PARTNERSHIP Essential requisites of a

contract of partnership
CHAPTER 1 1. There must be a valid
GENERAL PROVISIONS contract;
2. There must be a
contribution of money,
Art. 1767. By the contract of property, or industry to a
partnership, two or more common fund;
persons bind themselves to 3. The partnership must be
contribute money, property, organized for gain or profit;
or industry to a common and
fund, with the intention of 4. The partnership should
dividing the profits among have a lawful object or
themselves. purpose, and must be
established for the common
Two or more persons benefit or interest of the
may also form a partnership partners.
for the exercise of a
profession. (1665a) What are the two tests to
determine the existence of a
A partnership exists partnership?
when two or more persons
agree to place their money, 1. First test: Determine
effects, labor, and skill in whether or not there is an
lawful commerce or business, agreement to contribute
with the understanding that money, property or industry to
there shall be a proportionate a common fund.
sharing of the profits and
2. Second test: Determine
losses among them.
whether or not there is an
Meaning of Profession intent of the contracting
parties to divide the profits
Profession is "a group of among themselves.
men pursuing a learned art as
a common calling in the spirit PARTNERSHIP - A
of public service, no less a JURIDICAL PERSON
public service because it may To be considered a
incidentally be a means of juridical personality, a
livelihood. partnership must fulfill these
requisites: (1) two or more
persons bind themselves to 3. Principal: It is a contract
contribute money, property or that does not depend on other
industry to a common fund; contracts for its existence.
and (2) intention on the part of
4. Bilateral: It is a contract
the partners to divide the
entered into by two or more
profits among themselves. It
persons.
may be constituted in any
form; a public instrument is 5. Onerous: Each partner
necessary only where must contribute money,
immovable property or real property, or industry. Of
rights are contributed thereto. course, a partner can
This implies that since a contribute one, some or all of
contract of partnership is these.
consensual, an oral contract
of partnership is as good as a 6. Nominate: It is a contract
written one. Where no which has a name in law.
immovable property or real 7. Preparatory: It is a contract
rights are involved, what in preparation for another
matters is that the parties contract or contracts.
have complied with the
requisites of a partnership. Money: The medium of
exchange authorized or
Characteristics of a contract adopted by a government as
of partnership part of its currency,
1. Consensual: It is a contract Property: Any external thing
that is perfected by mere over which the rights of
consent because all of the possession, use, and
partners had a meeting of enjoyment are exercised.
minds to enter into a contract
of partnership. Industry: Diligence in the
performance of a task. A
2. Commutative: The particular form or branch of
contribution of each partner, productive labor.
whether money, property or
industry, is considered as the Note: The contribution to such
equivalent of the contribution fund need not be cash or fixed
of the other partners. assets; it could be an
intangible like credit or
industry.
Partnership vs. Joint turn, dependent on the
Venture constancy of that mutual
resolve, along with each
A partnership exists
partner's capability to give it,
when two or more persons
and the absence of cause for
agree to place their money,
dissolution provided by the
effects, labor, and skill in
law itself. Verily, any one of
lawful commerce or business,
the partners may, at his sole
with the understanding that
pleasure, dictate a dissolution
there shall be a proportionate
of the partnership at will. He
sharing of the profits and
must, however, act in good
losses between them. A
faith, not that the attendance
contract of partnership is
of bad faith can prevent the
defined by the Civil Code as
dissolution of the partnership
one where two or more
but that it can result in a
persons bound themselves to
liability for damages.
contribute money, property, or
industry to a common fund An unjustified
with the intention of dividing dissolution by a partner can
the profits among themselves. subject him to action for
A joint venture, on the other damages because by the
hand, is hardly distinguishable mutual agency that arises in a
from, and may be likened to, a partnership, the doctrine of
partnership since their delectus personae allows the
elements are similar, i.e., partners to have the power,
community of interests in the although not necessarily the
business and sharing of profits right to dissolve the
and losses. Being a form of partnership.
partnership, a joint venture is
Among partners,
generally governed by the law
mutual agency arises and the
on partnership.
doctrine of delectus
DOCTRINE OF DELECTUS personae allows them to have
PERSONAE the power, although not
The right to choose with whom necessarily the right. to
a person wishes to associate dissolve the partnership. An
himself is the very foundation unjustified dissolution by the
and essence of partnership. partner can subject him to a
Its continued existence is, in possible action for damages.
Delectus personarum partnership, not its partners,
("choice of persons") or officers or agents, which
Delectus personae ("Choice should be impleaded for a
of the person") cause of action against the
partnership itself The Court
The rule that when
added that the partners could
personal relations are
not be held liable for the
important, a person cannot be
obligations of the partnership
compelled to associate with
unless it was shown that the
another person; specifically,
legal fiction of a different
the principle that one has the
juridical personality was being
right to select the person or
used for fraudulent, unfair, or
persons with one whom one
illegal purposes.
might form a partnership.
Note: In the spirit of fair play,
Note: Although a partnership
it is a better rule that a partner
is based on delectus
must first be impleaded before
personae or mutual agency,
he could be prejudiced by the
whereby any partner can
judgment against the
generally represent the
partnership. A partner may
partnership in its business
raise several defenses during
affairs, it is non sequitur that a
the trial to avoid or mitigate
suit against the partnership is
his obligation to the
necessarily a suit impleading
partnership liability.
each and every partner It
Necessarily, before he could
must be remembered that a
present evidence during the
partnership is a juridical entity
trial, he must first be
that has a distinct and
impleaded and informed of
separate personality from the
the case against him. It would
persons composing it.
be the height of injustice to
In Aguila v. Court of rob an innocent partner of his
Appeals, the complainant had hard-earned personal
a cause of action against the belongings without giving him
partnership. Nevertheless, it an opportunity to be heard.
was the partners themselves
Partnership at will
that were impleaded in the
complaint. The Court A partnership that does not fix
dismissed the complaint and its term is a partnership at
held that it was the will. The birth and life of a
partnership at will is necessarily cash or fixed
predicated on the mutual assets. Being partner, they
desire and consent of the are all liable for debts incurred
partners. The right to choose by or on behalf of the
with whom a person wishes to partnership. The liability for a
associate himself is the very contract entered into on
foundation and essence of behalf of an unincorporated
that partnership. association or ostensible
corporation may lie in a
Best Evidence of The
person who may not have
Existence of a Partnership
directly transacted on its
In Idos v. Court of Appeals, behalf, but reaped benefits
the Supreme Court said: from that contract.

