2103-2

Partnership and Corporation Law
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Art. 1784. A partnership begins from the time or task continues without a formal new
moment of the execution of the contract, agreement. It says that if the partners keep running
unless it is otherwise stipulated. (1679) the business without settling or closing things
down, it’s assumed that the partnership is
**Explanation in Simple Terms:** continuing. In this case, their rights and
responsibilities stay the same as they were when
This article is about partnerships, which is when the original agreement ended, as long as these
two or more people agree to work together and terms make sense for a partnership that can be
ended at any time (a "partnership at will").
share profits, usually in a business. According to
this rule, a partnership officially starts the
**Example:**
moment the contract (the written or verbal
agreement) is made, unless the people involved
Let's say Emma and Frank form a partnership to
decide on a different starting time. organize a series of summer concerts, with the
partnership set to end after the last concert on
**Example:** August 31st. However, after August 31st, they
keep working together to plan more events without
Let's say Alice and Bob decide to start a bakery signing a new agreement or closing the books on
together. They sign a contract on September 1st, their partnership. According to this article, it is
agreeing to share the work and profits equally. assumed that their partnership is continuing, even
According to this article, their partnership though it was supposed to end. Their rights and
officially begins on September 1st, the day they responsibilities stay the same as they were before,
signed the contract. However, if they agreed that but now they can end the partnership anytime since
their partnership would start on October 1st it's now a "partnership at will."
instead, then it would officially begin on that
later date. Art. 1786. Every partner is a debtor of the
partnership for whatever he may have
Art. 1785. When a partnership for a fixed term promised to contribute thereto. He shall also be
or particular undertaking is continued after the bound for warranty in case of eviction with
termination of such term or particular regard to specific and determinate things which
undertaking without any express agreement, he may have contributed to the partnership, in
the rights and duties of the partners remain the the same cases and in the same manner as the
same as they were at such termination, so far as vendor is bound with respect to the vendee. He
is consistent with a partnership at will. A shall also be liable for the fruits thereof from
continuation of the business by the partners or the time they should have been delivered,
such of them as habitually acted therein during without the need of any demand. (1681a)
the term, without any settlement or liquidation
of the partnership affairs, is prima facie **Explanation in Simple Terms:**
evidence of a continuation of the partnership.
(n) This article outlines the responsibilities of each
partner in a partnership concerning what they
**Explanation in Simple Terms:** agreed to contribute, whether it's money, property,
or services. It says that:
This article explains what happens when a
partnership that was supposed to end after a certain
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1. **Debtor of the Partnership:** Each partner is

like a debtor (someone who owes something) to - **Liable for Fruits:** If Grace delays giving her
the partnership for whatever they promised to $10,000, she would be responsible for any profits
contribute. If a partner agreed to put in a certain or interest that the partnership missed out on
amount of money or property, they are obligated to because of the delay, starting from the time she
fulfill that promise. was supposed to contribute the money.
2. **Warranty in Case of Eviction:** If a partner

contributes specific items (like property) to the Art. 1787. When the capital or a part thereof
partnership and those items are taken away which a partner is bound to contribute consists
(evicted) by someone else with a stronger legal of goods, their appraisal must be made in the
claim, the partner who contributed those items is manner prescribed in the contract of
responsible, just as a seller would be responsible to partnership, and in the absence of stipulation, it
a buyer in a sale. This means they may need to shall be made by experts chosen by the
compensate the partnership. partners, and according to current prices, the
subsequent changes thereof being for account of
3. **Liable for Fruits:** "Fruits" here refers to any the partnership. (n)
benefits or profits that should have been delivered
along with the contribution. If a partner delays **Explanation in Simple Terms:**
delivering their promised contribution, they are
still responsible for any profits or benefits that the This article deals with how to determine the value
partnership would have received from the time of goods when a partner contributes them as part
they should have delivered it, even if no one of their share of the partnership's capital.
specifically asked them to deliver it.
1. **Appraisal Method in the Contract:** If the
**Example:** partnership agreement includes instructions on
how to appraise the goods (for example, using a
Imagine Grace and Henry form a partnership to specific appraiser or method), those instructions
start a farm. Grace promises to contribute $10,000, must be followed.
and Henry promises to contribute a piece of land.
2. **Absence of Stipulation:** If the contract does
- **Debtor of the Partnership:** Grace must not specify how to appraise the goods, the partners
provide the $10,000 as agreed, and Henry must must select experts to determine the value based on
contribute the land. If Grace or Henry fails to the current market prices.
fulfill their promise, they are in debt to the
partnership. 3. **Price Changes:** After the goods are
appraised and their value is set, any future changes
- **Warranty in Case of Eviction:** Suppose it in their value (whether they go up or down) will
turns out that Henry didn’t actually own the land affect the partnership's capital. The partnership, as
he contributed, and the true owner evicts the a whole, will bear any gains or losses.
partnership from the land. Henry is responsible for
this problem and must compensate the partnership, **Example:**
similar to how a seller would have to compensate a
buyer if the item sold was taken away by someone
with a stronger legal right to it.
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If Laura and Mark form a partnership to sell This article explains the consequences for a partner
electronics, and Mark contributes $20,000 worth of who either fails to contribute the money they
electronic gadgets instead of cash: promised to the partnership or takes money from
the partnership for personal use.
- **Appraisal Method in the Contract:** If their
contract says a certified electronics appraiser 1. **Failure to Contribute Money:** If a partner
should determine the value of the gadgets, they agrees to contribute a certain amount of money but
must follow this method. doesn’t fulfill that promise on time, they become
liable for paying interest on the amount they owe,
- **Absence of Stipulation:** If no specific starting from the date they were supposed to
method is mentioned in the contract, Laura and contribute the money. They are also responsible for
Mark would need to choose experts (like a any damages caused by their failure to contribute.
reputable electronics dealer) to appraise the
gadgets based on their current market prices. 2. **Taking Money from the Partnership:** If a
partner takes money from the partnership's funds
- **Price Changes:** After the gadgets are and uses it for personal purposes, they must repay
appraised, if the value of electronics in the market that money with interest. The partner’s liability
rises or falls, the partnership will either gain or begins from the moment they start using the
lose money, depending on the change in value. partnership’s money for themselves.
**Summary:** **Example:**
When a partner contributes goods as capital, the Imagine Sarah and Tom form a partnership, and
method for determining their value must be Sarah agrees to contribute $5,000 by August 1st,
followed as outlined in the partnership agreement. but she doesn’t do it on time:
If not specified, experts are chosen to appraise the
goods at current market prices. Any changes in the - **Failure to Contribute Money:** Sarah is now
goods' value after appraisal will affect the required to pay interest on the $5,000 from August
partnership's capital, with the partnership bearing 1st onward, plus any damages caused by her delay
the consequences of those changes. (like missed business opportunities because the
partnership didn’t have enough capital).
Art. 1788. A partner who has undertaken to If later, Tom takes $2,000 from the partnership’s
contribute a sum of money and fails to do so account to buy a personal item:
becomes a debtor for the interest and damages
from the time he should have complied with his - **Taking Money from the Partnership:** Tom
obligation. The same rule applies to any amount must pay back the $2,000 plus interest starting
he may have taken from the partnership from the day he took the money, as well as any
coffers, and his liability shall begin from the damages his actions may have caused to the
time he converted the amount to his own use. partnership.
(1682)
**Summary:**
**Explanation in Simple Terms:**
If a partner fails to contribute the money they
promised on time, they owe interest and damages
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starting from the due date. Similarly, if a partner partnership agreement does not allow her to start
takes money from the partnership for personal use, her own tech consulting business.
they must repay it with interest from the time they
took it. - **Without Permission:** If Emma starts her own
tech consulting business on the side without
permission, the other partners (who provide the
Art. 1789. An industrial partner cannot engage capital) have two options:
in business for himself, unless the partnership - **Exclude Emma:** They can remove her
expressly permits him to do so; and if he should from the partnership because she violated the
do so, the capitalist partners may either exclude agreement.
him from the firm or avail themselves of the - **Claim Benefits and Seek Damages:** They
benefits which he may have obtained in can take any profits Emma made from her
violation of this provision, with a right to consulting business and may also seek
damages in either case. (n) compensation for any damage her side business
caused to the partnership.
**Summary:**
This article addresses the restrictions on an
industrial partner (someone who contributes labor, An industrial partner cannot start their own
skill, or expertise rather than capital) regarding business unless the partnership allows it. If they do
engaging in business outside of the partnership. so without permission, the capitalist partners can
either remove them from the partnership, claim the
1. **Prohibition of Outside Business:** An profits from the outside business, or seek damages
industrial partner cannot start or engage in their for any harm caused.
own business unless the partnership agreement
specifically allows them to do so. Art. 1790. Unless there is a stipulation to the
contrary, the partners shall contribute equal
2. **Consequences for Violating the Rule:** If the shares to the capital of the partnership. (n)
industrial partner does engage in outside business
without permission: **Explanation in Simple Terms:**
- The capitalist partners (those who contribute
money or property) have the right to exclude the This article explains how the partners in a
industrial partner from the partnership. partnership should contribute to the capital (the
- Alternatively, the capitalist partners can claim money or assets used to start and run the business).
any profits the industrial partner made from the
outside business. - **Equal Contributions:** By default, unless the
- The capitalist partners can also seek damages partnership agreement says otherwise, all partners
for any harm caused by the industrial partner’s are expected to contribute equal amounts to the
unauthorized business activities. partnership's capital.
**Example:** - **Stipulation to the Contrary:** If the partners

have a different arrangement in mind (for example,
Suppose Emma is an industrial partner in a one partner contributes more money than the
partnership that operates a tech startup, others), this must be clearly stated in the
contributing her programming skills. The partnership agreement.
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failing, all partners, except industrial partners (who

**Example:** contribute labor or skills instead of money), are
expected to contribute additional capital to try to
Let's say Anna, Ben, and Carla decide to form a save the business.
partnership to open a café. According to this
article: 3. **Refusal to Contribute:** If a partner refuses
to contribute more money when needed, they are
- **Equal Contributions:** If they don’t specify required to sell their share of the partnership to the
how much each should contribute in their other partners who are willing to contribute.
agreement, they are all expected to contribute the
same amount. So, if the total capital needed is **Example:**
$30,000, each partner would contribute $10,000.
Imagine Julia, Mark, and Leo are partners in a
- **Stipulation to the Contrary:** However, if they boutique, and the business is about to fail due to a
agree that Anna will contribute $15,000, Ben sudden downturn in the market. They need to put
$10,000, and Carla $5,000, this must be stated in in more money to keep the boutique running:
their partnership agreement.
- **No Agreement to the Contrary:** Their
**Summary:** partnership agreement doesn’t address this
situation, so the rule in this article applies.
By default, partners are expected to contribute
equally to the partnership's capital unless the - **Additional Contribution:** Julia and Mark
agreement specifies a different arrangement. agree to contribute more money to save the
business, but Leo refuses to add more capital.
Art. 1791. If there is no agreement to the
contrary, in case of an imminent loss of the - **Refusal to Contribute:** Because Leo refuses,
business of the partnership, any partner who he must sell his share of the partnership to Julia
refuses to contribute an additional share to the and Mark, who are willing to put in the additional
capital, except an industrial partner, to save the capital.
venture, shall he obliged to sell his interest to
the other partners. (n) **Summary:**
**Explanation in Simple Terms:** If the partnership is facing imminent loss and more
money is needed to save it, partners (except
This article addresses what happens if the industrial partners) must contribute. If a partner
partnership is facing a serious and imminent loss, refuses, they must sell their share to the other
and more capital (money or assets) is needed to partners who are willing to contribute.
save the business.
Art. 1792. If a partner authorized to manage
1. **No Agreement to the Contrary:** If the collects a demandable sum which was owed to
partnership agreement doesn’t say anything him in his own name, from a person who owed
different, this rule applies. the partnership another sum also demandable,
the sum thus collected shall be applied to the
2. **Additional Contribution to Save the two credits in proportion to their amounts, even
Business:** When the business is in danger of though he may have given a receipt for his own
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credit only; but should he have given it for the - **Proportional Application:** If John collects
account of the partnership credit, the amount $900 from Peter and gives a receipt for his
shall be fully applied to the latter. The personal debt, that $900 should be divided between
provisions of this article are understood to be the two debts in proportion to the amounts owed.
without prejudice to the right granted to the Since Peter owes $1,000 to John personally and
other debtor by Article 1252, but only if the $2,000 to the partnership, the money might be split
personal credit of the partner should be more so that $300 goes toward John's debt and $600
onerous to him. (1684) toward the partnership's debt.
**Explanation in Simple Terms:** - **Full Application to Partnership Debt:** If John

instead gives a receipt stating that the payment is
This article deals with the situation where a for the partnership's debt, then all $900 would go
partner, who has the authority to manage, collects toward reducing the $2,000 that Peter owes the
money from someone who owes both the partner partnership.
personally and the partnership. It explains how the
collected money should be divided between the - **Rights of the Debtor:** If paying off John's
partner's personal debt and the debt owed to the personal debt is more burdensome for Peter, he can
partnership. insist that the payment be applied in a way that’s
less difficult for him, according to Article 1252.
1. **Proportional Application of Payments:** If a
managing partner collects money from someone **Summary:**
who owes both the partnership and the partner
personally, that money should be divided When a partner authorized to manage collects
proportionally between the two debts, even if the money owed to both them and the partnership, the
partner only gives a receipt for their personal debt. payment should be divided proportionally between
the two debts unless specified otherwise. The
2. **Full Application to Partnership Debt:** If the debtor’s rights are protected if paying off the
partner gives a receipt indicating that the payment partner's personal debt is more difficult for them.
is for the partnership’s debt, then all of the money
collected goes toward paying off the partnership’s Art. 1793. A partner who has received, in whole
debt. or in part, his share of a partnership credit,
when the other partners have not collected
3. **Rights of the Debtor:** The person who theirs, shall be obliged, if the debtor should
made the payment has rights under Article 1252, thereafter become insolvent, to bring to the
which generally deals with applying payments to partnership capital what he received even
multiple debts. However, these rights only apply if though he may have given receipt for his share
paying off the partner’s personal debt is more only. (1685a)
burdensome (onerous) for the debtor.
**Example:**
This article discusses what happens when one
Suppose John is a partner authorized to manage a partner receives their share of money owed to the
business. Peter owes John $1,000 personally and partnership (a partnership credit), but the other
also owes the partnership $2,000. partners have not yet collected their shares. If the
debtor later becomes insolvent (unable to pay what
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they owe), the partner who already received their However, the courts may equitably lessen this
share must return it to the partnership’s capital. responsibility if through the partner's
extraordinary efforts in other activities of the
1. **Receiving a Share of Partnership Credit:** If partnership, unusual profits have been realized.
a partner receives their portion of a debt owed to (1686a)
the partnership, but the other partners have not yet
received theirs, the partner who got their money is **Explanation in Simple Terms:**
still responsible to the partnership.
This article explains the responsibility of a partner
2. **Debtor Becomes Insolvent:** If the debtor if they cause damage to the partnership. It also
(the person who owed money to the partnership) discusses whether the partner can offset the
becomes unable to pay the remaining amount, the damage with the profits they have earned for the
partner who already received their share must partnership through their work.
return the amount they collected to the partnership.
This helps ensure that all partners share equally in 1. **Responsibility for Damages:** If a partner
the loss if the debtor cannot pay the full debt. causes harm or damage to the partnership because
of their actions (fault), they are responsible for
**Example:** compensating the partnership for those damages.
Imagine Mia, Noah, and Liam are partners in a 2. **No Compensation with Profits:** The partner
business, and a customer owes the partnership cannot simply balance out the damages by saying
$9,000. Mia receives her $3,000 share of the debt, that they also earned profits for the partnership
but Noah and Liam haven’t received their $3,000 through their work. In other words, they can’t
shares yet. offset the harm they caused with the good things
they’ve done for the partnership.
- **Debtor Becomes Insolvent:** If the customer
later goes bankrupt and can’t pay the remaining 3. **Equitable Reduction by the Court:**
$6,000, Mia must return her $3,000 to the However, the court has the authority to reduce the
partnership. This way, all three partners share partner's responsibility if they find that the partner
equally in the loss, rather than Mia keeping her full made extraordinary efforts in other areas of the
share while Noah and Liam get nothing. partnership that resulted in unusually high profits.
This means the court may decide to lessen the
**Summary:** damages the partner has to pay if their other
actions have significantly benefited the
If one partner receives their share of a debt owed partnership.
to the partnership but the debtor later becomes
insolvent, that partner must return the money to the **Example:**
partnership. This ensures that all partners share
equally in any losses. Let’s say Jake and Emily are partners in a
construction business. Jake makes a serious
Art. 1794. Every partner is responsible to the mistake on a project, causing the partnership to
partnership for damages suffered by it through lose $50,000.
his fault, and he cannot compensate them with
the profits and benefits which he may have
earned for the partnership by his industry.
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- **Responsibility for Damages:** Jake is contributed and the purpose for which they were
responsible for compensating the partnership for contributed.
this $50,000 loss.
1. **Specific and Determinate Things
- **No Compensation with Profits:** Jake can’t (Non-Fungible):** If a partner contributes specific,
argue that the partnership should overlook the unique items to the partnership that are not meant
$50,000 loss just because he previously brought in to be used up or sold (e.g., a piece of equipment or
a $100,000 profit from another project. a rare book), the risk of loss or damage to those
items is the responsibility of the partner who owns
- **Equitable Reduction by the Court:** If Jake them. This applies when the partnership is only
made extraordinary efforts on another project that meant to use the items or benefit from the income
resulted in a huge, unexpected profit, the court they generate (like renting out the equipment).
might decide to reduce the amount Jake owes to
the partnership for the $50,000 loss. 2. **Fungible Things or Those Likely to
Deteriorate:** If a partner contributes items that
**Summary:** are interchangeable, easily consumed, or likely to
deteriorate over time (e.g., grain, oil, or perishable
A partner is responsible for damages caused to the goods), or if the items were contributed to be sold,
partnership by their actions and cannot offset these the risk of loss or damage falls on the partnership.
damages with the profits they earned for the
partnership. However, a court may reduce the 3. **Items Listed in Inventory:** If the partnership
partner's liability if their extraordinary efforts agreement doesn’t specify otherwise, and the items
elsewhere led to significant gains for the contributed are listed and appraised in an
partnership. inventory, the risk is also borne by the partnership.
However, if something happens to these items, the
Art. 1795. The risk of specific and determinate claim for loss is limited to the appraised value
things, which are not fungible, contributed to noted in the inventory.
the partnership so that only their use and fruits
may be for the common benefit, shall be borne **Example:**
by the partner who owns them. If the things
contribute are fungible, or cannot be kept Consider a partnership where Alice and Bob
without deteriorating, or if they were contribute different items:
contributed to be sold, the risk shall be borne
by the partnership. In the absence of - **Non-Fungible Contribution:** Alice
stipulation, the risk of the things brought and contributes a vintage car to the partnership, with
appraised in the inventory, shall also be borne the agreement that the partnership will use it for
by the partnership, and in such case the claim special events. If something happens to the car
shall be limited to the value at which they were (like it gets damaged in storage), Alice bears the
appraised. (1687) risk since the car is specific and non-fungible, and
its use was for the partnership's benefit.
- **Fungible Contribution:** Bob contributes a
This article outlines who is responsible for the risk large amount of wine intended to be sold. If the
of loss or damage to items contributed by a partner wine spoils or is lost, the partnership bears the risk
to the partnership. It depends on the type of items
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because the wine is fungible and was contributed 2. **Obligations Contracted in Good Faith:** If a
to be sold. partner makes commitments or takes on
obligations in good faith (with honest intentions)
- **Items in Inventory:** If Bob’s wine while managing or working for the partnership, the
contribution is listed in an inventory and appraised partnership must fulfill these obligations. This
at $10,000, and the wine is lost, the partnership's means that if the partner agreed to something while
liability is limited to the $10,000 appraised value. acting in the best interests of the partnership, the
partnership is responsible for upholding that
**Summary:** agreement.
The responsibility for the risk of loss or damage to 3. **Risks from Management:** If a partner faces
items contributed to the partnership depends on the risks or losses as a result of managing the
type of items and their intended use. If the items partnership, the partnership is responsible for
are unique and only for use by the partnership, the covering those risks. This ensures that partners are
contributing partner bears the risk. If the items are protected when they act on behalf of the
consumable or meant to be sold, the partnership partnership.
bears the risk. Items listed in an inventory are also
covered by the partnership, limited to their **Example:**
appraised value.
Imagine Rachel and Sam are partners in a
consulting business:
Art. 1796. The partnership shall be responsible
to every partner for the amounts he may have - **Reimbursement of Expenses:** Rachel travels
disbursed on behalf of the partnership and for for a client meeting and spends $1,000 on travel
the corresponding interest, from the time the expenses. The partnership must reimburse her for
expense are made; it shall also answer to each the $1,000 and also pay interest on that amount
partner for the obligations he may have starting from the day Rachel paid for the travel.
contracted in good faith in the interest of the
partnership business, and for risks in - **Obligations Contracted in Good Faith:**
consequence of its management. (1688a) While negotiating a deal, Sam agrees to a discount
with a client to secure a large contract, believing
**Explanation in Simple Terms:** it’s in the best interest of the partnership. Even if
the discount turns out to be less profitable than
This article explains the partnership's expected, the partnership is responsible for
responsibility to reimburse partners for expenses, honoring the discount.
obligations, and risks they take on for the benefit
of the partnership. - **Risks from Management:** Sam takes a
calculated risk by investing partnership funds in a
1. **Reimbursement of Expenses:** If a partner new project. If the project doesn't go as planned
spends money on behalf of the partnership, the and results in a loss, the partnership, not Sam
partnership is responsible for paying that partner personally, bears the financial responsibility.
back. This includes not only the amount spent but
also interest on that amount, starting from when **Summary:**
the expense was made.
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The partnership must reimburse partners for any - **Industrial Partner Exception:** An industrial
expenses made on its behalf, including interest, partner (one who contributes labor or skills but no
and fulfill obligations partners take on in good money) is not responsible for covering losses.
faith. Additionally, the partnership is responsible However, they should receive a fair share of the
for any risks or losses that occur due to the profits, considering their contribution of work or
management activities of its partners. services.
- **Industrial Partner with Capital
Contribution:** If an industrial partner also
Art. 1797. The losses and profits shall be contributes capital (money or property), they
distributed in conformity with the agreement. If should receive a share of the profits based on both
only the share of each partner in the profits has their labor and their capital.
been agreed upon, the share of each in the losses
shall be in the same proportion. In the absence **Example:**
of stipulation, the share of each partner in the
profits and losses shall be in proportion to what Imagine Alice, Bob, and Carol form a partnership.
he may have contributed, but the industrial Alice contributes $40,000, Bob contributes
partner shall not be liable for the losses. As for $60,000, and Carol contributes her skills and labor
the profits, the industrial partner shall receive (as an industrial partner):
such share as may be just and equitable under
the circumstances. If besides his services he has - **With Agreement:** If they agree that profits
contributed capital, he shall also receive a share will be split 50% to Alice, 30% to Bob, and 20%
in the profits in proportion to his capital. to Carol, and only this is specified, then losses will
(1689a) also be split 50%, 30%, and 20% respectively.
**Explanation in Simple Terms:** - **No Agreement:**

- **Alice and Bob:** Since Alice and Bob
This article explains how profits and losses are to contributed money, profits and losses would be
be shared among partners in a partnership. It split according to their contributions (40% for
outlines what should happen based on the Alice, 60% for Bob).
agreement between partners and what to do if there - **Carol (Industrial Partner):** Carol won’t
is no specific agreement. have to share in the losses because she didn’t
contribute capital. However, she will receive a fair
1. **Distribution According to Agreement:** share of the profits based on her work, which could
Profits and losses should be distributed according be agreed upon later or decided based on what’s
to what the partners agreed upon. If they only fair under the circumstances.
agreed on how to split the profits, then losses
should be shared in the same way. - **Carol Contributes Capital:** If Carol also
contributed $20,000 on top of her labor, her share
2. **No Agreement (Stipulation):** If there is no in the profits would consider both her capital and
agreement about how to share profits and losses: her work.
- **Contribution-Based Sharing:** The profits
and losses should be divided based on how much **Summary:**
each partner contributed to the partnership (e.g.,
money, property). Profits and losses are shared according to the
partnership agreement. If only profit-sharing is
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agreed upon, losses follow the same proportion.

