PARTNERSHIP void; profit will be confiscated by the If the contract is not in public instrument

government; tools, instruments or proceeds such as when it is entered into orally or the
CHAPTER 1 will be confiscated by the government, instrument is a private instrument or it is
GENERAL PROVISON however the contribution will be return to the public instrument but it is not recorded in the
partner, unless those contribution as well is Office of Securities and Exchange
The law that governs the partnership considered unlawful it will be confiscated by Commission, the partnership still acquires
(particular subject matter) is the New Civil the government. juridical personality.
Code of the Philippines effective on August 5. The primary purpose must be to obtain
13, 1950, Book Four. profits and to divide profits among the Article 1769 In determining whether a
parties. There must be common interest partnership exists, these rules shall apply:
Under the civil code, a partnership is both or benefit. 1) Except as provided by Article 1825,
contract and a business organization. *Absence of any essential elements there is persons who are not partners as to each
 As a special contract - Article 1767 no partnership. other are not partners as to third persons.
 As business organization - Article 1768 2) Co-ownership or co-possession does not
General Professional Partnership / of itself establish a partnership, whether
Article 1767 By the contract of partnership Particular Partnership such co-ownership or co- possessors do
two or more persons bind themselves to Two or more persons may also form a or do not share any profits made by the
contribute money, property, or industry to a partnership for the exercise of a profession. use of the property.
common fund with the intention of dividing 3) The sharing of gross returns does not of
the profits among themselves. Principle of Delectus Personae (choice of itself establish a partnership, whether or
Two or more persons may also form a persons) – a person has the right to select not the persons sharing them have a joint
partnership for the exercise of a profession. persons with whom he wants to be or common right or interest in any
associated with in partnership. property from which the returns are
Characteristics of a Contract of derived.
Partnership Article 1768 The partnership has a juridical 4) The receipt by a person of a share of the
1. Bilateral/Multilateral – formed by two or personality separate and distinct from that of profits of a business is prima facie
more persons creating reciprocal rights each of the partners even in case of failure evidence that he is a partner in the
and obligations. to comply with the requirements of Article business, but no such inference shall be
2. Consensual – perfected by mere 1772, first paragraph. drawn if such profits were received in
consent. payment: (there is no partnership)
3. Commutative – the undertaking of each Partnership, as a juridical person a. As a debt by installments or otherwise.
partner is considered as the equivalent of As an independent juridical person, a b. As wages of an employee or rent to a
that of the others. partnership may enter into contracts, landlord.
4. Onerous – contributions in the form of acquire and possess property of all kinds in c. As an annuity to a widow or
either money, property and/or industry its name, as well as incur obligations and representative of a deceased partner.
must be made. There is exchange of bring civil or criminal actions. It is a being of d. As interest on a loan, though the
consideration to divide profits among legal existence, susceptible of rights and amount of payment vary with the profits
themselves. obligations or the being subject of juridical of the business.
5. Nominate – has a special name or relations. e. As the consideration for the sale of a
designation. Consequences of partnership is considered goodwill of a business or other property
6. Principal – its existence or validity does as a person, juridical person by installments or otherwise.
not depend on some other contract. It can -partnership can acquire properties
stand alone. -partnership can disposed the properties (1)General Rule but not Absolute Rule:
7. Preparatory - entered into as a means to -partnership can entered into the contract persons who are not partners as to each
an end. Preparation to entered into -partnership can incur obligations other are not partners as to third persons.
another contract -partnership can sue and can be sued Exception: Partnership by estoppel.
(if the partnership violated the contract) (2)Co-ownership or co-possession does not
Elements of a Contract of Partnership -partnership is a separate juridical person established a partnership even though there
Essential Features or Requisites is distribution of profit or none because its a
1. There must be a valid contract - form of Concept/ Doctrine of separate juridical requirement there must be agreement
contract determined the validity of a personality between the parties that they will going
contract of partnership. The personality of the partnership is create a partnership or created a
-essential elements of a contract (consent, considered separate and distinct from those partnership.
object, cause) persons opposing the partnership, therefore (3)Sharing of gross returns does not
determined existence of contract that would the consequence is that the properties of the established a partnership because its a
be matter on the form of a contract. partnership would not be considered as the requirement that there is an agreement.
2. The parties must have legal capacity to properties of the partners or vice versa, (4)Receipt of share in the profits is a strong
enter into the contract because they have separate personality presumptive evidence of partnership. Prima
-if one of the parties is incapable of giving apart from those persons opposing it, the facie can be rebutted (to prove something is
consent the contract is voidable, if both obligations of the partnership are not false by using arguments and evidence)
parties is incapable of giving consent the considered obligations of the partners
contract is enforceable because they considered separate from one
3. There must be mutual contribution of another.
money, property and industry to a
common fund
-property can be contributed whether real Article 1770 A partnership must have a
property or personal property (tangible or Acquisition of juridical personality even lawful object or purpose, and must be
intangible); industry is service in case of failure to comply with established for the common benefit or
4. The object (or purpose) must be lawful requirements of Article 1772, first interest of the partners.
-if the object is unlawful the contract will be paragraph. When an unlawful partnership is
dissolved by a judicial decree, the profits requires certain form so that contract will personality, and shall be governed by the
shall be confiscated in favor of the State, become valid, enforceable, convenience of provisions relating to co-ownership.
without prejudice to the provisions of the the parties or by third persons
Penal Code governing the confiscation of Secret partnerships without juridical
the instruments and effects of a crime. Form of partnership of contract personality
General Rule: No special form is Partnership relation is created only by the
Lawful object or purpose required for the validity or existence of the voluntary agreement of the partners. It is
Although partnership may have been lawful contract of partnership. essential that the partners are fully informed
at the start, it shall be deemed dissolve if “ Exceptions not only of the agreement but of all matters
any event makes it unlawful for the business 1. Where immovable property or real rights affecting the partnership. Secret
of partnership to be carried on or for the are contributed, the partnership contract partnerships are not by nature partnerships.
members to carry it on partnership.” shall be void unless: Secret partnerships shall be governed by
a. It is reduced to writing in a public the provisions relating to co- ownership.
Effects of unlawful partnership instrument (Art. 1771).
