Partnership. TSN
Partnership. TSN
Partnership. TSN
Art. 1767. By the contract of partnership a. Primarily a Contractual Relationship (Art. 1767, 1770,
two or more persons 1771, 1784)
bind themselves
to contribute money, property or industry b. Informal/ Consensual Juridical Personality
to a common fund,
Article 44. The following are juridical persons:
with the intention of dividing the profits among
xxx
themselves. xxx
(3) Corporations, partnerships and associations for private
Two or more persons may also
interest or purpose to which the law grants a juridical
form a partnership for the exercise of a personality, separate and distinct from that of each
profession. shareholder, partner or member.
2. TRI-LEVEL EXISTENCE/ LEGAL Article 1768. The partnership has a juridical personality
RELATIONSHIPS IN A PARTNERSHIP SETTING separate and distinct from that of each of the partners, even
in case of failure to comply with the requirements of article
a. Primarily a Contractual Relationship 1772, first paragraph.
Article 1767. By the contract of partnership two or more Article 1774. Any immovable property or an interest
persons bind themselves to contribute money, property, or therein may be acquired in the partnership name. Title so
industry to a common fund, with the intention of dividing acquired can be conveyed only in the partnership name.
the profits among themselves.
c. Delectus Personae
Article 1770. A partnership must have a lawful object or
purpose, and must be established for the common benefit a. Partner’s Assignment of Share DOES NOT
or interest of the partners. MAKE Assignee Partner
When an unlawful partnership is dissolved by a judicial Article 1804. Every partner may associate another
decree, the profits shall be confiscated in favor of the State, person with him in his share, but the associate shall
Article 1813. A conveyance by a partner of his whole Article 1819. Where title to real property is in the
interest in the partnership does not of itself dissolve partnership name, any partner may convey title to such
the partnership, or, as against the other partners in the property by a conveyance executed in the partnership
absence of agreement, entitle the assignee, during the name; but the partnership may recover such property
continuance of the partnership, to interfere in the unless the partner's act binds the partnership under the
management or administration of the partnership provisions of the first paragraph of article 1818, or unless
business or affairs, or to require any information or such property has been conveyed by the grantee or a person
account of partnership transactions, or to inspect the claiming through such grantee to a holder for value without
partnership books; but it merely entitles the assignee knowledge that the partner, in making the conveyance, has
to receive in accordance with his contract the profits exceeded his authority.
to which the assigning partner would otherwise be
entitled. However, in case of fraud in the management Article 1821. Notice to any partner of any matter relating
of the partnership, the assignee may avail himself of to partnership affairs, and the knowledge of the partner
the usual remedies. acting in the particular matter, acquired while a partner or
then present to his mind, and the knowledge of any other
Ortega v. CA partner who reasonably could and should have
communicated it to the acting partner, operate as notice to
d. Mutual Agency or knowledge of the partnership, except in the case of fraud
on the partnership, committed by or with the consent of
Article 1803. When the manner of management has not that partner. (n)
been agreed upon, the following rules shall be observed:
Article 1822. Where, by any wrongful act or omission of
(1) All the partners shall be considered agents and any partner acting in the ordinary course of the business of
whatever any one of them may do alone shall bind the the partnership or with the authority of his co-partners, loss
partnership, without prejudice to the provisions of or injury is caused to any person, not being a partner in the
article 1801. partnership, or any penalty is incurred, the partnership is
liable therefor to the same extent as the partner so acting or
Article 1818. Every partner is an agent of the partnership omitting to act. (n)
for the purpose of its business, and the act of every partner,
including the execution in the partnership name of any Article 1823. The partnership is bound to make good the
instrument, for apparently carrying on in the usual way the loss:
business of the partnership of which he is a member binds
the partnership, unless the partner so acting has in fact no (1) Where one partner acting within the scope of his
authority to act for the partnership in the particular matter, apparent authority receives money or property of a third
and the person with whom he is dealing has knowledge of person and misapplies it; and
the fact that he has no such authority.
(2) Where the partnership in the course of its business
An act of a partner which is not apparently for the carrying receives money or property of a third person and the
on of business of the partnership in the usual way does not money or property so received is misapplied by any
bind the partnership unless authorized by the other partner while it is in the custody of the partnership.
partners.
e. Unlimited Liability for Partners
Except when authorized by the other partners or unless
they have abandoned the business, one or more but less Article 1816. All partners, including industrial ones, shall
than all the partners have no authority to: be liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts
(1) Assign the partnership property in trust for creditors or which may be entered into in the name and for the account
on the assignee's promise to pay the debts of the of the partnership, under its signature and by a person
partnership; authorized to act for the partnership. However, any partner
may enter into a separate obligation to perform a
(2) Dispose of the good-will of the business; partnership contract. (n)
(3) Do any other act which would make it impossible to Article 1817. Any stipulation against the liability laid
carry on the ordinary business of a partnership; down in the preceding article shall be void, except as
among the partners.
(4) Confess a judgment;
Article 1824. All partners are liable solidarily with the
(5) Enter into a compromise concerning a partnership partnership for everything chargeable to the partnership
claim or liability; under articles 1822 and 1823.
Article 1822. Where, by any wrongful act or
(6) Submit a partnership claim or liability to arbitration; omission of any partner acting in the ordinary
(7) Renounce a claim of the partnership. course of the business of the partnership or with
the authority of his co-partners, loss or injury is
FAITH IMEE D. ROBLE 2
caused to any person, not being a partner in the
partnership, or any penalty is incurred, the b. Unincorporated Associations
partnership is liable therefor to the same extent
as the partner so acting or omitting to act. (n) RULE 3. Parties to Civil Actions
Section 15. Entity without juridical personality as
Article 1823. The partnership is bound to make defendant. — When two or more persons not organized as
good the loss: an entity with juridical personality enter into a transaction,
they may be sued under the name by which they are generally
(1) Where one partner acting within the scope of or commonly known.
his apparent authority receives money or
property of a third person and misapplies it; and In the answer of such defendant, the name and addresses of
the persons composing said entity must all be revealed.
(2) Where the partnership in the course of its
business receives money or property of a third Article 1775. Associations and societies, whose articles are
person and the money or property so received is kept secret among the members, and wherein any one of the
misapplied by any partner while it is in the members may contract in his own name with third persons,
custody of the partnership. shall have no juridical personality, and shall be governed by
the provisions relating to co-ownership.
Article 1839. In settling accounts between the partners
after dissolution, the following rules shall be observed, Association of Flood Victims v.
subject to any agreement to the contrary: COMELEC
a. Co-Ownership f. Cooperative
Article 486. Each co-owner may use the thing owned (1) Voluntary and Open Membership - Cooperatives are
in common, provided he does so in accordance with voluntary organizations, open to all persons able to use their
the purpose for which it is intended and in such a way services and willing to accept the responsibilities of
as not to injure the interest of the co-ownership or membership, without gender, social, racial, cultural, political
prevent the other co-owners from using it according or religious discrimination.
to their rights. The purpose of the co-ownership may
be changed by agreement, express or implied. (2) Democrative Member Control - Cooperatives are
democratic organizations that are controlled by their
Article 1769. In determining whether a partnership members who actively participate in setting their policies and
exists, these rules shall apply: making decisions. Men and women serving as elected
representatives, directors or officers are accountable to the
(2) Co-ownership or co-possession does not of itself membership. In primary cooperatives, members have equal
establish a partnership, whether such-co-owners or voting rights of one-member, one-vote. Cooperatives at other
co-possessors do or do not share any profits made by levels are organized in the same democratic manner.
the use of the property;
Navarro v. CA (3) Member Economic Participation - Members contribute
Jarantilla, Jr. v. Jarantilla equitably to, and democratically control, the capital of their
FAITH IMEE D. ROBLE 3
cooperatives. At least part of that capital is the common (7) Registration means the operative act granting juridical
property of the cooperative. They shall receive limited personality to a proposed cooperative and is evidenced by a
compensation or limited interest, if any, on capital certificate of registration;
subscribed and paid as a condition of membership. Members
allocate surpluses for any or all of the following purposes: (8) Cooperative Development Authority refers to the
developing the cooperative by setting up reserves, part of government agency in charge of the registration and
which should at least be indivisible; benefitting members in regulation of cooperatives as such hereinafter referred to s
proportion to their partonage of the cooperative's bubsiness; the Authority;
and, supporting other activities approved by the membership.
