PARTNERSHIP

Art. 1768. The partnership has a juridical

Art. 1767. By the contract of partnership two personality separate and distinct from that of
or more persons bind themselves to each of the partners even in case of
contribute money, property, or industry to a failure to comply with the requirements
common fund with the intention of dividing of Article 1772, first paragraph.
the profits among themselves.
Partnership, a juridical person
Definition As an independent juridical person, a
Partnership is a contract whereby two or more partnership may enter into contracts,
persons bind themselves to contribute money, acquire and possess property of all kinds
property or industry to a common fund with in its name, as well as incur obligations
the intention of dividing profits among and bring civil or criminal actions. Thus,
themselves. a partnership may be declared insolvent
even if the partners are not. It may enter
Elements into contracts and may sue and be sued
1. Intention to form a contract of in its firm name or by its duly authorized
partnership representative. It is sufficient that
2. Participation in both profits and losses service of summons be served on any
3. Community of interests partner.

Basic Features Partners cannot be held liable for the

1. Voluntary agreement obligations of the partnership unless it is
2. Association for profit shown that the legal fiction of a different
3. Mutual contribution to a common fund juridical personality is being used for a
4. Lawful purpose or object fraudulent, unfair or illegal purpose.
5. Mutual agency of partners
6. Articles must not be kept secret Effect of failure to comply with
7. Separate juridical personality statutory requirements
Under Art 1772
Characteristics Partnership still acquires personality
1. Consensual – perfected by mere consent. despite failure to comply with the
2. Bilateral – formed by two or more persons requirements of execution of public
creating reciprocal rights and obligations. instrument and registration of name in
3. Preparatory - entered into as a means to SEC.
an end. Under Arts 1773 and 1775
4. Nominate – has a special name or Partnership with immovable property
designation. contributed, if without requisite
5. Onerous – contributions in the form of inventory, signed and attached to public
either money, property and/or industry instrument, shall not acquire any
must be made. juridical personality because the contract
6. Commutative – the undertaking of each itself is void. This is also true for secret
partner is considered as the equivalent of associations or societies.
that of the others.
7. Principal – its existence or validity does To organize a partnership not an
not depend on some other contract. absolute right
It is but a privilege which may be
Principle of Delectus Personae (choice of enjoyed only under such terms as the
persons) – a person has the right to select State may deem necessary to impose.
persons with whom he wants to be associated
with in partnership. Art. 1769. In determining whether a
partnership exists, these rules shall
apply:
Persons not partners as to each other Persons
1. Except as provided by Article 1825, who are partners as between themselves are
persons who are not partners as to partners as to third persons. Generally, the
each other are not partners as to converse is true: if they are not partners
third persons. between themselves, they cannot be partners
as to third persons. Partnership is a matter of
2. Co-ownership or co-possession does intention, each partner giving his consent to
not of itself establish a partnership, become a partner. However, whether a
whether such co-ownership or co- partnership exists between the parties is a
possessors do or do not share any factual matter. Where parties declare they are
profits made by the use of the not partners, this, as a rule, settles the
property. question between them. But where a
3. partnership, whether or not the persons person misleads third persons into
sharing them have a joint or common right believing that they are partnersin a
or interest in any property from which the non-existent partnership, they become
returns are derived. subject to liabilities of partners (doctrine of
estoppel).Whether or not the parties call their
4. The receipt by a person of a share of the relationship or believe it to be a partnership is
profits of a business is prima facie immaterial. Thus, with the exception of
evidence that he is a partner in the partnership by estoppel, a partnership cannot
business, but no such inference shall be exist as to third persons if no contract of
drawn if such profits were received in partnership has been entered into between
payment: the parties themselves.

a. As a debt by installments or Co-ownership or co-possession

otherwise. There is co-ownership whenever the
ownership of an undivided thing or right
b. As wages of an employee or rent to a belongs to different persons.
landlord.
Clear intent to derive profits from
c. As an annuity to a widow or operation of business
representative of a deceased partner. Co-ownership does not of itself establish
the existence of a partnership, although
d. As interest on a loan, though the it is one of its essential elements. This is
amount of payment varies with the true even if profits are derived from the
profits of the business. joint ownership. The profits must be
derived from the operation of business
e. As the consideration for the sale of a by the members of the association and
goodwill of a business or other not merely from property ownership.
property by installments or otherwise. The law does not imply a partnership
between co-owners because of the fact
In general, to establish the existence of a that they develop or operate a common
partnership, all of its essential features or property, since they may rightfully do
characteristics must be shown as being this by virtue of their respective titles.
present. In case of doubt, art.1769 shall apply. There must be a clear intent to form a
This article seeks to exclude from the category partnership.
of partnership certain features enumerated
herein which, by themselves, are not Existence of fiduciary relationship
indicative of the existence of a partnership. Partners have a well-defined fiduciary
relationship between them. Co-owners
do not. Should there be dispute; the
 remedy of partners is an action for of the person sought to be held liable.
dissolution, termination and accounting.
For co-owners it would be one, for Sharing of profits as owner
instance, for non- performance of It is not merely the sharing of profits, but the
contract. People can become co-owners sharing of them as co-owner of the business
without a contract but they cannot or undertaking that makes one partner. Test:
become partners without one. Does the recipient have an equal voice as
proprietor in the conduct and control of the
Persons living together without benefit business? Does he own a share of the profits
of marriage as proprietor of the business producing them?
Property acquired is governed by rules One must have an interest with another in the
on co- ownership. profits of a business as profits.

Sharing of gross returns not even Burden of proof and presumption

presumptive evidence of partnership The burden of proving the existence of a
The mere sharing of gross returns alone partnership rests on the party having the
does not even constitute prima facie affirmative of that issue. The existence of a
evidence of partnership, since in a partnership must be proved and will not be
presumed. The law presumes that those acting
partnership, the partners share profits
as partners have entered into a contract of
after satisfying all of the partnership’s partnership. Where the law presumes the
liabilities. existence of partnership, the burden of proof
Reason for the rule is on the party denying its existence. When a
Partner interested in both failures and partnership is shown to exist, the presumption
successes; it is the chance of loss or gain that is that it continues and the burden of proof is
characterizes a business. Where the contract on the person asserting its termination. One
requires a given portion of gross returns to be who alleges partnership cannot prove it
paid over, the portion is paid over as merely by evidence of an agreement using the
commission, wages, rent, etc. term “partner”. Non-use of the term,
however, is entitled to weight. The question of
Where there is evidence of mutual whether a partnership exists is not always
management dependent upon the personal arrangement or
Where there is further evidence of mutual understanding of the parties. Parties intending
management and control, partnership may to do a thing which in law constitutes
result. partnership are partners.

Receipt of share in the profits strong Legal intention is the crux of partnership.
presumptive evidence of partnership Parties may call themselves partners but
An agreement to share both profits and losses their contract may be judged something
tends strongly to establish the existence of a quite different. Conversely, parties may
partnership. It is not conclusive, however, just expressly state that theirs is not a
prima facie and may be rebutted by other partnership yet the law may determine
circumstances. otherwise on the basis of legal intent.
However, courts will be influenced to
When no such inference will be drawn Under some extent by what the parties call
par. 4 of art. 1769, sharing of profits is not their contract.
prima facie evidence of partnership in the
cases enumerated under subsections (a) – (e). Tests and incidents of partnership
In these cases, the profits are not shared as In determining whether a partnership
partner but in some other respects or exists, it is important to distinguish
purpose. The basic test of partnership is between tests or indicia and incidents of
whether the business is carried on on behalf partnership. Only those terms of a
contract upon which the parties have limited partners are not bound
reached an actual understanding, either beyond the amount of their
expressly or impliedly, may afford a test investment.
by which to ascertain the legal nature of 5. A fiduciary relation exists between
the contract. Some of the typical the partners.
incidents of a partnership are: 6. On dissolution, the partnership is not
1. The partners share in profits and losses. terminated, but continues until the
2. They have equal rights in the mgt winding up of partnership is
and conduct of the partnership completed. Such incidents may be
business. modified by stipulation of the
3. Every partner is an agent of the partners.
partnership, and entitled to bind the
others by his acts. He may also be Similarities between a partnership and
liable for the entire partnership a corporation
obligations. 1. Both have juridical personality
4. All partners are personally liable for separate and distinct from that of
the debts of the partnership with the individuals composing it;
their separate property except that

