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According to Article 637 of the TCO, the partner, who enters into
a transaction with a third party in his name but on behalf of an ordinary
partnership, personally becomes the debtor or the creditor of such third
party. Where a transaction is conducted by one partner in the name of
an ordinary partnership, the other partners become the debtor or the
creditor under such transaction in accordance with the representation
rules of law. The partner, who is entitled to manage the partnership, is
also considered as entitled to represent the partnership against third
parties. However, having said that, for material dispositive transac-
tions, representation authority given by unanimous vote and a clear
indication of this authority in said partner’s proxy are required. In ordi-
nary partnerships, partners have joint ownership on property and sev-
eral liabilities for obligations. However, partners may decide to write
specific provisions into a written partnership agreement, in order to
share liability, e.g. whereby the partner causing the other partners to
pay indemnification agrees to reimburse or hold harmless the other
partners.
The management authority assigned to one of the partners cannot
be terminated or limited without just cause. Where there is just cause,
even if otherwise agreed, each of the other partners can terminate
another partner’s management authority. The TCO does not contain an
exhaustive list of just causes, but provides examples under Article 629,
e.g. extreme breach of duty, loss of competence for good management.
Rights and Obligations of Partners
The most important obligations of the partners in an ordinary part-
nership are the non-competition obligation and duty of care. The non-
competition obligation regulated under Article 626 TCO is a broad
obligation, which can be considered a prohibition of action against the
ordinary partnership’s interests. None of the partners may enter into
transactions, which may cause damage to or which conflict with the
partnership’s goal.
According to Article 628 TCO, each partner should take a certain
level of care and expend a certain level of effort for the partnership
similar to the care and effort put into his own work. Every partner
should indemnify losses caused as a result of his fault, and such losses
LAW OF OBLIGATIONS
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