PART I ART. 1769.

In determining whether a partnership exists, these rules

shall apply:
PARTNERSHIP
1. Except as provided by Article 1825, persons who are not
CHAPTER 1 – General Provisions
partners as to each other are not partners as to third
persons:
2. Co-ownership or co-possession does not of itself establish
ART. 1767. By the contract of partnership two or more a partnership, whether such co-owners or co-possessors do
persons bind themselves to contribute money, property, or industry or do not share any profits made by the use of the property.
to a common fund, with the intention of dividing the profits among 3. The sharing of gross returns does not of itself establish a
themselves. partnership, whether or not the persons sharing them have a
Two or more persons may also form a partnership for the joint or common right or interest in any property from which
exercise of a partnership for the exercise of a profession. the returns are derived;
4. The receipt by a person of a share of the profits is prima facie
A profession is a calling in the preparation for or practice of evidence that he is a partner in the business, but no such
which academic learning is required and which has for its prime purpose inference shall be drawn if such profits were received in
the rendering of public service. payment:
a. As a debt by installments or otherwise
Characteristic Elements of Partnership:
b. As wages of an employee or rent to a landlord
1. Consensual, because it is perfected by mere consent, that c. As an annuity to a widow or representative of a
is, upon the express or implied agreement of two or more deceased partner
persons d. As interest on a loan, through the amounts of
2. Nominate, because it has a special name or designation in payment vary with the profits of the business
our law e. As the consideration for the sale of a goodwill of a
3. Bilateral, because is entered into by two or more persons business or other property by installments or
and the rights and obligations arising therefrom are always otherwise.
reciprocal
Tests and Incidents of Partnership
4. Onerous, because each parties aspire to procure for
himself a benefit through the giving of something 1. Terms of Agreement and Control – only those terms of a contract
5. Commutative, because the undertaking of each of the upon which the parties have reach an agreement may afford a
partner is considered as the equivalent of that of the others test by which to ascertain the existence of a partnership.
6. Principal, because it does not depend for its existence or 2. Typical Incidents once existence established
validity upon some other contract a. The partners share in the profits and losses
7. Preparatory, because it is entered into as means to an end b. They have equal rights in the management and conduct
of business
A partnership contract, is a contract of agency
c. Every partner is an agent of the partnership, and those
Delectus personae choice of person entitled to bind the other partners by his acts, acts for
the purpose of its business
A limited partnership cannot be created by voluntary
d. All partners are personally liable for the debts of the
agreement.
partnership with their separate property except that
Five essential features of a partnership limited partners are not liable beyond their capital
investments.
1. There must be a valid contract e. A fiduciary relation exists between the partners
2. The parties must have legal capacity to enter into the contract f. On dissolution, the partnership is not terminated, but
3. There must be mutual contribution of money, property, or continues until the winding up of the partnership is
industry to a common fund completed.
4. The object must be lawful
5. The purpose must be to obtain profits and to divide the same Partnership distinguished from co-ownership
among the parties.
There is a co-ownership whenever the ownership of an
The following cannot give their consent to a contract of partnership: undivided thing or right belongs to different persons. Distinctions

1. Unemancipated minors 1. Creation – co-ownership is generally created by law and may

2. Insane or demented persons exist without a contract but partnership is created by contract.
3. Deaf-mutes who do not know how to write 2. Juridical Personality – a partnership has a juridical personality
4. Persons who are suffering from civil interdiction separate and distinct from that of each partner
5. Incompetents who are under guardianship 3. Purpose – the purpose of a partnership is the realization of
profits while in co-ownership, it is the common enjoyment of a
Unless authorized by law, a corporation is without capacity to or power right or a thing.
to enter into a contract of partnership. 4. Duration – Under the law, there is no limitation upon the
Forms of Contribution duration of a partnership, while co-ownership, 10 years.
5. Disposal of interests – A partner may not dispose of his
a. Money individual interests in the partnership so as to make the
b. Property assignee a partner unless agreed upon by all of the partners.
c. Industry 6. Power to act with third persons – in the absence of any
Legality of object stipulation to the contrary, a partner may bind the partnership,
while a co-owner cannot represent the co-ownership.
1. Effect of illegality – the object is unlawful when it is contrary to 7. Effect of death – the death of a partner results in the dissolution
law, morals, good customs, public order or public policy of the partnership but the death of a co-owner does not
2. Business partnership not permitted to engage in – A partnership necessarily dissolve the co-ownership.
may not engage in an enterprise for which the law requires a
Partnership distinguished from conjugal partnership of gains
specific form of business organization, such as banking which
under the general banking law of 2000, only stock corporations Conjugal partnership of gains is a partnership formed by the
may undertake. marriage of husband and wife by virtue of which, the place in a common
fund the fruits and income from their separate properties and those
ART. 1768. The partnership has a juridical personality separate and
acquired through their efforts or by chance
distinct from that of each of the partners, even in case of the failure
to comply with the requirements of Article 1772, first paragraph.
Difference 2. As to the liability of the partners
a. General Partnership – one consisting of general
1. Parties – business partnership is created by voluntary
partners who are liable pro rata and subsidiarily,
agreement of two person while a conjugal partnership arises in
sometimes solidarily, with their separate property for
case the future spouses agree that it shall govern their property
partnership debts.
relations during marriage
b. Limited Partnership – one formed by two or more
2. Laws which govern – Ordinary partnerships are governed by the
persons having as members one or more general
stipulation of the parties while a conjugal is by law
partners and 1 or more limited partners, the latter not
3. Juridical Personality – business partnership has a separate
being personally liable for partnership obligations.
personality while conjugal partnership has none
3. As to its duration
4. Commencement – a partnership begins from the moment of the
a. Partnership at will – one in which no time is specified
execution of contract, unless it is otherwise stipulated, while a
and is not formed for particular undertaking or venture
conjugal partnership of gains commences precisely on the date
and which may be terminated by mutual agreement or
of the celebration of marriage. Any stipulation to the contrary is
by will of any of the partner, or one for a fixed term or
void.
particular undertaking which is continued by the
5. Purpose – business partnership is to obtain profits, while
partnership after the termination of such term or
conjugal partnership is to regulate the property relations of
particular undertaking without express agreement.
husband and wife during the marriage
b. Partnership with a fixed term – one in which the term
6. Distribution of profits – in the ordinary partnership profits are
for the partnership is to exist is fixed or agreed upon or
divided according to the agreement, while in conjugal
one formed for a particular undertaking, and upon the
partnership, it is divided equally
expiration of the term or completion of the particular
7. Management – management is shared equally in business
enterprise, the partnership is dissolved, unless
partnership, while conjugal partnership, the administration
continued by the parties.
belongs to both spouses jointly.
4. As to legality of its existence
ART. 1770. A partnership must have a lawful object or purpose, and a. De jure partnership – one which has complied with all
must be established for the common benefit or interest of the the legal requirements for its establishment.
partners. b. De facto partnership – One which has failed to comply
with all legal requirements for its establishment
When an unlawful partnership is dissolved by judicial 5. As to representation to other
decree, the profits shall be confiscated in favor of the state without a. Ordinary or real partnership – one which actually
prejudice to the provisions of the penal code governing the exists among the partners and to third persons
classification of the instruments and effects of a crime. b. Ostensible partnership (estoppel) – one which in
Effects of unlawful partnership reality is not a partnership, but is considered one in
relation to those are precluded to deny its existence.
1. The contract is void ab initio, it never existed in law 6. As to publicity
2. The profits shall be confiscated in favor of the government a. Secret partnership – one where in the existence of
3. The instruments or tools and proceeds of the crime shall also certain persons as partners is not avowed or made
be forfeited in favor of the government known to the public by any partners
4. The contributions of the partners shall not be confiscated b. Open or notorious partnership – one whose existence
unless they fall under No. 3. is made known to the public by the firm members.
7. As to purpose –
ART. 1771. A partnership may be constituted in any form, except
a. Commercial or trading – one formed for the
where immovable property or real rights are contributed there to, in
transaction of business
which case a public instrument shall be necessary.
b. Professional or non-trading – one formed for the
ART. 1172. Every contract of partnership having a capital of three exercise of a profession.
thousand pesos or more, in money or property; shall appear in a
Kinds of Partners
public instrument, which must be recorded in the office of the SEC.
a. Capitalist partner – contributes money or property
Failure to comply with the requirements of the preceding
b. Industrial partner – contributes service or personal service
paragraph shall not affect the liability of the persons and the
c. General partner – whose liability to third persons extends to his
members of third persons.
separate property
ART. 1773. A contract of partnership is void, whenever immovable d. Limited partner – one whose liability to third persons is limited
property is contributed thereto, if an inventory of said property is not to his capital contribution
made, signed by the parties, and attached to the public instrument. e. Managing partner (General or Real) – one who manages the
affairs or the business of the partnership.
ART. 1774. Any immovable property or any interest therein may be
f. Liquidating partner – one who takes charge of the winding up
acquired in the partnership name. Title so acquired can be conveyed
of partnership affairs upon dissolution
only in the partnership name.
g. Partner by estoppel – one who is not really a partner, not being
ART. 1775. Associations and societies, whose articles are kept secret a party to a partnership agreement, but is liable as a partner for
among the members, and wherein anyone of the members may the protection of innocent third persons.
contract in his own name with third persons, shall have no juridical h. Continuing partner – one who continues the business of a
personality and shall be governed by the provisions relating to co- partnership after it has been dissolved by reasons of a new
ownership. partner, retirement, death, or expulsion of one or more partners.
i. Surviving partner – one who remains after a partnership has
ART. 1776. As to its object, a partnership is either universal or been dissolved by death of any partner.
particular
j. Subpartner – one who, not being a member of the partnership,
As regards to the liability of the partners, a partnership may contracts with a partner with reference to the latter’s share in
be general or limited. the partnership.
k. Ostensible – one who takes active part and known to the public
Classifications of Partnership as a partner
l. Secret partner – one who takes active part in the business but
1. As to the extent of its object
a. Universal partnership – one which refers to all the is not known to the public as a partner in the business
m. Silent partner – does not take an active part in the business but
present property or to all profits.
is known to be a partner.
i. Universal partnership of all present property
n. Dormant – one who does not take active part in the business
ii. Universal partnership of profits
and not known as a partner.
b. Particular Partnership
 o. Original partner – one who is a member of the original prevent any rights or obligations arising on either side for lack or
partnership from the time of its registration complete contract.
p. Incoming partner – a person lately to be taken into a
ART. 1785. When a partnership for a fix term or particular undertaking
partnership as a member.
is continued after the termination of such term or particular
q. Retiring partner – one withdrawn from the partnership
undertaking without any express agreement, the rights and duties of
the partners remaining the same as they were at such termination,
so far as is consistent with a partnership at will.
ART. 1777. A universal partnership may refer to all the present
property or to all the profits. A continuation of the business by the partners of such of
them as habitually acted therein during the term without any
ART. 1778. A partnership of all present property is that in which the
settlement or liquidation of the partnership affairs, is prima facie
partners contribute all the property which actually belongs to them
evidence of a continuation of a partnership.
to a common fund, with the intention of dividing the same among
themselves, as well as all the profits they may acquire therewith. ART. 1786. Every partner is a debtor of the partnership for whatever
he may have promised to contribute thereto.
ART. 1779. In a universal partnership of all partnership of all present
property, the property which belonged to each of the partners at the He shall also be bound for warranty in case of eviction with
time of the constitution of the partnership, becomes the common regard to specific and determinate things which he may have
property of all the partners, as well as all the profits which they may contributed to the partnership, in the same cases and in the same
acquire therewith. manner as the vendor is bound with respect to the vendee (governed
by the law on sales). He shall also be liable for the fruits thereof from
A stipulation for the common enjoyment of any other profits
the time they should have been delivered without need of any
may also be made; but the property which the partners may acquire
demand.
subsequently by inheritance, legacy, or donation cannot be included
in such stipulations, except the fruits thereof. Obligations with respect to contribution of property:

ART. 1780. A universal partnership of profits comprises all that the 1. To contribute at the beginning of the partnership or at the
partners may acquire by their industry or work during the existence stipulated time the money, property, or industry which he may
of the partnership. have promised to contribute.
2. To answer for eviction in case the partnership is deprived of the
Movable or immovable property which each of the partners
determinate property contributed
may possess at the time of the celebration of the contract shall
3. To answer to the partnership for the fruits of the property the
continue to pertain exclusively to each, only the usufruct passing to
contribution of which he delayed from the date they should have
the partnership.
been contributed up to the time of actual delivery.
ART. 1781. Articles of universal partnership, entered into without 4. TO preserve said property with diligence of a good father of a
specification of its nature, only constitute a universal partnership of family pending delivery to the partnership.
profits. 5. To indemnify the partnership for any damage caused to it by the
retention of the same or by the delay in its contribution.
ART. 1782. Persons who are prohibited from giving each other any
donation or advantage cannot enter into a universal partnership. ART. 1787. When the capital or a part thereof which a partner is
bound to contribute consists of goods, their appraisal must be made
a. Husband and wife in the manner prescribed in the contract of the partnership, and in
b. Those made between persons who were guilty of adultery or the absence of stipulation, it shall be made by experts chosen by the
concubinage partners, and according to current prices, the subsequent changes
c. Those made between persons found guilty of the same criminal thereof, being for the account of the partnership.
offense, in consideration thereof;
d. Those made to a public officer or his wife, descendants, and ART. 1788. A partner who has undertaken to contribute a sum of
ascendants by reason of his office. money and fails to do so becomes a debtor for the interest and
damages from the time he should have complied with his obligation.
ART. 1783. A particular partnership has for its object determinate
things, their use or fruits, or a specific undertaking, or the exercise The same rule applies to any amount he may have taken from
of a profession or vocation. the partnership coffers, and his liability shall begin from the time he
converted the amount to his own use.

ART. 1789. An industrial partner cannot engage in business for

SECTION 1. himself, unless the partnership expressly permits him to do so; and
Obligations of the Partners among Themselves. if he should do so, the capitalist partners may either exclude him
from the firm or avail themselves of the benefits which he may have
Relations created by a contract of partnership: obtained in the violation of this provision with a right to damages in
either case.
1. Relations among the partners themselves
2. Relations of the partners with the partnership Prohibition against engaging in business
3. Relations of the partnership with third persons with whom it
contracts 1. As regards an industrial partner – the prohibition is absolute and
4. Relations of the partners with such third persons applies whether the industrial partner is to engage in the same
kind of business in which the partnership is engaged or in any
ART. 1784. A partnership begins from the moment of the execution of kind of business.
the contract, unless it is otherwise stipulated. 2. As regards capitalist partners – the probation extends only to
any operation which is of the same kind of business in which the
Exceptions or Executory Agreements of Partnership:
partnership is engaged unless there is a stipulation to the
1. Future partnership – the partners may stipulate some other contrary.
date for the commencement of the partnership
ART. 1790. Unless there is a stipulation to the contrary, the partners
2. Agreement to Create partnership – a distinction must be
shall contribute equal shares to the capital of the partnership.
made between a partnership actually consummated and an
agreement to enter into a contract of partnership at a future ART. 1791. If there is no agreement to the contrary, in case of an
time. So long as the agreement remains executory, no imminent loss of the business of the partnership, any partner who
partnership can be said to exist. refuses to contribute an additional share to the capital, except an
3. Failure to agree on material terms – a failure of the parties to industrial partner, to save the venture, shall be obliged to sell his
agree on material terms may not merely be evidence of the interest to the other partners.
intent of the parties to be bound only in the future, but may
 4. Things contributed to be sold – the partnership bears risk for
loss for there cannot be any doubt that the partnership was
Requisites for the application of tule:
intended to be the owner; otherwise, the partnership could not
1. There is imminent loss of the business of the partnership effect the sale.
2. The majority of the capitalist partners are of the opinion that an 5. Things brought and appraised in the inventory – The partnership
additional contribution to the common fund would save the bears the risk of loss because the intention of the parties was to
business contribute to the partnership the price of the things contributed
3. The capitalist partner refuses (deliberately not because of his with an appraisal in the inventory.
financial inability to do so) to contribute an additional share to
ART. 1796. The partnership shall be responsible to every partner for
the capital
the amount he may have disbursed on behalf of the partnership and
4. There is no agreement that even in case of an imminent loss off
for the corresponding interests, from the time the expenses are
the business, the partners are not obliged to contribute.
made; it shall also answer to each partner for the obligations he may
ART. 1792. If a partner authorized to manage collects a demandable have contracted in good faith in the interest of the partnership
sum, which was owed to him in his own name, from a person who business, and for risks in consequence of its management.
owed the partnership another sum also demandable, the sum thus
Obligations of the partnership to every partner
collected shall be applied to the two credits in proportion to their
amounts, even though he may have given a receipt for his own credit 1. To refund amounts disbursed by him in behalf of the partnership
only; but should he have given it for the account of the partnership, (advances for partnership debts due and payable) plus the
the amount shall be fully paid to the latter. corresponding interest from the time the expenses were made.
2. To answer for the obligation (purchase price of supplies needed
The provisions of this article are understood to be without
by the partnership) he may have contracted in good faith in the
prejudice to the right granted to the debtor by Article 1252, but only
interest of the partnership business.
if the personal credit of the partner should be more onerous to him.
3. To answer for risks (loss of his property, accidents) in
(the debtor may choose which to apply the payment in which is more
consequence of its management
onerous to him)
ART. 1797. The losses and profits shall be distributed in conformity
Requisites for the application of rule:
with the agreement. If only the share of each partner in the profits
1. There shall be at least two debts, one where the collecting has been agreed upon, the share of each in the losses shall be in the
partner is creditor, and the other, where the partnership is the same proportion.
creditor.
In the absence of stipulation, the share of each partner in the
2. Both debts are demandable
profits and losses shall be in proportion to what he may have
3. The partner who collects is unauthorized to manage and
contributed, but the industrial partner shall not be liable for the
actually manages the partnership
losses. As for the profits, the industrial partner shall receive such
ART. 1793. A partner who has received, in whole or in part, his share share as may be just and equitable under the circumstances. If,
of a partnership credit, when the other partners have not collected besides his service, he has contributed capital, he shall also receive
theirs, shall be obliged, if the debtor should thereafter become a share in the profits in proportion to his capital.
insolvent, to bring to the partnership capital what he received even
ART. 1798. If the partners have agreed to entrust to a third person the
though he may have given receipt for his share only.
designation of the share of each one in the profits and losses, such
Requisites for the application of rule: designation may be impugned only when it is manifestly inequitable.
In no case may a partner who has begun to execute the decision of a
1. A partner has received, in whole or in part, his share of the third person, or who has not impugned the same within a period of
partnership credit three months from the time he had knowledge thereof, complain of
2. The other partners have not yet collected their shares such decision
3. The partnership debtor has become insolvent
The designation of losses and profits cannot be entrusted to
ART. 1794. Every partner is responsible to the partnership for one of the partners.
damages suffered by it through his fault, and he cannot compensate
them with the profits and benefits which he may have earned for the ART. 1799. A stipulation which excludes one or more partners from
partnership by industry. However, the courts may equitably lessen any share in the profits and losses is void.
this responsibility if through the partner’s extraordinary efforts in
ART. 1800. The partner who has been appointed manager in the
other activities of the partnership, unusual profits was realized.
articles of partnership may execute all acts of administration
ART. 1795. The risk of specific and determinate things, which are not despite the opposition of his partners, unless he should act in bad
fungible, contributed to the partnership so that only their use and faith; and his power is irrevocable without just or lawful cause. The
fruits may be for the common benefit, shall be borne by the partner vote of the partners representing the controlling interest shall be
who owns them. necessary for such revocation of power.

