Regulatory Framework AND Legal Issues IN Business: Cristine G. Policarpio Bsais 3-B

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REGULATORY FRAMEWORK

AND
LEGAL ISSUES
IN
BUSINESS

Cristine G. Policarpio
BSAIS 3-B
TITLE I. determinable future time, within the meaning of
this Act, which is expressed to be payable—
NEGOTIABLE INSTRUMENTS IN GENERAL.
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future
CHAPTER I. FORM AND INTERPRETATION. time specified therein; or

SECTION 1. Form of negotiable instrument.- An (c) On or at a fixed period after the occurrence of a
instrument to be negotiable must conform to the specified event, which is certain to happen, though
following requirements: the time of happening be uncertain.

(a) It must be in writing and signed by the maker An instrument payable upon a contingency is not
or drawer; negotiable, and the happening of the event does
not cure the defect.
(b) Must contain an unconditional promise or
order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or SEC. 5. Additional provisions not affecting
determinable future time; negotiability.- An instrument which contains an
order or promise to do any act in f addition to the
(d) Must be payable to order or to bearer; and payment of money is not negotiable. But the
negotiable character of an instrument otherwise
(e) Where the instrument is addressed to a negotiable is not affected by a provision which—
drawee, he must be named or otherwise indicated
therein with reasonable certainty. (a) Authorizes the sale of collateral securities in
case the instrument be not paid at maturity; or
(b) Authorizes a confession of judgment if the
SEC. 2. Certainly as to sum ; what constitutes. The instrument be not paid at maturity; or
sum payable sum is a sum certain within the
meaning of this Act, although it is to be paid— (c) Waives the benefit of any law intended for the
advantage or protection of the obligor; or
(a) With interest; or
(d) Gives the holder an election to require
(b) By stated installments^ or something to be done in lieu of payment of money.
(c) By stated installments, with a provision that But nothing in this section shall validate any
upon default in payment of any installment or of provision or stipulation otherwise illegal.
interest the whole shall become due; or
(d) With exchange, whether at a fixed rate or at
the current rate; or
SEC. 6. Omissions; seal; particular money. The
(e) With costs of collection or an attorney's fee, in validity and negotiable character of an instrument
case payment shall not be made at maturity. are not affected by the fact that—
(a) It is not dated; or

SEC. 3. When promise is unconditional.- An (b) Does not specify the value given, or that any
unqualified order or promise to pay is value has been given therefor; or
unconditional within the meaning of this Act,
though coupled with— (c) Does not specify the place where it is drawn or
the place where it is payable; or
(a) An indication of a particular fund out of which (d) Bears a seal; or
reimbursement is to be made, or a particular
account to be debited with the amount; or (e) Designates a particular kind of current money
in which payment is to be made.
(b) A statement of the transaction which gives rise
to the instrument. But nothing in this section shall alter or repeal any
statute requiring in certain cases the nature of the
But an order or promise to pay out of a particular consideration to be stated in the instrument.
fund is not unconditional.
SEC. 7. When payable on demand.- An instrument
is payable on demand—
SEC. 4. Determinable future time; what
constitutes.- An instrument is payable at a
(a) Where it is expressed to be payable on SEC. 12. Antedated and postdated.- The
demand, or at sight, or on presentation; or instrument is not invalid for the reason only that it
is antedated or postdated, provided this is not
(b) In which no time for payment is expressed. done for an illegal or fraudulent purpose. The
person to whom an instrument so dated is
Where an instrument is issued, accepted, or delivered acquires the title thereto as of the date
indorsed when overdue, it is, as regards the person of delivery.
so issuing, accepting, or indorsing it, payable on
demand.

SEC. 13. When date may be inserted.- Where an


instrument expressed to be payable at a fixed
SEC. 8. When payable to order.- The instrument is period after date is issued undated, or where the
payable to order where it is drawn payable to the acceptance of an instrument payable at a fixed
order of a specified person or to him or his order. period after sight is undated, any holder may insert
It may be drawn payable to the order of— therein the true date of issue or acceptance, and
the instrument shall be payable accordingly. The
(a) A payee who is not maker, drawer, or drawee; insertion of a wrong date does not avoid the
or instrument in the hands of a subsequent holder in
due course; but as to him, the date so inserted is to
(b) The drawer or maker; or be regarded as the true date.
(c) The drawee; or
(d) Two or more payees jointly; or
SEC. 14. Blanks; when may be filled.- Where the
(e) One or some of several payees; or instrument is wanting in any material particular,
the person in possession thereof has a prima facie
(f) The holder of an office for the time being. authority to complete it by filling up the blanks
therein. And a signature on a blank paper delivered
Where the instrument is payable to order the by the person making the signature in order that
payee must be named or otherwise indicated the paper may be converted into a negotiable
therein with reasonable certainty. instrument operates as a prima facie authority to
fill it up as such for any amount. In order, however,
that any such instrument when completed may be
enforced against any person who became a party
SEC. 9. When payable to bearer.- The instrument thereto prior to its completion, it must be filled up
is payable to bearer— strictly in accordance with the authority given and
within a reasonable time. But if any such
(a) When it is expressed to be so payable; or instrument, after completion, is negotiated to a
holder in due course, it is valid and effectual for all
(b) When it is payable to a person named therein purposes in his hands, and he may enforce it as if it
or bearer; or (c) When it is payable to the order of had been filled up strictly in accordance with the
a fictitious or person, and such fact was known to authority given and within a reasonable time.
the person making it so payable; or
(d) When the name of the payee does not purport
to be the name of any person; or SEC. 15. Incomplete instrument not delivered.
Where an incomplete instrument has not been
(e) When the only or last indorsement is an delivered it will not, if completed and negotiated,
indorsement in blank, sufficient terms. without authority, be a valid contract in the hands
of any holder, as against any person whose
signature was placed thereon before delivery.
SEC. 10. Terms, when sufficient.- The instrument
need not follow the language of this Act, but any
terms are sufficient which clearly indicate an SEC. 16. Delivery; when effectual: when
intention to conform to the requirements hereof. presumed.- Every contract on a negotiable
instrument is incomplete and revocable until
SEC. 11. Date, presumption as to.- Where the delivery of the instrument for the purpose of giving
instrument or an acceptance or any indorsement effect thereto. As between immediate parties, and
thereon is dated, such date is deemed prima facie as regards a remote party other than a holder in
to be the true date of the making, drawing, due course, the delivery, in order to be effectual,
acceptance, or indorsement, as the case may be. must be made either by or under the authority of
the party making, drawing, accepting, or indorsing,
as the case may be; and in such case the delivery
may be shown to have been conditional, or for a
special purpose only, and not for the purpose of authority of the agent may be established as in
transferring the property in the instrument. But other cases of agency.
where the instrument is in the hands of a holder in
due course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is
conclusively presumed. And where the instrument SEC. 20. Liability of person signing as agent, and
is no longer in the possession of a party whose so forth.- Where the instrument contains or a
signature appears thereon, a valid and intentional person adds to his signature words indicating that
delivery by him is presumed until the contrary is he signs for or on behalf of a principal, or in a
proved. representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere
addition of words describing him as an agent, or as
filling a representative character, without
SEC. 17. Construction where instrument is disclosing his"principal, does not exempt him from
ambiguous.- Where construction. the language of personal liability.
the instrument is ambiguous or there are
omissions therein, the following rules of
construction apply:
SEC. 21. Signature by procuration; effect of. A
(a) Where the sum payable is expressed in words signature by uration. "procuration" operates as
and also in figures and there is a discrepancy notice that the agent has but a limited authority to
between the two, the sum denoted by the words is sign, and the principal is bound only in ease the
the sum payable; but if the words are ambiguous agent in so signing acted within the actual limits of
or uncertain, reference may be had to the figures his authority.
to fix the amount;
(b) Where the instrument provides for the
payment of interest, without specifying the date
from which interest is to run, the interest runs SEC. 22. Effect of indorsement by infant or
from the date of the instrument, and if the corporation.- The corporation, indorsement or
instrument is undated, from the issue thereof; assignment of the instrument by a corporation or
by an infant passes the property therein,
(c) Where the instrument is not dated, it will be notwithstanding that from want, of capacity the
considered to be dated as of the time it was issued; corporation or infant may incur no liability
thereon.
(d) Where there is a conflict between the written
and printed provisions of the instrument, the
written provisions prevail;
SEC. 23. Forged signature; effect of.- When a
(e) Where the instrument is so ambiguous that signature is forged or made without the authority
there is doubt whether it is a bill or note, the of the person whose signature it purports to be, it
holder may treat it as either at his election; is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to
(f) Where a signature is so placed upon the enforce payment thereof against any party
instrument that it is not clear in what capacity the thereto, can be acquired through or under such
person making the same intended to sign, he is to signature, unless the party against whom it is
be deemed an indorser; sought to enforce such right is precluded from
setting up the forgery or want of authority.
(g) Where an instrument containing the words "I
promise to pay" is signed by two or more persons,
they are deemed to be jointly and severally liable
thereon. CHAPTER II. CONSIDERATION.
SEC. 18. Liability of person signing in trade or SEC. 24. Presumption of consideration. Every
assumed name.- No person is liable on the negotiable instrument is deemed prima facie to
instrument whose signature does not appear have been issued for a valuable consideration; and
thereon, except as herein otherwise expressly every person whose signature appears thereon to
provided. But one who signs in a trade or have become a party thereto for value.
assumed name will be liable to the same extent as
if he had signed in his own name.

SEC. 25. Value, what constitutes.- Value is any


consideration sufficient to support a simple
SEC. 19. Signature by agent; authority; how contract. An antecedent or preexisting debt
shown.- The signature of any party may be made constitutes value; and is deemed such whether the
by a duly authorized agent. No particular form of
appointment is necessary for this purpose; and the
instrument is payable on demand or at a future indorsement which purports to transfer to the
time. indorsee a part only of the amount payable, or
which purports to transfer the instrument to two
or more indorsees severally, does not operate as a
negotiation of the instrument. But where the
SEC. 26. What constitutes holder for value. Where instrument has been paid in part, it may be
value has at any time been given for the indorsed as to the residue.
instrument, the holder is deemed a holder for
value in respect to all parties who became such
prior to that time.
SEC. 33. Kinds of indorsement.- An indorsement
may be either special or in blank; and it may also
be either restrictive or qualified, or conditional.
SEC. 27. When lien on instrument constitutes
holder for value.- Where the holder has a lien on
the instrument, arising either from contract or by
implication of law, he is deemed a holder for value SEC. 34. Special indorsement; indorsement in
to the extent of his lien. blank.- A special in indorsement specifies the
person to whom, or to whose order, the blank'
instrument is to be payable; and the indorsement
of such indorsee is necessary to the further
SEC. 28. Effect of want of consideration. Absence negotiation of the instrument. An indorsement in
or failure of consideration is matter of defense as blank specifies no indorsee, and an instrument so
against any person not a holder in due course; and indorsed is payable to bearer, and may be
partial failure of consideration is a defense pro negotiated by delivery.
tanto, whether the failure is an ascertained and
liquidated amount or otherwise.
SEC. 35. Blank indorsement; how changed to
special indorsement.- The holder may convert a
SEC. 29. Liability of accommodation party. An blank indorsement into a special indorsement by
accommodation party is one who has signed the writing over the signature of the indorser in blank
instrument as maker, drawer, acceptor, or any contract consistent with the character of the
indorser, without receiving value therefor, and for indorsement.
the purpose of lending his name to some other
person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder
at the time of taking the instrument knew him to SEC. 36. "When indorsement restrictive.- An
be only an accommodation party. indorsement is restrictive which either—
(a) Prohibits the further negotiation of the
instrument; or
CHAPTER III. NEGOTIATION.
(b) Constitutes the indorsee the agent of the
SEC. 30. What constitutes negotiation. An indorser; or
instrument is negotiated when it is transferred
from one person to another in such manner as to (c) Vests the title in the indorsee in trust for or to
constitute the transferee the holder thereof. If the use of some other person.
payable to bearer, it is negotiated by delivery; if
payable to order, it is negotiated by the But the mere absence of words implying power to
indorsement of the holder completed by delivery. negotiate does not make an indorsement
restrictive.

SEC. 31. Indorsement; how made.- The


indorsment must be written on the instrument SEC. 37. Effect of restricting indorsement; rights of
itself or upon a paper attached thereto. The indorsee. -A restrictive indorsement confers upon
signature of the indorser, without additional the indorsee the right—
words, is a sufficient indorsement. (a) To receive payment of the instrument;
(b) To bring any action thereon that the indorser
could bring;
SEC. 32. Indorsement must be of entire
instrument.- The indorsement must be an
indorsement of the entire instrument. An
(c) To transfer his rights as such indorsee, where SEC. 43. Indorsement where name in misspelled,
the form of the indorsement authorizes him to do and so forth.— Where the name of a payee or
so. indorsee is wrongly designated or misspelled, he
may indorse the instrument as therein described,
But all subsequent indorsees acquire only the title adding, if he think fit, his proper signature.
of the first indorsee under the restrictive
indorsement.

