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Law on Partnership Reviewer

Business Process Management (Technological Institute of the Philippines)

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C ivil La w
SUMMER REVIEWER

CHAPTER 1: GENERAL PROVISIONS

PARTNERSHIP - a contract wherein two or more CHAPTER 2: OBLIGATIONS OF PARTNERS

persons bind themselves to contribute money,
property, or industry to a common fund, with Art. 1784. A partnership begins from the moment
the intention of dividing the profits among of the execution of the contract, unless it is
themselves. (see Art. 1767, CC) otherwise stipulated.

EXCEPTIONS:
(General Professional Partnership, Art.1767¶2) 1. Where immovable property/real rights are
Two or more persons may also form a partnership contributed (Art. 1771)
for the exercise of a profession. a. Public instrument is necessary
b. Inventory of the property contributed
ELEMENTS OF A PARTNERSHIP: must be made, signed by the
There shall be a partnership whenever: parties and attached to the public
1. There is a meeting of the minds; instrument otherwise it is VOID
2. To form a common fund; 2. When the contract falls under the
3. With intention that profits (and losses) will be coverage of the Statute of Frauds (Art.
divided among the contracting parties. 1409)
3. Where capital is P3,000 or more, in money
ESSENTIAL FEATURES: or property (Art. 1772)
1. There must be a VALID CONTRACT. a. Public instrument is necessary
2. The parties must have LEGAL CAPACITY to b. Must be registered with SEC
enter into the contract.
3. There must be a mutual contribution of NOTE:
money, property, or industry to a COMMON • SEC Opinion, 1 June 1960: For purposes of
FUND. convenience in dealing with government
4. There must be a LAWFUL OBJECT. offices and financial institutions, registration
5. The purpose or primary purpose must be to of partnership having a capital of less than
obtain PROFITS and DIVIDE the same Php 3,000 is recommended.
among the parties.
SEPARATE JURIDICAL PERSONALITY
• It is also required that the articles of partnership
must NOT be kept SECRET among the Art. 1768. The partnership has a juridical
members; otherwise, the association shall have personality separate and distinct form that of
no legal personality and shall be governed by the each of the partners, even in case of failure to
provisions on CO-OWNERSHIP (Art. 1775). comply with the requirements of Article 1772,
first paragraph.
• "kept secret among the members" = secrecy
directed not to third persons but to some of the
partners As a JURIDICAL PERSON, a partnership may:
1. acquire and possess property of all kinds;
CHARACTERISTICS: 2. incur obligations; and
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1. Essentially TIFF
contractual nature (Art. 1767,
in picture.
(Uncompressed) decompressor 3. bring civil or criminal actions,
are needed to see this
1784) in conformity with the laws and regulations of their
2. Separate juridical personality (Art. 1768) organization. (See Art. 46)
3. Delectus personae
4. Mutual Agency (Art. 1803) PRINCIPLE OF DELECTUS PERSONARUM
5. Personal liability of partners for partnership DELECTUS PERSONAE—The selection or choice of
debts the person.
FORM OF PARTNERSHIP CONTRACT
Implications: (Dean Villanueva)
GENERAL RULE: No special form is required for the
validity of a contract. (Art. 1356)
—Ad vise r: De a n C ynthia Ro xa s- De l C a stillo ; He a d s: Jo y Ma rie Po nsa ra n, Ele a no r Ma te o ; Und e rstud ie s: Jo y Ste pha nie
Ta ja n, Jo hn Pa ul Lim ; Sub je c t He a d : The a Ma rie Jim e ne z; Ple d g e e s: Na e a lla Ro se Ba into , Sa ndra Ma y Ma c la ng —

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• The assignment of a partner of his share • A newly admitted partner into an existing
does not make assignee a partner (Art. partnership is liable for all the obligations of the
1804 and 1813) partnership arising before his admission but out
• The existence of the partnership is closely of partnership property shares (Art. 1826)
tied-up to the particular contractual • Partnership creditors are preferred to those of
relationship of the partners (see instances of each of the partners as regards the partnership
dissolution of the partnership upon change of property (Art. 1827)
contractual relationship.) • Upon dissolution of the partnership, the partners
hall contribute the amounts necessary to satisfy
Ortega v. CA, G.R. No. 109248, July 3, 1995 the partnership liabilities (Art. 1839[4], [7])
Doctrine of Delectus Personae: PARTNERSHIP DISTINGUISHED FROM CO-
The birth and life of a partnership at will is OWNERSHIP AND CORPORATION
predicated on the mutual desire and consent of the
partners. The right to choose with whom a person CO-
PARTNERS CORP
wishes to associate himself is the very foundation OWNERS
HIP
and essence of that partnership. HIP
Creation Created by a Created by Created by
MEANING of MUTUAL AGENCY contract, by law law
(According to Dean Villanueva) mere
• In the absence of contractual stipulation, all agreement of
partners shall be considered agents and the parties
whatever any one of them may do alone shall Juridical Has a None Has a
bind the partnership (Art. 1803[1], 1818) personal juridical juridical
• Partners can dispose of partnership property ity personality personality
even when in partnership name (Art. 1819) separate and separate
• An admission or representation made by any distinct from and distinct
partner concerning partnership affairs is evidence that of each from that of
against the partnership (Art. 1820) partner each
• Notice to any partner of any matter relating to stockholder
partnership affairs is notice to the partnership Purpose Realization of Common Depends
(Art. 1821) profits enjoyment on AOI
• Wrongful act or omission of any partner acting for of a thing
partnership affairs makes the partnership liable or right
(Art. 1822) Duration/ No limitation 10 years 50 years
• Partnership bound to make good losses for acts Term of maximum maximum,
or misapplications of partners (Art. 1823) existenc extendible
e to not more
UNLIMITED LIABILITY than 50
(According to Dean Villanueva) years in
• All partners are liable pro rata with all their any one
properties and after partnership assets have instance
been exhausted, for all partnership debts (Art. Disposal Partner may Co-owner Stockholde
1816) / not dispose may freely r has a
• Any stipulation against personal liability of Transfer of his do so right to
partners for partnership debts is void , except as ability of individual transfer
among them (Art. 1817)
QuickTime™ and a interest interest shares
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unless without
• All partners are areneeded to see this picture.
liable solidarily with the
agreed upon prior
partnership for everything chargeable to the
by all consent of
partnership when caused by the wrongful act or
partners other
omission of any partner acting in the ordinary
stockholder
course of business of the partnership or with
s
authority from the other partners and for partner's
act or misapplication of properties (Art. 1824) Power to In absence of Co-owner Manageme
act with stipulation to cannot nt is vested
3rd contrary, a represent with the

