BUSINESS LAWS AND REGULATIONS

Lecture Notes 1.
WEEK 1-4 MATERIALS
rights are contributed
PARTNERSHIP - It must be in a public instrument and
 A contract whereby two or more an inventory signed by the parties
persons bind themselves to contribute must be attached. Otherwise, the
money, property or industry to a partnership is INVALID.
common fund with the intention of
dividing the profits among EXCEPTION TO THE
themselves. EXCEPTION:
- SC said if no third party will be
ELEMENTS
prejudiced, nullity of the partnership
1. Two or more persons bound
agreement will not prevent the court
themselves to contribute money,
from considering it as an ordinary
property or industry to a common
contract.
fund.
2. Intention to divide profits 2. When the partnership capital is PHP
- The contract of partnership is 3,000 or more
CONSENSUAL. Perfected by
- Must be in public instrument but
meeting of minds with respect to the
failure to comply does not affect the
object and consideration of the
existence of the juridical entity.
contract.
- Partnership with a capital of at least
ENTITY THEORY 3,000 must be registered with SEC.
 At the time of perfection, the Juridical personality still exists if not
partnership has personality separate registered in SEC.
and distinct from the partners.
 The PAT can acquire properties in its - Any capacitated person can be a
own name. partner.
 It may conduct business using its own DELECTUS PERSONAE
name which may or may not include - The partners choose with whom they
the names of the partners. will enter into a partnership
 The partnership should be impleaded agreement, who will be accepted in
in cases involving a property their partnership and whether they
registered in the name of the will remain as partners.
partnership.
DISQUALIFICATIONS IN
REAL PARTY IN INTEREST
UNIVERSAL PARTNERSHIP
- No formality is required. It need not
- Those who are prohibited from
to be in writing.
making donations can’t be partners.
EXCEPT:
1. Persons guilty of adultery or
1. When immovable property or real
concubinage at the time of the donation.
2. Persons found guilty of same criminal - Cannot be created by law, only by
offense in consideration thereof. agreement can be created by law and
3. Made to public officer or his wife, by agreement
defendants, ascendants by reason of his - Intent to distribute profit VS. No
office. intent
- Valid stipulation not to divide
PARTNERSHIP CORPORATION property for more than 10 years
- Created by mere agreement - Mutual agency: Does not apply
- Commences only from the issuance of - Death extinguishes VS. Death does
the Certificate of Registration not extinguish
- Subject only to what the parties have - Assignment does not result to
agreed upon partnership VS. Assignment may
- More restricted powers because of result to co-ownership
limited personality - May validly stipulate the division of
- MUTUAL AGENCY: Each general profit
partner may represent and bind the - Stipulation that it shall be divided not
partnership. respective in the interest is void
- Stockholders are not agents of the
corporation. JOINT VENTURE
- Interests cannot be transferred without  Association of persons or companies
the consent of the partners. jointly undertaking some commercial
- Can be freely transferred enterprise, generally all contribute
- Death of partner dissolved partnership assets and share risks.
- Does not dissolve partnership joint  Form of partnership and should be
accounts governed by law of partnership
- Separate and distinct personality
UNIVERSAL PARTNERSHIP
- No juridical personality
 May refer to all the present property
- Can adopt a partnership name
or all the profits.
- No commercial name common to all
 In absence of any statement, Universal
participants can be adopted
pat is presumed to be one of
 All general partners may be liable PROFITS only.
even up to the extent of their personal
properties and may therefore be sues UNIVERSAL PARTNERSHIP OF
by third person. ALL PRESENT PROPERTIES
 The person carrying on the joint  The partners contribute all the
business can be sued and is liable to properties tat actually belong to them
persons transacting with the former. AT THE TIME OF THE
PERFECTION to a common fund or
PARTNERSHIP CO-OWNERSHIP shall become part of the partnership
- Has juridical personality VS. No property, with the intention of
juridical personality dividing the same among themselves,
as well as all the profits which they
may acquire therewith.
 Property acquired subsequently by CAPITALIST PARTNER
INHERITANCE, LEGACY OR  One who contributes money or
DONATION, cannot be included in property.
stipulation making future properties
EXCEPT fruits thereof. INDUSTRIAL PARTNER
 One who contributes industry. He
UNIVERSAL PARTNERSHIP OF cannot be liable for losses. He cannot
PROFITS engage in business unless expressly
 Comprises of ALL that the partners provided for in the agreement.
may acquire by their industry or work
during the existence of the GENERAL PARTNER
partnership. Partners shall retain  One who controls and manages the
ownership their properties but partnership and is liable for
usufruct shall pertain to partnership. partnership obligations.

GENERAL PARTNERSHIP LIMITED PARTNERS

 The partners are all liable for all  He is not personally liable for
partnership obligations even up to the partnership obligations but is not
extent of their personal properties. involved in the management.
There is no limited partner.
MANAGING PARTNER
LIMITED PARTNERSHIP  One who is designated as the person
 There are limited and general who will administer the affairs of
Partners partnership.

