GROUP 3

LAW ON
PARTNERSHIP
 PARTNERSHIP
(General Provision)

DEFINITION OF PARTNERSHIP (Article 1767)

BUSINESS PARTNERSHIP GENERAL PROFESSIONAL PARTNERSHIP

By the contract of partnership, two Two or more persons may also

or more persons bind themselves to form a partnership for the
contribute money, property, or exercise of a profession.
industry to a common fund, with
the intention of dividing the profits
among themselves.
Contract
is a meeting of minds between two
persons whereby one binds himself, with
respect to the other, to give something or
to render some service.

Industry
may be either physical manual effort or
intellectual, service or skills
 Three Elements
1. The partners have a common profession
2. The purpose is to practice the common profession
3. No part of the Net Income is derived from
engaging in any trade or business

General
Professional
Essential requisites of a contract of partnership
1. There must be a valid contract
Partnership
2. There must be a contribution of money, property, or
industry to a common fund
3. The partnership must be organized for gain or profit
4. The partnership should have a lawful object or purpose, and
must be established for the common benefit or interest of
the partners
 Characteristics of a
Contract of Partnership
(ConPriBiMuNoPreOne)

Consensual Nominate
1 it is perfected by mere consent 4 it has a special name given to
of the parties it by law

Principal Preparatory
It does not depend upon any other It is a means by which other
2 5 contract will be entered into as the
contract for its validity or existence
partnership pursues it business

It is mostly presented before

Bilateral Onerous
an audience.
the partners contribute money,
it is entered into by two or more
3 persons whose right and obligation 6 property or industry to a common
are reciprocal fund
 Partnership vs
Corporation
PARTNERSHIP CORPORATION

Voluntary
Created by the state in the form of a special
Creation agreement ng
character by a general enabling law
Partnership parties
vs.
Corporation
Number of It can be incorporated by not more than 15
2 or more person
Organizers incorporators.

Under the old corporation code, it can only

exist to not more than 50 years, but under the
Existence No time limit 
revised corporation code, corporation now
has a perpetual existence.
 Partnership Corporation

Liability of It may extend to private

Liable only to their capital contributions 
Owners property

All partners need to consent to

Transferability of Does not need the consent of the other
the transfer of interest to
interest stockholders. 
another

Generally, partners acting on Generally, stockholders cannot bind corp. Partnership

Ability of owners vs.
behalf of the partnership are since its official acts are through a board of
to bind the firm agents therefor; 
Corporation
directors.

A stockholder cannot sue a director who

mismanages, it must be in the name of the
Remedies in case corp. through a derivative suit.- Derivative
A partner can sue another
of suit - a suit that is filed on behalf of the
partner who mismanages 
Mismanagement corporation as the real party in interest and
the corporation is the one that is the
aggrieved party.
 Partnership Corporation

A partnership is a national Generally, under whose law it was

of the country where it is created onto whether domestic of
Nationality
created and dependent on foreign, and as to nationality, on the

the percentage of ownership of the outstanding capital

ownership stock.

Partnership
vs. Legal From the time the contract Generally, from the issuance of COR
Corporation Personality begins (Certificate of Registration)

None. Death, retirement,

Right of insolvency, civil interdiction,
Yes, such causes do not dissolve a corp.
Succession or insanity of a partner

dissolves the partnership.
Art. 1768
The partnership has a judicial personality
separate and distinct from that of each of the
Separate
partners. The partners can, in general: Juridical
Personality
1. Acquire and posses’ property of all kinds;
2. Incur obligations;
3. Bring civil or criminal action;
4. Adjudged insolvent even if the individual
members be each financially solvent.
Art. 1769
In determining whether a partnership exist, these rules shall be apply:

There is no partnership:
Rule 1: Between persons who are not partners as to each other are not
partners as to third person; except a partnership by estoppel.
Rule 2: Co-ownership or co-possession of itself, whether such co-owners or
co-possessors do or do not share any profits made by the use of property;
Rule 3: The sharing of gross returns, whether or not the persons sharing
them have a joint or common right or interest in any property from which
return are derived.
 Rule 4: The receipt by a person of a share of the profits of a business is
prima facie evidence that he is partner in the business

Exception in Rule 4:
a. Is a debt by installment or otherwise;
b. As wages of an employee or rent to a landlord;
c. As an annuity to a widow or representative of deceased partner;
d. As interest on a loan;
e. As the consideration for the sale of a goodwill of a business or other
property.
1. According to Object
Universal Partnership
Universal partnership of all present property
The partners contribute all the property which
actually belongs to them to a common fund, with the
intention of dividing the same among themselves, as
well as all the profits which they may acquire Kinds
therewith.
Universal partnership of all profits
of
It comprises all that the partners may acquire by their Partnership
industry or work during the existence of the
partnership.
Limited partnership
A particular partnership has for its object determinate,
their use or fruits, or specific undertaking, or the o a
profession or vocation.
 2. According to liability
General partnership
It is one where all the partners are general partners. All
general partners here are liable up to the extent of their
separate properties after the assets of the partnership Kinds
have been exhausted of
Limited partnership
It is one where there is at least one general partner and
Partnership
one limited partner. A general partner is liable beyond
his contribution while a limited partner is liable only to
the extent of his contribution.
 3. According to duration
Partnership at will
It is one where there is no fixed term or it is not formed
for a particular undertaking, or it is one for a fixed term
or particular undertaking which is continued after the
termination of such term or particular undertaking
without any express agreement. Kinds
of
Partnership with a fixed term
It is one where the life or period of existence of the
Partnership
partnership has been agreed upon by the partners.