(9) Universally Accepted Principles means that body of
(4) Autonomy and Independence - Cooperatives are cooperative principles adhered to worldwide by
autonomous, self-help organizations controlled by their cooperatives;
members. If they enter into aggreements with other
organizations, including government, or raise capital from (10) Representative Assembly means the full membership of
external sources, they shall do so on terms that ensure a body of representatives elected by each of the sectors,
democratic control of their members and maintain their chapter or district o the cooperative duly assembled for the
cooperative autonomy. purpose of exercising such powers lawfully delegated unto
them by the general assembly in accordance with its bylaws;
(5) Education, Training and Information - Cooperatives shall
provide education and training for their members, elected (11) Officers of the Cooperative shall include the members
and appointed representatives, managers, and employees, so of the board of directors, members of the different committee
that they can contribute effectively and efficiently to the created by the general assembly, general manager or chief
development of their cooperatives. executive officer, secretary, treasurer and members holding
other positions as may be provided for in their bylaws;
(6) Cooperation Among Cooperatives - Cooperatives serve
their members most effectively and strengthen the (12) Social Audit is a procedure wherein the cooperative
cooperative movement by working together through local, assesses its social impact and ethical performance vis-à-vis
national, regional and international structures. its stated mission, vision, goals and code of social
responsibility for cooperatives to be established by the
(7) Concern for Community - Cooperatives work for the Authority in consultation with the cooperative sector. It
sustainable development of their communities through enables the cooperative to develop a process whereby it can
policies approved by their members. account for its social performance and evaluate its impact in
the community and be accountable for its decisions and
ART. 5. Definition of Terms. – The following terms shall actions to its regular members;
mean:
(13) Performance Audit shall refer to an audit on the
(1) Member includes a person either natural or juridical who efficiency and effectiveness of the cooperative as a whole; its
adhering to the principles set forth in this Code and in the management and officers; and its various responsibility
Articles of Cooperative, has been admitted by the centers as basis for improving individual team or overall
cooperative as member; performance and for objectively informing the general
membership on such performance;
(2) General Assembly shall mean the full membership of the
cooperative duly assembled for the purpose of exercising all (14) A Single-Line or Single-Purpose Cooperative shall
the rights and performing all the obligations pertaining to include cooperative undertaking activities which are related
cooperatives, as provided by this Code, its articles of to its main line of business or purpose;
cooperation and bylaws: Provided, That for cooperatives
with numerous and dispersed membership, the general (15) Service Cooperatives are those which provide any type
assembly may be composed of delegates elected by each of service to its members, including but not limited to,
sector, chapter or district of the cooperative in accordance transport, information and communication, insurance,
with the rules and regulations of the Cooperative housing, electric, health services, education, banking, and
Development Authority; savings and credit;
(3) Board of Directors shall mean that body entrusted with (16) Subsidiary Cooperative refers to three or more primary
the management of the affairs of the cooperative under its cooperatives, doing the same line of business, organized at
articles of cooperation and bylaws; the municipal, provincial, city, special metropolitan political
subdivision, or economic zones created by law, registered
(4) Committee shall refer to any body entrusted with specific with the Authority to undertake business activities in support
functions and responsibilities under the bylaws or resolution of its member-cooperatives.
of the general assembly or the board of directors;
ART. 12. Liability. – A cooperative duly registered under
(5) Articles of Cooperation means the articles of cooperation this Code shall have limited liability.
registered under this Code and includes a registered
amendment thereof; ART. 30. Termination of Membership. – (1) A member of
a cooperative may, for any valid reason, withdraw his
(6) Bylaws means the bylaws registered under this Code and membership from the cooperative by giving a sixty (60) day
includes any registered amendment thereof; notice to the board of directors. Subject to the bylaws of the
cooperative, the withdrawing member shall be entitled to a
FAITH IMEE D. ROBLE 4
refund of his share capital contribution and all other interests Art. 240. In their formation, joints accounts shall not be
in the cooperative: Provided, That such fund shall not be subject to any formality, and may be privately contracted,
made if upon such payment the value of the assets of the orally or in writing, and their existence may be proved by any
cooperative would be less than the aggregate amount of its of the means recognized by law, (according to the provisions
debts and liabilities exclusive of his share capital of Art. 51).
contribution.
Art. 241. In the transactions referred to by the two preceding
(2) The death or insanity of a member in a primary articles, no commercial name common to all the participants
cooperative, and the insolvency or dissolution of a member can be adopted, no can any further direct credit be used than
in a secondary or tertiary cooperative may be considered that of the merchant who makes and directs them in his name
valid grounds for termination of membership: Provided, That and under his individual responsibility.
in case of death or insanity of an agrarian reform beneficiary-
member of a cooperative, the next-of-kin may assume the Art. 242. Those who contract with the merchant who carries
duties and responsibilities of the original member on the business shall have a right of action against him only
and not against the others interested therein, who shall also
(3) Membership in the cooperative may be terminated by a have no right against the third person who contracted with
vote of the majority of all the members of the board of the manager, unless the latter formally cedes his rights to
directors for any of the following causes: them.
(a) When a member has not patronized any of the services of Art. 243. The liquidation shall be made by the manager who,
the cooperative for an unreasonable period of time as may be upon the conclusion of the transactions, shall render a
previously determined by the board of directors; verified account of their results.
(b) When a member has continuously failed to comply with PARTNERSHIP AS PRIMARILY A CONTRACTUAL
his obligations; RELATIONSHIP
(c) When a member has acted in violation of the bylaws and 1. ELEMENTS AND PURPOSE OF THE
the rules of the cooperative; and PARTNERSHIP
Litonjua v. Litonjua
(d) For any act or omission injurious or prejudicial to the
interest or the welfare of the cooperative. a. CONSENT: “Partnership Must Necessarily Arise
from a Contractual Relationship”
A member whose membership the board of directors may
wish to terminate shall be informed of such intended action Persons who are not partners to one
in writing and shall be given an opportunity to be heard another are not Partners as to Third
before the said board makes its decision. The decision of the Persons
board shall be in writing and shall be communicated in
person or by registered mail to said member and shall be Article 1769. In determining whether a
appealable within thirty (30) days from receipt thereof to the partnership exists, these rules shall apply:
general assembly whose decision shall be final. The general
assembly may create an appeal and grievance committee (1) Except as provided by article 1825,
whose members shall serve for a period of one (1) year and persons who are not partners as to each
shall decide appeals on membership termination. The other are not partners as to third persons;
committee is given thirty (30) days from receipt thereof to
decide on the appeal. Failure to decide within the prescribed Except: Partnership by Estoppel
period, the appeal is deemed approved in favor of the
member. Pending a decision by the general assembly, the Article 1825. When a person, by words
membership remains in force. spoken or written or by conduct, represents
himself, or consents to another representing
g. Corporations him to anyone, as a partner in an existing
partnership or with one or more persons not
Pioneer Insurance v. CA actual partners, he is liable to any such
persons to whom such representation has
h. Joint Ventures been made, who has, on the faith of such
representation, given credit to the actual or
Kilosbayan v. Guingona, Jr. apparent partnership, and if he has made such
representation or consented to its being made
i. Joint Accounts (Sociedad de Cuentas en Participacion) in a public manner he is liable to such person,
whether the representation has or has not been
Art. 239-243 of the Code of Commerce made or communicated to such person so
Art. 239. Merchants may interest themselves in the giving credit by or with the knowledge of the
transactions of other merchants, contributing thereto the part apparent partner making the representation or
of the capital they may agree upon, and participating in the consenting to its being made:
favourable ot favourable results thereof in the proportion
they may determine (1) When a partnership liability results, he is
liable as though he were an actual member of
the partnership;
FAITH IMEE D. ROBLE 5
Article 1799. A stipulation which excludes
(2) When no partnership liability results, he is one or more partners from any share in the
liable pro rata with the other persons, if any, profits or losses is void.
so consenting to the contract or representation
as to incur liability, otherwise separately. c. CONSIDERATION: Undertakings to Contribute
Money, Property, or Industry
When a person has been thus represented to
be a partner in an existing partnership, or with Duterte v. Rallos
one or more persons not actual partners, he is
an agent of the persons consenting to such d. TESTS ON EXISTENCE OF PARTNERSHIP (Art.
representation to bind them to the same extent 1769)
and in the same manner as though he were a
partner in fact, with respect to persons who (i) Co-Ownership or co-Possession Does Not
rely upon the representation. When all the Itself Establish a Partnership, Even When
members of the existing partnership consent Profits are Shared
to the representation, a partnership act or
obligation results; but in all other cases it is Obillos v. CIR
the joint act or obligation of the person acting Pascual v. CIR
and the persons consenting to the
representation. (ii) Sharing of Gross Return DOES NOT
CREATE Partnership
b. SUBJECT MATTER: A Partnership Must Have a
Lawful Object or Purpose Ona v. CIR
Article 1770. A partnership must have a lawful object (iii) Receipt by a Person of a Share of the Profits
or purpose, and must be established for the common of a Business
benefit or interest of the partners.