The best evidence of the Art. 1768. The partnership

existence of the partnership, has a judicial personality
which was not yet terminated separate and distinct from
(though in the winding up that of each of the partners,
stage), were the unsold goods even in case of failure to
and uncollected receivables, comply with the
which were presented to the requirements of Article
trial court. Since the 1772, first paragraph.
partnership has not been
Under Art. 1768 of the
terminated the petitioner and
Civil Code, a partnership "has
private complainant remained
a juridical personality separate
as co-partners. xxx.
and distinct from that of each
Note: A partnership may be of the partners." The partners
deemed to exist among cannot be held liable for the
parties who agree to borrow obligations of the partnership
money to pursue a business unless it is shown that the
and to divide the profits or legal fiction of a different
losses that may arise juridical personality is being
therefrom, even if it is shown used for fraudulent, unfair, or
that they have not contributed illegal purposes. Hence, it is
any capital of their own to a the partnership, not its officers
"common fund." Their or agents, which should be
contribution may be in the impleaded in any litigation
form of credit or industry, not
involving property registered (1) Except as provided by
in its name. Article 1825, persons who
are not partners as to each
Article 1772 of the
other are not partners as to
New Civil Code (NCC) states:
third persons;
Art. 1772. Every contract of (2) Co-ownership or co-
partnership having a capital of possession does not of
three thousand pesos or itself establish a
more, in money or property, partnership, whether such-
shall appear in a public co-owners or co-
instrument, which must be possessors do or do not
recorded in the Office of the share any profits made by
Securities and Exchange the use of the property;
Commission. (3) The sharing of gross
returns does not of itself
Failure to comply with the establish a partnership,
requirements of the preceding whether or not the persons
paragraph shall not affect the sharing them have a joint or
liability of the partnership and common right or interest in
the members thereof to third any property from which the
persons. returns are derived;
ARTIFICIAL (4) The receipt by a person
PERSON/JURIDICAL of
PERSON a share of the profits of a
An entity, such as a business is prima facie
corporation, created by law evidence that he is a partner
and given certain legal rights in the business, but no such
and duties of a human being; inference shall be drawn if
a being, real or imaginary, such profits were received
who for the purpose of legal in payment:
reasoning is treated more or (a) As a debt by installments
less as a human being. or otherwise
Art. 1769. In determining (b) As wages of an employee
whether a partnership or rent to a landlord;
exists, these rules shall (c) As an annuity to a widow
apply: or representative of a
deceased partner;
(d) As interest on a loan, Rule 3: The sharing of gross
though the amount of payment returns does not of itself
vary with the profits of the establish a partnership
business;
Note:
(e) As the consideration for
the sale of a goodwill of a There is a disputable
business or other property by presumption of establishing a
installments or otherwise. partnership if what is being
shared by two or more
Rule 1: Persons who are not
persons are net profit.
partners as to each other
However, if what is being
are not partners as to third
shared by two or more
persons
persons are gross returns or
Partnership by Estoppel gross profit, then there is no
presumption of establishing a
Where a partnership
partnership.
not duly organized has been
recognized as such in its Rule 4: The receipt by a
dealings with certain persons, person of a share of the
it shall be considered as profits of a business is
"partnership by estoppel" and prima facie evidence that he
the persons dealing with it are is a partner in the business
estopped from denying its
Prima facie
partnership existence.
Sufficient to establish a
Rule 2: Co-ownership or co-
fact or raise a presumption
possession does not of
unless disprove or rebutted;
itself establish a partnership
based on what seems to be
true on first examination, ever
though it may later be proved
to be untrue.
It is evident that an
isolated transaction whereby
two or more persons
contribute funds to buy certain
real estate for profit in the
absence of other
circumstances showing a
contrary intention cannot be whatever their relation may
considered a partnership. have been as to third parties.
Persons who In order to constitute a
contribute property or funds partnership, inter se, there
for a common enterprise and must be: (a) An intent to form
agree to share the gross the same; (b) generally
returns of that enterprise in participating in both profits
proportion to their contribution, and losses; (c) and such a
but who severally retain the community of interest, as far
title to their respective as third persons are
contribution, are not thereby concerned as enables each
rendered partners. They have party to make contract,
no common stock or capital, manage the business, and
and no community of interest dispose of the whole property.
as principal proprietors in the xxx.
business itself which the
The common
proceeds derived.
ownership of property does
A joint purchase of not itself create a partnership
land, by two, does not between the owners, though
constitute a co-partnership in they may use it for the
respect thereto; nor does an purpose of making gains; and
agreement to share the profits they may, without becoming
and losses on the sale of land partners, agree among
create a partnership; the themselves as to the
parties are only tenants in management, and use of such
common. property and the application of
the proceeds therefrom.
Where plaintiff, his
brother, and another agreed to Exceptions to Rule 4:
become owners of a single
a. As a debt by installments or
tract of realty, holding as
otherwise
tenants in common, and to
divide the profits of disposing b. As wages of an employee
it, the brother and the other or rent to a landlord
not being entitled to share in
plaintiffs' commission, no c. As an annuity to a widow or
partnership existed as representative of a deceased
between the three parties, partner
d. As an interest on a loan 3. A partnership formed to
create illegal monopolies or
e. As the consideration for the
combinations in restraint of
sale of a goodwill of a
trade.
business or other property
Effects of an unlawful
Art. 1770. A partnership
partnership
must have a lawful object or
purpose, and must be 1. The contract is void from
established for the common the very beginning:
benefit or interest of the
Note: A void contract is as if it
partners.
never existed from the very
When an unlawful beginning. Thus, it has no
partnership is dissolved by legal personality.
a judicial decree, the profits
2. The profits shall be
shall be confiscated in favor
confiscated in favor of the
of the State, without
government;
prejudice to the provisions
of the Penal Code governing 3. The instruments or tools
the confiscation of the and proceeds of the crime
instruments and effects of a shall be forfeited in favor of
crime. the government; and
Lawful object or purpose 4. The contributions of the
partners shall not be
The object or purpose
confiscated unless they fall
of a partnership must be
under no. 3.
within the commerce of man,
not impossible, and it must not Art. 1771. A partnership may
be contrary to law, morals, be constituted in any form,
good customs, public order or except where immovable
public policy. property or real rights are
contributed thereto, in
Examples of Unlawful
which case a public
Partnership
instrument shall be
1. A partnership formed for
necessary. (1667a)
gambling purposes.
2. A partnership formed to FORM OF CONTRACT OF
furnish houses for prostitution PARTNERSHIP
purposes.
General Rule: Failure to comply
with the requirements of the
No form is required.
preceding paragraph shall
Thus, the contract may be oral
not affect the liability of the
or in writing.
partnership and the
Exception: members thereof to third
persons. (n)
If real properties or
real rights in real properties Partnership having a capital
are contributed regardless of of P3,000 or more (personal
the value. A public instrument property only)
is needed; otherwise, the
The contract of
contract of partnership is void.
partnership must appear in a
REAL RIGHTS public instrument and must be
recorded in the office of the
A right that is SEC. Take note that non-
connected with a thing rather compliance with the
than a person. Real rights requirement of execution in a
include ownership, use, public instrument will not
habitation, usufruct, predial make the contract void Hence,
servitude, pledge and real it is still valid.
mortgage.
Partnership having a capital
PUBLIC INSTRUMENT of below P3,000 (personal
A document prepared property only)
by a notary public in the No form is required.
presence of the parties who Thus, it may be verbal.
sign it before witnesses.
Purpose of registration
Art. 1772. Every contract of
partnership having a capital The registration is to
of three thousand pesos or set "a condition for the
more, in money or property, issuance of licenses to
shall appear in a public engage in business or trade.
instrument, which must be In this way, the tax liabilities of
recorded in the Office of the big partnerships cannot be
Securities and Exchange evaded, and the public can
Commission. also determine more
accurately their membership
and capital before dealing with Article 1773 of the Civil Code
them” applies as long as real
property or real rights are
Art. 1773. A contract of
initially brought into the
partnership is void,
partnership. In short, it is
whenever immovable
really of no moment which of
property is contributed
the partners, contributed
thereto, if an inventory of
immovables. In context, the
said property is not made,
more important consideration
signed by the parties, and
is that real property was
attached to the public
contributed, in which case an
instrument. (1668a)
inventory of the contributed
Note: An inventory is still property duly signed by the
required if aside from real parties should be attached to
property, personal property is the public instrument, else
contributed. However, the there is legally no partnership
