PARTNERSHIP

PARTNERSHIP - a contract wherein two or  It is also required that the articles of

more persons bind themselves to contribute partnership must NOT be kept SECRET
money, property, or industry to a common among the members; otherwise, the
fund, with the intention of dividing the profits association shall have no legal
among themselves. (Art. 1767, CC) personality and shall be governed by
the provisions on CO-OWNERSHIP (Art.
By the contract of partnership: 1775).
(1) Two or more persons;  "kept secret among the members" =
(2) Bind themselves to contribute money, secrecy directed not to third persons
property, or industry to a common fund; but to some of the partners
(3) With the intention of dividing the profits
among themselves CHARACTERISTICS:
1. Essentially contractual in nature (Art. 1767,
General Professional Partnership Art.1767 1784)
Two or more persons may also form a 2. Separate juridical personality (Art. 1768)
partnership for the exercise of a profession. 3. Delectus personae
4. Mutual Agency (Art. 1803)
ELEMENTS OF A PARTNERSHIP: 5. Personal liability of partners for partnership
There shall be a partnership whenever: debts
1. There is a meeting of the minds;
2. To form a common fund; FORM OF PARTNERSHIP CONTRACT
3. With intention that profits (and losses) will be GENERAL RULE: No special form is required for
divided among the contracting parties. the validity of a contract. (Art. 1356)
The contract may be constituted in any form
ESSENTIAL FEATURES: [Art. 1771].
1. There must be a VALID CONTRACT.
2. The parties must have LEGAL CAPACITY to Exceptions:
enter into the contract. (1) Where immovable property or real rights are
3. There must be a mutual contribution of contributed:
money, property, or industry to a COMMON (a) The contract must appear in a public
FUND. instrument; and
4. There must be a LAWFUL OBJECT. (b) Attached to such instrument must be an
5. The purpose or primary purpose must be to inventory, signed by the parties, of the property
obtain PROFITS and DIVIDE the same among contributed [Arts. 1771 and 1773];
the parties. (2) Where the capital is at least P3,000, in
6. The partnership has a juridical personality money or property:
separate from individual partners [Art. 1768]. (a) The contract must appear in a public
instrument; and
 As such, any immovable property or an (b) It must be recorded in the Office of the
interest therein may be acquired in the Securities and Exchange Commission (SEC).
partnership name. Title so acquired can
be conveyed only in the partnership As to the second, failure to comply with these
name [Art. 1774]. requirements, however, does not affect the
 PARTNERSHIP
liability of the partnership and the partners to OBJECT OF PARTICULAR PARTNERSHIP
third persons [Arts. 1768 and 1772]. Art. 1783. A particular partnership has for its
object determinate things, their use or fruits, or
OBJECT a specific undertaking, or the exercise of a
Art. 1770. A partnership must have a lawful profession or vocation.
object or purpose, and must be established for
the common benefit or interest of the partners. EFFECT OF UNLAWFUL OBJECT
When an unlawful partnership is dissolved by a If the partnership has an unlawful object or
judicial decree, the profits shall be confiscated purpose:
in favor of the State, without prejudice to the (1) The contract is void ab initio [Art. 1409, p1].
provisions of the Penal Code governing the (2) Once dissolved by judicial decree:
confiscation of the instruments and effects of a (a) The profits shall be confiscated by favor of
crime. the State (Art. 1770);
(b) The instruments or tools and proceeds of
OBJECT OF UNIVERSAL PARTNERSHIP the crime shall also be forfeited in favor of the
A universal partnership may refer to: State [Art. 1770].
(1) All present property : (3) The contributions of partners shall not be
(a) The partners contribute all the property confiscated unless they are instruments or tools
which belongs to them to a common fund, with of the crime. (Arts. 1411 and 1412)
the intention of dividing the same among
themselves, as well as the profits they may NOTE: Judicial decree is not necessary to
acquire therewith [Art. 1778]. dissolve an unlawful partnership.
(b) The property contributed includes all those
belonging to the partners at the time of the EFFECT OF PARTIAL ILLEGALITY:
constitution of the partnership. 1. Where a part of the business of a partnership
(c) A stipulation for the common enjoyment of is legal and a part illegal, an account of that
any other profits may also be made. However, which is legal may be had.
the property which the partners may acquire 2. Where, without the knowledge or
subsequently by inheritance, legacy or donation participation of the partners, the firm's profits
cannot be included in such stipulation, except in a lawful business have been increased by
the fruits thereof [Art. 1779]. wrongful acts, the innocent partners are not
precluded as against the guilty partners from
(2) All the profits: recovering their share of the profits.
(a) It comprises all that the partners may
acquire by their industry or work during the DURATION
existence of the partnership. COMMENCEMENT
(b) Only the usufruct over the property of the Art. 1784. A partnership begins from the
partners passes to the partnership [Art. 1780]. moment of the execution of the contract, unless
Art. 1781. When the articles of universal it is otherwise stipulated.
partnership does not specify its nature (all
present property or all the profits), the EXCEPTIONS:
partnership will be considered as one only of all 1. Where immovable property/real rights are
the profits. contributed (Art. 1771)
a. Public instrument is necessary
 PARTNERSHIP
b. Inventory of the property contributed must (1) Those suffering from civil interdiction;
be made, signed by the parties and attached to (2) Minors;
the public instrument otherwise it is VOID (3) Insane or demented persons;
2. When the contract falls under the coverage (4) Deaf-mutes who do not know how to write;
of the Statute of Frauds (Art. 1409) (5) Incompetents who are under guardianship.
3. Where capital is P3,000 or more, in money or
property (Art. 1772) Exceptions : The capacity of the following
a. Public instrument is necessary persons to enter into a contract of partnership,
b. Must be registered with SEC though capacitated to contract generally, are
limited:
NOTE: • SEC Opinion, 1 June 1960: For purposes (1) Those who are prohibited from giving each
of convenience in dealing with government other any donation or advantage cannot enter
offices and financial institutions, registration of into a universal partnership [Art. 1782];
partnership having a capital of less than Php (2) A corporation cannot enter into a
3,000 is recommended. partnership in the absence of express
authorization by statute or charter.
TERM
As to period, a partnership may either be: MAY CORPORATIONS ENTER INTO
(1) For a fixed term or particular undertaking; or PARTNERSHIP?
(2) At will, the formation and dissolution of Although a corporation cannot enter into a
which depend on the mutual desire and consent partnership contract, it may, however, engage
of the parties. Any one of the partners may, at in a joint venture with others [Auerbach vs.
his sole pleasure, dictate the dissolution of the Sanitary Wares Manufacturing Corp (1989)]. On
partnership, even in bad faith, subject to the other hand, there is no prohibition against a
liability for damages [Ortega v. CA (1995)]. partnership being a partner in another
partnership [De Leon (2010)]
EXTENSION
A partnership term may be extended by:
Philippine Corporate Law (2001) by Dean
(1) Express renewal; or
Villanueva (p. 902) citing various SEC Opinions:
(2) Implied renewal, when these requisites
• Corporations may enter into partnership
concur:
agreements on the following conditions:
(a) The partnership is for a fixed term or
particular undertaking; 1. Authority to enter into a partnership relation
(b) It is continued after the termination of the is expressly conferred by the charter or the
fixed term or particular undertaking without articles of incorporation (AoI), and the nature of
any express agreement [Art. 1785] the business venture to be undertaken by the
partnership is in line with the business
PARTIES authorized by the charter or AoI.
General rule: Any person capacitated to
contract may enter into a contract of 2. If it is a foreign corporation, it must obtain a
partnership. license to transact business in the country in
accordance with the Corporation Code of the
As such, the following persons cannot enter into Philippines.
a contract of partnership:
 PARTNERSHIP
SEPARATE JURIDICAL PERSONALITY 5. MANAGING—one who manages the affairs
Art. 1768. The partnership has a juridical or business of the partnership
personality separate and distinct form that of 6. LIQUIDATING—one who takes charge of the
each of the partners, even in case of failure to winding up of partnership affairs upon
comply with the requirements of Article 1772, dissolution
first paragraph. 7. PARTNERS BY ESTOPPEL—one who is not
really a partner but is liable as a partner for the
As a JURIDICAL PERSON, a partnership may: protection of innocent 3rd persons
1. acquire and possess property of all kinds; 8. CONTINUING PARTNER—one who continues
2. incur obligations; and the business of a partnership after it has been
3. bring civil or criminal actions, in conformity dissolved by reason of the admission of a new
with the laws and regulations of their partner, retirement, death or expulsion of one
organization. (See Art. 46) of the partners
9. SURVIVING PARTNER—one who remains
PRINCIPLE OF DELECTUS PERSONARUM after a partnership has been dissolved by death
DELECTUS PERSONAE—The selection or choice of any partner
of the person. 10. SUBPARTNER—one who is not a member of
Implications: (Dean Villanueva) the partnership who contracts with a partner
• The assignment of a partner of his share does with reference to the latter's share in the
not make assignee a partner (Art. 1804 and partnership
1813) 11. OSTENSIBLE—one who takes active part and
• The existence of the partnership is closely known to the public as partner in the business
tied-up to the particular contractual 12. SECRET—one who takes active part in the
relationship of the partners (see instances of business but is not known to be a partner by
dissolution of the partnership upon change of outside parties
contractual relationship.) 13. SILENT—one who does not take any active
part in the business although he may be known
Ortega v. CA, G.R. No. 109248, July 3, 1995 to be a partner
Doctrine of Delectus Personae: 14. DORMANT—one who does not take active
The birth and life of a partnership at will is part in the business and is not known or held
predicated on the mutual desire and consent of out as a partner
the partners. The right to choose with whom a 15. Original partner- who has been a partner
person wishes to associate himself is the very since the constitution of the partnership
foundation and essence of that partnership. 16. Incoming partner - who is about to be taken
as a member into an existing partnership;
KINDS OF PARTNERS: 17. Retiring partner - who is withdrawing from
1. CAPITALIST—one who contributes money or the partnership
property to the common fund
2. INDUSTRIAL—one who contributes only his
industry or personal service
3. GENERAL—one whose liability to 3rd persons
extends to his separate property
4. LIMITED—one whose liability to 3rd persons
is limited to his capital contribution
 PARTNERSHIP
CAPITALIST vs INDUSTRIAL • Wrongful act or omission of any partner acting
for partnership affairs makes the partnership
liable (Art. 1822)
• Partnership bound to make good losses for
acts or misapplications of partners (Art. 1823)