SEC. 44. Indorsement in representative capacity.


— Where any person is under obligation to indorse
SEC. 38. Qualified indorsement.— A qualified in a representative capacity, he may indorse in
indorsement constitutes the indorser a mere such terms as to negative personal liability.
assignor of the title to the instrument. It may be
made by adding to the indorser's signature the
words "without recourse" or any words of similar
import. Such an indorsement does not impair the SEC. 45. Time of indorsement; presumption.
negotiable character of the instrument. Except where an indorsement bears date after the
maturity of the instrument, every negotiation is
deemed prima facie to have been effected before
the instrument was overdue.
SEC. 39. Conditional indorsement.— "Where an
indorsement is conditional, a party required to pay
the instrument may disregard the condition and
make payment to the indorsee or his transferee SEC. 46. Place of indorsement; presumption.—
whether the condition has been fulfilled or not. But Except where the contrary appears, every
any person to whom an instrument so indorsed is indorsement is presumed prima facie to have been
negotiated will hold the same, or the proceeds made at the place where the instrument is dated.
thereof, subject to the rights of the person
indorsing conditionally.

SEC. 47. Continuation of negotiable; presumption.


— An instrument negotiable character. negotiable
SEC. 40. Indorsement of instrument payable to in its origin continues to be negotiable until it has
bearer.— Where instruments to an instrument, been' restrictively indorsed or discharged by
payable to bearer, is indorsed specially, it may payment or otherwise.
nevertheless be further negotiated by delivery; but
the person indorsing specially is liable as indorser
to only such holders as make title through his
indorsement. SEC. 48. Striking out indorsement.— The holder
may at any time strike out any indorsement which
is not; necessary to Ids title. The indorser whose
indorsement is struck out, and all indorsers
SEC. 41. Indorsement where payable to two or subsequent to him, are thereby relieved from
more persons.— Where an instrument is payable liability on the instrument.
to the order of two or more payees more' or
indorsees who are not partners, all must indorse,
unless the one indorsing has authority to indorse
for the others. SEC. 49. Transfer without indorsement: effect of.
— Where the holder of an instrument payable to
his order transfers it for value without indorsing it,
the transfer vests in the transferee such title as the
transferor had therein, and the transferee
acquires, in addition, the right to have the
SEC. 42. Effect of instrument drawn or indorsed to indorsement of the transferor. But for the purpose
a person as — Where an instrument is drawn or of determining whether the transferee is a holder
indorsed to a person as "cashier" or other fiscal in due course, the negotiation takes effect as of the
officer of a bank or corporation, it is deemed prima time when the indorsement is actually made.
facie to be payable to the bank or corporation of
which he is such officer; and may be negotiated by
either the indorsement of the bank or corporation,
or the indorsement of the officer. SEC. 50. When prior party may negotiate
instrument.— Where an instrument is negotiated
back to a prior party, such party may, subject to
the provisions of this Act, reissue and further
negotiate the same. But he is not entitled to
enforce payment thereof against any intervening defect, or knowledge of such facts that his action
party to whom ho was personally liable. in taking the instrument amounted to had faith.

CHAPTER IV. RIGHTS OF THE HOLDER. SEC. 57. Rights of holder in due course.— A holder
in due course holds the instrument free from any
SEC. 51. Bight of holder to sue; payment.— The defect of title of prior parties, and payee from
holder of a negotiable instrument may sue thereon defenses available to prior parties among
in his own name; and payment to him in due themselves. and may enforce payment of the
course discharges the instrument. instrument for the full amount thereof against all
parties liable thereon.

SEC. 52. What constitutes a holder in due course.


— A holder in due course is a holder who has taken SEC. 58. When subject to original defenses.— In
the instrument under the following conditions: the hands of any holder other than a holder in due
course, a negotiable instrument is subject to the
(a) That it is complete and regular upon its face; same defenses as if it were nonnegotiable. But a
(b) That he became the holder of it before it was holder who derives his title through a holder in due
overdue, and without notice that it had been course, and who is not himself a party to any fraud
previously dishonored, if such was the fact; or illegality affecting the instrument, has all the
rights of such former holder in respect of all parties
(c) That he took it in good faith and for value; prior to the latter.

(d) That at the time it was negotiated to him he


had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it. SEC. 59. Who deemed holder in due course.—
Every holder is deemed prima facie to be a holder
in due course; but when it iacourse' shown that the
title of any person who has negotiated the
SEC. 53. When person not deemed holder in due instrument was defective, the burden is on the
course.— Where course an instrument payable on holder to prove that he or some person under
demand is negotiated an unreasonable length of whom he claims acquired the title as holder in due
time after its issue, the holder is not deemed a course. But the last-mentioned rule does not
holder in due course. apply in favor of a party who became bound on the
instrument prior to the acquisition of srich
defective title.

SEC. 54. Notice before full amount paid.— Where


the transferee receives notice of any infirmity in
the instrument or defect in the title of the person
negotiating the same before he has paid the full
amount agreed to be paid therefor, he will be CHAPTER V. LIABILITIES
deemed a holder in due course only to the extent
of the amount theretofore paid by him. SEC. 60. Liability of maker.— The maker of a
negotiable instrument by making it engages that
he will pay it according to its tenor, and admits the
existence of the payee and his then capacity to
SEC. 55. When title defective.— The title of a indorse.
person who negotiates an instrument is defective
within the meaning of this Act when he obtained
the instrument, or any signature thereto, by fraud,
duress, or force and fear, or other unlawful means, SEC. 61. Liability of drawer.— The drawer by
or for an illegal consideration, or when he drawing the instru-ment admits the existence of
negotiates it in breach of faith, or under such the payee and his then capacity to indorse; and
circumstances as amount to a fraud. engages that on due presentment the instrument
will be accepted or paid, or both, according to its
tenor, and that if it be dishonored, and the
necessary proceedings on dishonor be duly taken,
SEC. 56. What constitutes notice of defect.— To he will pay the amount thereof to the holder, or to
constitute notice of an infirmity in. the instrument any subsequent indorser who may be compelled to
or defect in the title of the person negotiating the pay it. But the drawer may insert in the instrument
same, the person to whom it is negotiated must an express stipulation negativing or limiting his
have had actual knowledge of the infirmity or own liability to the holder.
SEC. 62. Liability of acceptor.— The acceptor by SEC. 66. Liability of general indorser.—Every
accepting the instrument engages that he will pay indorser who indorses without qualification,
it according to the tenor of his acceptance; and warrants to all subsequent holders in due course—
admits—
(a) The matters and things mentioned in
(a) The existence of the drawer, the genuineness subdivisions (a), (&), and (c) of the next preceding
of his signature, and his capacity and authority to section; and
draw the instrument; and
(b) That the instrument is at the time of his
(b) The existence of the payee and his then indorsement valid and subsisting.
capacity to indorse.
And, in addition, he engages that on due
presentment, it shall be accepted or paid, or both,
as the case may be, according to its tenor, and that
SEC. 63. When person deemed indorser.— A if it be dishonored, and the necessary proceedings
person placing his signature upon an instrument on dishonor be duly taken, he will pay the amount
otherwise than as maker, drawer, or acceptor is thereof to the holder, or to any subsequent
deemed to be an indorser, unless he clearly indorser who may be compelled to Pay it.
indicates by appropriate words his intention to be
bound in some other capacity.
SEC. 67. Liability of indorser where paper
negotiable by delivery.— Where a person places
SEC. 64. Liability of irregular indorser.— Where a his indorsement on an instrument negotiable by
person, not otherwise a party to an instrument, delivery he incurs all the liabilities of an indorser.
places thereon his signature in blank before
delivery, he is liable as indorsee in accordance with
the following rules:
SEC. 68. Order in which endorsers are liable.— As
(a) If the instrument is payable to the order of a respects one another, indorsers are liable prim a
third person, he is liable to the payee and to all facie in the order in which they indorse; but
subsequent parties. evidence is admissible to show that as between or
among themselves they have agreed otherwise.
(b) If the instrument is payable to the order of the Joint payees or joint indorsees who indorse are
maker or drawer, or is payable to bearer, he is deemed to indorse jointly and severally.
liable to all parties subsequent to the maker or
drawer. SEC. 69. Liability of an agent or broker.— Where a
broker or other agent negotiates an instrument
(c) If he signs for the accommodation of the payee, without indorsement, he incurs all the liabilities
he is liable to all parties subsequent to the payee. prescribed by section sixty-five of this Act, unless
he discloses the name of his principal and the fact
SEC 65. Warranty where negotiation by delivery, that he is acting only as agent.
and so forth.— Every person negotiating an
instrument by delivery or by a qualified
indorsement warrants—
CHAPTER VI. PRESENTMENT FOR PAYMENT.
(a) That the instrument is genuine and in all
respects what it purports to be; SEC. 70. Effect of want of demand on principal
debtor.— Presentment for payment is not
(b) That he has a good title to it; necessary in order to charge the person primarily
liable on the instrument; but if the instrument is,
(c) That all prior parties had capacity to contract; by its terms, payable at a special place, and he is
(d) That he has no knowledge of any fact which able and willing to pay it there at maturity, such
would impair the validity of the instrument or ability and willingness are equivalent to a tender of
render it valueless. payment upon his part. But, except as herein
otherwise provided, presentment for payment is
But when the negotiation is by delivery only, the necessary in order to charge the drawer and
warranty extends in favor of no holder other than indorsers.
the immediate transferee.
The provisions of subdivision (c) of this section do
not apply to persons negotiating public or SEC. 71. Presentment where instrument is not
corporation securities, other than bills and notes. payable on demand and where payable on
demand.— Where the instrument is not payable
on demand, presentment must be made on the
day it falls due. Where it is payable on demand,
presentment must be made within a reasonable SEC. 76. Presentment where principal debtor is
time after its issue, except that in the case of a bill dead.— Where the person primarily liable on the
of exchange, presentment for payment will be instrument is dead, and no place of payment is
sufficient if made within a reasonable time after specified, presentment for payment must be made
the last negotiation thereof. to his personal representative, if such there be,
and if, with the exercise of reasonable diligence, he
can be found.
SEC. 72. What constitutes a sufficient
presentment.— Presentment for payment, to be
sufficient, must be made— SEC. 77. Presentment to persons liable as
partners.— Where the persons primarily liable on
(a) By the holder, or by some person authorized to the instrument are liable as partners, and no place
receive payment on his behalf; of payment is specified, presentment for payment
may be made to any one of them, even though
(b) At a reasonable hour on a business day; there has been a dissolution of the firm.
(c) At a proper place as herein defined;
(d) To the person primarily liable on the
instrument, or if he is absent or inaccessible, to any SEC. 78. Presentment to joint debtors.— Where
person found at the place where the presentment there are several persons, not partners, primarily
is made. liable on the instrument, and no place of payment
is specified, presentment must be made to them
all.

SEC. 73. Place of presentment. Presentment for


payment is made at the proper place,—
Sec. 79. When presentment not required to
(a) Where a place of payment is specified in the charge the drawer.— Presentment for payment is
instrument and it is there presented; not required in order to charge the require drawer
whereas he has no right to expect or require that
(b) Where no place of payment is specified, but the the drawee or acceptor will pay the instrument.
address of the person to make payment is given in
the instrument and it is there presented;
(c) Where no place of payment is specified and no SEC. 80. When presentment not required to
address is given and the instrument is presented at charge the indorser.— Presentment for payment is
the usual place of business or residence of the not required in order to charge an indorser where
person to make payment; the instrument was made or accepted for his
accommodation and he has no reason to expect
(d) In any other case if presented to the person to that the instrument will be paid if presented.
make payment wherever he can be found, or if
presented at his last known place of business or
residence.
SEC. 81. When delay in making presentment is
excused.— Delay in making presentment for
payment is excused when the delay is caused by
SEC. 74. Instrument must he exhibited.— The circumstances beyond the control of the holder,
instrument must be exhibited to the person from and not imputable to his default, misconduct, or
whom payment is demanded, and when it is paid negligence. When the cause of delay ceases to
must be delivered up to the party paying it. operate, presentment must be made with
reasonable diligence.