inventory need not include the to speak of.
personal property.
WHAT IS THE INTENTION
A partnership may be OF ARTICLE 1773?
constituted in any form, save
Article 1773 was
when immovable property or
intended primarily to protect
real rights are contributed
third persons. Thus, the
thereto or when the
eminent Arturo M. Tolentino
partnership has a capital of at
states that under the
least P3,000, in which case a
aforecited provision which is a
public instrument shall be
complement of Article 1771,
necessary. And an inventory
the execution of a public
to be signed by the parties
instrument would be useless if
and attached to the public
there is no inventory of the
instrument is also
property contributed, because
indispensable to the validity of
without its designation and
the partnership whenever
description, they cannot be
immovable property is
subject to inscription in the
contributed to it.
Registry of Property, and their
Lest it be overlooked, contribution cannot prejudice
the contract-validating third persons. This will result
inventory requirement under in fraud to those who contract
with the partnership in the Art. 1775. Associations and
belief in the efficacy of the societies, whose articles are
guaranty in which the kept secret among the
immovables may consist. members, and wherein any
Thus, the contract is declared one of the members may
void by the law when no such contract in his own name
inventory is made. The case with third persons, shall
at bar does not involve third have no juridical
parties who may be personality, and shall be
prejudiced." governed by the provisions
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 a judicial
personality separate and relating to co-ownership.
distinct from that of each of
The associations or
the partners; hence,
societies here cannot sue
immovable property to be
because it has no legal
acquired must be in the name
personality. However, the fact
of the partnership and if
that it has no legal personality
conveyed must also be in the
as a partnership cannot be
partnership name.
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.
Art. 1776. As to its object, a
partnership is either
universal or particular. As 2. According to liability
regards the liability of the a. General partnership
partners, a partnership may
It is one where all the
be general or limited.
partners are general partners.
(1671a)
All general partners here are
CLASSIFICATION OF liable up to the extent of their
PARTNERSHIP separate properties after the
assets of the partnership have
1. According to object
been exhausted.
a. Universal partnership
b. Limited partnership
Two Kinds
It is one where there is
(1) Universal partnership of
at least one general partner
all present property
and one limited partner. A
The partners general partner is liable
contribute all the property beyond his contribution while
which actually belongs to a limited partner is liable only
them to a common fund, with to the extent of his
the intention of dividing the contribution.
same among themselves, as
Note: Limited partnership will
well as all the profits which
be discussed in chapter 4.
they may acquire therewith.
3. According to duration
(2) Universal partnership of
a. Partnership at will
all profits
It is one where there is
It comprises all that the
no fixed term or it is not
partners may acquire by their
formed for a particular
industry or work during the
undertaking, or it is one for a
existence of the partnership.
fixed term or particular
b. Particular partnership undertaking which is
continued after the termination
A particular partnership of such term or particular
has for its object determinate undertaking without any
things, their use or fruits, or express agreement.
specific undertaking, or the
exercise of a profession or b. Partnership with a fixed
vocation. term
 It is one where the life It is one which has complied
or period of existence of the with all the legal requirements
partnership has been agreed for its creation.
upon by the partners.
a. De facto partnership
c. Partnership for a
It is one which has not
particular undertaking
complied with all the legal
It is one where it will requirements for its creation.
exist until the purpose is
Art. 1777. A universal
accomplished.
partnership may refer to all
4. According to the present property or to
representation to others all the profits. (1672)
a. Ordinary partnership
Kinds of Universal
It is one where two or Partnerships
more persons bind
1. Partnership of all present
themselves to contribute
property
money, property, or industry to
a common fund, with the 2. Partnership of all profits
intention of dividing the profits
among themselves. Art. 1778. A partnership of
all present property is that
B. Partnership by estoppel in which the partners
contribute all the property
It is one where
which actually belongs to
persons, by words spoken or
them to a common fund,
written or by conduct,
with the intention of
represent themselves, or
dividing the same among
consent to another
themselves, as well as all
representing them to anyone,
the profits which they may
as partners in an existing
acquire therewith. (1673)
partnership or with one or
more persons not actual The contributions of the
partners. partners here are the
following:
5. According to the legality
of its existence 1. All the properties actually
belonging to the partners; and
a. De jure partnership
2. The profits acquired with determinate, known, and
said properties. certain;
Art. 1779. In a universal 3. A universal partnership of
partnership of all present all present properties really
property, the property which implies a donation, and it is
belongs to each of the well-known that generally,
partners at the time of the future property cannot be
constitution of the donated.
partnership, becomes the
Art. 1780. A universal
common property of all the
partnership of profits
partners, as well as all the
comprises all that the
profits which they may
partners may acquire by
acquire therewith.
their industry or work
A stipulation for the during the existence of the
common enjoyment of any partnership.
other profits may also be
Movable or
made, but the property
immovable property which
which the partners may
each of the partners may
acquire subsequently by
possess at the time of the
inheritance, legacy, or
celebration of the contract
donation cannot be
shall continue to pertain
included in such stipulation,
exclusively to each, only the
except the fruits thereof.
usufruct passing to the
(1674a)
partnership. (1675)
Future Property
(Inheritance, Legacy, or
Donation)
Future properties
cannot be included because:
1. As a rule, contracts
regarding successional rights
cannot be made;
2. A partnership demands that
Partners retain their
the contributed things be
ownership over their present
and future property. What
passes to the partnership are Effect of Violation of Art.
the profits and the use of the 1782
same.
The partnership is null
Art. 1781. Articles of and void, and its nullity may
universal partnership, be raised anytime. No legal
entered into without personality was ever acquired.
specification of its nature,
Examples of persons who
only constitute a universal
cannot enter into a
partnership of profits. (1676)
universal partnership
Presumption in favor of
1. Legally married spouses;
universal partnership of
profits Note:
The universal However, spouses may enter
partnership of profits imposes into a particular partnership
less obligation because their like the exercise of a
real and personal properties profession or vocation.
are retained by them in naked
ownership. 2. Persons living together as
husband and wife without a
Art. 1782. Persons who are valid marriage,
prohibited from giving each
other any donation or 3. Persons who were guilty of
advantage cannot enter into adultery or concubinage at the
universal partnership. time of the donation,
(1677) 4. Persons found guilty of the
Rationale: same criminal offense, in
consideration thereof;
A universal partnership
is virtually a donation to each 5. A person or persons and a
other of the partner's public officer or his wife,
properties (or at least, their descendants and ascendants,
usufruct). Therefore, if by reason of his office.
persons are prohibited to A husband and a wife
donate to each other, they may not enter into a contract
should not be allowed to do of general co- partnership,
indirectly what the law forbids because under the Civil Code,
directl. which applies in the absence
of express provision in the of the causes provided for that
Code of Commerce, persons purpose
prohibited from making
Art. 1783. A particular
donations to each other are
partnership has for its
prohibited from entering into
object determinate things,
universal partnerships. It
their use or fruits, or
follows that the marriage of
specific undertaking, or the
partners necessarily brings
exercise of a profession or
about the dissolution of a pre-
vocation. (1678)
existing partnership.
The above-stated
WJG, Ltd. was not a
article defines a particular
universal partnership, but a
partnership
particular one. A universal
partnership requires either Note:
that the object of the
association be all the present If the partnership is a
property of the partners, as universal partnership, a
contributed by them to the husband and wife cannot
common fund, or else "all that enter into such contract.
the partners may acquire by However, if the partnership is
their industry or work during a particular partnership, they
the existence of the can.
partnership". WJG Ltd. was
not such a universal
partnership, since the
contributions of the partners
were fixed sums of money,
P20,000 by W and P18,000 by
J and neither one of them was
an industrial partner. It follows
that WIG. Ltd was not a
partnership that spouses were
forbidden to enter.
Nor could the
subsequent marriage of the
partners operate to dissolve it,
such marriage not being one
 Those who contribute money
or property or both money and
property to the common fund.
b. Industrial partners
Those who contribute only
their industry or labor to the
common fund.
b. Capitalist-industrial
partners
Those who contribute money
or property and industry or
both money, property and
industry to the common fund.
2. As to liability
a. General partners
Those who can be held liable
to third persons for
partnership obligations even
to the extent of their separate
property
b. Limited partners
Those who cannot be held
liable to third persons
CHAPTER 2 partnership obligations.