1. If the illegality of the partnership it b. An inventory of the property Importance of giving publicity to articles
constitutes a crime contributed is made, signed by the of partnership
a) The partnership is void. Thus, it has no parties and attached to the public It is essential that the arts of partnership be
juridical personality. instrument. (Art.1773). given publicity for the protection not only of
b) The partners of crime and the  Failure to comply with above the members themselves but also 3rd
instruments or tools (proceeds) which it requirements produces the following persons from fraud and deceit. A member
was committed shall be forfeited in the effects who transacts business for the secret
favor of the government, unless they be  The partnership contract is void partnership in his own name becomes
the property of a third person not liable  The partnership does not acquire personally bound to 3rd persons unaware of
for the offense, but those articles which juridical personality the existence of such association.
are not the subject of lawful commerce 2. Where the contract is by its terms not Partnership liability may still result, however,
shall be destroyed. to be performed within a year from the in cases of estoppel.
2. If the personality of partnership does not making thereof, such partnership contract
constitute a crime or there has been no is covered by the statute of frauds and Suits by or against voluntary associations
criminal prosecution thus requires a written agreement to be under the provision
a) The partnership is void. Thus, it has no enforceable.  It cannot be sue as such because only
juridical personality. 3. Where the contract of partnership has a natural or juridical persons or entities
b) The proceeds or profits but not the capital of 3,000 pesos or more, in money authorized by law may be parties to a civil
contributions of the partnership shall be or property action.
forfeited. a) it shall appear in a public  It may be sued as such in its common
instrument (notary) and name to prevent prejudice to third
Article 1771 A partnership may be b) must be recorded in the Office of persons when two or more person not
constituted in any form, except where the Securities and Exchange organized as an entity with juridical
immovable property or real rights are Commission personality enter into a transaction, they
contributed thereto, in which case a public  Failure to comply with above may be sued under the common name by
instrument shall be necessary. requirements produces the following which they are generally or commonly
effects known.
Article 1772 Every contract of partnership  The partnership is contract is still
having a capital of three thousand pesos or valid. The partnership still acquires Article 1776 As to its object, a partnership
more, in money or property, shall appear in juridical personality. is either universal or particular. As regards
a public instrument, which must be recorded  The partnership is contract is still the liability of the partners, a partnership
in the Office of the Securities and Exchange valid because the liability of the may be general or limited.
Commission. Failure to comply with the partnership and members thereof to
requirements of the preceding paragraph third persons are not affected. Article 1777 A universal partnership may
shall not affect the liability of the partnership refer to all the present property or to all the
and the members thereof to third persons. Article 1774 Any immovable property or an profits.
interest therein may be acquired in the
Article 1773 A contract of partnership is partnership name. Title so acquired can be Article 1778 A partnership of all present
void, whenever immovable property is conveyed only in the partnership name. property is that in which the partners
contributed thereto, if an inventory of said contribute all the property which actually
property is not made, signed by the parties, Acquisition or conveyance of property by belongs to them to a common fund, with the
and attached to the public instrument. partnership intention of dividing the same among
Since partnership has juridical personality of themselves, as well as all the profits they
Form of a contract - is a manner on how its own, it may acquire immovable property may acquire therewith.
the contract is manifested. in its own name. Title so acquired can be
conveyed only in the partnership name. In
certain instances, the immovable property
may not be under the name of the
partnership for some purposes, such as
convenience.
Form of contract may be oral or in writing
because according to the law, contracts Article 1775 Associations and societies,
shall be obligatory in whatever form they whose articles are kept secret among the Article 1779 In a universal partnership of all
may have been entered into as long as all members, and wherein any one of the present property, the property which
the essential requisites are present. members may contract in his own name with belongs to each of the partners at the time
However, there's certain contract that third persons, shall have no juridical of the constitution of the partnership
becomes the common property of all the obligations on the partners, since they  When is the commencement of
partners, as well as all the profits which preserve the ownership of their separate partnership? Perfection of the contract or
they may acquire there with. property. It transmits less rights and execution (constitution) of contract
A stipulation for the common privileges as only the use and fruits of the because it is consensual contract.
enjoyment of any other profits may also be partners properties are contributed. This is  May stipulate for a d different date.
made; but the property which the partners based on the rule that if the doubt in  A partnership acquires it juridical
may acquire subsequently by inheritance, interpretation refers to the incidents of a personality from the moment the contract
legacy or donation cannot be included in gratuitous contract, the less transmission of of partnership is executed, otherwise
such stipulation, except the fruits thereof. rights shall prevail. stipulated.
 Future partnership does not establish a
(1)All properties of the partners at the time Article 1782 Persons who are prohibited partnership, the partnership will not
of the constitution of partnership it will be from giving each other any donation or commence until that time arrives.
included in the partnership meaning it will advantage cannot enter into a universal
become the common property of the Partnership. Article 1785 When a partnership for a fixed
partners it is assume all properties will earn term or particular undertaking is continued
profits therefore all profits derived from According to the law, there are certain after the termination of such term or
those properties are considered included in persons who cannot donate to each other. particular undertaking without any express
the partnership. Those persons prohibited to donate to each agreement, the rights and duties of the
(2)Other profits are not included unless other are also prohibited to create a partners remains the same as they were at
there is stipulation that other profits are universal partnership because universal such termination, so far as is consistent with
included in the partnership. If there is partnership is in way of donation. a partnership at will.
stipulation only at the time it will become the
property of the partnership. Persons prohibited to enter universal A continuation of the business by the
(3)Properties acquired after the constitution partnership partners or such of them as habitually acted
of the partnership, subsequent properties a. Those made between spouses during the therein during the term, without any
acquired by way of inheritance, legacy or marriage as provide for Article 87, Family settlement or liquidation of the partnership
donation, it may not be included in the Code affairs, is prima facie evidence of a
partnership according to the law (absolute b. Those made between persons who are continuation of the partnership.
