LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
CONTRACT OF A PARTNERSHIP Separate Juridical Personality (POCCA)
a contract: 2 or more persons bind themselves (i) Acquire and possess property of all kinds
contribute (MPI): money, property, or industry to common (ii) Incur obligations
fund (iii) Bring civil or criminal actions
purpose/intention: (iv) Adjudged insolvent even if individual members be
(1) divide profits (losses) among themselves each financially solvent
(2) exercise a common profession (GPP)
Rules in Determining Existence of Partnership
PRINCIPLES APPLICABLE (ASDP) Cases that do not establish partnership: (NCOPS)
Affectio Societatis: desire to formulate active union (a) Persons who are not partners to each other
(mutual confidence and trust) (b) Co-ownership or co-possession
Delectus Personae (Personal Choice): right to choose (c) Sharing of gross returns
whom to associate himself
GR: Receipt by a person of profits is prima facie evidence
that he is a partner
CHARACTERISTICS OF A PARTNERSHIP XPN: Such profits were received in payment of: (DWAIC)
(B-NO-CP-PC) (a) Debt by installments
(1) Bilateral or multilateral: entered into by 2 or more (b) Wages of an employee/rent to landlord
persons (c) Annuity to a widow/representative of a deceased
(2) Nominate: has a special name in law partner
(3) Onerous: partners must contribute MPI (XPN: (d) Interest on a loan
Universal Partnership) (e) Consideration for sale of a goodwill
(4) Consensual: perfected by mere consent
(5) Principal: does not depend upon any other contract
Who may become partners? (NA)
(6) Preparatory: a means by w/c other contracts will be
Natural Persons: who is capacitated or individuals w/
entered into
legal capacity
(7) Commutative: contribution of each partner =
Artificial Persons: partnership & corporation
contribution of other partners
ESSENTIAL REQUISITES OF A PARTNERSHIP FORMALITY OF A PARTNERSHIP
(VCOL) GR: May be constituted in any form (oral or written)
(1) Valid contract (COC) XPN:
(2) Contribution of MPI to a common fund (1) Immovable property (regardless of amount)
(3) Organized for gain or profit o must be in a public instrument
(4) Lawful object or purpose o w/ an inventory to be signed by parties and
attached to PI
o noncompliance: void, no juridical personality
Examples of unlawful partnership: (GPIM)
(a) Gambling purposes
(2) Capital of P3,000 or more (money or personal
(b) Prostitution purposes
property)
(c) Illegal monopolies
o must be in a public instrument
o registered w/ SEC (not mandatory)
Effects of an unlawful partnership: (CPIC)
o noncompliance: still valid, acquires juridical
✓ Contract: void
personality, liability to third persons are not
✓ Profits: confiscated (in favor of government)
affected
✓ Instruments/tools & proceeds: forfeited (in
favor of government)
(3) Limited partnership
✓ Contributions: not confiscated (unless they
o a certificate signed under oath by partners
fall under no. 3)
o recorded w/ SEC
o noncompliance: treated as a general partnership
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
KINDS OF PARTNERSHIP KINDS OF PARTNERS
▪ At will: birth and life is predicated on mutual desire ▪ Surviving: continue partnership after its dissolution
and consent of partners ▪ Deceased: died while being a member of partnership
▪ w/ Fixed term: life or period of existence has been
agreed upon by the partners ▪ Liquidating: take charge of winding up of partnership
▪ Particular undertaking: its existence depends on ▪ Silent: do not take active part in business though they
accomplishment of certain undertaking share in p&l
▪ Managing: actively managing business
▪ Ordinary: actually exists among partners as well as to
third persons ▪ Expelled: expelled from partnership for a valid cause
▪ By estoppel: in reality is not a partnership but ▪ Expelling: caused expulsion of a partner
considered as one
▪ Retiring: withdraw from partnership
▪ Universal: ▪ Incoming: became members of partnership after its
ALL PRESENT PROPERTY ALL PROFITS (IF SILENT) establishment
common property: common property: ▪ Original: members of partnership from its formation
(a) all present property + (a) usufruct (use and
its profits fruits) of properties ▪ Dormant: do not take active part in business and are
may become common if (b) all profits acquired not known to public as partners (both secret & silent
stipulated: through industry or partners)
(a) profits from other work of partners ▪ Ostensible: take active part and known to public as a
property (acquired may become common if partner
after formation) stipulated: ▪ Secret: connection w/ partnership is not known to
(b) fruits of properties (a) profits and fruits of public
acquired through properties acquired
inheritance, legacy or during and after ▪ Capitalist: money or property or both
donation formation ▪ Industrial: industry or labor
▪ Capitalist-Industrial: money or property and industry
Persons who cannot enter into a universal partnership
(HASP) ▪ General: can be held liable up to extent of their
(a) Husband and wife separate property
(b) Guilty of adultery or concubinage ▪ Limited: cannot be held liable for partnership
(c) Guilty of same criminal offense obligations
(d) Public officer or his wife (descendants or
ascendants) by reason of his office ▪ Continuing: continue partnership business after