SEC. 75. Presentment where instrument payable


at bank.— Where Payable at bank. the instrument SEC. 82. When presentment may he dispensed
is payable at a bank, presentment for payment with.— Presentment for payment is dispensed
must be made during banking hours, unless the with—
person to make payment has no funds there to
meet it at any time during the day, in which case (a) Where after the exercise of reasonable
presentment at any hour before the bank is closed diligence presentment as required by this Act can
on that day is sufficient. not be made;
(b) Where the drawee is a fictitious person;
(c) By waiver of presentment, express or implied. CHAPTER VII.NOTICE OF DISHONOR.
SEC. 89. To whom notice of dishonor must be
given.— Except as herein otherwise provided,
SEC. 83. When instrument dishonored by when a negotiable instrument has been
nonpayment.— The instrument is dishonored by dishonored by nonacceptance or nonpayment,
nonpayment when— notice of dishonor must be given to the drawer
and to each indorser, and any drawer or indorser
(a) It is duly presented for payment and payment is to whom such notice is not given is discharged.
refused or can not be obtained; or
(b) Presentment is excused and the instrument is
overdue and unpaid. SEC. 90. By whom given.—The notice may be given
by or on behalf of the holder, or by or on behalf of
any party to the instrument who might be
compelled to pay it to the holder, and who, upon
SEC. 84. Liability of person secondarily liable, taking it up, would have a right to reimbursement
when instrument dishonored.— Subject to the from the party to whom the notice is given.
provisions of this Act, when the instrument is
dishonored by nonpayment, an immediate right of
recourse to all parties secondarily liable thereon
accrues to the holder. SEC. 91. Notice given by agent.— Notice of
dishonor may be given by an agent either in his
own name or in the name of any party entitled to
give notice, whether that party be his principal or
SEC. 85. Time of maturity.— Every negotiable not.
instrument is payable at the time fixed therein
without grace. When the day of maturity falls
upon Sunday, or a holiday, the instrument is
payable on the next succeeding business day. SEC. 92. Effect of notice given on behalf of
Instruments falling due or becoming payable on holder.— Where notice is given by or on behalf of
Saturday are to be presented for payment on the the holder, it inures for the benefit of all
next succeeding business day, except that subsequent holders and all prior parties who have
instruments payable on demand may, at the a right of recourse against the party to whom it is
option of the holder, be presented for payment given.
before twelve o'clock noon on Saturday when that
entire day is not a holiday.

SEC. 93. Effect where notice is given by party


entitled thereto.— Where notice is given by or on
SEC. 86. Time; how computed.— Where the behalf of a party entitled to give notice, it inures
instrument is payable at a fixed period after date, for the benefit of the holder and all parties
after sight, or after the happening of a specified subsequent to the party to whom notice is given.
event, the time of payment is determined by
excluding the day from which the time is to begin
to run, and by including the date of payment.
SEC. 94. When agent may give notice.— Where
the instrument has been dishonored in the hands
of an agent, he may either himself give notice to
SEC. 87. Rule where instrument payable at bank. the parties liable thereon, or he may give notice to
— Where the instrument is made payable at a his principal. If he give notice to his principal, he
bank it is equivalent to an order to the bank to pay must do so within the same time as if he were the
the same for the account of the principal debtor holder, and the principal upon the receipt of such
thereon. notice has himself the same time for giving notice
as if the agent had been an independent holder.

SEC. 88. What constitutes payment in due course.


— Payment is made in due course when it is made SEC. 95. When notice sufficient.— A written notice
at or after the maturity of the instrument to the need not be and an insufficient written notice may
holder thereof in good faith and without notice be supplemented and validated by verbal
that his title is defective. communication. A misdescription of the
instrument does not vitiate the notice unless the
party to whom the notice is given is in fact misled notice reside in the same place, notice must be
thereby. given within the following times:
(a) If given at the place of business of the person to
receive notice, it must be given before the close of
SEC. 96. Form of notice.— The notice may be in business hours on the day following.
writing or oral and may be given in any terms
which sufficiently identify the instrument and (b) If given at his residence, it must be given before
indicate that it has been dishonored by the usual hours of rest on the day following.
nonacceptance or nonpayment. It may in all
cases be given by delivering it personally or (c) If sent by mail, it must be deposited in the post-
through the mails. office in time to reach him in usual course on the
day following.

SEC. 97. To whom notice may be given.— Notice


of dishonor may be given either to the party SEC. 104. Where parties reside in different places.
himself or to his agent in that behalf. — Where the person giving and the person to
receive notice reside in different places, the notice
must be given within the following times:
(a) If sent by mail, it must be deposited in the post-
SEC. 98. Notice where party is dead.— When any office in time to go by mail the day following the
party is dead, and his death is known to the party day of dishonor, or if there be no mail at a
giving notice, the notice must be given to a convenient hour on that day, by the next mail
personal representative, if there be one, and if thereafter.
with reasonable diligence he can be found. If there
be no personal representative, notice may be sent (b) If given otherwise than through the post-office,
to the last residence or last place of business of the then within the time that notice would have been
deceased. received in due course of mail, if it had been
deposited in the post-office within the time
specified in the last subdivision.
SEC. 99. Notice to partners.— Where the parties
to be notified are partners, notice to any one
partner is notice to the firm even though there has SEC. 105. When sender deemed to have given due
been a dissolution. notice.— Where notice of dishonor is duly
addressed and deposited in the post-office, the
sender is deemed to have given due notice,
notwithstanding any miscarriage in the mails.
SEC. 100. Notice to persons jointly liable.— Notice
to joint parties who are not partners must be given
to each of them, unless one of them has authority
to receive such notice for the others. SEC. 106. Deposit in post-office; what constitutes.
— Notice is deemed to have been deposited in the
post-office when deposited in any branch post-
office or in any letter box under the control of the
SEC. 101. Notice to bankrupt.— Where a party has post-office department.
been adjudged bankrupt or an insolvent, or has
made an assignment for the benefit of creditors,
notice may be given either to the party himself or
to his trustee or assignee. SEC. 107. Notice to subsequent party; time of.—
Where a party receives notice of dishonor, he has,
after the receipt of such notice, the same time for
giving notice to antecedent parties that the h
SEC. 102. Time within which notice must be given.
— Notice may be given as soon as the instrument older has after the dishonor.
is dishonored; and unless delay is excused as
hereinafter provided, must be given within the
times fixed by this Act.
SEC. 108. Where notice must be sent.— Where a
party has added an address to his signature, notice
of dishonor must be sent to that address; but if he
SEC. 103. Where parties reside in same place.— has not given such address, then the notice must
Where the person giving and the person to receive be sent as follows:
(a) Either to the post-office nearest to his place of (b) When the drawee is a fictitious person or a
residence or to the post-office where he is person not having capacity to contract.
accustomed to receive his letters; or
(c) When the drawer is the person to whom the
(b) If he live in one place, and have his place of instrument is presented for payment.
business in another, notice may be sent to either
place; or (d) Where the drawer has no right to expect or
require that the drawee or acceptor will honor the
(c) If he is sojourning in another place, notice may instrument.
be sent to the place where he is so sojourning.
(e) Where the drawer has countermanded
But where the notice is actually received by the payment.
party within the time specified in this Act, it will be
sufficient, though not sent in accordance with the
requirements of this section.
SEC. 115. When notice need not be given to
indorser.— Notice of dishonor is not required to
be given to an indorser in either of the following
SEC. 109. Waiver of notice.— Notice of dishonor cases:
may be waived, either before the time of giving
notice has arrived or after the omission to give clue (a) Where the drawee is a fictitious person or a
notice, and the waiver may be express or implied. person not having capacity to contract, and the
indorser was aware of the fact at the time he
indorsed the instrument;

SEC. 110. Whom affected by waiver.— Where the (b) Where the indorser is the person to whom the
waiver is bodied in the instrument itself, it is instrument is presented for payment;
binding upon all parties; but where it is written
above the signature of an indorser, it binds him (c) Where the instrument was made or accepted
only. for his accommodation.
SEC. 116. Notice of nonpayment where
acceptance refused.— Where due notice ot
dishonor by nonacceptance has been given, notice
SEC. 111. Waiver of protest.— A waiver of protest, of a subsequent dishonor by nonpayment is not
whether in the case of a foreign bill of exchange or necessary, unless in the meantime the instrument
other negotiable instrument, is deemed to be a has been accepted.
waiver not only of a formal protest, but also of
presentment and notice of dishonor.

SEC. 117. Effect of omission to give notice of


nonacceptance.— An omission to give.notice of
SEC. 112. When notice is dispensed with.— Notice dishonor by nonacceptance does not prejudice the
of dishonor is dispensed with when, after the rights of a holder in due course subsequent to the
exercise of reasonable diligence, it can not be omission.
given to or does not reach the parties sought to be
charged.

SEC. 118. When protest need not be made; when


must be made.— Where any negotiable
SEC. 113. Delay in giving notice; how excused.— instrument has been dishonored it may be
Delay in giving notice of dishonor is excused when protested for nonacceptance or nonpayment, as
the delay is caused by circumstances beyond the the case may be; but protest is not required except
control of the holder, and not imputable to his in the case of foreign bills of exchange.
default, misconduct, or negligence. When the
cause of delay ceases to operate, notice must be
given with reasonable diligence.
CHAPTER VIII. DISCHARGE OF NEGOTIABLE
INSTRUMENTS.
SEC. 114. When notice need not be given to SEC. 119. Instrument; how discharged.— A
drawer.— Notice of dishonor is not required to be negotiable instrument is discharged—
given to the drawer in either of the drawee
following cases: (a) By payment in due course by or on behalf of the
principal debtor;
(a) Where the drawer and drawee are the same
person.
(b) By payment in due course by the party instrument discharges the instrument. But a
accommodated, where the instrument is made or renunciation does not affect the rights of a holder
accepted for accommodation; in due course without notice. A renunciation must
be in writing, unless the instrument is delivered up
(c) By the intentional cancellation thereof by the to the person primarily liable thereon.
holder;
(d) By any other act which will discharge a simple
contract for the payment of money; SEC 123. Cancellation; unintentional; burden of
proof.— A cancellation made unintentionally, or
(e) When the principal debtor becomes the holder under a mistake or without the authority of the
of the instrument at or after maturity in his own holder, is inoperative; but where an instrument or
right. any signature thereon appears to have been
canceled the burden of proof lies on the party who
alleges that the cancellation was made
unintentionally, or under a mistake or without
SEC. 120. When persons secondarily liable on, authority.
discharged.— A person secondarily liable on the
instrument is discharged—
(a) By any act which discharges the instrument; SEC. 124. Alteration of instrument; effect of.—
(b) By the intentional cancellation of his signature Where a instrument is materially altered without
by the holder; the assent of all parties liable thereon, it is
avoided, except as against a party who has himself
(c) By the discharge of a prior party; made, authorized, or assented to the alteration,
and subsequent indorsers.
(d) By a valid tender of payment made by a prior
party; But when an instrument has been materially
altered and is in the hands of a holder in due
(c) By a release of the principal debtor, unless the course, not a party to the alteration, he may
holder's right of recourse against the party enforce payment thereof according to its original
secondarily liable is expressly reserved; tenor.
(f) By any agreement binding upon the holder to SEC 125. What constitutes a material alteration.—
extend the time of payment, or to postpone the Any alteration which changes—
holder's right to enforce the instrument, unless
made with the assent of the party secondarily (a) The date;
liable, or unless the right of recourse against such
party is expressly reserved. (b) The sum payable, either for principal or
interest;
(c) The time or place of payment;
SEC. 121. Eight of party who discharges (d) The number or the relations of the parties;
instrument.— Where charging instrument is paid
by a party secondarily liable thereon, it is not (e) The medium or currency in which payment is
discharged; but the party so paying it is remitted to to be made; Or which adds a place of payment
his former rights as regards all prior parties, and he where no place of payment is specified, or any
may strike out his own and all subsequent other change or addition which alters the effect of
indorsements, and again negotiate the instrument, the instrument in any respect, is a material
except— alteration.
(a) Where it is payable to the order of a third
person, and has been paid by the drawer; and
(b) Where it was made or accepted for
accommodation, and has been paid by the party
accommodated.