rule). If there is profits or fruits from the guilty of adultery or concubinage at the
properties it may be included if there is time of donation Kinds of partnership as to duration
stipulation. c. Those made between persons found a) Partnership for a fixed term(period) - one
guilty to the same criminal offenses for which a duration is fixed by the
If there is no stipulation written assume that inconsideration thereof partners. partnership with a fixed period
there is no stipulation. d. Those made between a public officer of b) Partnership for a particular undertaking -
his wife or some other persons by reason one for which is organized for a certain
Article 1780 A universal partnership of of former’s office. undertaking (partnership in temporary
profits comprises all that the partners may project or business until finished).
acquire by their industry or work during the Status of partnership in violations of this partnership with a specific undertaking
existence of the partnership. article c) Partnership at will - one that may be
Movable or immovable property which Universal partnership implies real donation - terminate at any time by one or more or
each of the partners may possess at the common fun therefore a possibility that all the partners.
time of the celebration of the contract shall those person may form a partnership as an (a) if the partnership with a fixed period has
continue to pertain exclusively to each, only indirect way of circumventing the law; if such expired the partnership is dissolved it is
the usufruct passing to the partnership. will be the case, the partnership status is possible that the partnership will continue
void and will not acquire juridical personality. it is considered as partnership at will
(1)Profits acquire by industry or work at the (b) if the partnership with a specific
time of constitution of the contract is Husband and wife is prohibited to enter into undertaking has already been
included in the partnership. the universal partnership but they may enter accomplished the partnership is
(2)Properties at the time of the constitution into a particular partnership dissolved it is possible that the
with respect to universal partnership of profit partnership will continue it is considered
is not included in the partnership it is owned Article 1783 A particular partnership has for as partnership at will
by the partner, partnership has only a right its object determinate things, their use or According to the law if they will continue the
of usufruct or the right to use properties fruits, or a specific undertaking, or the business all the rights pertaining to the
including the profit or fruits. exercise of a profession or vocation. previous partnership will be carried over
(3)Subsequent properties acquire after the with respect with partnership at will.
constitution by the partners may not be CHAPTER 2
included in the partnership (absolute rule), if OBLIGATIONS OF THE PARTNERS Capitalist Partner - partner who contribute
there is stipulation properties are exclusively money or property
belong to the partners but the profits and SECTION 1 Industrial Partner - partner who contribute
fruits is included if there is stipulation. OBLIGATIONS OF THE PARTNERS service
AMONG THEMSELVES
Article 1781 Articles of universal
partnership, entered into without
specification of its nature, only constitute a
universal partnership of profits.
Could be possible that the partners in the
Presumption in favor of universal Article 1784 A partnership begins from the partnership may engage to the other
partnership of profits moment of the execution of the contract, business aside from the business of the
Reason for presumption: universal unless it is otherwise stipulated. (1679) partnership
partnership of profits imposes less Depends on the kind of partners
Capitalist partner may engage in any so becomes a debtor for the interest and
business of different kind but if the business damages from the time he should have Article 1791 If there is no agreement to the
is the same in the partnership he is not complied with his obligation. contrary, in case of an imminent loss of the
allowed because if the capitalist partner The same rule applies to any amount business of the partnership, any partner who
violates he is not excluded from the he may have taken from the partnership refuses to contribute an additional share to
partnership and not held liable to pay coffers, and his liability shall begin from the the capital, except an industrial partner, to
damages. The liability of the capitalist time he converted the amount to is own use. save the venture, shall be obliged to sell his
partner according to the law, he shall give interest to the other partners.
the profits or benefits he acquire to the Obligation of a partner who is obliged to
partnership while if there’s losses, he shall contribute money to the capital of the Exempt from contributing additional
borne(suffer) the losses. partnership shares
a) To deliver the money on the date of the 1. If a partner is insolvent
Article 1786 Every partner is a debtor of the contract or on the date fixed by partners. 2. If a partner is exempted by stipulation
partnership for whatever he may have b) In case of default or delay, to pay interest 3. If he is an industrial partner
promised to contribute thereto. from the time he should have given his
contribution plus damages. Article 1792 If a partner authorized to
He shall also be bound for warranty in manage collects a demandable sum, which
case of eviction with regard to specific and Misappropriation of partnership money, was owed to him in his own name, from a
determinate things which he may have partner liabilities: person who owned the partnership another
contributed to the partnership, in the same a. To return the amount misappropriated sum also demandable, the sum thus
cases and in the same manner as the b. To pay interest from the time of collected shall be applied to the two credits
vendor is bound with respect to the vendee. misappropriation in proportion to their amounts, even though
He shall also be liable for the fruits thereof c. To pay damages he may have given a receipt for his own
from the time they should have been credit only; but should he have given it for
delivered, without the need of any demand. Right of recession of contract the account of the partnership credit, the
Not entitle or no right of recession of amount shall be fully applied to the latter.
Eviction in partnership contract, the remedy is to collect the sum of The provisions of this article are
Whenever by a final judgement based on a money promised to contributed plus interest understood to be without prejudice to the
right prior to contribution or any act and damages. right granted to the debtor by Article 1252,
imputable to the contributing partners, the but only if the personal credit of the partner
partnership is deprived(removed) of the Article 1789 An industrial partner cannot should be more onerous to him.
whole or part of the thing delivered to the engage in any business for himself, unless
partnership. the partnership expressly permits him to do Payment in the name of:
so; and if he should do so, the capitalist 1. Managing partner - proportion to the
Three important duties of every partner partners may either exclude him from the credits of managing partner and the
contributing specific thing firm or avail themselves of the benefits partnership
1. The duty to contribute what he promised which he may have obtained in violation of  Exceptions
to contribute this provision, with a right to damages in  If the debt of the partnership is
2. The duty to deliver the fruits of what either case. not yet due on the date of payment
should have been delivered  If debt is more onerous in the
3. The duty to warrant the thing delivered According to the industrial partner cannot exercise of the debtors right as
(warrant - evidence for authorization) engage to other business unless he is provided in article 1252 (application
allowed by the partnership. If industrial of payment)
Duty to deliver the fruits of the thing partner violated excluded plus damages or 2. Partnership - credit all in the partnership
a. If property, the fruits arising from the time the partners may have require the prejudice
is should have been delivered, must be which the industrial partner may acquire for Article 1793 A partner who has received, in
given to the partnership. the reason that he violates the provision. whole or in part, his share of a partnership
b. If money the interest ad damages from credit, when the other partners have not
the time he should have been complied Reason of this prohibition collected theirs, shall be obliged, if the
with his obligation must be given to the The partnership the owner of his services debtor should thereafter become insolvent,
partnership also without the need for a which he cannot use for his own benefit and to bring to the partnership capital what he
demand. to detriment of the partnership. received even though he may have given
receipt for his share only.
