partner alone even if it is favorable
to the partnership unless such transaction created estoppel against the partnership.
29. Acts of the partner that bind the partnership
a. Any act of a partner (managing or nonmanaging) for the purpose of the partnership
business provided the other person acted in good faith.
b. Any act of a partner (managing or nonmanaging) 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 provided the other person acted in good faith.
c. Any act of a partner (managing or nonmanaging) which is not apparently for the carrying
on of business of the partnership in the usual way but authorized by the other partners

30. Acts of the partner that do not bind the partnership

a. Any act of partner (managing or nonmanaging) which is in the ordinary course of business
of the partnership wherein the managing partner exceeded his authority or acted in bad
faith and the third person acted in bad faith because he has knowledge that the managing
partner exceeded his authority.
b. Any act of a partner (managing or nonmanaging) which is not in the ordinary course of
business of the partnership whether or not the third person has knowledge of lack of
authority of the nonmanaging partner

31. Acts that are not considered for apparently carrying on in the usual way of business
of the partnership and may not be performed by a partner unless he is authorized by all the
other partners or these are acts which require unanimous vote of the partners because they
are considered acts of strict ownership or acts of strict dominion
a. Assignment of partnership property in trust for creditors or on the assignee’s promise to
pay the debts of the partnership.
b. Disposition of the goodwill of the business.
c. Acts which would make it impossible to carry on the ordinary business of the partnership.
d. Confession of judgment.
e. Entering into a compromise concerning a partnership’s claim or liability.
f. Submission of a partnership claim or liability to arbitration.
g. Renunciation of a claim of the partnership.

32. Right of industrial partner to engage in another business

a. An industrial partner cannot engage in any business for himself, unless the partnership
expressly permits him to do so.
b. Alternative remedies of the capitalist partner if the industrial partner engages in business
for himself without the express permission of the partnership
i. Exclude the industrial partner from the partnership with a right to damages; or
ii. Avail themselves of the benefits obtained from the business he engaged in with a
right to damages

33. Right of capitalist partner to engage in another business

a. The capitalist partner can engage in a business of different kind even without stipulation
allowing him to do so and in a business of the same kind if there is a stipulation allowing
him to do so.
b. Remedies available to injured partners when a capitalist partner engages in the same kind
of business without stipulation allowing him to engage in that business
i. To ask the guilty capitalist partner to bring to the common fund any profits accruing
to him from the said transaction; and
ii. To ask the guilty capitalist partner to bear all the losses from the said transaction.

34. Nature of liability of a general partner, whether capitalist or industrial, for the
partnership debts
a. They shall be liable pro rata and subsidiarily with all their separate property and after all
the partnership assets have been exhausted.

35. Nature of liabilities of newly admitted partner for partnership debts

a. He 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. (Limited Partner for Partnership Obligation arising before his admission)
b. He is liable pro-rata and subsidiarily for all obligations incurred after his admission as a
partner. (General Partners for Partnership Obligation arising after his admission)

36. Exceptional cases wherein the partnership shall be liable directly and solidarily with all
the partners and wherein all partners are liable directly and solidarily with the
partnership for everything chargeable to the partnership
a. For loss or injury caused to a third person or any penalty incurred by reason of the wrongful
act or omission of any partner acting in the ordinary course of business of the partnership
or with the authority of his co-partners.
b. Where one partner acting within the scope of his apparent authority receives money or
property of a third person and misapplies it.
c. Where the partnership in the course of business receives money or property of a third
person and such money or property is misapplied by any partner while it is in custody of
the partnership.

37. Effects of assignment or conveyance of partner’s interest to a third person

a. The associate or assignee or purchaser of partner's interest does not become an automatic
partner of the partnership without the consent of the other partners.
b. The partnership is not dissolved by the assignment of the said interest.
c. The associate or assignee is entitled only to the share of the assigning partner in the
partnership profits and share of the assigning partner in the net assets of the partnership
at the date of liquidation.

38. General Obligations of a partner

a. In the absence of contrary agreement, to make equal contribution to the capital of the
partnership.
b. Every partner shall render on demand true and full information of all things affecting the
partnership to any partner or the legal representative of any deceased partner or of any
partner under legal disability.
c. Every partner must account to the partnership for any benefit, and hold as trustee for it
any profits derived by him without the consent of the other partners from any transaction
connected with the formation, conduct, or liquidation of the partnership or from any use
by him of its property.
d. To reimburse to the partnership the amount that he has taken from the partnership coffers
with interest from the time of conversion plus damages suffered by partnershipby reason
of the conversion.
e. In case of imminent loss of the business of partnership, a partner has the obligation: (1)
to contribute additional share of capital to the partnership to save the venture unless: (a)
he is an industrial partner or (b) he is a capitalist partner exempted by stipulation of
partners or (2) to sell his interest to the other partners if he refuses to contribute such
additional capital.
f. To bring to the partnership capital his share of a partnership credit which he has received
in whole or in part even he may have given his receipt if the other partners have not
collected their shares and the debtor becomes insolvent after the partner has received the
payment.
g. To pay to the partnership for damages suffered by it through his fault but he cannot
compensate them with the profits and benefits which he may have earned for the
partnership by his industry. The court may equitably reduce or offset the liability for
damages of the said partner to the partnership if unusual profit has been realized by the
partnership from his extraordinary effort.

39. Obligations of a partner involving delivery of specific property he promises to

contribute
a. To take care of the specific property before its delivery to the partnership with the
diligence of a good father of a family.
b. To deliver to the partnership specific property at the time it was constituted or on the
date stipulated the property he has promised to contribute.
c. To be liable for the fruits of the specific thing from the time they should have been
delivered without the need of any demand.
d. To be liable for damages in case of default or delay in the delivery of specific property.
 e. To answer for eviction in case the partnership is deprived of the specific or determinate
thing he has contributed to the partnership in the same manner as the vendor is bound
with respect to the vendee.