OBLIGATIONS OF THE 3. As to management

PARTNERS a. Managing partners
Those who manage actively
KINDS OF PARTNERS the business or affairs of the
partnership.
1. As to contribution
b. Silent partners
a. Capitalist partners
Those who do not take active Those who are not really
part in the business or affairs partners but represent
of the partnership though they themselves, or consent to
share in the profits or losses. another or others representing
them to anyone as partners in
c. Liquidating partners
an existing partnership or in
Those who take charge of the one that is fictitious or
winding up or liquidation of the apparent.
partnership affairs after
6. As to continuation of the
dissolution.
business affairs after
4. As to third persons dissolution

a. Ostensible partners a. Continuing partners

Those who take active part Those who continue the

and known to the public as a partnership business after the
partner in the partnership. dissolution of the partnership.

b. Secret partners b. Discontinuing partners

Those whose connection with Those who do not continue

the partnership is known to the partnership business after
the public. the dissolution of the
partnership.
c. Dormant partners
7. As to the nature of
Those who do not take active membership
part in the business and are
not known to the public as a. Original partners
partners. Thus, they are bot
Those who are members of
secret and silent partners.
the partnership time of its
6. As to membership constitution.

a. Real partners b. Incoming partners

Those partners in an existing Those who became members

legal partnership. of the partnership after its
establishment
b. Partners by Estoppel
c. Retiring partners
Those who withdraw from the Those whose contribution to
partnership the partnership represents the
minority interest.
8. As to state of
survivorship SECTION 1.
a. Surviving partners Obligations of the Partners
Among Themselves
Those who continue the
partnership after its dissolution Legal relations created by a
by reason of death of a contract of partnership
partner.
1. Relations between partners;
b. Deceased partners
2. Relations between the
Those who died while being a partners on one hand and the
member of the partnership partnership on the other hand;
9. As to the effect of 3. Relations between the
expulsion partners on one hand and
third persons on the other
a. Expelled partners
hand; and
Those who are expelled from
4. Relations between the
the partnership by the other
partnership and the third
partners for a valid cause.
b. Expelling partners
Those who caused the
expulsion of a partner for a
valid cause.
10. As to the value of the
contribution
a. Majority partners
Those whose contribution to
the partnership represents the
persons.
majority or controlling interest.
Art. 1784. A partnership
b. Nominal partners
begins from the moment of
the execution of the
contract, unless it is It is one where the life
otherwise stipulated. (1679) or period of existence of the
partnership has been agreed
General Rule:
upon by the partners.
A partnership begins
Partnership for a particular
from the moment of the
undertaking
execution of the contract
It is one where it will
Exception:
exist until the purpose is
The partners can accomplished.
agree on some other date for
Partnership at will
the start of the partnership
A partnership that does
Art. 1785. When a
not fix its term is a partnership
partnership for a fixed term
at will. The birth and life of a
or particular undertaking is
partnership at will is
continued after the
predicated on the mutual
termination of such term t
desire and consent of the
particular undertaking
partners. The right to choose
without any express
with whom a person wishes to
agreement, the rights and
associate himself is the very
duties of the partners
foundation and essence of
remain the same as they
that partnership.
were at such termination, so
far as is consistent with a Art. 1786. Every partner is a
partnership at will. debtor of the partnership for
whatever he may have
A continuation of the
promised to contribute
business by the partners or
thereto.
such of them as habitually
acted therein during the He shall also be
term, without any settlement bound for warranty in case
of liquidation of the of eviction with regard to
partnership affairs, is prima specific and determinate
facie evidence of things which he may have
continuation of the contributed to the
partnership. (n) partnership, in the same
cases and in the same
Partnership with a fixed
manner as the vendor is
term
bound with respect to the fruits referred to are those
vendee. He shall also be arising from the time they
liable for the fruits thereof should have been delivered,
from the time they should without the need of any
have been delivered, demand. If the partner is in
without the need of any bad faith, he is liable not only
demand. (1681a) for the fruits actually
produced, but also for those
Obligation of every partner
that could have been
1. The obligation to produced.
contribute what had been
If money has been
promised;
promised and that partner
The mutual failed to do so, he becomes a
contribution to a common fund debtor for the interest and
is the first test in order to have damages from the time he
a contract of partnership. should have complied with his
obligation.
The failure to
contribute is to make the 3. The obligation to warrant
partner a debtor of the
The warranty in case
partnership even if there is no
of eviction refers only to
demand. This is an exception
specific or determinate things
to the general rule that there is
which a partner contributed to
no delay when there is no
the partnership.
demand.
Art. 1787. When the capital
Consequently, in case
or a part thereof which a
of failure to deliver the
partner is bound to
promised contribution, the
contribute consists of
remedy is specific
goods, their appraisal must
performance with interest and
be made in the manner
damages occasioned thereby
prescribed in the contract of
and not rescission.
partnership, and in the
2. The obligation to deliver absence of stipulation, it
the fruits thereof; and shall be made by experts
chosen by the partners, and
If property has been according to current prices,
promised, the fruits thereof the subsequent changes
should also be given. The
thereof being for account of liability shall begin from the
the partnership. (n) time he converted the
amount to his own use.
Rationale:
(1682)
In order to know the monetary
Essence of Partnership
value of the contribution of
that partner as of the date of It is a settled rule that
contribution. This is useful in when a partner who has
the future operation of the undertaken contribute a sum
partnership just like in the of money fails to do so, he
accounting of the share of becomes a debtor of the
profit or loss of every partner. partnership for whatever he
Under the law, in the absence may have promised to
of stipulation, the share of contribute and for interests
each partner in the profits and and damages from the time he
losses shall be in proportion to should have complied with hi
what he may have obligation. Being a contract of
contributed. partnership, each partner
must share in the profits and
Manner of appraisal:
losses of the venture. That is
1. By stipulation; or the essence of a partnership.
2. In the absence of
Cases covered of the
stipulation, by experts chosen
liability for damages and
by the partner according to
interest
current prices.
1. Money promised by a
Art. 1788. A partner who has
partner is not given on time;
undertaken to contribute a
and
sum of money and fails to
do so becomes a debtor for 2. Money of the partnership is
the interest and damages converted to partners' own
from the time he should use.
have complied with his
Demand is not necessary
obligation.
This case is an
The same rule
exception to the general
applies to any amount he
principle in the law o
may have taken from the
obligation which states: "there
partnership coffers, and his
is no default, if there is no Those who contribute money
demand." or property or both money and
property to the common fund.
1. In the case of
contribution, because time is Industrial partners
of the essence, partnership is
Those who contribute only
formed precisely to make use
their industry or labor to the
of the contributions, and this
common fund.
use should start from its
formation, unless a different Capitalist-industrial
period ha been set; otherwise partners
the firm is necessarily
deprived of the benefit thereof. Those who contribute money
Thus, injury is constant. or property and industry or
both money, property and
2. In the case of industry to the common fund.
conversion, demand is also
not necessary, even if n actual
injury results, the liability
exists, because the Article is
absolute.
Art. 1789. An industrial
partner cannot engage in
business for himself unless
the partnership expressly
permits him to do so; and if
he should do so, the
capitalist partners may Remedies of capitalist
either exclude him from the partners against an
firm of avail themselves of industrial partner when
the benefits which he may engaged in business for
have obtained i violation of himself
this provision, with a right
to damages in either case. 1. The capitalist partners may
(n) exclude the industrial partner
from the partnership plus
Capitalist partners damages; or
2. The capitalist partners may General rule: Capitalist
avail themselves of the partners are not bound to
benefits which the industrial contribute additional capital.
partner may have obtained
Exceptions:
plus damages.
1. Stipulation; and
Note:
2. In case of imminent loss of
An action for specific
the business of the
performance to compel the
partnership to save the
partner to perform the
venture. If the capitalist
promised industry is not
partners refuse to contribute
available as a remedy
additional capital, they shall
because this will lead to the
be obliged to sell their interest
prohibition on involuntary
to the other capitalist partners
servitude under the Philippine
who are willing to contribute
Constitution.
additional capital.
Art. 1790. Unless there is a
Note: Contract of partnership
stipulation to the contrary,
is governed by the principle of
the partner shall contribute
fiduciary relationship, that is
equal shares to the capital
trust and confidence, so that if
of the partnership. (n)
a capitalist partner is not
Art. 1791. If there is no willing to make additional
agreement to the contrary, contribution, then there is no
in case of an imminent loss more fiduciary relationship to
of the business of the speak of. Of course, the
partnership, any partner above-article presumes that
who refuses to contribute the capitalist partners are
an additional share to the solvent.
capital, except an industrial
Additionally, the above-stated
partner, to save the venture,
article is not applicable to
shall be obliged to sell his industrial partners because they
interest to the other are already giving their entire
partners. industry.
Obligation of capitalist Art. 1792. If a partner
partners to contribute authorized to manage
additional capital collects a demandable
sum which was owed to because there is no basis
him in his own name, for the suspicion that the
from a person who owed partner is in bad faith.
the partnership another
Obligation of a managing
sum also demandable,
partner who collects debt
the sum thus collected
Requisites:
shall be applied to the
two credits in proportion 1. The existence of at least
to their amounts, even 2 debts (one where the
though he may have managing partner is the
given a receipt for his creditor and the other
own credit only; but where the partnership is the
should he have given it creditor); and
for the account of the
partnership credit, the 2. Both sums are
amount shall be fully demandable.
applied to the latter. Art. 1793. A partner who
The provisions of this has received, in whole or
article are understood to in part, his shared a
be without prejudice to partnership credit, when
the right granted to the the other partners have
debtor by Article 1252, not collected theirs, shall
but only if the personal be obliged, if the debtor
credit of the partner should thereafter become
should be more onerous insolvent, to bring to the
to him. (1684) partnership capital what
he received ever though
Rationale: he may have given
receipt for his share only.
To prevent furtherance of
the partner's personal Rationale:
interest to the detriment of
the partnership. The above-
stated article is not
applicable to a partner who
is not a managing partner
Equity demands Rule:
proportionate share in the
Damages suffered by the
benefits and losses.
partnership through the
fault or negligence of a
partner are not generally
subject to set-off with the
profits and benefits which
that partner may have
earned for the partnership
by his industry.
Rationale:
It is the obligation of a
partner to earn benefits
and profits for the
Art. 1794. Every partner is partnership and it is also his
responsible to the obligation not to cause
partnership for damages damages through
suffered by it through his negligence for the
fault, and he cannot partnership. These are two
compensate them with distinct obligations that
the profits and benefits cannot be set-off. Moreover,
which he may have in the law on obligation,
earned for the only a right and an
partnership by his obligation are required to
industry. However, the be compensated or set-off.
courts may equitably Mitigation of liability by
lessen this responsibility the courts
if through the partner's
extraordinary efforts in In case of a partner's
other activities of the extraordinary efforts in
partnership, unusual other activities of the
profits have been partnership, unusual profits
realized. have been realized. This
principle rests equity.
Art. 1795. The risk of his delivery truck. Hence, it
specific and determinate is the partner who bears the
things, which are no risk of loss because the
fungible, contributed to partner did not transfer the
the partnership so that ownership to the
only their use and fruits partnership
may be for the common
2. Fungible things
benefit, shall be borne by
the partner who owns It is the partnership who
them. If the things bears the risk of loss as
contributed are fungible, there was transfer of
or cannot be kept without ownership after delivery of
deteriorating, or if they the fungible things.
were contributed to be
sold, the risk shall be 3. Things contributed to
borne by the partnership. be sold
In the absence of It is the partnership who
stipulation, the risk of the bears the risk of loss as
things brought and there was transfer of
appraised in the ownership after delivery of
inventory, shall also be the things that were
borne by the partnership, contribute to be sold.
and in such case the
claim shall be limited to 4. Things brought and
the value at which they appraised in the inventory
were appraised. (1687) It is the partnership who
Risk of loss bears the risk of loss as
there was transfer of
1. Specific and ownership after delivery of
determinate things which the things brought and
are not fungible appraise in the inventory.
What was contributed here Art. 1796. The partnership
is only the use of the object. shall be responsible to
For example, a partner every partner for the
contributes only the use of amounts he may have
disbursed on behalf of with the agreement. If
the partnership and for only the share of each
the corresponding partner in the profits has
interest, from the time the been agreed upon, the
expenses are made; shall share of each in the
also answer to each losses shall be in the
partner for the same proportion.
obligations he may have
In the absence of
contracted in good faith
stipulation, the share of
in the interest of the
each partner in the profits
partnership business and
and losses shall be in
for risks in consequence
proportion to what he
of its management.
may have contributed, but
(1688a)
the industrial partner
Obligation of the shall not be liable for the
partnership to every losses. As for the profits,
partner the industrial partner
shall receive such share
1. To refund the amounts a
as may be just and
partner may have disbursed
equitable under the
on behalf of the partnership
circumstances. If besides
plus the interest from the
his services he has
time the expenses were
contributed capital, he
made.
shall also receive a share
2. To answer to each in the profits in
partner for obligations, he proportion to his capital.
may have contracted into in (1689a)
good faith in the interest of
Being a contract of
the partnership, and for the
partnership, each partner
risks in consequence of its
must share in the profits
management.
and losses of the venture.
Art. 1797. The losses and That is the essence of a
profits shall be partnership.
distributed in conformity
RULES FOR the share of each partner in
DISTRIBUTION OF the profits, the share of
PROFITS AND LOSSES each in the losses shall be
OF A PARTNERSHIP in the same proportion.
However, the industrial
1. DISTRIBUTION OF
partner shall not be liable
PROFITS
for the losses.
a. According to
b. If there is no
agreement
agreement:
The profits shall be
1. Capitalist partners - in
distributed in conformity
proportion to what they may
with the agreement.
have contributed to the
b. If there is no common fund.
agreement 2. Industrial partners - not
liable for losses.
1. Capitalist partners in
proportion to what he may Art. 1798. If the partners
have contributed to the have agreed to intrust to
common fund. a third person the
designation of the share
2. Industrial partners - of each one in the profits
that which is just and and losses, such
equitable under the designation may be
circumstances. impugned only when it is
manifestly inequitable. In
no case may a partner
2. DISTRIBUTION OF who has begun to
LOSSES execute the decision of
a. According to the third person, or who
agreement has not impugned the
same within a period of
The losses shall be three months from the
distributed in conformity time he had knowledge
with the agreement. If the thereof, complain of such
only agreement pertains to decision.
The designation of losses losses is void. Take note
and profits cannot be that what is void is the
intrusted to one of the stipulation only and not the
partners. (1690) contract of partnership.
Hence, the profits and
Third Person Designating
losses shall b distributed as
the Share of Partners in
if there was no agreement
the Profits and Losses.
as discussed in the
General rule: It is valid. preceding article.