dissolution
▪ Particular: where its objects are: ▪ Discontinuing: do not continue partnership business
(a) determinate things, their use of fruits after dissolution
(b) specific undertaking
(c) exercise of profession or vocation ▪ Real: partners in an existing legal partnership
▪ By estoppel: not really partners but representing
▪ General: all are general partners who were held liable themselves as partners in a partnership
up to their separate properties
▪ Limited: at least 1 general partner and 1 limited ▪ Majority: represents majority or controlling interest
partner who is liable only to his contribution ▪ Nominal: represents the minority interest
▪ De jure: complied w/ all legal requirements (exists
both in fact and in law)
▪ De facto: did not comply w/ all legal requirements
(exists only in fact)
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
OBLIGATIONS OF A PARTNER: TO THE PARTNERSHIP (3) Prohibition to engage in other business
AND OTHER PARTNERS CAPITALIST INDUSTRIAL
(1) Contribution of capital GR: cannot engage in GR: cannot engage in any
o contribute equal shares to capital of partnership same kind of business in business for himself
unless a stipulation to contrary w/c partnership is XPN: capitalist partners
o provided upon perfection of contract unless engaged expressly permit him to do
otherwise stipulated by partners (NO DEMAND XPN: stipulation so
shall be necessary) authorizing him
Noncompliance:
Contribution of Property Noncompliance: (a) exclude him +
✓ to deliver what had been promised to (a) shall bring to damages
contribute on time common fund any (b) avail of benefits +
✓ to take care of the property w/ diligence of a profits accruing him damages
good father of a family (b) shall personally bears
✓ to be liable for damages in case of delay all losses
✓ to warrant in case of eviction
✓ to be liable for fruits of thing (4) Managing partner who collects from a common
debtor
Risk of Loss: (a) Issued a receipt in the name of the partnership:
BORNE BY PARTNER BORNE BY PARTNERSHIP o entire amount will be applied to partnership
(a) specific and things contributed are: credit
determinate things (a) fungible things or
w/c are not fungible cannot be kept w/o (b) Issued a receipt in his own name:
and only usufruct is deteriorating o proportionate to amounts of 2 debts
contributed (b) contributed to be sold o XPN: If debt to the managing partner is more
(b) stipulation that he (c) brought and onerous to the debtor
shall bear loss of appraised in inventory
thing (unless there is a (5) Other obligations of partners:
stipulation) (a) Art. 1743
(b) Art. 1788
Contribution of Money (c) Art. 1794
✓ to deliver what had been promised to (d) Art. 1805
contribute on time (e) Art. 1806
✓ to pay interest from time he should have (f) Art. 1807
complied w/ his obligation
✓ to pay damages by reason of delay OBLIGATIONS OF PARTNERS: TO THIRD PARTIES
(1) Firm name
Conversion to Partner’s Own Use (a) Strangers included his name in firm name
✓ to reimburse what he has taken from o liable as partners (estoppel)
partnership o do not have any rights of partners (to protect
✓ to pay interest from time of conversion customers from being misled)
✓ to pay damages suffered by partnership by
reason of conversion (b) Limited partner included his name in the firm name
o liable as a general partner
(2) Contribution of additional capital
o in case of imminent loss of partnership business (2) Liability after exhaustion of partnership assets
o shall be obliged to sell his interest to other o all partners (including industrial), shall be liable
partners if he refuses to contribute pro rata w/ all their property
o XPN: Industrial partners or if there is a stipulation o any stipulation to contrary shall be void, except as
to the contrary to partners (Art. 1817)
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
(3) Authority to act for and on behalf of the partnership (7) Partner by estoppel
o every partner is an agent of partnership for (a) Represents himself as a partner of an existing
purpose of its business partnership
o authority of may be: (EIA) o w/ consent: partnership by estoppel;
o Express partnership liability
o Implied o w/o consent: deceiver = partner by estoppel;
o Apparent liable as a partner but does not acquire rights
thereof + those who consented shall be liable
NOTE: If a partner is not carrying on usual business of
partnership, act will not bind partnership unless it is (b) Represents himself as a partner of a non-existent
authorized by other partners. partnership
o liability of parties is pro rata
(4) Effects of conveyance of real property o no partnership liability
Property: In Conveyance: In the Who
the name of name of conveyed? (8) Liability of new partner
Partnership Partnership Partner (a) Debts incurred prior to admission
o liable up to his contribution
1 or more 1 or more partners 1 or more o XPN: If there is stipulation
partners partners
Effect: (b) Debts incurred after admission
Valid; partnership may recover o liable up to his personal assets
XPN: No right to recover: RIGHTS OF A PARTNER
(a) transfer binds partnership (1) Right to share in the p&l
(b) transferee had no knowledge of lack or excess of Distribution of Partnership Profits
authority CAPITALIST INDUSTRIAL
Partnership Partner Partner w/ agreement based on profit agreement