Without an agreement, profits and losses are 3. **No Partner as the Decider:** The
shared based on contributions, except industrial responsibility of deciding how to divide profits and
partners, who are exempt from losses but get a fair losses cannot be given to one of the partners. It
share of profits. If an industrial partner also must be someone neutral, not involved in the
contributes capital, they share profits based on partnership.
both their work and their capital.
**Example:**
Art. 1798. If the partners have agreed to intrust
to a third person the designation of the share of Let’s say Mike, Sarah, and Tom are partners in a
each one in the profits and losses, such business. They can’t agree on how to split the
designation may be impugned only when it is profits and losses, so they decide to let an
manifestly inequitable. In no case may a independent accountant, Jane, make the decision.
partner who has begun to execute the decision
of the third person, or who has not impugned - **Manifestly Inequitable:** Jane decides to give
the same within a period of three months from Mike 90% of the profits and Sarah and Tom only
the time he had knowledge thereof, complain of 5% each, despite them all contributing equally.
such decision. The designation of losses and Sarah and Tom might challenge this as manifestly
profits cannot be intrusted to one of the inequitable because it’s clearly unfair.
partners. (1690)
- **Limits on Complaints:**
**Explanation in Simple Terms:** - If Tom starts taking his 5% share without
complaining, he can’t later challenge Jane’s
This article addresses situations where the partners decision.
in a partnership decide to let a third person - If Sarah doesn’t object within three months
determine how profits and losses should be divided after finding out about the 5% share, she loses the
among them. It also sets limits on when partners right to challenge the decision.
can challenge that decision and clarifies that one of
the partners cannot be the person making this - **No Partner as Decider:** Mike, Sarah, and
determination. Tom cannot make one of themselves the person
who decides how to split profits and losses. It must
1. **Third-Party Designation:** If the partners be someone who is not a partner.
agree to let an outsider (a third person) decide how
to split profits and losses, this decision can only be **Summary:**
challenged if it is obviously unfair or unjust
(manifestly inequitable). If partners allow a third person to decide how to
divide profits and losses, the decision can only be
2. **Limits on Complaints:** A partner cannot challenged if it's obviously unfair. Partners cannot
complain about the third person's decision if they: object if they start following the decision or wait
- **Begin to Act on It:** If they start to follow more than three months to complain. The
the decision without objecting, they lose the right responsibility of deciding on profit and loss
to challenge it. distribution cannot be given to one of the partners
- **Delay in Complaining:** If they wait more themselves.
than three months after learning about the decision
to object, they can no longer challenge it.
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Art. 1799. A stipulation which excludes one or exclude one or more partners from sharing in
more partners from any share in the profits or profits or losses is legally invalid.
losses is void. (1691)
Art. 1800. The partner who has been appointed
This article states a fundamental rule about manager in the articles of partnership may
partnerships: every partner must share in both the execute all acts of administration despite the
profits and losses of the partnership. Any opposition of his partners, unless he should act
agreement or condition that tries to exclude one or in bad faith; and his power is irrevocable
more partners from receiving profits or from being without just or lawful cause. The vote of the
responsible for losses is not legally valid. partners representing the controlling interest
shall be necessary for such revocation of power.
1. **Inclusion in Profits and Losses:** All A power granted after the partnership has been
partners must be included in both the profits (the constituted may be revoked at any time. (1692a)
money the partnership makes) and the losses (the
money the partnership loses). This ensures that
each partner has a stake in the success or failure of **Explanation in Simple Terms:**
the partnership.
This article discusses the authority of a partner
2. **Void Stipulation:** If the partners make an who has been designated as the manager of the
agreement (a stipulation) that says one or more partnership, as well as the conditions under which
partners won’t get any share of the profits or won’t their management authority can be revoked.
have to deal with any losses, this agreement is
considered void. This means the law does not 1. **Authority to Manage:** A partner who is
recognize it, and it has no legal effect. appointed as the manager (as stated in the
partnership agreement) can carry out all
**Example:** administrative tasks and decisions related to the
partnership. This authority is valid even if other
Imagine three friends, Jake, Emma, and Olivia, partners disagree, as long as the manager is acting
start a business together. They make an agreement in good faith (honestly and with proper intentions).
that Olivia will work in the business but won’t get
any share of the profits. Alternatively, they agree 2. **Irrevocability of Authority:** Once a partner
that Jake will share in the profits but won’t have to is appointed as the manager, their authority cannot
cover any losses if the business fails. be taken away without a just or lawful reason. To
revoke the manager’s power, a vote from partners
- **Void Agreement:** Both of these agreements who represent a controlling interest (typically a
would be void, meaning they are not legally majority or specified portion of ownership) is
enforceable. Olivia must be allowed to share in the required.
profits if she’s a partner, and Jake cannot be
excluded from sharing in the losses. 3. **Revocation of Post-Formation Power:** If
the power is granted after the partnership has
**Summary:** already started, it can be revoked at any time,
regardless of whether there is a specific cause or
Every partner in a partnership must be included in not.
both profits and losses. Any agreement that tries to
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**Example:**
Imagine Anna, Bob, and Carla form a partnership
and appoint Anna as the manager in their This article deals with situations where multiple
partnership agreement. partners are given management responsibilities but
there are no clear rules about their specific duties
- **Authority to Manage:** Anna can make or requirements for unanimous consent.
decisions about the business operations, even if
Bob and Carla disagree, as long as she is acting in 1. **Management by Multiple Partners:** When
good faith. two or more partners are given management
authority without clear division of their roles or
- **Revocability of Authority:** If Bob and Carla without a rule requiring all partners to agree on
want to remove Anna from the manager position, actions, each partner can individually carry out
they need to have a controlling interest vote (based administrative tasks.
on their ownership or a specified agreement). They
can't just remove her without a valid reason. 2. **Decision-Making:** If there are
disagreements between partners about
- **Post-Formation Power:** If Anna's management decisions:
management power is granted after the partnership - **Majority Rule:** The decision of the
has started, Bob and Carla can revoke her authority majority of the partners will be the one that
at any time if they decide to do so. prevails.
- **Tie Situation:** If there is a tie (an equal
**Summary:** number of partners for and against a decision),
then the decision will be made based on the votes
A partner appointed as manager can carry out all of the partners who have the controlling interest
administrative actions, even if other partners (those with the majority ownership or specified
oppose, provided they act in good faith. This power).
authority is generally irrevocable without a valid
reason and requires a controlling interest vote to **Example:**
remove. Powers granted after the partnership starts
can be revoked at any time. Suppose Mark, Jane, and Luis are partners in a
business, and they all have management
responsibilities but there are no specific rules
Art. 1801. If two or more partners have been about their duties or required consensus for
intrusted with the management of the decisions.
partnership without specification of their
respective duties, or without a stipulation that - **Individual Actions:** Mark, Jane, and Luis
one of them shall not act without the consent of can each make decisions about the business on
all the others, each one may separately execute their own.
all acts of administration, but if any of them
should oppose the acts of the others, the - **Disagreement:** If Mark wants to buy new
decision of the majority shall prevail. In case of equipment, but Jane and Luis oppose the purchase,
a tie, the matter shall be decided by the Mark’s decision won’t go through unless Jane and
partners owning the controlling interest. Luis agree or the majority decides otherwise.
(1693a)
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- **Tie Scenario:** If Mark and Jane support a

new marketing campaign and Luis opposes it, the Imagine that Alex, Sam, and Taylor are managing
decision will be made by the partners who hold the partners in a business, and their partnership
controlling interest if the votes are tied. agreement requires that all three must agree on any
major decisions.
**Summary:**
- **Unanimous Decision:** If Alex wants to sign
When multiple partners share management a new lease for office space, Sam and Taylor must
responsibilities without specific duties or consent also agree to the decision for it to be valid.
requirements, each can act individually. If
disagreements arise, the majority decision prevails. - **Absence or Disability:** If Sam is out of town
In the case of a tie, the decision is made by and unable to respond, Alex and Taylor cannot
partners with controlling interest. make the decision to sign the lease on their own,
unless there is an urgent situation that poses a
Art. 1802. In case it should have been stipulated serious threat to the partnership’s well-being.
that none of the managing partners shall act
without the consent of the others, the **Summary:**
concurrence of all shall be necessary for the
validity of the acts, and the absence or disability If the partnership agreement requires unanimous
of any one of them cannot be alleged, unless consent from all managing partners for any action,
there is imminent danger of grave or all must agree for the action to be valid. The
irreparable injury to the partnership. (1694) absence or disability of a partner cannot be used to
bypass this requirement, except in cases of urgent
**Explanation in Simple Terms:** situations threatening serious harm to the
partnership.
This article addresses situations where the
partnership agreement specifies that all managing Art. 1803. When the manner of management
partners must agree before any management action has not been agreed upon, the following rules
is taken. shall be observed: (1) All the partners shall be
considered agents and whatever any one of
1. **Unanimous Consent Required:** If the them may do alone shall bind the partnership,
partnership agreement states that no managing without prejudice to the provisions of Article
partner can take action without the consent of all 1801. (2) None of the partners may, without the
other managing partners, then all of them must consent of the others, make any important
agree for any management decision to be valid. alteration in the immovable property of the
partnership, even if it may be useful to the
2. **Absence or Disability:** If one of the partnership. But if the refusal of consent by the
managing partners is absent or unable to other partners is manifestly prejudicial to the
participate due to disability, this cannot be used as interest of the partnership, the court's
an excuse to proceed with actions without their intervention may be sought. (1695a)
consent. The only exception is if there is a serious
or immediate risk of significant harm to the **Explanation in Simple Terms:**
partnership that requires urgent action.
**Example:**
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This article outlines how management decisions **Summary:**

should be handled when there is no specific
agreement about the manner of management. When no specific management agreement exists,
each partner can act as an agent of the partnership,
1. **General Authority of Partners:** binding it with their actions. However, significant
- **Agents of the Partnership:** If the partners changes to immovable property require consent
have not specified how management should be from all partners. If consent is unfairly withheld
handled, each partner is considered an agent of the and harms the partnership, court intervention can
partnership. This means that any partner can make be sought.
decisions and bind the partnership with their
actions. This is in line with Article 1801, which Art. 1804. Every partner may associate another
discusses decision-making when multiple partners person with him in his share, but the associate
are involved. shall not be admitted into the partnership
without the consent of all the other partners,
2. **Changes to Immovable Property:** even if the partner having an associate should
- **Consent Required for Major Changes:** be a manager. (1696)
None of the partners can make significant changes
to the partnership's immovable property (e.g., real **Explanation in Simple Terms:**
estate) without the consent of the other partners.
This rule applies even if the changes might benefit This article addresses the situation where a partner
the partnership. wants to bring another person into their share of
- **Court Intervention for Unfair Refusal:** If the partnership.
the refusal of consent by other partners is clearly
harmful to the partnership’s interests, the partner 1. **Associate in a Share:**
wanting to make the change can seek intervention - **Adding an Associate:** A partner can
from the court. associate another person with them in their share
of the partnership. This means that the partner can
**Example:** have someone else share in the benefits and
responsibilities of their individual stake.
Let’s say Lisa, Jack, and Maria are partners in a
retail business: 2. **Consent for Admission:**
- **Requirement for Admission:** Even if a
- **General Authority:** If Lisa decides to sign a partner has an associate, that associate cannot
new supplier contract alone, her decision is become a formal member of the partnership or
binding on the partnership, as all partners are participate in the management of the partnership
considered agents. without the consent of all the other partners.
- **Changes to Property:** If Lisa wants to **Example:**

renovate the store’s building to improve its
appearance, she must get Jack’s and Maria’s Imagine John, Emma, and Lucas are partners in a
consent before proceeding. If Jack and Maria business:
refuse consent, and this refusal is clearly harming
the business (e.g., the store’s condition is affecting - **Associate in Share:** John wants to bring his
sales), Lisa can ask the court to intervene. friend Alex into his share of the partnership,
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meaning Alex will share in John’s portion of

profits and responsibilities. - **Location of Books:** The financial records of
the bakery must be kept at the bakery's main
- **Consent Needed:** Even though John and location, unless Sarah, Tom, and Mia agree to store
Alex are working together on John’s share, Alex them somewhere else.
cannot officially become a partner or participate in
partnership decisions unless Emma and Lucas - **Access Rights:** Sarah can check the financial
agree to it. records whenever she needs to, and she can also
make copies if necessary.
**Summary:**
**Summary:**
A partner can involve another person in their share
of the partnership but must get the consent of all Partnership books must be kept at the principal
other partners before that person can be admitted place of business unless otherwise agreed. Every
into the partnership or take part in management. partner has the right to access, inspect, and copy
these books at reasonable times.
Art. 1805. The partnership books shall be kept,
subject to any agreement between the partners, Art. 1806. Partners shall render on demand
at the principal place of business of the true and full information of all things affecting
partnership, and every partner shall at any the partnership to any partner or the legal
reasonable hour have access to and may inspect representative of any deceased partner or of
and copy any of them. (n) any partner under legal disability. (n)
**Explanation in Simple Terms:** **Explanation in Simple Terms:**
This article outlines the requirements for This article specifies the obligation of partners to
maintaining and accessing the partnership’s provide information about the partnership to
financial records and books. certain individuals.
1. **Location of Books:** 1. **Obligation to Provide Information:**

- **Principal Place of Business:** The - **True and Full Information:** Partners must
partnership’s books (financial records) must be provide accurate and complete information about
kept at the principal place of business of the anything that affects the partnership when
partnership, unless the partners have agreed to a requested.
different arrangement.
2. **Who Can Request Information:**
2. **Access and Inspection:** - **Any Partner:** Any active partner has the
- **Partner Rights:** Every partner has the right right to request this information.
to access the books at any reasonable time. They - **Legal Representatives:** This includes legal
can inspect and make copies of the records. representatives of a deceased partner or a partner
who is legally incapacitated (under legal
**Example:** disability).
Imagine Sarah, Tom, and Mia run a bakery **Example:**

together:
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Let’s say Lisa, Mark, and Rachel are partners in a during its formation, operation, or liquidation) or
consulting firm: from using partnership property, they must hold
these profits as a trustee for the partnership. This
- **Information Obligation:** If Lisa asks for means they must manage these profits on behalf of
details about recent financial transactions or the partnership and not keep them for themselves.
partnership decisions, Mark and Rachel must
provide her with truthful and complete **Example:**
information.
Imagine Jack, Nina, and Claire are partners in a
- **Legal Representatives:** If Rachel passes tech startup:
away, her legal representative can request the same
level of detailed information about the partnership. - **Accounting for Benefits:** If Jack makes a
side deal using the startup’s technology and earns
**Summary:** extra money, he must report this profit to Nina and
Claire.
Partners must provide accurate and comprehensive
information about the partnership upon request by - **Trustee Role:** Since Jack did not have
any partner or the legal representative of a permission from the other partners for this deal, he
deceased or legally disabled partner. must manage this profit as if it belongs to the
partnership and not keep it for himself.
Art. 1807. Every partner must account to the
partnership for any benefit, and hold as trustee **Summary:**
for it any profits derived by him without the
consent of the other partners from any Partners must account for and return any profits
transaction connected with the formation, they earn from partnership-related activities or use
conduct, or liquidation of the partnership or of partnership property without the other partners'
from any use by him of its property. (n) consent. They must hold these profits in trust for
the partnership.
Art. 1808. The capitalist partners cannot engage
This article sets out the rules regarding how for their own account in any operation which is
partners should handle benefits or profits they of the kind of business in which the partnership
receive from partnership-related activities. is engaged, unless there is a stipulation to the
contrary. Any capitalist partner violating this
1. **Accounting for Benefits:** prohibition shall bring to the common funds
- **Obligation to Account:** Every partner must any profits accruing to him from his
account to the partnership for any benefit or profit transactions, and shall personally bear all the
they receive. This means they must report and losses. (n)
possibly return any money or advantage they gain
from activities related to the partnership. **Explanation in Simple Terms:**
2. **Trustee Role:** This article addresses the restrictions on capitalist

- **Holding as Trustee:** If a partner earns partners (those who contribute capital but do not
profits without the consent of the other partners manage the business) regarding engaging in
from activities related to the partnership (such as similar business operations on their own.
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co-partners; (2) If the right exists under the

1. **Prohibition on Competing Operations:** terms of any agreement; (3) As provided by
- **Restriction:** Capitalist partners cannot article 1807; (4) Whenever other circumstances
engage in any business activities similar to those of render it just and reasonable. (n)
the partnership for their own personal gain unless
the partnership agreement specifically allows them **Explanation in Simple Terms:**
to do so.
This article outlines when a partner has the right to
2. **Consequences of Violation:** request a formal accounting of the partnership’s
- **Profits to Partnership:** If a capitalist affairs.
partner engages in such operations without
permission, they must give any profits from these 1. **Right to Formal Accounting:**
activities to the partnership’s common funds. - **Wrongful Exclusion:** A partner can request
- **Bearing Losses:** They must also personally a formal accounting if they are wrongfully
bear any losses incurred from these personal excluded from participating in the partnership
business activities. business or from accessing its property.
- **Agreement Terms:** If the partnership
**Example:** agreement specifies a right to an accounting, a
partner can request it based on those terms.
Suppose Alex, Bella, and Carlos are partners in a - **Article 1807:** In accordance with Article
coffee shop: 1807, which deals with partners accounting for
benefits and holding profits as trustees, a partner
- **Prohibition:** If Alex is a capitalist partner can also request an accounting if they have reason
and starts a separate coffee shop on the side, this to believe that other partners have not fulfilled
would be prohibited unless the partnership their obligations.
agreement allows it. - **Just and Reasonable Circumstances:** A
partner can request an accounting if there are other
- **Violation Consequences:** If Alex’s separate circumstances that make it fair and reasonable to
coffee shop makes a profit, Alex must give these do so.
profits to the coffee shop partnership. If Alex’s
separate shop incurs losses, Alex will have to **Example:**
cover these losses personally, not the partnership.
Imagine Daniel, Ava, and Liam are partners in a
**Summary:** consulting firm:
Capitalist partners cannot engage in similar - **Wrongful Exclusion:** If Daniel is excluded

business operations for themselves without explicit from seeing the firm’s financial records by Ava
permission. If they do, they must contribute any and Liam, he has the right to request a formal
profits to the partnership and bear all losses accounting.
personally. - **Agreement Terms:** If the partnership
agreement includes a clause that gives partners the
Art. 1809. Any partner shall have the right to a right to periodic financial reports, Daniel can
formal account as to partnership affairs: (1) If request an accounting based on that clause.
he is wrongfully excluded from the partnership - **Article 1807 Reference:** If Daniel suspects
business or possession of its property by his that Ava and Liam have made personal profits
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from partnership activities without reporting them,

he can ask for an accounting as provided by
Article 1807. **Example**: If you are in a business
- **Just and Reasonable:** If Daniel has any other partnership and the company owns vehicles,
valid reason that makes requesting an accounting you can use them for business purposes, but
fair, such as concerns about financial you can't take them for personal use or sell
mismanagement, he can also request one. them without the consent of the partnership.
2. **Interest in the Partnership:**

**Summary:**
- This refers to the partner’s share in the
A partner has the right to request a formal profits and losses of the business. A partner’s
accounting of partnership affairs if they are interest is usually determined by the
wrongfully excluded, if the partnership agreement partnership agreement or their contribution to
provides for it, as specified by Article 1807, or if the partnership.
other just and reasonable circumstances arise.
**Example**: If you contributed 30% of the
SECTION 2. – Property Rights of a capital to the partnership, you might be
Partner entitled to 30% of the profits. Likewise, you’ll
bear 30% of the losses.
Art. 1810. The property rights of a
partner are:
(1) His rights in specific partnership 3. **Right to Participate in Management:**

property;
- Each partner has the right to have a say in
(2) His interest in the partnership; and the decision-making process and to
participate in managing the business. The
(3) His right to participate in the level of involvement depends on the
management. (n) partnership agreement.
### Explanation of Article 1810 – Property

