PARTNERSHIP

Art. 1767 - New Civil Code of the Philippines

PARTNERSHIP DEFINED

 It is a contract whereby two or more persons

bind themselves to contribute money, property,
or industry to a common fund, with the
intention of dividing the profits among
themselves, or in order to exercise a profession.
(See Art. 1767)
“PARTNERSHIP DISTINGUISHED FROM A
CORPORATION”

DISTINGUISHING PARTNERSHIP CORPORATIONS

FACTOR

(a) HOW CREATED (a) VOLUNTARY (a)created by the

agreement of parties state in the form of
a special charter or
by a general
enabling law (The
Corporation Code)
DISTINGUISHING PARTNERSHIP CORPORATIONS
FACTOR
(b) HOW LONG IT (b) no time limit except (b) Perpetual existence
EXISTS agreement of parties

(c) LIABILITY TO (c) may be liable with (c) liable only for
STRANGERS their private property payment of their
beyond their subscribed capital stock
contribution to the firm
DISTINGUISHING PARTNERSHIP CORPORATIONS
FACTOR
(d) (d) even if a partner transfers (d) a transfer of interest
TRANSFERABILITY his interest to another, the makes the transferee a
transferee does not become a stockholder, even without the
OF INTEREST partner unless all other consent of the others
partners consent (This is due
to the principle of mutual
trust and confidence)

(e) generally, partners acting (e) generally, the

on behalf of the partnership stockholders cannot bind
(e) ABILITY TO BIND are agents thereof; corporation since they are not
THE FIRM consequently they can bind agents thereof
both the firm and the partners
DISTINGUISHING PARTNERSHIP CORPORATIONS
FACTOR

(f) MISMANAGEMENT (f) a partner can sue a (f) a stockholder cannot sue
partner who mismanaged a member of the board of
directors who mismanages:
the action must be in the
name of the corporation

(h) ATTAINMENT OF (h) the firm becomes a (h) the firm becomes a
LEGAL PERSONALITY juridical person from the juridical person from the
time the contracts begin time it is registered in the
Securities and Exchange
Commission, and all
requisites have been
complied with
DISTINGUISHING PARTNERSHIP CORPORATIONS
FACTOR
(i) DISSOLUTION (i) death, retirement, (i) such causes do not
insolvency, civil dissolve a corporation
interdiction, or insanity
of a partner dissolves
the firm
CHARACTERISTICS OF THE
CONTRACT OF PARTNERSHIP
1. CONSENSUAL – perfected by mere consent
2. BILATERAL - entered into by 2 or more persons
3. NOMINATE - with specific name
4. PRINCIPAL - existence does not depend on another
contract
5. ONEROUS - contributions have to be made
Art. 1768. The partnership has a juridical
personality separate and distinct from that of
each of the partners, even in case of failure to
comply with the requirements of Article 1772,
first paragraph.
Art. 1770. A partnership must have a lawful object
or purpose, and must be established for the common
benefit or interest of the partners. When an unlawful
partnership is dissolved by a judicial decree, the
profits shall be confiscated in favor of the State,
without prejudice to the provisions of the Penal
Code governing the confiscation of the instruments
and effects of a crime.
Art. 1771. A partnership may be constituted in
any form, except where immovable property or
real rights are contributed thereto, in which
case a public instrument shall be necessary.
Lawful Object or Purpose

The object or purpose must be LAWFUL, i.e., it must be

within the commerce of man, possible, and not contrary to
law, morals, good customs, public order or public policy
(See also Arts. 1347 and 1348, Civil Code). Otherwise, the
partnership contract is VOID AB INITIO. (Art. 1409,
Civil Code)
If a partnership has several purposes, one of
which is unlawful, the partnership can still
validly exist so long as the illegal purpose can
be separated from the legal purposes.
Art. 1772. Every contract of partnership having a
capital of three thousand pesos or more, money or
property, shall appear in a public instrument, which
must be recorded in the Office of the Securities and
Exchange Commission. Failure to comply with the
requirements of the preceding paragraph shall not
affect the liability of the partnership and the
members thereof to third persons.
Purpose of the Registration with the Office of the
Securities and Exchange Commission
The registration is to set “a condition for the
issuance of licences to engage in business or trade.
In this way, the tax liabilities of big partnerships
cannot be evaded, and the public can also determine
more accurately their membership and capital
before dealing with them.”
Art. 1773. A contract of partnership is void,
whenever immovable property is contributed
thereto, if an inventory of said property is not made,
signed by the parties, and attached to the public
instrument.