3
2. Both can only act through its agents; necessary to dissolve an unlawful
3. Both are organizations composed of an partnership. However, it is advisable that
aggregate of individuals; judicial decree be secured. 3rd persons who
4. Both distribute profits to those who deal w/ partnership w/o knowledge of
contribute capital to the business; illegal purposes are protected.
5. Both can only be organized where there Right to return of contribution where
is a law authorizing is organization; partnership is unlawful
6. Partnerships are taxable Partners must be reimbursed the
as corporations. amount of their respective
contributions. The partner who limits
Art. 1770. A partnership must have a lawful himself to demanding only the
object or purpose, and must be established amount contributed by him need not
for the common benefit or interest of the resort to the partnership contract on
partners. When an unlawful partnership is which to base his claim or action.
dissolved by a judicial decree, the profits Since the purpose for which the
shall be confiscated in favor of the State, contribution was made has not come
into existence, the manager or
without prejudice to the provisions of the
administrator must return it, and he
Penal Code governing the confiscation of who has paid his share is entitled to
the instruments and effects of a crime. recover it.
Object or purpose of partnership
Right to receive profits where
The provision of the 1st paragraph partnership is unlawful
reiterates 2 essential elements of a Law does not permit action for
contract of partnership: obtaining earnings from an unlawful
1. Legality of the object; and partnership because for that purpose,
2. Community of benefit or interest of the the partner will have to base his
partners. The parties possess absolute action upon the partnership contract,
freedom to choose the transaction or which is null and without legal
transactions they must engage in. The existence by reason of its unlawful
only limitation is that the object must object; and it is self-evident that what
be lawful and for the common benefit does not exist cannot be a cause of
of the members. The illegality of the action. Profits earned do not
object will not be presumed; it must constitute or represent the partner’s
appear to be of the essence of the contribution. He must base his claim
relationship. on the contract which is void. It would
be immoral and unjust for the law to
Effects of an unlawful partnership permit a profit from an industry
1. The contract is void and the partnership prohibited by it. The courts will refuse
never existed in the eyes of the law; to recognize its existence, and will not
2. The profits shall be confiscated in favor lend their aid to assist either of the
of the government; parties thereto in an action against
3. The instruments or tools and proceeds each other. Therefore, there cannot
of the crime shall also be forfeited in be any accounting demands of a
favor of the government; partner for the profits which may be
4. The contributions of the partners shall in his hands, nor can recovery be had.
not be confiscated unless they fall
under #3. Effect of partial illegality of
partnership business
A partnership is dissolved by operation of Where a part of the business is legal
law upon the happening of an event which and part illegal, a n account of that
makes it unlawful. A judicial decree is not which is legal may be had. Where,
w/o the knowledge or participation of thereto, in which case a public instrument
the partners, the firm’s profits in a shall be necessary .Form of partnership
lawful business has been increased by contract
wrongful acts, the innocent partners
are not precluded as against the guilty General rule
partners from recovering their share No special form required for validity or
of the profits. existence of the contract of partnership.
Contracts may be made orally or in writing
Effect of subsequent illegality of regardless of the value of the contributions.
partnership business
Contract will not be nullified. Where Where immovable property or real rights
the business for which the are contributed
partnership is formed is legal when Execution of public instruments necessary
the partnership is entered into, but for validity of contract of partnership. To
afterward becomes illegal, an affect 3rd persons, the transfer of real
accounting may be had as to the property to the partnership must be duly
business transacted prior to such registered in the Registry of Property.
time.
When partnership agreement covered by
Community of interest between the the Statute of Frauds
partners for business purposes An agreement to enter in a partnership at a
The salient features of an ordinary future time, which by its terms is not to be
partnership are a community of interest in performed w/in a year from the making
profits and losses, a community of interest thereof is covered by the Statute of Frauds.
in the capital employed, and a community Such agreement is unenforceable unless it
of power in administration. This community is in writing or at least evidenced by
of interest is the basis of the partnership some note or memorandum.
relation. However, although every
partnership is founded on a community of Partnership implied from conduct
interest, every community of interest does Binding effect
not necessarily constitute a partnership. Existence of partnership may be
Property used in the business may belong implied from the acts or conduct of
to one or more partners, so that there is no the parties, as well as from other
joint property, other than joint earnings. To declarations, and such implied
state that partners are co-owners of a contract would be as binding as a
business is to state that they have the written and express contract.
power of ultimate control. But partners
may agree upon concentration of Ascertainment of intention of parties
management, leaving some of their In determining whether a particular
members entirely inactive or dormant. Only transaction constitutes a partnership,
one of these features, profit-sharing, seems as between the parties, the intention
to be absolutely essential. But a mere as disclosed by the entire transaction,
sharing of profits of itself does not and as gathered from the facts and
necessarily constitute a partnership. The from the language employed by the
court must consider all the essential parties as well as their conduct,
elements in light of the facts of the should be ascertained.
particular case before deciding whether a
partnership exists. Conflict between intention and terms
of contract
Art. 1771. A partnership may be constituted If the parties intend a general
in any form, except where immovable partnership, they are general partners
property or real rights are contributed although their purpose is to avoid the
creation of such a relation. the date of presentation.