Partnership for a particular undertaking

It is one where it will exist until the purpose is
accomplished.
 4. According to representation to others
Ordinary partnership
It is one where two or more persons bind themselves to
contribute money, property, or industry to a common
fund, with the intention of dividing the profits among
themselves.
Kinds
of
Partnership by estoppel
It is one where persons, by words spoken or written or
Partnership
by conduct, represent themselves, or consent to another
representing them to anyone, as partners in an existing
partnership or with one or more persons not actual
partners.
 5. According to the legality of its existence
De jure partnership
It is one which has complied with all the legal Kinds
requirements for its creation. of
De facto partnership
Partnership
It is one which has not complied with all the legal
requirements for its creation.
 General Rule:
No form is required. Thus, the contract
Form of may be oral or in writing.
Contract of
Partnership
Exception:
If real properties or real rights in real
properties are contributed regardless of
the value. A public instrument is
needed; otherwise, the contract of
partnership is void.
 REAL RIGHTS
A right that is connected with a thing rather than a person. Real rights include
ownership, use, habitation, usufruct, predial servitude, pledge and real mortgage.

PUBLIC INSTRUMENT
1. A document prepared by a notary public in the presence of the parties who sign it
before witnesses.
2. Art. 1772. Every contract of partnership having a capital of three thousand pesos or
more, in money or property, shall appear in a public instrument, which must be
recorded in the Office of the Securities and Exchange Commission.
3. Failure to comply with the requirements of the preceding paragraph shall not affect
the liability of the partnership and the members thereof to third persons. (n)
Partnership having a capital of P3,000 or Partnership having a capital of below
more (personal property only) P3,000 (personal property only)

The contract of partnership must appear No form is required. Thus, it may be

in a public instrument and must be verbal.
recorded in the office of the SEC. Take
note that non-compliance with the
requirement of execution in a public
instrument will not make the contract
void. Hence, it is still valid.
Purpose of Registration

The registration is to set "a condition for the issuance of licenses to engage
in business or trade. In this way, the tax liabilities of big partnerships cannot
be evaded, and the public can also determine more accurately their
membership and capital before dealing with them."

Art. 1773. A contract of partnership is void, whenever immovable property is

contributed thereto, if an inventory of said property is not made, signed by
the parties, and attached to the public instrument. (1668a)

Note: An inventory is still required if aside from real property, personal

property is contributed. However, the inventory need not include the
personal property.
A partnership may be constituted in Lest it be overlooked, the contract-
any form, save when immovable validating inventory requirement
property or real rights are under Article 1773 of the Civil Code
contributed thereto or when the applies as long as real property or
partnership has a capital of at least real rights are initially brought into
P3,000, in which case a public the partnership. In short, it is really of
instrument shall be necessary. And an no. moment which of the partners,
inventory to be signed by the parties contributed immovables. In context,
and attached to the public instrument the more important consideration is
is also indispensable to the validity of that real property was contributed, in
the partnership whenever immovable which case an inventory of the
property is contributed to it.35 contributed property duly signed by
the parties should be attached to the
public instrument, else there is legally
no partnership to speak of.
 Art. 1774
Any immovable property or an interest therein may be acquired in the
partnership name. Title so acquired can be conveyed only in the
partnership name. (n)
The reason for the above-stated provision is that a partnership has:
judicial personality separate and distinct from that of each of the

partners hence, immovable property to be acquired must be in the name WHAT IS THE
of the partnership and if conveyed must also be in the partnership name.
INTENTION
OF ARTICLE
1773?
Art. 1775

Associations and societies, whose articles are kept secre

among the members, and wherein any one of the members
may contrac in his own name with third persons, shall have no
juridical personality and shall be governed by the provisions
relating to co-ownership (1669)
 Partnership vs
Association
PARTNERSHIP ASSOCIATION

It has juridical
Juridical Personality It has no juridical personality.
personality.

Partnership
vs.
Association
Purpose It is for profit. It may not be for profit.

There is a contribution There is no contribution of

Contribution of of money, property, or capital although fees are usually
Members industry, or a collected from the members to
combination of these. maintain the organization.