UNLIMITED LIABILITY
(According to Dean Villanueva)
• All partners are liable pro rata with all their
properties and after partnership assets have
been exhausted, for all partnership debts (Art.
1816)
• Any stipulation against personal liability of
partners for partnership debts is void , except as
among them (Art. 1817)
• All partners are liable solidarily with the
partnership for everything chargeable to the
partnership when caused by the wrongful act or
omission of any partner acting in the ordinary
course of business of the partnership or with
authority from the other partners and for
partner's act or misapplication of properties
(Art. 1824)
• A newly admitted partner into an existing
partnership is liable for all the obligations of the
partnership arising before his admission but out
of partnership property shares (Art. 1826)
• Partnership creditors are preferred to those of
MEANING of MUTUAL AGENCY each of the partners as regards the partnership
(According to Dean Villanueva) property (Art. 1827)
• In the absence of contractual stipulation, all • Upon dissolution of the partnership, the
partners shall be considered agents and partners hall contribute the amounts necessary
whatever any one of them may do alone shall to satisfy the partnership liabilities (Art.
bind the partnership (Art. 1803[1], 1818) 1839[4], [7])
• Partners can dispose of partnership property
even when in partnership name (Art. 1819) RULES TO DETERMINE EXISTENCE OF
• An admission or representation made by any PARTNERSHIP
partner concerning partnership affairs is GENERAL RULE: Persons who are NOT partners
evidence against the partnership (Art. 1820) as between themselves, CANNOT be partners as
• Notice to any partner of any matter relating to to third persons. (Art. 1769(1))
partnership affairs is notice to the partnership EXCEPTION: Partnership by Estoppel under
(Art. 1821) Article 1825
 PARTNERSHIP
OTHER RULES TO DETERMINE WHETHER A a partner has been found guilty of such conduct
PARTNERSHIP EXISTS: (See Art. 1769) as tends to affect prejudicially the partnership
1. Co-ownership or co-possession does not of business; partner willfully or persistently
itself establish a partnership commits a breach of partnership agreement;
2. The sharing of gross returns does not of itself the partnership business can only be carried at
establish a partnership, whether or not the a loss; other equitable reasons (Art. 1831)
persons sharing them have a joint or common
right or interest in any property from which the NOTE:
returns are derived; • SEC Opinion, 28 April 1995: The death of a
3. The receipt by a person of a share of the partner, as a general rule, dissolves the
profits of a business is prima facie evidence that partnership by operation of law, except if the
he is a partner in the business, UNLESS such articles of partnership stipulate for the
were received in payment: continuance of the partnership relations upon
a. As debt by installments or otherwise; the death of any of the partners.
b. As wages or rent; • SEC Opinion, 5 August 1997: If the remaining
c. As annuity; partners of the dissolved partnership intended
d. As interest on loan; for all legal intents and purposes, to continue
e. As consideration for sale of goodwill of the partnership business even after the death of
business/other property by installments. a partner, there is continuity of personality of
the partnership as there exists a "partnership at
WEAKNESSES OF A PARTNERSHIP will."
(Dean Villanueva)
• Partners are co-owners of the partnership WHEN IMMOVABLES OR REAL RIGHTS
properties and enjoy personal possession (Art. CONTRIBUTED
1811) Art. 1773. A contract of partnership is void,
• Partners may individually dispose of real whenever immovable property is contributed
property of the partnership even when in thereto, if an inventory of said property is not
partnership name (Art. 1819) made, signed by the parties, and attached to
• Dissolution of the partnership can come about the public instrument.
by the change in the relationship of the GENERAL RULE: Failure to comply with the
partners, such as when a partner chosses to requirement of appearance in public instrument
cease being part of the partnership (Art. 1828, and SEC Registration will not affect the liability
1830[1]b) of the partnership and the members thereof to
• Expulsion of partner dissolves the partnership third persons. (Art. 1772 ¶ 2)
(Art. 1830[1]d) EXCEPTION: When IMMOVABLE PROPERTY/
• Dissolved by the loss of the thing promised to REAL RIGHTS are contributed, *public
be contributed to the partnership (Art. 1830[4]) instrument + inventory* made and signed by
• Death, insolvency, or civil interdiction of a the parties and attached to the public
partner dissolves the partnership (Art. 1830 [5], instrument (Arts. 1771 and 1773) is required for
[6],[7]) the benefit of third persons.
• Petition by partner will dissolve the
partnership when a partner has been declared
insane; or the partner has become incapable of
performing his part of the partnership contract;
 PARTNERSHIP
EFFECT OF ABSENCE OF REQUIREMENTS PARTNERSHIP AND OTHER CONTRACTS
UNDER ARTICLES 1771 AND 1773 DISTINGUISHED

