Partnership 1.

Universal Partnership
a. Universal Partnership of all Present
A. General Provision Property
Definition: The partners contribute all the property which actually
Definition: By contract of partnership two or more person bind belongs to them to a common fund with the intention of dividing
themselves to contribute money, property, or industry to a the profits among themselves. Here, the property of the partner
common fund with the intention of dividing the profit among wil become the common property of all the partners.
themselves.
Note : There can be a stipulation as to the profits however such
Essence of partnership: The partners share in the profits and the stipulation cannot include properties subsequently acquired by
losses. Hence the receipt by a person of a share of the profits of each partner through inheritance, legacy or donation except the
the business is prima facie evidence that he is a partner in a fruits thereof.
business but no such interference is made iff such profits are
received as payments. b. Universal Partnership of Profits
Definition: Properties owned by the partners at the time of the
Juridical Personality constitution of the partnership shall continue to pertain
1. Two or more person bind themselves to contribute exclusively to each of them. However the fruits, income or profits
money, property and industry to a common fund thereof and the sue of the said property must belong to the
2. Intention on the part of the partners to divide profits partnership.
among themselves
Secret Association If acquired by a partner through his industry or work such
1. Those association and societies whose articles are kept property pertains to the partnership. If acquired by other means
secret among members and wherein any one of the such property does not pertain to the partnership.
members may contract in his own name with the third
person Note: Persons are prohibited from giving ach other any donation
As to members The association have no juridical personality and or advantage cannot enter into a Universal Partnership whether
their members shall be governed by the provision relating to co- for profits or present property.
ownership.
As to third person: The absence of personality cannot be invoked 2. Duration
against third person for the purpose of exempting themselves a. Fixed Term/ Undertaking : A partnership
from the compliance of the obligation for a fixed period is one entered into for a
definite period that is fixed by 1. Express
Requirement as to the form: agreement 2. Necessarily resulting from the
General Rule: A partnership can be instituted in any form. nature of the undertaking
Exception: 3. Partnership at will
1. Immovable property: If an inventory of the said Upon the expiration of the partnership of a fixed term or
property is not made, signed by the parties and undertaking if the parties wanted to continue the partnership it
attached to a public instrument : VOID ( as to third becomes a partnership at will. The original contract remains to be
person and not to the partners) in force.

Nb: This is only available when the case does not involve third Consequence: Any one of the partners may at his sole pleasure
parties who had not been prejudiced as when the action is dictate the dissolution of partnership at will. He must however act
between the parties themselves they cannot deny the existence in good faith and not the attendance of bad faith can prevent the
of partnership dissolution of partnership but it can result to damages

2. When the capital is P3,000 or more: If the capital of the 4. General Partners
partnership is P3,000 or more it is required to appear General Partnership : All the partners are liable pro rata beyond
in the pubic instrument to be recorded in the Office of the partnership assets for all the contracts which may have been
the Securities and Exchange Commission. entered into in his name, under its signature and by a person
The Juridical Personality of partnership is not affected by authorized to act for the partnership . Partners can be solidarily
1. It does not appear in a public instrument even if the liable with the partnership if the ff are present :
capital is P3,000 or more 1. Any wrongful act or omission of any partner acting in
2. It is not recorded in the SEC . The registration the ordinary course of business of the partnership or
requirement is not mandatory a partner retains its with the authority of co-partner.
juridical personality even if it fails to register. 2. Where one partner acts within the scope of his
apparent authority of a third person and misapplies it
Lawful Object or purpose 3. Where a partnership receives money from the third
Requirement : The partnership must have a lawful object or person and the money or property so received is
purpose to be established for the common benefit or interest of misapplied by any partner while in the custody of
the partners. partnership.
Effects :
1. The partners cannot be permitted to benefit from the 5. Limited Partners
profits earned through unlawful means In this kind of partnership there is one or more general partner.
2. Proceed of the crime shall be confiscated in favor of The limited partner is liable only to the extent of their stipulated
the government contribution.
Classification of Partneship
Kinds of Partners
1. Capitalist : There is a contribution either money, General Rule: If the partner has been appointed as a manager in
property and industry to the a common fund. The the articles of incorporation his power is irrevocable without just
contribution need not be in cash or fixed asset it could and lawful cause.
be intangible like a credit and a good will. Exception: This power is revokable at any time if the same was
2. Industrial : The industrial partner contributes their granted only after the time the partnership was constituted.
industry b. Two or more were entrusted with the
Capitalist Partner Industrial Partner management
A capitalist partner cannot 1.Cannot engage in any kind If there is no stipulation as to the respective duties : Each one may
engage for his own account of business for himself unless execute all acts of administration but if any of them should
in any operation or business the partnership expressly oppose the acts of other the decision of the majority shall prevail.
which is of the same nature permits him to do so. If there is a tie, the matter is to be decided by controlling interest (
as that of the partnership Majoriy  Controlling interest)
unless there is a stipulation
to the contrary. If there is no stipulation that none of the managing partners shall
Liable for the losses in the Not liable for any losses. act without the consent of the others: The concurrence of all is
same proportion to what he necessary and the absence and disability of any one of them
may have contributed any cannot be alleged unless there is a grave and imminent danger to
stipulation is voi the partnership.
The capitalist partner can be The industrial partner cannot
compelled to make additional be compelled to make any Partner’s right to specific partnership property
contribution more additional contribution 1. A partner is considered as co-owner with his partner f
specific partnership property
At the time of entry Incidents of co-ownership
1. Original : One during the time of the constitution of 1. Right to possession: Each of the partner has equal
the partnership becomes a member right to possess specific partnership property but he
2. Incoming : One who became such as a new member of has no right to possess such property for other
the existing partnership purpose without the consent of others.
Liability : As to old obligation prior to his admission to the 2. Restriction on the right to assign: The partner cannot
partnership, the liability of the incoming partner is only to be assign his interest in the specific partnership property
satisfied by the partnership property. because the property belongs to the partnership and
Other kinds of partners not to him.
1. Managing partner : One who has been entrusted with 3. Not subject to execution : Specific partnership
the management of the partnership property may be seized and sold on an attachment or
2. Liquidating partner : One who takes care of the execution only upon a partnership debt but not for
liquidation and the winding up of the affairs individual debt of the partner.
3. Retiring and continuing partner : After the dissolution
of the partnership, those partner who wanted to Partner’s interest in the partnership ( Equity Rights )
continue are referred to as continuing partner , those Concept: Upon the dissolution of the property remaining after all
who retired are retiring partner the debts and liabilities outside creditors have been satisfied, the
4. Dormant . silent or secret partner shall receive his share in the profit and surplus.
5. Estoppel : He makes himself liable as such by holding
himself out as a partner and allowing himself to be so Note: As compared to the share in the specific partnership
held out as one. property , the interest of the partner in the partnership is subject
to execution ( Interest in the partnership vs Interest in specific
B. RIGHT AND OBLIGATION OF PARTNERSHIP property )

1. His rights in a specific partnership property Redemption of the Interest charged: The interest charged may be
2. His interest in the partnership redeemed at any time before the foreclosure or in case a sale
3. His right to participate in the management being directed by the court may be purchased without causing a
dissolution 1. Separate property by one or more partner 2. With
partnership property by any one or more partner with the consent
Partners Right to Manage the partnership of the partner whose interest is charged.

Scope : This governs only the relationship among the partners Conveyance by a partner of his whole interest in the partnership
themselves and the breach of duty of said rules can bring about 1. The partner cannot convey his whole interest in the
a cause of action against the erring partner. partnership
Effect :
1. If there is no agreement : When the manner of the 1. It does not dissolve the partnership but the purchaser
management has not been agreed upon all partners may secure a decree of dissolution when 1.
are considered as agents and whatever any one of Termination of specified term or particular undertaking
them may do alone shall bind the partnership. 2. At any time if the partnership is one at will.
2. If there is an agreement : 2. The assignee does not become a partner in the
a. Only one appointed as managing partner absence of an agreement or consent of other parties.
The manager can exercise all acts of administration despite the Therefore the assignee has no right to interfere in the
opposition of its partner unless he should act in bad faith.
 management or administration of the partnership Rule : The partnership begins from the moment of the execution
( Assignee cannot interfere in administration) of the contract.
3. During the continuance of partnership the assignee is
entitled to receive all the profits that the assigning Except: Unless it is otherwise stipulated.
partner would have received ( Profits allowed)
4. The assignee is entitled to receive the assignor interest Obligation to Contribution to Partnership”
and may require an account from the date only of the
last account by the partner. 1. The right to contribute to the partnership

A Partner agreed to contribute : 1. Cash 2. Credit 3. Industry.