capital just and
1 or more Partner/Partnership Partner w/o agreement contribution equitable share
partners/Third ratio or equally
persons (in
trust) Distribution of Partnership Losses
Effect: CAPITALIST INDUSTRIAL
Passes only equitable interest of partnership if w/in w/ agreement based on loss agreement
authority (1) profit
agreement
If not, apparently nothing transfers (2) capital shall not share
All partners All partners All partners w/o agreement
contribution in losses
Effect: ratio or
Valid transfer equally
(5) Solidary liability for torts/quasi-delict Status of Stipulation Excluding a Partner from Share in
o any wrongful act or omission of any partner acting Partnership P&L
in ordinary course of business or w/ authority of excluding any partner
co-partners: partnership is liable to same extent VOID
from share of profit
as partner so acting or omitting to act excluding a capitalist
partner from share of VOID
(6) Solidary liability for misappropriation loss
o partner as receiver excluding an industrial
o partnership as receiver partner from share of VALID
loss
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
Designation of P&L by a Third Person as Agreed by the Rules of Management
Partners (1) One managing partner
If entrusted to a third person: (a) Appointed managing partner in the articles of
o binding upon the partners partnership
o may be impugned if it is manifestly inequitable Scope of Authority Revocation of
o XPN: It can no longer be impugned by: Appointment
(a) a partner who has begun to execute it o may execute all acts w/ just or lawful cause:
(b) any partner if 3 months had already lapsed of administration o by vote of partners
from the time he obtained knowledge thereof even w/ opposition representing
from other partners controlling interest
If entrusted to one of the partners: unless he acts in bad
o the designation is void faith w/o just or lawful cause:
o p&l shall be divided among the partners as if there o only w/ consent of all
was no stipulation thereon partners including
managing partner
(2) Property rights
(a) Rights in specific partnership property (b) Appointed managing partner after the partnership
o has an equal right w/ his partners to possess has been constituted
for p’ship purposes, but has no right for any Scope of Authority Revocation of
other purpose Appointment
o not assignable, except in connection w/ o may execute all acts may be removed w/ or w/o
assignment of rights of administration just or lawful cause:
o not subject to attachment or execution, o by vote of partners
except on a claim against p’ship in case of opposition: owning controlling
o not subject to legal support o partners representing interest
controlling interest
(b) Interest in partnership (share of profits & surplus) may resort to voting
Effect of conveyance of a partner’s whole interest: for his removal as
✓ Does not dissolve partnership manager
✓ The assignee does not become a partner and
has no right to: (IRI) (2) Multiple managing partners
(i) Interfere in management of partnership (a) w/ Stipulation that no managing partner may act
business w/o consent of others
(ii) Require information or accounting of (b) w/ Specification of duties
partnership transactions (c) w/o Specification of their respective duties or w/o a
(iii) Inspect partnership books stipulation that one of them shall not act w/o
consent of all partners
Rights of the assignee or conveyee: (GAR) o managing partner may separately execute all
(a) Get profits that assigning partner would have acts of administration
obtained o in case of opposition: decision of majority of
(b) Avail of usual remedies (in case of fraud in MPs shall prevail (per head count)
management) o in case of a tie: decision of MPs owning
(c) Receive assignor’s interest (in case of controlling interest (>50%) shall prevail
dissolution)
(3) No managing partner; w/ stipulation that no partner
NOTE: For limited partners, their interest may only be cannot act w/o the consent of the others
redeemed w/ separate property of general partners and o the concurrence of all of them shall be
not w/ property of the partnership. necessary for the validity of the acts
o XPN: If there is imminent danger of grave or
(c) Right to participate in the management irreparable injury to the partnership
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
(4) No agreement as to management of partnership Judicial Causes: dissolution of the partnership is decreed
o GR: All partners shall be considered agents by the court
o whatever any one of them may do alone shall
bind partnership w/o prejudice to provisions A partner has been declared: (IIGBLE)
of Art. 1801 (i) Insane or unsound mind
o XPN: No partners may make any important (ii) Incapable of performing his part
alteration in immovable property w/o consent (iii) Guilty of such conduct as tends to affect
of the partners even if it may be useful to the prejudicially
partnership (iv) Willfully or persistently commits a breach
o XPN to the XPN: If result of consent by other (v) Can only be carried on at a loss
partners is manifestly prejudicial to interest of (vi) Render a dissolution equitable
partnership, the court’s intervention may be
sought NOTE: A trial will be necessary to prove the facts that will
serve as the basis or ground to dissolve the partnership.