Heirs of Jose Lim & Juliet
Arbes v. Polistico Lim
Evangelista v. CIR
(iv) When Receipt of Profits Does Not Create
“Partners Seek the Joint Pursuit of a Business Presumption of Partnership:
Venture or Enterprise” as clearly indicated by:
(a) As a debt by installments or otherwise;
1. Agreement to Contribute to a Common
Fund; and (b) As wages of an employee or rent to a
landlord;
Lim Tong Lim v Phil. Fishing Gear
AFISCO v. CA (c) As an annuity to a widow or representative of
a deceased partner;
2. Agreement or Intention to Divide the
Profits or Losses (d) As interest on a loan, though the amount of
payment vary with the profits of the business;
Fernandez v. dela Rosa
Gatchalian v. CIR (e) As the consideration for the sale of a goodwill
Fernando Santos v. Sps. Arsenio & of a business or other property by installments or
Nieves Reyes otherwise.
Article 45. Juridical persons mentioned in Nos. 1 and 2 of f. It May be Declared Insolvent Even if the Partners
the preceding article are governed by the laws creating or are Not
recognizing them.
Campos Rueda & Co. v. Pacific
Private corporations are regulated by laws of general Commercial & Co.
application on the subject.
g. Partnership is a Person Entitled to Constitutional
Partnerships and associations for private interest or Rights
purpose are governed by the provisions of this Code
concerning partnerships. 2. LIMITATIONS ON PRINCIPLE OF SEPARATE
JURIDICAL PERSONALITY
Article 1768. The partnership has a juridical personality
separate and distinct from that of each of the partners, even a. Partners are Co-Owners of Partnership Properties
in case of failure to comply with the requirements of article
1772, first paragraph. Article 1811. A partner is co-owner with his partners of
specific partnership property.
Article 1784. A partnership begins from the moment of the
execution of the contract, unless it is otherwise stipulated. The incidents of this co-ownership are such that:
1. CONSEQUENCES OF BEING A JURIDICAL (1) A partner, subject to the provisions of this Title and
PERSON: to any agreement between the partners, has an equal
right with his partners to possess specific partnership
a. Entity Has Legal Capacity to Enter into Contracts property for partnership purposes; but he has no right to
and Incur Obligations possess such property for any other purpose without the
consent of his partners;
Article 46. Juridical persons may acquire and possess
property of all kinds, as well as incur obligations and (2) A partner's right in specific partnership property is
bring civil or criminal actions, in conformity with the not assignable except in connection with the assignment
laws and regulations of their organization. of rights of all the partners in the same property;
b. It May Acquire Properties in its Own Name (3) A partner's right in specific partnership property is
not subject to attachment or execution, except on a
Article 46. Juridical persons may acquire and possess claim against the partnership. When partnership
property of all kinds, as well as incur obligations and property is attached for a partnership debt the partners,
bring civil or criminal actions, in conformity with the or any of them, or the representatives of a deceased
laws and regulations of their organization. partner, cannot claim any right under the homestead or
exemption laws;
Article 1774. Any immovable property or an interest
therein may be acquired in the partnership name. Title (4) A partner's right in specific partnership property is
so acquired can be conveyed only in the partnership not subject to legal support under article 291.
name.
b. Partners May Individually Dispose of Real Property
c. It May Sue and Be Sued in its Firm Name of the Partnership Even when in Partnership Name
Article 46. Juridical persons may acquire and possess Article 1819. Where title to real property is in the
property of all kinds, as well as incur obligations and partnership name, any partner may convey title to such
bring civil or criminal actions, in conformity with the property by a conveyance executed in the partnership
laws and regulations of their organization. name; but the partnership may recover such property
unless the partner's act binds the partnership under the
provisions of the first paragraph of article 1818, or
FAITH IMEE D. ROBLE 7
unless such property has been conveyed by the grantee contributed thereto, in which case a public
or a person claiming through such grantee to a holder instrument shall be necessary.
for value without knowledge that the partner, in making
the conveyance, has exceeded his authority. Would be Void if Inventory of the Property is
Not Made, Signed by the Parties/ Partners and
c. Partners are Personally Liable for Partnership Attached to the Public Instrument
Debts After Exhaustion of Partnership Assets
Article 1773. A contract of partnership is
Article 1816. All partners, including industrial ones, void, whenever immovable property is
shall be liable pro rata with all their property and after contributed thereto, if an inventory of said
all the partnership assets have been exhausted, for the property is not made, signed by the parties,
contracts which may be entered into in the name and for and attached to the public instrument.
the account of the partnership, under its signature and
by a person authorized to act for the partnership. c. EXCEPT: When Capital is P3,000 or More is
However, any partner may enter into a separate Contributed:
obligation to perform a partnership contract. (n)
i. Must Appear in a Public Instrument,
Article 1817. Any stipulation against the liability laid and
down in the preceding article shall be void, except as ii. Registered with the SEC
among the partners.
BUT: Failure to Comply with Requirements
Article 1824. All partners are liable solidarily with the Shall Not Affect the Liability of the Partnership
partnership for everything chargeable to the partnership and the Members to Third Persons
under articles 1822 and 1823.
Article 1784. A partnership begins from the
Article 1839. In settling accounts between the partners moment of the execution of the contract, unless
after dissolution, the following rules shall be observed, it is otherwise stipulated.
subject to any agreement to the contrary:
3. JURISPRUDENCE:
(4) The partners shall contribute, as
provided by article 1797, the amount a. When Capital is P3,000 or More
necessary to satisfy the liabilities.
(7) The individual property of a deceased Article 1772. Every contract of partnership having a
partner shall be liable for the capital of three thousand pesos or more, in money or
contributions specified in No. 4. property, shall appear in a public instrument, which must
be recorded in the Office of the Securities and Exchange
FORMALITIES REQUIRED FOR THE CONTRACT OF Commission.
PARTNERSHIP
Failure to comply with the requirements of the preceding
1. COMMENCEMENT: A Partnership Begins from the paragraph shall not affect the liability of the partnership
Moment of the Execution of the Contract of Partnership; and the members thereof to third persons.
UNLESS, It is Otherwise Stipulated
Angeles v. Secretary of Justice
Article 1784. A partnership begins from the moment of the Ma v. Fernandez, Jr.
execution of the contract, unless it is otherwise stipulated.
b. When Immovable Property Contributed
2. FORMALITIES REQUIRED:
Article 1771. A partnership may be constituted in any
Lilibeth Sunga-Chan form, except where immovable property or real rights are
Litonjua v.Litonjua contributed thereto, in which case a public instrument shall
be necessary.
a. GENERAL RULE: A Partnership may be Constituted
in Any Form Article 1773. A contract of partnership is void, whenever
immovable property is contributed thereto, if an inventory
Article 1771. A partnership may be constituted in any of said property is not made, signed by the parties, and
form, except where immovable property or real rights attached to the public instrument.
are contributed thereto, in which case a public
instrument shall be necessary. Torres v. CA
Secuya v. Vda. de Selma
b. EXCEPT: Where Immovable Property or Real Rights
are Contributed: c. Legal Value of the Formal Requirements for
Partnerships
Must be in a Public Instrument
Article 1771. A partnership may be Heirs of Jose Lim v. Lim
constituted in any form, except where Rojas v. Maglana
immovable property or real rights are
4. RULES ON PARTNERSHIP NAME
FAITH IMEE D. ROBLE 8
Article 1783. A particular partnership has for its
Article 1815. Every partnership shall operate under a firm object determinate things, their use or fruits, or a
name, which may or may not include the name of one or specific undertaking, or the exercise of a
more of the partners. profession or vocation.