Art. 1772. Every contract of Art. 1773. A contract of partnership is void,

partnership having a capital of three whenever immovable property is
thousand pesos or more, in money or contributed thereto, if an inventory of said
property, shall appear in a public property is not made, signed by the parties,
instrument, which must be recorded and attached to the public instrument.
in the Office of the Securities and Partnership with contribution of immovable
Exchange Commission. Failure to property
comply with the requirements of the
preceding paragraph shall not affect Where immovable property contributed,
the liability of the partnership and the failure to comply w/ the following
members thereof to third persons. requisites will render the partnership
Registration of partnership contract void:
1. The contract must be in a public
Partnership with capital of P3, 000 or more instrument;
Requirements: 2. An inventory of the property
1. The contract must appear in a contributed must be made, signed by
public instrument; the parties, and attached to the public
2. It must be recorded or registered instrument. Art. 1773 is intended
w/ the SEC. However, failure to primarily to protect 3rd persons. W/
comply w/ the above regard to 3rd person, a de facto
requirements does not prevent partnership or partnership by estoppel
the formation of the partnership may exist. There is nothing to prevent
or affect its liability and that of the court from considering the
the partners to 3rd persons. But partnership agreement an ordinary
any partner is granted the right contract from which the parties’ rights
bylaw to compel each other to and obligations to each other may be
execute the contract in a public inferred and enforced.
instrument.
When inventory is not required
Purpose of Registration An inventory is required only whenever
Registration is necessary as a immovable property is contributed. If not
condition for the issuance of licenses contributed or if personal property, no
to engage in business and trade. In inventory required.
this way, the tax liabilities of big
partnerships cannot be evaded and Importance of making inventory of real
the public can determine more property in a p a r t n e r s h i p
accurately their membership and An inventory is very important in a
capital before dealing with them. partnership to determine how much is due
from each partner to complete his share in
When partnership is considered registered the common fund and how much is due to
The objective of the law is to make the each of them in case of liquidation. The
recorded instrument open to all and to give execution of a public instrument of
notice thereof to interested parties. This partnership would be useless if there is no
objective is achieved from the date the inventory of immovable property
partnership papers are presented to and contributed because w/o its
left for record in the Commission. This is description and designation, the
the effective date of instrument cannot be subject to
registration. If the inscription in the Registry of Property,
certificate of recording is issued on a and the contribution cannot prejudice
subsequent date, it effectively retroacts to 3rd persons.
Art. 1774. Any immovable property or Art. 1776. As to its object, a
an interest therein may be acquired in partnership is either universal or
the partnership name. Title so particular. As regards the liability of
the partners, a partnership may be
acquired can be conveyed only in the
general or limited.
partnership name. Acquisition or
conveyance of property by Classifications of partnership
partnership As to extent of its subject matter
1. Universal partnership. (Art. 1777)
Since partnership has a juridical
a. Universal partnership of all present
personality of its own, it may acquire
property. (Art. 1778)
immovable property in its own name.
b. Universal partnership of profits.
Title so acquired can be conveyed
(Art. 1780)
only in the partnership name.
2. Particular partnership. (Art. 1783)
Art. 1775. Associations and societies,
As to liability of the partners
whose articles are kept secret among
General partnership: one consisting of
the members, and wherein any one of
general partners who are liable pro rata
the members may contract in his own
and subsidiary and sometimes solidarily w/
name with third persons, shall have
their separate property for partnership
no juridical personality, and shall be
debts.
governed by the provisions relating to
co-ownership. Secret partnerships
Limited partnership: one formed by two or
without juridical personality
more persons having as members one or
more general partners and one or more
Partnership relations are created only
limited partners, the latter not being
by the voluntary agreement of the
personally liable for the obligations of the
partners. It is essential that the
partnership.
partners are fully informed not only of
the agreement but of all matters
As to duration
affecting the partnership. Secret
Partnership at will: one in w/c no time is
partnerships are not by nature
specified and is not formed for a particular
partnerships. Secret partnerships shall
undertaking or venture and w/c may be
be governed by the provisions relating
terminated at any time by mutual
to co- ownership.
agreement of the partners, or by the will of
any one partner alone; or one for a fixed
Importance of giving publicity to
term or particular undertaking w/c is
articles of partnership
continued after the end of the term or
It is essential that the arts of
undertaking w/o express agreement.
partnership be given publicity for the
Partnership with a fixed term: one w/c the
protection not only of the members
term for w/c the partnership is to exist is
themselves but also 3rd persons from
fixed or agreed upon or one formed for a
fraud and deceit. A member who
particular undertaking.
transacts business for the secret
partnership in his own name becomes
As to the legality of its existence
personally bound to 3rd persons
De jure partnership: one w/c has complied
unaware of the existence of such
w/ all the legal requirements for its
association. Partnership liability may
establishment.
still result, however, in cases of
De facto partnership: one w/c has failed to
estoppel.
comply w/ all the legal requirements for its
establishment. dissolution.
7. Partner by estoppel: one who is
not really a partner but is liable as
As to representation to others a partner for the protection of
Ordinary or real partnership: one w/c innocent 3rd persons. He is one
actually exists among the partners and also represented as being a partner
as to 3rd persons. but who is not so between the
Ostensible partnership or partnership or partners themselves.
partnership by estoppel: one w/c in reality 8. Continuing partner: one who
is not a partnership, but is considered a continues the business of a
partnership only in relation to those who, partnership after it has been
by their conduct or admission, are dissolved by reason of the
precluded to deny or disprove its existence. admission of a new partner, or
the retirement, death or
As to publicity expulsion of one or more
Secret partnership: one wherein the partners.
existence of certain persons as partners is 9. Surviving partner: one who
not avowed or made known to the public remains after a partnership has
by any of the partners. been dissolved by the death of
Open or notorious partnership: one any partner.
whose existence is avowed or made 10. Subpartner: one who, not being
known to the public by the members a member of the partnership,
of the firm. contracts w/ a partner
w/reference to the latter’s share
As to purpose in the partnership.
Commercial or trading partnership:
one formed or the transaction of Other classifications
business. 1. Ostensible partner: one who takes
active part and known to the
Professional or non-trading public as a partner.
partnership: one formed for the 2. Secret partner: one who takes an
exercise of a profession. active part in the business but is
not known to be a partner by
Kinds of partners outside parties nor held out as a
Under the Civil Code partner by the other partners. He
1. Capitalist partner: one who is an actual partner.
contributes money or property to 1. Silent partner: one who does not take
the common fund. any active part in the business although
2. Industrial partner: one who he may be known to be a partner.
contributes only his industry or 2. Dormant partner: one who does not
personal service. take active part in the business and is
3. General partner: one whose not known or held out as a partner. He
liability to 3rd persons extends to would be both a silent and a secret
his separate property. partner.
4. Limited partner: one whose 3. Original partner: one who is a member
liability to 3rd persons is limited to of the partnership from the time of its
his capital contribution. organization.
5. Managing partner: one who 4. Incoming partner: a person lately, or
manages the entity. about to be, taken into an existing
6. Liquidating partner: one who partnership as a member.
takes charge of the winding up of 5. Retiring partner: one withdrawn from
partnership affairs upon the partnership; a withdrawing partner.
 Art. 1777. A universal partnership may is like that of a donor, and donations
refer to all the present property or to cannot comprehend future property.
all the profits. Thus, property subsequently acquired
by
Art. 1778. A partnership of all present 1.Inheritance;
property is that in which the partners 2. Legacy;
contribute all the property which actually 3. Donation
belongs to them to a common fund, with
the intention of dividing the same among cannot be included by stipulation
themselves, as well as all the profits they except the fruits thereof. Hence, any
may acquire therewith. stipulation including property so
acquired is void. Profits from other
Art. 1779. In a universal partnership of all sources (not from properties
present property, the property which contributed) will become common
belongs to each of the partners at the time property only if there's a stipulation.
of the constitution of the partnership
becomes the common property of all the Art. 1780. A universal partnership of
partners, as well as all the profits which profits comprises all that the partners
they may acquire therewith. A stipulation may acquire by their industry or
for the common enjoyment of any other work during the existence of the
profits may also be made; but the property partnership. Movable or immovable
which the partners may acquire property which each of the partners
subsequently by inheritance, legacy or may possess at the time of the
donation cannot be included in such celebration of the contract shall
stipulation, except the fruits thereof. continue to pertain exclusively to
each, only the usufruct passing to the
Universal partnership of all present partnership.
property explained
A universal partnership of profits is one w/c Universal partnership of profits
comprises all that the partners may acquire explained A universal partnership of
by their industry or work during the profits is one w/c comprises all that
existence of the partnership and the the partners may acquire by their
usufruct of movable or immovable property industry or work during
w/c each of the partners may possess at existence of the partnership and
the time of the celebration of the contract. the usufruct of movable or immovable
In this kind of partnership, the following property w/c each of the partners
become the common property of all the may possess at the time of the
partners: celebration of the contract.
Property w/c belonged to each of
them at the time of the constitution Ownership of present and future
of the partnership; property The partners retain their
Profits w/c they may acquire from the ownership over their present and
property contributed. future property. What passes to the
partnership are the profits or income
Contribution of future property and the use or usufruct of the same.
General rule: future properties cannot Consequently, upon dissolution,
be contributed. The very essence of such property is returned to the
the contract of partnership that the partners who own it.
properties contributed be included in
the partnership requires the Profits acquired through chance
contribution of things to be Since the law only speaks of profits
determined. The position of a partner w/c the partners may acquire by their
industry or work, profits acquired required);
purely by chance are not included.

Fruits of property subsequently acquired

Fruits of property subsequently acquired by Those made between persons found guilty
the partners do not belong to of the same criminal offense,
the partnership. Such profits, however, may inconsideration thereof;
be included by express stipulation. c.)Those made to a public officer or his
wife, descendants and ascendants, by
Art. 1781. Articles of universal partnership, reason of his office.
entered into without specification of its Art. 1783. A particular partnership has
nature, only constitute a universal for its object determinate things, their
partnership of profits. use or fruits, or a specific undertaking,
or the exercise of a profession or
Presumption in favor of universal vocation.
partnership of profits
Reason for presumption: universal Particular partnership explained
partnership of profits imposes less A particular partnership is one w/c is
obligations on the partners, since they neither a universal partnership of
preserve the ownership of their separate present property nor a universal
property. partnership of profits. The
fundamental difference between a
Art. 1782. Persons who are prohibited from universal partnership and a particular
giving each other any donation or partnership lies in the scope of their
advantage cannot enter into a universal subject matter or object. In the
partnership. Limitations upon the right to former, the object is vague and
form a partnership indefinite, contemplating a general
business w/ some degree of
Persons who are prohibited by law to give continuity, while in the latter, it is
donations cannot enter into a universal limited and well-defined, being
partnership for the reason that each of the confined to an undertaking of a single,
partners virtually makes a donation. To temporary, or ad hoc nature.
allow it would be permitting them to do
indirectly what the law expressly prohibits. Business of partnership need not be
A partnership formed in violation of this continuing in nature
article is null and void. Consequently, no The carrying on of a business of a
legal personality is acquired. A husband and continuing nature is not essential to
wife, however, may enter into a particular constitute a partnership. An
partnership or be members thereof. agreement to undertake a particular
Relevant provisions: piece of work or a single transaction
or a limited number of transactions
Art. 87: Donations between spouses during and immediately divide the resulting
marriage void, except moderate gifts on profits would seem to fall within the
occasion of family rejoicing. Also applies to meaning of the term “partnership” as
those living together as husband and wife used in the law.
w/o valid marriage.
Art. 739: The following donations are void: Rule under American law
Those made between persons who are The above is not true under the
guilty of adultery or concubinage at the Uniform Partnership Act w/c does not
time of the donation (no need for include joint ventures w/c exists for a
conviction; preponderance of evidence only single transaction or a limited number
of transactions. continuation of the partnership.