If the things contributed are fungible, or cannot be kept A power granted after the partnership has been constituted
without deteriorating, or if they were contributed to be sold, the risk may be revoked at any time.
shall be borne by the partnership. In the absence of the stipulation,
Two distinct cases of appointments
the risk of things brought and appraised in the inventory, shall also
be borne by the partnership, and in such case the claim shall be 1. Appointment as manager in the articles of partnership – the
limited to the value at which they were appraised. partner appointed by common agreement in the articles of
partnership may exclude all acts of administration,
Five cases contemplated in risk of loss of things contributed
notwithstanding the opposition of the other partners unless he
1. Specific and determinate things which are not fungible where should act in bad faith. His power is revocable only upon just
the only use is contributed – the risk is borne by the partner and lawful cause and upon the vote of the partners representing
because he remains the owner of the thing. the controlling interest.
2. Specific and determinate things the ownership of which is 2. Appointment as manager after constitution of the
transferred to the partnership – the risk is for the partnership. partnership – management granted by the partners after the
3. Fungible things or things which cannot be kept without partnership has been constituted independently of the articles
deteriorating even if they are contributed only for the use of the of partnership may be revoked at any time for any cause
partnership. – The risk of loss is borne by the partnership for whatsoever.
evidently the ownership was being transferred since use is
impossible without the things being consumed or impaired.
 In the absence of an agreement to the contrary, no partner is entitled Partner accountable as fiduciary.
to compensation for his services to the partnership without the
1. Duty to act for common benefit
consent of all the partners. Except in proper cases, it can be implied
2. Duty to account for secret and similar profits
from the circumstances that the parties intended a partner to
3. Duty to account for earnings accruing even after termination of
receive additional compensation as where the partner’s work was
partnership
beyond normal partnership functions.
4. Duty to make full disclosure of information affecting
ART. 1801. If two or more partners have been entrusted with the partnership.
management of the partnership without specification of their
ART. 1808. The capitalist partners cannot engage for their own
respective duties, or without stipulation that one of them shall not
account in any operation which is of the kind of business in which the
act without the consent of all the others, each one may separately
partnership is engaged, unless there is a stipulation to the contrary.
execute all acts of administration, but if any of them should oppose
the acts of the others, the decision of the majority shall prevail. In Any capitalist partner violating this prohibition shall bring to
case of tie, the matter shall be decided by the partners owning the the common fund any profits accruing to him from his transactions,
controlling interest. and shall personally bear all the losses.

ART. 1802. In case it should have been stipulated that none of the 1. The capitalist partner is only prohibited from engaging for
managing partners shall act without the consent of the others, the his own account in any operation which is the same as or
concurrence of all shall be necessary for the validity of the acts, and similar to the business in which the partnership is engaged.
the absence or disability of any of them cannot be alleged unless 2. The law does not prohibit a partner from engaging in
there is imminent danger or grave or irreparable injury to the enterprises in his own behalf during the period that he is a
partnership. member of a firm but permits him to carry on a business or
activity not connected or competing with that of the
The partners may stipulate that none of the managing partners
partnership.
shall act without the consent of the others. In such a case, the
3. The law is silent on whether a capitalist partner can engage
unanimous consent of all the managing partners shall be necessary
in the same line of business for the account of another.
for the validity of their acts. Except when there is an imminent
danger of grave or irreparable injury to the partnership, a partner ART. 1809. Any partner shall have the right to a formal account as to
may act without the consent of the partner who is absent or under partnership affairs:
disability without prejudice to the former’s liability for damages.
1. If he is wrongfully excluded from the partnership business or
ART. 1803. When the manner of management has not been agreed possession of its property by his co-partners;
upon, the following rules shall be observed: (IMPORTANT) 2. If the right exists under the terms of any agreement;
3. As provided by Article 1807;
1. All of the partners are considered agents and whatever any
4. Whether other circumstances render it just and reasonable.
of them may do alone shall bind the partnership without
prejudice to the provisions of Article 1801. General Rule: During the existence of the partnership, a partner is not
2. None of the partners may, without the consent of the others, entitled to a formal account of partnership affairs.
make any important alteration in the immovable property of
the partnership, even if it may be useful to the partnership. Exceptions: However, in the special and unusual situations enumerated
But if the refusal of consent by the other parties is manifestly under Article 1809, the justification for a formal accounting even before
prejudicial to the interest of the partnership, the court’s dissolution of the partnership cannot be doubted.
intervention may be sought.

Rules of Management: SECTION 2.

1. All partners are considered managers PROPERTY RIGHTS OF A PARTNER
2. Unanimous consent required for any important alteration in
immovable property or partnership ART. 1810. The property rights of a partner are (Principal Rights):
a. This prohibition applies only to immovable property
1. His rights in specific partnership property
because of the greater importance of this kind of
2. His interest in the partnership
property as to movable property
3. His right to participate in the management
b. If the refusal to give consent by the other partners if
manifestly prejudicial to the interest of the partnership, Related Rights
the intervention by the court may be sought for
1. The right to reimbursement for amounts advanced to the
authority to make the necessary alteration.
partnership and to indemnification for risks in consequence of
c. Under the second paragraph, if the alteration of the
management
immovable property is necessary for its preservation,
2. The right to access and inspection of partnership books
not merely useful to the partnership, the consent of the
3. The right to true and full information of all things affecting the
other parties is not required.
partnership
ART. 1804. Every partner may associate another person with him in 4. The right to a formal account of particular partnership affairs
his share, but the associate shall not be admitted into the under certain circumstances
partnership without the consent of all the other partners, even if the 5. The right to have the partnership dissolved also under certain
partner having an associate should be a manager. (subpartner)interse conditions.