Article 1777. A universal partnership may refer i. Partnership with Fixed Term
to all the present property or to all the profits. ii. Partnership for a Particular Undertaking
(1672) iii. Partnership at Will
Movable or immovable property which each of Article 1825. When a person, by words
the partners may possess at the time of the spoken or written or by conduct, represents
celebration of the contract shall continue to himself, or consents to another representing
pertain exclusively to each, only the usufruct him to anyone, as a partner in an existing
passing to the partnership. (1675) partnership or with one or more persons not
actual partners, he is liable to any such
Article 1781. Articles of universal partnership, persons to whom such representation has
entered into without specification of its nature, been made, who has, on the faith of such
only constitute a universal partnership of profits. representation, given credit to the actual or
(1676) apparent partnership, and if he has made such
representation or consented to its being made
Article 1782. Persons who are prohibited from in a public manner he is liable to such person,
giving each other any donation or advantage whether the representation has or has not been
cannot enter into universal partnership. made or communicated to such person so
ii. Particular Partnership giving credit by or with the knowledge of the
Article 1791. If there is no agreement to the (7) Continue the business with partnership
contrary, in case of an imminent loss of the property on the death, retirement, insanity,
business of the partnership, any partner who civil interdiction or insolvency of a general
refuses to contribute an additional share to the partner, unless the right so to do is given in the
capital, except an industrial partner, to save the certificate.
venture, shall he obliged to sell his interest to
the other partners. ii. Industrial Partners
Article 1797. The losses and profits shall be Article 1797. The losses and profits shall be
distributed in conformity with the agreement. distributed in conformity with the agreement.
If only the share of each partner in the profits If only the share of each partner in the profits
has been agreed upon, the share of each in the has been agreed upon, the share of each in the
losses shall be in the same proportion. losses shall be in the same proportion.
In the absence of stipulation, the share of each In the absence of stipulation, the share of each
partner in the profits and losses shall be in partner in the profits and losses shall be in
proportion to what he may have contributed, proportion to what he may have contributed,
but the industrial partner shall not be liable for but the industrial partner shall not be liable for
the losses. As for the profits, the industrial the losses. As for the profits, the industrial
partner shall receive such share as may be just partner shall receive such share as may be just
and equitable under the circumstances. If and equitable under the circumstances. If
besides his services he has contributed capital, besides his services he has contributed capital,
he shall also receive a share in the profits in he shall also receive a share in the profits in
proportion to his capital. proportion to his capital.
Article 1799. A stipulation which excludes Article 1789. An industrial partner cannot
one or more partners from any share in the engage in business for himself, unless the
profits or losses is void. partnership expressly permits him to do so; and
if he should do so, the capitalist partners may
Article 1808. The capitalist partners cannot either exclude him from the firm or avail
engage for their own account in any operation themselves of the benefits which he may have
which is of the kind of business in which the obtained in violation of this provision, with a
partnership is engaged, unless there is a right to damages in either case.
stipulation to the contrary.
FAITH IMEE D. ROBLE 10
b. As to constitution of the Partnership: alone or with others without liquidation of the
partnership affairs.
i. Original Partners
The liability of a third person becoming a
Article 1767. By the contract of partnership partner in the partnership continuing the
two or more persons bind themselves to business, under this article, to the creditors of
contribute money, property, or industry to a the dissolved partnership shall be satisfied out
common fund, with the intention of dividing of the partnership property only, unless there is
the profits among themselves. a stipulation to the contrary.
(2) When all but one partner retire and assign c. As to the Nature of the Liabilities of the Partners
(or the representative of a deceased partner
assigns) their rights in partnership property to i. General Partners
the remaining partner, who continues the ii. Limited Partners (Arts. 1845-1866)
business without liquidation of partnership iii. Partner by Estoppel
affairs, either alone or with others;
Article 1815. Every partnership shall operate
(3) When any partner retires or dies and the under a firm name, which may or may not
business of the dissolved partnership is include the name of one or more of the
continued as set forth in Nos. 1 and 2 of this partners.
article, with the consent of the retired partners
or the representative of the deceased partner, Those who, not being members of the
but without any assignment of his right in partnership, include their names in the firm
partnership property; name, shall be subject to the liability of a
partner.
(4) When all the partners or their
representatives assign their rights in d. As to Scope of Work
partnership property to one or more third
persons who promise to pay the debts and who i. Managing Partners
continue the business of the dissolved
partnership; Article 1800. The partner who has been
appointed manager in the articles of
(5) When any partner wrongfully causes a partnership may execute all acts of
dissolution and the remaining partners administration despite the opposition of his
continue the business under the provisions of partners, unless he should act in bad faith; and
article 1837, second paragraph, No. 2, either his power is irrevocable without just or lawful
alone or with others, and without liquidation of cause. The vote of the partners representing the
the partnership affairs; controlling interest shall be necessary for such
revocation of power.
(6) When a partner is expelled and the
remaining partners continue the business either
FAITH IMEE D. ROBLE 11
A power granted after the partnership has been payment by bond approved by the court, or pay
constituted may be revoked at any time. any partner who has caused the dissolution
wrongfully, the value of his interest in the
Article 1801. If two or more partners have partnership at the dissolution, less any
been intrusted with the management of the damages recoverable under the second
partnership without specification of their paragraph, No. 1 (b) of this article, and in like
respective duties, or without a stipulation that manner indemnify him against all present or
one of them shall not act without the consent of future partnership liabilities.
all the others, each one may separately execute
all acts of administration, but if any of them (3) A partner who has caused the dissolution
should oppose the acts of the others, the wrongfully shall have:
decision of the majority shall prevail. In case
of a tie, the matter shall be decided by the (a) If the business is not continued under the
partners owning the controlling interest. provisions of the second paragraph, No. 2, all
the rights of a partner under the first paragraph,
ii. Liquidating Partners subject to liability for damages in the second
paragraph, No. 1 (b), of this article.
Article 1836. Unless otherwise agreed, the
partners who have not wrongfully dissolved (b) If the business is continued under the
the partnership or the legal representative of second paragraph, No. 2, of this article, the
the last surviving partner, not insolvent, has the right as against his co-partners and all claiming
right to wind up the partnership affairs, through them in respect of their interests in the
provided, however, that any partner, his legal partnership, to have the value of his interest in
representative or his assignee, upon cause the partnership, less any damage caused to his
shown, may obtain winding up by the court. co-partners by the dissolution, ascertained and
paid to him in cash, or the payment secured by
iii. Retiring Partners & Continuing Partners a bond approved by the court, and to be
released from all existing liabilities of the
Article 1837. When dissolution is caused in partnership; but in ascertaining the value of the
any way, except in contravention of the partner's interest the value of the good-will of
partnership agreement, each partner, as against the business shall not be considered.
his co-partners and all persons claiming
through them in respect of their interests in the Article 1839. In settling accounts between the
partnership, unless otherwise agreed, may have partners after dissolution, the following rules
the partnership property applied to discharge shall be observed, subject to any agreement to
its liabilities, and the surplus applied to pay in the contrary:
cash the net amount owing to the respective
partners. But if dissolution is caused by (1) The assets of the partnership are:
expulsion of a partner, bona fide under the
partnership agreement and if the expelled (a) The partnership property,
partner is discharged from all partnership
liabilities, either by payment or agreement (b) The contributions of the partners necessary
under the second paragraph of article 1835, he for the payment of all the liabilities specified in
shall receive in cash only the net amount due No. 2.
him from the partnership.
(2) The liabilities of the partnership shall rank
When dissolution is caused in contravention of in order of payment, as follows:
the partnership agreement the rights of the
partners shall be as follows: (a) Those owing to creditors other than
partners,
(1) Each partner who has not caused
dissolution wrongfully shall have: (b) Those owing to partners other than for
capital and profits,
(a) All the rights specified in the first paragraph
of this article, and (c) Those owing to partners in respect of
capital,
(b) The right, as against each partner who has
caused the dissolution wrongfully, to damages (d) Those owing to partners in respect of
breach of the agreement. profits.
(2) The partners who have not caused the (3) The assets shall be applied in the order of
dissolution wrongfully, if they all desire to their declaration in No. 1 of this article to the
continue the business in the same name either satisfaction of the liabilities.
by themselves or jointly with others, may do
so, during the agreed term for the partnership (4) The partners shall contribute, as provided
and for that purpose may possess the by article 1797, the amount necessary to satisfy
partnership property, provided they secure the the liabilities.