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persons partner may the co- Board of particular partnership which has for its object specific
bind ownership Directors undertaking.
partnership
(each partner Aurbach v. Sanitary Wares, 180 SCRA 130 (1989)
is agent of The Supreme Court has, however, recognized a
partnership) distinction between these two business forms and
Effect of Death of Death of Death of has held that although a corporation cannot enter into
death partner co-owner stockholder a partnership, it may, however, engage in a joint
results in does not does not venture with others.
dissolution of necessarily dissolve
partnership dissolve corporation WEAKNESSES OF A PARTNERSHIP
co- (Dean Villanueva)
ownership • Partners are co-owners of the partnership
Dissoluti May be May be Can only properties and enjoy personal possession (Art.
on dissolved at dissolved be 1811)
any time by anytime by dissolved • Partners may individually dispose of real property
the will of any the will of with the of the partnership even when in partnership
or all of the any or all of consent of name (Art. 1819)
partners the co- the state • Dissolution of the partnership can come about by
owners the change in the relationship of the partners,
# of Minimum of 2 Minimum of Minimum of such as when a partner chosses to cease being
incor- persons 2 persons 5 part of the partnership (Art. 1828, 1830[1]b)
porators incorporato • Expulsion of partner dissolves the partnership
rs (Art. 1830[1]d)
Commen From the None From date • Dissolved by the loss of the thing promised to be
cement moment of of issuance contributed to the partnership (Art. 1830[4])
of execution of of • Death, insolvency, or civil interdiction of a partner
juridical contract of certificate dissolves the partnership (Art. 1830 [5],[6],[7])
personal partnership of • Petition by partner will dissolve the partnership
ity incorporati when a partner has been declared insane; or the
on by the partner has become incapable of performing his
SEC part of the partnership contract; a partner has
been found guilty of such conduct as tends to
Heirs of Tan Eng Kee v. CA, G.R. No. 126881,. affect prejudicially the partnership business;
October 3, 2000 partner willfully or persistently commits a breach
of partnership agreement; the partnership
Particular partnership distinguished from joint business can only be carried at a loss; other
venture equitable reasons (Art. 1831)
A particular partnership is distinguished from joint
venture, to wit: NOTE:
1) a joint venture (an American concept similar to
• SEC Opinion, 28 April 1995: The death of a
our joint account) is a sort of informal partnership,
partner, as a general rule, dissolves the
with no firm name and no legal personality. In a joint
partnership by operation of law, except if the
account, the participating merchants can transact
articles of partnership stipulate for the
business under their own name, and can be
continuance of the partnership relations upon
individually liable therefore; and
the death of any of the partners.
2) usually, but not necessarily
QuickTime™ and a a joint venture is
• SEC Opinion, 5 August 1997: If the
limited to a singleTIFF (Uncompressed) decompressor
transaction,
are needed to see thisalthough
picture. the business
remaining partners of the dissolved
of pursuing to a successful termination may continue
partnership intended for all legal intents and
for a number of years; a partnership generally relates
purposes, to continue the partnership
to a continuing business of various transactions of a
business even after the death of a partner,
certain kind.
there is continuity of personality of the
partnership as there exists a "partnership at
It would seem that under Philippine law, a joint
will."
venture is a FORM of PARTNERSHIP, specifically a

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RULES TO DETERMINE EXISTENCE OF EFFECT OF PARTIAL ILLEGALITY:

PARTNERSHIP 1. Where a part of the business of a partnership
is legal and a part illegal, an account of that
GENERAL RULE: Persons who are NOT partners
which is legal may be had.
as between themselves, CANNOT be partners as
2. Where, without the knowledge or
to third persons. (Art. 1769(1))
participation of the partners, the firm's profits
EXCEPTION:
in a lawful business have been increased by
Partnership by Estoppel under Article 1825
wrongful acts, the innocent partners are not
precluded as against the guilty partners from
OTHER RULES TO DETERMINE WHETHER A
recovering their share of the profits. (De
PARTNERSHIP EXISTS: (See Art. 1769)
Leon, p. 65)
1. Co-ownership or co-possession does not of
itself establish a partnership
2. The sharing of gross returns does not of itself
establish a partnership, whether or not the WHO MAY BE PARTNERS
persons sharing them have a joint or
GENERAL RULE: Any person capacitated to
common right or interest in any property from
contract may enter into a contract of partnership.
which the returns are derived;
EXCEPTIONS:
3. The receipt by a person of a share of the
1. Persons who are prohibited from giving
profits of a business is prima facie evidence
each other any donation or advantage
that he is a partner in the business, UNLESS
cannot enter into a universal partnership.
such were received in payment:
(Art. 1782)
a. As debt by installments or otherwise;
2. Persons suffering from civil interdiction.
b. As wages or rent;
3. Persons who cannot give consent to a
c. As annuity;
contract:
d. As interest on loan;
a. Minors
e. As consideration for sale of goodwill
b. insane persons
of business/other property by
c. deaf-mutes who do not know how to
installments
write
Art. 1770. A partnership must have a lawful object
or purpose, and must be established for the MAY CORPORATIONS ENTER INTO
common benefit or interest of the partners. PARTNERSHIP?
When an unlawful partnership is Philippine Corporate Law (2001) by Dean
dissolved by a judicial decree, the profits Villanueva (p. 902) citing various SEC Opinions:
shall be confiscated in favor of the State, • Corporations may enter into partnership
without prejudice to the provisions of the agreements on the following conditions:
Penal Code governing the confiscation of the 1. Authority to enter into a partnership
instruments and effects of a crime. relation is expressly conferred by the
charter or the articles of
EFFECTS OF AN UNLAWFUL PARTNERSHIP: incorporation (AoI), and the nature of
1. The contract is void ab initio and the the business venture to be
partnership never existed in the eyes of the undertaken by the partnership is in
law. (Art. 1409[1]) line with the business authorized by
2. The profits shall be confiscated in favor of the the charter or AoI.
government. (Art. 1770) 2. If it is a foreign corporation, it must
3. The instrumentsQuickTime™
or toolsandand a proceeds of the obtain a license to transact business
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crime shall also
are beto see
needed forfeited
this picture. in favor of the in the country in accordance with the
government. (Art. 1770, Art. 45-RPC) Corporation Code of the Philippines.
4. The contributions of the partners shall not be
confiscated unless they fall under no. 3. (See
Arts. 1411 and 1412)
WHEN IMMOVABLES OR REAL RIGHTS
NOTE: Judicial decree is not necessary to dissolve CONTRIBUTED
an unlawful partnership.

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Art. 1773. A contract of partnership is void, Î Partnerships void under Art.1773, in

whenever immovable property is contributed relation Art. 1771 may still be considered
thereto, if an inventory of said property is not either de facto or estoppel partnerships vis-
made, signed by the parties, and attached to à-vis third persons; may even be treated as
the public instrument. an ordinary contract from which rights and
obligations may validly arise, although not
GENERAL RULE: Failure to comply with the
requirement of appearance in public instrument exactly a partnership under the Civil Code.
and SEC Registration will not affect the liability of ÎFailure to prepare an inventory of the
the partnership and the members thereof to third immovable property contributed, in spite of
persons. (Art. 1772 ¶ 2) article 1773 declaring the partnership void
EXCEPTION: When IMMOVABLE PROPERTY/ would not render the partnership void when:
REAL RIGHTS are contributed, a. NO THIRD PARTY INVOLVED
*public instrument + inventory* (since Art. 1773 was intended for the
made and signed by the parties and attached to protection of 3rd parties;
the public instrument (Arts. 1771 and 1773) is b. Partners have MADE A CLAIM ON
required for the benefit of third persons. THE PARTNERSHIP AGREEMENT.

EFFECT OF ABSENCE OF REQUIREMENTS

UNDER ARTICLES 1771 AND 1773 CLASSIFICATIONS OF PARTNERSHIP
CONDITION OF
AS TO EXTENT OF ITS SUBJECT MATTER
PARTNERSHIP
WHERE REAL BAUTISTA, E. DE LEON 1. UNIVERSAL PARTNERSHIP
PROPERTY IS a. UNIVERSAL PARTNERSHIP OF
CONTRIBUTED ALL PRESENT PROPERTY -
comprises the following:
No public
VOID VOID
i. Property which belonged to
Instrument, No
Inventory each of the partners at the
time of the constitution of the
With Public partnership
Instrument, No VOID VOID ii. Profits which they may
Inventory acquire from all property
VALID contributed
b. UNIVERSAL PARTNERSHIP OF
but either party PROFITS - comprises all that the
may compel partners may acquire by their
execution of industry or work during the existence
public instrument of the partnership
so it may be NOTE: Persons who are prohibited from giving
No Public registered in the
Instrument, With VOID donations or advantage to each other cannot enter
registry of
Inventory into a universal partnership. (Art. 1782)
property;
nonetheless,
partnership 2. PARTICULAR PARTNERSHIP—has for its
agreement may objects:
be enforced (cf. a. Determinate things
Arts. 1356 to b. Their use or fruits
1358) and a
QuickTime™ c. Specific undertaking
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are needed to see this picture. d. Exercise of profession or vocation
With Public
Instrument, With VALID VALID AS TO LIABILITY OF PARTNERS
Inventory
1. GENERAL PARTNERSHIP—consists of
(Source: Bar Review Notes for Partnership Law by general partners who are liable pro rata
Atty. Villareal) and subsidiarily and sometimes solidarily
NOTE: with their separate property for
• Torres v. CA, 320 SCRA 428 (1999) partnership debts.