Article 1787 When the capital or part Rights of capitalist partners in case of
thereof which a partner is bound to violation: Reason for bringing amount collected to
contribute consists of goods, their appraisal 1. If there is profit or benefit it shall be given the partnership capital
must be made in the manner prescribed in to the partnership plus damages or A partnership if formed for the common
the contract of partnership, and in the 2. Expulsion from the partnership plus benefit of the partners. Accordingly, the
absence of stipulation, it shall be made by damages partner who has collected his share of the
experts chosen by the partners, and credit must share such benefit with the other
according to current prices, the subsequent partners.
changes thereof being for the account of the
partnership. Article 1794 Every partner is responsible to
Article 1790 Unless there is a stipulation to the partnership for damages suffered by it
Appraisal is the act or process of the contrary, the partners shall contribute through his fault, and he cannot compensate
determining the value of a property as of a equal shares to the capital of the them with the profits and benefits which he
specific data for specific purpose. partnership. may have earned for the partnership by his
industry. However, the courts may equitably
Article 1788 A partner who has undertakes  Presumption of partners contribution lessen this responsibility if through the
to contribute a sum of money and fails to do  Presumption is rebutted by stipulation partner’s extraordinary efforts in other
activities of the partnership, unusual profits consequence of its management. one or more partners from any share in the
have been realized. profits or losses is void.
Article 1797 The profits and losses shall be
Damages suffered by the partnership due to distributed in conformity with the agreement. For the reason that partnership is
the fault of a partner cannot be offset by If only the share of each partner in the established for the common benefit or
benefits. Partner caused damages cannot profits has been agreed upon, the share of interest of the partners. Hence, the partners
ask for compensation because damages each in the losses shall be in the same must share in the benefits and losses in
cannot be offset to the profits that the proportion. some proportion.
partner going to receive from the
partnership. Partner caused damages can In the absence of stipulation, the share of Article 1800 The partner who has been
ask for litigation(lessen liability to damages) each partner in the profits and losses shall appointed manager in the articles of the
by his extraordinary efforts there is unusual be in proportion to what he may have partnership may execute all acts of the
profits earned by the partnership. contributed, but the industrial partner shall administration despite the opposition of his
not be liable for the losses. As for the profits, partners, unless he should act in Bad faith.,
Reason why there is no offsetting or the industrial partner shall receive such and his powers is irrevocable without the
compensation share as may be just and equitable under just or lawful cause. The vote of the
1. The partner has a duty not to be at fault in the circumstances. If besides his services partners representing the controlling
it execution he has contributed capital, he shall also interest shall be necessary for such
2. The partner being the debtor in both receive a share in the profits in proportion to revocation of power.
instances, compensation will not be his capital. A power granted after the partnership
proper has constituted may revoked at any time.
Distribution of profits
Article 1795 The risk of specific and 1. According to stipulation Each partner has a right to an equal voice
determinate things, which are not fungible, 2. No stipulation, according to capital in the conduct of the partnership business.
contributed to the partnership so that only contribution This right is not dependent on the amount or
their use and fruits may be for the common size of the partner’s capital contribution.
benefit, shall be borne by the partner who Distribution of losses
owns them. 1. According to stipulation Modes of appointing a manger
2. Stipulation, according to the profit A. Manager appointed in the articles of
If the things contributed are fungible, or sharing stipulation partnership
cannot be kept without deteriorating, or if 3. In the absence of (1) and (2), according to B. Manager appointed in another instrument
they were contributed to be sold, the risk capital contribution aside from the articles of partnership
shall be borne by the partnership. In the
absence of stipulation, the risk of things Industrial partner Power of manager appointed in the
brought and appraised in the inventory, shall Distribution of profit - just and equitable the articles of partnership
also be borne by the partnership, and in first one to receive profit before the capitalist  His power is he may execute all acts of
such case the claim shall be limited to the partner administration
value at which they were appraised. Distribution of loss - exempted because  Power is irrevocable without just or lawful
upon contribution of service automatically  To remove him for just cause, the
 Risk of loss shall be borne by the partners he would suffered(there is loss) so therefore controlling partners should vote to oust
- non-fungible suddenly there is losses he is exempted him or vote of the partners owning the
 When the things contributed are (double jeopardy) controlling interest.
non-consumable and only their use  To remove him without just or lawful
and fruits are for the benefit of the Article 1798 If the partners have agreed to cause, his appointment can be revoked
partnership. entrust to a third person the designation of only with the consent of all partners
 Risk of loss shall be borne by the the share of each one in the profits and including the manager partner because
partnership - fungible losses, such designation may be impugned such revocation would be a novation of
 When things contributed are to be only when it is manifestly inequitable. In no the articles of partnership - unanimity or
sold. case may a partner who has begun to unanimous vote
 When the things contributed are execute the decision of the third person, or  The extent of his power will depend upon
consumable or cannot be kept who has not impugned (cancelled) the same the following:
without deteriorating within a period of three months from the  If he acts in good faith, he may do
 When the things were contributed time he had knowledge thereof, complain of all acts of administration (not
under appraisal in the inventory such decision. ownership) despite the opposition of
The designation of losses and profits his co-partners
cannot be entrusted one of the partners -  If in bad faith, he may be ousted
otherwise such agreement is void and from the firm by the vote of the
without effect. controlling interest.