Rights of a Partner:
**Example**: As a partner, you may be
This article outlines the key rights a partner allowed to vote on important business
has within a partnership. These rights are decisions such as expanding the business,
important for understanding what a partner hiring key personnel, or deciding on new
can control and benefit from in a business investments.
relationship. Here’s a breakdown:
### Summary:
1. **Rights in Specific Partnership Property:**
Partners in a business have rights over
- A partner has rights to use the assets partnership property, a share in profits or
owned by the partnership. However, these losses, and the ability to participate in
assets are owned by the partnership itself, not managing the business. However, no
by any individual partner. For example, if the individual partner owns specific assets of the
partnership owns a building, no single partner business, but they can use them as part of the
can sell or mortgage it independently. partnership operations.
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This article outlines the concept of

co-ownership in a partnership, emphasizing
Art. 1811. A partner is co-owner with his that specific partnership property belongs to
partners of specific partnership the partnership as a whole, not to individual
property. partners. Here’s a breakdown of each point:
The incidents of this co-ownership are

such that:
1. **Equal Right to Possess Partnership
(1) A partner, subject to the provisions Property:**
of this Title and to any agreement
between the partners, has an equal - Each partner has the right to use and
right with his partners to possess possess the partnership’s property, but only
specific partnership property for for partnership-related activities. If a partner
partnership purposes; but he has no wants to use the property for personal
right to possess such property for any reasons, they must get the consent of the other
other purpose without the consent of partners.
his partners;
(2) A partner’s right in specific

partnership property is not assignable **Example**: If the partnership owns an
except in connection with the office building, all partners can use the
assignment of rights of all the partners building for business purposes. However, a
in the same property; partner can't use it for personal events, like a
family reunion, without the other partners'
(3) A partner’s right in specific permission.
partnership property is not subject to
attachment or execution, except on a
claim against the partnership. When
2. **Non-Assignable Right in Specific
partnership property is attached for a
Partnership Property:**
partnership debt the partners, or any of
them, or the representatives of a
- A partner cannot transfer or assign their
deceased partner, cannot claim any
rights in specific partnership property to
right under the homestead or
someone else unless all the partners agree to
exemption laws;
transfer their rights in that property. This
means you can’t just sell your share of a
(4) A partner’s right in specific
specific property, like a company car, without
partnership property is not subject to
the other partners' approval.
legal support under Article 291. (n)
**Example**: If a partnership owns a piece

### Explanation of Article 1811 –
of land, one partner cannot sell or assign their
Co-Ownership of Partnership Property:
interest in that land to someone else without
the approval of all the partners.
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3. **Exemption from Personal Claims:** Art. 1812. A partner’s interest in the

partnership is his share of the profits
- A partner’s rights in specific partnership and surplus. (n)
property cannot be taken or seized to satisfy a
personal debt. The property can only be ### Explanation of Article 1812 – A Partner’s
claimed if it’s related to a debt of the Interest in the Partnership:
partnership.
This article defines what is meant by a

**Example**: If a partner has personal **partner’s interest** in a partnership. It
debts, creditors cannot seize partnership refers to the partner's share of the profits and
property, like office equipment, to settle the surplus generated by the partnership, which
partner’s personal debts. However, if the are the financial benefits they are entitled to
partnership itself owes a debt, that property based on their involvement in the partnership.
can be used to pay off that debt.
1. **Share of the Profits:**

4. **Not Subject to Legal Support
Obligations:** - A partner’s interest includes their share of
the profits that the partnership makes. This
- A partner’s right in specific partnership share is usually determined by the partnership
property cannot be used to fulfill obligations agreement or based on the partner’s
for legal support (like alimony or child contribution to the partnership.
support) under Article 291 of the Civil Code of
the Philippines.
**Example**: If a partnership makes a profit

of ₱1,000,000 and the partnership agreement
**Example**: If a partner is required to states that a partner has a 30% share, that
provide financial support to a family member, partner will receive ₱300,000 as their share of
they cannot use specific partnership property the profits.
to meet that obligation.
2. **Share of the Surplus:**

### Summary:
- Surplus refers to what is left over after all
Partnership property is co-owned by all the partnership’s debts and obligations have
partners for partnership purposes. Partners been paid. A partner’s interest includes their
cannot use or assign specific property for share of this surplus if the partnership is
personal use without permission, and the dissolved or if there are extra funds available
property cannot be claimed for personal debts after covering operational costs and liabilities.
or legal support obligations. The partnership
as a whole, rather than individual partners,
has control over its assets.
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**Example**: If the partnership is dissolved, ### Explanation of Article 1813 – Conveyance

and after paying off all debts, there is of a Partner’s Interest:
₱500,000 left, the partner’s share of this
surplus would depend on their agreed
percentage, say 30%, meaning they would get
This article deals with what happens when a
₱150,000 from the surplus.
partner **transfers (conveys)** their entire
### Summary: interest in the partnership to someone else (an
**assignee**). It explains the rights and
A partner’s interest in a partnership is limitations of the person receiving the
essentially their share of the profits and any partner’s interest. Here’s a breakdown:
surplus funds after the partnership’s
obligations are met. This interest reflects the
financial return a partner gets for being part
1. **Conveying an Interest Does Not Dissolve
of the business.
the Partnership:**
- If a partner transfers their whole interest in

Art. 1813. A conveyance by a partner of the partnership to another person, this
his whole interest in the partnership transfer alone does **not** dissolve or end the
does not of itself dissolve the partnership. The partnership can continue its
partnership, or, as against the other operations without being affected by the
partners in the absence of agreement, conveyance.
entitle the assignee, during the
continuance of the partnership, to
interfere in the management or
2. **Limited Rights of the Assignee (the
administration of the partnership
person receiving the interest):**
business or affairs, or to require any
information or account of partnership - The assignee **does not** gain the rights
transactions, or to inspect the to participate in the management or
partnership books; but it merely decision-making of the partnership. They
entitles the assignee to receive in can’t demand to see the partnership’s books,
accordance with his contract the profits request an account of transactions, or get
to which the assigning partner would involved in running the business.
otherwise be entitled. However, in case
of fraud in the management of the - The only right the assignee gets is to
partnership, the assignee may avail **receive the profits** that the assigning
himself of the usual remedies. partner would have received, according to the
agreement between the original partner and
In case of a dissolution of the the assignee.
partnership, the assignee is entitled to
receive his assignor’s interest and may
require an account from the date only
of the last account agreed to by all the **Example**: If Partner A transfers their
partners. (n) interest to Person B, Person B can only collect
the profits that Partner A was entitled to.
However, Person B cannot vote on business
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matters or interfere with how the partnership Let me know if you need more clarification!
operates.
3. **Exception in Case of Fraud:**

Art. 1814. Without prejudice to the
- If there is **fraud** in the management of preferred rights of partnership
the partnership, the assignee can take legal creditors under Article 1827, on due
action (avail of the usual legal remedies) to application to a competent court by any
protect their interest. This means that if the judgment creditor of a partner, the
assignee believes the partnership is being court which entered the judgment, or
mismanaged or is defrauding them, they can any other court, may charge the
sue to protect their rights. interest of the debtor partner with
payment of the unsatisfied amount of
4. **Assignee's Rights Upon Dissolution of the such judgment debt with interest
Partnership:** thereon; and may then or later appoint
a receiver of his share of the profits,
- If the partnership dissolves, the assignee
and of any other money due or to fall
can claim the transferring partner's **share of
due to him in respect of the
the partnership’s assets**. At that point, the
partnership, and make all other orders,
assignee can also request an **accounting** (a
directions, accounts and inquiries
detailed financial report) but only from the
which the debtor partner might have
last account that all partners agreed upon, not
made, or which the circumstances of
from the entire history of the partnership.
the case may require.
The interest charged may be redeemed

at any time before foreclosure, or in
**Example**: If the partnership ends, the
case of a sale being directed by the
assignee can ask for Partner A's share of the
court, may be purchased without
remaining assets and can also ask for the
thereby causing a dissolution:
financial details of the partnership from the
last financial report approved by all partners.
(1) With separate property, by any one
or more of the partners; or
### Summary:
(2) With partnership property, by any
When a partner transfers their entire interest
one or more of the partners with the
in the partnership to someone else, the
consent of all the partners whose
partnership doesn’t dissolve, and the assignee
interests are not so charged or sold.
has no control over the partnership’s
management. The assignee is entitled only to
Nothing in this Title shall be held to
the profits the original partner would have
deprive a partner of his right, if any,
received unless there's fraud. If the
under the exemption laws, as regards
partnership dissolves, the assignee can claim
his interest in the partnership. (n)
the partner’s share and get financial
information starting from the last ### Explanation of Article 1814 – Creditor’s
agreed-upon account. Claim Against a Partner’s Interest:
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This article explains what happens when a - **With their own personal property**
**creditor** of an individual partner (a (not the partnership's property), or
judgment creditor) seeks to collect money
owed by that partner. It describes how the - **With partnership property**, but only if
creditor can charge the partner’s interest in all the other partners agree.
the partnership and outlines the legal
processes involved.
**Example**: If Partner A’s interest is about
to be sold to pay off a debt, Partner B and
1. **Charging a Partner’s Interest to Satisfy a Partner C can either use their own money or,
Debt:** with all partners' consent, use the
partnership’s money to buy Partner A’s
- If a partner owes money (has an unpaid interest and keep it within the group.
judgment debt), the creditor can go to court
and ask to have the partner’s **interest in the
partnership** charged to pay off that debt.
3. **Protection of Exemption Rights:**
This means the partner’s share of the profits
or any money owed to them by the
- The law ensures that a partner can still
partnership will be used to pay the creditor.
claim any rights they have under **exemption
laws**. These laws protect certain types of
- The court can also appoint a **receiver** to
property or interests from being seized to
take control of the debtor partner’s share of
satisfy debts. This provision makes it clear
the profits or other payments. The receiver
that partners can still use those protections for
manages the collection of the partner’s
their partnership interest if applicable.
financial benefits from the partnership until
the debt is paid off.
**Example**: If Partner A owes a personal

**Example**: If Partner A’s share in the
debt to Creditor X, the court can direct that
partnership qualifies for protection under
Partner A's share of the partnership profits be
exemption laws, they can claim those
given to Creditor X until the debt is paid.
protections even when their interest is
charged to satisfy a debt.
2. **Redemption of Charged Interest:**
- The **interest charged** by the creditor

can be **redeemed (paid off)** before it is
### Summary:
foreclosed (or sold). This means the debtor
partner can settle the debt to reclaim their A creditor can request a court to charge a
interest in the partnership. debtor partner’s share of partnership profits
to satisfy a debt. The court may appoint a
- If the court orders the sale of the debtor
receiver to manage the debtor partner’s share
partner’s interest, the **other partners** can
until the debt is paid. Other partners can buy
step in and buy it to prevent a third party from
the debtor partner's interest before
entering the partnership. The partners can do
foreclosure, either with personal or
this:
partnership property (with consent).
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Exemption laws may still protect the debtor Partners" (including partner names) or use a
partner's interest. different name like "Prime Business
Solutions" (without partner names).
SECTION 3. – Obligations of the
Partners
With Regard to Third Persons
2. **Liability for Non-Partners Using the Firm
Art. 1815. Every partnership shall Name:**
operate under a firm name, which may
- If someone **who is not a member of the
or may not include the name of one or
partnership** includes their name in the
more of the partners.
firm’s name, they become **liable as if they
Those who, not being members of the were a partner**. This means that third
partnership, include their names in the parties (like creditors or clients) can hold
firm name, shall be subject to the them responsible for the partnership’s
liability of a partner. (n) obligations, even though they are not officially
part of the business.
### Explanation of Article 1815 – Obligations
of the Partners With Regard to Third Persons:
**Example**: If someone named David is
not part of the partnership but allows his
This article explains how a partnership should name to be included in the firm’s name (e.g.,
operate under a **firm name** and outlines "John, Sarah, Mark & David Partners"), David
the responsibilities of those who use the firm’s can be held liable as a partner for the
name without being actual partners. partnership’s debts and responsibilities, even
if he didn’t formally join the partnership.
1. **Firm Name for the Partnership:**

### Summary:
- Every partnership must operate under a
**firm name**, which is the official name the A partnership must operate under a firm
business uses in its operations. The firm name name, which may or may not include the
can either: names of the partners. If a non-partner allows
their name to be included in the firm’s name,
- Include the name(s) of one or more of the they will be held liable as if they were a
partners, or partner for the partnership’s obligations.
- Exclude the names of the partners entirely Art. 1816. All partners, including
and use a different name that does not refer to industrial ones, shall be liable pro rata
any specific partner. with all their property and after all the
partnership assets have been
exhausted, for the contracts which may
be entered into in the name and for the
**Example**: A partnership of three
account of the partnership, under its
partners named John, Sarah, and Mark could
signature and by a person authorized to
operate under the name "John, Sarah & Mark
act for the partnership. However, any
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partner may enter into a separate 2. **Liability Arises from Contracts Made for
obligation to perform a partnership the Partnership:**
contract. (n)
- Partners are liable for contracts made **in
### Explanation of Article 1816 – Liability of the name of the partnership** and by
Partners for Partnership Obligations: someone authorized to act on its behalf
(usually a partner or someone the partnership
has given authority to act).
This article explains the **liability** of all

partners (including industrial partners) for
the obligations of the partnership. It **Example**: If a partner signs a contract
highlights how the partners’ personal property for the partnership to buy supplies or
may be used to cover the partnership’s debts equipment and the partnership cannot pay, all
after partnership assets are exhausted. partners are responsible for that debt.
1. **Pro Rata Liability of All Partners:** 3. **Separate Obligation by a Partner:**
- **All partners**, including those who only - A partner may also choose to take on a
contribute labor or skills (industrial partners), **separate obligation** to ensure the
are **liable for partnership obligations**. The performance of a partnership contract. This
liability is **pro rata**, meaning that each means a partner can independently agree to
partner is responsible for an amount fulfill a contract if the partnership fails to do
proportional to their share in the partnership. so.
- The partners’ **personal property** can be

used to pay off the partnership’s debts, but
only **after** all the partnership's assets have **Example**: If the partnership cannot meet
been exhausted. This means the partnership’s its payment obligations under a contract, a
property must be used first to satisfy partner may personally agree to pay the debt
creditors, and if it’s not enough, the partners’ out of their own pocket to protect the
personal property can be taken. partnership.
**Example**: If a partnership owes ### Summary:

₱1,000,000 but the partnership assets only
All partners, including those contributing only
cover ₱700,000, the remaining ₱300,000 can
labor, are liable for the debts and obligations
be collected from the partners’ personal
of the partnership in proportion to their share.
assets. If there are three partners, each may be
Their personal assets can be used to cover
responsible for a proportional share of that
debts, but only after the partnership’s assets
remaining debt.
are exhausted. Contracts made in the name of
the partnership hold all partners responsible,
and a partner can also take on a separate
obligation to fulfill a partnership contract.
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- While such an agreement is void when it

comes to third parties, it can still be **valid
Let me know if you need more details! internally** among the partners. This means
that if the partnership faces debts, Partner C
Art. 1817. Any stipulation against the
(in the above example) could ask Partners A
liability laid down in the preceding
and B to cover the payment according to their
article shall be void, except as among
internal agreement.
the partners. (n)
### Explanation of Article 1817 – Invalidity of

Stipulation Against Partner Liability: **Example**: Even though Partner C is still
liable to outsiders, Partners A and B must pay
off the debts internally according to their
private arrangement, and they cannot force
This article states that **any agreement** that
Partner C to contribute to paying those debts.
tries to remove a partner’s liability for the
partnership’s obligations (as described in
Article 1816) is considered **void**. However,
such agreements may still be valid between ### Summary:
the partners themselves.
Any agreement that tries to relieve a partner
of their liability to third parties is void.
However, such agreements can still apply
1. **No Agreement Can Remove Liability to
internally among the partners, meaning the
Third Parties:**
partners can decide amongst themselves who
bears the responsibility for debts, but they
- If the partners attempt to create an
remain liable to third parties regardless.
agreement that says one or more partners will
not be responsible for the partnership's debts
or obligations to **third parties** (such as
creditors or customers), that agreement will Let me know if you need more details or
be **invalid**. This means that regardless of examples!
any private agreements between the partners,
all partners are still liable to outsiders for the Art. 1818. Every partner is an agent of
partnership’s obligations. the partnership for the purpose of its
business, and the act of every partner,
including the execution in the
partnership name of any instrument,
**Example**: If Partner A, B, and C agree
for apparently carrying on in the usual
that Partner C will not be liable for any
way the business of the partnership of
partnership debts, this agreement is **void**
which he is a member binds the
when dealing with third parties. If the
partnership, unless the partner so
partnership owes money to a creditor, Partner
acting has in fact no authority to act for
C can still be held responsible.
the partnership in the particular
matter, and the person with whom he is
dealing has knowledge of the fact that
2. **Agreement Valid Among the Partners:** he has no such authority.
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An act of a partner which is not This article outlines the **authority of

apparently for the carrying on of partners** as agents of the partnership,
business of the partnership in the usual detailing how their actions can bind the
way does not bind the partnership partnership in business dealings and the
unless authorized by the other limitations on their authority.
partners.
Except when authorized by the other

partners or unless they have 1. **Partners as Agents:**
abandoned the business, one or more
- Each partner acts as an **agent** of the
but less than all the partners have no
partnership, meaning they can conduct
authority to:
business and make decisions on behalf of the
(1) Assign the partnership property in partnership. This includes signing documents
trust for creditors or on the assignee’s and entering into contracts.
promise to pay the debts of the
- An act performed by any partner that is
partnership;
consistent with the usual business operations
(2) Dispose of the good-will of the of the partnership **binds** the partnership,
business; unless the partner lacks authority to act in
that specific situation, and the other party
(3) Do any other act which would make involved knows about that lack of authority.
it impossible to carry on the ordinary
business of a partnership;
(4) Confess a judgment; **Example**: If Partner A signs a contract

for office supplies that are necessary for the
(5) Enter into a compromise partnership's operations, the partnership is
concerning a partnership claim or bound by that contract, assuming Partner A
liability; had the authority to make that purchase.
(6) Submit a partnership claim or

liability to arbitration;
2. **Acts Not for Usual Business:**
(7) Renounce a claim of the
partnership. - If a partner engages in an act that does not
appear to be part of the usual business
No act of a partner in contravention of a operations of the partnership, that act does
restriction on authority shall bind the not bind the partnership unless it is
partnership to persons having specifically authorized by the other partners.
knowledge of the restriction. (n)
### Explanation of Article 1818 – Agency and

Authority of Partners: **Example**: If Partner B decides to sell a
piece of partnership property without the
consent of the other partners and it’s not a
usual business activity, the partnership is not
bound by that sale.
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lacks that authority, the partnership is not

bound by the sale.
3. **Limitations on Authority:**
- Certain actions require **unanimous

authorization** from all partners (or at least ### Summary:
all those not abandoning the business). These
actions include: Each partner acts as an agent for the
partnership and can bind it through actions
1. **Assigning partnership property** in typical of business operations, unless they lack
trust for creditors or based on promises to pay authority and the other party is aware of that.
partnership debts. However, certain actions require consent from
all partners, and if a partner acts beyond their
2. **Disposing of the goodwill** of the authority, the partnership is not bound if the
business (the reputation and customer base). third party knows of those limitations.
3. Any act that would **prevent the

partnership** from continuing its ordinary
business. Let me know if you need further explanation
or examples!
4. **Confessing a judgment** (admitting
liability in court). Art. 1819. Where title to real property is
in the partnership name, any partner
5. **Compromising** a partnership claim may convey title to such property by a
or liability (settling a dispute). conveyance executed in the partnership
name; but the partnership may recover
6. Submitting a partnership claim or
such property unless the partner’s act
liability to **arbitration** (resolving disputes
binds the partnership under the
outside of court).
provisions of the first paragraph of
article 1818, or unless such property
7. **Renouncing a claim** that the
has been conveyed by the grantee or a
partnership has (giving up a legal right).
person claiming through such grantee
to a holder for value without knowledge
that the partner, in making the
4. **Knowledge of Restrictions:** conveyance, has exceeded his authority.
- If a partner acts in violation of restrictions Where title to real property is in the

on their authority, the partnership is not name of the partnership, a conveyance
bound to those actions if the third party executed by a partner, in his own name,
knows about the restrictions. passes the equitable interest of the
partnership, provided the act is one
within the authority of the partner
under the provisions of the first
**Example**: If Partner C is not authorized
paragraph of Article 1818.
to sell partnership property and does so
anyway, but the buyer knows that Partner C Where title to real property is in the
name of one or more but not all the
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partners, and the record does not legal document to transfer ownership) in the
disclose the right of the partnership, partnership's name.
the partners in whose name the title
stands may convey title to such - The partnership may **recover** the
property, but the partnership may property unless:
recover such property if the partners’
- The partner’s act binds the partnership
act does not bind the partnership under
according to the provisions of Article 1818
the provisions of the first paragraph of
(which outlines the authority of partners).
Article 1818, unless the purchaser or
his assignee, is a holder for value,
- The property has been conveyed to a third
without knowledge.
party who holds the property **for value**
and had no knowledge that the partner was
Where the title to real property is in the
exceeding their authority in the conveyance.
name of one or more or all the
partners, or in a third person in trust
for the partnership, a conveyance
executed by a partner in the **Example**: If a partner sells partnership
partnership name, or in his own name, land without proper authority, the partnership
passes the equitable interest of the can reclaim the land unless it was sold to a
partnership, provided the act is one buyer who paid for it and did not know about
within the authority of the partner the partner’s lack of authority.
under the provisions of the first
paragraph of Article 1818.
Where the title to real property is in the 2. **Conveyance in Partner’s Own Name:**
name of all the partners a conveyance
executed by all the partners passes all - If the title to real property is in the
their rights in such property. (n) **partnership name**, a partner can also
execute a conveyance in their own name. In
### Explanation of Article 1819 – Conveyance this case, the conveyance passes the
of Real Property in Partnership Name: **equitable interest** of the partnership,
provided the partner was acting within their
authority as described in Article 1818.
This article addresses how partners can