PARTNERSHIP AT WILL LIQUIDATING PARTNER

 Does not fix its term. The birth and  Winds up the affairs
life of this type is predicated on the
mutual desire and consent of the ASSOCIATE/SUBPARTNER
partners. He is not a real partner but he is the
one with who a partner shares his profits
DE FACTO PARTNERSHIP in partnership.
 Partnership if legal formalities are not - A corporation cannot become a
complied with. It cannot exist because member of a partnership in absence of
partnership is perfected by mere express authorization by statute or
consent. charter.
- The mutual agency would be
DE JURE PARTNERSHIP inconsistent with the policy of law
 Merely by consent as to the elements
that the corporation shall manage its
of the contract.
own affairs separately. Such
 If no intent to enter into a partnership,
arrangement would improperly allow
there can be no partnership whether de
corporate property to be subject of
facto
risks not contemplated by the
or de jure.
stockholders.
EXCEPTION BY SEC: Allowed if 2. Obedience
complied with the following conditions: 3. Diligence
1. Authority to enter into partnership 4. Inform
2. Nature of the business venture of
partnership is in line with the business DUTY OF LOYALTY
authorized by the charter or AOI - Duty not to act adversely to the
3. Partnership must be limited and interest of the partnership.
corporation is a limited partner - If a debtor is indebted in the
- Spouses cannot enter into a universal partnership and a managing partner
partnership. But it may enter limited and the latter was able to collect from
partnership with another spouse. the said debtor, The partner should
divide what he has collected and apply
OBLIGATIONS OF PARTNERS it to both debts in proportion to their
- To contribute money or property amount.
- The partner becomes the debtor from - Application of payment shall only be
the time of execution applied if the debt to the managing
- Liable to pay interest and damages partner is more onerous to the debt to
even if not stipulated and even the partnership.
without demand from the time the - If the debt is given in the name of the
execution unless different time is partnership, the entire amount should
stipulated. be paid to the partnership.
- If property, the partner who fails bears - If debt is given in the name of the
the risk of loss partner, in proportion of the amount of
- Partner who contributed the property debts.
is liable for warranty against hidden  INDUSTRIAL cannot engage in ANY
defects and eviction business for himself UNLESS
- It cannot be agreed upon that all will authorized by the partnership. If he
only contribute INDUSTRY in a engages, he may be excluded and be
partnership required to pay damages.
- If there is no agreement to contrary, a  CAPITALIST cannot engage in the
capitalist must contribute additional SAME LINE OF BUSINESS unless
capital to save the partnership in case expressly permitted. If he violated,
of imminent loss Profits of capitalist partners belong to
- IF HE FAILS TO CONTRIBUTE: he PARTNERSHIP and he shall bear the
may be obliged to sell his interest to loss.
other partners.  Partner must account for the common
- Partners have fiduciary duty that benefit all the secret profits connected
requires them to act in good faith and with the affairs or use of property of
with fairness. the partnership.
 When money or property have been
FIDUCIARY DUTIES OF received for a specific purpose, and he
PARTNER (LODI) misappropriated, HE IS LIABLE FOR
1. Loyalty ESTAFA
DUTY OF OBEDIENCE full information of things affecting
- Must adhere to the provisions of partnership
partnership agreement and decisions 7. Right to accounting when:
of partners A. If he is wrongfully excluded from the
- A partner is liable to the partnership partnership business
for any damage caused by his B. If agreed upon
negligence C. If he derives secret profits
- Negligent partner cannot compensate D. Whether other circumstances render it
the DAMAGE with the profits and just or reasonable.
benefits he earned.
DUTY TO INFORM
- Notice to the partner is notice to the
partnership unless there is fraud
- A partner who is in charge of the
books has the duty to allow other
partners to inspect books and records. TITLE IX
And has the duty to render accounting
in proper cases. Partnership
RIGHTS OF PARTNERS CHAPTER 1
1. Participate in management General Provisions
- May execute all acts of administration
unless otherwise agreed. ARTICLE 1767
By the contract of partnership two or
2. Rights to share in the profits.
more persons bind themselves to
Distribution shall be in accordance with:
contribute money, property, or industry to
A. Will and stipulation
a common fund, with the intention of
B. If no stipulation, capital contributions
dividing the profits among themselves.
C. For industrial, if no stipulation: He is
NOT LIABLE for the losses. If he ARTICLE 1768
contributed The partnership has a juridical personality
a capital, he is also entitled to share in separate and distinct from that of each of
profits in proportion to his capital. the partners, even in case of failure to
GR: Partners are not entitled to comply with the requirements of article
compensation unless agreed upon. 1772, first paragraph. (n)
3. Right to reimbursement of expenditures ARTICLE 1769
incurred in behalf of partnership In determining whether a partnership
4. Right to return advances. exists, these rules shall apply:
(1) Except as provided by article 1825,
5. Right to return of capital
persons who are not partners as to each
6. Right to information and right to other are not partners as to third persons;
inspect and copy the partnership’s books (2) Co-ownership or co-possession does
at any reasonable hours and to demand not of itself establish a partnership,
whether such co-owners or co-possessors property or real rights are contributed
do or do not share any profits made by the thereto, in which case a public instrument
use of the property; shall be necessary. (1667a)
(3) The sharing of gross returns does not
of itself establish a partnership, whether ARTICLE 1772
or not the persons sharing them have a Every contract of partnership having a
joint or common right or interest in any capital of three thousand pesos or
property from more, in money or property, shall appear
which the returns are derived; in a public instrument, which
(4) The receipt by a person of a share of be recorded in the Office of the Securities
the profits of a business is prima facie and Exchange Commission.
evidence that he is a partner in the Failure to comply with the requirements
business, but no such inference shall be of the preceding paragraph shall not affect
drawn if such profits were received in the
payment: liability of the partnership and the
(a) As a debt by installments or otherwise; members thereof to third persons. (n)
(b) As wages of an employee or rent to a ARTICLE 1773
landlord; A contract of partnership is void,
(c) As an annuity to a widow or whenever immovable property is
representative of a deceased partner; contributed thereto, if an inventory of said
(d) As interest on a loan, though the property is not made, signed by the
amount of payment vary with the profits parties, and attached to the public
of the business; instrument. (1668a)
(e) As the consideration for the sale of a
goodwill of a business or other property ARTICLE 1774
by installments or otherwise. (n) Any immovable property or an interest
therein may be acquired in the partnership
ARTICLE 1770 name. Title so acquired can be conveyed
A partnership must have a lawful object only in the partnership name. (n)
or purpose, and must be established for
the common benefit or interest of the ARTICLE 1775
partners. When an unlawful partnership is Associations and societies, whose articles
dissolved by a judicial decree, the profits are kept secret among the
shall be confiscated in favor of the State, members, and wherein any one of the
without prejudice to the provisions of the members may contract in his own name
Penal Code governing the confiscation of with third persons, shall have no juridical
the instruments and effects of a crime. personality, and shall be governed by the
(1666a) provisions relating to co-ownership.
(1669)
ARTICLE 1771
A partnership may be constituted in any ARTICLE 1776
form, except where immovable As to its object, a partnership is either
universal or particular. As regards the
liability of the partners, a partnership may ARTICLE 1781
be general or limited. (1671a) Articles of universal partnership, entered
into without specification of its
ARTICLE 1777
nature, only constitute a universal
A universal partnership may refer to all
partnership of profits. (1676)
the present property or to all the profits.
(1672) ARTICLE 1782
ARTICLE 1778 Persons who are prohibited from giving
A partnership of all present property is each other any donation or advantage
that in which the partners contribute all cannot enter into universal partnership.
the property which actually belongs to (1677)
them to a common fund, with the
intention of dividing the same among ARTICLE 1783
themselves, as well as all the profits A particular partnership has for its object
which they may acquire therewith. (1673) determinate things, their use
or fruits, or a specific undertaking, or the
ARTICLE 1779 exercise of a profession or vocation.
In a universal partnership of all present (1678)
property, the property which belonged to
each of the partners at the time of the CHAPTER 2
constitution of the partnership, becomes Obligations of the Partners
the common property of all the partners,
as well as all the profits which they may SECTION 1
acquire therewith. Obligations of the Partners Among
A stipulation for the common enjoyment Themselves
of any other profits may also be made; but
the property which the partners may ARTICLE 1784
acquire subsequently by inheritance, A partnership begins from the moment of
legacy, or donation cannot be included in the execution of the contract, unless it is
such stipulation, except the fruits thereof. otherwise stipulated. (1679)
(1674a) ARTICLE 1785
ARTICLE 1780 When a partnership for a fixed term or
A universal partnership of profits particular undertaking is continued after
comprises all that the partners may the termination of such term or particular
acquire by their industry or work during undertaking without any express
the existence of the partnership. agreement, the rights and duties of the
Movable or immovable property which partners remain the same as they were at
each of the partners may possess at the such termination, so far as is consistent
time of the celebration of the contract with a partnership at will.
shall continue to pertain exclusively to A continuation of the business by the
each, only the usufruct passing to the partners or such of them as habitually
partnership. (1675) acted therein during the term, without any
settlement or liquidation of the
partnership affairs, is prima facie An industrial partner cannot engage in
evidence of a continuation of the business for himself, unless the
partnership. (n) partnership expressly permits him to do
so; and if he should do so, the capitalist
ARTICLE 1786 partners may either exclude him from the
Every partner is a debtor of the firm or avail themselves of the benefits
partnership for whatever he may have which he may have obtained in violation
promised to contribute thereto. of this provision, with a right to damages
He shall also be bound for warranty in in either case. (n)
case of eviction with regard to specific
ARTICLE 1790
and determinate things which he may
Unless there is a stipulation to the
have contributed to the partnership, in the
contrary, the partners shall contribute
same case and in the same manner as the
equal shares to the capital of the
vendor is bound with respect to the
partnership. (n)
vendee. He shall also be liable for the
fruits thereof from the time they should ARTICLE 1791
have been delivered, without the need of If there is no agreement to the contrary, in
any demand. (1681a) case of an imminent loss of the business
of the partnership, any partner who
ARTICLE 1787
refuses to contribute an additional share to
When the capital or a part thereof which a
the capital, except an industrial partner, to
partner is bound to contribute consists of
save the venture, shall be obliged to sell
goods, their appraisal must be made in the
his interest to the other partners. (n)
manner prescribed in the contract of
partnership, and in the absence of ARTICLE 1792
stipulation, it shall be made by experts If a partner authorized to manage collects
chosen by the partners, and according to a demandable sum, which was owed to
current prices, the subsequent changes him in his own name, from a person who
thereof being for the account of the owed the partnership another sum also
partnership. (n) demandable, the sum thus collected shall
be applied to the two credits in proportion
ARTICLE 1788
to their amounts, even though he may
A partner who has undertaken to
have given a receipt for his own credit
contribute a sum of money and fails to do
only; but should he have given it for the
so becomes a debtor for the interest and
account of the partnership credit, the
damages from the time he should have
amount shall be fully applied to the latter.
complied with his obligation.
The provisions of this article are
The same rule applies to any amount he
understood to be without prejudice to the
may have taken from the partnership
right granted to the debtor by article 1252,
coffers, and his liability shall begin from
but only if the personal credit of the
the time he converted the amount to his
partner should be more onerous to him.
own use. (1682)
(1684)
ARTICLE 1789
 ARTICLE 1793 The partnership shall be responsible to
A partner who has received, in whole or every partner for the amounts he may
in part, his share of a partnership credit, have disbursed on behalf of the
when the other partners have not collected partnership and for the corresponding
theirs, shall be obliged, if the debtor interest, from the time the expenses are
should thereafter become insolvent, to made; it shall also answer to each partner
bring to the partnership capital what he for the obligations he may have
received even though he may have given contracted in good faith in the interest of
receipt for his share only. (1685a) the partnership business, and for risks in
consequence of its management. (1688a)
ARTICLE 1794
Every partner is responsible to the ARTICLE 1797
partnership for damages suffered by it The losses and profits shall be distributed
through his fault, and he cannot in conformity with the agreement. If only
compensate them with the profits and the share of each partner in the profits has
benefits which he may have earned for the been agreed upon, the share of each in the
partnership by his industry. However, the losses shall be in the same proportion.
courts may equitably lessen this In the absence of stipulation, the share of
responsibility if through the partner’s each partner in the profits and losses shall
extraordinary efforts in other activities of be in proportion to what he may have
the partnership, unusual profits have been contributed, but the industrial partner
realized. (1686a) shall not be liable for the losses. As for
ARTICLE 1795 the profits, the industrial partner shall
The risk of specific and determinate receive such share as may be just and
things, which are not fungible, equitable under the circumstances. If
contributed to the partnership so that only besides his services he has contributed
their use and fruits may be for the capital, he shall also receive a share in the
common benefit, shall be borne by the profits in proportion to his capital.
partner who owns them. (1689a)