(5) Other rights of a partner:
(a) Art. 1804 EFFECTS OF DISSOLUTION
(b) Art. 1805 (1) Mutual agency is terminated
(c) Art. 1809 o cause of dissolution is AIDS (Acts, Insolvency or
(d) Art. 1830-1831 Death): notice should be given
o other cause: dissolution is binding w/o notice
DISSOLUTION AND WINDING-UP
Dissolution: change in relation of partners; p’ship is not (2) Acts are still binding even after dissolution
terminated but continues until winding up of p’ship affairs o acts for winding-up of affairs of partnership
is completed o contracts w/ creditors who had no notice of the
dissolution
Winding Up: settling business affairs after dissolution
(3) Partnership may be continued after dissolution of
Termination: all partnership affairs have been wound up old partnership
CAUSES OF DISSOLUTION o dissolves old partnership
Extrajudicial Causes: w/o intervention of the court o a new partnership is created
(1) Without violation of agreement between partners o creditors of old partnership are creditors of the
(TEEE) ones continuing partnership business
(a) Termination of definite term or a particular
undertaking WINDING UP OR LIQUIDATION
(b) Express will of any partner : process of liquidating partnership assets and distributing
(c) Express will of all the partners proceeds to satisfy claims against partnership
(d) Expulsion of any partner
Liquidator shall be: (PLC)
(2) In contravention of agreement between partners ✓ A party who has not wrongfully caused the
o by the express will of any partner at any time dissolution
o the partner who causes the dissolution will be ✓ Legal representative of last surviving partner (if all
liable for damages are dead), if not insolvent
✓ Court, his legal representative or assignee
(3) By operation of law (UPDIC)
(a) Event w/c makes it unlawful for business of Distribution of Assets (OLCP)
partnership to be carried on (i) Outside creditors
(b) Specific thing w/c a partner had promised to (ii) Partners for loans or advances
contribute perishes before delivery (iii) Partners for capital contributions
(c) Death of any partner (iv) Partners for share of the profits
(d) Insolvency of any partner/partnership
(e) Civil interdiction of any partner
LAW ON PARTNERSHIP: SUMMARY NOTES BY AC
Partner’s Liability: in case of insufficient partnership General-Limited Partner: shall have the rights and powers
assets to cover the liabilities, remaining claims may be and be subject to all the restrictions of a general partner
satisfied against separate assets of partners
XPN: In respect of his contribution, he shall have rights
Claims Against Separate Property of an Insolvent Partner against other partners w/c he would have had if he were not
(PEPAC) also a general partner
(i) Personal creditors
(ii) Partnership creditors Dissolution and Winding up
(iii) Partners for additional contributions Grounds for general partner to dissolve partnership:
(RIDIC)
LIMITED PARTNERSHIP (a) Retirement
: formed by 2 or more persons having as members one or (b) Insolvency
more general partners and one or more limited partners (c) Death
(d) Insanity
Limited Liability: limited partners’ liability is limited only to (e) Civil interdiction
his capital contribution
XPN: If partnership business is continued by remaining
Limitations on a Limited Partner general partners under a right to do so as stated in
(a) Cannot be an industrial partner Certificate of Limited Partnership or w/ consent of all
o contribution must always be money or partners
property
(b) His surname shall not appear in the partnership Distribution of Assets of a Limited Partnership (OLPC2)
name unless: (i) Outside creditors
o it is also the username of a general partner (ii) Limited partners for loans and advances
o prior to the time when the limited partner (iii) Limited partners for share of profits
became such, the business has been carried (iv) Limited partners for capital contributions
on under a name in w/c his surname appeared (v) General partners for loans and advances
(c) Cannot take part in management of partnership (vi) General partners for share of profits
(vii) General partners for capital contributions
Rights of a Limited Partner
(a) Have p’ship books kept at principal place of
business at a reasonable hour to inspect and copy
any of them
(b) Have on demand true and full information of all
things affecting partnership and formal account
of partnership affairs
(c) Have dissolution and winding up by decree of
court
(d) Receive share of profits or other compensation
by way of income and to return his contribution
(e) Rightfully demand for his contribution
(f) Have his written consent/ratification be sought
by general partners
(g) May loan money and to transact other business w/
partnership (subject to restrictions)
NOTE: Any violation of the above restriction would be in
fraud of creditors and may thus be treated as rescissible
contract.