Requirements Where Immovable Property is Contributed (a) There

must be a public instrument regarding the partnership. (See Art.
1773). (b) The inventory of the realty must be made, signed by the
parties, and attached to the public instrument. (Art. 1773)
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.
Classification of Partnerships ( Art. 1776)
limited partnership — that where at least one partner is a
general partner, and the rest are limited partners.
(NOTE: A general partner is liable beyond his
contribution; a limited partner is liable only to the extent
of his contribution.)
Classification of Partnerships ( Art. 1776)
2. General partnership — that where all the partners are
general partners. A general partnership is one where all
the partners are general partners (that is, they are liable
even with respect to their individual properties, after the
assets of the partnership have been exhausted).
(NOTE: A partnership where all the partners are “limited
partners” cannot exist as a limited partnership; it will even
be refused registration. If at all it continues, it will be a
general partnership, and all the partners will be general
partners.)
PARTNERSHIP BY ESTOPPEL
When two or more persons attempt to create a
partnership but fail to comply with the legal
formalities essential for juridical personality,
the law considers them as partners, and the
association is a partnership insofar as it is
favorable to third persons, by reason of the
equitable principle of estoppel.
Classification of Partnerships ( Art. 1776)
2. General partnership — that where all the partners are
general partners. A general partnership is one where all
the partners are general partners (that is, they are liable
even with respect to their individual properties, after the
assets of the partnership have been exhausted).
(NOTE: A partnership where all the partners are “limited
partners” cannot exist as a limited partnership; it will even
be refused registration. If at all it continues, it will be a
general partnership, and all the partners will be general
partners.)
Art. 1777. A universal partnership may refer to
all the present property or to all the profits.

Art. 1778. A partnership of all present property

is that in which the partners contribute all the
property which actually belongs to them to a
common fund, with the intention of dividing the
same among themselves, as well as all the
profits which they may acquire therewith.
A stipulation for the common enjoyment of
any other profits may also be made; but the
property which the partners may acquire
subsequently by inheritance, legacy, or
donation cannot be included in such
stipulation, except the fruits thereof.
Art. 1780. A universal partnership of profits
comprises all that the partners may acquire by
their industry or work during the existence of
the partnership.
Movable or immovable property which each of
the partners may possess at the time of the
celebration of the contract shall continue to
pertain exclusively to each, only the usufruct
passing to the partnership.
ALL PROFITS ALL PRESENT PROPERTY

(a) Only the USUFRUCT of the (a) All the property actually belonging to
properties of the partners becomes the partners are CONTRIBUTED — and
COMMON PROPERTY (owned by them said properties become COMMON
and the partnership); NAKED PROPERTY (owned by all the partners
OWNERSHIP is retained by each of the and by the partnership).
partners. (