Right to participate in the Profits
When a partner agreed to contribute to the partnership he
General Rule : The losses and profits are to be distributed in favor becomes a debtor to the same. Hence, when he failed to comply
of the agreement even without regard to the respective with his obligation to deliver what he has promised to contribute
contribution . ( The share of profit : The share of the loses ) to the partnership the remedy is 1. Specific performance.

Qualification: A stipulation that exempts the partner from any Contribution of Money
share of the profit and loses is void.
This is to be contributed from the moment the partnership started
If there is NO agreement to commence its existence unless there is an agreement as to a
different date.
1. Capitalist Partner: The share of the partner in the
profit and loses is in proportion to what he may have Default: A partner becomes a debtor for the interest and damage
contributed. from the time he should have complied with his obligation. There
2. Industrial partner: Not liable for the loses as for the is no need for a demand, the party occurs default outright as long
profit the industrial partner receive such share as may as his failure to contribute the money when it was due.
be just and equitable
Contribution in Property
If delegate to Third Person
1. The designation of the losses and profits can be 1.Before actual delivery: The risk is borne by the partner who
entrusted to third person and that the decision of the retain ownership thereof.
third person is considered as valid and binding 2. After Delivery
Except: The partner cannot complaint of the decision except 1. Risk is borne by the partner : Specific and (Non
a. When he has began to execute the said decision fungible) Non consumable contributed so that their use and fruits
b. He fails to impugn the same within a period of three are enjoyed for the common benefit are borne by the parties that
months from the time of knowledge. own them. The loss of the same dissolve the partnership
Right to Demand Formal Accounting 2.The risk is borne by the partnership
General Rule : The right to accounting arises only upon the The risk of loss is borne by the partnership if the things
dissolution of the partnership because during the partnership the contributed are:
partner is not entitled to formal accounting 1. Fungible ( Consumable)
Exception: 2. Cannot be kept without deteriorating
1. If he is wrongfully excluded from the partnership 3. To be sold
business or possession of his property by his co-partner 4. Brought and appraised in the inventory in the absence
2. If the right exist under the terms of the government of stipulation and in such case the claim is limited to
3. If a partner derives benefit without the consent of what they have appraised.
others from any transaction connected with the When the capital or a part thereof which a partner is bound to
partnership contribute consist of goods their appraisal must be made inn
4. Whenever circumstance render it just and equitable the manner prescribed in the contract of partnership. If there
Right to demand reimbursement is none, it shall be made by 1. Experts chosen by the partner 2.
1. A partner who may have disbursed his own fund has According to current prices.
the right to demand reimbursement from the
partnership with the corresponding interest from the After the partnership acquired ownership: Once the partnership
time expenses are made. acquired ownership of the thing its loss will not dissolve the
right to enter into sub-partnership partnership.

1. The law authorizes each partner of a firm to make a Proportion of Capital due to partners
stranger a partner with him in his share of profits and Rule : That which is stipulated in the contract
losses that firm. Absence of stipulation: The partner are to contribute equal shares
in the partnership ( This does not include industrial partner)
Note: The sub partner are not partner inter se . However the sub-
partner does not become a member of the original partnership in Requirement of the contribution of additional capital
the absence of the assent of all other partners 1. The partners can be compelled to contribute additional
capital to save the business
Obligation of Parties Inter Se : Within the partnership Exception: This does not apply to industrial partner because the
industrial partner does not have a share in the losses.
Effect of Refusal to Contribute : The partner is obliged to sell his 1. Expel the industrial partner from the firm
interest to other partners except if there is an agreement to the 2. Avail themselves of the benefit which he may have
contrary. obtained in violation of the prohibition with a right
to damage in either case.

2. Obligation to observe good faith 2. Capitalist Partner

General Rule : Capitalist partner cannot engage for any own
Fiduciary Duties : Partners are required to exhibit towards each account in any operation which is of the kind of business in which
other the highest degree of good faith. The fiduciary duty of the the partnership is engaged.
partner subsist only while the partnership last. Exception: He can engage in business of the same nature if there
is a stipulation to the effect.
1. If the partner uses the funds of partnership Effect of Violation of Prohibition:
1. Personality bear the losses
A partner becomes a debtor for the interest and damage of the 2. He cannot however be expelled form the
partnership when he takes from the partnership any amount for partnership by reason thereof.
his personal use.
Duty to Observe Diligence : Every partner is responsible to the
Note : The partnership is not entitled to the excess or the profits partnership for damage suffered by its fault.
derived by the said partner using the partnership funds. Compensation:
1. The partner at fault cannot compensate his liability
Transaction that is connected with partnership affairs or with profits and benefit which he may have earned
involving the use of firm property. for the partnership by his industry
2. Mitigation: Lessen the responsibility if through the
Duty to Account: Every partner must account to the partnership act of the partner unusual profit is realized.
any benefit derived by him without the consent of other partners
connection with any transaction connected with the formation or
Obligation of the partnership and members to third persons
conduct or liquidation of the partnership. Hence, this means that
the partner merely holds the property in trust for the partnership.
1. Firm Name
PAYMENT COLLECTED FROM THE DEBTOR OF BOTH THE
The partnership has the right to adopt any name it may choose
MANAGING PARTNER AND THE PARTNERSHIP
provided that the ff are the limitation:
a. The name of the firm must either be those of living
Q: If the managing partner collects a credit from a debtor who
partners and in case of non-partner should be living
owes him and the partnership both debts being demandable.
person subject to liability.
a. If a third person includes his name in the
A: 1. The sum collected shall be applied to two credits in
partnership he is subject to the same
proportion to the amount even if the managing partner only gave
liability as that of the partner .
receipt for his own credit only. 2. If the managing partner gives
b. The use of the deceased partner is not allowed.
receipt of partnership credit, It is applied to the latter. 2. Representation of a firm
a. Ordinary Partner
General Rule: The debts to the partnership must prevail over the
General Rule : Every partner is an agent of the partnership and
individual debts to managing partner the act of every partner binds the partnership.
Requisites:
Exception: When the debts to a managing partner is more
1. Apparent authority: The act is for he carrying on in
onerous to the debts to an individual partnership the debtor can
the usual way the business of partnership which
declare at the time of the making of payment that the same be
he is a member
applied individually to the credit of managing partner.
Ex: When the business of the partnership is to sell movable
AMOUNTS COLLECTED AS SHARE IN THE PARTNERSHP CREDIT
property the sale of real property is not within the ordinary
AHEAD OF CO-PARTNER
powers of the partner because it is not in line with the normal
Scope : If one of the partner received in whole or in part his share
business of the firm.
in the partnership credit in whole or in part his share in the
partnership credit without the knowledge and the consent of
other partners without the latter collecting theirs and that the Therefore, any act of the partner which is not apparent for
partnership becomes insolvent. the carrying on of the business DOES NOT BIND the
partnership.
Rule : The partner shall be obliged to bring to the partnership Exception:
capital what he received even though he may have given receipt Such partner has been authorized by the other partner with
for his share only respect to the particular matter.
2. He acts in the name of the partnership
Engagement IN INDIVDUAL BUSINSESS
1. Industrial Partner Exception:
GENERAL Rule : The industrial partner cannot engage in a 1. The partner so acting has no authority to act for the
business for himself whether or not such business is in the same partnership in a particular matter
nature as the business of the partnership 2. The person with whom he is dealing has knowledge of
Exception : When the partnership expressly permits hi to do so the fact that he has no authority.