Partner’s power is he may execute all acts

Article 1796 The partnership shall be (1) If the designation by the third person is of administration despite of opposition. If he
responsible to every partner for the amounts impugned or annulled, the share of the acted in bad faith that act will be considered
he may have disbursed on behalf of the partners in the profits and losses shall be in invalid. Power is irrevocable unless there is
partnership and for the corresponding proportion to their capital distribution just or lawful cause the vote required is vote
interest, from the time the expenses are (2) If the agreement is void and without of the partners having controlling interest.
made; it shall also answer to each partner effect, the profit and loss sharing shall be Without just and lawful cause, the required
for the obligations he may have contracted divided according to heir capital distribution is vote of all partners.
in good faith in the interest of the
partnership business, and for the risk in Article 1799 A stipulation which excludes Power of the manager appointed in
another instrument aside from article of Partnership is based on mutual trust and
partnership (constitution of partnership) - Article 1802 In case it should have been confidence among the partners. Inclusion of
done through a resolution adopted by the stipulated that none of the managing new partner would be a modification of the
partners partner shall act without the consent of the original contract of partnership requiring
 Power is revocable at any time with or others, the concurrence of all shall be unanimous consent of all the partners.
without just cause. necessary for validity of the acts, and the Prohibition applies even if person
 The extent of his power is to exercise acts absence or disability of any one of them associated is already a partner.
of administration. However, if the other cannot alleged, unless there is imminent
partners opposed, and be persistent he danger of grave or irreparable injury to the Article 1805 The partnership books shall be
can be removed. partnership. kept, subject to any agreement between the
partners, at the principal place of the
With or without cause the power revocable Elements to concur before joint business of the partnership, and every
the vote required is vote of the partners management will apply partner shall at any reasonable hour have
have controlling interest. a. Two or more partners appointed as access to and may inspect and copy any of
managers them.
Scope of the powers of a manager b. No one of the managers can act without
Unless restricted, a manager of a the consent of the others Article 1806 Partners shall render on
partnership is considered as a general demand true and full information of all things
agent. He can therefore exercise powers If elements are present, the following affecting the partnership to any partner or
necessary to accomplish the objective of the rules are the legal representative of any deceased
partnership. He is even clothed with the 1. The consent of all of the managers is partner or of any partner under legal
powers to dismiss employees even without necessary too execute an act. disability.
just cause exists. 2. If one of the managers will oppose, the
act will not be executed, unless there is an Duty to render information, there must be no
Article 1801 If two or more partners have imminent danger of grave or irreparable concealment between partners in all matters
been in trusted with the management of the harm or injury to the partnership. affecting the partnership. Information must
partnership without the specification of 3. The absence or incapacity of one of the use only for partnership purpose. Not just on
their respective duties or without the managers is of no moment, the unanimity is demand but partner also has duty of
stipulation that one of them shall not act still required unless there is irreparable harm voluntary disclosure. However, duty to
without the consent of all others, each one or injury to the partnership. render info does notarize with respect to
separately execute all acts of matters appearing in partnership books
administration, but if anyone of them If there is stipulation that no one act without since each partner has the right to inspect
should oppose the act of each other, the the consent of the other, all of them must those. Good faith not only requires that a
decision of the majority shall prevail. In case consent. partner should not make a false statement
of tie, the matter shall be decided by the but also that he
partners owning the controlling interest. Article 1803 When the manner of should abstain from any false concealment.
management has not agreed upon, the
Elements to concur before solidary following rules shall observed: Who can demand information?
management will apply 1. All partners shall be considered agents 1. Any partner
A. There are two or more partners appointed and whatever any one of them may do 2. Legal representative of a dead partner
as managers alone shall bind the partnership without 3. Legal representative of any partner under
B. There is no specification of respective prejudice to the provision of article 1801 legal disability
duties 2. None of the partners may, without the
C. There is no stipulation requiring consent of others, make any important Article 1807 Every partner must account
unanimity alteration in the immovable property of the partnership for any benefit, and hold as
the partnership, even if it may be useful to trustee for it any profits derived from him
If elements are present, the following the partnership, but if there is refusal of without the consent of the partners from
rules are the consent by the other partners is any transaction connected with the
1. Each may separately execute all acts of manifestly prejudicial to the interest of the formation, conduct, or liquidation of the
administration partnership, the court’s intervention may partnership or from any use by him of his
2. If one of the managers should oppose, be sought. property
the majority of the managers will prevail.
3. If there should be a tie, the manner will be If there is no rules in management, all of
decided by the controlling interest them will be considered agents. If there is
provided they are also managers. opposition majority will prevail. In case of tie
Controlling interest of the managing the vote of managing partners having
partner. controlling interest. In case of alteration in
immovable property all of them must
consent.

If two or more partners have been

appointed as managers without the Article 1804 Every partner may associate The relation between the partners
specification of their respective duties or another person with him in his share, but is essentially fiduciary involving trust and
there is stipulation that no one act without the associates shall not admitted into the confidence, each partner considered in law,
the consent of the other. The partners partnership without the consent of all other as he is, in fact, the confidential agent of the
power, each one of them may exercise all partners, even of the partner having an others. Hence, partners assuming control
acts of administration. The opposition is associate should be a manager of and management of business, while
majority prevail. In case of tie the vote of subpartnership nature. controlling it, is to manage the business in
managing partners having controlling the interest of all partners. His duty , by
interest. Reason for the rule analogy, is a trustee, and he is not allowed
to derive personal advantage from the use property for partnership purposes; but he any information or account of the
of partnership asset or business, or has no right to possess such property for partnership transactions, or to inspect the
goodwill. any other purpose without the consent of partnership books; however it merely
his partners; entitles the assignee to receive the
Article 1808 The capitalist partners cannot 2. A partner’s right in specific partnership accordance with his contract, the profits to
engage for their own account in any property is not assignable except in which the assigning partner would
operation, which is of the kind of business connection with the assignment of rights otherwise be entitled.
in which the partnership is engaged, unless of all the partners in the same property;
there is a stipulation to the contrary. Any 3. A partner’s right in specific partnership In case of fraud in the management of the
capitalist partner violating this prohibition property is not subject to attachment or partnership, the assignee may avail himself
shall bring to the common funds any profit execution, except on a claim against the of the usual remedies. In case of dissolution
accruing to him from his transactions, and partnership; of the partnership, the assignee is entitle to
shall personally bear all the losses. 4. A partner’s right in specific partnership receive his assignor’s interest and may
property is not subject to legal support require an account from the date only of the
Article 1809 Any partner shall have the right under Article 291 nature of a partner’s last account agreed to by all partners.