Partnership at will is one in which no term

of existence has been fixed and which may
be terminated at the will of any partners.
Joint venture
While a joint venture is not a formal Art. 1786. Every partner is a debtor of the
partnership in the legal or technical partnership for whatever he may have
sense, both are governed, subject to promised to contribute thereto.
certain qualifications, practically by
the same rules or principles of He shall also be bound for warranty in case
partnership. This is logical since in a of eviction with regard to specific and
joint venture, like in a partnership, determinate things which he may have
there is a community of interest in contributed to the partnership, in the same
the business and a mutual right of cases and in the same manner as the
control and an agreement to share vendor is bound with respect to the
jointly in profits and losses. vendee. He shall also be liable for the fruits
thereof from the time they should have
Corporation as a partner been delivered, without the need of any
While under the Philippine Civil Code, demand.
a joint venture is a form of
partnership w/ a legal personality Obligations of partners to contribute:
separate and distinct from the parties 1. Shall deliver at the beginning of the
composing it, and should thus be partnership or, if a different date has
governed by the law of partnership, been agreed upon, at the stipulated
the Supreme Court has recognized the time the properties he agreed to
distinction between these two contribute;
business forms, and has held that 2. Shall answer for eviction, in case the
although a corporation cannot enter partnership is deprived of the
into a partnership contract, it may, ownership of any specific property he
however, engage in a joint venture if contributed;
the nature of the venture is 3. Shall answer to the partnership for the
authorized by its charter. fruits of the properties whose delivery
he delayed from the date he should
Art. 1784. A partnership begins from the
have contributed it up to actual
moment of the execution of the contract,
delivery without necessity of any
unless it is otherwise stipulated. (1679)
demand;
4. Shall preserve said properties
Art. 1785. When a contract for a fixed term
with the diligence of a good
or particular undertaking is continued after
father of a family pending their
the termination of such term or particular
delivery to the partnership;
undertaking without any express
5. And shall indemnify the
agreement, the rights and duties of the
partnership for any damage
partners remain the same as they were at
caused by the retention of said
such termination, so far as is consistent
properties or by the delay in their
with a partnership at will.
contribution.
A continuation of the business by the
Art. 1787. When the capital or part
partners or such of them as habitually acted
thereof which a partner is bound to
therein during the term, without any
contribute consists of goods, their
settlement or liquidation of the partnership
appraisal must be made in the
affairs, is prima facie evidence of a
manner prescribed in the contract of
partnership, and in the absence of the contrary, the partners shall contribute
stipulation, it shall be made by equal shares to the capital of the
experts chosen by the partners, and partnership.
according to current prices, the
subsequent changes thereof being for
the account of the partnership.
Art. 1791. If there is no agreement to the
Art. 1788. A partner who has contrary, in case of an imminent loss of the
undertaken to contribute a sum of business of the partnership, any partner
money and fails to do so becomes a who refuses to contribute an additional
debtor for the interest and damages share to the capital, except an industrial
from the time he should have partner, to save the venture, shall be
complied with his obligation. obliged to sell his interest to the other
partners.
The same rule applies to any amount
he may have taken from the Art. 1792. If a partner authorized to
partnership coffers, and his liability manage collects a demandable sum, which
shall begin from the time he was owed to him in his own name, from a
converted the amount to his own use. person who owned the partnership another
sum also demandable, the sum thus
Liability of partner for estafa collected shall be applied to the two credits
Failure to return the money taken, in proportion to their amounts, even
there is the element of fraudulent though he may have given a receipt for his
appropriation of the money delivered own credit only; but should he have given it
to a partner with specific instructions for the account of the partnership credit,
for the use of the partnership, then the amount shall be fully applied to the
estafa is committed under the Revised latter.
Penal Code.
The provisions of this article are understood
Art. 1789. An industrial partner to be without prejudice to the right granted
cannot engage in any business for to the debtor by Art. 1252, but only if the
himself, UNLESS the partnership personal credit of the partner should be
expressly permits him to do so; and if more onerous to him.
he should do so, the capitalist
partners may either exclude him from Requisites:
the firm or avail themselves of the 1. Two existing debts
benefits which he may have obtained 2. Both debts must be demandable
in violation of this provision, with a 3. The one who collected the debt is a
right to damages in either case. partner who is authorized to manage
and is actually managing the
Industrial partner is one who partnership
contributes his industry or labor in
the partnership. Art. 1793. A partner who has received, in
whole or in part, his share of a partnership
Industrial partner barred from credit, when the other partners have not
engaging in Business collected theirs, shall be obliged, if the
debtor should thereafter become insolvent,
To prevent any conflict of interest between
to bring to the partnership capital what he
the industrial and the partnership, and to
received even though he may have given
ensure faithful compliance by said partner
receipt for his share only.
with his prestation.
Art. 1794. Every partner is responsible to
Art. 1790. Unless there is a stipulation to
the partnership for damages suffered by it which they were appraised.
through his fault, and he cannot
compensate them with the profits Risk of Specific and determinate things
and benefits which he may have The risk of specific and determinate
earned for the partnership by his things which are not fungible, like a
industry. However, the courts may boat, only the use of which is
equitably lessen this responsibility if contributed, shall be borne by the
through the partner’s extraordinary partner as the ownership thereof is
efforts in other activities of the not transferred to the partnership.
partnership, unusual profits have This follows the general rule that the
been realized. thing perished with the owner.

Partner liable for damages caused Things fungible or perishable

the partnership If the things contributed are fungible
Art. 1794 follows the general rule of or cannot be kept without
contracts that where a person is at deteriorating(perishable) like wine,
fault in the fulfillment of his oil, etc., even if they are contributed
obligations he shall be liable for the only for the use of the partnership,
payment of damages. The partner’s the risk of loss shall be for the
fault, however, must be determined in account of the partnership for the
accordance with the circumstances of latter cannot make use of them
person, time and place. without their getting consumed or
presumed.
Liquidation necessary to ascertain
damages Things contributed to be sold
It is first necessary that a liquidation If the things contributed are to be sold, the
of the business thereof be made to partnership bears the risk of loss, for
the end that the profits and losses obviously the partnership is the intended
may be known and the causes of the owner; otherwise, the firm cannot make
latter and the responsibility of the the sale.
defendant as well as the damages
which each partner may have Things brought and appraised in inventory
suffered, may be determined. The partnership bears the risk of loss of
things brought and appraised in the
Art. 1795. The risk of specific and inventory as this has the effect of an
determinate things, which are not implied sale thus making the partnership
fungible, contributed to the the owner of said things.
partnership so that only their use and
fruits may be for the common benefit, Art. 1796. The partnership shall be
shall be borne by the partner who responsible to every partner for the
owns them. amounts he may have disbursed on behalf
of the partnership and for the
If the things contributed are fungible, corresponding interest, from the time the
or cannot be kept without expenses are made; it shall also answer to
deteriorating, or if they were each partner for the obligations he may
contributed to be sold, the risk shall have contracted in good faith in the interest
be borne by the partnership. In the of the partnership business, and for the risk
absence of stipulation, the risk of inconsequence of its management.
things brought and appraised in the
inventory, shall also be borne by the Responsibility of the partnership to a
partnership, and in such case the partner
claim shall be limited to the value at If a partner has advanced funds for the
partnership, he is entitled to recover the
amounts advanced by him with interest. Rules in loss sharing:
This must be so for the reason that a 1. The stipulation in the partnership
partner is a mere agent of the partnership agreement regarding loss sharing
and under the rules of agency, an agent must be followed.
who advances funds for his principal may 2. If there is no such agreement, but
recover the same interest. the contract provides for a profit
sharing ratio, the profit sharing
Art. 1797. The profits and losses shall be ratio shall also be the loss sharing
distributed in conformity with the ratio.
agreement. If only the share of each 3. In the absence of loss sharing and
partner in the profits has been agreed profit sharing stipulations in the
upon, the share of each in the losses shall contract, then the loss shall be
be in the same proportion. borne by the partners in
In the absence of stipulation, the share of proportion to their capital
each partner in the profits and losses shall contributions; but a purely
be in proportion to what he may have industrial partner is exempted
contributed, but the industrial partner shall from participation in the loss.
not be liable for the losses. As for the
profits, the industrial partner shall receive
such share as may be just and equitable Share of industrial partner in profits
under the circumstances. If besides his and losses
services he has contributed capital, he shall Unless agreed upon, the industrial
also receive a share in the profits in partner shall receive such share in the
proportion to his capital. profits as may be just and equitable
under the circumstances. As for the
Rules in profit sharing: losses, the industrial partner is not
1. The partners share the profits in liable. However, under Art. 1816, if
accordance with the ratio the partnership has a contractual debt
established by their contract. and it cannot pay, the industrial
2. If there is no such stipulation in partner equally with the capitalist
the partnership contract, then: partners, can be compelled by the
1. If all are capitalist partners creditor to pay his pro rata share out
they have the profits in of his own property or assets.
proportion to their capital
contributions; Art. 1798. If the partners have agreed
2. If there are capitalist as well to entrust to a third person the
as industrial partners, the designation of the share of each one
industrial partner get a share in the profits and losses, such
each that is just and equitable designation may be impugned only
while the capitalist partners when it is manifestly inequitable. In
divide the remainder in no case may a partner who has begun
proportion to their to execute the decision of the third
capital contributions; and person, or who has not impugned the
3. If there is a capitalist- same within a period of three months
industrial partner, he gets a from the time he had knowledge
share in the profits as an thereof, complain of such decision.
industrial partner and an
additional share in proportion The designation of profits and losses cannot
to his capital contribution to be entrusted to one of the partners.
be determined as in (b),
above. Reason for the provision
Admittedly, the designation of profits and administration notwithstanding the
losses cannot be entrusted to one of the opposition of the other partners,
partners as the fulfillment of a contract unless he should act in bad faith. His
cannot be left to one of the contracting power is revocable only upon just and
parties. It may, however, be entrusted to a lawful cause and upon the vote of the
third person by common interest. partners representing the controlling
interest.