Effect of violation: RESTRICTIONS on partner’s authority :

 1. The articles of partnership or the special agreement 2. The purchaser or his assignee is a holder for value
the partner may restrict their authority as agent of the without knowledge of lack of authority.
firm
Effect: 2. The title is in the name of one or more or all partners or in a
1. The act of the partner in contravention of the third person held in trust.
restriction still binds the partnership if the third
person HAS NO KNOWLEDGE of the restriction so long 1. The conveyance executed by a partner in the partnership nae or
as the act is for the usual way of the business. in his own name passes provided that
a. If the third person HAS KNOWLEDGE OF
THE RESTRICTION : The restriction on a. The partner’s act is for the apparent carrying out of the usual
authority shall not bind the partnership to way the business of the partnership to which he is a member
person having knowledge of the restriction. b. The third person dealt with has no knowledge of fact that he
has no authority.
Concurrence of ALL PARTNERS
1. Assigning of partnership property in trust for the EFFECT OF Admission
creditor or on the assignee promise to pay the deby of 1.Before dissolution : An admission is binding upon the
the partnership partnership if 1. It concerns the partnership affairs 2. It is within
2. Disposition of goodwill of the business the scope of his authority.
3. Doing any other act which would make it impossible to 2.After dissolution: Binding only if it is necessary for the winding
carry on the ordinary business of a partnership up of partnership affair.
4. Confession of a judgment
5. Entering into a compromise concerning a partnership Notice
claim or liability 1.The notice to the partner is notice to the partnership when
6. Submitting a partnership claim or liability to arbitration A. The knowledge of the partner acting in particular matter is
7. Renouncing a partnership claim acquired while a partner or then present to his mind
Rule on Conveyance : B. The knowledge is of any other partner who reasonably could
and should communicate it to the other partner
1. When the title is in the name of the partnership
a. Conveyance in partnership name
Delict
GENERAL Rule : The partner can convey the property executed in
the name of the partnership but the latter cannot recover if : The partnership is liable to third person for loss, injury or penalty
resulting from a wrongful act or omission of any of its partner
1. The act of the partner was due to the apparent acting within the ordinary scope of business
authority in carrying the usual trade and business of
the partnership Exception: Not liable
2. The property has been conveyed by the grantee or a 1.Outside the scope of partnership or authority granted y his co-
person claiming through such grantee to a holder for partner
value without knowledge that the partner has
Managing Partner :
exceeded his authority.
Definition: When the conduct of the partnership is left entirely
within one of the partners and that the latter is vested with the
b. Conveyance in the partner name power to carry out the business of the partnership without
consulting his co-partner and of biding in such matter. ( This is
The conveyance of the partner in his own name passes equitable subject to the restriction of apparent authority to third person)
interest in the partnership provided that :
Note: If there are restriction as to the managing partner’s
1. The act of the partner in carrying on his usual way of
authority the third person is not bound thereto unless the third
business of the partnership to which he is a member person has knowledge of the restriction.
2. The third person with whom he has death with had no
knowledge of the authority. Breach of Management Agreement : This only governs the
relationship among the parties themselves and the breach of any
2.When the title is NOT in the name of the partnership of said rules can bring about an action against the erring partner
( The action do not invalidate contracts with third person but only
1. The title is in the name of one or more but not all the partners as to the errig partners)
and record does not disclose the right of partnership
Individual Liability for partnership obligation
GENERAL rule : The partner can convey the property and the
All partners including industrial ones shall be liable pro-rata with
partnership has a right to recover all their property after all the partnership property is exhausted
for the contracts entered into in then name and for the account of
EXCPET: The partnership has no right to recover If :
the partnership Liability to third person ( as compared to losses
this pertain to liability of partner between themselves)
1. The act of the partner is for apparently carrying out in
Nature and Extent of liability
the usual way the business of the partnership to which
1.The individual liability of partner for partnership debt is
he is a member
secondary their individual asset become answerable only
when there are no firm asset or after the asset are exhausted.
 Termination: Point in time after the partnership affairs have
wound up
Liability of Industrial partner ( as compared to the losses)
Causes FOR Dissolution: Without the violation of the
Losses: This pertains to the distribution of losses among undertaking
partnership themselves in the settlement of the partnership
affairs and no reference to partnership obligation. 1.Termination of the definite term or agreement
2. Express will of any partner in the partnership at will who must
Any stipulation against liability is void act in good faith

Ant stipulation among the partners exempting one or some of Partnership at will: no fixed term or no particular undertaking is
them from individual liability for partnership obligation is VOID specified in the agreement it is therefore a partnership at will
( Insofar as third person are concerned but valid between them) predicated on their mutual desire and consent and it may be
dissolve after the will of the partner.
Partnership in Estoppel:
3.Express will of all the partners either before or after the
A person not an actual partner represents himself by words, or termination of a specified term or particular undertaking
deed as a partner or consent to another representing him to
anyone as a partner in an existing partnership with one or more A partnership may be dissolved at any time even before the
person not actual partners expiration of the term agreed upon or the completion of the
undertaking provided that it expressly willed by all the partner
Binding as to partnership who have not assigned its interest or suffered them to be charged
or their separate debts. ( Express will by all the partner + Not
1.When all the partners consent: A partnership liability result assigned interest) .
-The partner by estoppel becomes liable as if he is an actual
member of the partnership 4.Expulsion of any partner from the business bona fide in
2.When not all the partner consent: No partnership liability accordance with the agreement between partners
results. It is necessary that the power of expulsion is conferred by the
-He is liable pro rate with another person if any s consenting to agreement between the partners and exercised in good faith. If
the contract or representation. ( The liability here between the the expulsion is valid the partner cannot wind up the affairs of the
partner by estoppel and another person is joint) business.

LIABILITY ARISIGN FROM DELICT or Quasi Delict Causes for Dissolution : In violation of the agreement
1.The partnership is liable to third person for the loss, injury , 1. If there is a specified period, the dissolution of such partnership
penalty from any wrongful act or omission of any partner acting before the expiration of its term or the completion of its object is
within the ordinary course of business of the partnership or with a contravention of the partnership agreement and subject the
the authority of his co-partners. The liability of the partnership is partner who exercise such power to damages caused to the firm
direct and to the same extent as the partner who commit the act. and his co-partner for the beach of contract.

LIABILITY fo act s of misappropriation By operation of law :

The partnership is liable for the loss arising form the act of 1.Any event that makes it unlawful for the business of the
conversion and misappropriation committed by a partner when partnership to be carried on or for the members to carry it on the
A.The partner received or acted pursuant to his apparent partnership
authority 2.Loss of the thing:
b. Where the money or property held by a third person was a. Specific thing: Which the partner agreed to contribute to the
received by partnership in the course of business and it was partnership perished before the delivery.
misapplied while in custody of partnership 2.Loss of the thing before or after delivery when the partner who
contributed it having reserved only the ownership has only
transferred to the partnership the use and enjoyment of the
Liability of Incoming Partners: One who becomes a member of an same.
existing partnership
Note: After the partnership has acquired the ownership of the
-An incoming partner is liable as though he had been a partner of thing, the partnership is not dissolved.
the partnership BUT his liability is satisfied only out of the
partnership property unless there is a stipulation to contrary. 3.Death of the partner
C. Dissolution and Winding up 4. insolvency of any partner or the partnership
5.Civil Interdiction of any partner.
Final Stages : 1. Dissolution 2. Winding up 3. Termination
JURIDICAL Decree : The dissolution of the partnership may be
Dissolution: The change in the relation of partners caused by any
decreed by the court on application by or for partner or on
partner that ceased to be associated in the carrying on as
application of the purchaser of the partner’s interest.
distinguished from the winding up of a business. ( The partnership
is NOT terminated) a. On application by or for a partner
i.A partner has been declared insane in any judicial
Winding up: The process of settling the business affairs after
proceeding or is shown to be of unsound mind
dissolution
 ii. The partner becomes in any other way incapable of 2.Any act that would bind the partnership if dissolution had not
performing his part of the contract taken place provided that the other party to the transaction:
iii. A partner is guilty of act that tends to affect 1. Had extended credit to the partnership prior to the
prejudicially the carrying of the business dissolution and had no knowledge or notice of
iv. The partner that willfully and persistently commits a dissolution
breach in the partnership agreement or conducts 2.Though he had no extended credit had nevertheless
himself in matters relating to the partnership business known of the partnership prior to his dissolutun and
that is no practicable having NO knowledge of DISSOLUTION.
b. At the instance of purchaser or purchaser interest Notice of Dissolution
i. After the termination of the specified term 1. Must be sent to those person who extended credit to the firm
or particular undertaking prior to its dissolution , actual notice of the dissolution is
ii. At any time if partnership at will when the necessary
interest was assigned or when the charging 2.To those who did not extend credit to the firm but had
order was issued. knowledge of its existence prior to the dissolution notice of the
Effects of Dissolution: dissolution by advertisement in the newspaper is sufficient.
Liability of th e Retiring partner in general :
General Rule : The dissolution of the partnership does not IMPT: The notice of dissolution terminates the implied power of
discharge the existing liability of any partner. every partner to bind the partnership or other parties by new
Exception: obligation
1.If there is an agreement to that effect between himself and the
partnership creditor and the person or partnership continuing Cases when Notice of dissolution is not required
business. 1.Where the partnership is dissolved because it is unlawfully to
- If the agreement is only between partner , then the agreement is carry on the business unless the act is appropriate for winding up
binding only upon them but this does not relieve the retiring partnership affairs
partner from liability to the partnership creditor. 2.Where the partner is insolvent.

