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