(b) ALL PROFITS acquired by the (b) As a rule, aside from the contributed
INDUSTRY or WORK of the partners properties, only the PROFITS of said
become COMMON PROPERTY contributed COMMON PROPERTY (not
(regardless of whether or not said profits other profi ts). (NOTE: Profi ts from
were obtained through the usufruct other sources may become COMMON,
contributed) but only if there is a stipulation to such
effect.)
Future Property
Reasons why future (by inheritance, legacy, donation)
property cannot be included in the stipulation regarding
the universal partnership of all present property:
(a) First, as a rule, contracts regarding successional rights
cannot be made.
(b) Secondly, a partnership demands that the contributed
things be determinate, known, and certain.
(c) Thirdly, a universal partnership of all present properties
really implies a donation, and it is well-known that
generally, future property cannot be donated.
Hypothetical Problem on ALL PRESENT PROPERTY
(a) A and B entered into a universal partnership of all
present property. No stipulation was made regarding other
properties. Subsequently, A received a parcel of land by
inheritance from his father; and another parcel of land
from the San Beda College as remuneration for A’s work
as professor therein.
Question: Are the two parcels of land and their fruits to be
enjoyed by the partnership?
ANS.: No, because there was no stipulation
regarding future properties or their fruits.
Same facts in problem (a) except that in the contract,
it was stipulated that all properties subsequently
acquired would belong to the partnership.

ANS.: The land acquired as salary as well as its fruits will

belong to the firm; but the land acquired later by
inheritance will NOT belong to the partnership since this
cannot be stipulated upon. (Art. 1780). The fruits of the
inherited land will go to the firm because said fruits may
be considered as properties subsequently acquired, and
there is no prohibition to stipulate on fruits, even if the
fruits be those of properties acquired later on by
inheritance, legacy, or donation.
HYPOTHETICAL PROBLEMS
ON PROFITS
(a) In a universal partnership of profi ts, A contributed the
use of his car. At the end of the partnership, should the car
be returned to him?
ANS.: Yes, because the naked ownership had always been
with him, and upon the end of the usufruct, full ownership
reverts to him. Remember that only its use had been
previously contributed.
HYPOTHETICAL PROBLEMS
ON PROFITS
(b) A and B entered into a universal partnership of profits.
Subsequently, A won 1st prize in the sweepstakes. Will the money
belong to the partnership?

ANS.: No, because it was not acquired by

“industry or work.”
(c) A and B entered into a universal partnership of profits.
Subsequently A became a teacher at the Poveda Learning
Centre. Will A’s salary belong to the partnership?

ANS.: Yes, even though no stipulation was made on this

point because after all the salary was acquired by A’s
“industry or work during the existence of the
partnership.” (Art. 1780, par. 1). Such “profit” belongs
therefore to the fi rm as a matter of RIGHT. Of course,
had there been a stipulation that such salary would be
excluded, the stipulation would be VALID.
(d) A and B entered into a universal partnership of profits.
Later, A purchased a parcel of land. Will the fruits of said
land belong to the partnership?

ANS.: As a rule, NO, because the usufruct (use and fruits)

granted to the fi rm under Art. 1780, par. 2 refers only to
that of the property possessed by the partner at the time of
the celebration of the contract. It follows that fruits of
after-acquired property do not belong to the fi rm as a
matter of right. However, it would be valid to stipulate
that the usufruct of after-acquired properties would
belong to the partnership.
ART. 1781. ARTICLES OF UNIVERSAL PARTNERSHIP,
ENTERED INTO WITHOUT SPECIFICATION OF ITS
NATURE, ONLY CONSTITUTE A UNIVERSAL
PARTNERSHIP OF PROFITS.

Presumption in Favor of Partnership of Profits

Reason for the Article. Less obligation is imposed in the
universal partnership of profits because their real and
personal properties are retained by them in naked
ownership.
If however a universal partnership of all present
properties is desired, REFORMATION is the proper
remedy.
ART. 1782. PERSONS WHO ARE PROHIBITED FROM
GIVING EACH OTHER ANY DONATION OR
ADVANTAGE CANNOT ENTER INTO UNIVERSAL
PARTNERSHIP.
Persons Who Together Cannot Form a Universal
Partnership
Examples of people prohibited:
(a) Husband and wife — as a rule. (Art. 133, Civil Code).
(b) Those guilty of adultery or concubinage. (Art. 739, Civil
Code).
(c) Those guilty of the same criminal offense, if the
partnership was entered into in consideration of the same.
OBLIGATIONS OF THE
PARTNERS
Art. 1784. A partnership begins from the moment of the
execution of the contract, unless it is otherwise stipulated.