Exception: It is not valid Also, let it be noted that one

and it may be questioned if of the tests in order to have
it is manifestly inequitable: a partnership is the intent of
unless: the contracting parties to
divide the profits among
1. A partner began to themselves.
execute the decision of the
third person; or Exception:
2. A partner has not
An industrial partner is not
questioned the said
liable for losses unless he
decision of the third person
waived this right.
within a period of 3 months
from the time he had Rationale: Why an
knowledge thereof. Industrial Partner is not
liable for losses?
Art. 1799. A stipulation
which excludes one or While capitalist partners
more partners from any can withdraw their capital,
the industrial partner cannot
withdraw any labor or
share in the profits or industry he had already
losses is void. exerted. Moreover, in a
certain sense, he already
General rule: has shared in the losses in
A stipulation excluding one that if the partnership
or more partners from any shows no profit, this means
share in the profits and that he has labored in vain.
Art. 1800. The partner Who shall manage the
who has been appointed partnership?
manager in the articles of
Either one, some or all of
partnership may execute
the partners designated as
all acts of administration
managing partner/s either
despite the opposition of
in the articles of partnership
his partners, unless he
or after the contract of
should act in bad faith;
partnership had already
and his power is
been constituted. If there is
irrevocable without just
no agreement management
or lawful cause. The vote
is vested in all of the
of the partners
partners.
representing the
controlling interest shall TWO MODES OF
be necessary for such APPOINTMENT
revocation of power.
1. Appointment as manager
A power granted after the in the articles of
partnership has been partnership; or
constituted may be
revoked at any time. 2. Appointment as manager
(1692a) made in an instrument
other than the articles of
Example of an act of partnership.
administration
I. APPOINTMENT AS
A managing partner of a MANAGER IN THE
partnership may execute all ARTICLES OF
acts of administration PARTNERSHIP
including the right to sue
debtors of the partnership General Rule:
in case of their failure to
pay their obligation when it
became due and Power is irrevocable
demandable without just or lawful cause.
Exception:
1.To remove him for just The power to act may be
cause, vote of partners revoked at any time, with or
having controlling interest is without just cause by the
necessary partners owning the
controlling interest.
2. To remove him without
just cause, there must be Reason:
unanimity including his own
Such appointment is a
vote.
mere delegation of power;
Reason: revocable at any time.
This represents a change in Extent of power:
the will of the parties; a
The manager can do all
change in the terms of the
acts of administration.
contract; a novation; so to
speak, requiring unanimity Art. 1801. If two or more
partners have been
Extent of power:
intrusted with the
1. If he acts in good faith, management of the
he may do all acts of partnership without
administration despite the specification of their
opposition of his partners. respective duties, or
without a stipulation that
2. If he acts in bad faith, he
one of them shall act
cannot do any act of
without the consent of all
administration. It must be
the others, each one may
noted that the presumption
separately execute all
in law is in favor of good
acts of administration,
faith.
but if any of them should
II. APPOINTMENT AS oppose the acts of the
MANAGER MADE IN AN others, the decision of the
INSTRUMENT OTHER majority shall prevail. In
THAN THE ARTICLES OF case of tie, the matter
PARTNERSHIP shall be decided by the
partners owning the
Rule: controlling interest.
 When Two or More managers because in
Managing Partners have appointing their other
been Entrusted with the partners as managers, they
Management have stripped themselves
of all participation in the
Requisites:
administration.
1. Two or more partners are
Art. 1802. In case it
managers;
should have been
2. There is no specification stipulated that none of
of respective duties; and the managing partners
shall act without the
3. There is no stipulation consent of the others, the
requiring unanimity, that is, concurrence of all shall
that one of them shall not be necessary for the
act without the consent of validity of the acts, and
all the others. the absence or disability
General rule: Each one of any one of them cannot
may separately execute all be alleged, unless there
acts of administration. is imminent danger of
grave or irreparable injury
Exceptions: If any of the to the partnership. (1694)
managers should
oppose: Stipulation Requiring
1. The decision of the Unanimity of Action
majority (per head) of the General Rule:
managing partners shall
prevail. Unanimous consent of all
the managing partners
2. In case of a tie, the (even if one of the
decision of the managing managers is absent or
partners owning the incapacitated) shall be
controlling interest (more necessary for the validity
than 50%) shall prevail. the acts and absence or
Note: The right to oppose disability of any managing
is not given to non- partner cannot be alleged.
Exception: natural course of business,
the consent of his co-
When there is an imminent
partner: for otherwise he
danger of grave or
would not enter into the
irreparable injury to the
contract. The third person
partnership.
would naturally not
1802 NOT applicable to presume that the partner
third person with whom he enters Into
the transaction is violating
Art. The stipulation in the the articles of partnership,
articles of partnership that but on the contrary is acting
any of the two managing in accordance therewith.
partners may contract and And this finds support in the
sign in the name of the legal presumption that the
partnership with the ordinary course of business
consent of the other, has been followed, and that
undoubtedly creates an the law has been obeyed.
obligation between the two This last presumption is
partners, which consists in equally applicable to
asking the other's consent contracts which have the
before contracting for the force of law between the
partnership. This obligation parties.
of course is not imposed
upon a third person who Art. 1803. When the
contracts with the manner of management
partnership. Neither it is has not been agreed
necessary for the third upon, the following rules
person to ascertain if the shall be observed:
managing partner with
(1) All the partners shall
whom he contracts has
be considered agents and
previously obtained the
whatever any one of them
consent of the other. A third
may do alone shall bind
person may and has a right
the partnership, without
to presume that the partner
prejudice to the
with whom he contracts
has, in the ordinary and
provisions of Article 2. For important alterations
1801; in immovable property,
unanimity is required
(2) None of the partners
may, without the consent Note:
of the others, make any
Paragraph 2 deals only with
important alteration in the
immovable property:
immovable property of
the partnership, even if it a. First, because of their
may be useful to the comparative greater
partnership. But if the importance than
refusal of consent by the personality.
other partners is
manifestly prejudicial to b. Second, because, in a
the interest of the proper case, they should be
partnership, the court's returned to the partners in
intervention may be the same condition as when
sought. (1695a) they were delivered to the
partnership
Rules When Manner of
Management Has Not Consent of the others may
Been Agreed Upon be expressed or implied (as
when the partners had
1. All the partners shall be knowledge of the alteration
considered as managers. and no opposition was
Consequently, all partners made by them)
can do all acts of
administration. If the acts of Art. 1804. Every partner
a partner are opposed by may associate another
the other partners, the person with him in his
majority (per head) shall share, but the associate
prevail. In case of tie (per shall not be admitted into
head), then the vote of the the partnership without
partners representing the the consent of all the
controlling interest shall other partners, even if the
prevail. partner having an
associate should be a partnership, and every
manager. (1696) partner shall at any
reasonable hour have
The above stated article
access to and may
refers to Contract of Sub-
inspect and copy any of
partnership. It a contract of
them. (n)
sub-partnership, the
consent of the other A partner is given by law
partners is no required. the right to have access to,
Hence, all partners can inspect and copy the
have an associate in his partnership books for the
share or sub- partner purpose of enabling that
partner to obtain true and
It is a rule that no one can
full information of all things
become a partner in a
affecting the partnership.
partnership without the
Partnership books is an
consent of all of the
example of partnership
partners. Consequently, an
property and every partner
associate of sub-partner
is a co-owner of specific
shall not be admitted into
partnership property.
the partnership without the
consent of all the other What is reasonable hour?
partners based on the
The Supreme Court held
following reasons:
that reasonable hour should
a. Mutual trust is the basis be on business days
of partnership; and throughout the year, and
not merely during some
b. A change in membership
arbitrary period of a few
is a modification or novation
days chosen by the
of the contract
directors (or managers as
Art. 1805. The partnership regards partnership)
books shall be kept,
Art. 1806. Partners shall
subject to any agreement
render on demand true
between the partners, at
and full information of all
the principal place of
things affecting the
business of the
partnership to any The partners are governed
partner or the legal by fiduciary relationship,
representative of any that is, mutual trust and
deceased partner or of confidence.
any partner under legal
Note:
disability. (n)
The above article refers
Violation of the above
only to any profits derived
stated article is called
by a partner without the
concealment.
consent of the other
Who can demand true partners.
and full information?
Art. 1808. The capitalist
1. Any partner; partners cannot engage
for their own account in
2. Legal representative of
any operation which is of
any deceased partner; and