Art. 1799. A stipulation which excludes one Reason: revocation represents change
or more partners from any share in the in terms of contract.
profits or losses is void. In case of mismanagement: Usual
remedies allowed by law including
Stipulation to exclude a partner from dissolution.
profits and losses is void
The law does not allow a provision in the Appointment as manager after the
contract of partnership excluding one or constitution of the partnership
more partners from sharing in the profits Appointment may be revoked at any
and losses. The reason is that a partnership time for any cause whatsoever.
is organized for the common benefit or
interest of the partners. Reason: revocation not founded on a
change of will on the part of the
Reason for exclusion of industrial partner partners. Appointment not condition
An industrial partner is not liable for losses of contract. It is merely a simple
because if the partnership fails to realize contract of agency, which may be
any profits, the industrial partner would revoked at any time. It is believed
have contributed his labor in vain. that the vote for revocation must also
Furthermore, the industrial partner cannot represent the controlling interest.
withdraw the work already done by him for
the partnership. Scope of the power of the managing
partner
Art. 1800. The partner who has been General rule: a partner appointed as
appointed manager in the articles of the manager has all the powers of a
partnership may execute all acts of the general agent as well as all the
administration despite the opposition of his incidental powers necessary to carry
partners, unless he should act in Bad faith., out the object of the partnership in
and his powers are irrevocable without the the transaction of its business.
just or lawful cause. The vote of the Exception: When powers of manager
partners representing the controlling are specifically restricted. A managing
interest shall be necessary for such partner may not bind the partnership
revocation of power. A power granted after by contract foreign to its business.
the partnership has constituted may be
revoked at any time. Each partner has a Compensation for service rendered
right to an equal voice in the conduct of the Partner Generally not entitled to
partnership business. This right is not compensation, In the absence of an
dependent on the amount or size of the agreement to the contrary, each
partner’s capital contribution. member of the partnership assumes
the duty to give his time, attention,
Appointed as manager after the and skill to the management of its
constitution of the partnership affairs, as may be reasonably
Partner appointed in arts of necessary to the success of the
partnership may execute all acts of common enterprise; and for this
service a share of the profits is his
only compensation. In managing Each one may separately perform acts
partnership affairs, a partner is of administration
practically taking care of his own 1. If one or more of the managing
interest or managing his own partners shall oppose the acts of the
business. In the absence of any others, then the decision of the
prohibition in the arts. In partnership majority of the managing partners shall
for the payment of salaries to general prevail. Right to oppose can be
partners, there is nothing to prevent exercised only by those entrusted with
the partners from entering into a mgt.
collateral verbal agreement to that 2. In case of tie, matter shall be decided
effect. by the vote of the partners owning the
controlling interest.
EXCEPTIONS: In proper cases, the law
may imply a contract for compensation; REQUISITES FOR APPLICATION OF RULE
1. A partner engaged by his co-partners to 1. Two or more partners have been
perform services not required of him in appointed as managers;
fulfillment of the duties and in capacity 2. There is no specification of their
other than that of a partner. respective duties;
2. When there is extraordinary neglect on 3. There is no stipulation that one of
the part of one partner to perform his them shall not act without the
duties, imposing an entire burden on consent of all the others.
the remaining partner.
3. One partner may employ the other to ART. 1802 In case it should have been
do work for him outside of and stipulated that none of the managing
independent of the co-partnership. partner shall act without the consent
4. Partners exempted by terms of of the others, the concurrence of all
partnership from rendering services shall be necessary for validity of the
may demand payment for services acts, and the absence or disability of
rendered. any one of them cannot alleged,
5. Where one partner is entrusted with unless there is imminent danger of
management and devotes his whole grave or irreparable injury to the
time and devotion at the instance of partnership.
the other partners who are attending to
their individual business and giving no When unanimity of action
time or attention to the partnership stipulated concurrence necessary for
business. validity of acts
The partners may stipulate that none
Art. 1801. If two or more partners have of the managing partners shall act
been entrusted with the management of without the consent of the others. In
the partnership without the specification of such a case, the unanimous consent
their respective duties or without the of all the managing partners shall be
stipulation that one of them shall not act necessary for the validity of their
without the consent of all others, each one acts.This consent is so indispensable
separately execute all acts of that neither absence or disability of
administration, but if anyone of them any one of them may allege as an
should oppose the act of each other, the excuse to dispense with requirement.
decision of the majority shall prevail. In the Exception: When there is imminent
case of tie the partners owning the danger of grave or irreparable injury
controlling interest shall decide the matter. to the partnership then a partner may
Where the respective duties of two or more act alone without consent of the
managing partners are not specified. partner who is absent or under
disability. refusal to give consent is manifestly
prejudicial to the interest of the
Consent of managing partners not partnership, court intervention may be
necessary in routine transactions sought. Consent may presume from silence
The requirement of written authority (lack of opposition despite knowledge).If
refers evidently to formal and unusual alteration is necessary for preservation of
written contracts. the property, consent of the other partners
is not required.
Art. 1803. When the manner of Art. 1804. Every partner may associate
management has not agreed upon, another person with him in his share, but
the following rules shall observed: the associates shall not admitted into the
partnership without the consent of all other
1. All partners shall be considered partners, even of the partner having an
agents and whatever any one of associate should be a manager of sub
them may do alone shall bind the partnership nature
partnership without prejudice to
the provision of article 1801 The partnership formed between a
member of a partnership and a third
2. None of the partners may, Person for a division of the profits coming
without the consent of others, to him from the partnership enterprise is
make any important alteration in termed sub partnership.
the immovable property of the It is a partnership within a partnership and
partnership, even if it may be is distinct and separate from the main or
useful to the partnership, but if principal partnership.
there ids refusal of the consent by
the other partners is manifestly Right of the person associated with the
prejudicial to the interest of the partnership’s share
partnership, the court’s Sub Partnership agreements do not affect
intervention may be sought. the composition, existence, or operations of
Rules when manner of the management the firm. The subpartners are partners
that has not agreed upon all partners interest,
considered as managers and agents
All partners shall have equal rights in the However, in the absence of the mutual
mgmt. and conduct of partnership affairs. assent of all the parties, a sub partner does
All of them shall be considered mgrs. and not become a member of the partnership,
agents and whatever any one of them may even if the other partners know about the
do alone shall bind the partnership. If there agreement. Not being a member of
is timely opposition, however, the matter the partnership, he does not acquire
shall be decided by majority vote. In case of the rights of a partner nor is he liable
tie, vote of partners representing for its debts.
controlling interest.
Reason for the rule
Unanimous consent required for Partnership is based on mutual trust
alteration of immovable property and confidence among the partners.
The consent need not be expressed. It may Inclusion of a new partner would be a
presume from the fact of knowledge of the modification of the original contract
alteration without interposing any of partnership requiring unanimous
objection. Prohibition only applies to consent of all the partners.
immovable property because of the greater Prohibition applies even if the person
importance of this kind of property, and the associated is already a partner.
alteration thereof must be important. This
would be an act of strict dominion. If Art. 1805. The partnership books shall
be kept, subject to any agreement between partners in all matters
between the partners, at the principal affecting the partnership. Information
place of the business of the must be used only for partnership
partnership, and every partner shall purposes. Not just on demand but the
at any reasonable hour have access to partner also has the duty of voluntary
and may inspect and copy any of disclosure. However, duty to render
them. info does not arise with respect to
matters appearing in partnership
Keeping of partnership books books since each partner has the right
Partner with duty to keep to inspect those. Good faith not only
partnership books requires that a partner should not
The duty to keep true and correct make a false statement but also that
books showing the firm’s accounts, he should abstain from any false
such books being at all times open to concealment.
inspection of all members of the firm,
primarily rests on the managing or Art. 1807. Every partner must account the
active partner. It is presumed that the partnership for any benefit, and hold as
partners have knowledge of the trustee for it any profits derived from him
contents of the partnership books and without the consent of the partners from
that said books state accurately the any transaction connected with the
state of accounts, but errors can be formation, conduct, or liquidation of the
corrected. partnership or from any use by him of his
property.
Rights with the respect to
partnership books The relation between the partners is
Books should be kept at the principal essentially fiduciary involving trust and
place of business as each partner has confidence, each partner considered in law,
the right to free access to them and as he is, in fact, the confidential agent of
to inspect or copy any of them at any the others. The duties of a partner are
reasonable time, even after analogous to those of a trustee.
dissolution. Inspection rights not
absolute can be restrained from using Duty to act for common benefit
info for other than partnership Cannot use and apply exclusively to own
purposes. individual benefit partnership assets or
results of knowledge and info gained in
Access to partnership books character of partner. Managing partners
Rights can be exercised at any particularly owe a fiduciary duty to inactive
reasonable hour. This means partners.
reasonable hours on business days
throughout the year and not merely Duty begins during the formation
during some arbitrary period of a few of partnership
days chosen by the managing Principle of good faith applies not only
partners. during partnership but during the
negotiations leading to the formation of the
Art. 1806. Partners shall render on partnership. Also, a person who agreed w/
demand true and full information of another to form a partnership has the
all things affecting the partnership to obligation to account for commissions and
any partner or the legal discounts received in acquiring property for
representative of any deceased the future partnership.
partner or of any partner under legal
disability. Duty to render information, Duty continues even after the dissolution
there must be no concealment of the partnership
Duty of partner to act w/ utmost good faith of business in which the partnership is
towards his co-partners continues engaged, unless there is a stipulation
throughout the entire life of the to the contrary. Any capitalist partner
partnership even after dissolution for violating this prohibition shall bring to
whatever reason or whatever means, until the common funds any profit accruing
the relationship is terminated, to him from his transactions, and shall
i.e. the winding up of partnership personally bear all the losses.
affairs is completed.