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2. LIMITED PARTNERSHIP—one formed by 2 8. CONTINUING PARTNER—one who

or more persons having as members one continues the business of a partnership
or more general partners and one or after it has been dissolved by reason of
more limited partners, the latter not being the admission of a new partner,
personally liable for the obligations of the retirement, death or expulsion of one of
partnership the partners
9. SURVIVING PARTNER—one who remains
after a partnership has been dissolved by
AS TO DURATION death of any partner
10. SUBPARTNER—one who is not a member
1. PARTNERSHIP AT WILL—one in which no
of the partnership who contracts with a
time is specified and is not formed for a
partner with reference to the latter's
particular undertaking or venture which
share in the partnership
may be terminated anytime by mutual
11. OSTENSIBLE—one who takes active part
agreement
and known to the public as partner in the
2. PARTNERSHIP WITH A FIXED TERM—the
business
term for which the partnership is to exist
12. SECRET—one who takes active part in the
is fixed or agreed upon or one formed for
business but is not known to be a partner
a particular undertaking
by outside parties
13. SILENT—one who does not take any active
AS TO LEGALITY OF EXISTENCE
part in the business although he may be
1. DE JURE PARTNERSHIP—one which has known to be a partner
complied with all the legal requirements 14. DORMANT—one who does not take active
for its establishment part in the business and is not known or
2. DE FACTO—one which has failed to comply held out as a partner
with all the legal requirements for its
establishment OBLIGATIONS OF THE PARTNERS TO ONE
ANOTHER
AS TO PURPOSE
A) OBLIGATIONS OF THE PARTNERS AMONG
1. COMMERCIAL OR TRADING
THEMSELVES
PARTNERSHIP—one formed for the
transaction of business
1. PROMISED CONTRIBUTION
2. PROFESSIONAL OR NON TRADING
Obligations with respect to contribution of
PARTNERSHIP—one formed for the
property:
exercise of a profession a. to contribute at the beginning of the
partnership or at the stipulated time
KINDS OF PARTNERS: the money, property or industry
1. CAPITALIST—one who contributes money
which he may have promised to
or property to the common fund contribute (Art. 1786)
2. INDUSTRIAL—one who contributes only his b. To answer for eviction in case the
industry or personal service
partnership is deprived of the
3. GENERAL—one whose liability to 3rd determinate property contributed
persons extends to his separate property (Art. 1786)
4. LIMITED—one whose liability to 3rd persons
c. To answer to the partnership for the
is limited to his capital contribution fruits of the property the contribution
5. MANAGING—one who manages the affairs of which he delayed, from the date
QuickTime™ and a
or business of thedecompressor
TIFF (Uncompressed) partnership
are needed to see this picture. they should have been contributed
6. LIQUIDATING—one who takes charge of the up to the time of actual delivery (Art.
winding up of partnership affairs upon 1786)
dissolution
d. To preserve said property with the
7. PARTNERS BY ESTOPPEL—one who is diligence of a good father of a family
not really a partner but is liable as a pending delivery to partnership (Art.
partner for the protection of innocent 3rd
1163)
persons e. To indemnify partnership for any
damage caused to it by the retention

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of the same or by the delay in its PROHIBITION AGAINST ENGAGING IN

contribution (Arts. 1788, 1170) COMPETITIVE BUSINESS
INDUSTRIAL PARTNER CAPITALIST
EFFECT OF FAILURE TO CONTRIBUTE
PARTNER
PROPERTY PROMISED:
1. Partners becomes ipso jure a debtor of the --cannot engage in --cannot engage in
partnership even in the absence of any business (w/n same line of business (with same
demand (See Art. 1169[1]) business with the kind of business with
2. Remedy of the other partner is not rescission partnership) unless the partnership) for
but specific performance with damages from partnership expressly his own account,
defaulting partner (Art. 1788) permits him to do so. unless there is a
stipulation to the
Obligations with respect to contribution of (Art. 1789) contrary.
money and money converted to personal ( Art. 1808)
use:
a. To contribute on the date fixed the CONSEQUENCES IF AN INDUSTRIAL PARTNER
amount he has undertaken to ENGAGES IN ANY BUSINESS: (Art. 1789)
contribute to the partnership 1. he can be excluded from the partnership; or
b. To reimburse any amount he may 2. the capitalist partners can avail of the benefit
have taken from the partnership he obtained from the business, or
coffers and converted to his own use 3. the capitalist partners have the right to file an
c. To pay for the agreed or legal action for damages against the industrial
interest, if he fails to pay his partner, in either case.
contribution on time or in case he
takes any amount from the common CONSEQUENCES IF THE CAPITALIST PARTNER
fund and converts it to his own use ENGAGES IN A BUSINESS (which competes with
d. To indemnify the partnership for the the business of the partnership):
damages caused to it by delay in the 1. he may be required to bring to the common
contribution or conversion of any fund the profits he derived from the other
sum for his personal benefits business; (Art. 1808)
(See Art. 1788) 2. he shall personally bear the losses; (Art.
1808)
2. FIDUCIARY DUTY 3. he may be ousted form the partnership,
A partnership is a fiduciary relation—one entered especially if there was a warning.
into and to be maintained on the basis of trust and
confidence. With that, a partner must observe the Obligations with respect to contribution to
utmost good faith, fairness, and integrity in his partnership capital:
dealings with the others: a. Partners must contribute equal
a. he cannot directly or indirectly use shares to the capital of the
partnership assets for his own partnership unless there is stipulation
benefit; to contrary (Art. 1790)
b. he cannot carry on a business of the b. Partners (capitalist) must contribute
partnership for his private advantage; additional capital In case of imminent
c. he cannot, in conducting the loss to the business of the
business of the partnership, take any partnership and there is no
profit clandestinely; stipulation otherwise; refusal to do so
d. he cannot obtain
QuickTime™ and afor himself that he
shall create an obligation on his part
TIFF (Uncompressed) decompressor
should
are needed have obtained for the
to see this picture.
to sell his interest to the other
partnership (e.g. business partners (Art. 1790)
opportunity) Requisites:
e. he cannot carry on another business a. There is an imminent loss of the
in competition with the partnership; business of the partnership
f. he cannot avail himself of knowledge b. The majority of the capitalist partners
or information which may be properly are of the opinion that an additional
regarded as the property of the contribution to the common fund
partnership; would save the business