Partnerships void under Art.1773, in relation

Art. 1771 may still be considered either de facto
or estoppel partnerships visà-vis third persons;
may even be treated as an ordinary contract
from which rights and obligations may validly
arise, although not exactly a partnership under
the Civil Code.

Failure to prepare an inventory of the

immovable property contributed, in spite of
article 1773 declaring the partnership void
would not render the partnership void when:
a. NO THIRD PARTY INVOLVED (since
Art. 1773 was intended for the protection of 3rd
parties;
b. Partners have MADE A CLAIM ON
THE PARTNERSHIP AGREEMENT.
 PARTNERSHIP
a particular partnership which has for its object
specific undertaking.

Aurbach v. Sanitary Wares, 180 SCRA 130

(1989)
The Supreme Court has, however, recognized a
distinction between these two business forms
and has held that although a corporation cannot
enter into a partnership, it may, however,
engage in a joint venture with others

CLASSIFICATIONS OF PARTNERSHIP

AS TO EXTENT OF ITS SUBJECT MATTER

1. UNIVERSAL PARTNERSHIP
a. UNIVERSAL PARTNERSHIP OF ALL
PRESENT PROPERTY - comprises the following:
i. Property which belonged to
each of the partners at the time of the
constitution of the partnership
ii. Profits which they may
acquire from all property contributed
Heirs of Tan Eng Kee v. CA, G.R. No. 126881,.
October 3, 2000 b. UNIVERSAL PARTNERSHIP OF
- Particular partnership distinguished PROFITS - comprises all that the
from joint venture partners may acquire by their industry
A particular partnership is distinguished from or work during the existence of the
joint venture, to wit: partnership
1) a joint venture (an American concept similar
to our joint account) is a sort of informal NOTE: Persons who are prohibited from giving
partnership, with no firm name and no legal donations or advantage to each other cannot
personality. In a joint account, the participating enter into a universal partnership. (Art. 1782)
merchants can transact business under their
own name, and can be individually liable 2. PARTICULAR PARTNERSHIP—has for its
therefore; and objects:
2) usually, but not necessarily a joint venture is a. Determinate things
limited to a single transaction, although the b. Their use or fruits
business of pursuing to a successful termination c. Specific undertaking
may continue for a number of years; a d. Exercise of profession or vocation
partnership generally relates to a continuing
business of various transactions of a certain AS TO LIABILITY OF PARTNERS
kind. 1. GENERAL PARTNERSHIP—consists of general
It would seem that under Philippine law, a joint partners who are liable pro rata and subsidiarily
venture is a FORM of PARTNERSHIP, specifically
 PARTNERSHIP
and sometimes solidarily with their separate money or property thus contributed, or their
property for partnership debts. use or fruits, become the property of the
partnership.
2. LIMITED PARTNERSHIP—one formed by 2 or
more persons having as members one or more CONTRIBUTION OF MONEY OR PROPERTY
general partners and one or more limited With respect to contribution of property, a
partners, the latter not being personally liable partner is obliged to:
for the obligations of the partnership (1) To contribute, at the beginning of the
partnership or at the stipulated time, the
AS TO DURATION money, property or industry which he
1. PARTNERSHIP AT WILL—one in which no undertook to contribute;
time is specified and is not formed for a (2) In case a specific and determinate thing is to
particular undertaking or venture which may be be contributed:
terminated anytime by mutual agreement (a) To warrant against eviction in the
same manner as a vendor; and
2. PARTNERSHIP WITH A FIXED TERM—the (b) To deliver to the partnership the
term for which the partnership is to exist is fruits of the property promised to be
fixed or agreed upon or one formed for a contributed, from the time they should have
particular undertaking been delivered, without need of demand [Art.
1786];
AS TO LEGALITY OF EXISTENCE (3) In case a sum of money is to be contributed,
1. DE JURE PARTNERSHIP—one which has or in case he took any amount from the
complied with all the legal requirements for its partnership coffers, to indemnify the
establishment partnership for:
(a) Interest; and
2. DE FACTO—one which has failed to comply (b) Damages, from the time he should
with all the legal requirements for its have complied with his obligation, or from the
establishment time he converted the amount to his own use,
respectively [Art. 1788].
AS TO PURPOSE
1. COMMERCIAL OR TRADING PARTNERSHIP— AMOUNT OF CONTRIBUTION
one formed for the transaction of business General rule: Partners are to contribute equal
shares to the capital of the partnership.
2. PROFESSIONAL OR NON-TRADING Exception: When there is an agreement to the
PARTNERSHIP—one formed for the exercise of contrary, the contribution shall follow such
a profession agreement [Art. 1790].