to a formal account as partnership affairs: right in specific partnership property
(When may a partner demand for a formal Partner can assign or convey his interest to
accounting of partnership affairs) (1)Rights in specific property, separate another person because he owns the profit
1. If he is wrongfully excluded from the juridical personality, the property of the or surplus. Conveyance or assigning all his
partnership business or possession of its partnership will not be considered as distribution, to assignee he will not
property by his co-partner; property of those persons composing the considered as partners because partnership
2. If the right exists under the terms of any partnership. Rights specific partnership has mutual trust and confidence therefore
agreement; property. According to the law, the partners all partners must consented before having a
3. Provided by article 1807; (If a partner has will be considered co-owners of that specific new partner. Assignee cannot interfere in
derived profits from any transaction partnership property.They have the rights to the partnership because he is not a partner.
connected with the formation, conduct or possess it with respect only to partnership Assignee cannot acquire information.
liquidation of partnership or from any use purposes. (2)The specific partnership Assignee cannot inspect the books of
by him its property) property is not assignable, it cannot be partnership. Rights of assignee is to receive
4. Whenever other circumstances render it assigned to another person because in the profits, if there’s dissolution to receive
just and reasonable. first place the property belongs to the interest and he also has the right to inspect
partnership (the partners cannot assigned it or inquire with respect to the information
Partner’s obligation to render an account to another person) . However, with respect regarding the partnership. It is possible that
Any benefit o profit derived him without the of all the rights of the partners to the the interest of the partners in the
consent of the other partners from any property, if all of them consented that partnership can be subject to attachment
transaction connected with the formation, assignment would be considered valid. (3)A but it is not called attachment it is called
conduct or liquidation of the partnership or partner’s right in specific partnership charging order, you are going to charge the
from any use by him of its property. property is not subject to attachment or interest of the partners in the partnership by
execution, except on a claim against the the order of the court. It will be payment to
SECTION 2 partnership or partnership is the debtor. the debt. It can be redeemed by partner that
PROPERTY RIGHTS OF A PARTNER (4)Specific partnership property cannot be is subject to charging order.
subject to legal support because the
Article 1810 The property rights of partner property belongs to the partnership. Effect of assignment of partner’s whole
are: interest in partnership.
1. His rights in specific partnership property; Article 1812 A partner’s interest in the A partner’s right in specific partnership
2. His interest in the partnership; partnership is his share of the profits and property is not assignable but he may
3. His right to participate in the surplus. assign his interest in the partnership to any
management, (rules in management) of his co-partners or to a third Person
extent of property rights of a partner. Partner’s interest in the partnership irrespective of the consent of the other
a. His share in the profits partners, in the absence of agreement to
Principal Rights b. His share in the surplus after the the contrary.
1. Rights in specific partner property; partnership is dissolved and obligations to
2. Interest in partnership; creditors are paid. Effects of conveyance or assignment by
3. Right to participate in management. a partner of his interest in the
partnership
A. If a partner conveys, assigns, sells, or
donates his whole interest in the
partnership, that is, his share in the profits
and surplus, the partnership is not
dissolved but continue to exists.
B. The conveyee or assignee does not
necessarily become a partner. The
assignor is still considered the partner,
Article 1811 A partner is co-owner with his Article 1813 A conveyance by a partner by with a right to demand accounting.
partners of specific partnership property. his whole interest in the partnership does C. The conveyee or assignee cannot even
The incidents of this co-ownership are such not of itself dissolve the partnership, or, interfere in the management or
that; against the other partners in the absence of administration of the partnership business
1. A partner, subject to the provision of this agreement, entitle the assignee, during the or affairs
title and any agreement between the continuance of the partnership, to interfere D. The conveyee or assignee cannot
partner, has an equal right with his in the management or administration of the demand information, accounting, or
partners to possess specific partnership partnership business or affairs, or to require inspection of the partnership books.
 b) The partner must be authorized to act liable for contractual liability if all the profits
Rights of the conveyee or assignee. for the partnership. or assets o the partnership has already
A. To get whatever profits the assignor B. In the case of an obligation arising from been exhausted the partners can be held
partner would have obtained. criminal offense or quasi-delict. liable, all partners including industrial
B. To avail himself of usual remedies in a) The act must be performed by a partner partner it is called subsidiary liability. The
case of fraud in the management. in the ordinary course of the business of distribution of liability is pro rata or equal,
C. After dissolution, to demand accounting the partnership with the authority of his equal liability.
to cover the period only from the date of co-partner. Losses would pertain to the agreement of
the last accounting which he had been the partner. Liability has no agreement
agreed to by all the partners. SECTION 3 because it involved third person in order to
OBLIGATIONS OF THE PARTNERS WITH protect third person.
Article 1814 Without prejudice to the REGARD TO THIRD PERSONS
preferred rights of the partnership creditors Liability distinguished from losses
on due application to a competent court by Article 1815 Every partnership shall operate While an industrial partner is exempted by
any judgement creditor of the partner, the under a firm name, which may or may not the law from losses, he is not exempted
court which entered the interest of the include the name of one or more of the from liability to third person. The creditor of
debtor partner with payment of the partners. the firm can sue ALL partners. The partners
unsatisfied amount of such judgement debt Those who, not being members of are liable jointly or pro rata after exhausting
with the interest thereon; and may then or the partnership, include their names in the the partnership property. Later, the
later appoint a receiver of his share of the firm name, shall be subject to liability of a industrial partner who contributed his share
profits, and of any other money due or to partner. may ask reimbursement from the capitalist
fall due to him in respect of the partnership, partners, unless there is contrary
and make all other orders, directions and A partnership as a juridical person must agreement.
accounts and inquiries which the debtor operate under a firm name. It is not a
partner might have made, or which requirement that all the name of the Article 1817 Any stipulation against the
circumstances of the case may require. partners must not be included in the firm liability laid down in the preceding article
name. If you are not partner of the shall be void, except as among the partners.