the kind of business in
3. Legal representative of
which the partnership is
any partner under legal
engaged, unless there is
disability.
a stipulation to the
Art. 1807. Every partner contrary. Any capitalist
must account to the partner violating this
partnership for any prohibition shall bring to
benefit, and hold as the common funds any
trustee for it any profits profits accruing to him
derived by him without from his transactions,
the consent of the other and shall personally bear
partners from any all the losses. (n)
transaction connected
Rationale:
with the formation,
conduct, or liquidation of The capitalist partner has
the partnership or from already acquired
any use by him of its knowledge of the business
property. (n) secrets of the partnership;
hence, it is unfair for him to
Rationale:
engage in a business which
is of the kind of business in No formal accounting is
which the partnership is demandable until after the
engaged. dissolution of the
partnership.
Effects of violation
Exceptions:
1. If a partner is wrongfully
1. The capitalist partner
excluded from the
shall bring to the common
partnership business or
fund any profits accruing to
possession of its property
him; and
by his co-partners;
2. The capitalist partner
2. If the right to demand for
shall personally bear all the
accounting exists under the
losses.
terms of any agreement;
Art. 1809. Any partner
3. As provided by article
shall have the right to a
1807; and
formal account as to
partnership affairs: 4. Whenever other
circumstances render it just
(1) If he is wrongfully
and reasonable.
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) As provided by article
1807; and
(4) Whenever other
circumstances render it just
and reasonable. (n)
General Rule:
 and to any agreement
between the partners, has
an equal right with his
partners to possess
specific partnership
property for partnership
SECTION 2. purposes; but he has no
right to possess such
Property Rights of a property for any other
Partner purpose without the
Art. 1810. The property consent of his partners;
rights of a partner are: (2) A partner's right in
specific partnership
(1) His rights in specific property is not assignable
partnership property: except in connection with
(2) His interest in the the assignment of rights
partnership; and (3) His of all the partners in the
right to participate in the same property;
management. (n) (3) A partner's right in
Rights in specific specific partnership
partnership property property is not subject to
attachment or execution,
Interest in the partnership except on a claim against
Right to participate in the the partnership. When
management partnership property is
attached for partnership
Art. 1811. A partner is co- debt the partners, or any
owner with his partners of them, or the
of specific partnership representatives of a
property. deceased partner, cannot
claim any right under the
The incidents of this co-
homestead or exemption
ownership are such that:
laws; (4) A partner's right
(1) A partner, subject to
in specific partnership
the provisions of this Title
property is not subject a
to legal support under SURPLUS
Article 291.
The excess of receipts over
1. A partner has an equal disbursements. Funds that
right with his partners to remain after a partnership
possess specific has been dissolved and all
partnership property for its debts paid.
partnership purposes
Under the preceding article,
2. A partner's right in as a rule, a partner's right in
specific partnership specific partnership
property is not assignable property cannot be
assigned, cannot be
ASSIGNMENT
attached, and is not subject
The transfer of rights or to legal support. In the
property. The rights or above stated article, it
property so transferred.57 provides that a partner's
interest in the partnership
3. A partner's right in (partners' share in the
specific partnership profits and surplus), as a
property is not subject to rule, can be assigned, can
attachment or execution be attached, and can be
4. A partner's right in subject to legal support.
specific partnership Art. 1813. A conveyance
property is not subject to by a partner of his whole
legal support interest in the partnership
Art. 1812. A partner's does not of itself dissolve
interest in the partnership the partnership, or, as
is his share of the profits against the other partners
and surplus. (n) in the absence of
agreement, entitle the
PROFIT assignee, during the
The excess of revenues continuance of the
over expenditures in a partnership, to interfere in
business transaction. the management or
administration of the
partnership business or 1. If a partner conveys
affairs, or to require any (assigns, sells, donates) his
information or account of whole interest in the
partnership transactions, partnership, it may still
or to inspect the subsist (this is the general
partnership books; but it rule) or it may be dissolved
merely entitles the (this is an exception, for
assignee to receive in example, if the remaining
accordance with his partners do not want to
contract the profits to continue the operation of
which the assigning the business of the
partner would otherwise partnership). 2. The
be entitled. However, in assignee:
case of fraud in the
a. Cannot interfere in the
management of the
management of the
partnership, the assignee
partnership business;
may avail himself of the
usual remedies. b. Cannot require
information or accounting of
In case of a dissolution of
partnership transactions;
the partnership, the
and
assignee is entitled to
receive his assignor's c. Cannot inspect
interest and may require partnership books.
an account from the date
only of the last account Rights of the assignee
agreed to by all the 1. To receive the profits to
partners. (n) which the assigning partner
CONVEYANCE would otherwise be entitled:
2. In case of fraud in the
The voluntary transfer of a management of the
right or of property partnership, the assignee
may avail himself of the
Effects of Conveyance by
usual remedies provided by
Partner of His Whole
law;
Interest in the Partnership
3. In case of dissolution, to made, or which the
receive the assignor's circumstances of the
interest; and case may require.
4. In case of dissolution, the The interest charged may
assignee may require an be redeemed at any time
account from the date only before foreclosure, or in
of the last account agreed case of a sale being
to by all the partners. directed by the court, may
be purchased without
Art. 1814. Without
thereby causing a
prejudice to the preferred
dissolution:
rights of partnership
creditors under Article (1) With separate
1827, on due application property, by any one or
to a competent court by more of the partners; or
any judgment creditor of
(2) With partnership
a partner, the court which
property, by any one or
entered the judgment, or
more of the partners with
any other court, may
the consent of all the
charge the interest of the
partners whose interests
debtor partner with
are not so charged or
payment of the
sold.
unsatisfied amount of
such judgment debt with Nothing in this Title shall
interest thereon; and may be held to deprive a
then or later appoint a partner of his right, if any,
receiver of his share of under the exemption
the profits, and of any laws, as regards his
other money due or to fall interest in the
due to him in respect of partnership.
the partnership, and
make all other orders, What is meant by a
directions, accounts and "charging order" upon a
inquiries which the partner's interest in the
debtor partner might have partnership?
A "charging order" upon a 1. Before foreclosure
partner's interest in the
The interest charged may
partnership refers to the
be redeemed at any time
remedy available to a
before foreclosure.
judgment creditor of a
debtor-partner to charge 2. After foreclosure
the interest of the latter in
the partnership by means of It may still be purchased
a court order for the without thereby causing a
purpose of satisfying the dissolution:
amount of the judgment. A a. With separate property of
receiver of the debtor- a partner; or
partners' share of the profits
may even be appointed. b. With partnership property
This charging order, with the consent of all the
however, is always subject partner whose interests are
to the preferred rights or not so charged or sold.
partnership creditors. What is redemption?
Appointment of a receiver Redemption means the
The court may then or later extinguishment of the
appoint a receiver of the charge or attachment on
partner- debtors' share of the partner's interest in the
the profits, and of any other profits.
money due or to fall due to Right of a partner under
him in respect of the exemption laws
partnership, and make all
other orders, directions, A partner shall not be
accounts and inquiries deprived of his right under
which the debtor-partner the exemption laws, as
might have made, or which regards his interest in the
the circumstances of the partnership.
case may require. However, a partner, cannot
Redemption of interest avail himself of the
charged exemption laws insofar as
his right in specific The partnership cannot use
partnership property is an identical or deceptively
concerned. confusingly similar to that of
any existing partnership or
corporation or to any other
name already protected by
law or is patently deceptive
or contrary to existing laws.
Note:
SECTION 3. Persons who, not being
Obligations of the partners, include their
Partners With Regard to names in the firm name
Third Persons shall be subject to the
liability of a partner, for
Art. 1815. Every example, the subsidiary
partnership shall operate liability of a partner where
under a firm name, which he is liable up to the extent
may or may not include of his separate property in
the name of one or more favor of third persons who
of the partners. Those suffered damages because
who, not being members of such misrepresentation.
of the partnership, This is based on the
include their names in the principle of estoppel. The
firm name, shall be purpose of the law is to
subject to the liability of a protect innocent third
partner. persons from being misled.
General Rule: The However, that person has
partners may use any firm no right as a partner
name desired and this will because he is in fact not a
be the name of that juridical partner.
person.
Art. 1816. All partners,
Exception: including industrial ones,
shall be liable pro rata
with all their property and assets have failed or that
after all the partnership such partnership assets are