ADDITIONAL CAPITAL CONTRIBUTION

RIGHTS and OBLIGATIONS OF THE PARTNERS Requisites:
TO ONE ANOTHER (1) There is an imminent loss of the business of
the partnership;
RIGHT TO CONTRIBUTION (2) The majority of the capitalist partners are of
The partnership has a right to the contribution the opinion that an additional contribution to
(or the partners are obliged to contribute). The the common fund would save the business;
 PARTNERSHIP
(3) The capitalist partner refuses deliberately c. To answer to the partnership
(not because of financial inability) to contribute for the fruits of the property
an additional share to the capital; and the contribution of which he
(4) There is no agreement that even in case of delayed, from the date they
imminent loss of the business, the partners are should have been contributed
not obliged to contribute. up to the time of actual delivery
(Art. 1786)
Any partner who refuses to contribute an d. To preserve said property
additional share to the capital, except an with the diligence of a good
industrial partner, to save the venture, shall be father of a family pending
obliged to sell his interest to the other partners, delivery to partnership (Art.
unless there is an agreement to the contrary 1163) e. To indemnify
[Art. 1791]. partnership for any damage
caused to it by the retention of
CONTRIBUTION OF INDUSTRY the same or by the delay in its
An industrial partner is obliged to contribute his contribution (Arts. 1788, 1170)
industry at the stipulated time.
General rule: An industrial partner cannot EFFECT OF FAILURE TO CONTRIBUTE PROPERTY
engage in business for himself. Should he do so, PROMISED:
the capitalist partners, as well as industrial 1. Partners becomes ipso jure a debtor of the
partners [De Leon (2010)] may either: partnership even in the absence of any demand
(1) Exclude him from the firm; or (See Art. 1169[1])
(2) Avail themselves of the benefit which he 2. Remedy of the other partner is not rescission
may have obtained. but specific performance with damages from
defaulting partner (Art. 1788)
Exception: He may engage in business for
himself when the partnership expressly permits Obligations with respect to contribution of
him to do so [Art. 1789]. money and money converted to personal use:
a. To contribute on the date fixed the amount
A) OBLIGATIONS OF THE PARTNERS AMONG he has undertaken to contribute to the
THEMSELVES partnership
b. To reimburse any amount he may have taken
1. PROMISED CONTRIBUTION from the partnership coffers and converted to
Obligations with respect to contribution of his own use
property: c. To pay for the agreed or legal interest, if he
a. to contribute at the beginning of the fails to pay his contribution on time or in case
partnership or at the stipulated time he takes any amount from the common fund
the money, property or industry which and converts it to his own use
he may have promised to contribute d. To indemnify the partnership for the
(Art. 1786) damages caused to it by delay in the
b. To answer for eviction in case the contribution or conversion of any sum for his
partnership is deprived of the personal benefits (See Art. 1788)
determinate property contributed (Art.
1786)
 PARTNERSHIP
2. FIDUCIARY DUTY CONSEQUENCES IF THE CAPITALIST PARTNER
A partnership is a fiduciary relation—one ENGAGES IN A BUSINESS (which competes with
entered into and to be maintained on the basis the business of the partnership):
of trust and confidence. With that, a partner 1. he may be required to bring to the common
must observe the utmost good faith, fairness, fund the profits he derived from the other
and integrity in his dealings with the others: business; (Art. 1808)
a. he cannot directly or indirectly use 2. he shall personally bear the losses; (Art.
partnership assets for his own benefit; 1808)
b. he cannot carry on a business of the 3. he may be ousted form the partnership,
partnership for his private advantage; especially if there was a warning.
c. he cannot, in conducting the business
of the partnership, take any profit Obligations with respect to contribution to
clandestinely; partnership capital:
d. he cannot obtain for himself that he a. Partners must contribute equal
should have obtained for the shares to the capital of the partnership
partnership (e.g. business opportunity) unless there is stipulation to contrary
e. he cannot carry on another business (Art. 1790)
in competition with the partnership; b. Partners (capitalist) must contribute
f. he cannot avail himself of knowledge additional capital In case of imminent
or information which may be properly loss to the business of the partnership
regarded as the property of the and there is no stipulation otherwise;
partnership; refusal to do so shall create an
obligation on his part to sell his interest
PROHIBITION AGAINST ENGAGING IN to the other partners (Art. 1790)
COMPETITIVE BUSINESS
Requisites:
a. There is an imminent loss of the
business of the partnership
b. The majority of the capitalist partners
are of the opinion that an additional
contribution to the common fund
would save the business
c. The capitalist partner refuses
deliberately to contribute (not due to
CONSEQUENCES IF AN INDUSTRIAL PARTNER financial inability) d. There is no
ENGAGES IN ANY BUSINESS: (Art. 1789) agreement to the contrary
1. he can be excluded from the partnership; or
2. the capitalist partners can avail of the benefit RIGHT TO APPLY PAYMENT RECEIVED TO
he obtained from the business, or PARTNERSHIP CREDIT
3. the capitalist partners have the right to file an General rule: A partner authorized to manage,
action for damages against the industrial who collects a demandable sum owed to him in
partner, in either case. his own name from a person who also owes the
partnership a demandable sum, is obliged to
apply the sum collected to both credits pro rata,
 PARTNERSHIP
even if he issued a receipt for his own credit Obligation of partner who receives share of
only. partnership credit
Requisites: a. Obliged to bring to the partnership
(1) There exist at least two debts, one capital what he has received even
where the collecting partner is creditor, though he may have given receipt
and the other, where the partnership is for his share only (Art. 1793)
the creditor;
(2) Both debts are demandable; and Requisites:
(3) The partner who collects is authorized a. A partner has received in
to manage and actually manages the whole or in part, his share of
partnership. the partnership credit
b. The other partners have not
Exceptions: collected their shares
(1) In case the receipt was issued for the c. The partnership debtor has
account of the partnership credit only, become insolvent
however, the sum shall be applied to the
partnership credit alone. RIGHT TO RETURN OF CREDIT RECEIVED
(2) When the debtor declares, pursuant to A partner, authorized to manage or not, who
Article 1252, at the time of making the already received, in whole or in part, his share
payment, to which debt the sum must be of a partnership credit, is obliged to bring to the
applied, it shall be so applied [Art. 1792]. partnership capital what he received when:
(1) The other partners have not collected their
Obligation of managing partners who collects shares; and
debt from person who also owed the (2) The partnership debtor has become
partnership (Art. 1792) insolvent.
a. Apply sum collected to 2 credits in
proportion to their amounts b. If he This obligation exists even when he issued a
received it for the account of receipt for his share only [Art. 1793].
partnership, the whole sum shall be
applied to partnership credit Ratio: In this case, the debt becomes a bad
debt. It would be unfair for the partner who
Requisites: already collected not to share in the loss of the
a. There exists at least 2 debts, other partners.
one where the collecting
partner is creditor and the RIGHT TO INDEMNITY FOR DAMAGES
other, where the partnership is Every partner is responsible to the partnership
the creditor for damages suffered by it through his fault.
b. Both debts are demandable
c. The partner who collects is SET-OFF OF LIABILITY
authorized to manage and General rule: The liability for damages cannot
actually manages the be set-off or compensated by profits or benefits
partnership which the partner may have earned for the
partnership by his industry.
 PARTNERSHIP
Ratio: The partner has the obligation to secure partner having an associate is a managing
the benefits for the partnership. As such, the partner [Art. 1804].
requirement for compensation, that the partner
be both a creditor and a debtor of the This arrangement refers to a contract of
partnership at the same time, is not complied subpartnership, which is a partnership within a
with [Art. 1278; De Leon (2010)]. partnership, distinct and separate from the
main partnership. It is considered a
Exception : The court may equitably lessen the modification of the original contract [De Leon
liability if, through his extraordinary efforts in (2010)].
other activities of the partnership, unusual
profits were realized [Art. 1794]. Note, RIGHT TO INSPECT PARTNERSHIP BOOKS
however, that there is still no compensation in The partnership books shall be kept:
this case. (1) At a place agreed upon by the partners;
(2) When there is no such agreement, at the
SUIT FOR DAMAGES principal place of business of the partnership.
Before a partner may sue another for alleged
fraudulent management and resultant Every partner shall, at any reasonable hour,
damages, liquidation must first be effected to have access to and may inspect and copy any of
determine the extent of the damage. Without them.
liquidation of partnership affairs, a partner
cannot claim damages [Soncuya v. De Luna Any reasonable hour means reasonable hours
(1939)]. on business days throughout the year [Pardo v.
Lumber Co. (1925)].
RESPONSIBILITY TO PARTNERS
In the absence of any stipulation to the RIGHT TO FORMAL ACCOUNT
contrary, every partner is an agent of the General rule: The right to a formal account of
partnership for the purpose of its business. As partnership affairs accrues only when the
such, it is responsible to every partner: partnership is dissolved.
(1) For amounts, and the corresponding interest
from the time the expenses were made, which Exceptions: In the special and unusual cases
he may have disbursed on behalf of the mentioned in Article 1809, formal accounting
partnership; may be demanded by any partner even before
(2) For obligations he may have contracted in dissolution:
good faith in the interest of the partnership (1) If he is wrongfully excluded from the
business; and partnership business or possession of its
(3) For risks in consequence of the management property by his co-partners;
of the partnership [Art. 1796] (2) If the right exists under the terms of any
agreement;
RIGHT TO ASSOCIATE ANOTHER IN SHARE (3) If, without his consent, a partner has derived
Every partner may associate another person profits from any transaction connected with the
with him in his share. The admission of the formation, conduct, or liquidation of the
associate to the partnership, however, requires partnership or from any use of partnership
consent of all the other partners even if the property;
 PARTNERSHIP
(4) Whenever other circumstances render it just PROPERTY AND CAPITAL DISTINGUISHED
and reasonable [Art. 1809].