Duty to account for secret and Prohibition against partner engaging

similar profits the business
The duty of a partner to account as a Prohibition relative – Prohibition
fiduciary operates to prevent from against capitalist partners to engage
making a secret profit out of the in business is relative, unlike the
operation of the partnership and from industrial partner who is absolutely
carrying on the business for his prohibited from engaging in any
private advantage or a business in business for himself. Capitalist partner
competition w/ the firm w/o consent is only prohibited from engaging for
of other partners. Violation may be his own account in any operation
ground for dissolution. which is the same as or similar to the
business in which the partnership is
Duty to account for earnings accruing engaged and which is competitive w/
even after termination of partnership said business
If a partner uses info obtained by him VIOLATION – Obligation to bring to
from the partnership for his own common fund any profits derived and in
account w/o the consent of the other case of losses, he shall bear them alone.
partners, he is liable to account for Partners, however, by stipulation may
any benefit he might obtain. permit it. The law permits him to carry on a
business not connected or competing with
Duty to make full disclosure of that of the partnership. Law is silent on
information belonging to partnership whether he can engage in the same line of
A partner is also subject to the business for the account of another.
fiduciary duty of undivided loyalty and Prohibition still applies because of fiduciary
complete disclosure of info of all position imposing duties of utmost good
things affecting the partnership. By faith. He may not carry on any other
Information is meant information, business in rivalry w/ the partnership.
which can be used for the purposes of
the partnership. Info cannot be used Reason for prohibition
for a partner’s private gain – even if Fiduciary nature of a relationship imposes
after termination. an obligation of utmost good faith. Rule
prevents use of info obtained in the course
Duty not to acquire interest or right of transaction of partnership business or
adverse to partnership because of connection w/ firm regarding
If partner does, he holds it in trust for business secrets and clientele of firm to its
the benefit of the partnership and prejudice.
must account to the firm for the
profits of the transaction, unless it Art. 1809. Any partner shall have the right
appears that the others consented to a formal account as partnership affairs:

Art. 1808. The Capitalist partners 1. If he is wrongfully excluded from the

cannot engage for their own account partnership business or possession of
in any operation, which is of the kind its property by his co-partner;
2. If the right exists under the terms of 4. Right to formal account of
any agreement; partnership affairs under certain
3. Provided by article 1807; circumstances (art. 1809).
4. Whenever other circumstances 5. Right to have partnership
render it just and reasonable, Right of dissolved also under certain
the partner to a formal account. conditions (arts. 1830- 1831).

General rule: During the existence of Partnership property and

partnership, a partner is not entitled to a partnership capital
formal account of partnership affairs. distinguished
Reason: rights of partner amply protected Partnership Partnership
in arts1805 and 1806. In addition, it would property capital
cause much inconvenience and unnecessary Changes Variable: its Constant: it
waste of time. value value may remains
vary from day unchanged
Exception: In the special and unusual today w/ as the
situations enumerated under art. 1809. changes in amount is fix
Right of a partner to demand an accounting market value by
w/o bringing about dissolution is a agreement
necessary corollary to the right to share in of the
profits. A formal account is a necessary partners,
incident to the dissolution of the and is not
partnership. affected by
fluctuations
Art. 1810. The property rights of a in the value
partner are: of the
1. His rights in specific partnership partnership
property; property,
2. His interest in the partnership; although it
3. His right to participate in the may be
management, extent of property increased
rights of a partner. and
decreased by
Principal Rights unanimous
1. Rights in specific partner property; consent of the
partners.
2. Interest in partnership;
3. Right to participate in management.