SEC. 122. Renunciation by holder.— The holder


may expressly renounce his rights against any
party to the instrument before, at, or after its
maturity. An absolute and unconditional
renunciation of his rights against the principal
debtor made at or after the maturity of the
TITLE V no trust is implied by law, it being disputably
presumed that there is a gift in favor of the child.
TRUSTS (n)
Article 1449. There is also an implied trust when a
CHAPTER 1. General Provisions donation is made to a person but it appears that
although the legal estate is transmitted to the
Article 1440. A person who establishes a trust is donee, he nevertheless is either to have no
called the trustor; one in whom confidence is beneficial interest or only a part thereof.
reposed as regards property for the benefit of
another person is known as the trustee; and the Article 1450. If the price of a sale of property is
person for whose benefit the trust has been loaned or paid by one person for the benefit of
created is referred to as the beneficiary. another and the conveyance is made to the lender
or payor to secure the payment of the debt, a trust
Article 1441. Trusts are either express or implied. arises by operation of law in favor of the person to
Express trusts are created by the intention of the whom the money is loaned or for whom its is paid.
trustor or of the parties. Implied trusts come into The latter may redeem the property and compel a
being by operation of law. conveyance thereof to him.
Article 1442. The principles of the general law of Article 1451. When land passes by succession to
trusts, insofar as they are not in conflict with this any person and he causes the legal title to be put
Code, the Code of Commerce, the Rules of Court in the name of another, a trust is established by
and special laws are hereby adopted. implication of law for the benefit of the true
owner.
Article 1452. If two or more persons agree to
CHAPTER 2. Express Trusts purchase property and by common consent the
legal title is taken in the name of one of them for
Article 1443. No express trusts concerning an the benefit of all, a trust is created by force of law
immovable or any interest therein may be proved in favor of the others in proportion to the interest
by parol evidence. of each.
Article 1444. No particular words are required for Article 1453. When property is conveyed to a
the creation of an express trust, it being sufficient person in reliance upon his declared intention to
that a trust is clearly intended. hold it for, or transfer it to another or the grantor,
there is an implied trust in favor of the person
whose benefit is contemplated.
Article 1445. No trust shall fail because the trustee Article 1454. If an absolute conveyance of property
appointed declines the designation, unless the is made in order to secure the performance of an
contrary should appear in the instrument obligation of the grantor toward the grantee, a
constituting the trust. trust by virtue of law is established. If the
fulfillment of the obligation is offered by the
Article 1446. Acceptance by the beneficiary is grantor when it becomes due, he may demand the
necessary. Nevertheless, if the trust imposes no reconveyance of the property to him.
onerous condition upon the beneficiary, his
acceptance shall be presumed, if there is no proof Article 1455. When any trustee, guardian or other
to the contrary. person holding a fiduciary relationship uses trust
funds for the purchase of property and causes the
CHAPTER 3. Implied Trusts conveyance to be made to him or to a third
person, a trust is established by operation of law in
Article 1447. The enumeration of the following favor of the person to whom the funds belong.
cases of implied trust does not exclude others
established by the general law of trust, but the Article 1456. If property is acquired through
limitation laid down in article 1442 shall be mistake or fraud, the person obtaining it is, by
applicable. force of law, considered a trustee of an implied
trust for the benefit of the person from whom the
property comes.

Article 1448. There is an implied trust when Article 1457. An implied trust may be proved by
property is sold, and the legal estate is granted to oral evidence.
one party but the price is paid by another for the
purpose of having the beneficial interest of the
property. The former is the trustee, while the latter
is the beneficiary. However, if the person to whom
the title is conveyed is a child, legitimate or
illegitimate, of the one paying the price of the sale,
TITLE IX instruments and effects of a crime. (1666a)
Partnership
CHAPTER 1. General Provisions ARTICLE 1771. A partnership may be constituted in
ARTICLE 1767. By the contract of partnership two any form, except where immovable property or
or more persons bind themselves to contribute real rights are contributed thereto, in which case a
money, property, or industry to a common fund, public instrument shall be necessary. (1667a)
with the intention of dividing the profits among
themselves.Two or more persons may also form a
partnership for the exercise of a profession. ARTICLE 1772. Every contract of partnership having
(1665a) a capital of three thousand pesos or more, in
money or property, shall appear in a public
instrument, which must be recorded in the Office
of the Securities and Exchange Commission. Failure
ARTICLE 1768. The partnership has a juridical to comply with the requirements of the preceding
personality separate and distinct from that of each paragraph shall not affect the liability of the
of the partners, even in case of failure to comply partnership and the members thereof to third
with the requirements of article 1772, first persons. (n)
paragraph. (n)
ARTICLE 1773. A contract of partnership is void,
whenever immovable property is contributed
thereto, if an inventory of said property is not
ARTICLE 1769. In determining whether a made, signed by the parties, and attached to the
partnership exists, these rules shall apply: public instrument. (1668a)
(1) Except as provided by article 1825, persons who
are not partners as to each other are not partners
as to third persons; ARTICLE 1774. Any immovable property or an
interest therein may be acquired in the partnership
(2) Co-ownership or co-possession does not of name. Title so acquired can be conveyed only in
itself establish a partnership, whether such co- the partnership name. (n)
owners or co-possessors do or do not share any
profits made by the use of the property;
ARTICLE 1775. Associations and societies, whose
(3) The sharing of gross returns does not of itself articles are kept secret among the members, and
establish a partnership, whether or not the wherein any one of the members may contract in
persons sharing them have a joint or common right his own name with third persons, shall have no
or interest in any property from which the returns juridical personality, and shall be governed by the
are derived; provisions relating to co-ownership. (1669)
(4) The receipt by a person of a share of the profits
of a business is prima facie evidence that he is a ARTICLE 1776. As to its object, a partnership is
partner in the business, but no such inference shall either universal or particular. As regards the
be drawn if such profits were received in payment: liability of the partners, a partnership may be
(a) As a debt by installments or otherwise; general or limited. (1671a)

(b) As wages of an employee or rent to a landlord; ARTICLE 1777. A universal partnership may refer to
(c) As an annuity to a widow or representative of a all the present property or to all the profits. (1672)
deceased partner;
(d) As interest on a loan, though the amount of ARTICLE 1778. A partnership of all present
payment vary with the profits of the business; property is that in which the partners contribute all
the property which actually belongs to them to a
(e) As the consideration for the sale of a goodwill common fund, with the intention of dividing the
of a business or other property by installments or same among themselves, as well as all the profits
otherwise. (n) which they may acquire therewith. (1673)