The partnership is the Members are individually liable

Liability
one liable. for the debts of the association.
 The associations or societies here cannot
sue because it has no legal personality.
Partnership
vs. However, the fact that it has no legal
Association personality as a partnership cannot be
invoked by the "partners" for the
purpose of evading compliance with
obligations contracted by them, because
they who caused the nullity of a contract
are prohibited from availing of its
benefits.
1. When a partner has been appointed manager in the
articles of partnership
a. Scope of authority
The managing partner may execute all acts of
administration despite the opposition of his or her
partners unless he or she acts in bad faith. RULES
ON
b. Revocation of appointment of managing partner
MANAGEMENT
1. With just or lawful cause - the appointment of managing
partner can be revoked by the vote of the partners owning
the controlling interest.
2. Without just or lawful cause – the appointment of
managing partner can be revoked only with the consent of
all the partners including the managing partner because
such revocation would be a novation of the terms thereof.
2. When a partner has been appointed manager after
the partnership has been constituted
a. Scope of authority
The managing partner may execute all acts of
administration but in case of opposition by other partners,
the partners owning the controlling interest may resort to
voting for his or her removal as manager. RULES
ON
b. Revocation of appointment of managing partner
MANAGEMENT
The managing partner may be removed with or without
just or lawful cause by the vote of the partners owning the
controlling interest. This is so because such partner
(Managing partner) is only an agent whose authority may
be revoked at any time by his or her principal which is the
partnership.
3. When two or more partners have been appointed as
managers.
a. When there is specification of their respective duties
Scope of Authority
Each managing partner shall perform only the duties
specified in his or her appointment.
b. When there is no specification of their respective duties or RULES
there is no stipulation that one shall not act without the consent ON
of the others.
MANAGEMENT
Scope of authority
Each managing partner may separately execute all acts
of administration.
Rule in case of opposition of other managers
The decision of the majority of the managing partners
shall prevail (per head0.
In case of a ties, the decision of the managing partner/s
owning the controlling interest shall prevail.
 Example
ABCDEFG Company is owned by the following partners with their
respective contributions:
A (10,000)
B (20,000)
C (30,000)
D (40,000) RULES
E (50,000) ON
F (100,000) MANAGEMENT
G (200,000)
Except for F and G, all the rest are managers without any
specification as to their respective duties.

1. A wants to buy goods from NICE Company. E opposes it. B and C

side with A, while D sides with E.
2. Suppose that C abstains thereby creating a tie.
3. When two or more partners have been appointed as
managers.

c. When there is stipulation that none of the managing partners

shall act without the consent of others
Vote Required
RULES
The concurrence of all of them shall be necessary for the
validity of the acts.
ON
Rule in case of absence or disability of one of the managing
MANAGEMENT
partners
The absence of disability of one managing partner
cannot be alleged, i.e., the other managing partners are
not authorized to act for the partnership unless there is
imminent danger of grave or irreparable injury to the
partnership.
 4. When the manner of management has not been
agreed upon.

a. All of the partners shall be considered agents of the

partnership (all of them are managers)
However, none of them may, without the consent of the RULES
others, make any important alteration in the immovable
ON
property of the partnership, even if it may be useful to the
MANAGEMENT
partnership. But if the refusal to give consent by the other
partners is manifestly prejudicial to the interest of the
partnership, the court's intervention may be sought. in case
of absence or disability of one of the managing partners
b. Whatever any one of them may do alone shall bind the
partnership.
 4. When the manner of management has not been
agreed upon.
c. Rule in case of the opposition of the other partners
The decision of the majority shall prevail (per head).
In case of a tie, the decision of the partners owning the
controlling interest shall prevail

Example RULES
ABCDEFG Company is owned The partners did not designate who
ON
by the following partners with among themselves shall be the MANAGEMENT
their respective contributions: manager.
A (P10,000) 1. A wants to buy goods from NICE
Company. E opposes it. B, C and
B (P20,000)
D side with A, while F and G side
C (P30,000)
with E.
E (P50,000) 2. Suppose that C abstains from
F (P100,000) voting thereby creating a tie.
G (P200,000)
D (P40,000)
 Section 1 : Obligation of the Partners Among Themselves

Relations Created by a contract of

OBLIGATION Partnership
OF THE
PARTNERS A. Relations among partners themselves
B. Relations of the partners with the
partnership
C. Relation of the partnership with third
persons with whom it contracts
D. Relations of the partners with such
third person
1. As to contribution
a. Capitalist partners
money, property
b. Industrial Partners
Knowledge, service
c. Capitalist – industrial partners Kinds
Kinds of
of
money / property and industry
Partners
Partners
2. As to liability
a. General Partners
liable to third person
b. Limited Partners
Cannot be liable to third person
3. As to Management
a. Managing the Partners
Actively manage
b. Silent Partners
Do not active
c. Liquidating Partners
Take charge in winding up Kinds
Kinds of
of
4. As to third person
Partners
Partners
a. Ostensible partners
Active and known
b. Secret Partners
Not known
c. Dormant Partners
Both silent and secret
 5. As to membership
a. Real Partners
Partners in legal partnership
b. Partners by estoppel
Not really partner but represent
themselves
Kinds
Kinds of
of
6. As to contribution of the business affairs Partners
Partners
after dissolution