convey (transfer) title to real property owned
by the partnership and the implications of **Example**: Partner A sells a property
those actions, particularly concerning titled in the partnership name under their
authority and the rights of third parties. own name but does so with proper authority.
The partnership's interest in the property is
still validly transferred.
1. **Conveyance in Partnership Name:**
- When the title to real property is in the 3. **Conveyance When Title is in Some
**partnership name**, any partner can Partners' Names:**
transfer the title by executing a conveyance (a
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- If the title is in the name of **one or more of the partnership, as long as the act is within
but not all partners**, and the partnership's the partner's authority.
interest is not publicly disclosed, the partners
whose names are on the title can convey the
property. However, the partnership can
### Summary:
recover the property unless:
Partners can convey real property titled in the
- The partner’s act does not bind the
partnership name through documents
partnership (according to Article 1818).
executed in the partnership's name or in their
- The buyer or assignee is a **holder for own name (with proper authority). The
value** without knowledge of the limitations. partnership can recover property sold without
authority unless it was sold to an uninformed
buyer. When property is titled in the names of
fewer than all partners, those partners can sell
**Example**: If Partners B and C own it, but the partnership can reclaim it unless
property titled in their names, they can sell it. the buyer is protected. If titled in all partners'
However, if they did so improperly, the names, a conveyance by all partners transfers
partnership may reclaim it unless the buyer all ownership rights.
had no idea they were exceeding their
authority.
Let me know if you need more details or

further examples!
4. **Conveyance When Title is in All Partners’
Names:** Art. 1820. An admission or
representation made by any partner
- When the title is held in the name of **all concerning partnership affairs within
partners**, a conveyance executed by all the scope of his authority in accordance
partners passes all their rights in that with this Title is evidence against the
property. partnership. (n)
### Explanation of Article 1820 – Admissions

and Representations of Partners:
**Example**: If all partners agree to sell a
property titled in their names, their
conveyance is effective and transfers the full
ownership rights to the buyer. This article discusses how statements or
representations made by a partner can serve
as **evidence** against the partnership,
especially concerning the partnership's affairs.
5. **Conveyance in Trust:**
- If the title is in a **third person in trust**

for the partnership, a conveyance executed by 1. **Admissions or Representations:**
a partner in either the partnership's name or
their own name passes the equitable interest - Any **admission** (acknowledgment of a
fact) or **representation** (statement or
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assertion) made by a partner about the partnership legally, especially in matters

partnership affairs can be used as evidence related to obligations or commitments.
against the partnership.
- This applies as long as the partner was

acting within the **scope of their authority** Let me know if you need further explanation
as defined in the partnership agreement and or examples!
under the relevant laws.
Art. 1821. Notice to any partner of any
matter relating to partnership affairs,
and the knowledge of the partner acting
**Example**: If Partner A tells a supplier in the particular matter, acquired while
that the partnership can pay its debts, and this a partner or then present to his mind,
statement is made while acting in the course and the knowledge of any other partner
of business, this admission can be held against who reasonably could and should have
the partnership if the partnership fails to pay communicated it to the acting partner,
that supplier. operate as notice to or knowledge of the
partnership, except in the case of fraud
on the partnership, committed by or
with the consent of that partner. (n)
2. **Scope of Authority:**
### Explanation of Article 1821 – Notice and
- The statement must be made within the
Knowledge of Partners:
**scope of the partner's authority** for it to be
considered valid evidence against the
partnership. This means that the partner must
have the legal right to speak on behalf of the This article outlines how **notice**
partnership regarding the matter at hand. (information) and **knowledge** received by
partners can affect the partnership as a whole,
particularly in relation to partnership affairs.
**Example**: If Partner B, who has been

authorized to negotiate contracts, tells a client
that the partnership will deliver products by a 1. **Notice to Any Partner:**
specific date, this representation can be used
as evidence if the partnership fails to meet - If any partner receives **notice**
that commitment. regarding matters related to partnership
affairs, that notice is considered as having
been given to the entire partnership. This
means that if one partner knows something,
### Summary: the partnership is deemed to know it as well.
Any admission or representation made by a

partner concerning partnership affairs, as long
as it is within their authority, is considered **Example**: If Partner A learns about a
evidence against the partnership. This means significant change in regulations that affects
that statements made by partners can impact the partnership's business and informs
Partner B, the partnership is considered aware
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of that information, even if it hasn’t been to the partnership if it was intended to deceive
formally communicated to all partners. or mislead.
2. **Knowledge of the Acting Partner:** **Example**: If Partner E engages in

fraudulent activities without the knowledge of
- The **knowledge** of a partner involved in the other partners, the partnership may not be
a specific matter also counts as knowledge for held accountable for issues arising from that
the entire partnership. This includes any fraud because the other partners were
knowledge the partner had while they were a unaware of it.
partner or any relevant information that was
present to their mind at the time.
### Summary:
**Example**: If Partner C, who is managing Notice or knowledge received by any partner

a particular project, is aware of specific details regarding partnership matters is deemed
that impact that project, that knowledge is notice to the entire partnership. This includes
also attributed to the partnership. the knowledge of the acting partner and any
knowledge that other partners should have
communicated. However, if fraud is involved,
this attribution of knowledge may not apply,
3. **Knowledge of Other Partners:**
protecting the partnership from being held
liable for actions that were conducted
- Additionally, if another partner has
deceitfully.
knowledge that they reasonably could and
should have communicated to the acting
partner, that knowledge is also treated as
knowledge for the partnership. Let me know if you need further clarification
or examples!
Art. 1822. Where, by any wrongful act

**Example**: If Partner D is aware of a
or omission of any partner acting in the
client issue that could affect the project and
ordinary course of the business of the
fails to inform Partner C, the partnership is
partnership or with the authority of
still considered to have that knowledge
co-partners, loss or injury is caused to
because Partner D should have communicated
any person, not being a partner in the
it.
partnership, or any penalty is incurred,
the partnership is liable therefor to the
same extent as the partner so acting or
4. **Exceptions for Fraud:** omitting to act. (n)
- However, this rule does not apply in cases ### Explanation of Article 1822 –
of **fraud** committed by a partner or with Partnership Liability for Acts of Partners:
that partner's consent. In situations of fraud,
the knowledge or notice may not be attributed
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This article specifies how partnerships are - The wrongful act or omission must occur
held liable for the actions or omissions of their while the partner is acting **with the
partners, particularly regarding wrongful acts authority of co-partners** or within the
that result in loss or injury to third parties. **ordinary course of business** for the
partnership. This ensures that the actions are
legitimate business activities.
1. **Wrongful Acts or Omissions:**
- If a partner commits a **wrongful act** **Example**: If Partner G, while conducting

(such as negligence or misconduct) or fails to a business transaction authorized by other
act (an **omission**) while conducting partners, misrepresents information to a
business in the ordinary course of the client, and that results in financial loss to the
partnership or with the authority of the other client, the partnership is liable for the
partners, the partnership is held responsible damages incurred.
for that act or omission.
### Summary:
**Example**: If Partner F is driving a
delivery truck for the partnership and causes Partnerships are liable for wrongful acts or
an accident due to reckless driving, the omissions made by partners in the ordinary
partnership is liable for any damages resulting course of business or with the authority of
from that accident. co-partners. This liability extends to third
parties, meaning that if a partner causes loss
or injury, the partnership shares the same
level of responsibility as the acting partner.
2. **Liability to Third Parties:**
- The partnership is liable to third parties

(people or entities that are not partners) to the Let me know if you need more details or
**same extent** as the partner who examples!
committed the wrongful act or omission. This
means that if the partner is personally liable Art. 1823. The partnership is bound to
for damages, the partnership is equally liable. make good the loss:
(1) Where one partner acting within the

scope of his apparent authority receives
**Example**: Continuing from the previous money or property of a third person
example, if Partner F is ordered to pay and misapplies it; and
$10,000 in damages to the other party
involved in the accident, the partnership must (2) Where the partnership in the course
also cover that amount, as they share liability. of its business receives money or
property of a third person and the
money or property so received is
misapplied by any partner while it is in
3. **Authority of Co-Partners:**
the custody of the partnership. (n)
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Art. 1824. All partners are liable **(2) Misapplication While in Custody of the
solidarily with the partnership for Partnership:**
everything chargeable to the
partnership under Articles 1822 and - If the partnership receives money or
1823. (n) property from a third party and any partner
misapplies that money or property while it is
### Explanation of Article 1823 – in the custody of the partnership, the
Partnership Liability for Misapplication of partnership is also responsible for making
Funds or Property: good the loss.
This article outlines the circumstances under **Example**: If Partner I, after receiving a
which a partnership is liable for losses shipment of goods intended for resale, decides
resulting from the misapplication of money or to sell them personally for profit, the
property received from third parties by one of partnership is liable for any losses incurred by
its partners. the original owner of the goods.
1. **Loss Due to Misapplication by a ### Explanation of Article 1824 – Solidary

Partner:** Liability of Partners:
- The partnership is obligated to compensate

for losses in two specific situations:
This article states that all partners are jointly
and severally liable for obligations charged to
the partnership, specifically those outlined in
**(1) Misapplication by an Authorized Articles 1822 and 1823.
Partner:**
- If a partner, while acting within the scope

of their **apparent authority**, receives 1. **Solidary Liability:**
money or property from a third party but
misapplies it (uses it incorrectly or for - All partners are **solidarily liable** with
unauthorized purposes), the partnership is the partnership for anything chargeable to the
liable for the loss. partnership under Articles 1822 (liability for
wrongful acts) and 1823 (liability for
misapplication of funds or property). This
means that any creditor can pursue any
**Example**: If Partner H is authorized to partner for the full amount owed, not just the
collect payments from clients and instead uses partnership itself.
that money for personal expenses, the
partnership must reimburse the client for the
lost funds.
**Example**: If the partnership is found
liable for $20,000 due to a misapplication of
funds as described in Article 1823, a creditor
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can demand the entire amount from any one - **Solidary liability** means that all
partner, not just the partnership’s assets. This partners are jointly and severally responsible
ensures that partners are individually for the debts and obligations of the
accountable for the partnership’s obligations. partnership. This means that each partner can
be held liable for the full amount of any debts
or obligations incurred by the partnership, not
just their share.
### Summary:
- **Article 1823** states that a partnership

must compensate for losses if a partner **Example**: If the partnership incurs a
misapplies money or property received from a debt of $50,000 due to a wrongful act by one
third party, either when acting within their of the partners (as per Article 1822), any
authority or while the funds are in the creditor can pursue any one partner for the
partnership's custody. entire $50,000, regardless of that partner's
individual contribution to the partnership or
- **Article 1824** establishes that all partners
involvement in the wrongful act.
are solidarily liable for obligations charged to
the partnership, meaning creditors can hold
any partner responsible for the total amount
due. 2. **Application to Articles 1822 and 1823:**
- This solidary liability applies specifically to

situations outlined in:
Let me know if you have any questions or
need further examples! - **Article 1822**: Where a partner’s
wrongful act or omission, performed in the
Art. 1824. All partners are liable ordinary course of business or with authority,
solidarily with the partnership for causes loss or injury to a third party.
everything chargeable to the
partnership under Articles 1822 and - **Article 1823**: Where a partner
1823. (n) misapplies money or property received from a
third party, either while acting within their
### Explanation of Article 1824 – Solidary apparent authority or while the funds are in
Liability of Partners: the partnership’s custody.
Article 1824 emphasizes the concept of **Example**: If Partner J acts recklessly

**solidary liability** among partners while conducting business, leading to a loss
regarding obligations that arise from actions that requires payment to a third party, all
or losses chargeable to the partnership, partners (K, L, and M) are liable for the total
specifically under Articles 1822 and 1823. amount due, regardless of how much they
each contributed to the partnership.
1. **Solidary Liability Defined:**

### Summary:
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Article 1824 establishes that all partners are existing partnership, or with one or
solidarily liable for any obligations of the more persons not actual partners, he is
partnership that arise under Articles 1822 (for an agent of the persons consenting to
wrongful acts) and 1823 (for misapplication of such representation to bind them to the
funds or property). This means that creditors same extent and in the same manner as
can hold any one partner responsible for the though he were a partner in fact, with
full amount of partnership debts, ensuring respect to persons who rely upon the
accountability among all partners. representation. When all the members
of the existing partnership consent to
the representation, a partnership act or
obligation results; but in all other cases
If you have any more questions or need
it is the joint act or obligation of the
further clarification, feel free to ask!
person acting and the persons
consenting to the representation. (n)
Art. 1825. When a person, by words
spoken or written or by conduct,
### Explanation of Article 1825 – Liability of
represents himself, or consents to
Represented Partners:
another representing him to anyone, as
a partner in an existing partnership or
with one or more persons not actual
partners, he is liable to any such Article 1825 deals with the liability of
persons to whom such representation individuals who represent themselves (or
has been made, who has, on the faith of allow others to represent them) as partners in
such representation, given credit to the a partnership, even if they are not actual
actual or apparent partnership, and if partners. This is important for protecting
he has made such representation or third parties who may rely on such
consented to its being made in a public representations.
manner he is liable to such person,
whether the representation has or has
not been made or communicated to
1. **Representation as a Partner:**
such person so giving credit by or with
the knowledge of the apparent partner
- If a person **claims to be a partner**
making the representation or
(either by words or conduct) in an existing
consenting to its being made:
partnership or allows someone else to claim
them as a partner, they can be held liable to
(1) When a partnership liability results,
third parties who extend credit to the
he is liable as though he were an actual
partnership based on that representation.
member of the partnership;
(2) When no partnership liability

results, he is liable pro rata with the
**Example**: If Person A tells a supplier
other persons, if any, so consenting to
that they are a partner in Partnership X and
the contract or representation as to
the supplier provides goods based on that
incur liability, otherwise separately.
claim, Person A can be held liable for the
payment even if they are not an actual
When a person has been thus
partner.
represented to be a partner in an
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were actual partners regarding third parties

who rely on the representation.
2. **Liability to Third Parties:**
- The person making or consenting to the

representation is liable to third parties under **Example**: If all partners in Partnership
two conditions: X agree to allow Person A to act as a partner,
then any business transactions made by
- **(1) Partnership Liability Results:** If Person A on behalf of the partnership bind all
the partnership incurs a debt or obligation due partners to those obligations.
to the representation, the person is liable as if
they were an actual partner.
4. **Consent and Joint Obligations:**
**Example**: Continuing from the - If all actual partners consent to the

previous example, if the supplier later seeks representation, any act or obligation resulting
payment for the goods provided, Person A is from that is considered a partnership
liable as if they were a true partner of obligation. However, if not all partners
Partnership X. consent, it is treated as a joint obligation of
the person acting (the represented partner)
and those consenting to the representation.
- **(2) No Partnership Liability Results:**

If no partnership liability arises, the individual
is liable proportionately (pro rata) with any **Example**: If Partners B, C, and D agree
others who consented to the representation or to allow Person A to act as a partner, any
separately if no other parties are involved. resulting liabilities are obligations of
Partnership X. If only Partners B and C
consent, then it may only be a joint obligation
between them and Person A, rather than the
**Example**: If Person A represents
entire partnership.
themselves as a partner, but the actual
partnership does not incur any liability,
Person A may still be liable for any debts they
personally agreed to based on that ### Summary:
representation, but only in proportion to the
agreement made. Article 1825 outlines the liability of
individuals who represent themselves as
partners in a partnership, even if they are not.
If they misrepresent themselves or consent to
3. **Agency of the Represented Partner:** being represented as partners, they can be
held liable for partnership debts. Their
- When someone is represented as a partner,
representation also binds the actual partners
they act as an **agent** of those who
to the extent of their consent, creating
consented to that representation, meaning
obligations that may arise from third parties
they can bind them to obligations as if they
relying on those representations.
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2. **Satisfaction of Liability:**
If you need further clarification or examples, - The newly admitted partner's liability for
feel free to ask! these prior obligations will only be satisfied
from the **partnership property**. This
Art. 1826. A person admitted as a means that the new partner cannot be held
partner into an existing partnership is personally liable beyond what the partnership
liable for all the obligations of the assets can cover unless there is an explicit
partnership arising before his agreement stating otherwise.
admission as though he had been a
partner when such obligations were
incurred, except that this liability shall
be satisfied only out of partnership **Example**: Continuing from the previous
property, unless there is a stipulation to example, if Partnership Y has $10,000 in
the contrary. (n) assets and a debt of $30,000, Partner E can
only be held liable to the extent of the
### Explanation of Article 1826 – Liability of partnership’s assets ($10,000) and not for any
Newly Admitted Partners: additional amount from their personal assets.
Article 1826 addresses the liability of 3. **Stipulation to the Contrary:**

individuals who are admitted as partners into
an existing partnership. This article highlights - If there is a **specific agreement** among
how new partners are responsible for the partners that states otherwise, the new
obligations incurred by the partnership prior partner's liability could be different. Such
to their admission. agreements could potentially require the new
partner to assume more liability.
1. **Liability for Prior Obligations:**

**Example**: If the existing partners agree
- A person who joins an existing partnership that Partner E will personally guarantee the
is liable for all obligations that the partnership full $30,000 debt upon joining, then Partner
incurred before their admission. This means E can be held liable for the entire amount, not
that they are treated as if they were a partner just what can be satisfied from partnership
at the time those obligations were created. property.
**Example**: If Partnership Y had a debt of ### Summary:

$30,000 that was incurred before Partner E
joined the partnership, Partner E is Article 1826 establishes that a person who
responsible for that debt just as if they had becomes a partner in an existing partnership
been a partner when it was incurred. is liable for obligations incurred before their
admission as if they were a partner at that
time. However, this liability is limited to the
partnership property unless an agreement
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specifies otherwise, protecting the new any of the partners' private creditors can make
partner's personal assets from claims related a claim on that property.
to prior partnership debts.
2. **Private Creditors' Rights:**

If you have more questions or need further
details, feel free to ask! - Individual creditors of each partner can
still seek to **attach and publicly sell the share
Art. 1827. The creditors of the of that partner in the partnership assets**.
partnership shall be preferred to those This means that if a partner owes money to a
of each partner as regards the private creditor, that creditor can go after the
partnership property. Without partner's specific share of the partnership's
prejudice to this right, the private assets to recover the owed amount.
creditors of each partner may ask the
attachment and public sale of the share
of the latter in the partnership assets.
**Example**: If Partner C has personal
(n)
debts of $30,000 and owns 40% of
### Explanation of Article 1827 – Preference Partnership A (valued at $150,000), Partner
of Partnership Creditors: C's private creditors could seek to claim and
sell Partner C’s share (worth $60,000) to
satisfy their debts.
Article 1827 outlines the rights of creditors

concerning partnership assets and the
relationships between partnership creditors 3. **Interaction Between Creditors:**
and the individual creditors of partners.
- The article clarifies that the rights of
Here’s a breakdown of its key components:
partnership creditors are not diminished by
the claims of individual creditors. The
partnership’s obligations to its creditors take
1. **Partnership Creditors' Priority:** precedence, and individual creditors can only
pursue a partner's share in the partnership
- Creditors of the partnership have a assets after the partnership creditors have
**priority claim** over the partnership’s been satisfied.
property. This means that when the
partnership has debts, its creditors will be
paid first from the partnership assets before
any claims by the personal creditors of the ### Summary:
individual partners.
Article 1827 establishes that partnership
creditors have a preferential right to the
partnership's assets over the individual
**Example**: If Partnership A has an creditors of partners. However, private
outstanding loan of $100,000 to Bank B, and creditors can pursue the shares of partners in
it has assets worth $150,000, Bank B will be the partnership assets to settle debts, but this
paid first from the partnership's assets before does not affect the priority of partnership
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creditors. This framework ensures that partnership to pursue other interests, the
partnership debts are addressed first while relationship between Partners A and C with
allowing individual creditors to seek recourse Partner B changes, resulting in the
against a partner's share. **dissolution** of the partnership.
If you have any further questions or need 2. **Distinction from Winding Up:**
additional examples, just let me know!
- **Winding up** is a subsequent process
Title IX. – PARTNERSHIP that happens **after the dissolution** of the
CHAPTER 3 > DISSOLUTION AND partnership. It involves settling the affairs of
WINDING UP the partnership, including paying off debts,
liquidating assets, and distributing any
Art. 1828. The dissolution of a remaining assets to the partners.
partnership is the change in the
relation of the partners caused by any
partner ceasing to be associated in the
carrying on as distinguished from the **Example**: After Partner B's departure
winding up of the business. (n) from "Green Solutions," Partners A and C may
choose to continue the business or decide to
### Explanation of Article 1828 – Dissolution wind it up. If they opt for winding up, they will
of a Partnership: sell any remaining assets, pay creditors, and
then distribute any leftover funds between
themselves.
Article 1828 defines what dissolution of a

partnership is and differentiates it from the
winding up of the partnership's business. 3. **Legal Implications:**
Here’s a clearer breakdown:
- The dissolution signifies that the
partnership is no longer functioning as it once
was. It is crucial to follow legal protocols for
1. **Definition of Dissolution:** dissolution and winding up to ensure all
obligations are met and liabilities are settled.
- **Dissolution** refers to a **change in the
relationship among the partners** in a
partnership. This change occurs when one
partner stops being involved in the ### Summary:
partnership's business activities. The reasons
for this could include resignation, retirement, Article 1828 clarifies that the **dissolution**
death, or expulsion of a partner. of a partnership occurs when one partner
ceases to be involved in the partnership,
leading to changes in the relationships among
the remaining partners. This process is
**Example**: Consider a partnership named distinct from **winding up**, which involves
"Green Solutions" formed by Partners A, B, settling the partnership’s affairs after
and C. If Partner B decides to leave the dissolution. Understanding this distinction is
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essential for managing legal and financial assets, and distribute the proceeds before fully
responsibilities following a partner's terminating the partnership.
departure.
2. **Winding Up of Affairs:**
If you have any further questions or need
additional examples, feel free to ask! - **Winding up** is the process that involves
completing all tasks necessary to close the
Art. 1829. On dissolution the partnership. This includes:
partnership is not terminated, but
continues until the winding up of - Paying off any debts and obligations.
partnership affairs is completed. (n)
- Selling partnership assets.
- Distributing any remaining assets among
Continuation of Partnership After Dissolution:
the partners.
- The partnership continues to exist legally