Rule as to subsequent obligation: Dormant Partner

The retiring partner is not liable for subsequent obligation 1.One whose connection to the partnership is concealed and who
provided that he has the necessary notice of withdrawal. does not take any active part in the partnership

Authority of the Partner to act in partnership Extent of liability: The dissolution of the partnership does not
1.Between the parties : discharge the existing liability of any partner but with respect to
Rule : The dissolution terminates all authority of the partner to act obligation incurred by the dormant partner AFTER the dissolution
for the partnership except : it is to be satisfied based on partnership asset alone.
a. Necessary to wind up partnership affairs
b. To complete the transaction begun but not yet
finished. Liquidation: / Winding Up
The right of the partner to bind partnership to new contract or 1.The partnership is not bound by any act of the partner after the
obligation is terminated upon dissolution. dissolution where the partner has no authority to wind up the
partnership.
Dissolution terminates all act or authority of any partner to act for Exception: Where the partnership is bound even when no
the partnership authority
1.With respect to the partners : 1.Extended credit to a partnership prior to the dissolution and has
a. When the dissolution is not by act, insolvency or death no knowledge or notice of want of authory
b. When the dissolution is by virtue of act insolvency or death in 2.Had not extended credit to the partnership prior to the
case 1833 so requires. dissolution but known of the partnership prior to its dissolution
and having no knowledge or notice of his want of authorithy.as
Exception: the want of authority is NOT advertised in a newspaper of general
1.If the dissolution was due to ac, t death or insolvency of the circulation.
partner the party is liable to his co-partner for the share of any
liability created by any partner acting for the partnership in Settlement and distribution
relation to new business. As if the partnership is not dissolved. 
Each partner is liable for the share of his co partner Partner’s Lien: The partner against his co partner or against the
creditor to have the partnership property applied to the payment
1.The dissolution is by act of any partner but the partner of the firm debts and liabilities and to have the surplus asset
acting for the partnership had knowledge of the dissolution divided among the partners.
2.The dissolution is due to death or insolvency of the partner Exception:
but the partner acting for the partnership makes a new 1.As may be agreed to the contrary
contract knowing about the death and insolvency.
Contravention of the Tenor :
Effect as to third person The right of the partner who has not caused the dissolution
Rule : After the dissolution , a partner can bind the partnership to wrongly to :
a third person by : 1.The partners lien
1.Any act appropriate for the winding up of the partnership 2.The right as against each partner has caused the dissolution
affairs or completing the transaction unfinished wrongly to damage for breach of agreement
3.The right to continue the business.
The right of the partner who HAVE CAUSED the dissolution -The Creditors of dissolved partnership are also creditors of
1.Partner lien less damage recoverable by him if the business is partnership continuing business:
not continued
2.If the business is continued he has the right against his co Effects :
partner to have the value of his interest in the partnership less 1.Any New Partner admitted to the existing partnership or when a
any damage caused by the co partnership in the dissolution as partner assigns his right over the property to two or more
curtained and paid to him in cash . partner or to one or more partner: If the business is continued
In case of rescission due to fraud or misrepresentation without liquidation.
1.Lien or right of retention of the surplus of the partnership 2.One partner retires and assign their right to the partnership
property after satisfying the partnership liabilities to third person property with the remaining partner who constitutes the business
in the sum of money paid by him for the purchase of an interest in without liquidation.
the partnership and for any capital advances he contributed 3. When any partner retires or dies, and the business is continued
2.To stand in the place of the creditor of the partnership for any with the consent of the retired deceased partner but without the
payment made by him in respect to the partnership liabilities assignment of his rights over the property.
3.To be indemnified by the person guilty of fraud or making 4 When all the partner or their representative assigns their right
representation against all debts and liabilities of partnership. to one or more person who promises to pay the debts and
continue the business of dissolved partnership .
Right of Firm Creditors :
1.Firm Creditors Right of the creditor to set aside fraudulent assignment : This is
-As to the property of the partnership : They enjoy preference without right or prejudice to set aside the assignment on the
over the creditors of each partners. grund of fraud.
-Asset of Individual partner:
All the partners are liable pro rata ( industrial included) with all Rule of Preference : In case the partnership is continued after the
their properties and after the partnership asset have been partner retires or dies.
exhausted for the debt and obligation. 1.The creditors of the retiring or deceased partner or the
representative of the deceased partner has prior right to any
2.Creditor of individual claim of the retied partner against the person o partnership
-As to the property of the firm: An individual creditor is entitled continuing the business on account of the retired or deceased
only to be paid out of the debtor property in the share of the partner interest in the dissolved partnership ( The preference :
surplus after the debts of the firm is paid ( Partnership is Share of the deceased or retiring partner)
preferred)
-As to the asset of individual partner: His individual creditor enjoy Individual Liabilities
preference over the creditor of partnership 1. Retiring Partner
Definition: The retiring partner is liable to the creditor of the
RULE IN THE SETTLING ACCOUNTS BETWEEN PARTNERS AFTER partnership for any liability upon the dissolution of the
DISSOLUTION partnership unless there is an agreement that discharge the same
1.Asset in the partnership ( The agreement must be with him , the partnership creditor and
a. The partnership property the person or partnership that continues the business)/
b.The contribution of the partners necessary for the payment of Nb: If the agreement is only between partners themselves the
liabilities agreement is binding only between them and not relief partner
from liability to the partnership creditors.
Order of payment : Liabilities of partnership
1.Those owing to creditors other than partners As to new obligation: Prior to notice to the creditor indebtedness
2.Those owing to partners other than capital and profits incurred after the retirement binds the retiring partner. But once
3.Those owing to partners in respect to capital the retiring partner has notice of the retirement he is no longer
4.Those owing to partner in respect to profit. liable.
- The creditors of the partnership must first be compensated, after 2. Deceased Partner
the creditors are paid whatever is left becomes available to the Old Debts: The individual property of the deceased partner is
partner as his share. liable for the obligation of the partnership while he was a partner
but subject to prior payment of separate debts.
Doctrine of Marshalling of Partnership Assets : - Estate of deceased partner cannot be liable for new debts or
1.When the partnership property and the individual properties are obligation by the surviving partner except those necessary to
in the possession of the court for distribution partnership settle the affairs of partnership
creditors shall have priority over the partnership property and
separate creditor shall have priority over separate property. Rights of the Retiring Partner :
When the partner retires or dies and the business is continue
Rule in case of Insolvency : without any of the condition ( Settlement of account between him
The claim against the separate estate e are as follows : ( Individual and the estate and the partnership) the ff rules apply:
property )
1.Those owing to separate creditors 1 . The partner or his legal representative as against the person or
2.Those owing to partnership creditor partnership may have the value of the interest at the time of
3.Those owing to partners by way of contribution. dissolution ascertained ( The value of interest in the partnership)
2.The partner or his legal representative shall receive as an
Continuation of business after dissolution ordinary creditor an amount equal to the value of his interest in
the dissolved partnership with an option to :
Right of Partnership Creditors : a. To receive interest
b.In lieu of interest the profit attributable to the use of his right in General partner : Have the right and powers and be subject to all
the property of the dissolved partnership. restriction and liability of the partnership without the limited
partner.
Note: The creditors of the dissolved partnership has priority on
any claim against the separate creditors or representative of Limitation: Without the consent or ratification of specific act by all
the deceased partner ( Preference to partnership debts) the limited partner a general partner or all general partner have
no authority to :