If the things contribute are fungible, or ARTICLE 1798

cannot be kept without deteriorating, or if If the partners have agreed to intrust to to
they were contributed to be sold, the risk a third person the designation of the share
shall be borne by the partnership. of each one in the profits and losses, such
designation may be impugned only when
In the absence of stipulation, the risk of it is manifestly inequitable. In no case
things brought and appraised in the may a partner who has begun to execute
inventory, shall also be borne by the the decision of the third person, or who
partnership, and in such case the claim has not impugned the same within a
shall be limited to the value at which they period of three months from the time he
were appraised. (1687) had knowledge thereof, complain of such
decision.
ARTICLE 1796
The designation of losses and profits disability of any one of them cannot be
cannot be intrusted to one of the partners. alleged, unless there is imminent danger
(1690) of grave or irreparable injury to the
partnership. (1694)
ARTICLE 1799
A stipulation which excludes one or more ARTICLE 1803
partners from any share in the profits or When the manner of management has not
losses is void. (1691) been agreed upon, the following rules
shall be observed:
ARTICLE 1800
The partner who has been appointed (1) All the partners shall be considered
manager in the articles of partnership may agents and whatever any one of them may
execute all acts of administration despite do alone shall bind the partnership,
the opposition of his partners, unless he without prejudice to the provisions of
should act in bad faith; and his power is article 1801.
irrevocable without just or lawful cause. (2) None of the partners may, without the
The vote of the partners representing the consent of the others, make any important
controlling interest shall be necessary for alteration in the immovable property of
such revocation of power. the partnership, even if it may be useful to
A power granted after the partnership has the partnership. But if the refusal of
been constituted may be revoked at any consent by the other partners is manifestly
time. (1692a) prejudicial to the interest of the
partnership, the court’s intervention may
ARTICLE 1801 be sought. (1695a)
If two or more partners have been
intrusted with the management of the ARTICLE 1804
partnership without specification of their Every partner may associate another
respective duties, or without a stipulation person with him in his share, but the
that one of them shall not act without the associate shall not be admitted into the
consent of all the others, each one may partnership without the consent of all the
separately execute all acts of other partners, even if the partner having
administration, but if any of them should an associate should be a manager. (1696)
oppose the acts of the others, the decision
ARTICLE 1805
of the majority shall prevail. In case of a
The partnership books shall be kept,
tie, the matter shall be decided by the
subject to any agreement between the
partners owning the controlling interest.
partners, at the principal place of business
(1693a)
of the partnership, and every partner shall
ARTICLE 1802 at any reasonable hour have access to and
In case it should have been stipulated that may inspect and copy any of them. (n)
none of the managing partners shall act
ARTICLE 1806
without the consent of the others, the
Partners shall render on demand true and
concurrence of all shall be necessary for
full information of all things affecting the
the validity of the acts, and the absence or
partnership to any partner or the legal
representative of any deceased partner or (1) His rights in specific partnership
of any partner under legal disability. (n) property;