ART, 1805. The partnership books shall be kept, subject to any Partnership Property and Partnership Capital Distinguished
agreement between the partners at the principal place of business
1. Changes in value – partnership property value is variable, it may
of the partnership, and every partner shall at any reasonable hour
vary from day to day with changes in the market value of the
have access to and may inspect and copy any of them.
partnership assets, while partnership capital is constant, it
ART. 1806. Partners shall render on demand true and full information remains unchanged as the amount fixed by agreement of
of all things affecting the partnership to any partner or the legal partners.
representative of any deceased partner or of any partner under legal 2. Assets included – partnership property includes not only the
disability. original capital contributions but all property subsequently
acquired on account of the partnership, while partnership
ART. 1807. Every partner must account to the partnership for any
capital represent aggregate of the individual contributions.
benefit, and hold as trustee for it any profits derived by him without
the consent of the other partners from any transaction connected
with the formation, conduct, or liquidation of the partnership or from
any use by him of its property.
Ownership of certain property of the partnership, the assignee may vail himself of the usual
remedies.
1. Property used by the partnership – it is not unusual for an
individual partner to allow his property to be used in the In case of dissolution of the partnership, the assignee is
partnership business, without intending to transfer ownership entitled to receive his assignor’s interest and may require an
of it. A partner may contribute to the partnership only the use or account from the date only of the last account agreed to by all the
enjoyment of property, reserving the ownership thereof. partners.
2. Property acquired by a partner with partnership funds
A partnership’s right in specific partnership (particular
3. Property carried in partnership books as partnership asset.
partnership) is not assignable
4. Other factors tending to indicate property ownership
a. The fact that the income generated by the property is Rights withheld from the assignee
received by the partnership
b. Taxes thereon are paid by the partnership 1. To interfere in the management
2. To require any information or account
ART. 1811. A partner is co-owner with his partners of specific 3. To inspect any of the partnership books
partnership property.
Rights of assignee of partner’s interest
The incidents of this co-ownership are such that:
1. To receive in accordance with his contract the profits accruing
1. A partner, subject to the provisions of this title and to any to the assigning partner
agreement between the partners, has an equal right with his 2. To avail himself of the usual remedies provided by the event of
partners to possess specific partnership property for fraud in the management
partnership purposes; but he has no right to possess such 3. To receive the assignor’s interest in case of dissolution; and
property for any other purpose without the consent of his 4. To require an account of partnership affairs, but only in case of
partners. the partnership is dissolved, and such account shall cover the
2. A partner’s right in specific partnership property is not period from the date only of the last account agreed to by all the
assignable except in connection with the assignment of partners.
rights of all the partners in the same property.
3. A partner’s right in specific partnership property is not ART. 1814. Without prejudice to the preferred rights of partnership
subject to attachment or execution, except on a claim creditors under Article 1827, on due application to a competent
against the partnership. When partnership property is court by any judgement creditor of a partner, the court which
attached for a partnership debt, the partners, or any of them, entered the judgement, or any other court, may charge the interest
or the representatives of a deceased partner, cannot claim of the debtor partner with payment of the unsatisfied amount of such
any right under the homestead or exemption laws. judgement debt with interest thereon; and may then or later appoint
4. A partner’s right in specific partnership property is not a receiver of his share of the profits, and of any other money due or
subject to legal support under Article 291. to fall due to him in respect of the partnership, and make all other
orders, directions, accounts and inquiries which the debtor partner
Nature of partner’s right in specific partnership property might have made, or which the circumstances of the case may
require.
1. Equal right of possession of the property for partnership
purposes. (Tangible, not intangible things) The interest charged may be redeemed at any time before
a. Should any of them use the land for his own profit, he foreclosure, or in case of a sale being directed by the court, may be
must account to the others from the profits derived repurchased without thereby causing a dissolution:
therefrom.
b. Any partner shall have the right to formal account of 1. With separate property, by any one or more of the partners or
partnership affairs if he is wrongfully excluded from the 2. With partnership property, by any one or more of the parties
possession of its property by his co-partners with the consent of all the partners whose interest are not so
c. The wrongful exclusive possession of partnership charged or sold.
property by one or more partners may be a ground for Nothing in this Title shall be held to deprive the partner of his right, if
dissolution. any, under the exemption laws, as regards his interest in the
d. By agreement, the right to possess specific partnership partnership.
property may be surrendered, and this is especially true
of a partnership with large membership, where the A judgement creditor is a person or entity who has won a lawsuit
management and possession are concentrated in the and has a court order (judgement) requiring another party, the
managing partners. judgement debtor to pay them.
2. Assignment of right to the property
Article 1814 of the [Philippine] Civil Code outlines the remedies
3. Attachment or execution – partnership property is not subject to
available to a judgment creditor of a partner when that partner has an
attachment or execution except on a claim against the
unsatisfied debt.
partnership.
4. Legal support – partners’ right to the land is not subject to legal Remedies of separate judgement creditor of a partner
support, because it belongs to the partnership not partners.
1. Application for a “charging order” after securing judgement on
5. Partner’s interest not a debt due from partnership - A partner is
his credit. A separate creditor of a partner cannot attach or levy
not a creditor of the partnership for the amount of his share.
upon specific partnership property for the satisfaction of his
ART. 1812. A partner’s interest in the partnership is his share of the credit.
profits and surplus. 2. Preferred rights of partnership creditors – claims of the
partnership creditors must be satisfied first before the separate
ART. 1813. A conveyance by a partner of his whole interest in the
creditors of the partners can be paid out of the interest charged.
partnership does not of itself dissolve the partnership (except when
it is clear that the parties contemplated and intended the entire Redemption or purchase of interest charged
withdrawal from such partner and the termination of the partnership as
1. Redemptioner – the interest of the debtor-partner so charged
between the partners), or, as against the other partner in the absence
may be redeemed with the separate property of one or more of
of agreement, entitle the assignee, during the continuance of the
the partners, or with partnership property but with the consent
partnership, to interfere in the management or administration of the
of all the partners whose interest are not so charged or sold.
partnership business or affairs, or to require any information or
2. Redemption price – in an ordinary sale, the price of the thing
account of partnership transactions, or to inspect the partnership
sold theoretically represents its market value or actual value.
books; but it merely entitles the assignee to receive in accordance
Except in foreclosure sale where mere inadequacy of the price
with his contract the profits to which the assigning partner would
obtained at the sheriff’s sale is not material because the
otherwise be entitled. However, in case of fraud in the management
mortgagor is given the right to redeem/
 3. Right of redeeming non-debtor partner – for this reason, the is not exempted from liability to third persons for the debts of
redeeming non-debtor partner, it is believed, does not acquire the partnership.
absolute ownership over the debtor-partner’s interest but holds
ART. 1817. Any stipulation against the liability laid down in the
it in trust for him consistent with the principles of fiduciary
preceding article shall be void, except as among the partners. (pro
relationship.
rata should always be followed when it comes to damages)