40. Obligations of a partner involving delivery of money he promises to contribute

a. To deliver to the partnership at the time it was constituted or on the date stipulated the
money he has promised to contribute.
b. To pay interest on the amount he had promised to contribute from the time he should
have complied with his obligation without need of any demand.
c. To pay damages suffered by the partnership by reason of the default in the contribution
of money.

41. Rights of a general partner

a. Right to have the partnership books kept at the principal place of business of the
partnership
b. Right at a reasonable hour to inspect and copy any of the partnership books
c. Right to have on demand true and full information of all things affecting the partnership
d. Right to a formal account of partnership affairs whenever circumstances render it just
and reasonable
e. Right to have dissolution and winding up by decree of court in cases provided by law.
f. Right to convert the partnership into a corporation.
g. Right to receive his share in net income of the partnership.
h. Right to receive his share in net assets of the partnership after the liquidation.

42. Instances wherein any partner shall have the right to a formal account of the
partnership affairs
a. If the partner is wrongfully excluded from the partnership business or possession of its
property by his co-partners.
b. If the right for formal accounting is provided under the terms of articles of co- partnership.
c. If the other partner derived profits without the consent of other partners from any
transaction connected with the formation, conduct, or liquidation of the partnership or from
any use by him of its property.
d. Whenever the circumstances render formal accounting just and reasonable.

43. The partnership shall bear the risk of loss for the following contributions of partners
a. Fungible things or those that cannot be kept without deteriorating.
b. Things contributed to be sold.
c. Things brought and appraised in the inventory unless there is a stipulation to the
contrary but the liability of the partnership is limited only to the value of the things at which
they were appraised.

44. Liabilities or obligations of the partnership to the partners

a. 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.
b. The partnership shall answer to each partner for the obligations he may have contracted
in good faith in the interest of the partnership business.
c. The partnership shall answer to each partner the risks as a consequence of its
management.
45. Distinctions between partner’s right to specific partnership property and partner’s
interest in the partnership
a. As to nature of right, a partner’s right to specific partnership property pertains to
his right to a limited co-ownership over partnership property but a partner’s interest in
the partnership pertains to his share in the net income and net asset of the partnership
b. As to assignment of right, a partner cannot assign his partner’s right to specific
partnership property but he can assign his partner’s interest in the partnership.
c. As to beint subject to attachment, a partner’s personal creditor cannot attach a partner’s
right to specific partnership property but such creditor can attach the partner’s
interest in the partnership. Only the creditors of the partnership can attach the
properties of the partnership.

46. Rules for application of payment when a person owes separate demandable debts to
the partnership and to the partner authorized to receive also known as managing
partner
a. If the claim of the partnership is not yet due but the claim of the managing partner is
already due, the payment shall be applied to the partner’s credit in its entirety.
b. If the debt owed to the managing partner is more onerous than the claim of the
partnership, the selection by the debtor of the more onerous debt as to the application of
payment shall be followed.
c. If both debts are due and demandable and the managing partner issues the receipt for the
partnership claim, payment shall be applied to the partnership credit in its entirety.
d. If both debts are due and demandable and the managing partner issues his ownpersonal
receipt, payment shall be applied to the partnership credit and partner’s credit
proportionately.

Note: The provisions of this article are understood to be without prejudice to the right granted
to the other debtor by article 1252 as regards to application of payment, but only if the personal
credit of the partner should be more onerous to him.

47. Rules for application of payment when a person owes separate demandable debts to
the partnership and to a partner not authorized to receive credit also known as non-
managing partner
a. If both debts are due and demandable and the nonmanaging partner issues his own
personal receipt, payment shall be applied to the nonmanaging partner's claim in its
entirety.
b. If both debts are due and demandable and the nonmanaging partner issues the receipt for
the partnership claim, payment shall be applied to the partnership credit in its
entirety.

48. An admission or representation made by any partner concerning partnership affairs

within the scope of his authority is evidence against the partnership. The following
are the requisites in order for an admission or representation of a partner to be used
as evidence against the partnership
a. The admission or representation must concern partnership affairs.
b. The admission must be made within the scope of the authority of the partner making the
admission.
c. The admission must be made during the existence of the partnership.

49. As a general rule, notice to any partner of any matter relating to partnership affairs
binds the partnership. The following knowledge of a partner binds the partnership
a. The knowledge of a partner acting in the particular matter if he acquires the same while
already a partner.
b. The knowledge of a partner acting on a particular matter if he acquires it before his
admission to the partnership provided the same was still present on his mind.
c. The knowledge of any other partner not acting on a particular matter if he acquired the
same while already a partner and he could and should have reasonably communicated
the same to the partner acting on a particular matter.

50. Effects of misrepresenting as a partner but not in public

a. The nominal partner is liable pro-rata and subsidiarily like a general partner only to persons
to whom such representation has been made, who has, on the faith of such representation,
given credit to the actual or apparent partnership.
51. Effects of misrepresenting as a partner in public
a. The nominal partner is liable pro-rata and subsidiarily like a general partner to persons
giving credit whether the representation has or has not been communicated to the
latter.

52. Effects of Estoppel to the Partners and Partnership

a. 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
consentingto 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.
b. 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.

53. Preference of credits of partnership creditors and partner’s creditors

a. The partner’s personal creditors have preference over the partner’s personal assets.
Partner’s separate creditors shall be paid out of the share of the partner owing him if
there is an excess in the partnership’s assets over partnership’s liabilities.
b. The partnership’s creditors have preference over the partnership’s assets. Partnership’s
creditors shall be paid out of separate assets of the partners if there is an excess in the
partner’s separate assets over partner’s separate liabilities