ARTICLE 1807 (2) His interest in the partnership; and

Every partner must account to the (3) His right to participate in the
partnership for any benefit, and hold as management. (n)
trustee for it any profits derived by him
without the consent of the other partners ARTICLE 1811
from any transaction connected with the A partner is co-owner with his partners of
formation, conduct, or liquidation of the specific partnership property. The
partnership or from any use by him of its incidents of this co-ownership are such
property. (n) that:
ARTICLE 1808 (1) A partner, subject to the provisions of
The capitalist partners cannot engage for this Title and to any agreement between
their own account in any operation which the partners, has an equal right with his
is of the kind of business in which the partners to possess specific partnership
partnership is engaged, unless there is a property for partnership purposes; but he
stipulation to the contrary. has no right to possess such property for
any other purpose without the consent of
Any capitalist partner violating this his partners;
prohibition shall bring to the common
funds any profits accruing to him from his (2) A partner’s right in specific
transactions, and shall personally bear all partnership property is not assignable
the losses. (n) except in connection with the assignment
of rights of all the partners in the same
ARTICLE 1809 property;
Any partner shall have the right to a
formal account as to partnership affairs: (3) A partner’s right in specific
partnership property is not subject to
(1) If he is wrongfully excluded from the attachment or execution, except on a
partnership business or possession of its claim against the partnership. When
property by his co-partners; partnership property is attached for a
(2) If the right exists under the terms of partnership debt the partners, or any of
any agreement; them, or the representatives of a deceased
partner, cannot claim any right under the
(3) As provided by article 1807; homestead or exemption laws;
(4) Whenever other circumstances render (4) A partner’s right in specific
it just and reasonable. (n) partnership property is not subject to legal
support under article 291. (n)
SECTION 2
ARTICLE 1812
Property Rights of a Partner A partner’s interest in the partnership is
ARTICLE 1810 his share of the profits and surplus. (n)
The property rights of a partner are:
 ARTICLE 1813 may be redeemed at any time before
A conveyance by a partner of his whole foreclosure, or in case of a sale being
interest in the partnership does not of directed by the court, may be purchased
itself dissolve the partnership, or, as without thereby causing a dissolution:
against the other partners in the absence (1) With separate property, by any one or
of agreement, entitle the assignee, during more of the partners; or
the continuance of the partnership, to
interfere in the management or (2) With partnership property, by any one
administration of the partnership business or more of the partners with the consent
or affairs, or to require any information or of all the partners whose interests are not
account of partnership transactions, or to so charged or sold. Nothing in this Title
inspect the partnership books; but it shall be held to deprive a partner of his
merely entitles the assignee to receive in right, if any, under the exemption laws, as
accordance with his contract the profits to regards his interest in the partnership. (n)
which the assigning partner would
otherwise be entitled. However, in case of SECTION 3
fraud in the management of the Obligations of the Partners with
partnership, the assignee may avail Regard to Third Persons
himself of the usual remedies.
ARTICLE 1815
In case of a dissolution of the partnership,
Every partnership shall operate under a
the assignee is entitled to receive his
firm name, which may or may not include
assignor’s interest and may require an
the name of one or more of the partners.
account from the date only of the last
Those who, not being members of the
account agreed to by all the partners. (n)
partnership, include their names in the
ARTICLE 1814 firm name, shall be subject to the liability
Without prejudice to the preferred rights of a partner. (n)
of partnership creditors under Article ARTICLE 1816
1827, on due application to a competent
All partners, including industrial ones,
court by any judgment creditor of a
shall be liable pro rata with all their
partner, the court which entered the
property and after all the partnership
judgment, or any other court, may charge
assets have been exhausted, for the
the interest of the debtor partner with
contracts which may be entered into in the
payment of the unsatisfied amount of such
name and for the account of the
judgment debt with interest thereon; and
partnership, under its signature and by a
may then or later appoint a receiver of his
person authorized to act for the
share of the profits, and of any other
partnership. However, any partner may
money due or to fall due to him in respect
enter into a separate obligation to perform
of the partnership, and make all other
a partnership contract. (n)
orders, directions, accounts and inquiries
which the debtor partner might have ARTICLE 1817
made, or which the circumstances of the
case may require. The interest charged
Any stipulation against the liability laid (6) Submit a partnership claim or liability
down in the preceding article shall be to arbitration;
void, except as among the partners. (n)
(7) Renounce a claim of the partnership.
ARTICLE 1818 No act of a partner in contravention of a
Every partner is an agent of the restriction on authority shall bind the
partnership for the purpose of its business, partnership to persons having knowledge
and the act of every partner, including the of the restriction. (n)
execution in the partnership name of any
instrument, for apparently carrying on in ARTICLE 1819
the usual way the business of the  Where title to real property is in the
partnership of which he is a member partnership name, any partner may
binds the partnership, unless the partner convey title to such property by a
so acting has in fact no authority to act for conveyance executed in the
the partnership in the particular matter, partnership name; but the partnership
and the person with whom he is dealing may recover such property unless the
has knowledge of the fact that he has no partner’s act binds the partnership
such authority. under the provisions of the first
paragraph of article 1818, or unless
An act of a partner which is not
such property has been conveyed by
apparently for the carrying on of business
the grantee or a person claiming
of the partnership in the usual way does
through such grantee to a holder for
not bind the partnership unless authorized
value without knowledge that the
by the other partners. Except when
partner, in making the conveyance,
authorized by the other partners or unless
has exceeded his authority.
they have abandoned the business, one or
more but less than all the partners have no  Where title to real property is in the
authority to: name of the partnership, a conveyance
executed by a partner, in his own
(1) Assign the partnership property in
name, passes the equitable interest of
trust for creditors or on the assignee’s
the partnership, provided the act is
promise to pay the debts of the
one within the authority of the partner
partnership;
under the provisions of the first
(2) Dispose of the good-will of the paragraph of article 1818.
business;
 Where title to real property is in the
(3) Do any other act which would make it name of one or more but not all the
impossible to carry on the ordinary partners, and the record does not
business of a partnership; disclose the right of the partnership,
the partners in whose name the title
(4) Confess a judgment; stands may convey title to such
(5) Enter into a compromise concerning a property, but the partnership may
partnership claim or liability; meiriw recover such property if the partners’
act does not bind the partnership
under the provisions of the first
 paragraph of article 1818, unless the course of the business of the partnership
purchaser or his assignee, is a holder or with the authority of his co-partners,
for value, without knowledge. loss or injury is caused to any person, not
being a partner in the partnership, or any
 Where the title to real property is in
penalty is incurred, the partnership is
the name of one or more or all the
liable therefor to the same extent as the
partners, or in a third person in trust
partner so acting or omitting to act. (n)
for the partnership, a conveyance
executed by a partner in the ARTICLE 1823
partnership name, or in his own name, The partnership is bound to make good
passes the equitable interest of the the loss:
partnership, provided the act is one
within the authority of the partner (1) Where one partner acting within the
under the provisions of the first scope of his apparent authority receives
paragraph of article 1818. money or property of a third person and
misapplies it; and
 Where the title to real property is in
the names of all the partners a (2) Where the partnership in the course of
conveyance executed by all the its business receives money or property of
partners passes all their rights in such a third person and the money or property
property. (n) so received is misapplied by any partner
while it is in the custody of the
ARTICLE 1820 partnership. (n)
An admission or representation made by
any partner concerning partnership affairs ARTICLE 1824
within the scope of his authority in All partners are liable solidarily with the
accordance with this Title is evidence partnership for everything chargeable to
against the partnership. (n) the partnership under articles 1822 and
1823. (n)
ARTICLE 1821
Notice to any partner of any matter ARTICLE 1825
relating to partnership affairs, and the  When a person, by words spoken or
knowledge of the partner acting in the written or by conduct, represents
particular matter, acquired while a partner himself, or consents to another
or then present to his mind, and the representing him to anyone, as a
knowledge of any other partner who partner in an existing partnership or
reasonably could and should have with one or more persons not actual
communicated it to the acting partner, partners, he is liable to any such
operate as notice to or knowledge of the persons to whom such representation
partnership, except in the case of a fraud has been made, who has, on the faith
on the partnership, committed by or with of such representation, given credit to
the consent of that partner. (n) the actual or apparent partnership, and
if he has made such representation or
ARTICLE 1822 consented to its being made in a
Where, by any wrongful act or omission public manner he is liable to such
of any partner acting in the ordinary
 person, whether the representation has property, unless there is a stipulation to
or has not been made or the contrary. (n)
communicated to such person so
giving credit by or with the ARTICLE 1827
knowledge of the apparent partner The creditors of the partnership shall be
making the representation or preferred to those of each partner as
consenting to its being made: regards the partnership property. Without
prejudice to this right, the private
(1) When a partnership liability results, he creditors of each partner may ask the
is liable as though he were an actual attachment and public sale of the share of
member of the partnership; the latterin the partnership assets. (n)
(2) When no partnership liability results,
he is liable pro rata with the other CHAPTER 3
persons, if any, so consenting to the Dissolution and Winding Up
contract or representation as to incur
liability, otherwise separately. ARTICLE 1828
The dissolution of a partnership is the
 When a person has been thus change in the relation of the partners
represented to be a partner in an caused by any partner ceasing to be
existing partnership, or with one or associated in the carrying on as
more persons not actual partners, he is distinguished from the winding up of the
an agent of the persons consenting to business. (n)
such representation to bind them to
the same extent and in the same ARTICLE 1829
manner as though he were a partner in On dissolution the partnership is not
fact, with respect to persons who rely terminated, but continues until the
upon the representation. When all the winding up of partnership affairs is
members of the existing partnership completed. (n)
consent to the representation, a
partnership act or obligation results; ARTICLE 1830
but in all other cases it is the joint act Dissolution is caused:
or obligation of the person acting and (1) Without violation of the agreement
the persons consenting to the between the partners:
representation. (n)
(a) By the termination of the definite term
ARTICLE 1826 or particular undertaking specified in the
A person admitted as a partner into an agreement;
existing partnership is liable for all the
(b) By the express will of any partner,
obligations of the partnership arising
who must act in good faith, when no
before his admission as though he had
definite term or particular undertaking is
been a partner when such obligations
specified;
were incurred, except that this liability
shall be satisfied only out of partnership (c) By the express will of all the partners
who have not assigned their interests or
suffered them to be charged for their On application by or for a partner the
separate debts, either before or after the court shall decree a dissolution whenever:
termination of any specified term or
(1) A partner has been declared insane in
particular undertaking;
any judicial proceeding or is shown to be
(d) By the expulsion of any partner from of unsound mind;
the business bona fide in accordance with
(2) A partner becomes in any other way
such a power conferred by the agreement
incapable of performing his part of the
between the partners;
partnership contract;
(2) In contravention of the agreement
(3) A partner has been guilty of such
between the partners, where the
conduct as tends to affect prejudicially the
circumstances do not permit a dissolution
carrying on of the business;
under any other provision of this article,
by the express will of any partner at any (4) A partner wilfully or persistently
time; commits a breach of the partnership
agreement, or otherwise so conducts
(3) By any event which makes it unlawful
himself in matters relating to the
for the business of the partnership to be
partnership business that it is not
carried on or for the members to carry it
reasonably practicable to carry on the
on in partnership;
business in partnership with him;
(4) When a specific thing, which a partner
(5) The business of the partnership can
had promised to contribute to the
only be carried on at a loss;
partnership, perishes before the delivery;
in any case by the loss of the thing, when (6) Other circumstances render a
the partner who contributed it having dissolution equitable.
reserved the ownership thereof, has only
transferred to the partnership the use or On the application of the purchaser of a
enjoyment of the same; but the partner’s interest under article 1813 or
partnership shall not be dissolved by the 1814:
loss of the thing when it occurs after the (1) After the termination of the specified
partnership has acquired the ownership term or particular undertaking;
thereof;
(2) At any time if the partnership was a
(5) By the death of any partner; partnership at will when the interest was
(6) By the insolvency of any partner or of assigned or when the charging order was
the partnership; issued. (n)