When a Partnership Begins

(a) Generally, from the moment of the execution of the
contract.
(b) Exception — When there is a contrary stipulation.
RULE IF CONTRIBUTIONS
HAVE NOT YET BEEN
ACTUALLY MADE
Generally, even if contributions have not yet been
made, the firm already exists, for partnership is a
consensual contract (of course all the requisite
formalities for such consent must be present).
Art. 1785. When a partnership for a fixed term or
particular undertaking is continued after the
termination of such term or particular undertaking
without any express agreement, the rights and
duties of the partners remain the same as they were
at such termination, so far as is consistent with a
partnership at will.
A continuation of the business by the partners or
such of them as habitually acted therein during the
term, without any settlement or liquidation of the
partnership affairs, is prima facie evidence of a
continuation of the partnership.
THREE IMPORTANT DUTIES OF
EVERY PARTNER (ART. 1786)
The Article speaks of three things:
(a) the duty to contribute what had been
promised;
(b) the duty to deliver the fruits of what should
have been delivered; and
(c) the duty to warrant.
Problem If a partner fails to contribute within the
stipulated time what was promised, may the
partnership contract be?
ANS.: As a general rule, NO. The reason is, rescission
is not the proper remedy; the remedy should be to
collect what is owing, as well as damages. The general
rule in obligations cannot apply in the case of
partnership. (Sancho v. Lizarraga, 55 Phil. 601).
However, if the defaulting partner is already dead,
rescission may prosper.
When Contribution Consists of Goods
Appraisal of value is needed to determine how much has been
contributed.
How Appraisal Is Made
(a) Firstly, as prescribed by the contract.
(b) Secondly, in default of the first, by EXPERTS chosen by
the partners, and at CURRENT prices.
Risk of Loss
After goods have been contributed, the partnership bears the
risks of subsequent changes in their value. (Art. 1787).
Art. 1788. A partner who has undertaken to contribute
a sum of money and fails to do so becomes a debtor
for the interest and damages from the time he should
have complied with his obligation.
The same rule applies to any amount he may have
taken from the partnership coffers, and his liability
stroll begin from the time he converted the amount to
his own use.
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 either exclude him from the
firm or avail themselves of the benefits which he may
have obtained in violation of this provision, with a
right to damages in either case.
Capitalist partner — one who furnishes capital. (He is
not exempted from losses; he can engage in other
business provided there is NO COMPETITION
between the partner and his business.)

Industrial partner — one who furnishes industry or

labor. [He is exempted from losses as between the
partner; he cannot engage in any other business
without the express consent of the other partners
Capitalist-industrial partner — one who contributes
both capital and industry.

General partner — one who is liable beyond the extent

of his contribution.

Limited partner — one who is liable only to the extent

of his contribution.
Art. 1790. Unless there is a stipulation to the contrary the
partners shall contribute equal shares to the capital of the
partnership.