D. Limited Partnership 1.Do any act in contravention of the certificate

2.Do nay act which would make it impossible to carry on the
In limited partnership there are one or more general partner and ordinary business of the partnership
one or more limited partner. Its purpose to enable not desiring to 3.Confession of judgment
engage in particular business to invest capital and to share the 4.Possess partnership property for other purpose than that of
profit which is expected. partnership purpose
5. Admit a person as a general or limited partner unless the right
Limited Partner: Exist when two or more partner go into business is given in the certificate
together but the limited partner are only liable up to the amount 6. Continue the business with the partnership on death,
of their investment. Limited partner has no power 1. In the retirement insanity and civil interdiction of a general partner
control of the business and 2. Not personally liable for its debts. unless the right is stated in the certificate.

Limited Partnership vs Ordinary Partnership 2. Limited Partner

Limited Partner: Contribute 1. Cash 2. Property BUT NOT SERVICE
if service Not general partner With reference to relation of partner ( Within themselves)

Time For contribution: 1. Power of Management : He has NO right to manage

1. The contribution must be paid prior to the filing of the the firm’s business
certificate required to be filed with the SEC . This 2. Examination of books: Same right as a general partner
certificate must have the description: 1. Amount of he has the right to inspect the books within a
cash and 2. Description of the agreed value reasonable time
Exception: The partner may validly provide in the certificate of 3. Requiring information and formal account: Same right
limited partnership that payment is to be made in the future. as a general partner he has the right to demand true
Certificate filed with the SEC and full information of things affecting the partnership
1. The certificate be signed and sworn by the partner and a formal account of partnership affairs
2. The certificate is to be filed and recorded in the
office of the securities and exchange commission.
Right to Share in the Profits or other compensation:
The limited partner cannot claim benefit unless the
same is filed and registered as certificate of limited
The limited partner may receive from the partner the share in the
partnership
profit and compensation by way of income stipulated in the
Falsity : A limited person who signed the certificate knowing
that the provision therein to be false becomes ultimately liable certificate . The partnership creditors enjoys preference compared
to the person who relied on such false statement to limited or general partner in terms of payment of partnership
Cancellation of certification: The certificate shall be cancelled property.
when the partnership dissolved or the limited partner cease to
be such. Right to return of Contribution

1. When the right is to be demanded

Firm NAME
After the liabilities of the partnership have been paid, the general
As a rule, the surname of the limited partner must not appear in
and limited partner can demand the return of his contribution:
the partnership name.
Exception: 1. On the dissolution of the partnership
1. When it is also the name of the general partner
2. Date specified in the certificate
2. When prior to the time when the limited partner
3. After notice of six months in writing to all other
becomes such the business had been carried on under
the name which it appears members if no time is specified in the certificate.
Effect of violation of the rule: A limited partner whose surname
Limitation :
appears are liable as general partner to the partnership creditor
who extend credits to the partnership without actual knowledge
1. All liabilities of the partnership have been paid and
that he is not a general partner.
there remains property of the partnership sufficient to
pay the limited partner ( Partnership debts must first
Rights, Powers , Restriction and Liability of the partners: be paid)
2. The consent of all members must be obtained unless
1. General Partner the contribution is fully demanded under the law
- A limited partner has only the right to demand and
receive cash in return of his contribution when there is
no statement in the certificate.
 3. The certificate is cancelled or amended as to set forth 1. When one believes that he is a limited partner but he is
the withdrawal or reduction. not : Upon realizing his mistake the alleged limited partner
renounces his interest over the property.
Preference : a. Effects
1. He does not become liable as a general partner with
1. Limited partner : May agree that one or more of the
the person or in the partnership carrying business.
limited partner have priority over the other limited
2. Does not become bound by the obligation of the
partner in terms of payment ( This has priority)
partnership
 If there is no priority: They stand to be in equal footing
Assignee, Substitution and Addition of Members :
With reference to the relation of the firm
a. Assignment: The right of a limited partner is assignable
1. Limited partner is liable to the partnership
note that the assignee does not become a limited
a. For the difference between his contribution
partner if he does not substitute the latter. Therefore
actually made and that stated in the
he does not exercise the ff rights ;
certificate as having bee made
a. No right to require any information or
( Contribution – Cetificate)
account of partnership transaction or to
b. Unpaid contribution which he agreed in the
b. Inspect the books
certificate to make in the future.
c. Entitled only to receive the share of the
Trustee : A limited partner holds as trustee for the partnership profit by way of income or return of his
contribution
1. Specific Property stated in the certificate as
contributed by him but which was not wrongfully Substitution of Limited Partner :
returned
1. Substituted limited partner : A substituted limited
2. Money or other property wrongfully paid
partner is a person admitted to all the right of limited
Compromise: partner who has died or has assigned his interest in the
partnership .
1. The liability of the limited partner will only be waived a. All the members must consent thereto or if
when there is consent of all the member but the the assignor being thereunto empowered
waiver shall not affect the creditor (3rd ) person right by the certificate gives the assignee the
who extended credit – No knowledge right. Note that the certificate must be
appropriately amended.
Loan and other business transaction:
General Rule: The substituted limited partner has all the rights,
1. A limited partner also may loan money to and other powers and is subject to all restriction and liabilities of his assignor
business with the partnership.
Exception: Those liabilities which he was ignorant at the time he
Limited : No limited partner shall becomes a limited partner and cannot be ascertained in the
certificate.
1. Receive or hold as collateral security any partnership
property  Basta everytime mag aadd ka , you need to amend the
2. Receive from a general partner or partnership any certificate
payment , conveyance or release from liability if at the
time the asset of partnership is not sufficient to Dissolution:
discharge partnership liabilities to person not claiming
as general or limited partner. ( Di muna sila pede 1. The retirement, death, insolvency insanity and civil
makauha if di enough ung property pambayad sa ibang interdiction of a general partner dissolves the
creditors) partnership unless the business is continued by the
remaining general partner;
Rule: This is considered as a fraud on the creditors of the a. Under a right so to do in the certificate
partnership b. With the consent of all the members.

With reference to relation with third person 2. When a limited partner dissolve ap partnership
a. He is rightfully but unsuccessfully demand
As a rule, a limited partner does not become a general partner to
the return of his contribution
third person, but he becomes such when he takes a part of the
b. Other liabilities of the partnership is not
business of the partnership or when his surname appears in the
paid or the partnership is not insufficient for
instance stated.
their payment and that the limited partner
Rule in Special Cases : is entitled to their contribution.