Article 1829 states that when a partnership is during this process to ensure that all affairs
dissolved, it does not immediately end. are settled appropriately.
Instead, the partnership continues to exist
until all partnership affairs are settled through
the winding up process. Here’s a breakdown:
3. **Legal Implications:**
- Understanding that the partnership

remains in existence during the winding up
1. **Dissolution vs. Termination:**
process is important for all partners. It means
- **Dissolution** marks the point where one they still have certain rights and
partner ceases to be part of the partnership, responsibilities until everything is finalized.
leading to a change in the partnership’s
dynamics. However, this does not mean that
the partnership itself has come to an end.
### Summary:
- The partnership remains **active and
Article 1829 clarifies that upon
operational** for the purposes of winding up
**dissolution**, the partnership does not
its affairs. This means that it continues to exist
terminate immediately. Instead, it continues
legally until all necessary steps are taken to
to exist until all partnership affairs are wound
finalize the business matters.
up and settled. This ongoing existence allows
the partnership to fulfill its obligations, sell
assets, and distribute any remaining resources
**Example**: If the partnership "Green among partners before final termination.
Solutions" is dissolved because Partner B
leaves, the partnership doesn’t terminate
immediately. Partners A and C must still settle
any outstanding debts, liquidate remaining
more examples, feel free to ask!
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Art. 1830. Dissolution is caused: partnership shall not be dissolved by

the loss of the thing when it occurs after
(1) Without violation of the agreement the partnership has acquired the
between the partners: ownership thereof;
(a) By the termination of the definite (5) By the death of any partner;
term or particular undertaking
specified in the agreement; (6) By the insolvency of any partner or
of the partnership;
(b) By the express will of any partner,
who must act in good faith, when no (7) By the civil interdiction of any
definite term or particular is specified; partner;
(c) By the express will of all the (8) By decree of court under the
partners who have not assigned their following article. (1700a and 1701a)
interests or suffered them to be charged
for their separate debts, either before ### Explanation of Article 1830 – Causes of
or after the termination of any specified Dissolution
term or particular undertaking;
(d) By the expulsion of any partner

Article 1830 describes the different ways a
from the business bona fide in
partnership can be dissolved. Here’s a
accordance with such a power
simplified breakdown of each cause:
conferred by the agreement between
the partners;
(2) In contravention of the agreement

1. **Dissolution Without Violation of the
between the partners, where the
Agreement:**
circumstances do not permit a
dissolution under any other provision - **(a) Termination of a Specified Term or
of this article, by the express will of any Undertaking:** The partnership automatically
partner at any time; dissolves once the agreed-upon time or
specific project ends.
(3) By any event which makes it
unlawful for the business of the - **Example:** A partnership formed for a
partnership to be carried on or for the 5-year project will dissolve after those 5 years.
members to carry it on in partnership;
(4) When a specific thing which a

partner had promised to contribute to - **(b) Express Will of Any Partner (Good
the partnership, perishes before the Faith):** Any partner can decide to dissolve
delivery; in any case by the loss of the the partnership if there’s no set duration, but
thing, when the partner who they must do so honestly.
contributed it having reserved the
ownership thereof, has only - **Example:** If Partner A decides they no
transferred to the partnership the use longer wish to continue in a partnership with
or enjoyment of the same; but the
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no specific end date, they can initiate the - **Example:** If a partnership established
dissolution. to sell alcohol is affected by new laws banning
its sale, it must dissolve.
- **(c) Express Will of All Partners:** If all

remaining partners agree to dissolve the 4. **Loss of a Contributed Item:**
partnership, it can be done regardless of
previous agreements. - If a partner was supposed to provide a
specific item to the partnership, and that item
- **Example:** If Partners A, B, and C is lost before it is delivered, the partnership
unanimously agree to dissolve their can be dissolved unless the item has already
partnership after Partner D leaves, they can do been owned by the partnership.
so.
- **Example:** If Partner A promised to
contribute a vehicle to the partnership, and it
is stolen before delivery, the partnership
- **(d) Expulsion of a Partner:** If a partner dissolves.
is expelled from the partnership according to
the agreement, this can lead to dissolution.
- **Example:** If the partnership 5. **Death of a Partner:**

agreement allows expulsion for misconduct,
and Partner B is expelled, the partnership may - The partnership automatically dissolves
dissolve. when a partner dies unless stated otherwise in
the partnership agreement.
- **Example:** If one of the partners in a

2. **Dissolution in Contravention of the consulting firm dies, the partnership may
Agreement:** dissolve unless the agreement specifies
otherwise.
- A partner can still dissolve the partnership
even if it goes against the agreement if the
situation doesn’t allow for a different type of
dissolution. 6. **Insolvency:**
- **Example:** If a partner wants to - If a partner or the partnership itself

dissolve the partnership despite the becomes unable to pay its debts, this can
agreement suggesting a longer duration, they result in dissolution.
can do so if no other rules apply.
- **Example:** If the partnership goes
bankrupt and cannot pay its creditors, it must
dissolve.
3. **Unlawful Activities:**
- If something happens that makes it illegal

for the partnership to continue its business, it 7. **Civil Interdiction:**
must be dissolved.
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- If a partner is legally prohibited from contract; (3) A partner has been guilty
conducting business (civil interdiction), the of such conduct as tends to affect
partnership may dissolve. prejudicially the carrying on of the
business; (4) A partner wilfully or
- **Example:** If Partner A is deemed persistently commits a breach of the
legally incompetent to manage business partnership agreement, or otherwise so
affairs, the partnership may need to dissolve. conducts himself in matters relating to
the partnership business that it is not
reasonably practicable to carry on the
business in partnership with him; (5)
8. **Court Decree:**
The business of the partnership can
- A court may order the dissolution of a only be carried on at a loss; (6) Other
partnership based on specific conditions laid circumstances render a dissolution
out in further articles. equitable. On the application of the
purchaser of a partner’s interest under
- **Example:** If a court finds that a Article 1813 or 1814: (1) After the
partnership is not functioning fairly or legally, termination of the specified term or
it can mandate the dissolution of the particular undertaking; (2) At any time
partnership. if the partnership was a partnership at
will when the interest was assigned or
when the charging order was issued.
(n)
### Summary
Article 1830 outlines the causes for dissolving

a partnership, which can occur with or ### Explanation of Article 1831 – Court
without violating the partnership agreement. Decreed Dissolution
Causes include the completion of terms, the
express will of partners, unlawful activities,
loss of contributed items, death or insolvency
of partners, civil interdiction, and court Article 1831 outlines situations in which a
orders. This understanding helps partners court can decree the dissolution of a
manage their legal responsibilities effectively. partnership based on specific applications
from or on behalf of a partner. Here’s a
simplified explanation of the conditions:
If you have further questions or need more

details on a specific point, feel free to ask!
1. **Insanity or Unsound Mind:**
Art. 1831. On application by or for a
partner the court shall decree a - A court can dissolve the partnership if a
dissolution whenever: (1) A partner has partner has been declared insane or is deemed
been declared insane in any judicial mentally incapable of fulfilling their
proceeding or is shown to be of responsibilities.
unsound mind; (2) A partner becomes
- **Example:** If Partner A is diagnosed
in any other way incapable of
with a severe mental illness that affects their
performing his part of the partnership
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ability to make sound decisions regarding the - If the partnership can only operate at a
partnership, the other partners can request loss, indicating it’s not sustainable, the court
dissolution. may decree dissolution.
- **Example:** If the business consistently

loses money and shows no signs of recovery, a
2. **Incapable of Performing Duties:** partner may apply for dissolution.
- If a partner becomes unable to perform

their part of the partnership contract due to
physical or mental incapacity, the court may 6. **Equitable Circumstances:**
decree dissolution.
- Any other circumstances that make
- **Example:** If Partner B suffers a dissolution fair and just can lead to a
debilitating injury that prevents them from court-decreed dissolution.
participating in the business, the other
partners can seek dissolution. - **Example:** If there is a significant
disagreement among partners about the
direction of the business that cannot be
resolved, a partner may seek dissolution.
3. **Prejudicial Conduct:**
- If a partner engages in conduct that

negatively impacts the business, the court can 7. **Application by Purchaser of Partner's
dissolve the partnership. Interest:**
- **Example:** If Partner C is consistently - If someone purchases a partner’s interest

behaving unethically or making decisions that (as per Articles 1813 or 1814), they can request
harm the partnership’s reputation, this could dissolution:
justify dissolution.
- **(1)** After a specified term or
undertaking has ended.
4. **Breach of Agreement:** - **(2)** At any time if the partnership was

meant to be flexible (partnership at will) when
- A partner who willfully or repeatedly the interest was assigned.
violates the partnership agreement, making it
impractical to continue the partnership, can - **Example:** If Partner E sells their share
lead to court-ordered dissolution. in a partnership and the new partner believes
the business is no longer viable, they can
- **Example:** If Partner D ignores apply for dissolution.
agreed-upon financial contributions
repeatedly, the other partners might seek
dissolution.
### Summary
Article 1831 allows a court to dissolve a

5. **Ongoing Losses:** partnership under certain conditions,
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including a partner’s insanity, incapacity,

prejudicial conduct, breaches of agreement,
ongoing losses, or other equitable 1. **General Termination of Authority:**
circumstances. Additionally, the purchaser of
- When a partnership is dissolved, the
a partner’s interest can apply for dissolution
authority of partners to act for the partnership
under specified conditions. This framework
is generally terminated. This means they
ensures that partnerships can be dissolved
cannot make decisions or enter into
when continuing them would be impractical
agreements on behalf of the partnership after
or unjust.
dissolution.
- **Example:** If a partnership dissolves,

If you need further clarification or have none of the partners can sign contracts or
questions about specific points, feel free to make purchases for the partnership unless
ask! they are winding up ongoing affairs.
Art. 1832. Except so far as may be

necessary to wind up partnership
2. **Specific Conditions for Authority
affairs or to complete transactions
Termination:**
begun but not then finished, dissolution
terminates all authority of any partner
- **(1) With Respect to the Partners:**
to act for the partnership:
- **(a)** If the dissolution is not due to the
(1) With respect to the partners:
act, insolvency, or death of a partner, the
authority terminates for all partners.
(a) When the dissolution is not by the
act, insolvency or death of a partner; or
- **Example:** If the partnership
dissolves because the partners agree to end it,
(b) When the dissolution is by such act,
all partners lose their authority immediately.
insolvency or death of a partner, in
cases where article 1833 so requires;
- **(b)** If the dissolution is caused by the
act, insolvency, or death of a partner, the
(2) With respect to persons not
authority of the remaining partners is
partners, as declared in article 1834.
terminated only if Article 1833 applies.
(n)
- **Example:** If Partner F dies, the
remaining partners may still have authority to
### Explanation of Article 1832 – complete transactions until all necessary
Termination of Authority Upon Dissolution actions regarding the partnership’s affairs are
finalized, depending on the stipulations of
Article 1833.
Article 1832 discusses the effects of

partnership dissolution on the authority of
partners to act on behalf of the partnership. 3. **With Respect to Persons Not Partners:**
Here’s a breakdown of its key points:
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- The authority to act on behalf of the knowledge or notice of the death or

partnership also terminates concerning third insolvency.
parties, as further defined in Article 1834.
### Explanation of Article 1833
- **Example:** If a partner tries to enter
into a contract with a vendor after the
partnership has been dissolved, that contract
**Article 1833** addresses the implications of
would not be binding on the partnership, as
a partnership's dissolution when caused by the
the partner no longer has authority.
act, death, or insolvency of a partner. Here’s a
breakdown of its key points:
### Summary
Article 1832 states that the authority of 1. **Liability for Actions Post-Dissolution**:
partners to act on behalf of the partnership
- Even after a partnership is dissolved due to
ends upon dissolution, except when necessary
a partner's act, death, or insolvency, the
for winding up affairs or completing
remaining partners can still be held liable for
unfinished transactions. This termination
obligations incurred by any partner acting on
applies to all partners when dissolution is
behalf of the partnership.
mutual, and under specific conditions when
caused by the act, insolvency, or death of a
- This liability is as if the partnership had not
partner. Additionally, the termination of
been dissolved.
authority extends to third parties, ensuring
that no new obligations can be created by
partners after dissolution.
2. **Exceptions**:
- There are specific exceptions to this rule:

clarification, feel free to ask! - If the dissolution was initiated by the
action of a partner, that partner can only be
Art. 1833. Where the dissolution is caused by held liable if the acting partner was unaware
the act, death or insolvency of a of the dissolution.
partner, each partner is liable to his
co-partners for his share of any liability - If the dissolution was due to the death or
created by any partner acting for the insolvency of a partner, the acting partner is
partnership as if the partnership had not liable if they were aware of the death or
not been dissolved unless: insolvency.
(1) The dissolution being by act of any

partner, the partner acting for the
partnership had knowledge of the ### Example
dissolution; or
(2) The dissolution being by the death

Imagine a partnership of three people: Alex,
or insolvency of a partner, the partner
Brian, and Clara. They run a café together.
acting for the partnership had
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Art. 1834. After dissolution, a partner

can bind the partnership, except as
- **Scenario**: Suppose Alex decides to provided in the third paragraph of this
withdraw from the partnership and officially article:
dissolves the partnership through a notice.
However, Brian makes a business deal in the (1) By any act appropriate for winding
name of the partnership after the notice but up partnership affairs or completing
before any formal winding up of affairs. transactions unfinished at dissolution;
(2) By any transaction which would

bind the partnership if dissolution had
- **Liability**: Even though the partnership not taken place, provided the other
was dissolved when Alex left, Brian may still party to the transaction:
be held responsible for the obligations arising
from the deal he made because he acted as if (a) Had extended credit to the
the partnership was still operational. partnership prior to dissolution and
had no knowledge or notice of the
dissolution; or
- **Exceptions**: (b) Though he had not so extended

credit, had nevertheless known of the
- If Alex's withdrawal had been
partnership prior to dissolution, and,
communicated to Brian, he would be liable for
having no knowledge or notice of
that action.
dissolution, the fact of dissolution had
not been advertised in a newspaper of
- Conversely, if Clara, unaware of Alex's
general circulation in the place (or in
departure, made a deal believing the
each place if more than one) at which
partnership was intact, and it later turns out
the partnership business was regularly
Alex's departure was known by Brian, then
carried on.
Clara could potentially hold Brian accountable
for that misunderstanding.
The liability of a partner under the first
paragraph, No. 2, shall be satisfied out
of partnership assets alone when such
### Summary partner had been prior to dissolution:
(1) Unknown as a partner to the person

with whom the contract is made; and
In summary, **Article 1833** outlines how
partners can be liable for actions taken on (2) So far unknown and inactive in
behalf of a partnership even after its partnership affairs that the business
dissolution, while also providing exceptions reputation of the partnership could not
based on knowledge of that dissolution. This be said to have been in any degree due
ensures that third parties are protected while to his connection with it.
clarifying the responsibilities of the partners
The partnership is in no case bound by
involved.
any act of a partner after dissolution:
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(1) Where the partnership is dissolved

because it is unlawful to carry on the
business, unless the act is appropriate 1. **Binding Acts After Dissolution**:
for winding up partnership affairs; or
- Even after dissolution, a partner can still
(2) Where the partner has become bind the partnership in certain cases:
insolvent; or
1. **Winding Up**: Acts related to
(3) Where the partner has no authority finalizing the partnership's affairs or
to wind up partnership affairs; except completing ongoing transactions can still bind
by a transaction with one who: the partnership.
(a) Had extended credit to the 2. **Unfinished Business**: Transactions

partnership prior to dissolution and that would have bound the partnership before
had no knowledge or notice of his want dissolution may still apply if the third party:
of authority; or
- Had previously extended credit to the
(b) Had not extended credit to the partnership and was unaware of the
partnership prior to dissolution, and, dissolution.
having no knowledge or notice of his
- Was familiar with the partnership but
want of authority, the fact of his want of
unaware of its dissolution, and no public
authority has not been advertised in the
notice of dissolution was made (e.g., in a
manner provided for advertising the
newspaper).
fact of dissolution in the first
paragraph, No. 2 (b).
Nothing in this article shall affect the

2. **Exceptions**:
liability under Article 1825 of any
person who, after dissolution, - If a partner was unknown to a third party
represents himself or consents to or played a minor role in the business, the
another representing him as a partner partnership assets alone will satisfy their
in a partnership engaged in carrying liability for any acts they undertook after
business. (n) dissolution.
### Explanation of Article 1834 - The partnership is **not bound** by any

act of a partner after dissolution under certain
conditions:
**Article 1834** covers the extent to which a
- If the partnership dissolved because it
partner can bind the partnership after its
became illegal to continue business (unless
dissolution. It addresses two main scenarios:
the act is necessary for winding up).
actions appropriate for winding up the
business and binding transactions with third - If the partner becomes insolvent.
parties unaware of the dissolution.
- If the partner lacked the authority to wind
up the business, except for specific exceptions
#### Key Provisions:
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regarding third parties who were unaware of because the client extended credit in good
the lack of authority. faith, unaware of the dissolution.
3. **Uninformed Third Parties**: - **Scenario 2**: Carla, who was unknown to

the client and inactive in the business, has no
- A third party who had previously extended personal liability for this deal as the
credit to the partnership before dissolution, or partnership’s assets alone cover it.
who knew of the partnership but did not know
it dissolved, can still hold the partnership
liable for transactions initiated by a partner.
- **Scenario 3**: If Ben enters into a deal after
- If a third party did not have prior dealings Carla becomes insolvent, and the client was
with the partnership but reasonably believed unaware, the partnership is not bound by this
it was still in operation, the partner’s acts may action since insolvency is one of the grounds
still bind the partnership unless a public where binding no longer applies.
notice of dissolution was made.
### Summary
4. **Misrepresentation After Dissolution**:
- A person who, after dissolution, represents

or allows themselves to be represented as a **Article 1834** defines the conditions under
partner remains liable for that representation, which a partner can still bind the partnership
even if the partnership has dissolved. after its dissolution. It emphasizes acts
required for winding up, protecting third
parties unaware of the dissolution, and
preventing partners from taking unauthorized
### Example actions that could unfairly bind the dissolved
partnership. It also limits liability for partners
who were previously unknown or inactive in
the partnership business.
Suppose three people, Ana, Ben, and Carla,
were running a marketing agency. The
Art. 1835. The dissolution of the
partnership dissolves because Ana retires.
partnership does not of itself discharge
However, Ben continues to conduct business
the existing liability of any partner.
under the partnership's name without
informing previous clients about the A partner is discharged from any
dissolution. existing liability upon dissolution of the
partnership by an agreement to that
effect between himself, the partnership
creditor and the person or partnership
- **Scenario 1**: Ben closes a deal with a
continuing the business; and such
client who had no knowledge of the
agreement may be inferred from the
dissolution. The partnership is still liable
course of dealing between the creditor
having knowledge of the dissolution
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and the person or partnership 2. The creditor of the partnership, and

continuing the business.
3. The person or partnership continuing the
The individual property of a deceased business.
partner shall be liable for all
obligations of the partnership incurred - Such an agreement can be **explicit** or
while he was a partner, but subject to **implied** based on the interactions or
the prior payment of his separate debts. dealings between the creditor and the new
(n) partnership or the partner continuing the
business. For example, if the creditor
### Explanation of Article 1835 continues dealing solely with the new
partnership, this might imply that they have
agreed to release the former partner from
liability.
**Article 1835** addresses the continuation of
liabilities for partners after the dissolution of a
partnership. It clarifies that the dissolution of
the partnership does not automatically free 3. **Liability of Deceased Partners**:
partners from their previous obligations.
However, there are specific ways to discharge - If a partner passes away, their personal
a partner's liability under certain conditions. property is still liable for the obligations that
the partnership incurred while they were a
partner.
#### Key Points: - However, their personal debts take