(7) By the civil interdiction of any ARTICLE 1832

partner; Except so far as may be necessary to wind
up partnership affairs or to complete
(8) By decree of court under the following transactions begun but not then finished,
article. (1700a and 1701a) dissolution terminates all authority of any
partner to act for the partnership:
ARTICLE 1831
(1) With respect to the partners,
(a) When the dissolution is not by the act, (b) Though he had not so extended credit,
insolvency or death of a partner; or had nevertheless known of the partnership
prior to dissolution, and having no
(b) When the dissolution is by such act,
knowledge or notice of dissolution, the
insolvency or death of a partner, in cases
fact of dissolution had not been advertised
where article 1833 so requires;
in a newspaper of general circulation in
(2) With respect to persons not partners, the place (or in each place if more than
as declared in article 1834. (n) one) at which the partnership business
was regularly carried on.
ARTICLE 1833
Where the dissolution is caused by the The liability of a partner under the first
act, death or insolvency of a partner, each paragraph, No. 2, shall be satisfied out of
partner is liable to his co-partners for his partnership assets alone when such
share of any liability created by any partner had been prior to dissolution:
partner acting for the partnership as if the (1) Unknown as a partner to the person
partnership had not been dissolved unless: with whom the contract is made; and
(1) The dissolution being by act of any (2) So far unknown and inactive in
partner, the partner acting for the partnership affairs that the business
partnership had knowledge of the reputation of the partnership could not be
dissolution; or said to have been in any degree due to his
(2) The dissolution being by the death or connection with it.
insolvency of a partner, the partner acting The partnership is in no case bound by
for the partnership had knowledge or any act of a partner after dissolution:
notice of the death or insolvency.
(1) Where the partnership is dissolved
because it is unlawful to carry on the
ARTICLE 1834 business, unless the act is appropriate for
winding up partnership affairs; or
After dissolution, a partner can bind the
partnership, except as provided in the (2) Where the partner has become
third paragraph of this article: insolvent; or ewIisi
(1) By any act appropriate for winding up (3) Where the partner has no authority to
partnership affairs or completing wind up partnership affairs; except by a
transactions unfinished at dissolution; transaction with one who —
(2) By any transaction which would bind (a) Had extended credit to the partnership
the partnership if dissolution had not prior to dissolution and had no knowledge
taken place, provided the other party to or notice of his want of authority; or
the transaction:
(b) Had not extended credit to the
(a) Had extended credit to the partnership partnership prior to dissolution, and
prior to dissolution and had no knowledge having no knowledge or notice of his
or notice of the dissolution; or want of authority, the fact of his want of
authority has not been advertised in the
manner provided for advertising the fact ARTICLE 1837
of dissolution in the first paragraph, No. 2 When dissolution is caused in any way,
(b). except in contravention of the partnership
Nothing in this article shall affect the agreement, each partner, as against his co-
liability under article 1825 of any person partners and all persons claiming through
who after dissolution represents himself them in respect of their interests in the
or consents to another representing him as partnership, unless otherwise agreed, may
a partner in a partnership engaged in have the partnership property applied to
carrying on business. (n) discharge its liabilities, and the surplus
applied to pay in cash the net amount
ARTICLE 1835 owing to the respective partners. But if
 The dissolution of the partnership dissolution is caused by expulsion of a
does not of itself discharge the partner, bona fide under the partnership
existing liability of any partner. agreement and if the expelled partner is
discharged from all partnership liabilities,
 A partner is discharged from any
either by payment or agreement under the
existing liability upon dissolution of
second paragraph of article 1835, he shall
the partnership by an agreement to
receive in cash only the net amount due
that effect between himself, the
him from the partnership.
partnership creditor and the person or
partnership continuing the business; When dissolution is caused in
and such agreement may be inferred contravention of the partnership
from the course of dealing between agreement the rights of the partners shall
the creditor having knowledge of the be as follows:
dissolution and the person or
(1) Each partner who has not caused
partnership continuing the business.
dissolution wrongfully shall have:
 The individual property of a deceased
(a) All the rights specified in the first
partner shall be liable for all
paragraph of this article, and
obligations of the partnership incurred
while he was a partner, but subject to (b) The right, as against each partner who
the prior payment of his separate has caused the dissolution wrongfully, to
debts. (n) damages for breach of the agreement.
ARTICLE 1836 (2) The partners who have not caused the
Unless otherwise agreed, the partners who dissolution wrongfully, if they all desire
have not wrongfully dissolved the to continue the business in the same name
partnership or the legal representative of either by themselves or jointly with
the last surviving partner, not insolvent, others, may do so, during the agreed term
has the right to wind up the partnership for the partnership and for that purpose
affairs, provided, however, that any may possess the partnership property,
partner, his legal representative or his provided they secure the payment by bond
assignee, upon cause shown, may obtain approved by the court, or pay any partner
winding up by the court. (n) who has caused the dissolution
wrongfully, the value of his interest in the
partnership at the dissolution, less any in the partnership and for any capital or
damages recoverable under the second advances contributed by him;
paragraph, No. 1 (b) of this article, and in
(2) To stand, after all liabilities to third
like manner indemnify him against all
persons have been satisfied, in the place
present or future partnership liabilities.
of the creditors of the partnership for any
(3) A partner who has caused the payments made by him in respect of the
dissolution wrongfully shall have: partnership liabilities; and
(a) If the business is not continued under (3) To be indemnified by the person
the provisions of the second paragraph, guilty of the fraud or making the
No. 2, all the rights of a partner under the representation against all debts and
first paragraph, subject to liability for liabilities of the partnership. (n)
damages in the second paragraph, No. 1
(b), of this article. ARTICLE 1839
In settling accounts between the partners
(b) If the business is continued under the after dissolution, the following rules shall
second paragraph, No. 2, of this article, be observed, subject to any agreement to
the right as against his co-partners and all the contrary:
claiming through them in respect of their
interests in the partnership, to have the (1) The assets of the partnership are:
value of his interest in the partnership, (a) The partnership property,
less any damage caused to his co-partners
by the dissolution, ascertained and paid to (b) The contributions of the partners
him in cash, or the payment secured by a necessary for the payment of all the
bond approved by the court, and to be liabilities specified in No. 2.
released from all existing liabilities of the (2) The liabilities of the partnership shall
partnership; but in ascertaining the value rank in order of payment, as follows:
of the partner’s interest the value of the
good-will of the business shall not be (a) Those owing to creditors other than
considered. (n) partners,