Settlement of Account

1. Order of settlement of payment :

 a. Those to creditor in the order of priority as 1.Marriage ceremony the declaration by the parties that they
provided by law , except those limited are taking each other as man and wife may not be delegated
partner on account of their contribution to because parties are required to make the declaration
general partner. personally.
b. Those limited partner in respect to their 2.The mechanical act of drafting a holographic will may not be
share in the profit and other compensation delegated because the same must be entirely written and
signed by the testator
by way of income on contribution
3.The making of the will may not likewise be delegated
c. Those limited partner in respect to capital
because the same is a strictly personal act of the testator.
of their contribution
4.Illegal or unlawful act may not be validly delegated.
d. Those to general partner other than capital
and profit
e. Those to general partner in respect to profit Elements of the Contract
f. Those general partner in respect to capital 1.Consent: This must be expressed or implied of the parties to
establish the relationship
Priority between firm creditors and limited partner 2.Object, the execution of the juridical act in relation to third
person
 Claim of the limited partner in the capital and in 3.Act of the representative and not for himself
respect to their claim for profit or for compensation by 4.Agent acts within the scope of his authority.
way of income on the contribution
Consent
1. As to loan and other business transaction: Limited Requirement of Consent: There must be mutual consent, first
partner loans, money to and transact other business consent on the part of the principal that the agent will act for him,
with the partnership he may share pro rata in the firm ( There must be actual intention to appoint or intent that is
asset with general creditor of the firm in respect of inferable from the act)and second the consent on the part of the
such claim ( Loan and other business transaction) agent to accept the authority and act on it.
2. As to return of contribution: A limited partner is not
Capacity
permitted to share in the firm asset until all the general
Both parties are required to have capacities to a contract. A
creditors are paid. principal may either be a natural or juridical person.
Priority between limited and general partner:
Effect of Incapacity:
1. Limited partner : Enjoys preference in the application 1.If one is incapable of giving consent : Voidable
2.If both are incapable of giving consent : Unenforceable
of firm asset to their claims
2. After satisfying the claim of genera creditor and limited
Q: What happens if the principal is incapacitated to contract?
the residue is to e applied to the claim of the general A: He is considered personally liable if there is knowledge as to
partner the incapacity of the principal. If there is no knowledge as to the
a. Those other than for capital and profit incapacity of the principal, the agent is not liable. Note that the
b. Those in respect to profit capacity of the principal is material as the agent enters a contract
c. Those in respect to capital . on behalf of the principal and not on his own behalf

Death of Limited partner : The executor has the right of a limited Object
partner for the purpose of setting his estate such power as the General: The object is the execution of the juridical act in relation
deceased had constitute his assignee a substituted limited to third persons.
partner. It is the estate of the decease which is liable for his share.
How is agency established?
Part 2 : Contract of agency 1.Expressly
2.Impliedly
Definition: By a contract f agency a person binds himself to render
some service or to do something in representation or on behalf of 1.Expressly
the other called the principal. Here, the principal must consent Rule: No form is required, an agency may be in writing or in oral
that the principal consent that the agent act on his behalf form
Exception:
Concept: The agent acts on his behalf and not on behalf of the 1.When the law requires a certain form such as when the agency
principal on matters within the scope of his authority and said acts relates to a certain piece of land or any interest in which case the
have the same legal effect as if they were personally executed by authority of the agent is required to be in writing.
the principal.
2.Impliedly
Fiduciary: The agent in regad to the property forming the subject a.Implied from the acts of the principal
matter is estopped from the acquisition of title adverse to that of -Apparent authority: Actively holing out another as his agent or
the principal. thereby entrusting him with apparent ostensible authority
-When the principal has previously employed the alleged agent to
General Rule: What a man can do in person he may do through such in transaction of similar nature to the one in question
another
Exception: Remember: Dito si Prinicpal mismo ng pamuka sa third
 persons na may authority ung agent 3.relying on such representation the third person changed his
position to his detriment.
b.Implied from his silence or failure to repudiate *Here, ung principal ng manifest na may authority ung agent and
-The principal knew that another person was acting on his behalf ng rely ung third person dun
without any authority , despite knowledge he still kept quiet and Agency by Estoppel Apparent authority
did not repudiate the agency. 1.Ther is no agency at all but Not limited to instances
the one assuming to act as when there is no real agency
the agent has apparent or it may be actual or ostensible
ostensible authority to *The doctrine of apparent
represent another authority is a species of
doctrine of estoppel.
Principal : The rule is that one
Acceptance on the agent’s part who clothes another with the
1.Express apparent authority as his
2.implied. agent and hold him out to
-acts that carry out the agency the public as such cannot be
GENERAL RULE: Acceptance cannot be implied from the acts of permitted to deny the
the agent except : authority.
1.When the principal transmits his power of authority to the The acts of the principal and
agent who receives it without any objection ot by the act of the agent .
2.When the principal entrust to the agent by letter or telegram a The principal is therefore not
power of attorney with respect to the business he is habitually responsible where the agents
engaged and the agent did not reply own conduct and statement
have created the apparent
Apparent or Ostensible Agency authority.
An agency is apparent or ostensible where a person whether In apparent authority the
authorized or not appears to third person because of the liability of principal is
manifestation of another to be authorized to act as agent for imposed not as a result of
another. reality of a contractual
-Here the ostensible agency is a result of the actions of the relationship but rather
principal or an employer in somehow misleading the public into because of the action of
believing that a relationship or authority exist. Here apparent principal or an employer in
authority is determined based on the act of the principal and NOT somehow misleading the
THE AGENT public believing that the
relationship or the authority
Apparent authority is determined by : exist.
1.The general manner which the corporation holds out its officer
or agent as having the power to act or in other words the EXTENT OR KINDS OF AGENCY
apparent authority to act in general. 1.General Agency
2.The acquiescence in his act of a particular nature with actual or 2.Special agency.
constructive knowledge thereof whether within or beyond the
scope of his ordinary powers. 1.General Agency ::It comprises all the business of the principal
Whether the principal has by his voluntary act placed the 2.Special agency.: It comprises one or more specific transaction
agent in such situation that an ordinary prudence conversant
with business usage and the nature of the particular business NATURE OF THE ACTS:
is justified into presuming that the agent has authority to General Terms : It comprises only of acts of administration even if
perform the act in question. the principal states that he withholds no power of the at the
agent may execute such acts that he deems as appropriate. ( This
Agency by estoppel does not pertain to the business of the principal but of the
One who clothes another with apparent authority as his agent and number of acts or transaction that is conferred by the agent)
holds him out to the public as such cannot be permitted to deny
the authority of such person to act as his agent to the prejudice of Specific terms: An agent that is couched on specific terms indicate
innocent third parties dealing with such person in good faith and the particular function or function that the agent is authorized to
in honest belief that he is what he appears to be. exercise whether It be at of strict dominion or administration.