FAITH IMEE D. ROBLE 12
(4) When all the partners or their
(5) An assignee for the benefit of creditors or representatives assign their rights in
any person appointed by the court shall have partnership property to one or more third
the right to enforce the contributions specified persons who promise to pay the debts and who
in the preceding number. continue the business of the dissolved
partnership;
(6) Any partner or his legal representative shall
have the right to enforce the contributions (5) When any partner wrongfully causes a
specified in No. 4, to the extent of the amount dissolution and the remaining partners
which he has paid in excess of his share of the continue the business under the provisions of
liability. article 1837, second paragraph, No. 2, either
alone or with others, and without liquidation of
(7) The individual property of a deceased the partnership affairs;
partner shall be liable for the contributions
specified in No. 4. (6) When a partner is expelled and the
remaining partners continue the business either
(8) When partnership property and the alone or with others without liquidation of the
individual properties of the partners are in partnership affairs.
possession of a court for distribution,
partnership creditors shall have priority on The liability of a third person becoming a
partnership property and separate creditors on partner in the partnership continuing the
individual property, saving the rights of lien or business, under this article, to the creditors of
secured creditors. the dissolved partnership shall be satisfied out
of the partnership property only, unless there is
(9) Where a partner has become insolvent or a stipulation to the contrary.
his estate is insolvent, the claims against his
separate property shall rank in the following When the business of a partnership after
order: dissolution is continued under any conditions
set forth in this article the creditors of the
(a) Those owing to separate creditors; dissolved partnership, as against the separate
creditors of the retiring or deceased partner or
(b) Those owing to partnership creditors; the representative of the deceased partner, have
a prior right to any claim of the retired partner
(c) Those owing to partners by way of or the representative of the deceased partner
contribution. (n) against the person or partnership continuing
the business, on account of the retired or
Article 1840. In the following cases creditors deceased partner's interest in the dissolved
of the dissolved partnership are also creditors partnership or on account of any consideration
of the person or partnership continuing the promised for such interest or for his right in
business: partnership property.
(1) When any new partner is admitted into an Nothing in this article shall be held to modify
existing partnership, or when any partner any right of creditors to set aside any
retires and assigns (or the representative of the assignment on the ground of fraud.
deceased partner assigns) his rights in
partnership property to two or more of the The use by the person or partnership
partners, or to one or more of the partners and continuing the business of the partnership
one or more third persons, if the business is name, or the name of a deceased partner as part
continued without liquidation of the thereof, shall not of itself make the individual
partnership affairs; property of the deceased partner liable for any
debts contracted by such person or partnership.
(2) When all but one partner retire and assign (n)
(or the representative of a deceased partner
assigns) their rights in partnership property to Article 1841. When any partner retires or dies,
the remaining partner, who continues the and the business is continued under any of the
business without liquidation of partnership conditions set forth in the preceding article, or
affairs, either alone or with others; in article 1837, second paragraph, No. 2,
without any settlement of accounts as between
(3) When any partner retires or dies and the him or his estate and the person or partnership
business of the dissolved partnership is continuing the business, unless otherwise
continued as set forth in Nos. 1 and 2 of this agreed, he or his legal representative as against
article, with the consent of the retired partners such person or partnership may have the value
or the representative of the deceased partner, of his interest at the date of dissolution
but without any assignment of his right in ascertained, and shall receive as an ordinary
partnership property; creditor an amount equal to the value of his
interest in the dissolved partnership with
interest, or, at his option or at the option of his
FAITH IMEE D. ROBLE 13
legal representative, in lieu of interest, the judgment, or any other court, may charge the interest of the debtor
profits attributable to the use of his right in the partner with payment of the unsatisfied amount of such judgment
property of the dissolved partnership; provided debt with interest thereon; and may then or later appoint a receiver
that the creditors of the dissolved partnership of his share of the profits, and of any other money due or to fall due
as against the separate creditors, or the to him in respect of the partnership, and make all other orders,
representative of the retired or deceased directions, accounts and inquiries which the debtor partner might
partner, shall have priority on any claim arising have made, or which the circumstances of the case may require.
under this article, as provided article 1840,
third paragraph. The interest charged may be redeemed at any time before
foreclosure, or in case of a sale being directed by the court, may be
PROPERTY RIGHTS OF PARTNERS purchased without thereby causing a dissolution:
c.f. Arts. 1810-1814 (1) With separate property, by any one or more of the partners; or
Article 1810. The property rights of a partner are: (2) With partnership property, by any one or more of the partners
with the consent of all the partners whose interests are not so charged
(1) His rights in specific partnership property; or sold.
(2) His interest in the partnership; and Nothing in this Title shall be held to deprive a partner of his right, if
any, under the exemption laws, as regards his interest in the
(3) His right to participate in the management (n) partnership.
(2) A partner's right in specific partnership property is not assignable Not Subject to Attachment/ Execution by
except in connection with the assignment of rights of all the partners Partners’ Separate Creditors nor for Legal
in the same property; Support Obligations of Any Partner (Art.
1811 [3])
(3) A partner's right in specific partnership property is not subject to
attachment or execution, except on a claim against the partnership. b. MUTUAL AGENCY: Right to Participate in
When partnership property is attached for a partnership debt the Management of the Partnership
partners, or any of them, or the representatives of a deceased partner,
cannot claim any right under the homestead or exemption laws; i. General Rule on Agency
(4) A partner's right in specific partnership property is not subject to Art. 1803 (1). All Partners shall be
legal support under article 291. (n) considered Agents and Whatever any of
them May Do Alone shall Bind the
Article 1812. A partner's interest in the partnership is his share of the Partnership
profits and surplus. (n)
Art. 1818. Every Partner is an Agent of the
Article 1813. A conveyance by a partner of his whole interest in the Partnership for Apparently Carrying On in
partnership does not of itself dissolve the partnership, or, as against the Usual Way the Business of the
the other partners in the absence of agreement, entitle the assignee, Partnership
during the continuance of the partnership, to interfere in the
management or administration of the partnership business or affairs, Art. 1796. Partnership shall answer to each
or to require any information or account of partnership transactions, partner for the Obligation a Partner may
or to inspect the partnership books; but it merely entitles the assignee have Contracted in Good Faith in the
to receive in accordance with his contract the profits to which the Interest of the Partnership Business, and
assigning partner would otherwise be entitled. However, in case of the Risks in Consequence of its
fraud in the management of the partnership, the assignee may avail Management
himself of the usual remedies.
ii. Other Powers or Rights Relating to Mutual
In case of a dissolution of the partnership, the assignee is entitled to Agency:
receive his assignor's interest and may require an account from the
date only of the last account agreed to by all the partners. (n)
Can Dispose of Partnership Property
Article 1814. Without prejudice to the preferred rights of partnership
Even When in Partnership Name
creditors under article 1827, on due application to a competent court
by any judgment creditor of a partner, the court which entered the
FAITH IMEE D. ROBLE 14
Article 1819. Where title to real property Article 1821. Notice to any partner of any
is in the partnership name, any partner may matter relating to partnership affairs, and
convey title to such property by a the knowledge of the partner acting in the
conveyance executed in the partnership particular matter, acquired while a partner
name; but the partnership may recover or then present to his mind, and the
such property unless the partner's act binds knowledge of any other partner who
the partnership under the provisions of the reasonably could and should have
first paragraph of article 1818, or unless communicated it to the acting partner,
such property has been conveyed by the operate as notice to or knowledge of the
grantee or a person claiming through such partnership, except in the case of fraud on
grantee to a holder for value without the partnership, committed by or with the
knowledge that the partner, in making the consent of that partner.
conveyance, has exceeded his authority.