ARTICLE 1838 (b) Those owing to partners other than for

Where a partnership contract is rescinded capital and profits,
on the ground of the fraud or (c) Those owing to partners in respect of
misrepresentation of one of the parties capital,
thereto, the party entitled to rescind is,
without prejudice to any other right, (d) Those owing to partners in respect of
entitled: profits.

(1) To a lien on, or right of retention of, (3) The assets shall be applied in the order
the surplus of the partnership property of their declaration in No. 1 of this article
after satisfying the partnership liabilities to the satisfaction of the liabilities.
to third persons for any sum of money
paid by him for the purchase of an interest
(4) The partners shall contribute, as partner retires and assigns (or the
provided by article 1797, the amount representative of the deceased partner
necessary to satisfy the liabilities. assigns) his rights in partnership property
to two or more of the partners, or to one
(5) An assignee for the benefit of
or more of the partners and one or more
creditors or any person appointed by the
third persons, if the business is continued
court shall have the right to enforce the
without liquidation of the partnership
contributions specified in the preceding
affairs;
number.
(2) When all but one partner retire and
(6) Any partner or his legal representative
assign (or the representative of a deceased
shall have the right to enforce the
partner assigns) their rights in partnership
contributions specified in No. 4, to the
property to the remaining partner, who
extent of the amount which he has paid in
continues the business without liquidation
excess of his share of the liability.
of partnership affairs, either alone or with
(7) The individual property of a deceased others;
partner shall be liable for the
(3) When any partner retires or dies and
contributions specified in No. 4.
the business of the dissolved partnership
(8) When partnership property and the is continued as set forth in Nos. 1 and 2 of
individual properties of the partners are in this article, with the consent of the retired
possession of a court for distribution, partners or the representative of the
partnership creditors shall have priority deceased partner, but without any
on partnership property and separate assignment of his right in partnership
creditors on individual property, saving property;
the rights of lien or secured creditors.
(4) When all the partners or their
(9) Where a partner has become insolvent representatives assign their rights in
or his estate is insolvent, the claims partnership property to one or more third
against his separate property shall rank in persons who promise to pay the debts and
the following order: who continue the business of the
dissolved partnership;
(a) Those owing to separate creditors;
(5) When any partner wrongfully causes a
(b) Those owing to partnership creditors; dissolution and the remaining partners
(c) Those owing to partners by way of continue the business under the provisions
contribution. (n) of article 1837, second paragraph, No. 2,
either alone or with others, and without
ARTICLE 1840 liquidation of the partnership affairs;
In the following cases creditors of the
dissolved partnership are also creditors of (6) When a partner is expelled and the
the person or partnership continuing the remaining partners continue the business
business: either alone or with others without
liquidation of the partnership affairs.
(1) When any new partner is admitted into
an existing partnership, or when any
 The liability of a third person of accounts as between him or his estate
becoming a partner in the partnership and the person or partnership continuing
continuing the business, under this the business, unless otherwise agreed, he
article, to the creditors of the or his legal representative as against such
dissolved partnership shall be satisfied person or partnership may have the value
out of the partnership property only, of his interest at the date of dissolution
unless there is a stipulation to the ascertained, and shall receive as an
contrary. ordinary creditor an amount equal to the
value of his interest in the dissolved
 When the business of a partnership
partnership with interest, or, at his option
after dissolution is continued under
or at the option of his legal representative,
any conditions set forth in this article
in lieu of interest, the profits attributable
the creditors of the dissolved
to the use of his right in the property of
partnership, as against the separate
the dissolved partnership; provided that
creditors of the retiring or deceased
the creditors of the dissolved partnership
partner or the representative of the
as against the separate creditors, or the
deceased partner, have a prior right to
representative of the retired or deceased
any claim of the retired partner or the
partner, shall have priority on any claim
representative of the deceased partner
arising under this article, as provided by
against the person or partnership
article 1840, third paragraph. (n)
continuing the business, on account of
the retired or deceased partner’s ARTICLE 1842
interest in the dissolved partnership or The right to an account of his interest
on account of any consideration shall accrue to any partner, or his legal
promised for such interest or for his representative as against the winding up
right in partnership property. partners or the surviving partners or the
 Nothing in this article shall be held to person or partnership continuing the
modify any right of creditors to set business, at the date of dissolution, in the
aside any assignment on the ground of absence of any agreement to the contrary.
fraud. The use by the person or (n)
partnership continuing the business of
the partnership name, or the name of a
deceased partner as part thereof, shall
not of itself make the individual CHAPTER 4
property of the deceased partner liable Limited Partnership
for any debts contracted by such
person or partnership. (n) ARTICLE 1843
A limited partnership is one formed by
ARTICLE 1841 two or more persons under the provisions
When any partner retires or dies, and the of the following article, having as
business is continued under any of the members one or more general partners
conditions set forth in the preceding and one or more limited partners. The
article, or in article 1837, second limited partners as such shall not be
paragraph, No. 2, without any settlement
bound by the obligations of the (k) The right, if given, of the partners to
partnership. admit additional limited partners;