Art. 1791. If there is no agreement to the contrary, in case of

an imminent loss of the business of the partnership, any
partner who refuses to contribute an additional share to the
capital, except an industrial partner, to save the venture, shall
be obliged to sell his interest to the other partners.
Art. 1792. If a partner authorized to manage collects a
demandable sum, which was owed to him in his own
name, from a person who owed the partnership
another sum also demandable, the sum thus collected
shall be applied to the two credits in proportion to
their amounts, even though he may have given a
receipt for his own credit only, but should he have
given it for the account of the partnership credit, the
amount shall be fully applied to the latter.
The provisions of this article are understood to be
without prejudice to the right granted to the debtor by
Article 1252, but only if the personal credit of the
partner should be more onerous to him.
Rule if Managing Partner Collects a Credit
For this Article to apply the following requisites must
concur:
(a) The existence of at least 2 debts (one where the
firm is the creditor; the other, where the partner is the
creditor).
(b) Both sums are demandable.
(c) The collecting partner is a managing partner.
P, a managing partner, is X’s creditor to the amount of P1
million, already demandable. X also owes the partnership P1
million, also demandable. P collects P1 million.
(a) If P gives a receipt for the firm, it is the firm’s credit that
has been collected.
(b) If P gives a receipt for his own credit only, P500,000 will
be given to him; the other P500,000, to the firm. (Note the
use of the word “proportion.”) [Reason for the law: To
prevent furtherance of the partner’s personal interest to the
detriment of the firm.
Exception:
X may decide that he is paying only P’s credit in
accordance with his right of “application of payment.”
(Art. 1262, Civil Code). This is all right; BUT only if
the personal credit of P is more onerous to X (Art.
1792, Civil Code).
When Article Does Not Apply
Art. 1792 does not apply if the partner collecting is not a
managing partner. Here there is no basis for the suspicion
that the partner is in BAD FAITH.
Art. 1795. The risk of specific and determinate things, which
are not fungible, contributed to the partnership so that only
their use and fruits may be for the common benefit, shall be
borne by the partner who owns them.
If the things contributed are fungible, or cannot be kept
without deteriorating, or if they were contributed to be sold,
the risk shall be borne by the partnership. In the absence of
stipulation, the risk of things brought and appraised in the
inventory, shall also be borne by the partnership, and in such
case the claim shall be limited to the value of which they
were appraised.
Risk of Loss
(a) Specific and determinate things (NOT fungible) —
whose usufruct is enjoyed by a fi rm — like a car —
partner who owns it bears loss for ownership was
never transferred to the fi rm.
(b) Fungible or Deteriorable — Firm bears loss for
evidently, ownership was being transferred; otherwise,
use is impossible.
(c) Things Contributed to be Sold — Firm bears
loss for evidently, fi rm was intended to be the
owner; otherwise, a sale could not be made.
(d) Contributed under Appraisal — Firm bears
loss because this has the effect of an implied
sale.
Art. 1796. The partnership shall be responsible to
every partner for the amounts he may have disbursed
on behalf of the partnership and for the corresponding
interest, from the time the expenses are made, it shall
also answer to each partner for the obligations he may
have contracted in good faith in the interest of the
partnership business, and for risks in consequence of
its management.
Responsibility of Firm
To refund amounts disbursed on behalf of firm plus
interest (legal) from the time expenses were made.

NOTE: A partner who advances funds from his own pocket

for taxes on partnership land, must be reimbursed the same
from partnership assets. If the firm is insolvent, the other
partners must reimburse the paying partner except for the
latter’s proportionate share in the taxes.
Art. 1799
How Profits Are Distributed
(a) according to agreement (but not inequitously to
defeat).
(b) if none, according to amount of contribution.
How Losses are Distributed
(a) according to agreement — as to losses (but not
inequitously)
(b) if none, according to agreement as to profits
(c) if none, according to amount of contribution.
Industrial Partner’s Profits
A just and equitable share (a share equivalent to that of the
capitalist partner with the least capital).
Industrial Partner’s Losses
While he may be held liable by third persons, still he can recover
whatever he is made to give them, from the other partners, for he
is exempted from LOSSES, with or without stipulation to this
effect.
Non-Applicability to Strangers
Art. 1797 applies only to the partners, not when liability in favor
of strangers are concerned, particularly with reference to the
industrial partner.
Art. 1798. Designation by Third Person of Shares in Profi ts
and Losses
(a) The Article speaks of a “third person,” not a partner. Reason:
To avoid partiality.
(b) When designation by 3rd party may be impugned — “when it
is MANIFESTLY INEQUITABLE.”
(c) When designation by third party cannot be impugned even if
manifestly inequitable:
1) if the aggrieved partner has already begun to execute the
decision;
2) or if he has not impugned the same within a period of three
months from the time he had knowledge thereof (not from the time
of making).
Art. 1799. A stipulation which excludes one or more
partners from any share in the profits or losses is void.
(1) Stipulation Excluding a Partner from Profits or Losses
(a) The general rule is that a stipulation excluding one or more
partners from any share in the profits or losses is void. Reason:
The partnership is for COMMON BENEFIT.
(b) One exception is in the case of the industrial partner whom the
law itself excludes from losses. (Art. 1797, par. 2).
If the law itself does this, a stipulation exempting the industrial
partner from losses is naturally valid. (Of course, it is permissible
to stipulate that even the industrial partner shall be liable for
losses.)
REASON WHY INDUSTRIAL
PARTNER IS GENERALLY
EXEMPTED FROM LOSSES
While capitalist partners can withdraw their capital,
the industrial partner cannot withdraw any labor or
industry he had already exerted. Moreover, in a
certain sense, he already has shared in the losses in
that, if the partnership shows no profit, this means
that he has labored in vain.
PROBLEM
A, B, and C were partners, the first one being an industrial partner.
During the first year of operation, the fi rm made a profit of P3
million. During the second year, a loss of P1.5 million was
sustained. Thus, the net profit for the two years of operation was
only P1.5 million. In the articles of partnership it was stipulated
that A, the industrial partner would get 1/3 of the profits, but
would not participate in the losses.