Other rights and obligations of partners:

1. Right to associate another person with him in
his share without consent of other partners
(subpartnership)
2. Right to inspect and copy partnership books
at any reasonable hour
3. Right to a formal account as to partnership OWNERSHIP OF CERTAIN PROPERTIES
affairs (even during existence of partnership): (1) The ownership of property used by the
a. If he is wrongfully excluded from partnership depends on the intention of the
partnership business or possession of parties, which may be drawn from an express
its property by his copartners agreement or their conduct.
b. If right exists under the terms of any (a) A partner may allow the property to
agreement be used by the partnership without
c. As provided by art 1807 d. Whenever transfer of ownership, contributing only
other circumstances render it just and the use or enjoyment thereof.
reasonable (b) He may also hold title to partnership
4. Duty to render on demand true and full property, without acquiring ownership
information affecting partnership to any partner thereof [Art. 1819].
or legal representative of any deceased partner (2) Property acquired by a partner with
or of any partner under legal disability partnership funds is presumed to be
5. Duty to account to the partnership as partnership property.
fiduciary (3) The same presumption also arises when the
property is indicated in the partnership books
as partnership asset.
B) PROPERTY RIGHTS OF A PARTNER (4) Other factors may be considered to
1. His rights in specific partnership property determine ownership of the property.
2. His interest in the partnership
3. His right to participate in the management RIGHTS IN SPECIFIC PROPERTY
(Art. 1810) (1) The partners have equal rights to possess
partnership property for partnership purposes.
NATURE OF PARTNER'S RIGHT IN SPECIFIC (2) For other purposes, the consent of his
PARTNERSHIP PROPERTY—a partner has an partners is necessary.
equal right to possession which is not assignable (3) If the partner is excluded, he may ask for:
and such right is limited to the share of what (a) Formal accounting [Art. 1809]; or
remains after partnership debts have been paid (b) Dissolution by judicial decree [Art.
1831].
NATURE OF PARTNER'S RIGHT IN THE (4) A partner’s right in such property is not
PARTNERSHIP—a share in the profits and assignable, except when all the partners assign
surplus their rights in the same property;
(5) The right is not subject to attachment or
execution, except on claim against the
 PARTNERSHIP
partnership. In case of such attachment, the (2) Appoint a receiver of the share of the profits
partners, or any of them, or the representatives and of any other money due or to fall due to the
of a deceased partner, cannot claim any right partner; and
under the homestead or exemption laws. (3) Make all other orders, directions, accounts
(6) The right is not subject to legal support and inquiries, which the debtor partner might
under Article 291 [Art. 1811]. have made, or which the circumstances may
require.
INTEREST IN PARTNERSHIP
A partner’s interest in the partnership is his The interest charged may be redeemed before
share of the profits and surplus [Art. 1812]. foreclosure or, in case of sale directed by the
court, may be purchased without causing
ASSIGNMENT OF INTEREST dissolution:
Assignment by a partner of his whole interest in (1) With separate property, by one or more of
the partnership, of itself: the partners; or
(1) Does not dissolve the partnership; or (2) With partnership property, by one or more
(2) Does not entitle the assignee to: of the partners, will consent of all, except the
(a) Interfere in the management or debtor partner [Art. 1814].
administration of the partnership
business or affairs; RIGHT TO PARTICIPATE IN MANAGEMENT
(b) Require information or account of Management of the partnership is primarily
partnership; or governed by the agreement of the partners in
(c) Inspect the partnership books. the articles of partnership. It may be stipulated
that the partnership will be managed by:
It merely entitles the assignee to: (1) All the partners; or
(1) Receive the profits to which the assigning (2) A number of partners appointed as
partner was entitled; managers, which may be appointed:
(2) In case of fraud in management, avail (a) In the articles of partnership; or
himself of the usual remedies; (b) After constitution of the partnership.
(3) In case of dissolution:
(a) Receive his assignor’s interest; and POWERS OF A MANAGING PARTNER
(b) Require an accounting from the date General rule: The partner designated as
only of the last account agreed to by all manager in the articles may execute all acts of
the partners [Art. 1813]. administration despite opposition by the other
partners.
INTEREST BY PERSONAL CREDITORS
General rule: Partnership creditors are Exception: He cannot do so when he acts in bad
preferred over the personal creditors of the faith.
partners as regards partnership property.