a. Continuing partners
Who continue the partnership
b. Discontinuing partners
Who do not continue the partnership
7. As the nature of membership
a. Original Partners
Members from time of constitution
b. Incoming partners
After establishment
c. Retiring Partners
Withdrawn Kinds
Kinds of
of
8. As to state of survivorship
Partners
Partners
a. Surviving Partners
Who continue after dissolution
b. Deceased partners
Who died while being member
9. As to effect of expulsion
a. Expelled partners
Who are expelled
b. Expelling Partners
Who caused the expulsion of a partner
Kinds
Kinds of
of
10. As to the value of the contribution Partners
Partners
a. Majority of the Partners
Represent the majority interest
b. Nominal Partners
Represent minority interest
 A. GENERAL RULE
From the moment of celebration of the
contract
Commencement
Commencement
of
of aa
Partnership
Partnership
B. EXCEPTION (Article
(Article 1784)
1784)
When there is a contrary stipulation that the
partnership is to be formed at some future time or on
the happening or fulfillment of some condition or
future contingency
 A partnership is unlimited as to its
duration in the sense that no time limit is
fixed by law. The duration may be agreed
upon – expressly, as when there is a definite
Duration
Duration ofof a
a
period or impliedly, as when a particular
Partnership
Partnership
enterprise is undertaken – it being
(Article
(Article 1785)
1785)
understood that the firm ends as soon as its
purpose has been achieved.
A. DUTY TO CONTRIBUTE
The contribution must be made ordinarily at the
time the partnership is entered into, unless a
Obligations
Obligations
different period is stipulated. Failure to contribute of
of the
the
would make the partner automatically liable as a partners
partners
debtor of the partnership and in default even among
among
without demand. themselves
themselves
B. DUTY TO WARRANT AGAINST EVICTION
and
and to
to the
the
The warranty in case of eviction refers to specific
partnership
partnership
and determinate things already contributed
(Article
(Article 1786)
1786)
C. DUTY TO DELIVER FRUITS
A partner shall be liable for the fruits thereof from
the time they should have been contributed to the
time of actual delivery, without the need of any
Obligations
Obligations
demand.
of
of the
the
D. DUTY TO PRESERVE PROPERTY
partners
partners
The partner must exercise due diligent in preserving
among
among
the property to be contributed, before he actually
themselves
themselves
contributed the same; otherwise, he can be held liable
and
and to
to the
the
for losses and deterioration. ( in relation to Article 1163) partnership
partnership
(Article
(Article 1786)
1786)
E. DUTY TO INDEMNIFY FOR DAMAGES
Damages in case the contribution is retained without
justifiable reason or contribution is delayed.
 A partnership is unlimited as to its
duration in the sense that no time limit is
fixed by law. The duration may be agreed
upon – expressly, as when there is a definite
Extend
Extend ofof
period or impliedly, as when a particular
Contribution
Contribution
enterprise is undertaken – it being
(Article
(Article 1790)
1790)
understood that the firm ends as soon as its
purpose has been achieved.
Necessary to determined hoe much has
been contributed by the partners in
order to determined the share of each
partner in the profits and losses in APPRAISAL
APPRAISAL
proportion to what he has contributed OF
OF GOODS
GOODS
in the absence of any stipulation to the
contrary.
A. As prescribed by the contract of
partnership. HOW
HOW
B. In default of the first, by experts APPRAISAL
APPRAISAL IS IS
chosen by the partners; and at
MADE
MADE
(Article
(Article 1787)
1787)
current prices.
In case when there is failure to
contribute or in cases when a partner
takes money from the partnership
DUTY
DUTY TOTO
coffers
INDEMNIFY
INDEMNIFY FOR FOR
The guilty partner is liable for both
INTEREST
INTEREST ANDAND
interest and damages from the time
DAMAGES
DAMAGES
he should have complied with is
(Article
(Article 1788)
1788)
obligation or from the tie he converted
the amount to his own use.
To contribute on the date due the amount he
has undertaken to contribute to the partnership
To reimburse any amount he may have taken
from the partnership coffers and converted to Obligation
Obligation With
With
his own use. Respect
Respect to
to
To pay the agreed or legal interest, if he fails to Contribution
Contribution ofof
pay his contribution on time or in case he takes Money
Money and
and
any amount from the common fund and Money
Money
convert it to his own use Converted
Converted to to
To indemnify the partnership for the damages Personal
Personal Use
Use
caused to it by the delay in the contribution or (Article
(Article 1788)
1788)
the conversion of any sum for his personal
benefits
RULES
RULES REGARDING
REGARDING RISK
RISK OF
OF LOSS
LOSS OF
OF THINGS
THINGS CONTRIBUTED
CONTRIBUTED OR
OR DELIVERED
DELIVERED
(Article
(Article 1795)
1795)
SPECIFIC AND DETERMINATE THINGS WHICH ARE NOT FUNGIBLE WHERE ONLY THE USE IS CONTRIBUTED
The risk is borne by the partners because he remains the owner of the things.

SPECIFIC AND DETERMINATE THINGS THE OWNERSHIP OF WHICH TRANSEFERED TO THE PARTNERSHIP
The risk is for the account of the partnership, being the owner

FUNGIBLE THINGS OR THINGS WHICH CANNOT BE KEPT WITHOUT DETERIORATING EVEN IF THEY ARE
CONTRIBUTED ONLY FOR THE USE OF THE PARTNERSHIP
The risk of loss is borne by the partnership evidently the ownership was being transferred since use
is impossible without the things being consumed or impaired

THINGS CONTRIBUTED TO BE SOLD

The partnership bear risk of loss for there cannot be any doubt that the partnership was intended
to be the owner.