ART. 1818. Every partner is an agent of the partnership for the

SECTION 3. – purpose of its business, and the act of every partner, including the
execution in the partnership name of any instrument, for apparently
Obligations of the Partners with Regard to Third Persons
carrying on in the usual way of the partnership of which he is a
ART. 1815. Every partnership shall operate under a firm name, which member binds the partnership, unless the partner so acting has in
may or may not include the name of one or more of the partners. fact no authority to act for the partnership in the particular matter,
and the person with whom he is dealing has knowledge of the fact
Those who, not being members of the partnership, include that he has no such authority.
their names in the firm name, shall be subject to the liability of a
partner. An act of a partner which is not apparently for the carrying on of
business of the partnership in the usual way does not bind the
Firm (company) is the name, title, or style, under which a company partnership unless authorized by the partnership
transacts a business; a partnership of two or more persons; a
commercial house. Except when authorized by the other partners or unless they
have abandoned the business, one or more but less than all partners
Use of misleading name – the partnership may adopt any name it have no authority to:
wishes as long as it is not identical with or receptively similar to a name
which was previously adopted by another entity, or interfere with the 1. Assign the partnership property in trust for creditors or on
right of others, or is contrary to law. the assignee’s promise to pay the debts of the partnership.
2. Dispose of the goodwill of the business
Use of names of deceased persons – the supreme court has rules that 3. Do any other act which would make it impossible to carry on
a partnership cannot continue to use in its firm name the names of the ordinary business of the partnership
deceased persons for such use will run counter to Article 1815. This is 4. Confess a judgement
by reason that a partnership is dissolved by the death of any partner, in 5. Enter into a compromise concerning a partnership claim or
case of non-partners, should be living persons who can be subjected to liability
liability. 6. Submit a partnership claim or liability to arbitration
THIS RULING ABOVE MUST BE CONSIDERED ABANDONED IN VIEW 7. Renounce a claim of the partnership
OF RULE 302 OF THE CODE OF PROFESSIONAL RESPONSIBILITIES. No act of a partner in contravention of a restriction on authority shall
“In the choice of a firm name, no false, misleading or assumed name bind the partnership to persons having knowledge of the restriction.
shall be used. The continued use of the name of a deceased partner is Power of partner as agent of partnership.
permissible provided that the firm indicates in all its communications
that said partner is deceased. In the absence of an agreement to the contrary, all partners have
equal rights in the management and conduct of the business.
ART. 1816. All partners, including industrial ones, shall be liable pro
rata with all their property and after all the partnership assets have As to third persons
been exhausted, for the contracts which may be entered into in the
Limitations upon the authority of any one of the partners are not
name and for the account of the partnership, under its signature and
binding upon innocent third persons, who have the right to assume that
by a person authorized to act for the partnership. However, any
every general partner has power to bind the partnership especially those
partner may enter into a separate obligation to perform a partnership
partners acting with ostensible authority.
contract.
a. No duty to make inquiries as to acting partner’s authority
1. Partnership Liability – partners are principals to the other
b. Presumption that acting partner has authority to bind the
partners and agents for them and for the partnership. They are
partnership
liable to third persons who have dealt with one of them in the
c. No right to assume that acting partner has unlimited authority
same way that a principal is liable to third persons who have
dealt with an agent. Liability of partnership for acts of partners
2. Industrial Liability – A partner, however, may assume a separate
1. Acts for apparently carrying on in the usual way the business of
undertaking in his name with a third party to perform a
the partnership
partnership contract.
Requisites that the partnership will not be liable:
Nature of individual liability of partners. a. The partner so acting has, in fact, no authority; and
b. The third person knows that the acting partner has no
1. Pro rata
authority.
2. Subsidiary or secondary
2. Acts of strict Dominion or Ownership – for acts which are not
3. Liability of industrial partner – even the industrial partner who,
apparently for carrying on in the usual way of the business o f
ordinarily, is not liable for losses would have to pay but, of
the partnership is not bound, unless authorized by all the other
course, he can recover the amount he has paid from the
partners or unless they have abandoned the business.
capitalist partners unless there is an agreement to the contrary.
3. Acts in contravention of a restriction on authority – The
Distinction between a liability and a loss partnership is not liable to third persons having actual or
presumptive knowledge of the restriction.
1. The inability of a partnership to pay a debt to a third party at a
particular time does not necessarily mean that the partnership ART. 1819. Where title to real property is in the partnership name, any
business, as a whole, has been operated at a loss. The partner may convey title to such property by a conveyance executed
partnership may have outstanding credits which for the in the partnership name; but the partnership may recover such
moment may be unavailable for the payment of debts, but property unless the partner’s acts bind the partnership under the
which eventually may be realized upon and yield profits more provisions of the first paragraph of Article 1818, or unless such
the than sufficient to cover all losses. property has been conveyed by the grantee or a person claiming
2. The exemption of the industrial partner to pay losses relates through such grantee to a holder for value without knowledge that
exclusively to the settlement of the partnership affairs among the partner, in making the conveyance, has exceeded his authority.
the partners themselves and has nothing to do with the
Where title to real property is in the name of the partnership,
liabilities of the partners to third persons. An industrial partner
a conveyance executed by a partner, in his own name, passes the
equitable interest of the partnership provided the act is one with the
authority of the partner under the provisions of the first paragraph of 3. Declaration made in presence of a partner – admissions or
Article 1818. declarations made in the presence of a person to be charged as
a partner are admissible to prove the existence of the
Where title to real property is in the name of one or more but
partnership.
not all the partners, and the record does not disclose the right of the
partnership, the partners in whose name the title stand may convey ART. 1821. Notice to any partner of any matter relating to partnership
the title to such property, but the partnership, may recover such affairs, and the knowledge of the partner acting in the particular
property if the partners’ act does not bind the partnership under the matter, acquired while a partner, of then present to his mind, the
provisions of the first paragraph of Article 1818, unless the purchaser knowledge of any other partner who reasonably could and should
of his assignee, is a holder for value, without knowledge. have communicated it to the acting partner, operate as notice to or
knowledge of the partnership, except in the case of a fraud on the
Where the title to real property is in the name of one or more
partnership, committed by or with the consent of that partner.
or all partners, or in a third person, in trust for the partnership, a
conveyance executed by a partner in the partnership name, or in his ART. 1822. Where, by any wrongful act or omission of any z or with the
name, passes the equitable interest of the partnership, provided the authority of his co-partners, loss or injury is caused to any person,
act is one within the authority of the partner under the provisions of not being a partner in the partnership, or any penalty incurred, the
the first paragraph of Article 1818. partnership is liable to therefor to the same extent as the partner so
acting or omitting to act.
Where the title to real property is in the name of all the
partners a conveyance executed by all the partners passes all their ART. 1823.The partnership is bound to make good the loss:
rights in such authority.
1. Where one partner acting within the scope of his
apparent authority receives money or property of a third
person and misapplies it (property of third person).
Legal effects of conveyance, the real property may be registered or
2. Where the partnership in the course of its business
owned in the name of:
receives money or property of a third person and the
a. The partnership money or property so received is misapplied by any
b. One or more but not all the partners partner while it is in the custody of the partnership.
c. One or more, or all the partners, or in a third person in trust for
ART. 1824. All partners are liable solidarily with the partnership for
the partnership
everything chargeable to the partnership under Articles 1822 and
d. All the partners
1823.
Protection of innocent purchasers for value
Rule is different from Article 1816, arising from their contractual
1. Legal title to partnership property in partner making the obligations. When it resulted from breach of trust, or wrongful act or
conveyance – where the legal title is in the partner making the omission, the partnership is solidarily liable, not pro rata (1816).
conveyance, although the equitable or beneficial title or interest
ART. 1825. When a person by words spoken, or written, or by
is in the firm, a purchaser without notice may acquire a valid title
conduct, represents himself, as consents to another representing
since he has the right to presume that possession or interest of
him to anyone, as a partner in an existing partnership or with one or
the partnership is subordinate to and not inconsistent with the
more persons not actual parts, he is liable to any such persons to
record title.
whom such representation has been made, who has, on the faith of
2. Legal title of property in partnership name, conveyed in
such representation, given credit to the actual or apparent
partnership name – a conveyance by a partner of partnership
partnership, and if he has made such representation or consented to
property in the partnership name even where it has been
its being made in a public manner he is liable to such person,
conveyed by the grantee to a holder for value and without notice
whether the representation has or has not been made or
or knowledge that the partner, in making the conveyance, had
communicated to such person so giving credit by or with the
exceeded his authority.
knowledge of the apparent partner making the representation or
3. Authorization or ratification of conveyance. – A conveyance
considering to its being made:
of partnership property by one partner may be authorized by his
co-partners, or when made without authority, may be ratified by 1. When a partnership liability results, he is liable as though he
them. were an actual member of the partnership;
2. When no partnership liability results, he is liable pro rata
ART. 1820. An admission or representation made by any partner
with the other persons, if any, so consenting to the contract
concerning partnership affairs within the scope of his authority in
or representation as to incur liability, otherwise separately.
accordance with this title is evidence against the partnership.
When a person has been thus represented to be a partner in an
A person is not bound by the act, admission, statement or agreement of
existing partnership, or with one or more persons not actual
another which he has no knowledge or to which he has not given his
partners, he is an agent of the persons consenting to such
consent except by virtue of particular relation between them.
representation to bind them to the same extent and in the same
1. Admissions by a party as testified to by a third person are manner as though her were a partner in fact, with respect to persons
admissible in evidence against him in litigation. who rely upon the representation. When all the members of the
2. Admissions by another are received against a party if the former existing partnership consent to the representation, a partnership act
is acting in the capacity of agent of the latter. or obligation results; but in all other cases it is the joint act or
3. When a partner makes admissions for himself only without obligation of the person acting and the persons consenting to the
purporting to act for the partnership, he alone shall be representation.
chargeable with his admissions
4. After dissolution, admission made by a partner will bind the
partnership only if necessary to wind up partnership affairs. When liability pro rata – no existing partnership and all those represented
as partners consented to the representation, or not all of the partners of
Necessity of proving existence of partnership
an existing partnership consented to the representation, then the
1. Evidence other than the admission itself. – the partnership liability of the person who represented himself to be a partner or who
relation must be shown and proof of that fact must be made by consented to his being represented as partner, and all those made and
evidence other than the admission itself. consented to such representation is joint, or pro rata.
2. Declaration made by partner acting for the partnership. – Once
When liability separate – When there is no existing partnership and not
the existence of the partnership relation has been proven by
all but only some of those represented as partners consented to the
other independent evidence made by any partner speaking for
representation, or none of the partners in an existing partnership
partnership concerning partnership affairs, while acting within
consented to such representation, when the liability will be separate
the scope of his authority, are admissible as evidence against
between him who represented as a partner and the others that consent.
the partnership.
ART. 1826. A person admitted as a partner into an existing 1. A partner has been declared insane in any judicial
partnership is liable for all the obligations of the partnership arising proceeding or is shown to be of unsound mind;
before his admission as though he had been a partner when such 2. A partner becomes in any other ways incapable of
obligations were incurred, except that this liability shall be satisfied performing his part of the partnership.
only out of partnership property, unless there is stipulation to the 3. A partner has been guilty of such conduct as tends to affect
contrary. prejudicially the carrying on of the business
4. A partner willfully or persistently commits a breach of the
When an incoming partner assumed the obligation of a retiring
partnership agreement, or otherwise so conducts himself in
partner, he is affirmatively directly liable to the old partnership creditor if
matters relating to the partnership business that is not
the assumption was made to benefit the firm creditors.
reasonably predictable to carry on the business in
ART. 1827. The creditors of the partnership shall be preferred to partnership with him;
those of each partner as regards the partnership property. Without 5. The business of the partnership can only be carried on at a
prejudice to this right, the private creditors of each partner may ask loss;
for the attachment and public sale of the share of the latter in the 6. Other circumstances render a dissolution equitable
partnership assets.
On the other application of the purchaser of a partner’s interest
under Article 1813 or 1814:

CHAPTER 3 1. After the termination of the specific term or undertaking

2. At any time if the partnership was a partnership at will when
DISSOLUTION AND WINDING UP the interest was assigned or when the charging order was
ART. 1828. The dissolution of a partnership is the change in the issued.
relation of the partners caused by any partner ceasing to be ART. 1832. Except so far as may be necessary to wind up partnership
associated in the carrying on as distinguished from the winding up of affairs or to complete transactions begun but not finished,
the business. dissolution terminates all authority of any partner to act for the
Dissolution – is the change in the relation of the partners caused by any partnership:
partner ceasing to be associated in the carrying on of the business. 1. With respect to the partners
Winding up – is the process of settling the business or partnership affairs a. When the dissolution is not by the act, insolvency, or
after dissolution death of a partner
b. When the dissolution is by such act, insolvency or
• Judicially – under the control and direction of the proper court death of a partner, in cases where Article 1833 so
requires;
• Extrajudicially – the partners themselves without intervention
2. With respect to persons not partners, as declared in Article
of the court
1834.
Termination – is that point in time when all partnership affairs are
ART. 1833. Where the dissolution is caused by the act, death or
completely wound up and finally settled. End of partnership life.
insolvency of a partner, each partner is liable to his co-partners for
ART. 1829. On dissolution the partnership is not terminated but his share of any liability created by any partner acting for the
continues until the winding up of partnership affairs is completed. partnership as if the partnership had not been dissolved unless:

ART. 1830. Dissolution is caused: 1. The dissolution being by act of any partner, the partner
acting for the partnership had knowledge of the dissolution;
1. Without the violation of the agreement between partners
2. (or) The dissolution being by the death or insolvency of a
a. By the termination of the definite term or particular
partner, the partner acting for the partnership had
undertaking specified in the agreement
knowledge or notice of the death or insolvency.
b. By express will of any partner, who must act in good
faith, when no definite term or particular When a partner has knowledge or notice of a fact
undertaking is specified.
The Uniform partnership Act defines two terms as follow:
c. By the express will of all the partners who have not
assigned their interests or suffered them to be 1. A persons has knowledge of a fact within the meaning of this Act
charged for their separate debts either before or not only when he has actual knowledge thereof, but also when
after the termination of any specified term or he has knowledge of such other facts as in the circumstances
undertaking (must be unanimous) show bad faith.
d. By the expulsion of any partner from the business 2. A person has notice of a fact within the meaning of this act when
bona fide in accordance with such power conferred the person who claims the benefit of the notice:
by the agreement between the partners. a. States the fact to such person
2. In contravention of the agreement between the partners, b. Delivers through the mail or by other means of
where the circumstances do not permit a dissolution under communication, a written statement of the fact to such
any other provision of this article, by the express will of any person or to a proper person at his place of business or
partner at any time residence.
3. By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on ART. 1834. After dissolution, a partner can bind the partnership,
in partnership except as provided in the third paragraph of this article:
4. When specific thing, which a partner had promised to 1. By an act appropriate for winding up partnership affairs or
contribute to the partnership, perishes before the delivery; completing transactions unfinished at dissolution;
in any case by the loss of the thing, when the partner who 2. By any transaction which would bind the partnership if
contributed it having reserved the ownership thereof, has dissolution had not taken place, provided, the other party to
only transferred to the partnership the use or enjoyment of the transaction:
the same; but the partnership shall not be dissolved by the a. Had extended credit to the partnership prior to the
loss of the thing when it occurs after the partnership has dissolution and had no knowledge or notice of the
acquired the ownership thereof; dissolution; or
5. By the death of any partner b. Though he had not so extended credit, had
6. By the insolvency of any partner or of the partnership nevertheless known of the partnership prior to the
7. By the civil interdiction of any partner (legal restraint) dissolution, and, having no knowledge or notice of
8. By decree of court under the following article dissolution, the fact of dissolution had not been
ART. 1831. On application by or for a partner, the court shall decree a advertised in a news paper of general circulation in
dissolution whenever:
 the place at which the partnership was regularly ART. 1837 – ART. 1839. (READ IT IN THE BOOK OR ONLINE)
carried on.
Dissolution is caused:

(W-C-U-S-D-I-C-D)
The liability of a partner under the first paragraph, No. 2,
shall be satisfied out of partnership assets alone when such partner 1. Without violation of the partners (T-E-E-E)
had been prior to dissolution: a. Termination of the definite term or particular
undertaking
1. Unknown as a partner to the person whom the contract b. By the express will of any partner who must act in
is made good faith
2. So far unknown and inactive in partnership affairs that c. By the express will of all the partners who have not
the business reputation of the partnership could not be assigned their interest
said to have in any degree due to his connection with it. d. By the expulsion of any partner from the business
2. In contravention of the agreement between the partners
The partnership is in no case bound by any act of a partner after
3. By the event in which makes it unlawful for the partnership to
dissolution: carry on
1. Where the partnership is dissolved because it is unlawful to 4. When a specific thing to be contributed perishes before the
delivery and has only transferred the use or enjoyment of it
carry on the business, unless the act is appropriate for
5. By the death of any partner
winding up partnership affairs
6. By the insolvency of any partner or of the partnership
2. Where the partner has become insolvent
7. By the civil interdiction of any partner
3. Where the partner had no authority to wind up affairs; except
8. By decree of court
by a transaction with one who
a. Had extended credit to the partnership to Dissolution effected in contravention of partnership agreement:
dissolution and had no knowledge or notice of his (DLP)
want of authority; or 1. Dissolution may be for any cause or reason
b. Had not extended credit to the partnership prior to 2. Power of dissolution always exists
dissolution, and, having no knowledge or notice of 3. Legal effects of dissolution
his want of authority, the fact of his want of authority
has not been advertised in the manner provided for Loss of specific thing:
advertising the fact of dissolution in the first 1. Loss before delivery
paragraph. 2. Loss after delivery
3. When only use or enjoyment has been contributed
Nothing in this article shall affect the liability under Article 1825 of
any person who after dissolution represents himself or consents to On application by or for a a partner the court shall decree a
another representing him as a partner in a partnership engaged in a dissolution whenever: (IBIMOP)
business.
1. A partner has been declared insane
2. A partner becomes incapable
3. Misconduct
Character of notice required: 4. Persistent breach of partnership contract
5. Business can be carried on only at a loss
1. As to prior dealers – Notice must be actual. Mere mailing of a
6. Other circumstances
letter to a former dealer is insufficient to relieve the retiring
partner from subsequent liability, where the notice was never On application of a partner’s interest (TI)
received.
1. After the termination of the specific term or particular
2. As to all others – Notice is accomplished by an advertisement in
undertaking
a local newspaper.
2. At any time if the partnership was a partnership at will when
ART. 1835. The dissolution of the partnership does not of itself the interest was assigned or when the charging order was
discharge the existing liability of any partner. issued