Exception: On due application by any judgment

creditor of a partner, a competent court may:
(1) Charge the interest of the partner for the
satisfaction of the judgment debt; REVOCATION OF POWER BY MANAGING
PARTNER
 PARTNERSHIP
The powers of the managing partner may be When there is no agreement as to the manner
revoked: of management, the following rules apply:
(1) If appointed in the articles of partnership, (1) All the partners are considered agents
when: (mutual agency). Whatever any one does alone
(a) There is just or lawful cause for binds the partnership, unless there is a timely
revocation; and opposition to the act, under Article 1801.
(b) The partners representing the (2) Any important alteration in the immovable
controlling interest revoke such power. property of the partnership, even if useful to
(2) If appointed after the constitution of the the partnership, requires unanimity. If the
partnership, at any time and for any cause [Art. alteration is necessary for the preservation of
1800]. the property, however, consent of the others is
not required [De Leon (2010)].
MANAGING BY TWO OR MORE PARTNERS
When there are two or more managing partners If the refusal is manifestly prejudicial to the
appointed, without specification of their duties partnership, court intervention may be sought
or without a stipulation on how each one will [Art. 1803].
act:
(1) Each one may separately execute all acts of MUTUAL AGENCY
administration. In addition to the Article 1801, there is
(2) If any of them opposes the acts of the effectively a mutual agency in the following
others, the decision of the majority prevails. cases:
(3) In case of a tie, the partners owning the (1) Partners can dispose of partnership property
controlling interest will decide [Art. 1801]. even when in partnership name [Art. 1819].
(2) An admission or representation made by any
Requisites: partner concerning partnership affairs is
(1) Two or more partners have been appointed evidence against the partnership [Art. 1820].
as managers; (3) Notice to any partner of any matter relating
(2) There is no specification of their respective to partnership affairs is notice to the
duties; and partnership [Art. 1821].
(3) There is no stipulation that one of them shall (4) Wrongful act or omission of any partner
not act without the consent of all the others. acting for partnership affairs makes the
partnership liable [Art. 1822].
STIPULATION OF UNANIMITY (5) Partnership is bound to make good losses for
Art. 1802. In case there is a stipulation that wrongful acts or misapplications of partners
none of the managing partners shall act without [Art. 1823].
the consent of others, the concurrence of all is
necessary for the validity of the acts, and the
absence or disability of one cannot be alleged,
unless there is imminent danger of grave or
irreparable injury to the partnership.

MANAGEMENT WHEN MANNER NOT AGREED RIGHT TO PROFITS AND OBLIGATIONS FOR
UPON LOSSES
 PARTNERSHIP
BEARING THE RISK OF LOSS OF THINGS concerned, any such stipulation may be
CONTRIBUTED (Art. 1795) properly declared void.

RULES FOR DISTRIBUTION OF PROFITS AND

LOSSES
The distribution of profits and losses shall be in
accordance with the following rules:
(1) They shall be distributed in conformity with
the agreement.
(2) If only the share in profits has been
stipulated, the share in the losses shall be in the
same proportion.
(3) In the absence of any stipulation:
(a) The share in the profits of the
capitalist partners shall be in proportion
RULES FOR DISTRIBUTION OF PROFITS AND to their contributions.
LOSSES (See Art. 1797) (b) The losses shall be borne by the
capitalist partners, also in proportion to
the contributions.
(c) The share of the industrial partners
in the profits is that share as may be
just and equitable. If he also
contributed capital, he will receive a
share of the profits in proportion to his
contribution; and
(d) The industrial partner, who did not
contribute capital, is not liable for losses
[Art. 1797].

EXCLUSION OF PARTNER FROM SHARE

General rule: A stipulation excluding one or
more partners from any share in the profits or
losses is void [Art. 1799].

Art. 1799. A stipulation which excludes one or Exception: A stipulation exempting an industrial
more partners from any share in the profits and partner from losses is valid, since, if the
losses is void. partnership fails to realize profits, he can no
longer withdraw his work or labor [De Leon
NOTE: Stipulation exempting a partner from (2010)].
losses should be allowed. If a person can make a
gift to another, there is no sound reason why a
person cannot also agree to bear all the losses. OBLIGATION TO RENDER INFORMATION
Of course, as far as THIRD PERSONS are Partners shall render on demand true and full
 PARTNERSHIP
information of all things affecting the b. Knowledge of the partner acting in
partnership to: the particular matter then present to
(1) Any partner; his mind
(2) The legal representative of any deceased c. Knowledge of any other partner who
partner; or reasonably could and should have
(3) The legal representative of any partner communicated it to the acting partner
under legal disability [Art. 1806]. 5. Partners and the partnership are solidary
liable to 3rd persons for the partner's tort or
OBLIGATION TO ACCOUNT AND ACT AS breach of trust
TRUSTEE Every partner must: 6. Liability of incoming partner is limited to:
(1) account to the partnership for any benefit a. His share in the partnership property
and for existing obligations
(2) hold as trustee for it any profits derived by b. His separate property for subsequent
him without the consent of the other partners: obligations
(1) From any transaction connected 7. Creditors of partnership preferred in
with the formation, conduct, or liquidation of partnership property & may attach partner's
the partnership; or share in partnership assets
(2) From any use by him of: its property 8. Every partner is an agent of the partnership
[Art. 1807].
OBLIGATION TO OPERATE UNDER A FIRM
C) OBLIGATION OF PARTNERS WITH REGARD NAME
TO THIRD PERSONS Art. 1815. Every partnership shall operate under
1. Every partnership shall operate under a firm a firm name, which may or may not include the
name. Persons who include their names in the name of one or more of the partners.
partnership name even if they are not members
shall be liable as a partner Those who, not being members of the
2. All partners shall be liable for contractual partnership, include their names in the firm
obligations of the partnership with their name, shall be subject to the liability of a
property, after all partnership assets have been partner.
exhausted: General rule: The partners may adopt any firm
a. Pro rata name desired.
b. Subsidiary Exceptions:
3. Admission or representation made by any (1) They cannot use a name which is “identical
partner concerning partnership affairs within or deceptively or confusingly similar to an
scope of his authority is evidence against the existing or corporation [or partnership] or to
partnership any other name already protected by law or is
4. Notice to partner of any matter relating to patently deceptive, confusing or contrary to
partnership affairs operates as notice to existing laws” [Sec. 18, Corporation Code].
partnership, except in case of fraud: (2) Use of names of deceased partner in law
a. Knowledge, of partner acting in the firms is “permissible provided that the firm
particular matter, acquired while a indicates in all its communications that said
partner partner is deceased” [Rule 3.02, Code of
Professional Responsibility].
 PARTNERSHIP
LIABILITY OF PARTNERS FOR PARTNERSHIP EFFECTS OF CONVEYANCE OF REAL PROPERTY
CONTRACTS BELONGING TO PARTNERSHIP
The partnership is primarily liable for contracts
entered into:
(1) In its name and for its account;
(2) Under its signature; and
(3) By a person authorized to act for it.