RELATED RIGHTS
1. Right to reimbursement for
amounts advanced to
partnership and to
indemnification for risks
inconsequence of management
(art. 1796).
2. Right of access and inspection of
partnership books (art. 1805).
3. Right to true and full information
of all things affecting partnership
(art. 1806).
 . he has no right to possess such
property for any other purpose without
Assets Includes not The
the consent of his partners;
2. A partner’s right in specific
Included only the aggregate partnership property is not assignable
original of the except in connection with the
capital individual assignment of rights of all the partners
contributions, contributions in the same property;
but also all made by the 3. A partner’s right in specific
property partners in partnership property is not subject to
subsequently establishing attachment or execution, except on a
acquired or continuing claim against the partnership;
because of the
the partnership. 4. A partner’s right in specific
partnership partnership property is not subject to
or w/ legal support under art. 291 nature of a
partnership partner’s right in specific partnership
funds, property.
including Art. 1811 contemplates tangible
partnership property but not intangible things. A
name and partner is a co owner w/ his partners of
goodwill. specific partnership property, but the
rules on co ownership do not
Ownership of certain property Property use necessarily apply. The legal incidents
by the partnership – Where there is no of this tenancy in partnership are
express agreement that property used by a distinctively characteristic of the
partnership constitutes partnership property, partnership relation. They are as
such use does not make it partnership follows:
property, and whether it is so depends on
the intention of the parties, w/c may be
Equal rights of possession -
shown by proving an express agreement or
Ordinarily, a partner has an equal
acts of particular conduct. The intent of the
parties is the controlling factor. Property right to possess specific partnership
acquired by a partner with partnership funds property for partnership purposes.
– Unless a contrary intention appears, None of the partners can possess
property acquired by a partner in his own and use the specific partnership
name w/ partnership funds is partnership property other than for partnership
property. However, if the property was purposes w/o the consent of the
acquired after dissolution but before the other partners. Should any of them
winding up of the partnership affairs, it use the property for his own benefit,
would be his separate property but he he must account, like a stranger, to
would be liable to account to the the others for the profits derived
partnership for the funds used in its therefrom or the value of his wrongful
acquisition. possession or occupation. A partner
Art. 1811. A partner is co-owner with wrongfully excluded from possession
his partners of specific partnership of partnership property by a co-
property. The incidents of this co- partner has a right to formal account
ownership are such that; and may even apply for a judicial
decree of dissolution. On the death of
1. A partner, subject to the provision a partner, his right in specific
of this title and any agreement between partnership property vests in the
the partner, has an equal right with his
partners to possess specific partnership
property for partnership purposes; but
surviving partners. By agreement, the Right limited to share of what remains after
right to possess specific partnership partnership debts has been paid Strictly
property may surrender. In the absence speaking, no particular partnership property
of special agreement, however, neither or any specific or an aliquot part thereof can
partner separately owns, or has the be considered the separate or individual
exclusive right of possession of any property of any partner. The whole of
partnership property or any proportional partnership property belongs to the
part thereof. Each has dominion over partnership considered as a juridical person,
the entire partnership property. and a partner has no interest in it but his
share of what remains after all partnership
The possession of partnership property debts are paid. Consequently, specific
by one partner is the possession of all partnership property is not subject to
until his possession becomes adverse. A attachment, execution, garnishment, or
partner cannot initiate title by adverse injunction, w/o the consent of all the partners
possession until and unless he makes an except on a claim against the partnership. For
adverse claim proportional part thereof. the same reason that the property belongs to
Each has dominion over the entire the partnership, the partners cannot claim any
partnership property. The possession of right under the homestead or exemption laws
partnership property by one partner is when it is attached for partnership debts.
the possession of all until his possession However, a judgment creditor may levy
becomes adverse. A partner cannot upon a partner’s interest in
initiate title by adverse possession until the partnership itself because it is actually his
and unless he makes an adverse claim. property, by means of a “charging order.” The
right of the partners to
Right not assignable - A partner cannot specific partnership property is not
separately assign his right to specific subject to legal support since the property
partnership property but all of them can belongs to the partnership and not to the
assign their rights in the same property. partners. However, their interest in the
partnership is. The method of reaching a
Reasons for non-assignability: judgment debtor’s interest in partnership
1. It prevents interference by outsiders in property is specifically set forth in art.1814.
partnership affairs;
2. It protects the right of other partners and Art. 1812. A partner’s interest in the
partnership creditors to have partnership partnership is his share of the profits
assets applied to firm debts; and surplus.
3. It is often impossible to determine the
extent of a partner’s beneficial interest in Share of profits and surplus – The
a particular partnership asset. Reason for partner’s interest in the partnership
impossibility: Each partner, having a consists of his share in the undistributed
beneficial interest in the partnership profits during the life of the partnership
property considered as a whole, has a as a going concern and his share in the
beneficial interest in each part. Where, undistributed surplus after its
however, none of the above reasons dissolution.
apply, an authorized assignment by a
partner of his right in specific partnership Profits: the excess of returns over
property is void, but it may be regarded as expenditure in a transaction or series of
a valid assignment of the partner’s transactions; or the net income of the
interest in the partnership. The law allows partnership for a given period.
a retiring partner to assign his rights in
partnership property to the partner(s) Surplus: the assets of the partnership
continuing the business. after partnership debts and liabilities are
paid and settled and the rights of the
partners among themselves are however, provides the non- assigning
adjusted. It is the excess of assets over collaborates w/ a ground for dissolving the
liabilities. If the liabilities are more than partnership if they so desire.
the assets, the difference represents the
extent of the loss. Remedy of other partners
Dissolution of partnership not intended –
Art.1813. A conveyance by a partner by Many partnership agreements are made
his whole interest in the partnership merely as security for loans, the assigning
does not of itself dissolve the partner never intending to destroy the
partnership, or, against the other partnership relation. If the assigning partner
partners in the absence of agreement, neglects his duties after assignment, the other
entitle the assignee, during the partners may dissolve the partnership under
continuance of the partnership, to art. 1830.
interfere in the management or Dissolution of partnership intended – A
administration of the partnership partner’s conveyance of his interest in the
business or affairs, or to require any partnership operates as dissolution of the
information or account of the partnership only when it is clear that the
partnership transactions, or to inspect parties contemplated and intended the entire
the partnership books; however it withdrawal from the partnership of such
merely entitles the assignee to receive partner and the termination of the partnership
the accordance with his contract, the as between the partners.
profits to which the assigning partner
would otherwise be entitled. Rights of assignee of partner’s interest
1. To receive in accordance w/ his contract
In case of fraud in the management of the profits accruing to the assigning
the partnership, the assignee may avail partner;
himself of the usual remedies. In case of 2. To avail himself of the usual remedies
dissolution of the partnership, the provided by law in the event of fraud in
assignee is entitled to receive his the management;
assignor’s interest and may require an 3. To receive the assignor’s interest in case
account from the date only of the last of dissolution;
account agreed to by all partners. Effect 4. To require an account of partnership
of assignment of partner’s whole interest affairs, but only in case the partnership is
in partnership. dissolved, and such account shall cover
the period from the date only of the last
A partner’s right in specific partnership account agreed to by all partners. The
property is not assignable but he may purchaser of a partner’s interest may
assign his interest in the partnership to apply to the court for dissolution after the
any of his co-partners or to a third termination of the specified term or
Person irrespective of the consent of the undertaking or at any time if the
other partners, in the absence of partnership is one at will.
agreement to the contrary.
Art. 1814. Without prejudice to the
Rights withheld from assignee preferred rights of the partnership creditors on
1. To interfere in the management. due application to a competent court by any
2. To require any information or account. judgment creditor of the partner, the court
3. To inspect any of the partnership books. which entered the interest of the debtor
partner with payment of the unsatisfied
No one can be compelled to be partners w/ amount of such judgment debt with the
someone else. The assignment does not divest interest thereon; and may then or later
the assignor of his status and rights as a appoint a receiver of his share of the profits,
partner nor operate as dissolution. The law, and of any other money due or to fall due to
him in respect of the partnership, and make all
other orders, directions and accounts and inquiries There deeming non-debtor partner does not
which the debtor partner might have made, or acquire absolute ownership over the debtor-
which circumstances of the case may require. The partner’s interest but holds it in trust for him
interest charged may redeem at any time before consistent w/ principles of fiduciary
foreclosure, or in any case of a sale being directed relationship.
by the court, may be purchase without thereby
causing dissolution: Rights of partner under exemption laws
1. With separate property, by any one or more of A partner cannot claim any right under the
the partners; homestead laws or exemption laws when
specific partnership property is attached for
2. With partnership property, by any one or more of partnership debt. W/ respect, however, to the
the partners with the consent of all the partners partner’s interest in the partnership as
whose interests are not so charged or sold, nothing distinguished from his interest in specific
in this title shall be held to deprive a partner of his partnership property, the partner may avail
right, if any, under the exemption laws, as regards himself of the exemption laws after
his interest in the partnership. partnership debts have been paid. A partner’s
Application for a charging order after securing interest or share in the partnership property is
judgment on his credit really his property.
While a separate creditor of a partner cannot attach
or levy upon specific partnership property for the Art. 1815. Every partnership shall operate
satisfaction of his credit because partnership assets under a firm name, which may or may not
are reserved for partnership creditors, he can include the name of one or more of the
secure a judgment on his credit and then apply to partners, those who, not being members of
the proper court for a “charging order”, subjecting the partnership, include their names in the
the interest of the debtor partner in the partnership firm name, shall be subject to liability of a
w/ the payment of the unsatisfied amount of such partner
judgment w/ interest thereon w/ the least
interference w/ the partnership business and the Requirement of the firm name
rights of the other partners. By virtue of the Meaning of word “firm” – The name, title, or
charging order, any amount or portion thereof w/c style under which a company transacts
the partnership would otherwise pay to the debtor- business; a partnership of two or more
partner should instead be given to the judgment persons; a commercial house. In its common
creditor. This remedy, however, is w/o prejudice to acceptance, the term implies a partnership.
the preferred rights of partnership creditors whose The term is also used as synonymous with
claims should be satisfied first. Availability of other “company,” “house,” and “concern.”
remedies Art. 1814 have made this an exclusive
Importance of having a firm name
Redemption or purchase of interest charged A partnership must have a firm name
Redemptioner – The interest of the debtor- partner under which it will operate. A firm name
so charged may be redeemed or purchased w/ the is necessary to distinguish the
separate property of any one or more of the partnership, which has a distinct and
partners, or w/ partnership property but w/ the separate juridical personality from the
consent of all the partners whose interests are not individuals composing the partnership
so charged or sold. and from other partnerships and
entities.
Redemption Price – The value of the partner’s
interest in the partnership has no bearing on the Right of the partners to choose a firm
redemption price w/c is likely to be lower since it name The partners enjoy the utmost
will be dependent on the amount of the unsatisfied freedom in the selection of the
judgment debt. partnership name.