A partner is discharged from any existing liability upon The authority of a partner affects his co-partners is not deemed
terminated except;
dissolution of the partnership by an agreement to that effect
between himself, the partnership creditor and the person or 1. The cause of the dissolution is the act of a partner and the
partnership continuing the business; and such agreement may be acting partner had knowledge of the dissolution
inferred from the course of dealing between the creditor having 2. The cause of the dissolution is death or insolvency of a partner
knowledge of the dissolution and the person or partnership and the acting partner had knowledge of it.
continuing the business.
When a partner has knowledge or notice of a fact
The individual property of a deceased partner shall be liable
1. When he has actual knowledge thereof, but also when he has
for all obligations of the partnership incurred while he was a partner,
knowledge of such other facts as in the circumstances show
but subject to prior payment of his separate debt. bad faith
Individual creditors of the deceased partner are preferred 2. A person has notice of a fact
a. States the fact to such person
ART. 1836. Unless otherwise agreed, the partners who have not b. Delivers through mail or by other means of
wrongfully dissolved the partnership or legal representative of the communication
last surviving partner, not insolvent, has the right to wind up the
Partnership Liable (Article 1834) (WCD)
partnership affairs, provided, however, that any partner, his legal
representative or his assignee, upon cause shown, may obtain 1. Act appropriate for winding up partnership affairs
winding up by the court. 2. Act for completing transactions unfinished at dissolution
3. Any transaction which would bind the partnership if the
dissolution had not taken place
a. Had extended credit to the partnership prior to
Persons authorized to wind up:
dissolution and had no knowledge or notice
1. The partners designated by the agreement; b. Known of the partnership prior to dissolution and had
2. In the absence of such agreement, all the partners who have not no knowledge or notice of dissolution
wrongfully dissolved the partnership
Partnership Not Liable (IALI)
3. The legal representative of the last surviving partner.
1. Partnership was dissolved because it was unlawful unless the
act is appropriate for winding up affairs
 2. Where the partner has become insolvent 6. Any partner or his legal representative shall have the right to
3. Where the partner had no authority to wind up partnership enforce the contributions in no.3 to the extent of the amount
affairs except by a transaction with a third person who is in which he has paid in excess of his share of the liability
good faith. 7. The individual property of a deceased partner shall be liable
4. Where acting partner has become insolvent for the contributions
8. When the individual properties of the partners are in
Character of notice required
possession of the court for distribution, partnership creditors
1. As to prior dealers – actual notice shall have priority on partnership property and separate
2. As to all others – Advertisement creditors on individual property
9. Where a partner has become insolvent or his estate is
Manner of winding up insolvent, the claims against his separate property shall rank:
a. Those owing to separate creditor
1. Judicially – control of the proper court
b. Those owing to partnership creditor
2. Extrajudicially – by the partners themselves
c. Those owing to partners by way of contribution
Persons authorized to wind up (DWS)
Cases when the creditors of the dissolved partnership are also
1. The partners designated by the agreement creditors of the person or partnership continuing the business
2. In the absence of agreement, all the partners who have not
1. New partner is admitted or partner retires and assigns his
wrongfully dissolved the partnership
rights to the partners or third person, if the business is
3. The legal representative of the last surviving partner
continued without liquidation of partnership
Rights of partners in case of liquidation 2. All but one partner retire and assign their rights to the
remaining partner who continues the business without
Without contravention or violation
liquidation of partnership affairs
1. To have the partnership property applied to discharge the 3. Any partner retires or dies and the business dissolved is
liabilities of the partnership continued with the consent of the retired partners but without
2. To have the surplus applied to pay in cash in the net amount assignment of his right in partnership property
owing to the respective partners. 4. When all the partners assign their rights in partnership
property to one or more third persons who promise to pay the
In contravention or violation debts who continue the business of the dissolved partnership
5. Any partner wrongfully causes a dissolution and the remaining
1. Rights of a partner who has not caused the dissolution
partners continues the business either alone or with others
wrongfully:
without liquidation of partnership affairs.
a. To have partnership property applied for the payment
6. When a partner is expelled and the remaining partners
of its liabilities and to receive his share in the surplus
continue the business either alone or with others without
b. To be indemnified for damages caused by the partner
liquidation of the partnership affairs
guilty of wrongful dissolution
c. To continue the business in the same name during the Liability of persons continuing business of dissolved partnership
agreed term of the partnership
d. To possess partnership property should they decide 1. The liability of the new or incoming partners shall be satisfied
to continue out of partnership property only unless there is stipulation in
2. Rights of a partner who wrongfully caused the dissolution the contrary
a. If the business is not continued, to have the 2. Third person promises to pay the debts of the partnership
partnership property applied to discharge its liabilities otherwise creditors of the dissolved partnership have no claim
and to receive in cash his share of the surplus less on the partnership continuing the business or its property
damages caused by his wrongful dissolution unless the assignment can be set aside as a fraud on creditors
b. If the business is not continued
Rights of retiring or legal representative of deceased partners
i. Have the value of his interest in the
when business is continued
partnership at the time of dissolution
ascertained and pain in cash or secured by 1. To have the value of the interest of the retiring or deceased
bond approved by court partner in the partnership ascertained as of the date of
ii. To be released from all existing and future dissolution
liabilities of the partnership 2. To receive thereafter, as an ordinary creditor, an amount equal
to the value of his share in the dissolved partnership with
Rights of injured partner where partnership contract rescinded
interest, or, at his option, in lieu of interest the profits
(ART. 1838)
attributable to the use of his right.
1. Right of a lien on, or retention of, the surplus of partnership
Partner’s right to an account of his interest
property after satisfying partnership liabilities for any sum of
money paid or contributed by him 1. Accrual of right – the right to demand an accounting of the
2. Right to subrogation in place of partnership creditors after value of his intertest accrues to any partner or his legal
payment of partnership liabilities representative after dissolution in the absence of an
3. Right of indemnification by the guilty partner against all debts agreement to the contrary
and liabilities of the partnership 2. Person liable to render an account – the right of a partner or
the one who represents him as owner of his interest to an
Rules
account ie, to a statement of the partnership affairs and in due
1. The assets of the partnership are: course of liquidation to a payment of the amount of his interest
a. The partnership property may be exercised as against
b. The contribution of the partners necessary for the a. The winding up partner
payment of all the liabilities b. The surviving partner
2. The liabilities of the partnership shall rank in the order of c. The person or partnership continuing the business
payment as follows:
a) Those owing to creditors other than partners
b) Those owing to partners other than for capital and profits
c) Those owing to partners in respect of capital
d) Those owing to partners in respect of profits
3. Assets are applied in order of declaration in No. 1
4. Partners shall contribute the amount necessary to satisfy
liabilities
5. An assignee for the benefit of creditors appointed by the court
shall have the right to enforce the contributions specified in
the preceding number
 CHAPTER 4 Essential requirements for the formation of a limited partnership

LIMITED PARTNERSHIP 1. The certificate or articles of the limited partnership which