(a) Is the stipulation valid? Why?

(b) How much will A get: 1/3 of P3 million or 1/3 of P1.5 million?
Why?
ANSWER
1) The stipulation is valid, for even the law itself exempts
the industrial partner from losses. His share in the profits
is presumably fair.
A will get only 1/3 of P1.5 million, the net profit and not
1/3 of P3 million. While it is true that he does not share in
the losses, this only means that he will not share in the net
losses. It is understood that he share in the losses insofar
as these can be accommodated in the profits. It is but fair
to compute all the various transactions in determining the
net profi ts or losses.
ART. 1800 APPOINTMENT OF MANAGER
Art. 1800 speaks of two modes of appointment:
(a) appointment as manager in the articles of partnership;
(b) appointment as manager made in an instrument other
than the articles of partnership or made orally.
Appointment in Articles of Partnership
(a) Power is irrevocable without just or lawful cause.
THEREFORE:
1) to remove him for JUST cause, the controlling partners
(controlling financial interest) should vote to OUST HIM.
2) to remove him WITHOUT CAUSE, or FOR AN
UNJUST CAUSE, there must be UNANIMITY (including
his own vote).
ART. 1803.
Rules to Be Observed When Manner of Management Has
Not Been Agreed Upon
(a) Generally, each partner is an agent.
(b) Although each is an agent, still if the acts of one are
opposed by the rest, the majority should prevail (Art.
1801) for the presumed intent is for all the partners to
manage
(c) When a partner acts as agent, it is understood that he
acts in behalf of the firm; therefore when he acts in his
own name, he does not bind the partnership generally.
Generally, a sale made by a partner of partnership
property is not binding on the firm if not authorized.
However, said transaction may be ratified as when the
proceeds thereof are spent for the benefit of the firm.
Art. 1804. Every partner may associate another
person with him in his share, but the associate
shall not be admitted in the partnership without the
consent of all the other partners, even if the partner
having an associate should be a manager.

Reason: mutual trust is the basis of partnership

Art. 1805. The partnership books shall be kept,
subject to any agreement between the partners, at
the principal place of business of the partnership,
and every partner shall at any reasonable hour have
access to and may inspect and copy any of them.
(a) The right in this Article is granted to enable the partner to
obtain true and full information of the partnership affairs (Art.
1806), for after all, he is a co-owner of the properties, including
the books.
Art. 1806 says “a reasonable hour.” What is this? Our Supreme
Court has held that the reasonable hour should be on business
days throughout the year, and not merely during some
capricious or arbitrary period selected by the managers.
Art. 1806. Partners shall render on demand true and full
information of all things affecting the partnership to any partner
or the legal representative of any deceased partner or of any
partner under legal disability.