**priority** over the partnership's debts. This
means that the deceased partner’s personal
creditors will be paid first before the
1. **Liability Continues After Dissolution**:
partnership creditors can claim any remaining
assets.
- The dissolution of the partnership does
**not** automatically release any partner
from their existing liabilities incurred during
the partnership. ### Example
- Partners remain responsible for

partnership debts or obligations that arose
before dissolution. Imagine a partnership between three
individuals, Daniel, Eva, and Frank. They
dissolve the partnership, but there are still
outstanding debts to a supplier.
2. **Discharge of a Partner's Liability**:
- A partner can be released from existing

liabilities if there is an **agreement** - **Scenario 1**: Daniel wants to retire from
between: the business, and Eva and Frank decide to
continue under a new partnership. If the
1. The partner seeking discharge,
supplier (creditor) agrees that only Eva and
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Frank will be responsible for the debt moving **Article 1836** focuses on the right to wind
forward, Daniel can be discharged from the up the affairs of a partnership after its
liability. The agreement can either be explicit dissolution and outlines who can manage this
or inferred if the supplier continues dealing process. Winding up refers to settling the
with the new partnership without demanding partnership’s business, which involves paying
payment from Daniel. debts, distributing remaining assets, and
concluding the partnership’s obligations.
- **Scenario 2**: Suppose Frank passes away,

and the partnership still owes money to a #### Key Points:
supplier. Frank’s personal property will be
used to pay off the debt incurred while he was
a partner, but only after his personal debts are
1. **Right to Wind Up the Partnership**:
settled first.
- After the dissolution of the partnership, the
partners who have **not wrongfully caused
### Summary the dissolution** have the right to manage the
winding-up process. This includes activities
such as:
**Article 1835** emphasizes that the - Settling outstanding debts,

dissolution of a partnership does not
automatically free partners from their - Collecting and liquidating partnership
obligations. A partner’s liability can only be assets,
discharged if the creditor, the partner, and the
- Distributing remaining funds to the
remaining partners agree. Additionally, the
partners according to their share.
individual assets of a deceased partner can be
used to settle partnership debts, but only after
their personal debts are paid.
2. **Legal Representative of the Last
Surviving Partner**:
Art. 1836. Unless otherwise agreed, the
- If only one partner remains (i.e., the other
partners who have not wrongfully
partners have passed away), the legal
dissolved the partnership or the legal
representative (e.g., executor of their estate) of
representative of the last surviving
the last surviving partner has the right to wind
partner, not insolvent, has the right to
up the partnership's affairs, provided the last
wind up the partnership affairs,
surviving partner is not insolvent.
provided, however, that any partner,
his legal representative or his assignee,
upon cause shown, may obtain winding
up by the court. (n) 3. **Court Intervention**:
### Explanation of Article 1836 - Any partner, their legal representative, or

an assignee can petition the **court** to take
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over the winding-up process if there is **just ### Summary

cause**. For example, if there is a
disagreement among the partners about how
to wind up the business or if one partner is
**Article 1836** states that, unless otherwise
suspected of acting in bad faith, the court can
agreed, partners who have not wrongfully
step in to ensure fairness and proper handling
dissolved the partnership have the right to
of the process.
wind up the partnership’s affairs. If only one
partner remains, the legal representative of
the last surviving partner can handle the
### Example process. However, if there is a dispute or just
cause, a court can intervene to manage the
winding up of the partnership.
Let’s say three individuals, Anna, Ben, and Art. 1837. When dissolution is caused in
Chris, are in a partnership that they decide to any way, except in contravention of the
dissolve. However, Chris dissolves the partnership agreement, each partner,
partnership wrongfully, perhaps by as against his co-partners and all
abandoning the business without proper persons claiming through them in
notice or violating their partnership respect of their interests in the
agreement. partnership, unless otherwise agreed,
may have the partnership property
applied to discharge its liabilities, and
the surplus applied to pay in cash the
- In this case, **Anna and Ben** (who did not
net amount owing to the respective
wrongfully dissolve the partnership) would
partners. But if dissolution is caused by
have the right to wind up the partnership’s
expulsion of a partner, bona fide under
affairs. Chris would not have the right to
the partnership agreement and if the
manage this process due to his wrongful
expelled partner is discharged from all
actions.
partnership liabilities, either by
payment or agreement under the
second paragraph of Article 1835, he
- Now, suppose Ben dies, leaving only Anna to shall receive in cash only the net
manage the wind-up. If Anna is incapable or amount due him from the partnership.
there is a dispute, Ben’s **legal
representative** could step in to wind up the When dissolution is caused in
business. contravention of the partnership
agreement the rights of the partners
shall be as follows:
- Additionally, if Anna or Ben’s legal (1) Each partner who has not caused
representative thinks it’s necessary, they can dissolution wrongfully shall have:
ask the **court** to supervise the winding-up
process to ensure it is done fairly. (a) All the rights specified in the first
paragraph of this article, and
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(b) The right, as against each partner the partnership; but in ascertaining the
who has caused the dissolution value of the partner’s interest the value
wrongfully, to damages breach of the of the good-will of the business shall
agreement. not be considered. (n)
(2) The partners who have not caused
the dissolution wrongfully, if they all ### Explanation of Article 1837
desire to continue the business in the
same name either by themselves or
jointly with others, may do so, during
**Article 1837** explains the rules that apply
the agreed term for the partnership and
when a partnership is dissolved, whether it is
for that purpose may possess the
done according to the partnership agreement
partnership property, provided they
or in violation of it (contravention). It
secure the payment by bond approved
provides guidelines for the distribution of
by the court, or pay any partner who
partnership assets and liabilities among the
has caused the dissolution wrongfully,
partners and addresses specific rights for
the value of his interest in the
those partners who either caused or did not
partnership at the dissolution, less any
cause the dissolution.
damages recoverable under the second
paragraph, No. 1 (b) of this article, and
in like manner indemnify him against
all present or future partnership #### Key Points:
liabilities.
(3) A partner who has caused the

dissolution wrongfully shall have: 1. **Dissolution in Line with the Partnership
Agreement (First Paragraph)**:
(a) If the business is not continued
under the provisions of the second - When a partnership dissolves in a manner
paragraph, No. 2, all the rights of a that does **not violate the partnership
partner under the first paragraph, agreement** (for example, by reaching the
subject to liability for damages in the agreed end date or due to mutual consent):
second paragraph, No. 1 (b), of this
- **Each partner** has the right to ensure
article.
that the partnership’s property is used to
(b) If the business is continued under **pay off its liabilities**.
the second paragraph, No. 2, of this
- After the debts are cleared, any
article, the right as against his
**surplus** is distributed to the partners in
co-partners and all claiming through
cash based on their share in the partnership.
them in respect of their interests in the
partnership, to have the value of his
- If a partner was **expelled** following the
interest in the partnership, less any
agreement, and they were discharged from
damage caused to his co-partners by the
partnership liabilities (as stated in **Article
dissolution, ascertained and paid to
1835**), the expelled partner is entitled only
him in cash, or the payment secured by
to receive the **net amount** due to them, in
a bond approved by the court, and to be
cash, from the partnership.
released from all existing liabilities of
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partnership liabilities. Importantly, in

determining the value of their share, the
2. **Dissolution in Contravention of the **goodwill** (reputation and brand value) of
Agreement (Second Paragraph)**: the business is **not** considered.
- When the partnership is dissolved in

violation of the agreement (e.g., a partner
wrongfully withdraws before the agreed term), ### Example
the rights of the partners are as follows:
Consider a partnership between three

- **For partners who did not cause the individuals: Alex, Bob, and Charlie. According
wrongful dissolution**: to their agreement, they are supposed to run
the partnership for 5 years. However, after 3
1. They retain all rights mentioned in the years, Alex unilaterally decides to dissolve the
first paragraph (ensuring liabilities are paid partnership, violating the agreement.
and surplus distributed).
2. They have the right to seek **damages**

from the partner who caused the wrongful - **Bob and Charlie** (who did not cause the
dissolution. wrongful dissolution) have the right to:
3. If all non-violating partners agree, they 1. Ensure the partnership’s assets are used to
can choose to **continue the business** under settle any debts.
the same name, either alone or with others.
They must compensate the partner who 2. Continue running the business (if they
caused the dissolution for their share in the agree) under the same name, but they must
business, but they can **deduct any pay Alex the value of his share, deducting any
damages** owed by that partner for wrongful damages caused by Alex's wrongful
dissolution. Additionally, they need to dissolution.
indemnify the partner from future liabilities of
the partnership.
- **Alex** (who caused the dissolution
wrongfully) can:
- **For the partner who caused the
1. Either receive the value of his share (after
dissolution wrongfully**:
subtracting damages) if the business
1. If the business is not continued, they continues without him.
have the rights of any other partner but must
2. If the business is not continued, he retains
bear liability for damages caused by the
the rights to his share in the partnership but is
wrongful dissolution.
responsible for any damages caused by his
2. If the business continues without them, wrongful dissolution.
they are entitled to be paid the value of their
share in the partnership (minus any
damages), and they must be released from all
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### Summary ### Explanation of Article 1838
**Article 1837** outlines the rights of partners **Article 1838** deals with situations where a
during dissolution, distinguishing between partnership contract is rescinded (canceled)
dissolutions made according to the due to fraud or misrepresentation by one of
partnership agreement and those that violate the parties. In this case, the party who is the
it. Partners who did not cause the wrongful victim of the fraud is given certain rights to
dissolution can either have the partnership protect their interests and recover losses, in
property used to pay off debts and receive addition to any other legal remedies.
their share in cash, or they can continue the
business. The partner who caused the
dissolution wrongfully must either accept
#### Key Points:
damages and receive their share, or, if the
business continues, be compensated for their
interest in the partnership, excluding
goodwill. 1. **Right to a Lien or Retention (First
Paragraph, No. 1)**:
Art. 1838. Where a partnership
contract is rescinded on the ground of - The innocent party is entitled to a **lien**
the fraud or misrepresentation of one or a right to **retain** any surplus of the
of the parties thereto, the party entitled partnership’s property after the partnership's
to rescind is, without prejudice to any debts to third parties have been settled.
other right, entitled:
- This lien covers:
(1) To a lien on, or right of retention of,
the surplus of the partnership property - Any money the innocent party paid to
after satisfying the partnership purchase an interest in the partnership.
liabilities to third persons for any sum
of money paid by him for the purchase - Any capital or advances the innocent
of an interest in the partnership and for party contributed to the partnership.
any capital or advances contributed by
him;
Essentially, this provision ensures that the
(2) To stand, after all liabilities to third
innocent party can hold onto the surplus
persons have been satisfied, in the
assets of the partnership to recover the money
place of the creditors of the partnership
they invested or contributed.
for any payments made by him in
respect of the partnership liabilities;
and
2. **Standing in the Place of Creditors (First
(3) To be indemnified by the person
guilty of the fraud or making the
representation against all debts and - Once the partnership’s debts to third
liabilities of the partnership. (n) parties have been paid, the innocent party is
entitled to take the position of the
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**partnership’s creditors**. This means they - Finally, Lisa has the right to be
can seek repayment for any payments they **indemnified** by Mark (the party who
made towards the partnership's debts, committed the fraud), meaning Mark is
effectively giving them priority in reclaiming responsible for compensating her for any
their money. losses or liabilities of the partnership.
3. **Right to Indemnification (First ### Summary

- The innocent party is also entitled to be

**indemnified** (compensated) by the **Article 1838** provides protection to a
partner who committed the fraud or made the partner who has been a victim of fraud or
misrepresentation. This includes being misrepresentation in a partnership contract.
protected from any debts or liabilities of the The innocent party is entitled to a lien on the
partnership that arise from the fraudulent or surplus partnership property, can stand in the
misrepresented agreement. position of creditors to recover payments
made toward partnership liabilities, and has
the right to be indemnified by the partner
guilty of fraud for any debts or liabilities. This
### Example ensures that the wronged party has several
avenues for recovering their losses.
Art. 1839. In settling accounts between

Let’s say Lisa and Mark enter into a
the partners after dissolution, the
partnership. Mark fraudulently misrepresents
following rules shall be observed,
the value of the partnership’s assets to Lisa,
subject to any agreement to the
leading her to invest a significant amount of
contrary:
money. When Lisa discovers the fraud, she
decides to **rescind** (cancel) the (1) The assets of the partnership are:
partnership contract.
(a) The partnership property,
(b) The contributions of the partners

According to **Article 1838**: necessary for the payment of all the
liabilities specified in No. 2.
- Lisa can place a **lien** on any surplus
(2) The liabilities of the partnership
partnership property (after debts to third
shall rank in order of payment, as
parties are paid) to recover her investment
follows:
and any capital she contributed.
(a) Those owing to creditors other than
- If Lisa has made payments to cover the
partners,
partnership’s liabilities, she can stand in the
place of the **creditors** and recover that (b) Those owing to partners other than
money. for capital and profits,
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(c) Those owing to partners in respect (b) Those owing to partnership

of capital, creditors;
(d) Those owing to partners in respect (c) Those owing to partners by way of
of profits. contribution. (n)
(3) The assets shall be applied in the
order of their declaration in No. 1 of ### Explanation of Article 1839
this article to the satisfaction of the
liabilities.
**Article 1839** outlines the rules for
(4) The partners shall contribute, as
**settling accounts** between partners after
provided by article 1797, the amount
the dissolution of a partnership. These rules
necessary to satisfy the liabilities.
ensure that the liabilities are settled in an
(5) An assignee for the benefit of orderly and fair manner. The article provides
creditors or any person appointed by a clear structure for how the partnership’s
the court shall have the right to enforce assets should be used and in what order
the contributions specified in the payments should be made to creditors and
preceding number. partners.
(6) Any partner or his legal

representative shall have the right to
#### Key Points:
enforce the contributions specified in
No. 4, to the extent of the amount which
he has paid in excess of his share of the
liability. 1. **Assets of the Partnership (First
(7) The individual property of a
deceased partner shall be liable for the - The assets of the partnership are:
contributions specified in No. 4.
- **Partnership property** (everything
(8) When partnership property and the owned by the partnership).
individual properties of the partners
are in possession of a court for - **Contributions of the partners**, which
distribution, partnership creditors may be necessary to cover any outstanding
shall have priority on partnership liabilities.
property and separate creditors on
individual property, saving the rights of
lien or secured creditors.
2. **Liabilities of the Partnership (First
(9) Where a partner has become Paragraph, No. 2)**:
insolvent or his estate is insolvent, the
- The liabilities are prioritized in the
claims against his separate property
following order for payment:
shall rank in the following order:
- **Creditors** other than partners
(a) Those owing to separate creditors;
(external debts).
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- **Partners** who are owed something - If a partner has paid more than his share of
other than capital or profits (loans or the liabilities, that partner (or their legal
advances made by partners). representative) has the right to demand
contributions from other partners to cover the
- **Partners' capital contributions** excess amount paid.
(money or assets partners contributed).
- **Profits** owed to the partners (earnings

distributed among partners). 7. **Liability of Deceased Partner's Property
(First Paragraph, No. 7)**:
- The individual property of a deceased

3. **Application of Assets (First Paragraph, partner is liable for contributions that were
No. 3)**: required to satisfy the partnership’s liabilities.
The deceased partner's property must cover
- The partnership’s assets must be applied in
these liabilities after the partner's own debts
the order listed in No. 1 to satisfy the
are settled.
liabilities. This means external creditors are
paid first, followed by partners, as described.
8. **Priority of Partnership and Individual

Creditors (First Paragraph, No. 8)**:
4. **Partners' Contributions (First Paragraph,
No. 4)**: - When both partnership property and
individual partners’ property are in court for
- The partners must contribute the necessary
distribution, **partnership creditors** have
amount to satisfy all the liabilities if the assets
priority on the partnership’s assets, while
of the partnership are insufficient. This is in
**separate creditors** (those who have claims
line with **Article 1797**, which discusses
against individual partners) have priority on
partners' responsibilities in contributing to
the personal property of the partners.
losses.
9. **Order of Claims in Insolvency (First

5. **Rights of Assignees and Court-Appointed
Persons (First Paragraph, No. 5)**:
- If a partner or the estate of a partner
- An **assignee for the benefit of creditors**
becomes insolvent, the claims against the
or any person appointed by the court has the
partner’s **separate property** will be ranked
right to enforce the contributions that
as follows:
partners must make to settle the liabilities.
- **Separate creditors** (those who are
owed personally by the partner).
6. **Right of Partners or Legal
- **Partnership creditors** (those who are
Representatives (First Paragraph, No. 6)**:
owed by the partnership).
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- **Partners' contributions** (amounts

owed to other partners as part of
contributions to settle liabilities). **Article 1839** provides a detailed guide for
settling the accounts of a dissolved
partnership. It establishes a clear hierarchy
for how the partnership’s assets should be
### Example: used to pay off liabilities and how partners’
contributions should be managed if the assets
are insufficient. The article ensures fairness by
giving priority to external creditors and
Let's say a partnership between three
outlining the rights of partners in settling the
partners—Alice, Bob, and Carol—is dissolved.
partnership's debts.
The partnership has external debts to
suppliers, Alice and Bob have made loans to
Art. 1840. In the following cases
the partnership, and the partnership still owes
creditors of the dissolved partnership
capital contributions and profits to the
are also creditors of the person or
partners.
partnership continuing the business:
(1) When any new partner is admitted

into an existing partnership, or when
According to **Article 1839**:
any partner retires and assigns (or the
1. **Partnership property** will first be used representative of the deceased partner
to pay off the **external creditors** assigns) his rights in partnership
(suppliers). property to two or more of the
partners, or to one or more of the
2. If there's any money left, Alice and Bob will partners and one or more third
be repaid for their **loans**. persons, if the business is continued
without liquidation of the partnership
3. After that, the remaining assets will be used affairs;
to repay the **capital contributions** of Alice,
Bob, and Carol. (2) When all but one partner retire and
assign (or the representative of a
4. Lastly, any leftover funds will be distributed deceased partner assigns) their rights
as **profits**. in partnership property to the
remaining partner, who continues the
business without liquidation of
partnership affairs, either alone or with
If the partnership’s assets are insufficient to
others;
cover the liabilities, Alice, Bob, and Carol will
have to contribute the necessary funds to
(3) When any partner retires or dies
settle the remaining debts. If one partner has
and the business of the dissolved
paid more than their fair share, they can
partnership is continued as set forth in
demand repayment from the others.
Nos. 1 and 2 of this article, with the
consent of the retired partners or the
representative of the deceased partner,
### Summary: but without any assignment of his right
in partnership property;
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(4) When all the partners or their Nothing in this article shall be held to
representatives assign their rights in modify any right of creditors to set
partnership property to one or more aside any assignment on the ground of
third persons who promise to pay the fraud.
debts and who continue the business of
the dissolved partnership; The use by the person or partnership
continuing the business of the
(5) When any partner wrongfully partnership name, or the name of a
causes a dissolution and the remaining deceased partner as part thereof, shall
partners continue the business under not of itself make the individual
the provisions of article 1837, second property of the deceased partner liable
paragraph, No. 2, either alone or with for any debts contracted by such person
others, and without liquidation of the or partnership. (n)
partnership affairs;
### Explanation of Article 1840
(6) When a partner is expelled and the
remaining partners continue the
business either alone or with others
**Article 1840** addresses the rights of
without liquidation of the partnership
**creditors** when a partnership is dissolved
affairs.
and its business is continued without a proper
The liability of a third person becoming liquidation of the partnership’s affairs. The
a partner in the partnership continuing article ensures that the creditors of the
the business, under this article, to the **dissolved partnership** can still claim debts
creditors of the dissolved partnership from the business or individuals who continue
shall be satisfied out of the partnership the business. It also explains how certain
property only, unless there is a changes in the partnership, like the admission
stipulation to the contrary. of new partners or the retirement of old ones,
affect the creditors.
When the business of a partnership
after dissolution is continued under any
conditions set forth in this article the
#### Key Points:
creditors of the dissolved partnership,
as against the separate creditors of the
retiring or deceased partner or the
representative of the deceased partner, 1. **Creditors' Rights in Various Situations
have a prior right to any claim of the (First Paragraph)**
retired partner or the representative of
the deceased partner against the person - **Creditors** of the dissolved partnership
or partnership continuing the business, become creditors of the new or continuing
on account of the retired or deceased partnership or individuals in the following
partner’s interest in the dissolved situations:
partnership or on account of any
consideration promised for such 1. A **new partner** is admitted, or a
interest or for his right in partnership partner **retires** and assigns their interest
property. to two or more remaining partners (or third
persons) who continue the business.
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2. All but one partner **retire**, and the

remaining partner continues the business
alone or with others. 4. **Right to Set Aside Fraudulent
Assignments (Fourth Paragraph)**
3. A partner **retires or dies**, and the
business is continued with their consent but - If the assignment of partnership rights to
without assigning their interest. another party is done **fraudulently**,
creditors can still **challenge** the
4. The rights of all partners are **assigned transaction, protecting their claims.
to third persons**, and those third persons
promise to pay the partnership’s debts and
continue the business.
5. **Use of the Partnership Name (Fifth
5. One partner **wrongfully causes Paragraph)**
dissolution**, and the remaining partners
- The mere **use of the old partnership’s
continue the business without liquidation, as
name** (including the name of a deceased
per Article 1837.
partner) by the continuing business does
6. A partner is **expelled**, and the **not** make the deceased partner’s personal
remaining partners continue the business. property liable for any new debts contracted
after dissolution.
2. **Liability of Third Persons Becoming

Partners (Second Paragraph)** ### Example:
- If a **third person** becomes a partner in

the new or continuing partnership, they are
Imagine a partnership between four people:
liable to the creditors of the dissolved
John, Mark, Lisa, and Sarah. The partnership
partnership, but their liability is limited to the
is dissolved when Sarah dies, but the business
**partnership property**, unless there is an
is continued by John, Mark, and Lisa without
agreement that extends this liability to their
formally liquidating the partnership.
personal assets.
According to **Article 1840**:
1. The **creditors** of the original partnership

3. **Priority of Creditors (Third Paragraph)** (i.e., suppliers or banks) still have the right to
claim their debts from the new, continued
- The **creditors of the dissolved business.
partnership** have **priority** over the
personal creditors of the retired or deceased 2. If the new business brings in a new partner,
partner when it comes to claims against the that new partner’s liability is limited to
continuing partnership. This means that if a **partnership property**, unless otherwise
retired or deceased partner has an interest in agreed.
the new partnership, the old partnership’s
3. The creditors of the dissolved partnership
creditors get paid before any personal
have **priority** over any personal creditors
creditors of the retired or deceased partner.
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of Sarah’s estate regarding her interest in the partnership; provided that the
new partnership. creditors of the dissolved partnership
as against the separate creditors, or the
4. The **use of Sarah’s name** in the business representative of the retired or
does not make her personal estate liable for deceased partner, shall have priority on
any debts contracted by the new partnership. any claim arising under this article, as
provided Article 1840, third paragraph.
(n)
### Summary:
Art. 1842. The right to an account of his
interest shall accrue to any partner, or
his legal representative as against the
**Article 1840** ensures that the winding up partners or the surviving
**creditors** of a dissolved partnership can partners or the person or partnership
still claim their debts from the business, even continuing the business, at the date of
if it continues under new or remaining dissolution, in the absence of any
partners without formal liquidation. It agreement to the contrary. (n)
prioritizes partnership creditors over personal
### Explanation of Articles 1841 and 1842
creditors of a retired or deceased partner and
limits the liability of new partners unless
agreed otherwise. The article also protects
against fraud in assignments and clarifies that #### **Article 1841** – Partner's Right to
the use of the old partnership name does not Payment After Retirement or Death
automatically extend liability to deceased
partners’ estates.
Art. 1841. When any partner retires or This article ensures that when a **partner
dies, and the business is continued retires or dies** and the partnership business
under any of the conditions set forth in continues without proper settlement of
the preceding article, or in Article 1837, accounts, the **retired partner or their legal
second paragraph, No. 2, without any representative** (in case of death) is entitled
settlement of accounts as between him to receive the **value of their interest** in the
or his estate and the person or partnership.
partnership continuing the business,
unless otherwise agreed, he or his legal
representative as against such person
Key Points:
or partnership may have the value of
his interest at the date of dissolution
1. **Settlement of Interest**: The retired or
ascertained, and shall receive as an
deceased partner (or their legal
ordinary creditor an amount equal to
representative) can have the value of their
the value of his interest in the dissolved
interest in the dissolved partnership
partnership with interest, or, at his
determined at the **date of dissolution**.
option or at the option of his legal
representative, in lieu of interest, the
profits attributable to the use of his
right in the property of the dissolved
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2. **Payment Options**: The partner or their

representative may:
Key Points:
- Receive an amount equal to the value of
their **interest** as an **ordinary creditor**, 1. **Right to Account**: Any partner,
along with **interest** on the amount. including retired or deceased partners (or
their legal representatives), can demand an
- Opt to receive **profits** attributable to **accounting** of their share when the
the use of their interest in the partnership partnership is dissolved.
instead of receiving interest.
2. **Timing**: This right arises when the