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c.The capitalist partner refuses

deliberately to contribute (not due to
RULES FOR DISTRIBUTION OF PROFITS AND
financial inability)
LOSSES (See Art. 1797)
d. There is no agreement to the
contrary PROFITS LOSSES
Obligation of managing partners who With According to According to
collects debt from person who also owed the agreement agreement agreement
partnership (Art. 1792) Without 1. Share of 1. If sharing of
a. Apply sum collected to 2 credits in agreement capitalist profits is
proportion to their amounts partner is in stipulated -
b. If he received it for the account of proportion to his apply to
partnership, the whole sum shall be capital sharing of
applied to partnership credit contribution losses
Requisites: 2. Share of 2. If no profit
a. There exists at least 2 debts, one industrial sharing
where the collecting partner is partner is not stipulated -
creditor and the other, where the fixed - as may losses shall
partnership is the creditor be just and be borne
b. Both debts are demandable equitable under according to
c. The partner who collects is the capital
authorized to manage and actually circumstances contribution
manages the partnership 3. Purely
industrial
Obligation of partner who receives share of partner not
partnership credit liable for
a. Obliged to bring to the partnership losses
capital what he has received even
though he may have given receipt for Art. 1799. A stipulation which excludes one or
his share only (Art. 1793) more partners from any share in the profits
Requisites: and losses is void.
a. A partner has received in whole or in
part, his share of the partnership
NOTE: Stipulation exempting a partner from losses
credit
should be allowed. If a person can make a gift to
b. The other partners have not
another, there is no sound reason why a person
collected their shares
cannot also agree to bear all the losses. Of course,
c. The partnership debtor has become
as far as THIRD PERSONS are concerned, any such
insolvent
stipulation may be properly declared void.
(De Leon, pp. 124-125, citing Espiritu and Sibal)
BEARING THE RISK OF LOSS OF THINGS
CONTRIBUTED (Art. 1795)
RIGHTS AND OBLIGATIONS WITH RESPECT TO
Specific and determinate things Risk is borne by MANAGEMENT
which are not fungible where only partner
Partner is Power of Vote of
the use is contributed
appointed managing partners
Specific and determinate things Risk is borne by
manager in the partner is representing
the ownership of which is partnership irrevocable controlling
articles of
transferred to the partnership without interest
QuickTime™ and a partnership
Fungible things (consumable)
TIFF (Uncompressed) decompressorRisk is borne by
are needed to see this picture. just/lawful necessary to
partnership cause; revoke power
Things contributed to be sold Risk is borne by Revocable only
partnership when in bad
Things brought and appraised in Risk is borne by faith
the inventory partnership Partner is Power is
Specific and determinate things Risk is borne by appointed revocable any
which are not fungible where only partner manager after time for any
the use is contributed constitution of cause

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partnership deceased partner or of any partner under

2 or more persons Each may In case of legal disability
entrusted with execute all acts opposition, 5. Duty to account to the partnership as
management of of decision of fiduciary
partnership administration majority shall
without prevail; In B) PROPERTY RIGHTS OF A PARTNER
specification of case of tie, 1. His rights in specific partnership property
duties/stipulation decision of 2. His interest in the partnership
that each shall not partners 3. His right to participate in the management
act w/o the other's owning (Art. 1810)
consent controlling
interest shall NATURE OF PARTNER'S RIGHT IN SPECIFIC
prevail PARTNERSHIP PROPERTY—a partner
Stipulated that Concurrence of Absence or has an equal right to possession which is
none of the all necessary for disability of not assignable and such right is limited to
managing the validity of any one the share of what remains after partnership
partners shall act acts cannot be debts have been paid
w/o the consent of alleged
others unless there NATURE OF PARTNER'S RIGHT IN THE
is imminent PARTNERSHIP—a share in the profits and
danger of surplus
grave or
irreparable C) OBLIGATION OF PARTNERS WITH REGARD
injury to TO THIRD PERSONS
partnership 1. Every partnership shall operate under a
Manner of 1. All partners If refusal of firm name. Persons who include their
management not are agents partner is names in the partnership name even if they
agreed upon of the manifestly are not members shall be liable as a
partnership prejudicial to partner
2. Unanimous interest of 2. All partners shall be liable for contractual
consent partnership, obligations of the partnership with their
required for court's property, after all partnership assets have
alteration of intervention been exhausted:
immovable may be a. Pro rata
property sought b. Subsidiary
3. Admission or representation made by any
Other rights and obligations of partners: partner concerning partnership affairs
1. Right to associate another person with him in within scope of his authority is evidence
his share without consent of other partners against the partnership
(subpartnership) 4. Notice to partner of any matter relating to
2. Right to inspect and copy partnership books partnership affairs operates as notice to
at any reasonable hour partnership, except in case of fraud:
3. Right to a formal account as to partnership a. Knowledge, of partner acting in
affairs (even during existence of partnership): the particular matter, acquired
a. If he is wrongfully excluded from while a partner
partnership business or possession b. Knowledge of the partner acting
ofTIFF
its(Uncompressed)
property
QuickTime™ byandhis
a copartners in the particular matter then
decompressor
b. If right exists
are needed under
to see this picture. the terms of any present to his mind
agreement c. Knowledge of any other partner
c. As provided by art 1807 who reasonably could and
d. Whenever other circumstances should have communicated it to
render it just and reasonable the acting partner
4. Duty to render on demand true and full 5. Partners and the partnership are solidary
information affecting partnership to any liable to 3rd persons for the partner's tort or
partner or legal representative of any breach of trust
6. Liability of incoming partner is limited to:

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a. His share in the partnership

property for existing obligations EFFECTS OF CONVEYANCE OF REAL
b. His separate property for PROPERTY BELONGING TO PARTNERSHIP
subsequent obligations
Title in partnership name, Conveyance passes
7. Creditors of partnership preferred in
partnership property & may attach partner's Conveyance in partnership title but partnership
name can recover if:
share in partnership assets
1. Conveyance was
8. Every partner is an agent of the partnership
not in the usual
way of business,
or
POWER OF PARTNER AS AGENT OF
2. Buyer had
PARTNERSHIP
knowledge of
Acts for carrying on in the Every partner is an lack of authority
usual way the business agent and may Title in partnership name, Conveyance does
of the partnership execute acts with Conveyance in partner's not pass title but only
binding effect even if name equitable interest,
he has no authority unless:
Except: when 3rd 1. Conveyance was
person has knowledge not in the usual
of lack of authority way of business,
1. Act w/c is not Does not bind or
apparently for the partnership unless 2. Buyer had
carrying of business authorized by other knowledge of lack of
in the usual way partners authority
2. Acts of strict Title in name of 1/ more Conveyance passes
dominion or partners, Conveyance in title but partnership
ownership: name if partner/partners in can recover if:
3. Assign partnership whose name title stands 1. Conveyance was
property in trust for not in the usual
creditors way of business,
4. Dispose of good-will or
of business 2. Buyer had
5. Do an act w/c would knowledge of
make it impossible lack of authority
to carry on ordinary Title in name of 1/more/all Conveyance will only
business of partners or 3rd person in pass equitable
partnership trust for partnership, interest
6. Confess a Conveyance executed in
judgement partnership name if in name
7. Enter into of partners
compromise Title in name of all partners, Conveyance will
concerning a Conveyance in name of all pass title
partnership claim or partners
liability
8. Submit partnership
claim or liability to PARTNER BY ESTOPPEL—by words or conduct, he
QuickTime™ and a
arbitration TIFF (Uncompressed) decompressor does any of the ff.:
9. Renounce claim of
are needed to see this picture. 1. Directly represents himself to anyone as a
partnership partner in an existing partnership or in a non-
existing partnership
Acts in contravention of a Partnership not liable
2. Indirectly represents himself by consenting to
restriction on authority to 3rd persons having
another representing him as a partner in an
actual or presumptive
existing partnership or in a non existing
knowledge of the
partnership
restrictions

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ELEMENTS TO ESTABLISH LIABILITY AS A 2. To answer for obligations partner may have

PARTNER ON GROUND OF ESTOPPEL: contracted in good faith in the interest of the
1. Defendant represented himself as partnership business
partner/represented by others as such and 3. To answer for risks in consequence of its
not denied/refuted by defendant management
2. Plaintiff relied on such representation
3. Statement of defendant not refuted
CHAPTER 3: DISSOLUTION AND WINDING UP
LIABILITIES IN ESTOPPEL
DISSOLUTION—change in the relation of the
All partners Partnership is liable
partners caused by any partner ceasing to be
consented to associated in the carrying on of the business;
representation
partnership is not terminated but continues until
No existing Person who represented the winding up of partnership affairs is completed
partnership & all himself & all those who
those represented made representation liable WINDING UP—process of settling the business or
consented; pro-rata/jointly partnership affairs after dissolution
Not all partners of
existing partnership TERMINATION—that point when all partnership
consents to affairs are completely wound up and finally
representation settled. It signifies the end of the partnership life.
No existing Person who represented
partnership & not all himself liable & those who CAUSES OF DISSOLUTION:
represented made/consented to 1. Without violation of the agreement between
consented; representation separately the partners
None of partners in liable a. By termination of the definite term/
existing partnership particular undertaking specified in the
consented agreement
b. By the express will of any partner, who
must act in good faith, when no definite
ASSIGNMENT OF INTEREST IN PARTNERSHIP term or particular undertaking is specified
Assignment is subject to three (3) conditions: c. By the express will of all the partners
1. made in good faith who have not assigned their interest/
2. for fair consideration charged them for their separate debts,
3. after a fair and complete disclosure of all either before or after the termination of
important information as to its value any specified term or particular
undertaking
RIGHTS OF AN ASSIGNEE: d. By the bona fide expulsion of any partner
1. Get whatever assignor-partner would have from the business in accordance with
obtained power conferred by the agreement
2. Avail usual remedies in case of fraud in the 2. In contravention of the agreement between
management the partners, where the circumstances do not
3. Ask for annulment of contract of assignment permit a dissolution under any other provision
if he was induced to join through any of the of this article, by the express will of any
vices of consent partner at any time
4. Demand an accounting (only in case of 3. By any event which makes it unlawful for
dissolution) QuickTime™ and a business to be carried on/for the members to
TIFF (Uncompressed) decompressor
are needed to see this picture. carry it on for the partnership
D) RESPONSIBILITY OF PARTNERSHIP TO 4. Loss of specific thing promised by partner
PARTNERS before its delivery
1. To refund the amounts disbursed by partner 5. Death of any partner
in behalf of the partnership + corresponding 6. Insolvency of a partner/partnership
interest from the time the expenses are made 7. Civil interdiction of any partner
(loans and advances made by a partner to the 8. Decree of court under art 1831
partnership aside from capital contribution)