Wrongful Act or Omission of Any
Where title to real property is in the name Partner Acting for Partnership Affairs
of the partnership, a conveyance executed makes the Partnership Liable
by a partner, in his own name, passes the
equitable interest of the partnership, Article 1822. Where, by any wrongful act
provided the act is one within the authority or omission of any partner acting in the
of the partner under the provisions of the ordinary course of the business of the
first paragraph of article 1818. partnership or with the authority of his co-
partners, loss or injury is caused to any
Where title to real property is in the name person, not being a partner in the
of one or more but not all the partners, and partnership, or any penalty is incurred, the
the record does not disclose the right of the partnership is liable therefor to the same
partnership, the partners in whose name the extent as the partner so acting or omitting
title stands may convey title to such to act.
property, but the partnership may recover
such property if the partners' act does not Partnership Bound to Make Good
bind the partnership under the provisions Losses for Acts of Misapplications of
of the first paragraph of article 1818, unless Partners
the purchaser or his assignee, is a holder
for value, without knowledge. Article 1823. The partnership is bound to
make good the loss:
Where the title to real property is in the
name of one or more or all the partners, or (1) Where one partner acting within the
in a third person in trust for the partnership, scope of his apparent authority receives
a conveyance executed by a partner in the money or property of a third person and
partnership name, or in his own name, misapplies it; and
passes the equitable interest of the
partnership, provided the act is one within (2) Where the partnership in the course of
the authority of the partner under the its business receives money or property of
provisions of the first paragraph of article a third person and the money or property
1818. so received is misapplied by any partner
while it is in the custody of the partnership.
Where the title to real property is in the
name of all the partners a conveyance iii. Acts Requiring Unanimous Consent
executed by all the partners passes all their
rights in such property. Article 1818. Every partner is an agent of the
partnership for the purpose of its business, and the act
Admission or Representation made by of every partner, including the execution in the
any Partner Concerning Partnership partnership name of any instrument, for apparently
Affairs is Evidence Against the carrying on in the usual way the business of the
Partnership partnership of which he is a member binds the
partnership, unless the partner so acting has in fact no
Article 1820. An admission or authority to act for the partnership in the particular
representation made by any partner matter, and the person with whom he is dealing has
concerning partnership affairs within the knowledge of the fact that he has no such authority.
scope of his authority in accordance with
this Title is evidence against the An act of a partner which is not apparently for the
partnership. carrying on of business of the partnership in the usual
way does not bind the partnership unless authorized by
Notice to Any Partners Relating to the other partners.
Partnership Affairs is Notice to the
Partnership 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:
FAITH IMEE D. ROBLE 15
necessary for the validity of the acts, and the absence or
(1) Assign the partnership property in trust for creditors disability of any one of them cannot be alleged, unless
or on the assignee's promise to pay the debts of the there is imminent danger of grave or irreparable injury
partnership; to the partnership.
(2) Dispose of the good-will of the business; Litton v. Hill & Ceron
Munasque v. CA
(3) Do any other act which would make it impossible to
carry on the ordinary business of a partnership; c. EQUITY RIGHTS: Right to Shares in Profits and
Losses
(4) Confess a judgment;
Article 1810. The property rights of a partner are:
(5) Enter into a compromise concerning a partnership
claim or liability; (1) His rights in specific partnership property;
(6) Submit a partnership claim or liability to arbitration; (2) His interest in the partnership; and
(7) Renounce a claim of the partnership. (3) His right to participate in the management.
No act of a partner in contravention of a restriction on Article 1812. A partner's interest in the partnership is
authority shall bind the partnership to persons having his share of the profits and surplus.
knowledge of the restriction.
Stipulations Excluding Partner from Sharing
iv. Consent Required in Making Alterations of in Profits or Losses Void
Immovable Property
Article 1799. A stipulation which excludes one
Article 1803. When the manner of management has or more partners from any share in the profits or
not been agreed upon, the following rules shall be losses is void.
observed:
i. Participation in Profits and Losses
(2) None of the partners may, without the
consent of the others, make any Article 1797. The losses and profits shall be
important alteration in the immovable distributed in conformity with the agreement. If
property of the partnership, even if it only the share of each partner in the profits has
may be useful to the partnership. But been agreed upon, the share of each in the losses
if the refusal of consent by the other shall be in the same proportion.
partners is manifestly prejudicial to
the interest of the partnership, the In the absence of stipulation, the share of each
court's intervention may be sought. partner in the profits and losses shall be in
proportion to what he may have contributed, but
v. When there is Designation of Manager the industrial partner shall not be liable for the
losses. As for the profits, the industrial partner
Article 1800. The partner who has been appointed shall receive such share as may be just and
manager in the articles of partnership may execute all equitable under the circumstances. If besides his
acts of administration despite the opposition of his services he has contributed capital, he shall also
partners, unless he should act in bad faith; and his power receive a share in the profits in proportion to his
is irrevocable without just or lawful cause. The vote of capital.
the partners representing the controlling interest shall be
necessary for such revocation of power. Distributed in Accordance with
Stipulation;
A power granted after the partnership has been If Share in Profits only Stipulated, Share in
constituted may be revoked at any time. (1692a) the Losses shall be the same;
If No Stipulation on Sharing, Partners
Article 1801. If two or more partners have been share Profits and Losses in Proportion to
intrusted with the management of the partnership their Capital Contributions;
without specification of their respective duties, or In the Absence of Stipulation, an Industrial
without a stipulation that one of them shall not act Partner Shall Receive Such Share in the
without the consent of all the others, each one may Profits as may be Just and Equitable under
separately execute all acts of administration, but if any the circumstances
of them should oppose the acts of the others, the
decision of the majority shall prevail. In case of a tie, Moran, Jr. v. CA
the matter shall be decided by the partners owning the Ramnani v. CA
controlling interest. (1693a) d. Conveyance of a Partner of his Whole Interest in
the Partnership Does Not (Art. 1813, cf: Art.
Article 1802. In case it should have been stipulated that 1832):
none of the managing partners shall act without the
consent of the others, the concurrence of all shall be
FAITH IMEE D. ROBLE 16
Dissolve the partnership
Entitle the assignee, during the continuance of Article 1807. Every partner must account to
the partnership, to interfere in the management or the partnership for any benefit, and hold as
administration of the partnership business trustee for it any profits derived by him without
Entitle the assignee to require any information or the consent of the other partners from any
accounting of partnership transactions, or to transaction connected with the formation,
inspect the partnership books; conduct, or liquidation of the partnership or
But it merely entitles the assignee to receive from any use by him of its property.
profits to which the assigning partner would
otherwise be entitled. iii. Right to Reimbursement for Advances
However, in case of fraud in the management of Article 1796. The partnership shall be
the partnership, the assignee may avail himself responsible to every partner for the amounts he
of the usual remedies. may have disbursed on behalf of the
partnership and for the corresponding interest,
In case of a dissolution of the partnership, the from the time the expense are made; it shall
assignee is entitled to receive his assignor's also answer to each partner for the obligations
interest and may require an account from the date he may have contracted in good faith in the
only of the last account agreed to by all the interest of the partnership business, and for
partners. risks in consequence of its management.
Article 1832. Except so far as may be necessary iv. DELECTUS PERSONAE: Right to
to wind up partnership affairs or to complete Dissolve the Partnership
transactions begun but not then finished,
dissolution terminates all authority of any partner Article 1830. Dissolution is caused:
to act for the partnership:
(3) In contravention of the agreement
(1) With respect to the partners, between the partners, where the
circumstances do not permit a
(a) When the dissolution is not by the act, dissolution under any other provision of
insolvency or death of a partner; or this article, by the express will of any
partner at any time
(b) When the dissolution is by such act,
insolvency or death of a partner, in cases where Rojas v. Maglana
article 1833 so requires;
OBLIGATIONS OF PARTNERS TO THE PARTNERSHIP
(2) With respect to persons not partners, as
declared in article 1834. a. Obligation to Contribute to the Common Fund (Art.