assets have been insufficient to cover the
exhausted, for the entire obligation. The
contracts which may be subsidiary nature of the
entered into in the name partners' liability with the
and for the account of the partnership is one of the
partnership, under its valid defenses against a
signature and by a premature execution of
person authorized to act judgment directed to a
for the partnership. partner. Second, Article
However, any partner may 1816 provides that the
enter into a separate partners' obligation to third
obligation to perform a persons with respect to the
partnership contract. (n) partnership liability is pro
rata or joint. Liability is joint
This provision clearly states
when a debtor is liable only
that, first, the partners'
for the payment of only a
obligation with respect to
proportionate part of the
the partnership liabilities is
debt. In contrast, a solidary
subsidiary in nature. It
liability makes a debtor
provides that the partners
liable for the payment of the
shall only be liable with
entire debt. In the same
their property after all the
vein, Article 1207 does not
partnership assets have
presume solidary liability
been exhausted. To say
unless: 1) the obligation
that one's liability is
expressly so states; or 2)
subsidiary means that it
the law or nature requires
merely becomes secondary
solidarity. With regard to
and only arises if the one
partnerships, ordinarily, the
primarily liable fails to
liability of the partners is not
sufficiently satisfy the
solidary. The joint liability of
obligation. Resort to the
the partners is a defense
properties of a partner may
that can be raised by a
be made only after efforts in
partner impleaded in a
exhausting partnership
complaint against the creditors' exhausted the
partnership. assets of the partnership.
In other words, only in Note:
exceptional circumstances
Liability as to third persons
shall the partners' liability
Losses as between the
be solidary in nature.
partners
Articles 1822, 1823 and
1824 of the Civil Code Separate obligation of a
provide for these partner
exceptional conditions.
If a partner, in his own
name, enters into a contract
with a third person, then it
is only that partner who is
Liability for contractual liable and not the
obligations partnership.
The above article refers to Art. 1817. Any stipulation
liability and not to loss that against the liability laid
is why even an industrial down in the preceding
partner is also liable as he article shall be void,
is not liable only with except as among the
respect to loss. Hence, all partners. (n)
partners including industrial
Stipulation against
partners' liability is pro rata
liability
and subsidiary, unless
otherwise stipulated. A stipulation against liability
of all partners for the
PRO-RATA VS.
contracts entered into in the
SUBSIDIARY
name of the partnership
Pro-rata liability means
Art. 1818. Every partner is
equally or joint, while
an agent of the
subsidiary means that the
partnership for the
partners' separate property
purpose of its business,
may be held liable only
and the act of every
after the partnership
partner, including the creditors or on the
execution in the assignee's promise to
partnership name of any pay the debts of the
instrument, for apparently partnership:
carrying on in the usual
(2) Dispose of the good-
way the business of the
will of the business;
partnership of which he is
a member binds the (3) Do any other act which
partnership, unless the would make it impossible
partner so acting has in to carry on the ordinary
fact no authority to act for business of a
the partnership in the partnership;
particular matter, and the
person with whom he is (4) Confess a judgment;
dealing has knowledge of (5) Enter into a
the fact that he has no compromise concerning a
such authority. partnership claim or
An act of a partner which liability;
is not apparently for the (6) Submit a partnership
carrying on of business claim or liability to
of the partnership in the arbitration; and
usual way does not bind
the partnership unless (7) Renounce a claim of
authorized by the other the partnership. No act of
partners. Except when a partner in contravention
authorized by the other of a restriction on
partners or unless they authority shall bind the
have abandoned the partnership to persons
business, one or more having knowledge of the
but less than all the restriction.
partners have no Partner as agent of the
authority to: partnership
(1) Assign the partnership It is the nature of a contract
property in trust for of partnership that it is
fiduciary, that is, trust and partnership. This obligation
confidence governed the of course is not imposed
partners. Hence, every upon a third person who
partner is an agent of the contracts with the
other partners and the partnership. Neither it is
partnership. necessary for the third
person to ascertain if the
1. Acts Apparently for
managing partner with
Carrying on in the Usual
whom he contracts has
Way the Business of the
previously obtained the
Partnership
consent of the other. A third
It binds the partnership person may and has a right
unless: to presume that the partner
with whom he contracts has
a. The partner so acting has in the ordinary and natural
in fact no authority to act for course of business, the
the partnership; and consent of his co-partner:
b. The person with whom for otherwise he would not
he is dealing has enter into the contract. The
knowledge of the fact that third person would naturally
he has no such authority. not presume that the
partner with whom he
Note: enters into the transaction
The stipulation in the is violating the articles of
articles of partnership that partnership, but on the
any of the two managing contrary is acting in
partners may contract and accordance therewith. And
sign in the name of the this finds support in the
partnership with the legal presumption that the
consent of the other, ordinary course of business
undoubtedly creates on has been followed, and that
obligation between the two the law has been obeyed.
partners, which consists in This last presumption is
asking the other's consent equally applicable to
before contracting for the contracts which have the
force of law between the The same rule obtains in
parties. American law.
It is next urged that the In Rosen vs. Rosen, 212
widow, even as a partner, N.Y. Supp. 405, 406, it was
had no authority to sell the held:
real estate of the firm. This
A partnership to deal in real
argument is lamentably
estate may be created and
superficial because it fails
either partner has the legal
to differentiate between real
right to sell the firm's real
estate acquired and held as
estate.
stock-in-trade and real
estate held merely as In Chester vs. Dickerson,
business site for the 54 N. Y. 1, 13 Am. Rep.
partnership. Where the 550:
partnership business is to
deal in merchandise and And hence, when the
goods, ie, movable partnership business is to
property, the sale of its real deal in real estate, one
property (immovables) is partner has ample power,
not within the ordinary as a general agent of the
powers of a partner, firm, to enter into an
because it is not in line with executory contract for the
the normal business of the sale of real estate. 83:
firm. But where the express And in Revelsky vs. Brown,
and avowed purpose of the 92 Ala. 522, 9 South 182,
partnership is to buy and 25 Am. St. Rep.
sell real estate, the
immovables thus acquired If the several partners
by the firm form part of its engaged in the business of
stock-in-trade, and the sale buying and selling real
thereof is in pursuance of estate cannot bind the firm
partnership purposes, by purchases or sales of
hence within the ordinary such property made in the
powers of the partner. regular course of business,
then they are incapable of
exercising the essential binds the partnership
rights and powers of under the provisions of
general partners and their the first paragraph of
association is not really a article 1818, or unless
partnership at all, but a such property has been
several agency, conveyed by the grantee
or a person claiming
II. Acts Not Apparently for
through such grantee to a
the Carrying on in the
holder for value without
Usual Way of Business of
knowledge that the
the Partnership
partner, in making the
It does not bind the conveyance, has
partnership, unless exceeded his authority.
authorized by the other
Where title to real
partners
property is in the name of
III. Acts of Ownership the partnership, a
conveyance executed by
IV. Acts in contravention a partner, in his own
of a restriction on name, passes the
authority equitable interest of the
The act is not binding to the partnership, provided the
partnership as to persons act is one within the
having knowledge of the authority of the partner
restriction. under the provisions of
the first paragraph of
Art. 1819. Where title to Article 1818.
real property is in the
partnership name, any Where title to real
partner may convey title property is in the name of
to such property by a one or more but not all
conveyance executed in the partners, and the
the partnership name; but record does not disclose
the partnership may the right of the
recover such property partnership, the partners
unless the partner's act in whose name the title
stands may convey title all the partners passes all
to such property, but the their rights in such
partnership may recover property. (n)
such property if the
TITLE
partners' act does not
bind the partnership Legal evidence of a
under the provisions of person's ownership rights in
the first paragraph of property; an instrument
Article 1818, unless the (such as deed) that
purchaser or his constitutes such evidence.
assignee, is a holder for
value, without knowledge. EQUITABLE INTEREST
An interest held by virtue of
an equitable title or claimed
Where the title to real on equitable grounds, such
property is in the name of as the interest held by a
one or more or all the trust beneficiary.
partners, or in a third
person in trust for the In the above-stated article,
partnership, a real property may be
conveyance executed by registered or
a partner in the owned in the name of:
partnership name, or in
his own name, passes the 1. The partnership:
equitable interest of the 2. One or more or all the
partnership, provided the partners;
act is one within the
authority of the partner 3. One or more or all the
under the provisions of partners; or in a third
the first paragraph of person in trust for the
Article 1818. partnership; and