3. **Priority of Creditors**: The **creditors of partnership dissolves, unless all partners
the dissolved partnership** have **priority** agreed in advance to a different arrangement.
over the separate creditors of the retired or
deceased partner. This means that the
business must first pay its existing debts
Example:
before paying out the value of the retiring or
deceased partner’s interest.
If a partner leaves a partnership and
dissolution occurs, they or their legal
representative can demand an accounting of
Example: their share of the partnership assets and
liabilities to settle their interest. This ensures
Imagine Sarah retires from a partnership transparency in settling accounts after the
without a settlement of her share. The partnership ends.
remaining partners continue the business.
Sarah (or her legal representative) can request
that the value of her interest at the time of
### Summary:
dissolution be determined and paid to her,
either as a sum with interest or as profits from
- **Article 1841** ensures that a retired or
the continuing business.
deceased partner (or their legal
representative) is entitled to receive the value
of their interest in the partnership, either with
#### **Article 1842** – Right to an Account interest or by sharing in the profits, after
of a Partner's Interest dissolution. However, the partnership’s
creditors have priority over the retired or
deceased partner’s claim.
This article establishes the **right** of any - **Article 1842** grants partners or their
partner (or their legal representative) to representatives the right to an **accounting**
receive an **accounting** or settlement of of their share of the partnership’s assets upon
their interest in the partnership at the **time dissolution unless otherwise agreed by the
of dissolution**, unless there is an agreement partners.
that states otherwise.
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These articles safeguard the financial rights of - These partners manage the business and
retired or deceased partners during the are personally liable for the debts and
dissolution process and ensure transparency obligations of the partnership. Their liability is
and fairness in settling accounts. **unlimited**, meaning they can be held
responsible for any debts or liabilities beyond
Title IX. – PARTNERSHIP their investment in the partnership.
CHAPTER 4 > LIMITED
PARTNERSHIP (n)
3. **Limited Partners**:
Art. 1843. A limited partnership is one
formed by two or more persons under - These partners invest in the partnership
the provisions of the following article, but do not participate in the management or
having as members one or more day-to-day operations.
general partners and one or more
limited partners. The limited partners - Their liability is **limited** to the amount
as such shall not be bound by the of their investment in the partnership, which
obligations of the partnership. means they are **not personally responsible**
for the obligations or debts of the business
### Explanation of Article 1843 – Limited beyond what they contributed.
Partnership
#### Example:
**Article 1843** defines a **limited
partnership** and the distinction between its In a limited partnership, John and Anna are
members. general partners, and Sarah and Mark are
limited partners. John and Anna manage the
business and are fully liable for any debts. If
the business incurs a debt, creditors can go
#### Key Points:
after John and Anna's personal assets.
However, Sarah and Mark, as limited
partners, are only liable up to the amount they
1. **Formation of a Limited Partnership**: invested. They cannot lose more than what
they contributed, and they have no say in
- A **limited partnership** is formed by managing the business.
**two or more persons** following specific
legal provisions.
- It consists of two types of partners: ### Summary:
- **General partners** A **limited partnership** is a type of business

structure with two types of partners: **general
- **Limited partners** partners**, who manage the business and
have unlimited liability, and **limited
partners**, who contribute financially but
have limited liability, only up to the amount
2. **General Partners**:
they invested. Limited partners do not
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participate in the management of the (j) The right, if given, of a limited

business. This structure is often used when partner to substitute an assignee as
some investors want to contribute funds contributor in his place, and the terms
without being involved in the business's and conditions of the substitution;
operations or risk beyond their contribution.
(k) The right, if given, of the partners to
admit additional limited partners;
Art. 1844. Two or more persons (l) The right, if given, of one or more of
desiring to form a limited partnership the limited partners to priority over
shall: other limited partners, as to
contributions or as to compensation by
(1) Sign and swear to a certificate, way of income, and the nature of such
which shall state – priority;
(a) The name of the partnership, adding (m) The right, if given, of the remaining
thereto the word “Limited”; general partner or partners to continue
the business on the death, retirement,
(b) The character of the business;
civil interdiction, insanity or insolvency
of a general partner; and
(c) The location of the principal place of
business;
(n) The right, if given, of a limited
partner to demand and receive
(d) The name and place of residence of
property other than cash in return for
each member, general and limited
his contribution.
partners being respectively designated;
(2) File for record the certificate in the
(e) The term for which the partnership Office of the Securities and Exchange
is to exist; Commission.
(f) The amount of cash and a A limited partnership is formed if there

description of and the agreed value of has been substantial compliance in
the other property contributed by each good faith with the foregoing
limited partner; requirements.
(g) The additional contributions, if any, ### Explanation of Article 1844 –

to be made by each limited partner and Requirements to Form a Limited Partnership
the times at which or events on the
happening of which they shall be made;
**Article 1844** provides the steps and
(h) The time, if agreed upon, when the
necessary information required to form a
contribution of each limited partner is
**limited partnership**.
to be returned;
(i) The share of the profits or the other

compensation by way of income which
#### Key Points:
each limited partner shall receive by
reason of his contribution;
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1. **Signing and Swearing to a Certificate**: - **(i)** How **profits** will be divided,

specifying what share each limited partner will
- The individuals forming the partnership receive.
must prepare a certificate that includes
specific details about the partnership. This - **(j)** Whether limited partners can
certificate must be **signed and sworn** to, **assign** their interest to someone else, and
ensuring the information is truthful and the terms for doing so.
complete.
- **(k)** Whether new **limited partners**
can be admitted into the partnership.
2. **Details Included in the Certificate**: - **(l)** Whether any limited partner has a
**priority** over others in terms of
- The certificate must contain the following compensation or contributions.
information:
- **(m)** The right of the general partners
- **(a)** The **name** of the partnership, to **continue the business** if one of the
which must include the word **"Limited"** to general partners dies, retires, or becomes
show it is a limited partnership. incapacitated.
- **(b)** The **character of the business**, - **(n)** Whether a limited partner can
describing the type of business the receive **property other than cash** in return
partnership will operate. for their contribution.
- **(c)** The **location** of the main office

of the partnership.
3. **Filing the Certificate**:
- **(d)** The **names** and
**residences** of all partners, distinguishing - After completing the certificate, it must be
between general and limited partners. **filed** with the **Securities and Exchange
Commission (SEC)** to officially record the
- **(e)** The **duration** or term for formation of the limited partnership.
which the partnership is expected to exist.
- **(f)** The **contributions** made by

each limited partner (e.g., cash, property) and 4. **Substantial Compliance**:
the agreed value of non-cash contributions.
- The partnership is considered legally
- **(g)** Any **additional contributions** formed when the partners have
limited partners must make, including when **substantially complied in good faith** with
or under what circumstances they are the above requirements.
required.
- **(h)** When the contributions of each

limited partner should be **returned** (if #### Example:
applicable).
John, Lisa, and Mike want to form a limited
partnership. John and Lisa will be general
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partners, and Mike will be a limited partner. - **Cash**: This refers to money that the
They sign and file a certificate stating the limited partner invests in the partnership.
name of their business as “XYZ Limited,”
explain their business, specify their office - **Property**: This includes any tangible
location, list their names and contributions, or intangible assets (like real estate,
and agree on profit-sharing. They file this equipment, or intellectual property) that the
certificate with the SEC, and once approved, limited partner provides to the partnership.
their limited partnership is officially formed.
2. **Exclusion of Services**:
### Summary:
- Limited partners **cannot** contribute
To form a **limited partnership**, the services. This means that any work or labor
individuals must create a certificate that provided by a limited partner does not count
provides detailed information about the as a contribution to the partnership. Their role
business and its partners, including their is more of a passive investor rather than an
roles, contributions, and rights. The certificate active participant in managing the business.
must be filed with the **Securities and
Exchange Commission (SEC)**. The
partnership is legally formed once these steps
#### Example:
are completed in good faith, ensuring
transparency and compliance with legal If Mike is a limited partner in a limited
requirements. partnership, he can invest $10,000 in cash or
contribute a piece of machinery worth
Art. 1845. The contributions of a limited
$10,000. However, if Mike offers to manage
partner may be cash or property, but
the partnership’s social media as a service,
not services.
this contribution would not be accepted under
the terms of Article 1845.
Contributions of Limited Partners
### Summary:
**Article 1845** specifies the nature of
Limited partners in a limited partnership can
contributions that limited partners can make
contribute cash or property to the business
to a limited partnership.
but are prohibited from contributing services.
This structure ensures that limited partners
maintain their status as investors rather than
#### Key Points: becoming active participants in the
management of the partnership.
Art. 1846. The surname of a limited

1. **Types of Contributions**: partner shall not appear in the
partnership name unless:
- Limited partners can contribute either:
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(1) It is also the surname of a general became a limited partner. In this case, the
partner, or continued use of the surname is allowed.
(2) Prior to the time when the limited

partner became such, the business has
been carried on under a name in which 2. **Liability Implications**:
his surname appeared.
- If a limited partner’s surname appears in
A limited partner whose surname the partnership name in violation of this
appears in a partnership name contrary article, they will be treated as a **general
to the provisions of the first paragraph partner**. This means they can be held liable
is liable as a general partner to for the debts and obligations of the
partnership creditors who extend partnership if creditors extend credit to the
credit to the partnership without actual partnership without knowing that they are not
knowledge that he is not a general a general partner.
partner.
### Explanation of Article 1846 – Surname of

#### Example:
Limited Partners in Partnership Name
- If a limited partner named "Smith" joins a
partnership where the name is "ABC
**Article 1846** addresses the use of Partners," "Smith" cannot have their surname
surnames of limited partners in the name of a included in the name unless:
limited partnership and the implications of
- There is also a general partner with the
such usage.
surname "Smith," or
- The partnership has previously operated

#### Key Points: under a name that included "Smith."
1. **Surname Restrictions**: If "Smith" is included in the name without

meeting these conditions, creditors who
- The surname of a limited partner extend credit without knowing "Smith" is not
**cannot** be included in the partnership a general partner could hold "Smith"
name unless: personally liable for partnership debts.
- **(1)** It is also the surname of a general

partner. This means that if a general partner
has the same surname, it can be included in ### Summary:
the partnership name.
Article 1846 restricts the use of a limited
- **(2)** The partnership has been partner's surname in a partnership name to
operating under a name that included the protect the limited partner’s liability status. If
limited partner's surname **before** they their surname appears contrary to the rules,
they risk being treated as a general partner,
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making them liable for the partnership's 2. **Conditions for Liability**:

debts.
- A party to the certificate can be held liable
Art. 1847. If the certificate contains a if they:
false statement, one who suffers loss by
reliance on such statement may hold - **(1)** Knew the statement was false **at
liable any party to the certificate who the time** they signed the certificate, or
knew the statement to be false:
- **(2)** Became aware of the falsehood
(1) At the time he signed the certificate, **subsequently**, but within a reasonable
or time frame before anyone relied on that
statement. This gives them the opportunity to
(2) Subsequently, but within a cancel or amend the certificate or to file a
sufficient time before the statement petition for its cancellation or amendment as
was relied upon to enable him to cancel outlined in **Article 1865**.
or amend the certificate, or to file a
petition for its cancellation or
amendment as provided in Article 1865.
#### Example:
### Explanation of Article 1847 – Liability for
- Suppose a limited partnership's certificate
False Statements in Limited Partnership
states that all limited partners have made
Certificates
their required cash contributions. If a limited
partner (let's call them "Partner A") knows
this statement is false—meaning some
**Article 1847** addresses the consequences contributions haven't been made—they could
of false statements in the certificate of a be held liable for any losses incurred by third
limited partnership and the liability of those parties (like creditors) who relied on that
who knowingly contribute to such information.
misinformation.
If Partner A signed the certificate with

#### Key Points: knowledge of its inaccuracy, or learned of the
falsehood before it was relied upon by others
and failed to act (such as by amending the
certificate), they could be held responsible for
1. **False Statements**:
the consequences.
- If the certificate of a limited partnership
contains any false statements, parties who
suffer losses due to reliance on those false ### Summary:
statements can hold liable any signatories of
the certificate who knew the statement was Article 1847 establishes that parties can be
false. held liable for losses suffered by others due to
false statements in a limited partnership
certificate. Liability arises when a party knew
the statement was false when signing or
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became aware of the falsehood before it was - **(2)** They also **take part in the
relied upon but failed to act to correct it. control of the business**. This means actively
managing or participating in the day-to-day
Art. 1848. A limited partner shall not operations and decision-making processes of
become liable as a general partner the partnership.
unless, in addition to the exercise of his
rights and powers as a limited partner,
he takes part in the control of the
business. #### Example:
### Explanation of Article 1848 – Limited - Consider a limited partner named "Partner
Partner Liability B." Partner B has invested in a limited
partnership but has not participated in any
management decisions or operations. As long
as they stay within their role as a limited
**Article 1848** outlines the conditions under partner, they maintain limited liability.
which a limited partner can become liable as a
general partner in a limited partnership.
However, if Partner B starts making

management decisions or controlling business
#### Key Points: operations, they risk losing their limited
liability status. If the business incurs debts,
Partner B could be held liable for those debts
just like a general partner.
1. **Limited Liability**:
- Limited partners are typically shielded

from personal liability for the debts and
### Summary:
obligations of the partnership beyond their
contributions. This protection is a defining Article 1848 states that a limited partner
feature of a limited partnership. maintains limited liability and will not become
liable as a general partner unless they not only
exercise their rights as a limited partner but
also actively participate in controlling the
2. **Conditions for Liability as a General
business. Engaging in management activities
Partner**:
can expose them to personal liability for
- A limited partner will **not** be held liable partnership obligations.
as a general partner unless they do two things:
Art. 1849. After the formation of a lifted
- **(1)** They exercise their rights and partnership, additional limited
powers as a limited partner, which usually partners may be admitted upon filing
involves participation in the limited an amendment to the original
partnership's decisions within the scope certificate in accordance with the
allowed for limited partners. requirements of Article 1865.
### Explanation of Article 1849 – Admission

of Additional Limited Partners
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partner and two limited partners. If they

decide to bring in an additional limited
**Article 1849** provides the procedure for partner named "Partner C," they must prepare
admitting additional limited partners to an an amendment to their original partnership
existing limited partnership after its initial certificate. This amendment will state the
formation. addition of Partner C and any related details
as required by the law.
#### Key Points:

### Summary:
Article 1849 allows the admission of

1. **Admission of Additional Limited
additional limited partners to a limited
Partners**:
partnership after its formation. This is done
by filing an amendment to the original
- Once a limited partnership is established, it
partnership certificate, following the
is possible to bring in more limited partners.
requirements specified in Article 1865. This
This allows the partnership to expand its
process helps maintain legal clarity regarding
resources and potentially enhance its business
the partnership structure and obligations.
operations.
Art. 1850. A general partner shall have
all the rights and powers and be subject
2. **Filing an Amendment**: to all the restrictions and liabilities of a
partner in a partnership without
- To admit additional limited partners, the limited partners. However, without the
existing partners must file an **amendment** written consent or ratification of the
to the original partnership certificate. This specific act by all the limited partners, a
amendment must adhere to the specific general partner or all of the general
requirements outlined in **Article 1865**. partners have no authority to:
(1) Do any act in contravention of the

certificate;
3. **Legal Compliance**:
(2) Do any act which would make it
- The amendment process ensures that the impossible to carry on the ordinary
changes in the partnership structure are business of the partnership;
documented officially and comply with legal
standards. This protects both the existing and (3) Confess a judgment against the
new partners by providing clarity on the partnership;
partnership’s composition and obligations.
(4) Possess partnership property, or
assign their rights in specific
partnership property, for other than a
#### Example: partnership purpose;
- Suppose a limited partnership named "ABC (5) Admit a person as a general partner;
Limited" has been formed with one general
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(6) Admit a person as a limited partner, limited partners, the general partner(s)
unless the right so to do is given in the cannot perform the following actions:
certificate;
- **Contravene the partnership
(7) Continue the business with certificate**: Any act that goes against the
partnership property on the death, terms of the partnership certificate is not
retirement, insanity, civil interdiction allowed.
or insolvency of a general partner,
unless the right so to do is given in the - **Disrupt business operations**: General
certificate. partners cannot take actions that would make
it impossible for the partnership to continue
### Explanation of Article 1850 – Rights and its business.
Limitations of General Partners in a Limited
Partnership - **Confess judgment**: General partners
cannot admit liability on behalf of the
partnership in court without limited partners'
consent.
**Article 1850** outlines the rights and
limitations of a general partner in a **limited - **Misuse partnership property**: General
partnership**. It emphasizes that general partners cannot use or assign partnership
partners in a limited partnership have the property for personal reasons or for anything
same rights, powers, and liabilities as partners outside the partnership’s business.
in a general partnership, but there are specific
restrictions that require the consent of the - **Admit new general partners**: New
limited partners. general partners cannot be added without all
limited partners' consent.
- **Admit new limited partners**: Unless

#### Key Points: the partnership certificate allows it, general
partners cannot admit new limited partners
without consent.
1. **General Powers and Rights**: - **Continue the business after major

events**: On the **death**, **retirement**,
- A general partner in a limited partnership
**insanity**, **civil interdiction**, or
enjoys all the rights and powers similar to
**insolvency** of a general partner, the
those in a general partnership, meaning they
business cannot continue using partnership
have the authority to manage the business and
property unless the partnership certificate
bind the partnership in normal business
specifies otherwise.
dealings.
#### Example:
2. **Restrictions on Authority**:
If the general partners of "XYZ Limited
- Without **written consent** or
Partnership" want to sell a major partnership
**ratification** (approval after the act) by all
asset for personal gain or admit a new partner
without the limited partners' consent, they
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would be acting beyond their authority under **Article 1851** outlines the rights that a
Article 1850. **limited partner** has in a limited
partnership. Although limited partners are not
involved in the daily control of the business,
they are still granted certain rights to protect
### Summary:
their investment and ensure transparency
within the partnership.
Article 1850 grants general partners in a
limited partnership the same rights as general
partners in a general partnership. However, to
protect the interests of limited partners, #### Key Points:
certain actions—like altering the partnership
structure or making major business
decisions—cannot be done without the
**written consent** of all limited partners. 1. **Access to Partnership Books**:
These restrictions ensure that general
- Limited partners have the **right to
partners cannot take actions that would harm
inspect** and **copy the partnership books**.
the partnership or affect its business
These books must be kept at the partnership’s
operations without agreement.
**principal place of business**, and access
Art. 1851. A limited partner shall have must be granted at a **reasonable hour**.
the same rights as a general partner to:
- This right ensures that limited partners can
(1) Have the partnership books kept at review the financial health and transactions of
the principal place of business of the the partnership.
partnership, and at a reasonable hour
to inspect and copy any of them;
2. **Right to Information and Accounts**:
(2) Have on demand true and full
information of all things affecting the
- Limited partners can **demand full and
partnership, and a formal account of
accurate information** on matters affecting
partnership affairs whenever
the partnership.
circumstances render it just and
reasonable; and - They also have the right to request a
**formal accounting** of partnership affairs,
(3) Have dissolution and winding up by
particularly when it is **just and
decree of court.
reasonable**, for instance, if there is suspicion
of mismanagement.
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 of his contribution as 3. **Right to Dissolution and Winding Up**:
provided in Articles 1856 and 1857.
- Limited partners have the right to request
### Explanation of Article 1851 – Rights of a the **dissolution and winding up** of the
Limited Partner partnership by a **court decree**. This could
happen when there is a serious issue, such as a
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breach of the partnership agreement or his exercise of the rights of a limited

mismanagement of the partnership. partner, a general partner with the
person or in the partnership carrying
on the business, or bound by the
obligations of such person or
4. **Right to Share in Profits**:
partnership, provided that on
ascertaining the mistake he promptly
- Limited partners are entitled to receive a
renounces his interest in the profits of
**share of the profits** or other forms of
the business, or other compensation by
compensation, as well as the **return of their
way of income.
contribution** (capital) as detailed in Articles
**1856** and **1857**.
### Explanation of Article 1852 – Protection
for an Erroneous Limited Partner
#### Example:
**Article 1852** provides protection for
In a partnership named "ABC Limited
individuals who, in good faith, mistakenly
Partnership," if a limited partner suspects the
believe they are limited partners in a
general partners are mismanaging the
partnership but find out later that this is not
partnership’s funds, they can request access to
legally the case. The article ensures that these
the financial records, ask for a formal
individuals are not automatically treated as
accounting, and, if necessary, petition the
general partners, which would expose them to
court for dissolution of the partnership.
higher liability, as long as they take corrective
action upon realizing the mistake.
### Summary:
Article 1851 grants limited partners specific #### Key Points:

rights to ensure transparency and protect
their investment. These rights include
inspecting the partnership’s books, receiving
1. **Mistaken Belief of Limited Partner
information about the partnership’s affairs,
Status**:
sharing in the profits, and, if necessary,
initiating the dissolution and winding up of - A person who contributes capital to a
the partnership through a court process. This business may **erroneously believe** they are
ensures that limited partners remain informed a limited partner in a **limited partnership**.
and protected, despite not being involved in This can happen due to misunderstandings or
the business's day-to-day operations. incomplete legal processes when setting up
the partnership.
Art. 1852. Without prejudice to the
provisions of Article 1848, a person
who has contributed to the capital of a
business conducted by a person or 2. **Not Automatically a General Partner**:
partnership erroneously believing that
he has become a limited partner in a - Even if the person exercises rights that
limited partnership, is not, by reason of typically belong to a **limited partner**, such
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as inspecting books or requesting information, Article 1852 provides a safeguard for

they are **not automatically considered a individuals who mistakenly believe they are
general partner**. limited partners. As long as they **promptly
renounce any claim** to profits or income
- General partners have **unlimited upon discovering the mistake, they will not be
liability** for the partnership’s debts, while treated as general partners and will not be
limited partners are only liable up to the liable for the partnership's obligations. This
amount of their contribution. This article ensures fairness and protects investors from
protects the person from unintentionally unintended liabilities.
assuming the broader liabilities of a general
partner. Art. 1853. A person may be a general
partner and a limited partner in the
same partnership at the same time,
provided that this fact shall be stated in
3. **Corrective Action**:
the certificate provided for in Article
1844.
- Upon **realizing the mistake**, the person
must take action by **promptly renouncing**:
A person who is a general, and also at
the same time a limited partner, shall
- Any **interest in the profits** of the
have all the rights and powers and be
business, or
subject to all the restrictions of a
- Any **other compensation** by way of general partner; except that, in respect
income. to his contribution, he shall have the
rights against the other members which
- This action is necessary to avoid being held he would have had if he were not also a
liable for the obligations of the partnership as general partner.
a general partner.
### Explanation of Article 1853 – Dual Role