1786):
e. Other Proprietary Rights of Partners
Every Partner is a Debtor of the Partnership
i. Right to Inspect Partnership Books & for Whatever He may Have Promised to
Records (Art. 1805) Contribute
Article 1805. The partnership books shall be He shall be bound for Warranty in case of
kept, subject to any agreement between the Eviction with Regard to Specific and
partners, at the principal place of business of Determinate Things Contributed
the partnership, and every partner shall at any
reasonable hour have access to and may inspect He shall be liable for the fruits thereof from
and copy any of them. the time they should have been delivered,
without need of demand (cf: Art. 1169)
ii. Right to Formal Accounting
Article 1169. Those obliged to deliver
Article 1809. Any partner shall have the right or to do something incur in delay from
to a formal account as to partnership affairs: the time the obligee judicially or
extrajudicially demands from them the
(1) If he is wrongfully excluded from the fulfillment of their obligation.
partnership business or possession of its
property by his co-partners; However, the demand by the creditor
shall not be necessary in order that
(2) If the right exists under the terms of any delay may exist:
agreement;
(1) When the obligation or the law
(3) As provided by article 1807; expressly so declare; or
(4) Whenever other circumstances render it (2) When from the nature and the
just and reasonable. circumstances of the obligation it
FAITH IMEE D. ROBLE 17
appears that the designation of the contract of partnership, and in the absence of
time when the thing is to be delivered stipulation, it shall be made by experts chosen by the
or the service is to be rendered was a partners, and according to current prices, the subsequent
controlling motive for the changes thereof being for account of the partnership.
establishment of the contract; or
Article 1795. The risk of specific and determinate
(3) When demand would be useless, as things, which are not fungible, contributed to the
when the obligor has rendered it partnership so that only their use and fruits may be for
beyond his power to perform. the common benefit, shall be borne by the partner who
owns them.
In reciprocal obligations, neither party
incurs in delay if the other does not If the things contribute are fungible, or cannot be kept
comply or is not ready to comply in a without deteriorating, or if they were contributed to be
proper manner with what is incumbent sold, the risk shall be borne by the partnership. In the
upon him. From the moment one of the absence of stipulation, the risk of the things brought and
parties fulfills his obligation, delay by appraised in the inventory, shall also be borne by the
the other begins. partnership, and in such case the claim shall be limited
to the value at which they were appraised.
i. When Sum of Money Liable for Interest & Damages
from the Time Due iv. When Real Property
Article 1788. A partner who has undertaken to Article 1772. Every contract of partnership having a
contribute a sum of money and fails to do so becomes a capital of three thousand pesos or more, in money or
debtor for the interest and damages from the time he property, shall appear in a public instrument, which
should have complied with his obligation. must be recorded in the Office of the Securities and
Exchange Commission.
The same rule applies to any amount he may have taken
from the partnership coffers, and his liability shall begin Failure to comply with the requirements of the
from the time he converted the amount to his own use. preceding paragraph shall not affect the liability of the
partnership and the members thereof to third persons.
ii. When Property- in General
Article 1773. A contract of partnership is void,
Article 1795. The risk of specific and determinate whenever immovable property is contributed thereto, if
things, which are not fungible, contributed to the an inventory of said property is not made, signed by the
partnership so that only their use and fruits may be for parties, and attached to the public instrument.
the common benefit, shall be borne by the partner who
owns them. v. When in Service
If the things contribute are fungible, or cannot be kept Article 1789. An industrial partner cannot engage in
without deteriorating, or if they were contributed to be business for himself, unless the partnership expressly
sold, the risk shall be borne by the partnership. In the permits him to do so; and if he should do so, the
absence of stipulation, the risk of the things brought and capitalist partners may either exclude him from the firm
appraised in the inventory, shall also be borne by the or avail themselves of the benefits which he may have
partnership, and in such case the claim shall be limited obtained in violation of this provision, with a right to
to the value at which they were appraised. damages in either case.
Who Bears Risk of Loss for Determinate Thing vi. Percentage of Capital
Article 1830. Dissolution is caused: Article 1790. Unless there is a stipulation to the
(4) When a specific thing which a partner contrary, the partners shall contribute equal shares to the
had promised to contribute to the capital of the partnership.
partnership, perishes before the delivery;
in any case by the loss of the thing, when vii. Additional Contribution, In case of Imminent Loss:
the partner who contributed it having
reserved the ownership thereof, has only Article 1791. If there is no agreement to the contrary,
transferred to the partnership the use or in case of an imminent loss of the business of the
enjoyment of the same; but the partnership, any partner who refuses to contribute an
partnership shall not be dissolved by the additional share to the capital, except an industrial
loss of the thing when it occurs after the partner, to save the venture, shall he obliged to sell his
partnership has acquired the ownership interest to the other partners.
thereof;
Rojas v. Maglana
iii. When Contribution in Goods FIDUCIARY DUTIES OF PARTNERS
Article 1787. When the capital or a part thereof which a. DUTY OF DILIGENCE
a partner is bound to contribute consists of goods, their
appraisal must be made in the manner prescribed in the Article 1794.
FAITH IMEE D. ROBLE 18
Every partner is responsible to the partnership for Capital in the event Partnership becomes
damages suffered by it through his fault; Insolvent
Partner at fault cannot compensate such damages
with the profits and benefits which he may have iii. Partners in General Cannot engage in
earned for the partnership by his industry; Competitive Business
However, the courts may equitably lessen this
responsibility if through the partner's Article 1808. The capitalist partners cannot
extraordinary efforts in other activities of the engage for their own account in any operation
partnership, unusual profits have been realized. which is of the kind of business in which the
partnership is engaged, unless there is a
b. DUTY TO ACCOUNT stipulation to the contrary.
Article 1807. Every partner must account to the Article 1789. An industrial partner cannot
partnership for any benefit, and hold as trustee for it engage in business for himself, unless the
any profits derived by him without the consent of the partnership expressly permits him to do so; and
other partners from any transaction connected with if he should do so, the capitalist partners may
the formation, conduct, or liquidation of the either exclude him from the firm or avail
partnership or from any use by him of its property. themselves of the benefits which he may have
obtained in violation of this provision, with a
Article 1809. Any partner shall have the right to a right to damages in either case.
formal account as to partnership affairs:
Evangelista & Co. v. Abad Santos
(1) If he is wrongfully excluded from the partnership Lim Tanhu v. Remolete
business or possession of its property by his co- Rojas v. Maglana
partners;
PARTNERS SUBJECT TO UNLIMITED LIABILITY FOR
(2) If the right exists under the terms of any PARTNERSHIP DEBTS
agreement;
a. Partners Liable Pro-rata with their separate properties
(3) As provided by article 1807; after partnership assets have been exhausted, for ALL
Partnership Debts
(4) Whenever other circumstances render it just and
reasonable. Article 1816. All partners, including industrial ones, shall
be liable pro rata with all their property and after all the
c. DUTY OF LOYALTY partnership assets have been exhausted, for the contracts
i. On Recovery of Demandable Sum which may be entered into in the name and for the account
of the partnership, under its signature and by a person
Article 1792. If a partner authorized to manage authorized to act for the partnership. However, any partner
collects a demandable sum which was owed to may enter into a separate obligation to perform a
him in his own name, from a person who owed partnership contract.
the partnership another sum also demandable,
the sum thus collected shall be applied to the Article 1817. Any stipulation against the liability laid
two credits in proportion to their amounts, even down in the preceding article shall be void, except as
though he may have given a receipt for his own among the partners.
credit only; but should he have given it for the
account of the partnership credit, the amount Compania Maritima v. Munoz
shall be fully applied to the latter. Delos Reyes v. Tukban
Received for Partner’s Account: Share b. All Partners Solidarily Liable with Partnership for
Proportionately with Partnership; Everything Chargeable to the Partnership when
Received for Partnership Account: All to Caused by:
be Credited to the Partnership.
Article 1822. By any wrongful act or omission
ii. On Receiving Partnership Credits of any partner acting:
in the ordinary course of the business
Article 1793. A partner who has received, in of the partnership or;
whole or in part, his share of a partnership with the authority of his co-partners,
credit, when the other partners have not loss or injury is caused to any person, not
collected theirs, shall be obliged, if the debtor being a partner in the partnership, or any
should thereafter become insolvent, to bring to penalty is incurred, the partnership is
the partnership capital what he received even liable therefor to the same extent as the
though he may have given receipt for his share partner so acting or omitting to act.
only. Article 1823. Partner’s Act or Misapplication
of Properties of Third Parties—
Partner receiving capital when other have (1) Where one partner acting within
not, obliged to bring sum to the Partnership the scope of his apparent authority
(2) Where the partnership in the course he is an agent of the persons consenting to such
of its business receives money or representation to bind them to the same extent and in the
property of a third person and the same manner as though he were a partner in fact, with
money or property so received is respect to persons who rely upon the representation. When
misapplied by any partner while it is in all the members of the existing partnership consent to the
the custody of the partnership. representation, a partnership act or obligation results; but
c. Newly Admitted Partner into an Existing Partnership in all other cases it is the joint act or obligation of the
is Liable only out of Partnership Property Shares and person acting and the persons consenting to the
Contributions, for all the obligations of the Partnership representation.