The interest charged may redeem at any partnership and suddenly your name is
time before foreclosure, or in any case of a written in the firm name, you are not Stipulation eliminating liability is void as to
sale being directed by the court, may be considered as partner but you are liable as third person but valid among the partners.
purchase without thereby causing a partner. (If one partner paid the third person the
dissolution: (Redemption of the interest liability will reimbursed in the partners)You
charged - If the interest charged, the same Liability of strangers who include their are going to protect the third person.
be redeemed or bought at any time before names in the firm name
or after closure:) Strangers or third person(not members of Article 1818 Every partner is an agent of
1. With separate property, by any one or partnership) who include their name in the the partnership for the purpose of its
more of the partners; firm are liable as partners because of business, and the act of every partner,
2. With partnership property, by any one or principle of estoppel, but do not have the including the execution in the partnership
more of the partners with the consent of rights as partners. The purpose of the law is name of any instrument, for apparently
all the partners a whose interest are not to protect customers from being misled as carrying on in the usual way the business of
so charged or sold, nothing in this title with whom they are dealing. If a person the partnership of which he is a member
shall be held to deprive a partner of his misrepresents himself as a partner, and as a binds the partnership, unless the partner so
right, if any, under the exemption laws, as consequences thereof, a stranger is misled, acting has in fact no authority to act for the
regards his interest in the partnership. the deceiver is liable as a partner, without partnership in the particular matter, and the
the rights of a partner, even if he did not person with whom he is dealing has
Charging the interest of a partner include his name in the firm name. knowledge of the fact that he has no such
While the interest of a partner in the specific liability (authority).
partnership property cannot be attached, Article 1816 All partners, including industrial An act of a partner which is not
charged or levied upon, the interest of a ones, shall be liable pro rata with all their apparently for the carrying on of business of
partner in the partnership, that is, his share property and after all the partnership assets the partnership in the usual way does not
charged or levied upon. have been exhausted, for the contracts bind the partnership unless authorized by
which may be entered into in the name and the other partners.
Preferred rights of partnership creditors for the account of the partnership, under its Except when authorized by the other
and the separate creditors of a partner signature and by a person authorized to act partners or unless they have abandoned the
A. Partnership creditors have preference for the partnership. However, any partner business, one or more but less than all the
over partnership asset may enter into a separate obligation to partners have no authority to:
B. Separate or individual creditors have perform a partnership contract. 1. Assign the partnership property in trust for
preference over the separate property of creditors or on the assignee’s promise to
a partner. pay the debts of the partnership.
2. Dispose of the goodwill of the business.
3. Do any other act which would make it
impossible to carry on the ordinary
business of a partnership.
Requisites in order that a partnership Contracts entered into the name of 4. Confess a judgment.
may be held liable to a third person for partnership and for the account of 5. Enter into a compromise concerning a
the act of one of the partners partnership by the authorized of the partnership claim or liability.
A. In the case of contractual obligation partners it will bind the partnership. 6. Submit a partnership claim or liability to
a) The contract must be entered into in Contractual right liability, the one who will arbitration.
the name and for the account of the become liable is the partnership. It is 7. Renounce a claim of the partnership.
partnership and under its signature possible that the partnership can be held No act of a partner in contravention
of a restriction on authority shall bind the whose name the title stands may convey or then present to his mind, and the
partnership to persons having knowledge of title to such property, but the partnership knowledge of any other partner who
the restriction. may recover such property if the partners’ reasonably could and should have
act does not bind the partnership under the communicated it to the acting partner,
All partners is considered as agents with provisions of the first paragraph of Article operate as notice to or knowledge of the
respect to the business of the partnership. 1818, unless the purchaser or his assignee, partnership, except in the case of fraud on
(1)Agents may exercise any acts carried on is a holder for value, without knowledge. the partnership, committed by or with the
the usual business partnership it will bind Where the title to real property is in consent of that partner.
the partnership. Unless the partner has no the name of one or more or all the partners,
authority and there is third person dealing to or in a third person in trust for the Article1822 Where, by any wrongful act
that partner in which the third person has a partnership, a conveyance executed by a or omission of any partner acting in the
knowledge that there is no authority it will partner in the partnership name, or in his ordinary course of the business of the
not the bind the partnership. The partner own name, passes the equitable interest of partnership or with the authority of co-
without authority will be the accused. the partnership, provided the act is one partners, loss or injury is caused to any
(2)In case strict dominion or ownership, it is within the authority of the partner under the person, not being a partner in the
void unless all the partners must consent. provisions of the first paragraph of partnership, or any penalty is incurred, the
(3) If there is restriction on the authority of Article 1818. partnership is liable therefor to the same
the partner, if he violates it, it will still bind Where the title to real property is in extent as the partner so acting or omitting
the partnership however it will not bind the the name of all the partners a conveyance to act.
partnership if the third person has executed by all the partners passes all their
knowledge of that restriction. rights in such property. Liability of partnership for torts of partners.
Quasi-delict is an act or omission caused
Instances when partnership is bound Instances when partnership is not bound damage to another person there being fault
A partner can bind the partnership when the 1. When the act is executed is not for or negligence and there is no preexisting
following requisites are present: “apparently carrying on in the usual way of contractual relation between the parties so
1. When he is expressly or impliedly the partnership and the partner has no therefore there is another person involved.
authorized. Instances: authority.” in here, even if the third person It is not considered solidary liable if its
a) When the other partners do not object, has no knowledge of the lack of authority, personal business not the partnership
although they have knowledge of the the partnership is not bound. business. But if he is acting his duty as
act. 2. If the act executed is “apparently carrying partner or with authority of the partner the
b) When the act is for “apparently carrying on in the usual way the business of the fault or liability is in the partnership or
on in the usual way the business of the partnership.”but the partner has no authority solidary liable to the partners.
partnership.” This binding on the firm and the third person knows that the acting
even if the partner was not really partner has no authority. Article 1823 The partnership is bound to
authorized, provided that the party is in make good the loss:
good faith. Article 1820 An admission or representation 1. Where one partner acting within the
2. When he acts in behalf and in the name made by any partner concerning partnership scope of his apparent authority receives
of the partnership. affairs within the scope of his authority in money or property of a third person and
accordance with this Title is evidence misapplies it.