Purpose: The purpose of this is to bind the principal sa act ng Powers of attorney:
agents nila hindi to magaaply when the principal wishes to take This is an instrument whereby a person appoints another as his
advantage or ratifies that act of the agent agent and confers upon him the authority to perform certain
specified acts on behalf of the principal.
Requisites ‘
1.The principal manifested a representation of the agent’s Formalities:
authority or knowingly allowed the agent to assume such 1.There is no requirement of a specific formalities when it comes
authority to special power of attorney it may be in any form clearly showing
2.The third person in good faith relied upon the representation of on its face the authority of the agent.
authority Exception:
1.The authority of the agent to sell a price of land must be in The contract of agency need not be in writing but the contract of
writing otherwise the sale is void lease of real property for more than a year is covered in the
statute of fraud and therefore it must be in writing ( Agency need
Kinds of special powers of attorney: not be in writing pero ung contracto f lease needs)
1.General: Permits the agent to do all acts for which the law does
not require a special power of attorney. 9.Biding principal to render some service WITHOUT compensation
Note: Even if the document is a general power of attorney a and binding the principal to a contract of partnership
special power of attorney is met if there is a clear mandate from
the principal authorizing the performance of such act ( Dito kahit 10.Accepting or repudiating an inheritance
general power lang pero the power of attorney must be so
express and clear and unmistakable) 11. Ratifying or recognizing obligation contracted before the
agency
2.Special powers of attorney
1.Making payments that are not considered as acts of 12.Acts of strict dominion
administration -Note that one form of special power cannot give the
2.Effecting novation which put an end to obligation that are presumption that it includes under any form of construction
already in existence at the time the agency is constituted another form of special powers.
3.Compromising, submitting question to arbitration , renouncing
the right to appeal from judgment waiving objection to venue of Implied powers
action or abandoning prescription acquired Every grant of power implies and carries with it as an incident
The SPA to compromise dos not authorize submission to authority to do acts or use whatever means that are reasonably
arbitration.  Need to be expressly stated necessary and proper for the accomplishment of the purpose to
RATIO: The attorney’s have the authority to bind their clients in which the agency is created unless the inference of power is
any cause by any agreement in relation thereto made in writing expressly excluded by the instrument creating the agency.
and in taking an appeal and in all matters of ordinary judicial
procedure but they cannot without SPA compromise their client’s DUTIES OF THE AGENT TO THE PRINCIPAL
claim,
4.Waiving ay obligation gratuitously 1.When the agent declines the agency
5.Entering into a contract where the ownership of immovable is -The agent who declines is bound to observe the diligence of a
transmitted or acquired either gratuitously or for valuable good father and a family in the custody and preservation of the
consideration and conveying real rights over the immovable. goods forwarded to him by the owner until the latter appoints an
1.The SPA to sell does not include the SPA to mortgage and the agent tor takes charge of the goods. ( Hangang di nakaaopoint si
SPA to mortgage does not include the SPA to sell. In a sale of the principal alaga nya muna un goods)
parcel of land or any interest thereto it is required that the
authority of the agent must be in writing. 2.When the agency is accepted
2.Note that not only the power to sell , needs and SPA but also -The agent is bound to carry out the agency but will not carry out
the power to purchase an immovable/ the agency if its execution will manifestly result to a loss or
damage to the principal.
6.Making gift, except customary ones for charity or those made to
employee in business managed by the agent Funds:
GEN RULE: The agent has no authority to advance the necessary
7.Loaning or borrowing money unless the act of the later be funds to carry out the agency
urgent and indispensable for the preservation of the thing under Exception: If there is a stipulation to that effect and note that
his administration and obligating the principal as guarantor or even if there is a stipulation to the effect that the agent must
surety advance the necessary funds, he cannot do so when the principal
-The authority to mortgage does not carry with it the authority is insolvent.
to contract obligation.Likewise, the authority to borrow money
and mortgage the principal proepty to secure the loan may not be Death of Principal
interpreted to include the authority to mortgage the property to General Rule: The death of the principal extinguishes the agency
support the agent’s personal loan ( Thus were the power of EXCEPTION: The agent is still obliged to finish the business already
attorney is given to the husband by the wife was limited to begun on the death of the principal should delay entail any
authority to mortgage this does not mean that the wife is liable danger.
for the payment debt that is contracted by the husband )
-The power of attorney to loan money does not include the Rule on the power of Agent and authority
implied power to make a principal a surety for the payment fo General Rule : The agent must act within the scope of his
the debt to third person. The authority of an agent to obligate the authority
principal as a guarantor or surety need not be in writing but the Exception:
special undertaking of the guarantor or surety is required to be in 1.Implied powers : The agent can do acts as may be conducive for
writing otherwise it is unenforceable based on the statute of the accomplishment or purpose of agency
fraud.s 2. If the act of the agent is more advantageous to the principal
8.Leasing any real property for more than a year that what is specified to him the agent is not deemed to have
The leasing of the property for more than a year is an act of strict exceeded his authority.
dominion or of ownership. A special power of attorney is thus
necessary for its execution through an agent Delegation of authority
The agent may appoint a substitute except if the principal
prohibited him from doing so.
 This means that the agent cannot borrow the property by
Effect: purchase or public auction the property of the principal this
1.As between principal and third person does not apply after the termination of the affairs of the
a.If the substitution is not prohibited: The act of the substitute agency.
will bind the principal
b.If the substitution is prohibited the act of the substitute is void, Duty to Exercise due diligence
the void acts here are only invalid as to the principal if the latter General Rule: The agent in the execution of the agency must do all
does not ratify the unauthorized acts. ( Unenforceable) that good father of family would do as required in the nature of
the business.
2.As between principal and agent
a.If the agent appoints a substitute an appoints one designated 1.The law imposes upon the agent the absolute obligation to
by the principal himself : The agent is NOT LIABLE for the act of make a full disclosure of the complete account to his principal of
the substitute all relevant transaction. This means that the agent is liable not
2.If the agent is empowered to appoint a SUBSTITUTE and only for fraud but also for negligence.
appoints a substitute of his own choice: The agent is not liable for
the acts of the substitute unless the person appointed is Negligence: This must be adjudged in a more or less rigor by the
notoriously incompetent or insolvent court accordingly as to whether the agency is one with
3.If the agent is not empowered to appoint a substitute but not compensation or not ( Check mo muna if may bayad or wala)
prohibited to do so: He is responsible for the act of the substitute
4.If the agent is not authorized to appoint a substitute : He is Commission agent :
therefore liable to the principal for the act of the substitute. 1.The commission agent is responsible for the goods received by
him in terms and condition described in the consignment unless
General Rule: The principal may in addition to remedy against the receiving them he makes a written statement of the damage and
agent bring an action against the substitute with respect to the declaration that he suffers.
obligation which the latter has contracted under substitution( 2.If the commission handles the same kind or mark which belongs
remedy against the substitute) to the different owner he shall distinguish the by countermarks,
designate merchandise respectively belonging to the principal.
Remedy against the substitute 3.sale by commission agent :
1.When agent has not been given the power to appoint a a.The commission cannot without the express or implied
substitute but not prohibited consent of the principal sell on credit.
2.Although empowered to appoint a substitute he appoints one -If there is a sale on credit without the authority the principal
who was notoriously incompetent or insolvent. may demand from him payment in cash but the commission agent
is entitled to any interest or benefit resulting from the sale.
DUTIES OF PRINCIPAL TO THE AGENT -If there is a sale of credit with authority: He informs the principal
the statement of the names of the buyers, if he fails to do so the
1.Obedience: The agent is required to act in accordance with the payment is deemed to be made in cash.
instruction of the principal. Departure from the instruction is
permitted in the ff cases : Del credere agent
A Del Credere agent is an agent that sells products for a fee and
1.Performs the agency in a manner more advantageous to the guarantees payment to the seller.( The del credere agent receives
principal to the principal . 1, A guarantee commission 2.Oridnary commission)
2.In case of sudden emergency not caused by the fault of the
agent fault where there is no time to communicate with the Duty of Del Credere agent: A del credere agent bears the risk of
principal but some thing must be done and a strict compliance collection and he shall pay the principal the proceeds of the sale
with the instruction becomes impossible or would be detrimental on the same terms as agreed upon with the purchaser. (but this
to the interest of the principal. does not mean that the principal cannot go to the third party to
*basta anything for the benefit of the principal. obtain)