ARTICLE 1770. A partnership must have a lawful ARTICLE 1779. In a universal partnership of all
object or purpose, and must be established for the present property, the property which belonged to
common benefit or interest of the partners.When each of the partners at the time of the constitution
an unlawful partnership is dissolved by a judicial of the partnership, becomes the common property
decree, the profits shall be confiscated in favor of of all the partners, as well as all the profits which
the State, without prejudice to the provisions of they may acquire therewith. A stipulation for the
the Penal Code governing the confiscation of the common enjoyment of any other profits may also
be made; but the property which the partners may ARTICLE 1787. When the capital or a part thereof
acquire subsequently by inheritance, legacy, or which a partner is bound to contribute consists of
donation cannot be included in such stipulation, goods, their appraisal must be made in the manner
except the fruits thereof. (1674a) prescribed in the contract of partnership, and in
the absence of stipulation, it shall be made by
experts chosen by the partners, and according to
ARTICLE 1780. A universal partnership of profits current prices, the subsequent changes thereof
comprises all that the partners may acquire by being for the account of the partnership. (n)
their industry or work during the existence of the
partnership.Movable or immovable property which
each of the partners may possess at the time of the ARTICLE 1788. A partner who has undertaken to
celebration of the contract shall continue to contribute a sum of money and fails to do so
pertain exclusively to each, only the usufruct becomes a debtor for the interest and damages
passing to the partnership. (1675) from the time he should have complied with his
obligation. The same rule applies to any amount he
may have taken from the partnership coffers, and
ARTICLE 1781. Articles of universal partnership, his liability shall begin from the time he converted
entered into without specification of its nature, the amount to his own use. (1682)
only constitute a universal partnership of profits.
(1676) ARTICLE 1789. An industrial partner cannot engage
in business for himself, unless the partnership
expressly permits him to do so; and if he should do
ARTICLE 1782. Persons who are prohibited from so, the capitalist partners may either exclude him
giving each other any donation or advantage from the firm or avail themselves of the benefits
cannot enter into universal partnership. (1677) which he may have obtained in violation of this
provision, with a right to damages in either case.
(n)
ARTICLE 1783. A particular partnership has for its
object determinate things, their use or fruits, or a
specific undertaking, or the exercise of a ARTICLE 1790. Unless there is a stipulation to the
profession or vocation. (1678) contrary, the partners shall contribute equal shares
to the capital of the partnership. (n)
CHAPTER 2. Obligations of the Partners
SECTION 1. Obligations of the Partners Among ARTICLE 1791. If there is no agreement to the
Themselves contrary, in case of an imminent loss of the
ARTICLE 1784. A partnership begins from the business of the partnership, any partner who
moment of the execution of the contract, unless it refuses to contribute an additional share to the
is otherwise stipulated. (1679) capital, except an industrial partner, to save the
venture, shall be obliged to sell his interest to the
other partners. (n)
ARTICLE 1785. When a partnership for a fixed term
or particular undertaking is continued after the
termination of such term or particular undertaking ARTICLE 1792. If a partner authorized to manage
without any express agreement, the rights and collects a demandable sum, which was owed to
duties of the partners remain the same as they him in his own name, from a person who owed the
were at such termination, so far as is consistent partnership another sum also demandable, the
with a partnership at will. A continuation of the sum thus collected shall be applied to the two
business by the partners or such of them as credits in proportion to their amounts, even
habitually acted therein during the term, without though he may have given a receipt for his own
any settlement or liquidation of the partnership credit only; but should he have given it for the
affairs, is prima facie evidence of a continuation of account of the partnership credit, the amount shall
the partnership. (n) be fully applied to the latter.The provisions of this
article are understood to be without prejudice to
the right granted to the debtor by article 1252, but
ARTICLE 1786. Every partner is a debtor of the only if the personal credit of the partner should be
partnership for whatever he may have promised to more onerous to him. (1684)
contribute thereto. He shall also be bound for
warranty in case of eviction with regard to specific
and determinate things which he may have ARTICLE 1793. A partner who has received, in
contributed to the partnership, in the same cases whole or in part, his share of a partnership credit,
and in the same manner as the vendor is bound when the other partners have not collected theirs,
with respect to the vendee. He shall also be liable shall be obliged, if the debtor should thereafter
for the fruits thereof from the time they should become insolvent, to bring to the partnership
have been delivered, without the need of any capital what he received even though he may have
demand. (1681a) given receipt for his share only. (1685a)
ARTICLE 1794. Every partner is responsible to the ARTICLE 1799. A stipulation which excludes one or
partnership for damages suffered by it through his more partners from any share in the profits or
fault, and he cannot compensate them with the losses is void. (1691)
profits and benefits which he may have earned for
the partnership by his industry. However, the
courts may equitably lessen this responsibility if ARTICLE 1800. The partner who has been
through the partner’s extraordinary efforts in other appointed manager in the articles of partnership
activities of the partnership, unusual profits have may execute all acts of administration despite the
been realized. (1686a) opposition of his partners, unless he should act in
bad faith; and his power is irrevocable without just
or lawful cause. The vote of the partners
ARTICLE 1795. The risk of specific and determinate representing the controlling interest shall be
things, which are not fungible, contributed to the necessary for such revocation of power. A power
partnership so that only their use and fruits may be granted after the partnership has been constituted
for the common benefit, shall be borne by the may be revoked at any time. (1692a)
partner who owns them. If the things contribute
are fungible, or cannot be kept without
deteriorating, or if they were contributed to be ARTICLE 1801. If two or more partners have been
sold, the risk shall be borne by the partnership. In intrusted with the management of the partnership
the absence of stipulation, the risk of things without specification of their respective duties, or
brought and appraised in the inventory, shall also without a stipulation that one of them shall not act
be borne by the partnership, and in such case the without the consent of all the others, each one
claim shall be limited to the value at which they may separately execute all acts of administration,
were appraised. (1687) but if any of them should oppose the acts of the
others, the decision of the majority shall prevail. In
case of a tie, the matter shall be decided by the
ARTICLE 1796. The partnership shall be responsible partners owning the controlling interest. (1693a)
to every partner for the amounts he may have
disbursed on behalf of the partnership and for the
corresponding interest, from the time the ARTICLE 1802. In case it should have been
expenses are made; it shall also answer to each stipulated that none of the managing partners shall
partner for the obligations he may have contracted act without the consent of the others, the
in good faith in the interest of the partnership concurrence of all shall be necessary for the
business, and for risks in consequence of its validity of the acts, and the absence or disability of
management. (1688a) any one of them cannot be alleged, unless there is
imminent danger of grave or irreparable injury to
the partnership. (1694)
ARTICLE 1797. The losses and profits shall be
distributed in conformity with the agreement. If
only the share of each partner in the profits has ARTICLE 1803. When the manner of management
been agreed upon, the share of each in the losses has not been agreed upon, the following rules shall
shall be in the same proportion.In the absence of be observed:
stipulation, the share of each partner in the profits (1) All the partners shall be considered agents and
and losses shall be in proportion to what he may whatever any one of them may do alone shall bind
have contributed, but the industrial partner shall the partnership, without prejudice to the
not be liable for the losses. As for the profits, the provisions of article 1801.
industrial partner shall receive such share as may
be just and equitable under the circumstances. If
besides his services he has contributed capital, he (2) None of the partners may, without the consent
shall also receive a share in the profits in of the others, make any important alteration in the
proportion to his capital. (1689a) immovable property of the partnership, even if it
may be useful to the partnership. But if the refusal
of consent by the other partners is manifestly
prejudicial to the interest of the partnership, the
court’s intervention may be sought. (1695a)
ARTICLE 1798. If the partners have agreed to
intrust to a third person the designation of the
share of each one in the profits and losses, such ARTICLE 1804. Every partner may associate
designation may be impugned only when it is another person with him in his share, but the
manifestly inequitable. In no case may a partner associate shall not be admitted into the
who has begun to execute the decision of the third partnership without the consent of all the other
person, or who has not impugned the same within partners, even if the partner having an associate
a period of three months from the time he had should be a manager. (1696)
knowledge thereof, complain of such decision.The
designation of losses and profits cannot be
intrusted to one of the partners. (1690) ARTICLE 1805. The partnership books shall be kept,
subject to any agreement between the partners, at
the principal place of business of the partnership, (2) A partner’s right in specific partnership
and every partner shall at any reasonable hour property is not assignable except in connection
have access to and may inspect and copy any of with the assignment of rights of all the partners in
them. (n) the same property;
(3) A partner’s right in specific partnership
ARTICLE 1806. Partners shall render on demand property is not subject to attachment or execution,
true and full information of all things affecting the except on a claim against the partnership. When
partnership to any partner or the legal partnership property is attached for a partnership
representative of any deceased partner or of any debt the partners, or any of them, or the
partner under legal disability. (n) representatives of a deceased partner, cannot
claim any right under the homestead or exemption
laws;
ARTICLE 1807. Every partner must account to the
partnership for any benefit, and hold as trustee for (4) A partner’s right in specific partnership
it any profits derived by him without the consent property is not subject to legal support under
of the other partners from any transaction article 291. (n)
connected with the formation, conduct, or
liquidation of the partnership or from any use by
him of its property. (n)
ARTICLE 1812. A partner’s interest in the
partnership is his share of the profits and surplus.
(n)
ARTICLE 1808. The capitalist partners cannot
engage for their own account in any operation
which is of the kind of business in which the ARTICLE 1813. A conveyance by a partner of his
partnership is engaged, unless there is a stipulation whole interest in the partnership does not of itself
to the contrary. Any capitalist partner violating this dissolve the partnership, or, as against the other
prohibition shall bring to the common funds any partners in the absence of agreement, entitle the
profits accruing to him from his transactions, and assignee, during the continuance of the
shall personally bear all the losses. (n) partnership, to interfere in the management or
administration of the partnership business or
affairs, or to require any information or account of
ARTICLE 1809. Any partner shall have the right to a partnership transactions, or to inspect the
formal account as to partnership affairs: partnership books; but it merely entitles the
(1) If he is wrongfully excluded from the assignee to receive in accordance with his contract
partnership business or possession of its property the profits to which the assigning partner would
by his co-partners; otherwise be entitled. However, in case of fraud in
the management of the partnership, the assignee
(2) If the right exists under the terms of any may avail himself of the usual remedies.In case of a
agreement; dissolution of the partnership, the assignee is
entitled to receive his assignor’s interest and may
(3) As provided by article 1807; require an account from the date only of the last
account agreed to by all the partners. (n)
(4) Whenever other circumstances render it just
and reasonable. (n)
ARTICLE 1814. Without prejudice to the preferred
rights of partnership creditors under article 1827,
SECTION 2. Property Rights of a Partner on due application to a competent court by any
ARTICLE 1810. The property rights of a partner are: judgment creditor of a partner, the court which
(1) His rights in specific partnership property; entered the judgment, or any other court, may
(2) His interest in the partnership; and charge the interest of the debtor partner with
payment of the unsatisfied amount of such
(3) His right to participate in the management. (n) judgment debt with interest thereon; and may
then or later appoint a receiver of his share of the
profits, and of any other money due or to fall due
ARTICLE 1811. A partner is co-owner with his to him in respect of the partnership, and make all
partners of specific partnership property. The other orders, directions, accounts and inquiries
incidents of this co-ownership are such that: which the debtor partner might have made, or
which the circumstances of the case may
(1) A partner, subject to the provisions of this Title require.The interest charged may be redeemed at
and to any agreement between the partners, has any time before foreclosure, or in case of a sale
an equal right with his partners to possess specific being directed by the court, may be purchased
partnership property for partnership purposes; but without thereby causing a dissolution:
he has no right to possess such property for any (1) With separate property, by any one or more of
other purpose without the consent of his partners; the partners; or
(2) With partnership property, by any one or more (5) Enter into a compromise concerning a
of the partners with the consent of all the partners partnership claim or liability;
whose interests are not so charged or sold.
Nothing in this Title shall be held to deprive a (6) Submit a partnership claim or liability to
partner of his right, if any, under the exemption arbitration;
laws, as regards his interest in the partnership. (n)
(7) Renounce a claim of the partnership. No act of
a partner in contravention of a restriction on
authority shall bind the partnership to persons
SECTION 3. Obligations of the Partners with having knowledge of the restriction. (n)
Regard to Third Persons
ARTICLE 1815. Every partnership shall operate
under a firm name, which may or may not include Article 1819. Where title to real property is in the
the name of one or more of the partners.Those partnership name, any partner may convey title to
who, not being members of the partnership, such property by a conveyance executed in the
include their names in the firm name, shall be partnership name; but the partnership may
subject to the liability of a partner. (n) recover such property unless the partner's act
binds the partnership under the provisions of the
first paragraph of article 1818, or unless such
property has been conveyed by the grantee or a
person claiming through such grantee to a holder
Article 1816. All partners, including industrial ones, for value without knowledge that the partner, in
shall be liable pro rata with all their property and making the conveyance, has exceeded his
after all the partnership assets have been authority. Where title to real property is in the
exhausted, for the contracts which may be entered name of the partnership, a conveyance executed
into in the name and for the account of the by a partner, in his own name, passes the
partnership, under its signature and by a person equitable interest of the partnership, provided the
authorized to act for the partnership. However, act is one within the authority of the partner under
any partner may enter into a separate obligation to the provisions of the first paragraph of article
perform a partnership contract. (n) 1818. Where title to real property is in the name of
one or more but not all the partners, and the
record does not disclose the right of the
Article 1817. Any stipulation against the liability partnership, the partners in whose name the title
laid down in the preceding article shall be void, stands may convey title to such property, but the
except as among the partners. (n) partnership may recover such property if the
partners' act does not bind the partnership under
Article 1818. Every partner is an agent of the the provisions of the first paragraph of article
partnership for the purpose of its business, and the 1818, unless the purchaser or his assignee, is a
act of every partner, including the execution in the holder for value, without knowledge. Where the
partnership name of any instrument, for title to real property is in the name of one or more
apparently carrying on in the usual way the or all the partners, or in a third person in trust for
business of the partnership of which he is a the partnership, a conveyance executed by a
member binds the partnership, unless the partner partner in the partnership name, or in his own
so acting has in fact no authority to act for the name, passes the equitable interest of the
partnership in the particular matter, and the partnership, provided the act is one within the
person with whom he is dealing has knowledge of authority of the partner under the provisions of
the fact that he has no such authority. An act of a the first paragraph of article 1818. Where the title
partner which is not apparently for the carrying on to real property is in the name of all the partners a
of business of the partnership in the usual way conveyance executed by all the partners passes all
does not bind the partnership unless authorized by their rights in such property. (n)
the other partners. Except when authorized by the
other partners or unless they have abandoned the
business, one or more but less than all the partners Article 1820. An admission or representation made
have no authority to: by any partner concerning partnership affairs
within the scope of his authority in accordance
with this Title is evidence against the partnership.
(1) Assign the partnership property in trust for (n)
creditors or on the assignee's promise to pay the
debts of the partnership;
Article 1821. Notice to any partner of any matter
(2) Dispose of the good-will of the business; relating to partnership affairs, and the knowledge
of the partner acting in the particular matter,
(3) Do any other act which would make it acquired while a partner or then present to his
impossible to carry on the ordinary business of a mind, and the knowledge of any other partner who
partnership; reasonably could and should have communicated
it to the acting partner, operate as notice to or
(4) Confess a judgment; knowledge of the partnership, except in the case of
fraud on the partnership, committed by or with the joint act or obligation of the person acting and the
consent of that partner. (n) persons consenting to the representation. (n)
Article 1826. A person admitted as a partner into
an existing partnership is liable for all the
obligations of the partnership arising before his
Article 1822. Where, by any wrongful act or admission as though he had been a partner when
omission of any partner acting in the ordinary such obligations were incurred, except that this
course of the business of the partnership or with liability shall be satisfied only out of partnership
the authority of his co-partners, loss or injury is property, unless there is a stipulation to the
caused to any person, not being a partner in the contrary. (n)
partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as
the partner so acting or omitting to act. (n) Article 1827. The creditors of the partnership shall