Meaning of transaction within the scope against the partnership. 2. Where the partnership in the course of its
of the partnership business receives money or property of a
The scope of the business may be gauged Admission or representation made by third person and the money or property so
by the usual manner in which it is carried partner received is misapplied by any partner
out in the place of the transaction An admission of the partner is evidence while it is in the custody of the
against under the following conditions: partnership.
Article 1819 Where title to real property is in A. The facts admitted concern partnership
the partnership name, any partner may affairs When the partnership and the other
convey title to such property by a B. The fact admitted are within the scope of partners are not liable
conveyance executed in the partnership his authority a. If the wrongful act or omission was not
name; but the partnership may recover C. The admission must be made during the done within the scope of partnership
such property unless the partner's act binds existence of the partnership business and for its benefit, or with the
the partnership under the provisions of the D. Proof of the existence of the partnership authority of co- partners.
first paragraph of article 1818, or unless must be shown. b. Act or omission was not wrongful.
such property has been conveyed by the c. If the wrongful act or omission was
grantee or a person claiming through such Admission after dissolution committed after the partnership had been
grantee to a holder for value without Admission made after the dissolution of the dissolved and the same was not in
knowledge that the partner, in making the partnership binds the partnership is only if connection with the process of winding
conveyance, has exceeded his authority. necessary to wind up the business. Where up.
Where title to real property is in the the admission is not for the winding up of
name of the partnership, a conveyance partnership affairs, it does not affect the Article 1824 All partners are liable solidarily
executed by a partner, in his own name, partnership. with the partnership for everything
passes the equitable interest of the chargeable to the partnership under
partnership, provided the act is one within Articles 1822 and 1823.
the authority of the partner under the
provisions of the first paragraph of Article
1818.
Where title to real property is in the Article 1821 Notice to any partner of any
name of one or more but not all the matter relating to partnership affairs, and
partners, and the record does not disclose the knowledge of the partner acting in the When the partnership and partners are
the right of the partnership, the partners in particular matter, acquired while a partner solidary liable
1. Where, by any wrongful act or omission of as a partner in an existing partnership a. Obligations incurred before admission - a
any partner acting in the ordinary course without the knowledge or consent of the newly admitted partner is liable for
of the business of the partnership or with partners, and because of such obligations of the partnership incurred
the authority of co- partners, loss or injury misrepresentation a third person is misled before his admission to the firm. Such
is caused to any person not being a and acts because of misrepresentation, the liability is limited to his capital contribution,
partner. deceiver is partner by estoppel. unless otherwise agreed.
2. Where one partner acting within the If the partnership and the partners b. Obligations incurred after admission - if
scope of his authority receives money or consented to the misrepresentation, and a the obligation is incurred after his admission,
property of a third person and misapplies partnership liability results, there is a all partners, the original and the new partner
them. partnership by estoppel, with the original shall be liable to the extent of their separate
3. Where the partnership in the course of its members and the deceiver as partners. property satisfying such obligation of the
business receives money or property of a If the partnership or the partners had partnership.
third person and the money or property so not consented, no partnership liability
received is misapplied by any partner. results, but the deceiver is still considered a Creation of a new partnership
The acting partners any or all of the partner by estoppel with all obligations but The admission of a new partner in an
partners, including the partnership are liable not the rights of partner. existing partnership dissolves the old firm
because the obligation is solidary, without When there is misrepresentation, the third and creates a new one. However, the
prejudice to their right to proceed against party is not deceived, the doctrine of creditors of the old form shall continue to be
the guilty partner. estoppel does not apply. creditors of the new firm.

Article 1825 When a person, by words In order to protect the third person. Article 1827 The creditors of the
spoken or written or by conduct, represents Partnership by estoppel there is a third partnership shall be preferred to those of
himself, or consents to another representing person representing himself as partner of each partner as regards the partnership
him to anyone, as a partner in the partnership if all the partners consented property. Without prejudice to this right, the
an existing partnership or with one or more that he may represent as partner or partners private creditors of each partner may ask
persons not actual partners, he is liable to by estoppel. The liability in the partnership the attachment and public sale of the share
any such persons to whom such the third person is considered as agent of of the latter in the partnership assets.
representation has been made, who has, on the partnership. If all of the properties of the
the faith of such representation, given partnership is exhausted it will be subsidiary Creditors of partnership are preferred
credit to the actual or apparent liability plus the third person representing Although the separate creditors of a partner
partnership,and if he has made such himself as partners. If there is only few may attach the interest or profit of a partner
representation or consented to its being partners consented the liability will be jointly in the partnership assets, still the creditor of
made in a public manner he is liable to such not the liability of the partnership. If no the partnership are preferred as regards
person, whether the representation has or partners consented the liability is separate. partnership property.
has not been made or communicated to
such person so giving credit by or with the Nature and extent of liability of partner
knowledge of the apparent partner making by estoppel
the representation or consenting to its being A partner by estoppel shall be liable to
made: persons who has, on the faith of the
1. When a partnership liability results, he is representation, given credit to the actual or
liable as though he were an actual apparent partnership
member of the partnership. 1. When all the members of the existing
2. When no partnership liability results, he is partnership consent to the
liable pro rata with the other persons, if misrepresentation a partnership obligation
any, so consenting to the contract or results. Hence, the partner by estoppel is
representation as to incur liability, liable as though he were actual member of
otherwise separately. the partnership.
When a person has been thus 2. When there is no actual partnership, or
represented to be a partner in an existing not all the partners of the existing
partnership, or with one or more persons not partnership consent to the representation
actual partners, he is an agent of the the partner by estoppel is liable pro rata with
persons consenting to such representation other persons, otherwise separately.
to bind them to the same extent and in the
same manner as though he were a partner Article 1826 A person admitted as a partner
in fact, with respect to persons who rely into an existing partnership is liable for all
upon the representation. When all the the obligations of the partnership arising
members of the existing partnership consent before his admission as though he had been
to the representation, a partnership act or a partner when such obligations were
obligation results; but in all other cases it is incurred, except that this liability shall be
the joint act or obligation of the person satisfied only out of partnership property,
acting and the persons consenting to the unless there is a stipulation to the contrary.
representation.

Partners by estoppel distinguished from

partnership by estoppel Liability of newly admitted partner for
When a person represents himself obligations of the partnership