states the matters in the articles, must be signed and sworn
Limited Partnership
to
A limited partnership is one formed by two or more persons, under the 2. Such certificate shall be filed for record in the office of the
provisions of the following article, having as members one or more securities of exchange and commission.
general partners and one or more limited partners. The limited
Presumption of General Partnership
partners as such shall not be bound by partnership obligation.
1. Those who seek themselves the protections accorded by law
Characteristics of a limited partnership
to limited partners must show due compliance with the
1. A limited partnership is formed by compliance with the statutory requirements
statutory requirements 2. The failure of the limited partnership to extend its term when
2. One or more general partners control the business and are it expired and to register it anew with the securities of
personally liable to the creditors exchange and commission has the effect of divesting the
3. One or more limited partners contribute capital and share in limited partners of the privilege of limited liability.
the profits but do not participate in the management of the
Limited Partners contribution
business and are not personally liable partnership obligations
beyond their capital contributions 1. Medium – A limited partner or special partner is not allowed to
4. A limited partner can ask for the return of their capital contribute services
contributions under the circumstances prescribed by law 2. Time – the contribution of the limited partners shall be made
5. The partnership debts are paid out of the common fund and before the formation of the limited partnership.
the individual properties of the general partners
The surname of the limited partner shall not appear in the name
Purpose of statutes allowing the formation of limited of the business unless;
partnerships
1. The surname if also a surname of a general partner.
1. Secure capital from others for one’s business and still retain 2. Prior to the time the limited partner become such, the
control business has had been carried on under a name in which his
2. Share in the profits of a business without risk of personal surname appeared.
liability
Requisites of liability for false certificates
3. Associate as partners with those who have business skills.
1. He knew the certificate to be false when he signed it or
Differences between general and limited partner
subsequently but with sufficient time to cancel or amend the
1. Liability certificate or file a petition for the cancelation or amendment,
2. Management he failed to do so.
3. Contribution 2. The person seeking to enforce the liability has relied upon the
4. Proper Party to Proceedings false statement in transacting business with the partnership
5. Assignability of interest 3. The person suffered a loss as a result of reliance upon such
6. Name false statement.
7. Business prohibitions
General partners have no authority to: (ART.1850)
8. Dissolution
1. Do any act in contravention to the certificate
Article 1844:
2. Do any act which would make it impossible to carry on the
1. The name of the business adding thereto the word “Limited” ordinary business of the partnership
2. The character of the business 3. Confess a judgement against the partnership
3. The location of the principal place of the business 4. Possess a partnership property or assign their rights in
4. The name and place of residence of each partner; general and specific partnership property for other than partnership
limited respectively designated purposes.
5. The term for which the partnership to exist 5. Admit a person as a general partner
6. The amount of contribution and a description or agreed value 6. Admit a person as a limited partner unless the right to do so
of the other party contributed by each limited partner is given in partnership
7. The additional contributions, if any, to be made by each limited 7. Continue the business with partnership property on the death,
partner, and the times at which or the events on the happening retirement, insolvency, civil interdiction, or insanity of a
of which they shall be made general partner, unless the right to do so is given in the
8. The time, if agreed upon, when the contributions of each certificate
limited partner shall be returned
A limited partner shall have the same rights as general partners
9. The share in the profits or other compensation by way of
to:
income which the limited partner shall receive by reason of his
contribution 1. (1) Have the partnership books kept at the principal place of
10. The right, if given, of the limited partner to substitute an the business of the partnership and at reasonable hour to (2)
assignee as contributor in his place; and the terms and inspect and copy any of them
conditions of the substitution. 2. (3) Have on demand true and full information on all things
11. The right, if given, of partners to admit additional general affecting the partnership, and a (4) formal account of
partners partnership affairs whenever circumstances render it just and
12. The right, if given, of one or more limited partners to priority reasonable
over other limited partners as to contribution or as to 3. (5) Have dissolution and winding up by decree of court. // (6)
compensation by way of income and the nature of such To receive a share of t he profits or other compensation by
priority. way of income (7) To receive the return of the contribution
13. The right, if given, of the general partners to continue the provided the partnership assets are in excess of liabilities
business on the death, retirement, civil interdiction, insanity,
or insolvency of a general partner
14. The right, if given, of the limited partner to demand and
ART. 1854 No limited partner shall in respect to such any claim
receive property other than cash in return for their contribution
1. Receive or hold as collateral security any partnership property
2. Receive from a general partner or the partnership any
payment, conveyance, or release from liability, if at the time
the assets of the partnership are not sufficient to discharge
liabilities to persons not claiming as general or limited
partners.
3.
Allowable Transactions (LP) 3. The certificate as must be registered in the Securities and
Exchange Commission
1. Granting loans to the partnership
2. Transacting other business with it Liability of substituted limited partner and assignor.
3. Receiving a pro rata share of the partnership assets with
1. It must be observed that the substituted limited partner is
general creditors if is not also a general partner
liable for all the liabilities of his assignor except only those of
Preferred Limited Partners which he was ignorant at the time he became a limited partner
and which could not be ascertained from the certificate
1. Return of their contributions
2. Similarly, the assignor is not released from liability to persons
2. Their compensation by way of income
who suffered damage by reliance on a false statement in the
3. Any other matter
certificate and to creditors who extended credit or whose
A limited partner shall not receive from a general partner out of claims arose before the substitution.
partnership property any part of his contribution until: (1857)
The general partner can continue the business
(Also the requisites)
1. Under a right so to do stated in the certificate
1. All liabilities of the partnership except liabilities to general
2. With the consent of all members
partners and to limited partners on account of their
contributions have been paid or there remains property of the Payment Order (1863):
partnership sufficient to pay them
1. Those due to creditors including limited partners except those
2. The consent of all members is had, unless the return of the
on account of their contributions
contribution may be rightfully demanded under the provisions
2. Those to limited partners in respect to their share of the profits
of the second paragraph and
and other compensation by way of income on their
3. The certificate is cancelled or so amended as to set forth the
contributions
withdrawal or reduction.
3. Those to limited partners in respect to the capital of their
A limited partner may right fully demand the return of his contributions
contribution 4. Those to general partners other than for capital and profits
5. Those to general partners in respect to profits
1. On the dissolution of a partnership
6. Those to general partners in respect to capital
2. When the date specified in the certificate for its return has
arrived or A certificate shall be amended when (1864):
3. After he has given six months’ notice in writing to all other
1. There is a change in the name of the partnership or character
members, if no time specified in the certificate either for the
of the contribution of any limited partner
return of the contribution or for dissolution
2. A person is substituted as a limited partner
A limited partner may have the partnership dissolved and its 3. An additional limited partner is admitted
affairs wound up when: 4. A person is admitted as a general partner
5. A general partner retires, dies, becomes insolvent or insane,
1. When rightfully but unsuccessfully demands the return of his
or is sentenced to civil interdiction and the business is
contribution or
continued
2. The other liabilities of the partnership have not been paid or
6. There is a change in the character of the business of the
the partnership property is insufficient for their payment as
partnership
required and the limited partner would otherwise be entitled to
7. There is a false or erroneous statement in the certificate
the return of his contribution.
8. There is a change in the time as stated in the certificate for
Exceptions to the right of a limited partner to cash in return for the dissolution of the partnership or for the return of
contribution contribution
9. A time is fixed for the dissolution of the partnership or the
1. When there is stipulation to the contrary in the certificate or return of a contribution, no time having been specified in the
2. Where all the partners have consent to the return other than certificate or
in form of cash 10. The members desire to make a change in any statement in
the certificate in order that it shall accurately represent the
A limited partner is liable to the partnership:
agreement among them.
1. For the difference between his contribution as actually made
The writing to amend a certificate shall: (1865)
and stated in the certificate as having been made
2. For any unpaid contribution which he agreed in the certificate 1. Conform to the requirements of Article 1844 as far as
to make in the future at the time and on the conditions stated necessary to set forth clearly the change in the certificate
in the certificate which it is desired to make
2. Be signed and sword to by all members an amendment
A limited partner holds as trustee for the partnership
substituting a limited partner or adding a limited or general
(Liabilities of a trustee)
partner shall be signed also by the member to be substituted
1. (1) Specific property stated in the certificate as contributed by or added and when a limited partner is to be substituted the
him but which was not contributed or (2) which has been amendment shall also be signed by the assigning limited
wrongfully returned partner.
2. (3) Money or other property wrongfully paid or conveyed to
A certificate is cancelled or amended when:
him on account of his contribution. (4) Other properties
1. A writing in accordance with the provisions of the first or
Requisites for waiver or compromise of liabilities
second paragraph
1. The waiver or compromise is made with the consent of all the 2. A certified copy of the order of court in accordance with the
partners and provision of the fourth paragraph
2. The waiver or compromise does not prejudice the partnership 3. After the certificate is duly amended in accordance with this
creditors who extended credit or whose claims arose before article, the amended certificate shall thereafter be for all
the cancellation or amendment of the certificate purposes the certificate provided for in this chapter.

Requisites in order that the assignee to become a substituted

limited partner

1. All the members must consent to the assignee becoming a

Requirements for cancellation and amendment
substituted limited partner or the limited partner, being
empowered by the certificate, must give the assignee the right 1. The amendment must be in writing
to become a limited partner. 2. It must be signed and sworn to by all members including the
2. The certificate must be amended in accordance with Article new members and the assigning limited partner in case of
1865 substitution or addition of a limited or general partner.
 3. The certificate, as amended, must be filed for record in the
securities and exchange commission

When limited partner a proper party

1. The limited partner may maintain an action in his own name

where the object is to enforce his individual rights against the
partnership and to recover damages for violation of such right
2. AN action at law may be maintained by creditors of a firm
against a limited partner to account for and restore sums
withdrawn by him from the capital of the firm with outstanding
debts on a voluntary dissolution

A limited partnership formed under the law prior to this code may
become a limited partnership under this chapter by complying
with the provision provided the certificate sets forth:

1. The amount of the original contribution of each limited partner

and the time when the contribution was made
2. That the property of the partnership exceeds the amount
sufficient to discharge its liabilities to persons not claiming as
general or limited partners by an amount greater than the sum
of the contributions of its limited partner