be preferred to those of each partner as regards
the partnership property. Without prejudice to this
Article 1823. The partnership is bound to make right, the private creditors of each partner may ask
good the loss: the attachment and public sale of the share of the
(1) Where one partner acting within the scope of latter in the partnership assets. (n)
his apparent authority receives money or property
of a third person and misapplies it; and
CHAPTER 3
(2) Where the partnership in the course of its
business receives money or property of a third Dissolution and Winding Up
person and the money or property so received is
misapplied by any partner while it is in the custody Article 1828. The dissolution of a partnership is
of the partnership. (n) the change in the relation of the partners caused
by any partner ceasing to be associated in the
carrying on as distinguished from the winding up of
Article 1824. All partners are liable solidarily with the business. (n)
the partnership for everything chargeable to the
partnership under articles 1822 and 1823. (n)
Article 1829. On dissolution the partnership is not
terminated, but continues until the winding up of
Article 1825. When a person, by words spoken or partnership affairs is completed. (n)
written or by conduct, represents himself, or
consents to another representing him to anyone,
as a partner in an existing partnership or with one Article 1830. Dissolution is caused:
or more persons not actual partners, he is liable to (1) Without violation of the agreement between
any such persons to whom such representation has the partners:
been made, who has, on the faith of such (a) By the termination of the definite term or
representation, given credit to the actual or particular undertaking specified in the agreement;
apparent partnership, and if he has made such
representation or consented to its being made in a (b) By the express will of any partner, who must act
public manner he is liable to such person, whether in good faith, when no definite term or particular is
the representation has or has not been made or specified;
communicated to such person so giving credit by (c) By the express will of all the partners who have
or with the knowledge of the apparent partner not assigned their interests or suffered them to be
making the representation or consenting to its charged for their separate debts, either before or
being made: after the termination of any specified term or
(1) When a partnership liability results, he is liable particular undertaking;
as though he were an actual member of the
partnership; (d) By the expulsion of any partner from the
business bona fide in accordance with such a
(2) When no partnership liability results, he is liable power conferred by the agreement between the
pro rata with the other persons, if any, so partners;
consenting to the contract or representation as to
incur liability, otherwise separately. When a person (2) In contravention of the agreement between the
has been thus represented to be a partner in an partners, where the circumstances do not permit a
existing partnership, or with one or more persons dissolution under any other provision of this
not actual partners, he is an agent of the persons article, by the express will of any partner at any
consenting to such representation to bind them to time;
the same extent and in the same manner as
though he were a partner in fact, with respect to (3) By any event which makes it unlawful for the
persons who rely upon the representation. When business of the partnership to be carried on or for
all the members of the existing partnership the members to carry it on in partnership;
consent to the representation, a partnership act or
obligation results; but in all other cases it is the
(4) When a specific thing which a partner had (b) When the dissolution is by such act, insolvency
promised to contribute to the partnership, or death of a partner, in cases where article 1833
perishes before the delivery; in any case by the loss so requires;
of the thing, when the partner who contributed it
having reserved the ownership thereof, has only (2) With respect to persons not partners, as
transferred to the partnership the use or declared in article 1834. (n)
enjoyment of the same; but the partnership shall
not be dissolved by the loss of the thing when it
occurs after the partnership has acquired the Article 1833. Where the dissolution is caused by
ownership thereof; the act, death or insolvency of a partner, each
partner is liable to his co-partners for his share of
(5) By the death of any partner; any liability created by any partner acting for the
partnership as if the partnership had not been
6) By the insolvency of any partner or of the dissolved unless:
partnership;
(1) The dissolution being by act of any partner, the
(7) By the civil interdiction of any partner; partner acting for the partnership had knowledge
of the dissolution; or
(8) By decree of court under the following article.
(1700a and 1701a) (2) The dissolution being by the death or
insolvency of a partner, the partner acting for the
partnership had knowledge or notice of the death
Article 1831. On application by or for a partner the or insolvency.
court shall decree a dissolution whenever:
(1) A partner has been declared insane in any
judicial proceeding or is shown to be of unsound Article 1834. After dissolution, a partner can bind
mind; the partnership, except as provided in the third
paragraph of this article:
(2) A partner becomes in any other way incapable
of performing his part of the partnership contract; (1) By any act appropriate for winding up
partnership affairs or completing transactions
(3) A partner has been guilty of such conduct as unfinished at dissolution;
tends to affect prejudicially the carrying on of the
business; (2) By any transaction which would bind the
partnership if dissolution had not taken place,
(4) A partner wilfully or persistently commits a provided the other party to the transaction:
breach of the partnership agreement, or otherwise (a) Had extended credit to the partnership prior to
so conducts himself in matters relating to the dissolution and had no knowledge or notice of the
partnership business that it is not reasonably dissolution; or
practicable to carry on the business in partnership
with him; (b) Though he had not so extended credit, had
nevertheless known of the partnership prior to
(5) The business of the partnership can only be dissolution, and, having no knowledge or notice of
carried on at a loss; dissolution, the fact of dissolution had not been
advertised in a newspaper of general circulation in
(6) Other circumstances render a dissolution the place (or in each place if more than one) at
equitable. On the application of the purchaser of a which the partnership business was regularly
partner's interest under article 1813 or 1814: carried on. The liability of a partner under the first
paragraph, No. 2, shall be satisfied out of
(1) After the termination of the specified term or partnership assets alone when such partner had
particular undertaking; been prior to dissolution:
(2) At any time if the partnership was a partnership (1) Unknown as a partner to the person with whom
at will when the interest was assigned or when the the contract is made; and
charging order was issued. (n)
(2) So far unknown and inactive in partnership
affairs that the business reputation of the
Article 1832. Except so far as may be necessary to partnership could not be said to have been in any
wind up partnership affairs or to complete degree due to his connection with it. The
transactions begun but not then finished, partnership is in no case bound by any act of a
dissolution terminates all authority of any partner partner after dissolution:
to act for the partnership: (1) Where the partnership is dissolved because it is
unlawful to carry on the business, unless the act is
(1) With respect to the partners, appropriate for winding up partnership affairs; or
(a) When the dissolution is not by the act, (2) Where the partner has become insolvent; or
insolvency or death of a partner; or
(3) Where the partner has no authority to wind up (a) All the rights specified in the first paragraph of
partnership affairs; except by a transaction with this article, and
one who -
(a) Had extended credit to the partnership prior to (b) The right, as against each partner who has
dissolution and had no knowledge or notice of his caused the dissolution wrongfully, to damages
want of authority; or breach of the agreement.
(b) Had not extended credit to the partnership (2) The partners who have not caused the
prior to dissolution, and, having no knowledge or dissolution wrongfully, if they all desire to continue
notice of his want of authority, the fact of his want the business in the same name either by
of authority has not been advertised in the manner themselves or jointly with others, may do so,
provided for advertising the fact of dissolution in during the agreed term for the partnership and for
the first paragraph, No. 2 (b). Nothing in this article that purpose may possess the partnership
shall affect the liability under article 1825 of any property, provided they secure the payment by
person who after dissolution represents himself or bond approved by the court, or pay any partner
consents to another representing him as a partner who has caused the dissolution wrongfully, the
in a partnership engaged in carrying on business. value of his interest in the partnership at the
(n) dissolution, less any damages recoverable under
the second paragraph, No. 1 (b) of this article, and
in like manner indemnify him against all present or
Article 1835. The dissolution of the partnership future partnership liabilities.
does not of itself discharge the existing liability of
any partner. A partner is discharged from any (3) A partner who has caused the dissolution
existing liability upon dissolution of the partnership wrongfully shall have:
by an agreement to that effect between himself, (a) If the business is not continued under the
the partnership creditor and the person or provisions of the second paragraph, No. 2, all the
partnership continuing the business; and such rights of a partner under the first paragraph,
agreement may be inferred from the course of subject to liability for damages in the second
dealing between the creditor having knowledge of paragraph, No. 1 (b), of this article.
the dissolution and the person or partnership
continuing the business. The individual property of (b) If the business is continued under the second
a deceased partner shall be liable for all obligations paragraph, No. 2, of this article, the right against
of the partnership incurred while he was a partner, his co-partners and all claiming through them in
but subject to the prior payment of his separate respect of their interests in the partnership, to
debts. (n) have the value of his interest in the partnership,
less any damage caused to his co-partners by the
dissolution, ascertained and paid to him in cash, or
Article 1836. Unless otherwise agreed, the partners the payment secured by a bond approved by the
who have not wrongfully dissolved the partnership court, and to be released from all existing liabilities
or the legal representative of the last surviving of the partnership; but in ascertaining the value of
partner, not insolvent, has the right to wind up the the partner's interest the value of the good-will of
partnership affairs, provided, however, that any the business shall not be considered. (n)
partner, his legal representative or his assignee,
upon cause shown, may obtain winding up by the
court. (n) Article 1838. Where a partnership contract is
rescinded on the ground of the fraud or
misrepresentation of one of the parties thereto,
Article 1837. When dissolution is caused in any the party entitled to rescind is, without prejudice
way, except in contravention of the partnership to any other right, entitled:
agreement, each partner, as against his co- (1) To a lien on, or right of retention of, the surplus
partners and all persons claiming through them in of the partnership property after satisfying the
respect of their interests in the partnership, unless partnership liabilities to third persons for any sum
otherwise agreed, may have the partnership of money paid by him for the purchase of an
property applied to discharge its liabilities, and the interest in the partnership and for any capital or
surplus applied to pay in cash the net amount advances contributed by him;
owing to the respective partners. But if dissolution
is caused by expulsion of a partner, bona fide (2) To stand, after all liabilities to third persons
under the partnership agreement and if the have been satisfied, in the place of the creditors of
expelled partner is discharged from all partnership the partnership for any payments made by him in
liabilities, either by payment or agreement under respect of the partnership liabilities; and
the second paragraph of article 1835, he shall
receive in cash only the net amount due him from (3) To be indemnified by the person guilty of the
the partnership. When dissolution is caused in fraud or making the representation against all
contravention of the partnership agreement the debts and liabilities of the partnership. (n)
rights of the partners shall be as follows:
(1) Each partner who has not caused dissolution
wrongfully shall have:
Article 1839. In settling accounts between the existing partnership, or when any partner retires
partners after dissolution, the following rules shall and assigns (or the representative of the deceased
be observed, subject to any agreement to the partner assigns) his rights in partnership property
contrary: to two or more of the partners, or to one or more
of the partners and one or more third persons, if
(1) The assets of the partnership are: the business is continued without liquidation of the
(a) The partnership property, partnership affairs;
(b) The contributions of the partners necessary for (2) When all but one partner retire and assign (or
the payment of all the liabilities specified in No. 2. the representative of a deceased partner assigns)
their rights in partnership property to the
(2) The liabilities of the partnership shall rank in remaining partner, who continues the business
order of payment, as follows: without liquidation of partnership affairs, either
(a) Those owing to creditors other than partners, alone or with others;
(b) Those owing to partners other than for capital (3) When any partner retires or dies and the
and profits, business of the dissolved partnership is continued
as set forth in Nos. 1 and 2 of this article, with the
(c) Those owing to partners in respect of capital, consent of the retired partners or the
representative of the deceased partner, but
(d) Those owing to partners in respect of profits. without any assignment of his right in partnership
property;
(3) The assets shall be applied in the order of their
declaration in No. 1 of this article to the (4) When all the partners or their representatives
satisfaction of the liabilities. assign their rights in partnership property to one or
more third persons who promise to pay the debts
(4) The partners shall contribute, as provided by and who continue the business of the dissolved
article 1797, the amount necessary to satisfy the partnership;
liabilities.
(5) An assignee for the benefit of creditors or any (5) When any partner wrongfully causes a
person appointed by the court shall have the right dissolution and the remaining partners continue
to enforce the contributions specified in the the business under the provisions of article 1837,
preceding number. second paragraph, No. 2, either alone or with
others, and without liquidation of the partnership
(6) Any partner or his legal representative shall affairs;
have the right to enforce the contributions
specified in No. 4, to the extent of the amount (6) When a partner is expelled and the remaining
which he has paid in excess of his share of the partners continue the business either alone or with
liability. others without liquidation of the partnership
affairs. The liability of a third person becoming a
partner in the partnership continuing the business,
(7) The individual property of a deceased partner under this article, to the creditors of the dissolved
shall be liable for the contributions specified in No. partnership shall be satisfied out of the partnership
4. property only, unless there is a stipulation to the
contrary. When the business of a partnership after
(8) When partnership property and the individual dissolution is continued under any conditions set
properties of the partners are in possession of a forth in this article the creditors of the dissolved
court for distribution, partnership creditors shall partnership, as against the separate creditors of
have priority on partnership property and separate the retiring or deceased partner or the
creditors on individual property, saving the rights representative of the deceased partner, have a
of lien or secured creditors. prior right to any claim of the retired partner or the
representative of the deceased partner against the
(9) Where a partner has become insolvent or his person or partnership continuing the business, on
estate is insolvent, the claims against his separate account of the retired or deceased partner's
property shall rank in the following order: interest in the dissolved partnership or on account
(a) Those owing to separate creditors; of any consideration promised for such interest or
for his right in partnership property. Nothing in this
(b) Those owing to partnership creditors; article shall be held to modify any right of creditors
to set aside any assignment on the ground of
(c) Those owing to partners by way of contribution. fraud. The use by the person or partnership
(n) continuing the business of the partnership name,
or the name of a deceased partner as part thereof,
shall not of itself make the individual property of
Article 1840. In the following cases creditors of the the deceased partner liable for any debts
dissolved partnership are also creditors of the contracted by such person or partnership. (n)
person or partnership continuing the business:
(1) When any new partner is admitted into an
Article 1841. When any partner retires or dies, and (h) The time, if agreed upon, when the
the business is continued under any of the contribution of each limited partner is to be
conditions set forth in the preceding article, or in returned;
article 1837, second paragraph, No. 2, without any
settlement of accounts as between him or his (i) The share of the profits or the other
estate and the person or partnership continuing compensation by way of income which each
the business, unless otherwise agreed, he or his limited partner shall receive by reason of his
legal representative as against such person or contribution;
partnership may have the value of his interest at
the date of dissolution ascertained, and shall ( j) The right, if given, of a limited partner to
receive as an ordinary creditor an amount equal to substitute an assignee as contributor in his place,
the value of his interest in the dissolved and the terms and conditions of the substitution;
partnership with interest, or, at his option or at the
option of his legal representative, in lieu of (k) The right, if given, of the partners to admit
interest, the profits attributable to the use of his additional limited partners;
right in the property of the dissolved partnership;
provided that the creditors of the dissolved (l) The right, if given, of one or more of the limited
partnership as against the separate creditors, or partners to priority over other limited partners, as
the representative of the retired or deceased to contributions or as to compensation by way of
partner, shall have priority on any claim arising income, and the nature of such priority;
under this article, as provided article 1840, third
paragraph. (n) (m) The right, if given, of the remaining general
partner or partners to continue the business on the
death, retirement, civil interdiction, insanity or
Article 1842. The right to an account of his interest insolvency of a general partner; and
shall accrue to any partner, or his legal
representative as against the winding up partners (n) The right, if given, of a limited partner to
or the surviving partners or the person or demand and receive property other than cash in
partnership continuing the business, at the date of return for his contribution.
dissolution, in the absence of any agreement to
the contrary. (n) (2) File for record the certificate in the Office of the
Securities and Exchange Commission.
A limited partnership is formed if there has been
CHAPTER 4 . Limited Partnership (n) substantial compliance in good faith with the
Article 1843. A limited partnership is one formed foregoing requirements.
by two or more persons under the provisions of
the following article, having as members one or
more general partners and one or more limited Article 1845. The contributions of a limited partner
partners. The limited partners as such shall not be may be cash or property, but not services.
bound by the obligations of the partnership.