ARTICLE 1844 (l) The right, if given, of one or more of

Two or more persons desiring to form a the limited partners to priority over other
limited partnership shall: limited partners, as to contributions or as
to compensation by way of income, and
(1) Sign and swear to a certificate, which the nature of such priority;
shall state —
(m) The right, if given, of the remaining
(a) The name of the partnership, adding general partner or partners to continue the
thereto the word “Limited”; business on the death, retirement, civil
(b) The character of the business; interdiction, insanity or insolvency of a
general partner; and
(c) The location of the principal place of
business; (n) The right, if given, of a limited partner
to demand and receive property other than
(d) The name and place of residence of cash in return for his contribution.
each member, general and limited
partners being respectively designated; (2) File for record the certificate in the
Office of the Securities and Exchange
(e) The term for which the partnership is Commission.
to exist;
A limited partnership is formed if there
(f) The amount of cash and a description has been substantial compliance in good
of and the agreed value of the other faith with the foregoing requirements.
property contributed by each limited
partner; ARTICLE 1845
The contributions of a limited partner
(g) The additional contributions, if any, to
be made by each limited partner and the may be cash or property, but not services.
times at which or events on the happening
of which they shall be made;
ARTICLE 1846
The surname of a limited partner shall not
(h) The time, if agreed upon, when the appear in the partnership name unless:
contribution of each limited partner is to
be returned; (1) It is also the surname of a general
partner, or
(i) The share of the profits or the other
compensation by way of income which (2) Prior to the time when the limited
each limited partner shall receive by partner became such, the business had
reason of his contribution; been carried on under a name in which his
surname appeared.
(j) The right, if given, of a limited partner
to substitute an assignee as contributor in A limited partner whose surname appears
his place, and the terms and conditions of in a partnership name contrary to the
the substitution; provisions of the first paragraph is liable
as a general partner to partnership
creditors who extend credit to the (1) Do any act in contravention of the
partnership without actual knowledge that certificate;
he is not a general partner.
(2) Do any act which would make it
ARTICLE 1847 impossible to carry on the ordinary
If the certificate contains a false business of the partnership;
statement, one who suffers loss by (3) Confess a judgment against the
reliance on such statement may hold partnership;
liable any party to the certificate who
knew the statement to be false: (4) Possess partnership property, or assign
their rights in specific partnership
(1) At the time he signed the certificate property, for other than a partnership
(2) Subsequently, but within a sufficient purpose;
time before the statement was relied upon (5) Admit a person as a general partner;
to enable him to cancel or amend the
certificate, or to file a petition for its (6) Admit a person as a limited partner,
cancellation or amendment as provided in unless the right so to do is given in the
article 1865. certificate;

ARTICLE 1848 (7) Continue the business with partnership

A limited partner shall not become liable property on the death, retirement,
as a general partner unless, in addition to insanity, civil interdiction or insolvency
the exercise of his rights and powers as a of a general partner, unless the right so to
limited partner, he takes part in the do is given in the certificate.
control of the business.
ARTICLE 1851
ARTICLE 1849 A limited partner shall have the same
After the formation of a limited rights as a general partner to:
partnership, additional limited partners (1) Have the partnership books kept at the
may be admitted upon filing an principal place of business of the
amendment to the original certificate in partnership, and at a reasonable hour to
accordance with the requirements of inspect and copy any of them;
article 1865.
(2) Have on demand true and full
ARTICLE 1850 information of all things affecting the
A general partner shall have all the rights partnership, and a formal account of
and powers and be subject to all the partnership affairs whenever
restrictions and liabilities of a partner in a circumstances render it just and
partnership without limited partners. reasonable; and
However, without the written consent or
ratification of the specific act by all the (3) Have dissolution and winding up by
limited partners, a general partner or all of decree of court.
the general partners have no authority to: A limited partner shall have the right to
receive a share of the profits or
otherccompensation by way of income,
and to the return of his contribution as the assets. No limited partner shall in
provided in Articles 1856 and 1857. respect to any such claim:

ARTICLE 1852 (1) Receive or hold as collateral security

Without prejudice to the provisions of any partnership property, or
article 1848, a person who has contributed (2) Receive from a general partner or the
to the capital of a business conducted by a partnership any payment, conveyance, or
person or partnership erroneously release from liability, if at the time the
believing that he has become a limited assets of the partnership are not sufficient
partner in a limited partnership, is not, by to discharge partnership liabilities to
reason of his exercise of the rights of a persons not claiming as general or limited
limited partner, a general partner with the partners.
person or in the partnership carrying on
the business, or bound by the obligations The receiving of collateral security, or
of such person or partnership; provided payment, conveyance, or release in
that on ascertaining the mistake he violation of the foregoing provisions is a
promptly renounces his interest in the fraud on the creditors of the partnership.
profits of the business, or other
compensation by way of income.
ARTICLE 1855
Where there are several limited partners
ARTICLE 1853 the members may agree that one or more
 A person may be a general partner and of the limited partners shall have a
a limited partner in the same priority over other limited partners as to
partnership at the same time, provided the return of their contributions, as to their
that this fact shall be stated in the compensation by way of income, or as to
certificate provided for in article 1844. any other matter. If such an agreement is
made it shall be stated in the certificate,
 A person who is a general, and also at
and in the absence of such a statement all
the same time a limited partner, shall
the limited partners shall stand upon equal
have all the rights and powers and be
footing.
subject to all the restrictions of a
general partner; except that, in respect ARTICLE 1856
to his contribution, he shall have the A limited partner may receive from the
rights against the other members partnership the share of the profits or the
which he would have had if he were compensation by way of income
not also a general partner. stipulated for in the certificate; provided,
that after such payment is made, whether
ARTICLE 1854 from the property of the partnership or
A limited partner also may loan money to
that of a general partner, the partnership
and transact other business with the
assets are in excess of all liabilities of the
partnership, and, unless he is also a
partnership except liabilities to limited
general partner, receive on account of
partners on account of their contributions
resulting claims against the partnership,
and to general partners.
with general creditors, a pro rata share of
ARTICLE 1857
A limited partner shall not receive from a (1) He rightfully but unsuccessfully
general partner or out of partnership demands the return of his contribution, or
property any part of his contributions
(2) The other liabilities of the partnership
until:
have not been paid, or the partnership
(1) All liabilities of the partnership, property is insufficient for their payment
except liabilities to general partners and to as required by the first paragraph, No. 1,
limited partners on account of their and the limited partner would otherwise
contributions, have been paid or there be entitled to the return of his
remains property of the partnership contribution.
sufficient to pay them;
ARTICLE 1858
(2) The consent of all members is had, A limited partner is liable to the
unless the return of the contribution may partnership:
be rightfully demanded under the
provisions of the second paragraph; and (1) For the difference between his
contribution as actually made and that
(3) The certificate is cancelled or so stated in the certificate as having been
amended as to set forth the withdrawal or made, and
reduction.
(2) For any unpaid contribution which he
Subject to the provisions of the first agreed in the certificate to make in the
paragraph, a limited partner may future at the time and on the conditions
rightfully demand the return of his stated in the certificate.
contribution:
A limited partner holds as trustee for the
(1) On the dissolution of a partnership, or partnership:
(2) When the date specified in the (1) Specific property stated in the
certificate for its return has arrived, or certificate as contributed by him, but
(3) After he has given six months’ notice which was not contributed or which has
in writing to all other members, if no time been wrongfully returned, and
is specified in the certificate, either for the (2) Money or other property wrongfully
return of the contribution or for the paid or conveyed to him on account of his
dissolution of the partnership. contribution.
In the absence of any statement in the The liabilities of a limited partner as set
certificate to the contrary or the consent forth in this article can be waived or
of all the members, a limited partner, compromised only by the consent of all
irrespective of the nature of his members; but a waiver or compromise
contribution, has only the right to demand shall not affect the right of a creditor of a
and receive cash in return for his partnership who extended credit or whose
contribution. claim arose after the filing and before a
A limited partner may have the cancellation or amendment of the
partnership dissolved and its affairs certificate, to enforce such liabilities.
wound up when:
When a contributor has rightfully could not be ascertained from the
received the return in whole or in part of certificate.
the capital of his contribution, he is  The substitution of the assignee as a
nevertheless liable to the partnership for limited partner does not release the
any sum, not in excess of such return with assignor from liability to the
interest, necessary to discharge its partnership under articles 1847 and
liabilities to all creditors who extended 1858.
credit or whose claims arose before such
return. ARTICLE 1860
The retirement, death, insolvency,
ARTICLE 1859 insanity or civil interdiction of a general
 A limited partner’s interest is partner dissolves the partnership, unless
assignable. the business is continued by the remaining
 A substituted limited partner is a general partners:
person admitted to all the rights of a
limited partner who has died or has (1) Under a right so to do stated in the
assigned his interest in a partnership. certificate, or
 An assignee, who does not become a (2) With the consent of all members.
substituted limited partner, has no
right to require any information or ARTICLE 1861
account of the partnership transactions On the death of a limited partner his
or to inspect the partnership books; he executor or administrator shall have all
is only entitled to receive the share of the rights of a limited partner for the
the profits or other compensation by purpose of settling his estate, and such
way of income, or the return of his power as the deceased had to constitute
contribution, to which his assignor his assignee a substituted limited partner.
would otherwise be entitled. The estate of a deceased limited partner
 An assignee shall have the right to shall be liable for all his liabilities as a
become a substituted limited partner if limited partner.
all the members consent thereto or if ARTICLE 1862
the assignor, being thereunto  On due application to a court of
empowered by the certificate, gives competent jurisdiction by any creditor
the assignee that right. of a limited partner, the court may
 An assignee becomes a substituted charge the interest of the indebted
limited partner when the certificate is limited partner with payment of the
appropriately amended in accordance unsatisfied amount of such claim, and
with article 1865. may appoint a receiver, and make all
 The substituted limited partner has all other orders, directions, and inquiries
the rights and powers, and is subject which the circumstances of the case
to all the restrictions and liabilities of may require.
his assignor, except those liabilities of  The interest may be redeemed with
which he was ignorant at the time he the separate property of any general
became a limited partner and which partner, but may not be redeemed with
 partnership property. The remedies partners cease to be such. A certificate
conferred by the first paragraph shall shall be amended when:
not be deemed exclusive of others
(1) There is a change in the name of the
which may exist.
partnership or in the amount or character
 Nothing in this Chapter shall be held of the contribution of any limited partner;
to deprive a limited partner of his
(2) A person is substituted as a limited
statutory exemption.
partner;
ARTICLE 1863 (3) An additional limited partner is
In settling accounts after dissolution the
admitted;
liabilities of the partnership shall be
entitled to payment in the following order: (4) A person is admitted as a general
partner;
(1) Those to creditors, in the order of
priority as provided by law, except those (5) A general partner retires, dies,
to limited partners on account of their becomes insolvent or insane, or is
contributions, and to general partners; sentenced to civil interdiction and the
business is continued under article 1860;
(2) Those to limited partners in respect to
their share of the profits and other (6) There is a change in the character of
compensation by way of income on their the business of the partnership;
contributions;
(7) There is a false or erroneous statement
(3) Those to limited partners in respect to in the certificate;
the capital of their contributions;
(8) There is a change in the time as stated
(4) Those to general partners other than in the certificate for the dissolution of the
for capital and profits; partnership or for the return of a
contribution;
(5) Those to general partners in respect to
profits; (9) A time is fixed for the dissolution of
the partnership, or the return of a
(6) Those to general partners in respect to
contribution, no time having been
capital.
specified in the certificate, or
Subject to any statement in the certificate
(10) The members desire to make a
or to subsequent agreement, limited
change in any other statement in the
partners share in the partnership assets in
certificate in order that it shall accurately
respect to their claims for capital, and in
represent the agreement among them.
respect to their claims for profits or for
compensation by way of income on their ARTICLE 1865
contribution respectively, in proportion to The writing to amend a certificate shall:
the respective amounts of such claims.
(1) Conform to the requirements of article
ARTICLE 1864 1844 as far as necessary to set forth
The certificate shall be cancelled when clearly the change in the certificate which
the partnership is dissolved or all limited it is desired to make; and
(2) Be signed and sworn to by all (3) After the certificate is duly amended
members, and an amendment substituting in accordance with this article, the
a limited partner or adding a limited or amended certificate shall thereafter be for
general partner shall be signed also by the all purposes the certificate provided for in
member to be substituted or added, and this Chapter.
when a limited partner is to be substituted,
the amendment shall also be signed by the ARTICLE 1866
assigning limited partner. A contributor, unless he is a general
partner, is not a proper party to
The writing to cancel a certificate shall be proceedings by or against a partnership,
signed by all members. except where the object is to enforce a
A person desiring the cancellation or limited partner’s right against or liability
amendment of a certificate, if any person to the partnership.
designated in the first and second ARTICLE 1867
paragraphs as a person who must execute A limited partnership formed under the
the writing refuses to do so, may petition law prior to the effectivity of this Code,
the court to order a cancellation or may become a limited partnership under
amendment thereof. If the court finds that this Chapter by complying with the
the petitioner has a right to have the provisions of article 1844, provided the
writing executed by a person who refuses certificate sets forth:
to do so, it shall order the Office of the
Securities and Exchange Commission (1) The amount of the original
where the certificate is recorded to record contribution of each limited partner, and
the cancellation or amendment of the the time when the contribution was made;
certificate; and when the certificate is to and
be amended, the court shall also cause to (2) That the property of the partnership
be filed for record in said office a certified exceeds the amount sufficient to
copy of its decree setting forth the discharge its liabilities to persons not
amendment. claiming as general or limited partners by
A certificate is amended or cancelled an amount greater than the sum of the
when there is filed for record in the Office contributions of its limited partners.
of the Securities and Exchange A limited partnership formed under the
Commission, where the certificate is law prior to the effectivity of this Code,
recorded: until or unless it becomes a limited
(1) A writing in accordance with the partnership under this Chapter, shall
provisions of the first or second continue to be governed by the provisions
paragraph, or of the old law.

(2) A certified copy of the order of court

in accordance with the provisions of the
fourth paragraph;