Duty of good faith and loyalty: Duty to account: every agent is bound to render an account of his
1.Conflict of interest: The agent is liable for damages if there is transaction and to deliver to the principal whatever he may have
conflict of interest between his interest and the principal and he received due to the agency.
choses his interest over the principal. - A stipulation exempting the agent from obligation to
When authorized to borrow or to lend render account is void
1.The agent borrows for himself or for the account of the Ex: An agent who takes a secret profit in the nature of the bonus,
principal: The agent can lend the money to the principal provided gratuity or personal benefit form the vendee without revealing
that the interest rate be at current rate of interest. ( Agent the same to the principal the vendor is guilty of breach of loyalty
borrowing from himself for the account of the principal) to the principal and forfeits the right to collect his commission
2.If the agent is authorized to lend money at interest he cannot even if the principal did not suffer any injury. It is the act of taking
borrow it without the consent of the principal. ( Agent must ask the profit without the consent of the principal which is penalized
permission first to the principal before he can borrow the money by law.
for himself )
Note: The agency is prohibited to acquire by purchase even at Liability of two or more agents
a public auction or judicial auction either in person or through Nature: The responsibility of two or more agents even though
the mediation of another the property of the principal whose they have been appointed simultaneously is not solidary if
administration or sale may have been entrusted to him unless solidarity has not been expressly stipulated. ( Joint)
consent –
Exception: If solidarity is agreed upon each of the agent is liable Rule: The principal must indemnify the agent for all the damages
for the non fulfillment of agency. which the agent incurred as a result of the execution of the
agency
Duty and liabilities of Principal to the agent Exception: 1. If the damage was due to the fault or negligence of
the agent the principal has no obligation to reimburse.
1.Duty to pay compensation : Agency is presumed to be for
compensation unless there is a proof to the contrary Agent’s lien: The agent may retain in pledge the things which are
object of the agency until the effects of reimbursement. The lien
When is compensation earned? can be enforced in same way as a pledge by having the property
1.When there is an agreement to time when compensation is due sold at public auction in a manner prescribed by law
Exception: In the absence of stipulation
a.The agent has the duty to carry out the agency must be Liability of two or more principal
performed before the right to compensation accrues. 1.If two or more principal appointed an agent for the common
transaction or undertaking they are SOLIDARILY liable ( vs agent
a. If rendition of service is enough and that the result is joint). * Note there is a requirement that two or more person
not the basis for compensation then proof for the appointed the agent in a common transaction or undertaking
rendition of service is enough to entitle the agent for
compensation DUTIES TO THIRD PERSON
b. If the result is the basis for compensation then then
the rendition of the service without achieving the 1.If the agent acts within the scope of his authority: Th agent
desired result will not entitle the agent to apparent representation yields to the principal true
compensation. representation and the contract is considered as entered into
between the principal and the third person
Doctrine of Proximate cause: In order for the agent to be entitled
to a commission he must e the procuring cause of the sale which GENERAL RULE:
means that the measures that is employed by the agent results to The agent is not liable if it acted within the bounds of his
the sale. ( Gen Rule: The agent procuring cause for the sale authority In this case the agent is completely absolved of any
entitled to compensation) liability as a rule.
Exception: If the principal denies the agency, the third person still ha a right
1.If the agent notwithstanding the expiration of his authority against the principal notwithstanding the latter’s denial of agency
nonetheless took diligent steps to bring back together the parties and he having the right of action certainly has the right to adduce
such that a sale was finalized and consummated between them. proof of the agency or commission to make the right effective.
Therefore, the third person has the right to adduce proof that
Broker or agent agency exist. Hence if proven the principal is held to be liable.
1.Broker: A broker is defined as one that is engaged for others on
a commission, negotiating contracts relative to property with the Exception:
custody of which he has no concern 1.He expressly binds himself
2.Guilty of fraud and negligence.
Proximate cause: Cause originating ta series of events which
without break in their continuity results in the acocmplismhnet of Knowledge of third person not essential
prime objective of employment of the broker which is to procure 1.An act is deemed to have performed within the scope of the
a purchaser that is willing and able to buy real estate on the terms authority of the agent if such act is within the scope of the agent’s
of the owner. authority. The third person can require the agent to present the
power of attorney or instruction as to the agency.
Broker Agent -The third person is bound to ascertain not only the fact of agency
The broker is merely used to An agent is duly authorized but also the nature and the extent of authority . A person dealing
procure a purchaser for to enter into juridical acts on with an agent assumes lack of authority in the agent. He cannot
property ready, able and behalf of the principal charge the principal by relying upon the agent’s assumption of
willing to buy at the price and authority if it later proves to be unfounded.
on the terms agreed upon
Agent acted beyond the scope of his authority

Q: What happens if the agent acted beyond the scope of his or

Cases where the principal is not liable for the expenses conducted her authority?
by the agent
A: If the agent is without authority the contract is unenforceable.
1,If the agent acted in contravention of the instruction of the A contract entered into in the name of another by one who has
principal unless the latter wishes to avail themselves of the
no authority or legal representation shall be unenforceable unless
benefit of the contract the same is ratified.
2.When the expenses were due to the fault of the agent
3.When th agent incurred them with knowledge that unfavorable Exception:In a sale of a parcel of land is made though an agent it is
result would ensue if the principal was not aware of
necessary that the authority of agent is in writing otherwise the
4.When it was stipulated that the expenses would be borne by the same is void
agent
Effects :
Duty to indemnify for damages
1.Principal : the acts f the agent beyond the scope of authority
does not bind the principal the contract is unenforceable
Exception 1.Revocation
1.Ratificatin: When the principal ratifies the contract expressly or 2.Withdrawal of an agent
impliedly 3.Death, civil interdiction insanity or insolvency of the principal
RATIFICATION or the agent
Concept: This is the adoption or confirmation by one person of 4.Dissolution of the firm or corporation that accepted or
an act performed on his behalf by another without authority . entrusted the agency
5.Accomplishment of the object and the purpose of agency
6.Any other modes for the extinguishment of the agency.
For the Principal to ratify: He or she must have full knowledge
at the time of ratification of all the material facts and
circumstance relating to the unauthorized act of the person
who assume to act as agent. Therefore, if the principal has no Revocation
knowledge of the facts relating to the unauthorized act of the A contract of agency is revocable at will it is a personal cotnract of
person ratification cannot be made , exception if the ignorance representation that is based on trust and confidence. The power
is willful. of agency ceases when the will or permission is withdrawn by the
principal. ( Gen Rule : Revocable at will)

-effect: The principal becomes liable to third person with Manner of revocation: 1. Express 2. Implied
whom the agent contracts.
Exception:
Implied ratification: The act must be inconsistent with any 1.When the agency is one that is coupled with interest
other hypothesis than that he approved and intended to adopt a. A bilateral contract depends upon it
what had been done in his name b.If it is a means to fulfill an obligation that is already contracted
c.If a partner is appointed as maanger of the partnership in the
2.when the principal allowed the agent to act as if he has contract of partnership and his removal form the management is
apparent authority. unjustifiable.
Effect: The agent is liable to a third person with whom he
contracts when he exceeds the limits of authority without giving Note: If the agency is constituted in the clause of a bilateral
notice of his powers to third person. But if he notifies the third contract that is when the agency is inserted in another agreement
person of his authority he is not liable to said third person unless the agency ceases to be revocable at the pleasure of the principal
it was undertaken with ratification of the principal as the agency will now follow the condition of the bilateral
2.Third person agreement. ( If ung agency nakasulat sa loob ng bilateral
The third person cannot hold the principal liable for the acts of agreement)
the
agent who acted beyond the scope of his power ( Note it is the Implied revocation
duty of the third person to inquire into the power of the agent) 1.When the new agent is appointed for the same business or
-When a third person was not given notice of the agent’s power transaction the previous agency is revoked form the day on which
he can hold the agent personally liable to him notice thereof was given to the former agent
2.Whne the principal directly manages the business entrusted to
When the agency acts in his own name the agent dealing directly to third person
GENERAL RULE: The principal has no right of action against the 3.A general power of attorney is revoked by a special one granted
person with whom the agent contracted neither have such person to another agent as regard to a special matter involved in the
against the principal. The agent is one directly boudn to the third latter.
person as if the transaction was his
EXCEPTION Notice of revocation
1.If the transaction belongs things belonging to the principal the 1.Between the principal and third person: The revocation will not
agent is bound to the principal although he does not assume the prejudice third person if the third person are not given notice
character of such agent and appears to be acting on his own thereof. Note that a revocation of the agency through a
name. ( The contract entered into is between the principal and newspaper of general circulation is sufficient warning to third
third person) persons .
Exception to exception: Cannot apply when the agent exceeded 2.Between the principal and agent : The agent must be notified.
authority
Withdrawal of the agent
When the principal and agent both entered into transaction Manner of withdrawal: The agent may withdraw from the agency
*Principal and agent entered into the transaction together who y giving of the due notice to the princiipal.
has priority Duties and responsibilities of the withdrawing agent:
1.The withdrawing agent must indemnify he principal for any
Rule of preference: damage by eason of withdrawal by th agent the latter must
1.When two person contract with respect to the same thing one indemnify the principal therefor unless the agent based his
with the agent and one with the principal and the two contract withdrawl in impossibility of continuing the performance f the
are incompatible with each other 1. Prior date is preferred. agency
-If the agent has acted good faith the principal shall be liable in 2.The agent must continue to act until the principal has
damage to the third person whose contract must be rejected. If reasonable opportunity to take the necessary steps to meet the
the agent acted in ad faith he must be responsible. situation.

Extinguishment of Agency Death:

Mode of Extinguishment : 1.If the principal or the agent dies the agency is extinguished
EXCEPTON
1.If the agency is constituted for the common interest of the
principal and of the agent or the interest of a third person who
accepted the stipulation in his favor the agency is deemed to
remain in full force and effect
2.If the agent does not know that the principal died, anything
done by the agent is vali.

Upon the death of the agent the heirs must notify the principal
thereof and in the meantime adopt such measure as to the
circumstance may demand in the interest of the principal