Right of redeeming non-debtor partner – As a general rule, they may adopt any
firm name desired. “Obligations of the Partners Among
Themselves.” The pro rata liability of partners
Use of misleading name – The partners to third persons under Article 1816 being a
cannot use a name that is identical or clear mandate of the law, any stipulation
deceptively confusingly similar to that of changing or modifying such liability is void
any existing partnership or corporation except as among the partners.
or to any other name already protected
by law or is patently deceptive, Refers to partnership obligations
confusing or contrary to existing laws, as Article 1816 which refers to the payment of
to mislead the public by passing itself off partnership obligations arising from contracts
as another partnership or corporation, clearly imposes subsidiary and joint (pro rata)
or its goods or services as those of such liability for contractual debts owing to third
other company. persons upon all the partners, including
industrial partners who ordinarily are not
Liability inclusion of name in the firm liable for losses. The liability is subsidiary
name – Persons who, not being because the partners cannot be made
partners, include their names in the firm answerable with their separate property
name do not acquire the rights of a unless the partnership property has first been
partner but shall be subject to the exhausted.
liability of a partner insofar as 3rd
Persons without notice are concerned. Pro rata liability – Literally, pro rata liability
Such persons become partners by means proportionate distribution of liability. In
estoppel. Art. 1815 does not cover the the law of obligations, the concurrence of two
case of a limited partner who allows his or more debtors in one and the same
name to be included in the firm name, obligation makes it prima facie a joint (pro
orof a person continuing the business of rata) obligation, and the debts is presumed
a partnership after dissolution, who uses divided into as many equal shares as there are
the name of the dissolved partnership or debtors and each one of them is bound to pay
the name of a deceased partner as part only his share.
thereof.
Art. 1817. Any stipulation against the liability
Art. 1816. All partners, including laid down in the preceding article shall be
industrial ones, shall be liable pro rata void, except as among the partners.
with all their property and after all the
partnership assets have been exhausted, Industrial partner cannot exempt himself
for the contracts which may be entered from liability to third persons
into in the name and for the account of Each one of the industrial partners is liable to
the partnership, under its signature and third persons for the debts of the firm and if
by a person authorized to act for the he has paid such debts out of his private
partnership. However, any partner may property during the life of the partnership,
enter into a separate obligation to when its affairs are settled he is entitled to
perform a partnership contract. credit for the amount so paid, and if its results
that there is not enough property in the
Article 1816 distinguished from article partnership to pay him, then the capitalist
1787 partners must pay him. Our conclusion is that
Article 1816 applies in cases where third party neither on principle nor on authority can the
creditors are concerned as it falls under the industrial partner be relieved from liability to
heading of section 3. “Obligations of the third persons for the debts of the partnership.
Partners with Regard to Third Persons.” Article Art. 1818. Every partner is an agent of
1797 applies only where the issue is among the partnership for the purpose of its
the partners as it falls under the heading of business, and the act of every partner,
Section 1, Chapter 2, which states: including the execution in the
partnership name of any instrument, for has exceeded his authority.
apparently carrying on in the usual way
the business of the partnership of which Where title to real property is in the name
he is a member binds the partnership, of the partnership, a conveyance executed
unless the partner so acting has in fact by a partner, in his own name, passes the
no authority to act for the partnership in equitable interest of the partnership,
the particular matter, and the person provided the act is one within the authority
with whom he is dealing has knowledge of the partner under the provisions of the
of the fact that he has no such liability. first paragraph of Article 1818.

An act of a partner which is not

apparently for the carrying on of Where title to real property is in the name of
business of the partnership in the usual one or more but not all the partners, and the
way does not bind the partnership record does not disclose the right of the
unless authorized by the other partners. partnership, the partners in whose name the
title stands may convey title to such property,
Except when authorized by the other but the partnership may recover such
partners or unless they have abandoned property if the partners’ act does not bind the
the business, one or more but less than partnership under the provisions of the first
all the partners have no authority to: paragraph of Article 1818, unless the
purchaser or his assignee, is a holder for value,
1. Assign the partnership property in without knowledge.
trust for creditors or on the
assignee’s promise to pay the debts Where the title to real property is in the name
of the partnership. of one or more or all the partners, or in a third
2. Dispose of the goodwill of the business. person in trust for the partnership, a
3. Do any other act which would make conveyance executed by a partner in the
it impossible to carry on the ordinary partnership name, or in his own name, passes
business of a partnership. the equitable interest of the partnership,
4. Confess a judgment. provided the act is one within the authority of
5. Enter into a compromise concerning the partner under the provisions of the first
a partnership claim or liability. paragraph of Article 1818.
6. Submit a partnership claim or
liability to arbitration. Where the title to real property is in the name
7. Renounce a claim of the partnership. of all the partners a conveyance executed by
all the partners passes all their rights in such
restriction on authority shall bind the property.
partnership to persons having
knowledge of the restriction. Art. 1820. An admission or representation
made by any partner concerning partnership
Art. 1819. Where title to real property is affairs within the scope of his authority in
in the partnership name, any partner accordance with this Title is evidence against
may convey title to such property by a the partnership.
conveyance executed in the partnership
name; but the partnership may recover Art. 1821. Notice to any partner of any matter
such property unless the partner's act relating to partnership affairs, and the
binds the partnership under the knowledge of the partner acting in the
provisions of the such property has been particular matter, acquired while a partner or
conveyed by the grantee or a person then present to his mind, and the knowledge
claiming through such grantee to a of any other partner who reasonably could
holder for value without knowledge that and should have communicated it to the
the partner, in making the conveyance, acting partner, operate as notice to or
knowledge of the partnership, except in the
case of fraud on the partnership, committed Art. 1823. The partnership is bound to
by or with the consent of that partner. make good the loss:

Notice to partner is notice to 1. Where one partner acting within the

partnership Clearly a third person scope of his apparent authority
desiring to give notice to a partnership receives money or property of a
of some matter pertaining to the third person and misapplies it.
partnership business need not
communicate with all of the partners. If 2. Where the partnership in the course
notice is delivered to a partner, that is of its business receives money or
an effective communication to the property of a third person and the
partnership. money or property so received is
misapplied by any partner while it is in
Knowledge before becoming partner the custody of the partnership.
Where the knowledge or notice had
been received by the partner before he Partnership bound by partner’s breach
became a partner, and his partners are of trust
ignorant of this, and he is not the The partnership is liable for the
partner acting in the particular matter, conversion (misappropriation) of money
there is no doubt that there has been or property entrusted to the partnership
neither knowledge of nor notice to the by a third person. The effect under
partnership. Article 1824 is the same whether by the
partnership and subsequently
Art. 1822. Where, by any wrongful act or misappropriated by a partner.
omission of any partner acting in the
ordinary course of the business of the Art. 1824. All partners are liable
partnership or with the authority of co- solidarily with the partnership for
partners, loss or injury is caused to any everything chargeable to the partnership
person, not being a partner in the under Articles 1822 and 1823.
partnership, or any penalty is incurred,
the partnership is liable therefor to the Law imposes solidary liability
same extent as the partner so acting or The law imposes solidary liability upon
omitting to act. the partners and the partnership in cases
of torts and acts of conversion by a
Partner liable for wrongful act of a partner as provided in Art. 1824. It may
partner The partners are liable for the be stated that the liability of a partner
negligent operation of a vehicle by a for a debt of the partnership depends
partner, acting in the course of business, upon whether the debt is contractual or
which results in a traffic accident. it arises from tort or conversion. If it
arises from contract, the liability is
If he is driving a partnership-owned subsidiary and pro rata; if it arises from
vehicle for purposes of his own, the tort or conversion, the liability is solidary.
acting partner alone is liable it is not a
partnership tort. Business partners solidarily liable
Arts. 1711 and 1712 of the New Civil
Partnership may proceed against Code and Sec. 2 of the Workmen’s
negligent partner Compensation Act reasonably indicate
Where a partnership is liable to a third that in compensation cases, the liability
person, there is a right of indemnity of business partners should be merely
against the partner whose negligence joint and not solidary, and one of them
caused the injuries. happens to be insolvent, the amount
awarded to the dependents of the acting and the persons consenting to the
deceased employee would only be representation.
partially satisfied, which is evidently
contrary to the intent and purpose of the Estoppel – A preclusion, in law, which
law to give full protection to the prevents a man from alleging or denying
employee. a fact, in consequence of his own
previous act, allegation, or denial of a
Art. 1825. When a person, by words contrary tenor. Person bound by his
spoken or written or by conduct, representation A person who holds
represents himself, or consents to himself out as a partner in a business, or
another representing him to anyone, as a consents to his being so held out, is liable
partner in an existing partnership or with on contracts made with third persons
one or more persons not actual partners, who deal with the persons carrying on
he is liable to any such persons to whom the business on the faith of the
such representation has been made, who representation. He is stopped to deny
has, on the faith of such representation, the apparent agency.
given credit to the actual or apparent
partnership, and if he has made such Person bound by his Representation
representation or consented to its being A person who holds himself out as a
made in a public manner he is liable to partner in a business, or consents to his
such person, whether the representation being so held out, is liable on contracts
has or has not been made or made with third person who deal with
communicated to such person so giving the person carrying on business on the
credit by or with the knowledge of the faith of the representation. He is being
apparent partner making the stopped to deny the apparent agency.
representation or consenting to its being
made:

1. When a partnership liability results, he

is liable as though he were an actual
member of the partnership.

2. When no partnership liability results,

he is liable pro rata with the other
persons, if any, so consenting to the
contract or representation as to incur
liability, otherwise separately.

When a person has been thus

represented to be a partner in an
existing partnership, or with one or more
persons not actual partners, he is an
agent of the persons consenting to such
representation to bind them to the same
extent and in the same manner as
though he were a partner in fact, with
respect to persons who rely upon the
representation. When all the members
of the existing partnership consent to the
representation, a partnership act or
obligation results; but in all other cases it
is the joint act or obligation of the person