Upon exhaustion of its assets, all partners are

liable pro rata with all their property. Any
partner may enter into a separate obligation to
perform a partnership contract [Art. 1816].

PARTNER BY ESTOPPEL—by words or conduct,

he does any of the ff.:
1. Directly represents himself to anyone as a
partner in an existing partnership or in a
nonexisting partnership
2. Indirectly represents himself by consenting to
another representing him as a partner in an
existing partnership or in a non existing
partnership
 PARTNERSHIP
ELEMENTS TO ESTABLISH LIABILITY AS A D) RESPONSIBILITY OF PARTNERSHIP TO
PARTNER ON GROUND OF ESTOPPEL: PARTNERS
1. Defendant represented himself as 1. To refund the amounts disbursed by partner
partner/represented by others as such and not in behalf of the partnership + corresponding
denied/refuted by defendant interest from the time the expenses are made
2. Plaintiff relied on such representation (loans and advances made by a partner to the
3. Statement of defendant not refuted partnership aside from capital contribution)
2. To answer for obligations partner may have
LIABILITIES IN ESTOPPEL contracted in good faith in the interest of the
partnership business
3. To answer for risks in consequence of its
management

DISSOLUTION AND WINDING UP

DISSOLUTION—change in the relation of the
partners caused by any partner ceasing to be
associated in the carrying on of the business;
partnership is not terminated but continues
until the winding up of partnership affairs is
completed

WINDING UP—process of settling the business

ASSIGNMENT OF INTEREST IN PARTNERSHIP or partnership affairs after dissolution
Assignment is subject to three (3) conditions:
1. made in good faith TERMINATION—that point when all partnership
2. for fair consideration affairs are completely wound up and finally
3. after a fair and complete disclosure of all settled. It signifies the end of the partnership
important information as to its value life.

RIGHTS OF AN ASSIGNEE: CAUSES OF DISSOLUTION:

1. Get whatever assignor-partner would have 1. Without violation of the agreement between
obtained the partners
2. Avail usual remedies in case of fraud in the a. By termination of the definite term/
management particular undertaking specified in the
3. Ask for annulment of contract of assignment agreement
if he was induced to join through any of the b. By the express will of any partner,
vices of consent who must act in good faith, when no
4. Demand an accounting (only in case of definite term or particular undertaking
dissolution) is specified
c. By the express will of all the partners
who have not assigned their interest/
charged them for their separate debts,
either before or after the termination of
 PARTNERSHIP
any specified term or particular reasonably impracticable to carry on
undertaking partnership with him
d. By the bona fide expulsion of any 5. Business can only be carried on at a loss
partner from the business in 6. Other circumstances which render dissolution
accordance with power conferred by equitable
the agreement
2. In contravention of the agreement between Upon application by purchaser of partner's
the partners, where the circumstances do not interest:
permit a dissolution under any other provision • After termination of specified term/particular
of this article, by the express will of any partner undertaking
at any time • Anytime if partnership at will when interest
3. By any event which makes it unlawful for was assigned/charging order issued
business to be carried on/for the members to
carry it on for the partnership
4. Loss of specific thing promised by partner EFFECTS OF DISSOLUTION
before its delivery
5. Death of any partner A. AUTHORITY OF PARTNER TO BIND
6. Insolvency of a partner/partnership PARTNERSHIP
7. Civil interdiction of any partner GENERAL RULE: Authority of partners to bind
8. Decree of court under art 1831 partnership is terminated

OTHER CAUSES Exception:

(1) When a new partner is admitted into an 1. Wind up partnership affairs
existing partnership; 2. Complete transactions not finished
(2) When any partner retires;
(3) When the other partners assign their rights QUALIFICATIONS:
to the sole remaining partner; 1. WITH RESPECT TO PARTNERS
(4) When all the partners assign their rights in The authority of partners to act for the
the partnership property to third persons [Art. partnership is terminated, with respect to
1840]. partners:
(1) When the dissolution is not by the act,
The statutory enumeration of the causes of insolvency or death of a partner; or
dissolution is exclusive (2) When the dissolution is by such act,
insolvency or death, when the partner acting for
GROUNDS FOR DISSOLUTION BY DECREE OF the partnership has knowledge or notice of the
COURT (Art. 1831) cause [Arts. 1832 and 1833].
1. Partner declared insane in any judicial
proceeding or shown to be of unsound mind In other cases, each partner is still liable for his
2. Incapacity of partner to perform his part of share in the liability created by the partner
the partnership contract acting for the partnership [Art. 1833].
3. Partner guilty of conduct prejudicial to
business of partnership 2. WITH RESPECT TO THIRD PERSONS
4. Willful or persistent breach of partnership With respect to persons not partners:
agreement or conduct which makes it
 PARTNERSHIP
(1) After dissolution, a partner can bind the 2. Apply surplus, if any to pay in cash the net
partnership by any act appropriate for: amount owed to partners
(a) Winding up partnership affairs; or
(b) Completing transactions unfinished RIGHTS OF PARTNER WHERE DISSOLUTION IN
at dissolution. CONTRAVENTION OF AGREEMENT:
(2) He can also bind it by any transaction which 1. Partner who did not cause dissolution
would bind the partnership as if dissolution had wrongfully:
not taken place, provided the other party to the a. Apply partnership property to
transaction: discharge liabilities of partnership
(a) Had extended credit to the b. Apply surplus, if any to pay in cash
partnership prior to dissolution and had the net amount owed to partners
no knowledge or notice thereof; or c. Indemnity for damages caused by
(b) Had not so extended credit but had partner guilty of wrongful dissolution
known of the partnership prior to d. Continue business in same name
dissolution, and having no knowledge during agreed term
or notice of dissolution, the fact had not e. Posses partnership property if
been advertised in a newspaper of business is continued
general circulation in the place (or in 2. Partner who wrongly caused dissolution:
each place if more than one) at which a. If business not continued by others -
the partnership business was regularly apply partnership property to discharge
carried on [Art. 1834, par. 1]. liabilities of partnership & receive in
cash his share of surplus less damages
Note the character of the notice required: caused by his wrongful dissolution
(1) As to persons who extended credit to the b. If business continued by others - have
partnership prior to dissolution, notice must be the value of his interest at time of
actual. dissolution ascertained and paid in
(2) As to persons who merely knew of the cash/secured by bond & be released
existence of the partnership, publication in a from all existing/future partnership
newspaper of general circulation in the place of liabilities
business of the partnership is sufficient. ON
RIGHTS OF INJURED PARTNER WHERE
B. DISCHARGE OF LIABILITY PARTNERSHIP CONTRACT IS RESCINDED ON
Dissolution does not discharge existing GROUND OF FRAUD/MISREPRESENTATION BY
liability of partner, except by agreement 1 PARTY:
between: 1. Right to lien on surplus of partnership
• Partner and himself property after satisfying partnership liabilities
• person/partnership continuing the 2. Right to subrogation in place of creditors
business after payment of partnership liabilities
• partnership creditors 3. Right of indemnification by guilty partner
against all partnership debts & liabilities
RIGHTS OF PARTNER WHERE DISSOLUTION
NOT IN CONTRAVENTION OF AGREEMENT:
1. Apply partnership property to discharge
liabilities of partnership
 PARTNERSHIP
C. SETTLEMENT OF ACCOUNTS BETWEEN LIMITED PARTNERSHIP
PARTNERS
CHARACTERISTICS:
ASSETS OF THE PARTNERSHIP: 1. Formed by compliance with statutory
1. Partnership property (including goodwill) requirements
2. Contributions of the partners 2. One or more general partners control the
business
ORDER OF APPLICATION OF ASSETS: 3. One or more general partners contribute to
1. Partnership creditors the capital and share in the profits but do not
2. Partners as creditors participate in the management of the business
3. Partners as investors—return of capital and are not personally liable for partnership
contribution obligations beyond their capital contributions
4. Partners as investors—share of profits if any 4. May ask for the return of their capital
contributions under conditions prescribed by
D. WHEN BUSINESS OF DISSOLVED law
PARTNERSHIP IS CONTINUED: 5. Partnership debts are paid out of common
1. Creditors of old partnership are also fund and the individual properties of general
creditors of the new partnership which partners
continues the business of the old one w/o
liquidation of the partnership affairs DIFFERENCES BETWEEN GENERAL AND
2. Creditors have an equitable lien on the LIMITED PARTNER/PARTNERSHIP
consideration paid to the retiring /deceased
partner by the purchaser when
retiring/deceased partner sold his interest w/o
final settlement with creditors
3. Rights if retiring/estate of deceased partner:
a. To have the value of his interest
ascertained as of the date of dissolution
b. To receive as ordinary creditor the
value of his share in the dissolved
partnership with interest or profits
attributable to use of his right, at his
option

PERSONS AUTHORIZED TO WIND UP

1. Partners designated by the agreement
2. In absence of agreement, all partners who
have not wrongfully dissolved the partnership
3. Legal representative of last surviving partner
 PARTNERSHIP
Limited Partnership n. Right of limited partner (if given) to
DEFINITION demand/receive property/cash in
A limited partnership is: return for contribution
(1) A partnership;
(2) Formed by two or more persons; 3. Certificate must be filed with the SEC
(3) Having as members:
(a) One or more general partners; and WHEN GENERAL PARTNER NEEDS
(b) One or more limited partners. The CONSENT/RATIFICATION OF ALL LIMITED
limited partners as such shall not be PARTNERS:
bound by the obligations of the 1. Do any act in contravention of the certificate
partnership [Art. 1843]. 2. Do any act which would make it impossible to
carry on the ordinary business of the
A limited partnership has the following partnership
advantages: 3. Confess judgment against partnership
(1) For general partners, to secure capital from 4. Possess partnership property/assign rights in
others while retaining control and supervision specific partnership property other than for
for the business; partnership purposes
(2) For limited partners, to have a share in the 5. Admit person as general partner
profits without risk of personal liability. 6. Admit person as limited partner - unless
authorized in certificate
REQUIREMENTS FOR FORMATION OF LIMITED 7. Continue business with partnership property
PARTNERSHIP: on death, retirement, civil interdiction, insanity
1. Certificate of articles of the limited or insolvency of gen partner unless authorized
partnership must state the ff. matters: in certificate
a. Name of partnership + word "ltd."
b. Character of business SPECIFIC RIGHTS OF LIMITED PARTNERS:
c. Location of principal place of business 1. Right to have partnership books kept at
d. Name/place of residence of members principal place of business
e. Term for partnership is to exist 2. Right to inspect/copy books at reasonable
f. Amount of cash/value of property hour
contributed 3. Right to have on demand true and full info of
g. Additional contributions all things affecting partnership
h. Time agreed upon to return 4. Right to have formal account of partnership
contribution of limited partner affairs whenever circumstances render it just
i. Sharing of profits/other compensation and reasonable
j. Right of limited partner (if given) to 5. Right to ask for dissolution and winding up by
substitute an assignee decree of court
k. Right to admit additional partners 6. Right to receive share of profits/other
l. Right of limited partners (if given) to compensation by way of income
priority for contributions 7. Right to receive return of contributions
m. Right of remaining gen partners (if provided the partnership assets are in excess of
given) or continue business in case of all its liabilities
death, insanity, retirement, civil
interdiction, insolvency
 PARTNERSHIP
REQUISITES FOR RETURN OF CONTRIBUTION
OF LIMITED PARTNER:
1. All liabilities of partnership have been paid/if
not yet paid, at least sufficient to cover them
2. Consent of all members has been obtained
3. Certificate is cancelled/amended as to set
forth withdrawal /reduction of contribution

LIABILITIES OF A LIMITED PARTNER

To the partnership
1. for the difference between his contribution
as actually made and that stated in the
certificate as having been made, and
2. for any unpaid contribution which he agreed
in the certificate to make in the future time

As a trustee for the partnership

1. for the specific property stated in the
certificate as contributed by him but which he
had not contributed;
2. for the specific property of the partnership
which had been wrongfully returned to him;
and
3. Money or other property wrongfully paid or
conveyed to him on account of his contribution.

DISSOLUTION OF LIMITED PARTNERSHIP

(Priority in Distribution of Assets):
1. Those due to creditors, including limited
partners
2. Those due to limited partners in respect of
their share in profits/compensation
3. Those due to limited partners of return of
capital contributed
4. Those due to general partner other than
capital & profits
5. Those due to general partner in respect to
profits
6. Those due to general partner for return of
capital contributed