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GROUNDS FOR DISSOLUTION BY DECREE OF affairs/completing transactions

COURT (Art. 1831) unfinished
1. Partner declared insane in any judicial (2) Transactions which would bind
proceeding or shown to be of unsound mind partnership if not dissolved, when
2. Incapacity of partner to perform his part of the other party/obligee:
the partnership contract (a) Situation 1 -
3. Partner guilty of conduct prejudicial to i. Had extended credit to
business of partnership partnership prior to
4. Willful or persistent breach of partnership dissolution &
agreement or conduct which makes it ii. Had no
reasonably impracticable to carry on knowledge/notice of
partnership with him dissolution, or
5. Business can only be carried on at a loss (b) Situation 2 -
6. Other circumstances which render i. Did not extend credit to
dissolution equitable partnership
ii. Had known partnership
Upon application by purchaser of partner's interest: prior to dissolution
• After termination of specified term/particular iii. Had no
undertaking knowledge/notice of
• Anytime if partnership at will when interest dissolution/fact of
was assigned/charging order issued dissolution not advertised in
a newspaper of general
circulation in the place
EFFECTS OF DISSOLUTION where partnership is
regularly carried on
A. AUTHORITY OF PARTNER TO BIND b. Partner cannot bind the partnership
PARTNERSHIP anymore after dissolution:
(1) Where dissolution is due to
GENERAL RULE: Authority of partners to bind unlawfulness to carry on with
partnership is terminated business (except: winding up of
Exception: partnership affairs)
1. Wind up partnership affairs (2) Where partner has become insolvent
2. Complete transactions not finished (3) Where partner unauthorized to wind
up partnership affairs, except by
QUALIFICATIONS: transaction with one who:
1. With respect to partners— (a) Situation 1 -
a. Authority of partners to bind partnership i. Had extended credit to
by new contract is immediately partnership prior to dissolution
terminated when dissolution is not due to &
ACT, DEATH or INSOLVENCY (ADI) of ii. Had no knowledge/notice of
a partner (art 1833); dissolution, or
b. If due to ADI, partners are liable as if (b) Situation 2 -
partnership not dissolved, when the ff. i. Did not extend credit to
concur: partnership prior to
i. If cause is ACT of partner, acting dissolution
partner must have knowledge of ii. Had known partnership prior
such dissolution
QuickTime™ and a to dissolution
TIFF (Uncompressed) decompressor
ii. If cause
are neededis DEATH
to see this picture.or INSOLVENCY, iii. Had no knowledge/notice of
acting partner must have knowledge/ dissolution/fact of dissolution
notice not advertised in a
2. With respect to persons not partners (Art. newspaper of general
1834)— circulation in the place where
a. Partner continues to bind partnership partnership is regularly
even after dissolution in ff. cases: carried on
(1) Transactions in connection to
winding up partnership

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B. DISCHARGE OF LIABILITY 1. Partnership property (including goodwill)