Article 1844. Two or more persons desiring to form Article 1846. The surname of a limited partner shall
a limited partnership shall: not appear in the partnership name unless:
(1) Sign and swear to a certificate, which shall state
- (1) It is also the surname of a general partner, or
(a) The name of the partnership, adding thereto
the word "Limited"; (2) Prior to the time when the limited partner
became such, the business has been carried on
(b) The character of the business; under a name in which his surname appeared.

(c) The location of the principal place of business; A limited partner whose surname appears in a
partnership name contrary to the provisions of the
(d) The name and place of residence of each first paragraph is liable as a general partner to
member, general and limited partners being partnership creditors who extend credit to the
respectively designated; partnership without actual knowledge that he is
not a general partner.
(e) The term for which the partnership is to exist;
( f ) The amount of cash and a description of and Article 1847. If the certificate contains a false
the agreed value of the other property contributed statement, one who suffers loss by reliance on
by each limited partner; such statement may hold liable any party to the
certificate who knew the statement to be false:
(g) The additional contributions, if any, to be made (1) At the time he signed the certificate, or
by each limited partner and the times at which or
events on the happening of which they shall be (2) Subsequently, but within a sufficient time
made; before the statement was relied upon to enable
him to cancel or amend the certificate, or to file a Article 1852. Without prejudice to the provisions of
petition for its cancellation or amendment as article 1848, a person who has contributed to the
provided in article 1865. capital of a business conducted by a person or
partnership erroneously believing that he has
become a limited partner in a limited partnership,
Article 1848. A limited partner shall not become is not, by reason of his exercise of the rights of a
liable as a general partner unless, in addition to the limited partner, a general partner with the person
exercise of his rights and powers as a limited or in the partnership carrying on the business, or
partner, he takes part in the control of the bound by the obligations of such person or
business. partnership, provided that on ascertaining the
mistake he promptly renounces his interest in the
profits of the business, or other compensation by
Article 1849. After the formation of a lifted way of income.
partnership, additional limited partners may be
admitted upon filing an amendment to the original
certificate in accordance with the requirements of Article 1853. A person may be a general partner
article 1865. and a limited partner in the same partnership at
the same time, provided that this fact shall be
stated in the certificate provided for in article
Article 1850. A general partner shall have all the 1844.
rights and powers and be subject to all the A person who is a general, and also at the same
restrictions and liabilities of a partner in a time a limited partner, shall have all the rights and
partnership without limited partners. However, powers and be subject to all the restrictions of a
without the written consent or ratification of the general partner; except that, in respect to his
specific act by all the limited partners, a general contribution, he shall have the rights against the
partner or all of the general partners have no other members which he would have had if he
authority to: were not also a general partner.
(1) Do any act in contravention of the certificate;
(2) Do any act which would make it impossible to Article 1854. A limited partner also may loan
carry on the ordinary business of the partnership; money to and transact other business with the
partnership, and, unless he is also a general
(3) Confess a judgment against the partnership; partner, receive on account of resulting claims
against the partnership, with general creditors, a
(4) Possess partnership property, or assign their pro rata share of the assets. No limited partner
rights in specific partnership property, for other shall in respect to any such claim:
than a partnership purpose; (1) Receive or hold as collateral security any
(5) Admit a person as a general partner; partnership property, or

(6) Admit a person as a limited partner, unless the (2) Receive from a general partner or the
right so to do is given in the certificate; partnership any payment, conveyance, or release
from liability if at the time the assets of the
(7) Continue the business with partnership partnership are not sufficient to discharge
property on the death, retirement, insanity, civil partnership liabilities to persons not claiming as
interdiction or insolvency of a general partner, general or limited partners. The receiving of
unless the right so to do is given in the certificate. collateral security, or payment, conveyance, or
release in violation of the foregoing provisions is a
fraud on the creditors of the partnership.
Article 1851. A limited partner shall have the same
rights as a general partner to:
(1) Have the partnership books kept at the Article 1855. Where there are several limited
principal place of business of the partnership, and partners the members may agree that one or more
at a reasonable hour to inspect and copy any of of the limited partners shall have a priority over
them; other limited partners as to the return of their
contributions, as to their compensation by way of
(2) Have on demand true and full information of all income, or as to any other matter. If such an
things affecting the partnership, and a formal agreement is made it shall be stated in the
account of partnership affairs whenever certificate, and in the absence of such a statement
circumstances render it just and reasonable; and all the limited partners shall stand upon equal
footing.
(3) Have dissolution and winding up by decree of
court. A limited partner shall have the right to
receive a share of the profits or other
compensation by way of income, and to the return Article 1856. A limited partner may receive from
of his contribution as provided in articles 1856 and the partnership the share of the profits or the
1857. compensation by way of income stipulated for in
the certificate; provided, that after such payment
is made, whether from property of the partnership (1) Specific property stated in the certificate as
or that of a general partner, the partnership assets contributed by him, but which was not contributed
are in excess of all liabilities of the partnership or which has been wrongfully returned, and
except liabilities to limited partners on account of
their contributions and to general partners. (2) Money or other property wrongfully paid or
conveyed to him on account of his contribution.
The liabilities of a limited partner as set forth in
Article 1857. A limited partner shall not receive this article can be waived or compromised only by
from a general partner or out of partnership the consent of all members; but a waiver or
property any part of his contributions until: compromise shall not affect the right of a creditor
(1) All liabilities of the partnership, except liabilities of a partnership who extended credit or whose
to general partners and to limited partners on claim arose after the filing and before a
account of their contributions, have been paid or cancellation or amendment of the certificate, to
there remains property of the partnership enforce such liabilities.
sufficient to pay them; When a contributor has rightfully received the
return in whole or in part of the capital of his
(2) The consent of all members is had, unless the contribution, he is nevertheless liable tothe
return of the contribution may be rightfully partnership for any sum, not in excess of such
demanded under the provisions of the second return with interest, necessary to discharge its
paragraph; and liabilities to all creditors who extended credit or
whose claims arose before such return.
(3) The certificate is cancelled or so amended as to
set forth the withdrawal or reduction.
Article 1859. A limited partner's interest is
Subject to the provisions of the first paragraph, a assignable. A substituted limited partner is a
limited partner may rightfully demand the return person admitted to all the rights of a limited
of his contribution: partner who has died or has assigned his interest in
(1) On the dissolution of a partnership; or a partnership.
(2) When the date specified in the certificate for its An assignee, who does not become a substituted
return has arrived, or limited partner, has no right to require any
information or account of the partnership
(3) After he has six months' notice in writing to all transactions or to inspect the partnership books;
other members, if no time is specified in the he is only entitled to receive the share of the
certificate, either for the return of the contribution profits or other compensation by way of income,
or for the dissolution of the partnership. or the return of his contribution, to which his
In the absence of any statement in the certificate assignor would otherwise be entitled.
to the contrary or the consent of all members, a An assignee shall have the right to become a
limited partner, irrespective of the nature of his substituted limited partner if all the members
contribution, has only the right to demand and consent thereto or if the assignor, being thereunto
receive cash in return for his contribution. A empowered by the certificate, gives the assignee
limited partner may have the partnership dissolved that right.
and its affairs wound up when: An assignee becomes a substituted limited partner
when the certificate is appropriately amended in
accordance with article 1865.
(1) He rightfully but unsuccessfully demands the The substituted limited partner has all the rights
return of his contribution, or and powers, and is subject to all the restrictions
(2) The other liabilities of the partnership have not and liabilities of his assignor, except those liabilities
been paid, or the partnership property is of which he was ignorant at the time he became a
insufficient for their payment as required by the limited partner and which could not be ascertained
first paragraph, No. 1, and the limited partner from the certificate.
would otherwise be entitled to the return of his The substitution of the assignee as a limited
contribution. partner does not release the assignor from liability
to the partnership under articles 847 and 1858.
Article 1858. A limited partner is liable to the
partnership: Article 1860. The retirement, death, insolvency,
(1) For the difference between his contribution as insanity or civil interdiction of a general partner
actually made and that stated in the certificate as dissolves the partnership, unless the business is
having been made, and continued by the remaining general partners:
(2) For any unpaid contribution which he agreed in (1) Under a right so to do stated in the certificate,
the certificate to make in the future at the time or
and on the conditions stated in the certificate. (2) With the consent of all members.
A limited partner holds as trustee for the
partnership:
Article 1861. On the death of a limited partner his (3) An additional limited partner is admitted;
executor or administrator shall have all the rights
of a limited partner for the purpose of setting his (4) A person is admitted as a general partner;
estate, and such power as the deceased had to
constitute his assignee a substituted limited (5) A general partner retires, dies, becomes
partner. The estate of a deceased limited partner insolvent or insane, or is sentenced to civil
shall be liable for all his liabilities as a limited interdiction and the business is continued under
partner. article 1860;
(6) There is a change in the character of the
Article 1862. On due application to a court of business of the partnership;
competent jurisdiction by any creditor of a limited
partner, the court may charge the interest of the (7) There is a false or erroneous statement in the
indebted limited partner with payment of the certificate;
unsatisfied amount of such claim, and may appoint
a receiver, and make all other orders, directions (8) There is a change in the time as stated in the
and inquiries which the circumstances of the case certificate for the dissolution of the partnership or
may require. for the return of a contribution;
The interest may be redeemed with the separate
property of any general partner, but may not be (9) A time is fixed for the dissolution of the
redeemed with partnership property. The partnership, or the return of a contribution, no
remedies conferred by the first paragraph shall not time having been specified in the certificate, or
be deemed exclusive of others which may exist.
Nothing in this Chapter shall be held to deprive a (10) The members desire to make a change in any
limited partner of his statutory exemption. other statement in the certificate in order that it
shall accurately represent the agreement among
them.
Article 1863. In settling accounts after dissolution
the liabilities of the partnership shall be entitled to
payment in the following order: Article 1865. The writing to amend a certificate
shall:
(1) Those to creditors, in the order of priority as (1) Conform to the requirements of article 1844 as
provided by law, except those to limited partners far as necessary to set forth clearly the change in
on account of their contributions, and to general the certificate which it is desired to make; and
partners;
(2) Be signed and sworn to by all members, and an
(2) Those to limited partners in respect to their amendment substituting a limited partner or
share of the profits and other compensation by adding a limited or general partner shall be signed
way of income on their contributions; also by the member to be substituted or added,
and when a limited partner is to be substituted,
(3) Those to limited partners in respect to the the amendment shall also be signed by the
capital of their contributions; assigning limited partner. The writing to cancel a
certificate shall be signed by all members.
(4) Those to general partners other than for capital A person desiring the cancellation or amendment
and profits; of a certificate, if any person designated in the first
and second paragraphs as a person who must
(5) Those to general partners in respect to profits; execute the writing refuses to do so, may petition
the court to order a cancellation or amendment
(6) Those to general partners in respect to capital. thereof.
Subject to any statement in the certificate or to If the court finds that the petitioner has a right to
subsequent agreement, limited partners share in have the writing executed by a person who refuses
the partnership assets in respect to their claims for to do so, it shall order the
capital, and in respect to their claims for profits or Office of the Securities and Exchange Commission
for compensation by way of income on their where the certificate is recorded, to record the
contribution respectively, in proportion to the cancellation or amendment of the certificate; and
respective amounts of such claims. when the certificate is to be amended, the court
shall also cause to be filed for record in said office
a certified copy of its decree setting forth the
Article 1864. The certificate shall be cancelled amendment. A certificate is amended or cancelled
when the partnership is dissolved or all limited when there is filed for record in the Office of the
partners cease to be such. A certificate shall be Securities and Exchange Commission, where the
amended when: certificate is recorded:
(1) There is a change in the name of the
partnership or in the amount or character of the (1) A writing in accordance with the provisions of
contribution of any limited partner; the first or second paragraph, or
(2) A person is substituted as a limited partner;
(2) A certified copy of the order of the court in
accordance with the provisions of the fourth
paragraph;
(3) After the certificate is duly amended in
accordance with this article, the amended certified
shall thereafter be for all purposes the certificate
provided for in this Chapter.

Article 1866. A contributor, unless he is a general


partner, is not a proper party to proceedings by or
against a partnership, except where the object is to
enforce a limited partner's right against or liability
to the partnership.