Arising before his admission
Article 1814. May Apply with the Court that entered the judgment
debt---
To charge the debtor’s equity interests for the
payment from his share in the Profits or any
other money due from the partnership;
(2) When no partnership liability results, he is liable pro rata with the DISSOLUTION, WINDING UP, AND TERMINATION OF
other persons, if any, so consenting to the contract or representation THE PARTNERSHIP
as to incur liability, otherwise separately.
1. NATURE & EFFECTS OF DISSOLUTION:
FAITH IMEE D. ROBLE 20
(a) When the dissolution is not by the act,
a. As Among the Partners: insolvency or death of a partner; or
Article 1828. The dissolution of a partnership is (b) When the dissolution is by such act,
the change in the relation of the partners caused by insolvency or death of a partner, in cases where
any partner ceasing to be associated in the carrying article 1833 so requires;
on as distinguished from the winding up of the
business. (2) With respect to persons not partners, as
declared in article 1834.
Article 1832. Except so far as may be necessary to
wind up partnership affairs or to complete Art. 1834. A Partner can Still Bind the
transactions begun but not then finished, Partnership:
dissolution terminates all authority of any partner
to act for the partnership: By any act appropriate for winding up
partnership affairs or completing
(1) With respect to the partners, transactions unfinished at dissolution;
(a) When the dissolution is not by the act, By any transaction which would bind the
insolvency or death of a partner; or partnership if dissolution had not taken
place, provided the other party to the
(b) When the dissolution is by such act, transaction:
insolvency or death of a partner, in cases where
article 1833 so requires; (a) Had extended credit to the
partnership prior to dissolution and
(2) With respect to persons not partners, as had no knowledge or notice of the
declared in article 1834. dissolution; or
Article 1842. The right to an account of his interest (b) Though he had not so extended
shall accrue to any partner, or his legal credit, had nevertheless known of the
representative as against the winding up partners or partnership prior to dissolution, and,
the surviving partners or the person or partnership having no knowledge or notice of
continuing the business, at the date of dissolution, dissolution, the fact of dissolution had
in the absence of any agreement to the contrary. not been advertised in a newspaper of
general circulation in the place (or in
Villareal v. Ramirez each place if more than one) at which
Fue Leung v. IAC the partnership business was regularly
carried on.
b. On the Partnership Itself:
The liability of a partner under the first
Partnership continues for purposes of paragraph, No. 2, shall be satisfied out
winding-up the partnership affairs of partnership assets alone when such
partner had been prior to dissolution:
Article 1829. On dissolution the partnership is
not terminated, but continues until the winding (1) Unknown as a partner to the person
up of partnership affairs is completed. with whom the contract is made; and
EXCEPT: When the non-breaching partners (2) So far unknown and inactive in
choose to continue the partnership Business partnership affairs that the business
Until a New Partnership reputation of the partnership could not
be said to have been in any degree due
Yu v. NLRC to his connection with it.
Singson v. Isabela Sawmill
The partnership is in no case bound by
c. On the Authority of the Partners: any act of a partner after dissolution:
Terminates All Partners’ Authority to Bind (1) Where the partnership is dissolved
the Partnership, Except for Winding Up of because it is unlawful to carry on the
Partnership Affairs business, unless the act is appropriate
for winding up partnership affairs; or
Article 1832. Except so far as may be necessary
to wind up partnership affairs or to complete (2) Where the partner has become
transactions begun but not then finished, insolvent; or
dissolution terminates all authority of any
partner to act for the partnership: (3) Where the partner has no authority
to wind up partnership affairs; except
(1) With respect to the partners, by a transaction with one who -
Nothing in this article shall affect the (2) In contravention of the agreement between
liability under article 1825 of any the partners, where the circumstances do not
person who after dissolution permit a dissolution under any other provision of
represents himself or consents to this article, by the express will of any partner at
another representing him as a partner any time
in a partnership engaged in carrying on
business. iii. Art. 1830. By Operation of Law
a. Non-Judicial Dissolution (i.e., Ipso Jure (1) A partner has been declared insane in any
Dissolution) judicial proceeding or is shown to be of unsound
mind;
i. Art. 1830: Without Violation of the (2) A partner becomes in any other way
Partnership Agreement: incapable of performing his part of the
partnership contract;
(a) By the termination of the definite term or
particular undertaking specified in the
agreement;
FAITH IMEE D. ROBLE 22
(3) A partner has been guilty of such conduct as -to receive their net share in the
tends to affect prejudicially the carrying on of surplus after payment of all
the business; liabilities:
(5) The business of the partnership can only be -to be released from all existing
carried on at a loss; partnership liabilities
(6) Other circumstances render a dissolution All Non-Breaching Partners, If they All desire, may
equitable. continue the business (Art. 1837):
Assignee of Partner’s Interest may seek court Provided they secure the payment by bond
order: or Pay to any breaching partner the value of
his interest, net the damages; and
(1) After the termination of the specified term or Indemnify him against all present or Future
particular undertaking; Partnership Liabilities
(2) At any time if the partnership was a A NEW Partnership is thereby constituted
partnership at will when the interest was among the continuing Partners
assigned or when the charging order was issued.
When a Partner Retires or Dies and Business is
3. LEGAL EFFECTS AND OPTION ARISING BY Continued Without Settlement of Accounts, Such
REASON OF DISSOLUTION Partner or his Representative shall against such person
or partnership (Art. 1841):
a. When Dissolution is without contravention of
Partnership Agreement, Each Partner may have Have the value of his interest at the date of
demand for the Winding-up of the Partnership: dissolution ascertained;
Art. 1837. partnership property applied to
Receive as an ordinary creditor an amount
discharge its liabilities, and
equal to the value of his interest in the
the surplus applied to pay in cash the
dissolved partnership with interest
net amount owing to the respective partners.
Option to receive interest on such value or the
b. When Dissolution caused by bona fide expulsion of
Profits Attributable to the Use of His Right in
a partner who is discharged from partnership
the property of the dissolved partnership
liabilities:
o But Partnership Creditors shall
HAVE PRIORITY over the
Art. 1837. Expelled partner shall receive in
separate creditors of the partner
cash only the net amount due him from the
partnership., i.e., less damages
d. When there is Fraud or Misrepresentation (Art. 1838):
Partnership Business continues with the
Article 1838. Where a partnership contract is rescinded
Remaining Partners
on the ground of the fraud or misrepresentation of one
of the parties thereto, the party entitled to rescind is,
c. When dissolution is in contravention of
without prejudice to any other right, entitled:
Partnership Agreement:
(1) To a lien on, or right of retention of, the surplus of
Each non-breaching partner shall have the
the partnership property after satisfying the
right to:
partnership liabilities to third persons for any sum of
money paid by him for the purchase of an interest in
Liquidate the Partnership (i.e.,
the partnership and for any capital or advances
have partnership properties
contributed by him;
applied to discharge liabilities and
receive his share of the surplus;
(2) To stand, after all liabilities to third persons have
been satisfied, in the place of the creditors of the
Art. 1837. Recover damages partnership for any payments made by him in respect
against each breaching partner of the partnership liabilities; and
All Breaching Partners shall have:
Article 1834. After dissolution, a partner can bind the (1) The assets of the partnership are:
partnership, except as provided in the third paragraph of
this article: (a) The partnership property,
(1) By any act appropriate for winding up partnership (b) The contributions of the partners
affairs or completing transactions unfinished at necessary for the payment of all the liabilities
dissolution specified in No.2 under the “Unlimited
Liability Rule”.
b. Authority to Wind-Up: Only the Partners who have not
wrongfully dissolved the Partnership or the Legal (2) The liabilities of the partnership shall rank in order
Representative of the Last Surviving Partner of payment, as follows:
Article 1836. Unless otherwise agreed, the partners who (a) Those owing to creditors other than
have not wrongfully dissolved the partnership or the legal partners,
representative of the last surviving partner, not insolvent,
has the right to wind up the partnership affairs, provided, (b) Those owing to partners other than for
however, that any partner, his legal representative or his capital and profits,
assignee, upon cause shown, may obtain winding up by the
court. (c) Those owing to partners in respect of
capital,
c. Upon Dissolution and Winding-Up. Partners shall
contribute the amount necessary to satisfy the (d) Those owing to partners in respect of
partnership liabilities profits.