2. Contributions of the partners
Dissolution does not discharge existing liability of
partner, except by agreement between:
ORDER OF APPLICATION OF ASSETS:
• Partner and himself 1. Partnership creditors
• person/partnership continuing the business 2. Partners as creditors
• partnership creditors 3. Partners as investors—return of capital
contribution
RIGHTS OF PARTNER WHERE DISSOLUTION 4. Partners as investors—share of profits if
NOT IN CONTRAVENTION OF AGREEMENT: any
1. Apply partnership property to discharge
liabilities of partnership D. WHEN BUSINESS OF DISSOLVED
2. Apply surplus, if any to pay in cash the net PARTNERSHIP IS CONTINUED:
amount owed to partners 1. Creditors of old partnership are also creditors
of the new partnership which continues the
RIGHTS OF PARTNER WHERE DISSOLUTION IN business of the old one w/o liquidation of the
CONTRAVENTION OF AGREEMENT: partnership affairs
1. Partner who did not cause dissolution 2. Creditors have an equitable lien on the
wrongfully: consideration paid to the retiring /deceased
a. Apply partnership property to partner by the purchaser when
discharge liabilities of partnership retiring/deceased partner sold his interest
b. Apply surplus, if any to pay in cash w/o final settlement with creditors
the net amount owed to partners 3. Rights if retiring/estate of deceased partner:
c. Indemnity for damages caused by a. To have the value of his interest
partner guilty of wrongful dissolution ascertained as of the date of dissolution
d. Continue business in same name b. To receive as ordinary creditor the value
during agreed term of his share in the dissolved partnership
e. Posses partnership property if with interest or profits attributable to use
business is continued of his right, at his option
2. Partner who wrongly caused dissolution:
a. If business not continued by others - PERSONS AUTHORIZED TO WIND UP
apply partnership property to 1. Partners designated by the agreement
discharge liabilities of partnership & 2. In absence of agreement, all partners who
receive in cash his share of surplus have not wrongfully dissolved the partnership
less damages caused by his 3. Legal representative of last surviving partner
wrongful dissolution
b. If business continued by others -
have the value of his interest at time
CHAPTER 4: LIMITED PARTNERSHIP
of dissolution ascertained and paid in
cash/secured by bond & be released
CHARACTERISTICS:
from all existing/future partnership
1. Formed by compliance with statutory
liabilities
requirements
2. One or more general partners control the
RIGHTS OF INJURED PARTNER WHERE
business
PARTNERSHIP CONTRACT IS RESCINDED ON
3. One or more general partners contribute to
GROUND OF FRAUD/MISREPRESENTATION BY 1
the capital and share in the profits but do not
PARTY: QuickTime™ and a participate in the management of the
1. Right to TIFFlien on surplus
(Uncompressed) decompressor of partnership
are needed to see this picture. business and are not personally liable for
property after satisfying partnership liabilities
partnership obligations beyond their capital
2. Right to subrogation in place of creditors
contributions
after payment of partnership liabilities
4. May ask for the return of their capital
3. Right of indemnification by guilty partner
contributions under conditions prescribed by
against all partnership debts & liabilities
law
C. SETTLEMENT OF ACCOUNTS BETWEEN
5. Partnership debts are paid out of common
PARTNERS
fund and the individual properties of general
ASSETS OF THE PARTNERSHIP: partners

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DIFFERENCES BETWEEN GENERAL AND of death, insanity, retirement, civil

LIMITED PARTNER/PARTNERSHIP interdiction, insolvency
n. Right of limited partner (if given) to
GENERAL LIMITED demand/receive property/cash in
Personally liable for Liability extends only return for contribution
partnership obligations to his capital 2. Certificate must be filed with the SEC
contributions
When manner of mgt. not No participation in WHEN GENERAL PARTNER NEEDS
agreed upon, all gen management CONSENT/RATIFICATION OF ALL LIMITED
partners have an equal PARTNERS:
right in the mgt. of the 1. Do any act in contravention of the certificate
business 2. Do any act which would make it impossible to
Contribute cash, property Contribute cash or carry on the ordinary business of the
or industry property only, not partnership
industry 3. Confess judgment against partnership
Proper party to Not proper party to 4. Possess partnership property/assign rights in
proceedings by/against proceedings specific partnership property other than for
partnership by/against partnership partnership purposes
Interest not assignable Interest is freely 5. Admit person as general partner
w/o consent of other assignable 6. Admit person as limited partner - unless
partners authorized in certificate
Name may appear in firm Name must appear in 7. Continue business with partnership property
name firm name on death, retirement, civil interdiction,
Prohibition against No prohibition against insanity or insolvency of gen partner unless
engaging in business engaging in business authorized in certificate
Retirement, death, Does not have same
insolvency, insanity of effect; rights SPECIFIC RIGHTS OF LIMITED PARTNERS:
gen partner dissolves transferred to legal 1. Right to have partnership books kept at
partnership representative principal place of business
2. Right to inspect/copy books at reasonable
REQUIREMENTS FOR FORMATION OF LIMITED hour
PARTNERSHIP: 3. Right to have on demand true and full info of
1. Certificate of articles of the limited all things affecting partnership
partnership must state the ff. matters: 4. Right to have formal account of partnership
a. Name of partnership + word "ltd." affairs whenever circumstances render it just
b. Character of business and reasonable
c. Location of principal place of 5. Right to ask for dissolution and winding up by
business decree of court
d. Name/place of residence of 6. Right to receive share of profits/other
members compensation by way of income
e. Term for partnership is to exist 7. Right to receive return of contributions
f. Amount of cash/value of property provided the partnership assets are in excess
contributed of all its liabilities
g. Additional contributions
h. Time agreed upon to return
contribution of limited partner REQUISITES FOR RETURN OF CONTRIBUTION
i. SharingQuickTime™ and of a profits/other OF LIMITED PARTNER:
TIFF (Uncompressed) decompressor
compensation
are needed to see this picture. 1. All liabilities of partnership have been paid/if
j. Right of limited partner (if given) to not yet paid, at least sufficient to cover them
substitute an assignee 2. Consent of all members has been obtained
k. Right to admit additional partners 3. Certificate is cancelled/amended as to set
l. Right of limited partners (if given) to forth withdrawal /reduction of contribution
priority for contributions
m. Right of remaining gen partners (if LIABILITIES OF A LIMITED PARTNER
given) or continue business in case
To the partnership

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1. for the difference between his contribution as

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

As a trustee for the partnership

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

DISSOLUTION OF LIMITED PARTNERSHIP

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

QuickTime™ and a
TIFF (Uncompressed) decompressor
are needed to see this picture.

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