Even without the demand, honesty demands the giving of vital

information, the refraining from all kinds of concealment.
 Poss v. Gottlieb 1922, 18 Misc. 318
FACTS: A and B were real estate partners. A heard of a
possible purchaser of a certain parcel of land owned by the fi
rm. But A did not inform B. Instead, A persuaded B to sell to
him (A) B’s share at a nominal amount, after which A sold the
whole parcel at a big profit. B sued A for damages for alleged
deceit A’s defense was that he after all had not been asked by B
about a possible purchaser.
HELD: A is liable, for he should not have concealed. “Good
faith not only requires that a partner should not make any false
concealment, but he should abstain from all concealment.”
Art. 1808. The capitalist partners cannot engage for their own
account in any operation which is of the kind of business in
which the partnership is engaged, unless there is a stipulation to
the contrary.
Any capitalist partner violating this prohibition shall bring to
the common funds any profits accruing to him from his
transactions, and shall personally bear all the losses.

Note: same with industrial partner is prohibited from

engaging “in business for himself”
Instances When There Is No Prohibition
(a) When it is expressly stipulated that the capitalist partner can
so engage himself. (Art. 1808, par. 1).
(b) When the other partners expressly allow him to do so.
(c) When the other partners impliedly allow him to do so.
(Example: When ALL of them are likewise violating the
article.)
(d) When the company ceases to be engaged in business (hence
during the period of liquidation and winding up, the article no
longer applies, even if the “engaging” partner is himself the
“liquidating partner”). The reason is clear: there can possibly
be no unfair competition.
EFFECT OF THE VIOLATION
(a) the violator shall bring to the partnership all the profi ts
illegally obtained
(b) but he shall personally bear all the losses.
(c) Although not mentioned in the law expressly, it is believed
that the violator can be ousted from the fi rm on the ground of
loss of trust and confidence, particularly if the violation is
repeated after due warning. This would of course result in the
dissolution of the firm.
[NOTE: Suppose he gains a total of P10 million and
losses for a total of P2 million, how much must he bring
to the firm?

ANS.: Strictly construed, he must bring P1 million, and

suffer the P2 million loss all by himself; however this
would be unduly harsh, and the proper interpretation, it is
submitted, is for him to give only P8 million. In other
words, losses can be deducted from profits. It is only net
losses which he must shoulder.]
PROPERTY RIGHTS OF A PARTNER
Art. 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
Ex. Car contributed to the partnership
(2) His interest in the partnership; and
Ex. share of the profits and losses
(3) His right to participate in the management.
the right to participate in the management is a very valuable
property right.
 1813. EFFECTS OF CONVEYANCE BY PARTNER
OF HIS INTEREST IN THE PARTNERSHIP

(a) If a partner CONVEYS (assigns, sells, donates) his WHOLE

interest in the partnership (his share in the profits and surplus),
either of two things may happen:
1) the partnership may still remain; or
2) the partnership may be dissolved.
(b) The assignee (conveyee) does not necessarily become a
partner. The assignor is still the partner, with a right to demand
accounting and settlement.
 1813. EFFECTS OF CONVEYANCE BY PARTNER
OF HIS INTEREST IN THE PARTNERSHIP

(c) The assignee cannot even interfere in the management or

administration of the partnership business or affairs.
(d) The assignee cannot also demand:
1) information;
2) accounting;
3) inspection of the partnership books.
 1813. EFFECTS OF CONVEYANCE BY PARTNER
OF HIS INTEREST IN THE PARTNERSHIP
Rights of the Assignee
(a) To get whatever profits the assignor-partner would have obtained.
(b) To avail himself of the usual remedies in case of fraud in the management.
(c) To ask for annulment of the contract of assignment if he was induced to enter into
it thru any of the vices of consent (fraud, error, intimidation, force, undue influence) or
if he himself was incapacitated to give consent (minor, insane).
(d) To demand an accounting — (but only if indeed the partnership is dissolved, but
even then, the account can co8po 9*
/362 \/ver the period only from the date of the last accounting which has been agreed t

‘bvo[; njbbbbbbb piu-=/ 0././mk,.>?/ popok8n8by all the partners).