THINGS BROUGHT AND APPRAISED IN THE INVENTORY

The partnership bears the risk of loss because the intention of the parties was to contribute to the
partnership the price of the things contributed with an appraisal in the inventory
An industrial partner cannot engage in
business for himself, unless the
partnership expressly permits him to do DUTY
DUTY NOT
NOT TO
TO
so. Consequently, if he engages in ENGAGE
ENGAGE IN IN ANY
ANY
business for himself such act is BUSINESS
BUSINESS
considered prejudicial to the interest of (Article
(Article 1789)
1789)
the other partners.
A. The capitalist partner, even industrial
one, can exclude said partner from the firm

B. The partnership can avail themselves of

EFFECT
EFFECT OFOF
the benefits from the illegal business.
VIOLATION
VIOLATION
(Article
(Article 1789)
1789)
C. The partnership has right to damages in
either case
 DUTY
DUTY OF
OF THE
THE MANAGING
MANAGING PARTNER
PARTNER TO
TO CREDIT
CREDIT TO
TO THE
THE PARTNERSHIP,
PARTNERSHIP,
PAYMENT
PAYMENT MADE
MADE BY
BY A
A DEBTOR
DEBTOR WHO
WHO OWES
OWES HIMHIM PERSONALLY
PERSONALLY AND
AND THE
THE
PARTNERSHIP
PARTNERSHIP (Article
(Article 1792)
1792)
When a debtor is separately indebted to the partnership and to the
managing partner, any sum received by the managing partner
shall be applied to the two credits pro rata except when such sum
was received for the account of the partnership, in which the
whole sum shall be applied to the partnership credit only.

DUTY
DUTY OF
OF THE
THE MANAGING
MANAGING PARTNER
PARTNER TO
TO CREDIT
CREDIT TO
TO THE
THE PARTNERSHIP,
PARTNERSHIP,
PAYMENT
PAYMENT MADE
MADE BY
BY A
A DEBTOR
DEBTOR WHO
WHO OWES
OWES HIMHIM PERSONALLY
PERSONALLY AND
AND THE
THE
PARTNERSHIP
PARTNERSHIP (Article
(Article 1792)
1792)
The article applies whether the partner has received his share
wholly or in part.
DUTY
DUTY TO
TO PAY
PAY FOR
FOR DAMAGES
DAMAGES CAUSSED
CAUSSED BY
BY HIS
HIS FAULT
FAULT (Article
(Article 1794)
1794)
Every partner is responsible to the partnership for damages suffered by it
through his fault, and he cannot compensate them with the profits and
benefits which he may have earned for the partnership by his industry.
The court may mitigate or lessen the ability for damages if through
extraordinary efforts, unusual profits were realized.

WHY
WHY GENERAL
GENERAL DAMAGES
DAMAGES CANNOT
CANNOT BE
BE OFFSET
OFFSET BY
BY BENEFITS
BENEFITS
A. The partner has the duty to secure benefits for the partnership on the
other has, he has the duty also not to be at fault
B. Since both are duties, compensation should not take place, the partner
being the debtor in both instances. Compensation requires two persons
who are reciprocally debtors and creditors of each other
A. DUTY TO REFUND
The partnership has the duty to refund amounts
disbursed on behalf of the firm plus legal interest
from the time expenses were made

THREE
THREE DUTIES
DUTIES
B. DUTY TO ANSWER FOR OBLIGATION OR
GIVE EFFECT TO CONTRACTS
OF
OF THE
THE
The partnership is obliged to recognize or give effect to
PARTNERSHIP
PARTNERSHIP
contracts entered into by a partner in good faith in the
TO
TO THE
THE
interest of the partnership business with authority from PARTNERS
PARTNERS
the partnership. (Article
(Article 1796)
1796)
C. DUTY TO ANSWER FOR RISK
These are risk as a consequence of the management of
the partnership
 Article 1815: Every partnership shall operate
under a firm name, which may or may not
include the name of one or more of the
Section 3: partners.
Obligation of
Those who, not being members of the
a Partner: to
partnership, include their names in the firm
Third Persons
name, shall be subject to the liability if a
partner.

If a limited partner included his name in the

firm name, he shall be liable as a general
partner
 Art. 1816
All partners, including industrial ones, shall be liable pro rata with
all their property and after all the partnership assets have been
exhausted, for the contracts which may be entered into in the
name and for the account of the partnership, under its signature Liability
and by a person authorized to act for the partnership. However,
any partner may enter into a separate obligation to perform a
after
partnership contract. exhaustion
of
partnershi
p asset
Art. 1817
Any stipulation against the liability laid down in the preceding
article shall be void, except as among the partners.
 Illustration
A, B. C and D partners of ABCD Partnership agreed on equal distribution of profits. As
regards third parties, however, they exempted C, an industrial partner. Total Assets of the
partnership amounted to P200,000 while the remaining liabilities to X amounts to
P800,000. In this case:

1. The liabilities can be settled first through the remaining partnership assets of
P200,000.
2. The P600,000 shall be borne by all partners: A, B, C and D and they shall share pro-
rata, but since nothing in the problem indicated a different sharing agreement, or
capital contributions, it shall be presumed equal. So, each may be made liable by the
creditor for P150,000 each.
3. C may also be made liable by the creditor since as to X (creditor), the stipulation
exempting C is void.
4. C, however, if made to pay P150,000 can seek reimbursement from A, B and D, since
the agreement exempting him is valid as to the partners.
 Art 1818: Every partner is an agent of the
partnership for the purpose of its business.
The authority of the partners to act on behalf of the partnership
Authority to may be:
act for and in 1. Express - Those expressly granted to the partner, or
behalf of the 2. Implied - Those which may be implied from the express
partnership authority or
3. Apparent - When he apparently carries on the usual
business of the partnership and the person to whom he is
dealing has no knowledge of the fact that he has no such
authority.
Note: if the partner is not carrying on the usual course of business
of the partnership, the act will not bind the partnership unless it is
authorized by other partners.
 Consent of ALL Partners necessary to:

1. Assign the partnership property in trust for creditor or on the assignee’s

promise to pay the debts of the partnership;
2. Dispose of the good will of the business;
3. DO any other act which would make it impossible to carry on the ordinary
business of a partnership;
4. Confess a judgment;
5. Enter into a compromise concerning a partnership claim or liability;
6. Submit a partnership claim or liability to arbitration;
7. Renounce a claim of the partnership.

Except: When authorized by the other partners or unless they have abandoned
the business.
 Conveyed By Title is on the Executed in the Effect
name of name of

Any partner Partnership Partnership Title passes to the buyer but

Art. 1819: the Partnership may
Effect of recover. Except:
conveyance
of property. 1. If in the usual way of
One or more One or more One or more partners business, except when
partners partners the buyer has knowledge
of partner/s lack of
authority;
2. Real property was
transferred to an
innocent buyer.
 Conveyed Title is on the Executed in Effect
By name of the name of

Art. 1819:
Effect of Any partner Partnership Partnership Passes the equitable interest of the
conveyance partnership provided the
of property.
conveyance was in the usual way of
One or more Partner/Partnership Partner business
partners

All partners All partners All partners Passes all the rights in such property
 Art. 1820
An admission made by any partner concerning partnership affairs within the
scope of his authority in accordance with this Title is evidence against the
partnership.
Admission - a statement in which someone admits that something is true
or that he or she has done something wrong.

Art. 1821
ADMISSION
Notice to any partner of any matter relating to partnership affairs, and the AND
knowledge of the partner acting in the particular matter, acquired while a
partner or then present to his mind, and the knowledge of any other
NOTICES
partner who reasonably could and should have communicated it to the

acting partner, operate as notice to or knowledge of the partnership,

except in the case of fraud on the partnership, committed by or with the
consent of that partner.
General rule: Notice to the partner is notice to the partnership
Exemption: In the case of fraud on the partnership, committed by or with
the consent of that partner.
 Art. 1822:
Where, by any wrongful act or
Solidary omission of any partner acting in the
Liability ordinary course of the business of the
for Torts/ partnership or with the authority of co-
partners, loss or injury is caused to any
Quasi- person, not being a partner in the
Delict partnership, or any penalty is incurred, the
partnership is liable therefor to the same
extent as the partner so acting or omitting
to act.
 Solidary Liability for Misappropriation

Art. 1823. The partnership is bound to make good the loss:

Pertains to partner as receiver: Pertains to partnership as receiver:

Pertains to partner as receiver: Where Where the partnership in the course of
one partner acting within the scope of its business receives money or
his apparent authority receives money property of a third person and the
or property of a third person and money or property so received is
misapplies it. misapplied by any partner while it is
in the custody of the partnership.

Art. 1824. All partners are liable solidarily with the partnership for everything
chargeable to the partnership under articles 1822 and 1823.
 Property rights of a partner

ARTICLE 1810. The property rights of a partner are:

(1) His rights in specific partnership property;
RIGHTS OF
A (2) His interest in the partnership; and
PARTNER (3) His right to participate in the management.

ARTICLE 1811. A partner is co-owner with his

partners of specific partnership property.

ARTICLE 1812. A partner’s interest in the

partnership is his share of the profits and surplus.
 Property rights of a partner
ARTICLE 1813.
A conveyance by a partner of his whole interest in the partnership does not of itself
dissolve the partnership, or, as against the other partners in the absence of
agreement, entitle the assignee, during the continuance of the partnership, to
interfere in the management or administration of the partnership business or
affairs, or to require any information or account of partnership transactions, or to
inspect the partnership books; but it merely entitles the assignee to receive in
accordance with his contract the profits to which the assigning partner would
otherwise be entitled. However, in case of fraud in the management of the
partnership, the assignee may avail himself of the usual remedies.
In case of a dissolution of the partnership, the assignee is entitled to receive his
assignor’s interest and may require an account from the date only of the last
account agreed to by all the partners.
 Property rights of a partner

ARTICLE 1804.
Every partner may associate another person with him in his
share, but the associate shall not be admitted into the
partnership without the consent of all the other partners,
even if the partner having an associate should be a
manager.
 Right of Access and Inspection of Right to True and Full Information of
Partnership Books all Things Affecting the Partnership

ARTICLE 1805. ARTICLE 1806.