Where the title to real 4. All the partners.

property is in the name of REAL PROPERTY
all the partners a REGISTERED OR OWNED
conveyance executed by
IN THE NAME OF THE partnership name, or in his
PARTNERSHIP (PAR. 1) own name
The conveyance here was TITLE TO REAL
executed in the partnership PROPERTY IS IN THE
name. NAME OF ALL THE
PARTNERS (PAR. 5)
REAL PROPERTY
REGISTERED OR OWNED Conveyance executed by
IN THE NAME OF THE all the partners passes all
PARTNERSHIP (PAR. 2) their rights in such property.
The conveyance here was Art. 1820. An admission
executed in the partners' or representation made
name. by any partner
concerning partnership
TITLE TO REAL
affairs within the scope of
PROPERTY IS IN THE
his authority in
NAME OF ONE OR MORE
accordance with this Title
BUT NOT ALL THE
is evidence against the
PARTNERS (PAR.3)
partnership. (n)
ADMISSION
The partners in whose
name the title stands
convey the title to such A statement in which
property. someone admits that
something is true or that he
TITLE TO REAL
or she has done something
PROPERTY IS IN THE
wrong.
NAME OF ONE OR MORE
OR ALL THE PARTNERS, An admission by any
OR IN A THIRD PERSON partner is evidence against
IN TRUST FOR THE the partnership if: 1. The
PARTNERSHIP (PAR.4) admission must concern
partnership affairs; and
Conveyance was executed
by a partner in the
2. The admission must be Instances where
within the scope of his knowledge of a partner is
authority. considered knowledge of
the partnership:
Note:
1. Knowledge of the partner
An admission by a former
acting in the particular
partner, made after he has
matter acquired while
retired from the partnership,
is not evidence against the
firm.
a partner; 2. Knowledge of
Art. 1821. Notice to any the partner acting in the
partner of any matter particular matter then
relating to partnership present
affairs, and the
knowledge of the partner
acting in the particular to his mind; and
matter, acquired while a
partner or then present to
his mind, and the 3. Knowledge of any other
knowledge of any other partner who reasonably
partner who reasonably could and should have
could and should have communicated it to the
communicated it to the acting partner.
acting partner, operate as
notice to or knowledge of
the partnership, except in Exception:
the case of fraud on the
partnership, committed
by or with the consent of In the case of fraud on the
that partner. (n) partnership, committed by
The general rule is that or with the consent of that
notice to a partner is notice partner.
to the partnership
Article 1821 of the Civil
Code does not state that
there is no need to implead
a partner in order to be
bound by the partnership
liability. It provides t es that:

Notice to any partner of any

matter relating to
partnership affairs, and the
knowledge of the partner
acting in the particular
matter, acquired while a
partner or then present to
his mind, and the