Article 1867. A limited partnership formed under


the law prior to the effectivity of this Code, may
become a limited partnership under this Chapter
by complying with the provisions of article 1844,
provided the certificate sets forth:
(1) The amount of the original contribution of each
limited partner, and the time when the
contribution was made; and
(2) That the property of the partnership exceeds
the amount sufficient to discharge its liabilities to
persons not claiming as general or limited partners
by an amount greater than the sum of the
contributions of its limited partners. A limited
partnership formed under the law prior to the
effectivity of this Code, until or unless it becomes a
limited partnership under this Chapter, shall
continue to be governed by the provisions of the
old law.
TITLE X Article 1875. Agency is presumed to be for a
AGENCY compensation, unless there is proof to the
contrary. (n)

CHAPTER 1. Nature, Form and Kinds of Agency Article 1876. An agency is either general or special.
The former comprises all the business of the
Article 1868. By the contract of agency a person principal. The latter, one or more specific
binds himself to render some service or to do transactions. (1712)
something in representation or on behalf of
another, with the consent or authority of the
latter. (1709a) Article 1877. An agency couched in general terms
comprises only acts of administration, even if the
principal should state that he withholds no power
Article 1869. Agency may be express, or implied or that the agent may execute such acts as he may
from the acts of the principal, from his silence or consider appropriate, or even though the agency
lack of action, or his failure to repudiate the should authorize a general and unlimited
agency, knowing that another person is acting on management. (n)
his behalf without authority. Agency may be oral,
unless the law requires a specific form. (1710a)
Article 1878. Special powers of attorney are
necessary in the following cases:
Article 1870. Acceptance by the agent may also be (1) To make such payments as are not usually
express, or implied from his acts which carry out considered as acts of administration;
the agency, or from his silence or inaction
according to the circumstances. (n) (2) To effect novations which put an end to
obligations already in existence at the time the
agency was constituted;
Article 1871. Between persons who are present, (3) To compromise, to submit questions to
the acceptance of the agency may also be implied arbitration, to renounce the right to appeal from a
if the principal delivers his power of attorney to the judgment, to waive objections to the venue of an
agent and the latter receives it without any action or to abandon a prescription already
objection. (n) acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
Article 1872. Between persons who are absent, the ownership of an immovable is transmitted or
acceptance of the agency cannot be implied from acquired either gratuitously or for a valuable
the silence of the agent, except: consideration;
(1) When the principal transmits his power of (6) To make gifts, except customary ones for
attorney to the agent, who receives it charity or those made to employees in the
without any objection; business managed by the agent;
(2) When the principal entrusts to him by letter (7) To loan or borrow money, unless the latter act
or telegram a power of attorney with be urgent and indispensable for the preservation
respect to the business in which he is of the things which are under administration;
habitually engaged as an agent, and he did
not reply to the letter or telegram. (n)
(8) To lease any real property to another person
Article 1873. If a person specially informs another for more than one year;
or states by public advertisement that he has given (9) To bind the principal to render some service
a power of attorney to a third person, the latter without compensation;
thereby becomes a duly authorized agent, in the
former case with respect to the person who (10) To bind the principal in a contract of
received the special information, and in the latter partnership;
case with regard to any person.
The power shall continue to be in full force until (11) To obligate the principal as a guarantor or
the notice is rescinded in the same manner in surety;
which it was given. (n)
(12) To create or convey real rights over
immovable property;
Article 1874. When a sale of a piece of land or any
interest therein is through an agent, the authority (13) To accept or repudiate an inheritance;
of the latter shall be in writing; otherwise, the sale
shall be void. (n) (14) To ratify or recognize obligations contracted
before the agency;
(15) Any other act of strict dominion. (n) of the principal. In default thereof, he shall do all
that a good father of a family would do, as
required by the nature of the business. (1719)
Article 1879. A special power to sell excludes the
power to mortgage; and a special power to
mortgage does not include the power to sell. (n) Article 1888. An agent shall not carry out an
agency if its execution would manifestly result in
loss or damage to the principal. (n)
Article 1880. A special power to compromise does
not authorize submission to arbitration. (1713a)
Article 1881. The agent must act within the scope Article 1889. The agent shall be liable for damages
of his authority. He may do such acts as may be if, there being a conflict between his interests and
conducive to the accomplishment of the purpose those of the principal, he should prefer his own. (n)
of the agency. (1714a)

Article 1882. The limits of the agent's authority Article 1890. If the agent has been empowered to
shall not be considered exceeded should it have borrow money, he may himself be the lender at
been performed in a manner more advantageous the current rate of interest. If he has been
to the principal than that specified by him. (1715) authorized to lend money at interest, he cannot
borrow it without the consent of the principal. (n)
Article 1883. If an agent acts in his own name, the
principal has no right of action against the persons Article 1891. Every agent is bound to render an
with whom the agent has contracted; neither have account of his transactions and to deliver to the
such persons against the principal. principal whatever he may have received by virtue
In such case the agent is the one directly bound in of the agency, even though it may not be owing to
favor of the person with whom he has contracted, the principal. Every stipulation exempting the
as if the transaction were his own, except when agent from the obligation to render an account
the contract involves things belonging to the shall be void. (1720a)
principal. The provisions of this article shall be
understood too be without prejudice to the actions
between the principal and agent. (1717) Article 1892. The agent may appoint a substitute if
the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint
one;
CHAPTER 2. Obligations of the Agent (2) When he was given such power, but without
designating the person, and the person appointed
Article 1884. The agent is bound by his acceptance was notoriously incompetent or insolvent.
to carry out the agency, and is liable for the
damages which, through his non performance, the All acts of the substitute appointed against the
principal may suffer. He must also finish the prohibition of the principal shall be void. (1721)
business already begun on the death of the
principal, should delay entail any danger. (1718)
Article 1893. In the cases mentioned in Nos. 1 and
2 of the preceding article, the principal may
Article 1885. In case a person declines an agency, furthermore bring an action against the substitute
he is bound to observe the diligence of a good with respect to the obligations which the latter has
father of a family in the custody and preservation contracted under the substitution. (1722a)
of the goods forwarded to him by the owner until
the latter should appoint an agent or take charge
of the goods. Article 1894. The responsibility of two or more
agents, even though they have been appointed
simultaneously, is not solidary, if solidarity has not
been expressly stipulated. (1723)
Article 1886. Should there be a stipulation that the
agent shall advance the necessary funds, he shall
be bound to do so except when the principal is Article 1895. If solidarity has been agreed upon,
insolvent. (n) each of the agents is responsible for the non-
fulfillment of agency, and for the fault or
negligence of his fellows agents, except in the
latter case when the fellow agents acted beyond
Article 1887. In the execution of the agency, the the scope of their authority. (n)
agent shall act in accordance with the instructions
Article 1896. The agent owes interest on the sums Article 1904. The commission agent who handles
he has applied to his own use from the day on goods of the same kind and mark, which belong to
which he did so, and on those which he still owes different owners, shall distinguish them by
after the extinguishment of the agency. (1724a) countermarks, and designate the merchandise
respectively belonging to each principal. (n)
Article 1897. The agent who acts as such is not
personally liable to the party with whom he Article 1905. The commission agent cannot,
contracts, unless he expressly binds himself or without the express or implied consent of the
exceeds the limits of his authority without giving principal, sell on credit. Should he do so, the
such party sufficient notice of his powers. (1725) principal may demand from him payment in cash,
but the commission agent shall be entitled to any
interest or benefit, which may result from such
Article 1898. If the agent contracts in the name of sale. (n)
the principal, exceeding the scope of his authority,
and the principal does not ratify the contract, it
shall be void if the party with whom the agent Article 1906. Should the commission agent, with
contracted is aware of the limits of the powers authority of the principal, sell on credit, he shall so
granted by the principal. In this case, however, the inform the principal, with a statement of the
agent is liable if he undertook to secure the names of the buyers. Should he fail to do so, the
principal's ratification. (n) sale shall be deemed to have been made for cash
insofar as the principal is concerned. (n)
Article 1899. If a duly authorized agent acts in
accordance with the orders of the principal, the Article 1907. Should the commission agent receive
latter cannot set up the ignorance of the agent as on a sale, in addition to the ordinary commission,
to circumstances whereof he himself was, or ought another called a guarantee commission, he shall
to have been, aware. (n) bear the risk of collection and shall pay the
principal the proceeds of the sale on the same
terms agreed upon with the purchaser. (n)
Article 1908. The commission agent who does not
Article 1900. So far as third persons are concerned, collect the credits of his principal at the time when
an act is deemed to have been performed within they become due and demandable shall be liable
the scope of the agent's for damages, unless he proves that he exercised
due diligence for that purpose. (n)
authority, if such act is within the terms of the
power of attorney, as written, even if the agent has Article 1909. The agent is responsible not only for
in fact exceeded the limits of his authority fraud, but also for negligence, which shall be
according to an understanding between the judged with more or less rigor by the courts,
principal and the agent. (n) according to whether the agency was or was not
for a compensation. (1726)
Article 1901. A third person cannot set up the fact
that the agent has exceeded his powers, if the CHAPTER 3. Obligations of the Principal
principal has ratified, or has signified his
willingness to ratify the agent's acts. (n) Article 1910. The principal must comply with all
the obligations which the agent may have
contracted within the scope of his authority. As for
Article 1902. A third person with whom the agent any obligation wherein the agent has exceeded his
wishes to contract on behalf of the principal may power, the principal is not bound except when he
require the presentation of the power of attorney, ratifies it expressly or tacitly. (1727)
or the instructions as regards the agency. Private
or secret orders and instructions of the principal do
not prejudice third persons who have relied upon
the power of attorney or instructions shown them. Article 1911. Even when the agent has exceeded
(n) his authority, the principal is solidarily liable with
the agent if the former allowed the latter to act as
though he had full powers. (n)
Article 1903. The commission agent shall be
responsible for the goods received by him in the
terms and conditions and as described in the Article 1912. The principal must advance to the
consignment, unless upon receiving them he agent, should the latter so request, the sums
should make a written statement of the damage necessary for the execution of the agency. Should
and deterioration suffered by the same. (n) the agent have advanced them, the principal must
reimburse him therefor, even if the business or
undertaking was not successful, provided the
agent is free from all fault. The reimbursement (3) By the death, civil interdiction, insanity or
shall include interest on the sums advanced, from insolvency of the principal or of the agent;
the day on which the advance was made. (1728)
(4) By the dissolution of the firm or corporation
which entrusted or accepted the agency;
Article 1913. The principal must also indemnify the
agent for all the damages which the execution of (5) By the accomplishment of the object or
the agency may have caused the latter, without purpose of the agency;
fault or negligence on his part. (1729)
(6) By the expiration of the period for which the
agency was constituted. (1732a)
Article 1914. The agent may retain in pledge the
things which are the object of the agency until the
principal effects the reimbursement and pays the Article 1920. The principal may revoke the agency
indemnity set forth in the two preceding articles. at will, and compel the agent to return the
(1730) document evidencing the agency. Such revocation
Article 1915. If two or more persons have may be express or implied. (1733a)
appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the
agent for all the consequences of the agency.
(1731) Article 1921. If the agency has been entrusted for
the purpose of contracting with specified persons,
its revocation shall not prejudice the latter if they
Article 1916. When two persons contract with were not given notice thereof. (1734)
regard to the same thing, one of them with the
agent and the other with the principal, and the two
contracts are incompatible with each other, that of Article 1922. If the agent had general powers,
prior date shall be preferred, without prejudice to revocation of the agency does not prejudice third
the provisions of article 1544. (n) persons who acted in good faith and without
knowledge of the revocation. Notice of the
revocation in a newspaper of general circulation is
Article 1917. In the case referred to in the a sufficient warning to third persons. (n)
preceding article, if the agent has acted in good
faith, the principal shall be liable in damages to the
third person whose contract must be rejected. If Article 1923. The appointment of a new agent for
the agent acted in bad faith, he alone shall be the same business or transaction revokes the
responsible. (n) previous agency from the day on which notice
thereof was given to the former agent, without
prejudice to the provisions of the two preceding
Article 1918. The principal is not liable for the articles. (1735a)
expenses incurred by the agent in the following Article 1924. The agency is revoked if the principal
cases: directly manages the business entrusted to the
agent, dealing directly with third persons. (n)
(1) If the agent acted in contravention of the
principal's instructions, unless the latter should
wish to avail himself of the benefits derived from Article 1925. When two or more principals have
the contract; granted a power of attorney for a common
transaction, any one of them may revoke the same
(2) When the expenses were due to the fault of the without the consent of the others. (n)
agent;
(3) When the agent incurred them with knowledge Article 1926. A general power of attorney is
that an unfavorable result would ensue, if the revoked by a special one granted to another agent,
principal was not aware thereof; as regards the special matter involved in the latter.
(n)
(4) When it was stipulated that the expenses would
be borne by the agent, or that the latter would be
allowed only a certain sum. (n) Article 1927. An agency cannot be revoked if a
bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already
contracted, or if a partner is appointed manager of
CHAPTER 4. Modes of Extinguishment of Agency a partnership in the contract of partnership and his
removal from the management is unjustifiable. (n)
Article 1919. Agency is extinguished:
(1) By its revocation;
Article 1928. The agent may withdraw from the
(2) By the withdrawal of the agent; agency by giving due notice to the principal. If the
latter should suffer any damage by reason of the
withdrawal, the agent must indemnify him
therefor, unless the agent should base his
withdrawal upon the impossibility of continuing
the performance of the agency without grave
detriment to himself. (1736a)

Article 1929. The agent, even if he should


withdraw from the agency for a valid reason, must
continue to act until the principal has had
reasonable opportunity to take the necessary steps
to meet the situation. (1737a)

Article 1930. The agency shall remain in full force


and effect even after the death of the principal, if it
has been constituted in the common interest of
the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in
his favor. (n)

Article 1931. Anything done by the agent, without


knowledge of the death of the principal or of any
other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third
persons who may have contracted with him in
good faith. (1738)

Article 1932. If the agent dies, his heirs must notify


the principal thereof, and in the meantime adopt
such measures as the circumstances may demand
in the interest of the latter. (1739)

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