The partnership books shall be Partners shall render on
kept, subject to any agreement demand true and full
between the partners, at the information of all things
principal place of business of affecting the partnership to any
the partnership, and every partner or the legal
partner shall at any reasonable representative of any deceased
hour have access to and may partner or of any partner under
inspect and copy any of them. legal disability
 Right to a Formal Account of Partnership Affairs Under Certain
Circumstances
ARTICLE 1809.

Any partner shall have the right to a formal account as to partnership affairs:
(1) If he is wrongfully excluded from the partnership business or
possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) If a partner has derived profits from any transaction connected with
the formation conduct, or liquidation of partnership or from any use by
him of property
(4) Whenever other circumstances render it just and reasonable.
 Right to have the Partnership Dissolved Under Certain
Conditions

Right of the Partners to Use a Firm Name

ARTICLE 1815.
Every partnership shall operate under a firm name, which may or may
not include the name of one or more of the partners. Those who, not
being members of the partnership, include their names in the firm name,
shall be subject to the liability of a partner.
 ART. 1797
Art. 1797. The losses and profits shall be distributed in conformity
with the agreement. If only the share of each partner in the profits
has been agreed upon, the share of each in the losses shall be in
the same proportion.
DISTRIBUTION
OF PROFITS
AND LOSSES
In the absence of stipulation, the share of each partner in
the profits and losses shall be in proportion to what he
may have contributed, but the industrial partner shall not
be liable for the losses. As for the profits, the industrial
partner shall receive such share as may be just and
equitable under the circumstances. If besides his services
he has contributed capital, he shall also receive a share in
the profits in proportion to his capital. (1689a)
 Distribution of Distribution of
Profits Losses
a. According to agreement a. According to agreement
b. If there is no agreement b. If there is no agreement
1. Capitalist partners 1. Capitalist partners
2. Industrial partners 2. Industrial partners
Art. 1798

If the partners have agreed to intrust to a third person the designation of the
share of each one in the profits and losses, such designation may be impugned only
when it is manifestly inequitable. In no case may a partner who has begun to
execute the decision of the third person, or who has not impugned the same within
a period of three months from the time he had knowledge thereof, complain of such
decision.

The designation of losses and profits cannot be intrusted to one of the partners.
(1690)
Third Person
Designating the
Share of Partners in
the Profits and
Losses
ARTICLE 1799

A stipulation which excludes one or

more partners from any share in the
profits or losses is void. (1691)
 Article 1828. The dissolution of a partnership is the
change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on as
distinguished from the winding up of the business.

Dissolution, winding up, and termination defined

DISSOLUTION
1. Dissolution
AND It is the change in the relation of the partners caused by
WINDING UP any partner ceasing to be associated in the carrying on of

business.
2. Winding up
The process of settling the business or partnership affairs
after dissolution
3. Termination
All partnership affairs are completely wound up and finally
settled. It signifies the end of the partnership life.
 EXTRA JUDICIAL CAUSES (Article 1830)

1. Without violation of the agreement between the partners:

By the termination of the definite term or particular
undertaking specified in the agreement;
By the express will of any partner, who must act in good
faith, when no definite term or particular is specified;
By the express will of all the partners who have not
assigned their interests or suffered them to be charged
DISSOLUTION
for their separate debts, either before or after the
termination of any specified term or particular
undertaking;
By the expulsion of any partner from the business
bona fide in accordance with such a power conferred by
the agreement between the partners;
 EXTRA JUDICIAL CAUSES (Article 1830)
2. In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision
of this article, by the express will of any partner at any time;
Note: that the partnership may be dissolved with or without
contravention to the agreement of the parties, but if it is
dissolved in contravention to the agreement, the partner who
causes the dissolution will be liable for damages.
DISSOLUTION
In Ortega vs. CA, it was held by the SC that "neither would the
presence of a period for its specific duration or the statement of a
particular purpose for its creation prevent the dissolution of any
partnership by an act or will of a partner. Among partners, mutual
agency arises and the doctrine of delectus personae allows them to
have the power, although not necessarily the right, to dissolve the
partnership. An unjustified dissolution by the partner can subject
him to a possible action for damages." (GR No. 109248; July 3, 1995)
 EXTRA JUDICIAL CAUSES (Article 1830)
By operation of law:
By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on
in partnership;
When a specific thing which a partner had promised to
contribute to the partnership, perishes before the delivery; in
any case by the loss of the thing, when the partner who
DISSOLUTION
contributed it having reserved the ownership thereof, has
only transferred to the partnership the use or enjoyment of
the same; but the partnership shall not be dissolved by the
loss of the thing when it occurs after the partnership has
acquired the ownership thereof;
By the death of any partner;
By the insolvency of any partner or of the partnership;
By the civil interdiction of any partner;
 JUDICIAL CAUSES (Article 1831)

1. A partner has been declared insane in any judicial proceeding or

is shown to be of unsound mind;
2. A partner becomes in any other way incapable of performing his
part of the partnership contract;
3. A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
4. A partner wilfully or persistently commits a breach of the
DISSOLUTION
partnership agreement, or otherwise so conducts himself in
matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership
with him;
5. The business of the partnership can only be carried on at a loss:
6. Other circumstances render a dissolution equitable.
 EFFECTS OF DISSOLUTION
1. The mutual agency is terminated. As a rule, the partners can no
longer act to bind the partnership, subject to the following rules:
a. If the cause of the dissolution is Acts, Insolvency or Death (AID)
NOTICE should be given by the partners to terminate the mutual
agency
b. If the cause is NOT AID - the mutual agency is terminated and
the dissolution is binding even without notice.
DISSOLUTION
2. The following acts are still binding even after dissolution:
Acts to for winding-up of the affairs of the partnership
Contracts with creditors who had no notice of the dissolution
3. The partners may continue the partnership after dissolution of the
old partnership. Such continuation still dissolves the old partnership
and a new partnership is created. The creditors of the old
partnership are also creditors of the person or partnership
continuing the business.
WINDING UP
The process of liquidating the
partnership assets and the WINDING UP
distributing of the proceeds to satisfy
the claims against the partnership.
 LIQUIDATOR
The liquidator shall be:
1. A party who has not wrongfully caused the
dissolution;
2. The legal representative of the last surviving WINDING UP
partner (if all are dead), if not insolvent;
3. The court, upon cause shown by a partner, his
legal representative or assignee.
 DISTRIBUTION OF ASSETS

The distribution of assets will be done in the

following order:
1. Those owing to creditors other than partner;
2. Those owing to partners other than for
WINDING UP
capital and profits;
3. Those owing to partners in respect of capital;
4. Those owing to partners in respect of profits.
 PARTNER'S LIABILITIES
In case the assets of the partnership are not sufficient
to cover the liabilities, the remaining claims may be
satisfied against the separate assets of the partners.
However, where a partner has become insolvent, the
claims against his separate property shall be satisfied WINDING UP
in the following order:
1. Those owing to separate creditors;
2. Those owing to partnership creditors;
3. Those owing to partners by way of contribution.
 LIMITED PARTNERSHIP (Article 1843)
One formed by two or more persons having
CHAPTER 4 : as member one or more general partners
LIMITED and one or more limited partners. The limited
PARTNERSHIP partners as such shall not be bound by the
obligation of the partnership

In absence of statutory restriction, a limited

partnership may carry on any business which
could be carried on by a general partnership
 CHARACTERISTICS
CHARACTERISTICS OF
OF LIMITED
LIMITED PARTNERSHIP
PARTNERSHIP

A limited partnership is formed by compliance with the statutory

requirements.
One or more general partners control the business and are personally
liable to creditors
One or more limited partners contribute to the capital and share in
the profits but do not participate in the management of the business
and are not personally liable for partnership obligation beyond their
contribution
The limited partners may ask for the return of their capital
contribution under the conditions prescribed by law.
The partnership debts are paid out of the common fund and the
individual properties of the general partners
REQUIREMENTS FOR FORMATION OF A LIMITED PARTNERSHIP
(Article 1844)

The Certificate/Articles of the limited partnership which

states the matters enumerated in Article 1844 must be
signed and sworn to.
The filing for record of the Certificate/Article of
Partnership in the Office of the Securities and Exchange
Commission (SEC)
 LIMITED PARTNER’S
CONTRIBUTION (Article 1845)

The contribution of a limited partner may be cash or

property, but not services

The contribution must be paid before the formation of the

limited partnership although additional contribution
maybe paid after the limited partnership has been formed
 LIABILITY FOR UNPAID CONTRIBUTION (Article 1858)

Under the first paragraph, the limited partner is liable

not only for the difference between the amount of his
actual contribution and that stated in the certificate as
having been made but also for any unpaid contribution
he agreed to make at a future time
 LIABILITY FOR RETURN OF
CONTRIBUTION LAWFULLY
RECEIVED (Article 1858)
A limited partner who has received his contribution is
bound to return the same with interest when there are
still liabilities to be paid but the amount returned should
not be in excess of what he received
 LIABILITY
LIABILITY AS
AS TRUSTEE
TRUSTEE (Article
(Article 1858)
1858)
A. Specific property stated in the certificate as contributed by him but
which he had not contributed

B. Specific property of the partnership which had been wrongfully

return to him

C. Money wrongfully paid or conveyed to him on account of his

contribution

D. Other property wrongfully paid or conveyed to him on account of

his contribution
 REQUISITES FOR WAIVER OR COMPROMISE OF LIABILITIES
(Article 1858)

A. The waiver or compromise is made with the consent of

all the partners

B. The waiver or compromise does not prejudice

partnership creditors who extended credit or whose claims
arose before the cancellation or amendment of the
certificate.
 LIABILITY WHERE SURNAME OF
LIMITED PARTNER APPEAR IN
PARTNERSHIP NAME (Article 1846)
The limited partner whose surname appears in the
partnership name is liable, as a general rule, to the
partnership creditors without, however, the rights of a
general partners. Of course, such limited partner shall not
be liable as a general partner with respect to third persons
with actual knowledge that he is only a limited partner
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