#### Example: of General and Limited Partner
If Sarah contributes money to a business and

believes she has become a limited partner but
later discovers that the necessary legal steps **Article 1853** allows a person to
were not followed to form a limited simultaneously be both a **general partner**
partnership, she will not automatically be held and a **limited partner** in the same
liable as a general partner. However, once partnership, as long as this dual role is
Sarah realizes this error, she must quickly properly declared in the partnership
renounce any claim to the business’s profits or certificate (as required by **Article 1844**).
income to ensure she remains protected from This situation is unique because it combines
general liability. two different types of roles in the partnership,
each with different rights and liabilities.
### Summary:
#### Key Points:
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4. **Separation of Roles**:
1. **Dual Role Allowed**: - The article clarifies that while the person
functions as a general partner in terms of
- A person may hold both the position of a overall management and liability, they
**general partner** and a **limited partner** maintain their **limited partner rights**
in the same partnership. concerning their **specific contribution** to
the partnership. This creates a separation
- The fact that a partner is fulfilling both
between the roles, offering some protection
roles must be clearly **stated in the
over the limited partner’s financial investment
certificate** filed with the Securities and
while still imposing broader responsibilities as
Exchange Commission (SEC), as per Article
a general partner.
1844.
#### Example:
2. **Rights and Powers of a General
Partner**: If John invests $100,000 into a partnership as
a **limited partner** but also serves as a
- As a **general partner**, the person has
**general partner** managing the business,
full **management authority** and
his dual role would be valid as long as it's
**unlimited liability** for the debts and
properly declared in the partnership
obligations of the partnership. This means
certificate. While John would be **personally
they can make decisions regarding the
liable** for the partnership’s obligations as a
operation of the partnership but are also
general partner, in respect to his $100,000
personally liable for partnership debts beyond
contribution, he retains the rights of a limited
their initial contribution.
partner, such as receiving a share of profits
and the return of his capital.
3. **Rights as a Limited Partner**:

### Summary:
- In respect to the **contribution** made as
a limited partner, the person retains the
**Article 1853** permits a person to act as
**limited partner’s rights**. These rights
both a **general** and a **limited partner**
include a limited partner’s claim to **profits**
within the same partnership, provided that
and the right to the **return of their
this is declared in the official certificate. The
contribution**, just as if they were not also a
partner has full management powers and
general partner.
personal liability as a general partner but
retains limited liability and rights in relation
- As a limited partner, their liability for
to their contribution as a limited partner. This
partnership debts is limited to the amount of
article provides flexibility for partners to
their contribution, but only in respect to this
balance involvement in the business with
contribution, not their general partner
protection for their personal investment.
obligations.
Art. 1854. A limited partner also may
loan money to and transact other
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business with the partnership, and, - A **limited partner** is permitted to

unless he is also a general partner, **loan money** to the partnership or engage
receive on account of resulting claims in other business transactions, just like any
against the partnership, with general external creditor.
creditors, a pro rata share of the assets.
No limited partner shall in respect to - Unless the limited partner is also a
any such claim: **general partner**, they can receive
repayment or compensation for these
(1) Receive or hold as collateral security transactions in line with other general
and partnership property, or creditors. This means that in the case of
liquidation or debt payment, they have the
(2) Receive from a general partner or right to a **pro rata** (fair) share of the
the partnership any payment, partnership's assets along with other
conveyance, or release from liability if creditors.
at the time the assets of the partnership
are not sufficient to discharge
partnership liabilities to persons not
claiming as general or limited partners. 2. **Restrictions on Collateral and
Payments**:
The receiving of collateral security, or
payment, conveyance, or release in - The article restricts a limited partner from
violation of the foregoing provisions is receiving certain benefits in relation to any
a fraud on the creditors of the claims against the partnership if the
partnership. partnership's assets are insufficient to pay
**outside creditors** (those who are neither
### Explanation of Article 1854 – Limited general nor limited partners). Specifically, a
Partner's Loans and Transactions with the limited partner:
Partnership
- **Cannot receive or hold collateral** that
is partnership property to secure their claims.
**Article 1854** establishes the rights of a - **Cannot receive payment** or other

**limited partner** to engage in financial compensation from the general partner or the
transactions with the partnership, such as partnership if the partnership does not have
**loaning money** or engaging in business enough assets to cover its debts to outside
transactions with the partnership. However, creditors.
there are restrictions and protections in place
to ensure fairness, especially in the event of
insolvency or insufficient partnership assets.
3. **Protection for External Creditors**:
- The purpose of these restrictions is to

#### Key Points: ensure that **external creditors** (not related
to the partnership) are not at a disadvantage
compared to limited partners when the
partnership is in financial trouble. If a limited
1. **Limited Partner's Right to Loan and partner receives collateral or payment when
Transact Business**: the partnership is insolvent, it would be
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considered **fraud** against the partnership's of their contributions, as to their

creditors. compensation by way of income, or as
to any other matter. If such an
- This means that limited partners, despite agreement is made it shall be stated in
having rights to engage in business the certificate, and in the absence of
transactions with the partnership, are such a statement all the limited
**subject to fair distribution rules** and partners shall stand upon equal
cannot undermine the rights of external footing.
creditors.
### Explanation of Article 1855 – Priority
Among Limited Partners
#### Example:
If Maria, a limited partner, loans $50,000 to **Article 1855** addresses the possibility of
her partnership, she can expect to receive creating **priority arrangements** among
repayment for this loan just like any external limited partners in a partnership. It allows
creditor. However, if the partnership becomes limited partners to agree that one or more of
insolvent and does not have enough assets to them can have preferential treatment in
pay its external debts, Maria cannot take certain matters, such as:
partnership property as collateral for her loan.
Similarly, she cannot receive any payment
from the partnership if doing so would leave
external creditors unpaid. 1. **Return of Contributions**: Some limited
partners may get back their initial investments
before others.
### Summary: 2. **Compensation by Way of Income**:

Some limited partners might receive income
**Article 1854** allows a **limited partner** or profits from the partnership before others.
to engage in financial transactions, such as
**loaning money** to the partnership, and to 3. **Other Matters**: Any other form of
be treated as a **creditor** in the event of priority can be agreed upon.
liquidation or repayment. However, it places
important restrictions to ensure that
**external creditors** are not disadvantaged.
#### Key Points:
A limited partner cannot receive collateral or
payment from the partnership if the
partnership's assets are insufficient to cover
external debts, as doing so would be 1. **Priority Agreement**:
considered **fraud** against the creditors.
- The article allows the limited partners to
Art. 1855. Where there are several **agree among themselves** that certain
limited partners the members may partners will have priority in receiving
agree that one or more of the limited benefits from the partnership. This could
partners shall have a priority over involve the return of their financial
other limited partners as to the return contributions or the distribution of profits.
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**priority** over others regarding the

**return of contributions, compensation, or
2. **Requirement to State Priority in the other matters**. Such an agreement must be
Certificate**: **included in the partnership certificate**;
otherwise, all limited partners will be treated
- If such an agreement is made, it must be
**equally** in these matters.
**stated in the partnership certificate** (as
required by **Article 1844**). This certificate Art. 1856. A limited partner may receive
is a formal document filed with the from the partnership the share of the
**Securities and Exchange Commission** and profits or the compensation by way of
outlines key details about the partnership. income stipulated for in the certificate;
provided that after such payment is
- If the priority agreement is **not included
made, whether from property of the
in the certificate**, all limited partners will be
partnership or that of a general
treated equally, meaning they will share
partner, the partnership assets are in
profits, income, and the return of their
excess of all liabilities of the
contributions **on equal footing**.
partnership except liabilities to limited
partners on account of their
contributions and to general partners.
3. **Equality in the Absence of Agreement**:
### Explanation of Article 1856 – Receiving
- In the absence of an explicit agreement in Profits or Income by Limited Partners
the partnership certificate, the **default
rule** applies, and all limited partners will be
treated equally in terms of contributions,
**Article 1856** outlines the circumstances
profits, and other partnership rights.
under which a **limited partner** may
receive their share of the partnership’s profits
or income. It emphasizes certain conditions to
#### Example: ensure that the partnership remains solvent
after making such payments.
Suppose a partnership has three limited
partners: Anna, Ben, and Carla. They agree
that Anna, who invested the most, should
#### Key Points:
have priority in getting back her contribution
before Ben and Carla. This agreement must be
**included in the partnership certificate**. If
it is not, then Anna, Ben, and Carla will all be 1. **Right to Receive Profits or
treated equally when the partnership Compensation**:
distributes profits or returns contributions.
- A **limited partner** is entitled to receive
the share of profits or compensation as agreed
in the **partnership certificate**. This
### Summary:
amount can be paid either from the
partnership’s assets or, in some cases, from
**Article 1855** allows limited partners to
the assets of a general partner.
agree that some members may have
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**Article 1856** allows limited partners to

receive their **share of profits or income** as
2. **Condition for Payment**: agreed, but only if the partnership’s assets
**remain greater than its liabilities** after the
- The partnership must ensure that, **after
payment. This rule ensures that the
the payment** to the limited partner, the
partnership remains solvent and protects
remaining **assets are greater than all
creditors, general partners, and other limited
liabilities**. This means the partnership must
partners from financial harm.
still have enough assets to cover its debts and
obligations, except for those owed to: Art. 1857. A limited partner shall not
receive from a general partner or out of
- Limited partners (contributions they’ve
partnership property any part of his
made to the partnership).
contributions until:
- General partners.
(1) All liabilities of the partnership,
except liabilities to general partners
and to limited partners on account of
3. **Protection of Partnership Solvency**: their contributions, have been paid or
there remains property of the
- The article protects the solvency of the partnership sufficient to pay them;
partnership. Payments to limited partners
should not be made if doing so would leave (2) The consent of all members is had,
the partnership with insufficient assets to unless the return of the contribution
cover its general liabilities. This ensures that may be rightfully demanded under the
creditors and other partners are not provisions of the second paragraph;
disadvantaged by the distribution of profits. and
(3) The certificate is cancelled or so

amended as to set forth the withdrawal
#### Example: or reduction.
Suppose a limited partner, Alice, is entitled to Subject to the provisions of the first
receive 20% of the profits from a partnership. paragraph, a limited partner may
Before paying Alice her share, the partnership rightfully demand the return of his
must ensure that its remaining assets are contribution:
enough to cover all its liabilities (like loans or
payments owed to suppliers), except for (1) On the dissolution of a partnership;
contributions from other limited partners or or
the interests of general partners. If paying
(2) When the date specified in the
Alice would make the partnership unable to
certificate for its return has arrived, or
pay these liabilities, the payment cannot be
made.
(3) After he has six months’ notice in
writing to all other members, if no time
is specified in the certificate, either for
### Summary: the return of the contribution or for the
dissolution of the partnership.
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In the absence of any statement in the 2. **Rightful Demand for Return:** A limited
certificate to the contrary or the partner can request the return of their
consent of all members, a limited contribution in these cases:
partner, irrespective of the nature of
his contribution, has only the right to - Upon the dissolution of the partnership.
demand and receive cash in return for
- When the date specified in the partnership
his contribution.
certificate for return has arrived.
A limited partner may have the
- After providing six months' written notice
partnership dissolved and its affairs
if no date is specified.
wound up when:
(1) He rightfully but unsuccessfully

demands the return of his contribution,
3. **Form of Return:** Unless otherwise
or
stated in the certificate or with the consent of
all members, the contribution must be
(2) The other liabilities of the
returned in cash.
partnership have not been paid, or the
partnership property is insufficient for
their payment as required by the first
paragraph, No. 1, and the limited 4. **Dissolution and Winding Up:** The
partner would otherwise be entitled to limited partner can request the partnership be
the return of his contribution. dissolved and wound up if:
Article 1857 establishes the conditions under - Their rightful demand for a return of the
which a limited partner can receive their contribution is unsuccessful.
contributions back from the partnership:
- The partnership is unable to pay other
liabilities, and the limited partner is otherwise
entitled to a return of their contribution.
1. **Restrictions on Returning
Contributions:** A limited partner cannot
receive their contributions unless:
This article provides the framework for when
- All partnership liabilities (except to other and how a limited partner can retrieve their
general or limited partners for their contributions, ensuring liabilities are handled
contributions) have been settled or there are first to protect the interests of creditors and
enough assets to cover them. the remaining partners.
- All members consent to the return, or a Art. 1858. A limited partner is liable to
rightful demand is made. the partnership:
- The partnership certificate is cancelled or (1) For the difference between his
updated to reflect the withdrawal or reduction contribution as actually made and that
of the limited partner’s interest. stated in the certificate as having been
made; and
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(2) For any unpaid contribution which - A limited partner is responsible for:
he agreed in the certificate to make in
the future at the time and on the 1. The difference between the contribution
conditions stated in the certificate. they actually made and what is stated in the
partnership certificate.
A limited partner holds as trustee for
the partnership: 2. Any unpaid contribution they agreed to
make in the future, as stated in the certificate.
(1) Specific property stated in the
certificate as contributed by him, but
which was not contributed or which has
2. **Trustee Role:**
been wrongfully returned, and
- A limited partner holds specific property or
(2) Money or other property wrongfully
contributions as a trustee for the partnership
paid or conveyed to him on account of
when:
his contribution.
1. The property they were supposed to
The liabilities of a limited partner as set
contribute was not actually contributed or was
forth in this article can be waived or
wrongfully returned.
compromised only by the consent of all
members; but a waiver or compromise
2. They wrongfully received money or other
shall not affect the right of a creditor of
property due to their contribution.
a partnership who extended credit or
whose claim arose after the filing and
before a cancellation or amendment of
the certificate, to enforce such 3. **Waiver or Compromise of Liabilities:**
liabilities.
- The partnership members can waive or
When a contributor has rightfully compromise the liabilities of a limited partner,
received the return in whole or in part but such waivers do not affect creditors'
of the capital of his contribution, he is rights. Creditors who extended credit between
nevertheless liable to the partnership the filing and amendment/cancellation of the
for any sum, not in excess of such certificate can still enforce the liabilities.
return with interest, necessary to
discharge its liabilities to all creditors
who extended credit or whose claims
4. **Liability After Return of Contribution:**
arose before such return.
- If a limited partner has rightfully received
Article 1858 outlines the liabilities of a limited
the return of their contribution (partially or
partner to the partnership, particularly
fully), they are still liable to the partnership up
regarding their contributions, and specifies
to the amount returned (with interest) if
their role as a trustee for the partnership in
necessary to satisfy debts owed to creditors
certain situations:
who extended credit before the return.
1. **Liability for Contributions:**
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This article emphasizes the responsibility of The substitution of the assignee as a

limited partners to meet their financial limited partner does not release the
obligations to the partnership and ensure assignor from liability to the
creditors' claims are satisfied before receiving partnership under Articles 1847 and
their contributions back. 1848.
Art. 1859. A limited partner’s interest is Article 1859 deals with the assignability of a
assignable. limited partner's interest in a partnership and
the implications of such assignments:
A substituted limited partner is a
person admitted to all the rights of a
limited partner who has died or has
assigned his interest in a partnership. 1. **Assignability of Interest:**
An assignee, who does not become a - A limited partner's interest in the

substituted limited partner, has no partnership can be assigned to another
right to require any information or person.
account of the partnership transactions
or to inspect the partnership books; he
is only entitled to receive the share of
2. **Substituted Limited Partner:**
the profits or other compensation by
way of income, or the return of his - A substituted limited partner is someone
contribution, to which his assignor who is admitted to all the rights of a limited
would otherwise be entitled. partner after the original limited partner has
either died or assigned their interest in the
An assignee shall have the right to
partnership.
become a substituted limited partner if
all the members consent thereto or if
the assignor, being thereunto
empowered by the certificate, gives the 3. **Rights of an Assignee:**
assignee that right.
- An assignee who does not become a
An assignee becomes a substituted substituted limited partner has limited rights:
limited partner when the certificate is
appropriately amended in accordance - They cannot require information about
with Article 1865. partnership transactions or inspect
partnership books.
The substituted limited partner has all
the rights and powers, and is subject to - They are only entitled to receive the share
all the restrictions and liabilities of his of profits, compensation, or the return of their
assignor, except those liabilities of contribution that their assignor would have
which he was ignorant at the time he received.
became a limited partner and which
could not be ascertained from the
certificate.
4. **Becoming a Substituted Limited
Partner:**
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- An assignee can become a substituted partnership, unless the business is

limited partner if: continued by the remaining general
partners:
- All current members of the partnership
consent to it. (1) Under a right so to do stated in the
certificate, or
- The assignor has the authority to grant
this right as specified in the partnership (2) With the consent of all members.
certificate.
**Article 1860** outlines the circumstances
- The assignee becomes a substituted limited under which a partnership is dissolved in the
partner once the partnership certificate is event of certain events affecting a general
amended appropriately. partner. Here’s a breakdown of its key
provisions:
5. **Rights and Liabilities:**

1. **Events Leading to Dissolution:**
- A substituted limited partner assumes all
the rights and powers of the assignor, along - The retirement, death, insolvency, insanity,
with any restrictions and liabilities. However, or civil interdiction (legal incapacity) of a
they are not liable for any obligations of which general partner results in the dissolution of
they were unaware at the time of becoming a the partnership. These events trigger a
limited partner, provided these liabilities reevaluation of the partnership’s continuity.
could not be found in the partnership
certificate.
2. **Continuing the Business:**
6. **Liability of the Assignor:** - Despite these events leading to dissolution,

the partnership can continue under two
- The substitution of the assignee as a conditions:
limited partner does not relieve the original
assignor from their liabilities to the 1. **Certificate Provision:** If the
partnership as outlined in Articles 1847 and partnership certificate explicitly grants the
1848. remaining general partners the right to
continue the business after such events, they
may do so without dissolving the partnership.
This article clarifies the conditions under 2. **Consent of All Members:** If all
which a limited partner’s interest can be members (including any limited partners)
assigned and the rights and responsibilities of consent to continue the business, the
both the assignee and the original partner in a partnership can also proceed without
limited partnership. dissolution.
Art. 1860. The retirement, death,

insolvency, insanity or civil interdiction
of a general partner dissolves the ### Summary
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In summary, Article 1860 states that the 2. **Liability of the Estate:**

partnership dissolves automatically with the
retirement or death of a general partner - The estate of the deceased limited partner
unless the remaining general partners have is responsible for all liabilities that the limited
the right to continue the business as specified partner had as a limited partner. This means
in the partnership certificate or if all members that any debts or obligations the limited
agree to continue. This provision is important partner incurred during their partnership
as it allows flexibility in partnership tenure can be claimed against their estate.
operations, providing a path to maintain
business continuity even in the face of
significant changes among general partners.
### Summary
Art. 1861. On the death of a limited
In summary, Article 1861 ensures that the
partner his executor or administrator
executor or administrator of a deceased
shall have all the rights of a limited
limited partner can manage their partnership
partner for the purpose of setting his
interests and settle their estate. Furthermore,
estate, and such power as the deceased
the deceased partner's estate is liable for any
had to constitute his assignee a
obligations arising from their status as a
substituted limited partner.
limited partner, ensuring creditors can seek
repayment from the estate for debts incurred
The estate of a deceased limited partner
by the partner. This provision protects the
shall be liable for all his liabilities as a
partnership's interests and provides a
limited partner.
framework for handling the death of a limited
**Article 1861** addresses the rights and partner.
liabilities of a limited partner's estate upon
Art. 1862. On due application to a court
their death. Here’s a breakdown of the article:
of competent jurisdiction by any
creditor of a limited partner, the court
may charge the interest of the indebted
1. **Rights of the Executor or limited partner with payment of the
Administrator:** unsatisfied amount of such claim, and
may appoint a receiver, and make all
- Upon the death of a limited partner, their other orders, directions and inquiries
executor or administrator inherits all rights of which the circumstances of the case
the deceased limited partner. This includes: may require.
- The ability to manage the deceased The interest may be redeemed with the
partner's interests in the partnership for the separate property of any general
purpose of settling their estate. partner, but may not be redeemed with
partnership property.
- The authority to exercise any powers the
deceased had to designate an assignee as a The remedies conferred by the first
substituted limited partner, allowing for paragraph shall not be deemed
continuity in the partnership structure. exclusive of others which may exist.
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Nothing in this Chapter shall be held to partnership assets from being used to satisfy
deprive a limited partner of his the individual debts of a limited partner.
statutory exemption.
4. **Non-Exclusive Remedies:**
**Article 1862** outlines the procedures and
remedies available to creditors of a limited - The remedies available to creditors as
partner when there are outstanding debts. outlined in this article are not exclusive. This
Here’s a detailed explanation: means creditors may have additional legal
avenues to pursue their claims beyond what is
specified in this article.
1. **Court Application by Creditors:**
- A creditor of a limited partner can apply to 5. **Statutory Exemption:**

a court of competent jurisdiction to have the
limited partner's interest in the partnership - The provisions in this article do not deprive
charged for payment of any unpaid debts. This a limited partner of any statutory exemptions
means that the creditor can seek legal that may apply. This clause protects limited
recognition that the limited partner’s share in partners from losing certain rights or
the partnership can be used to satisfy the privileges that are guaranteed by law.
outstanding claim.
### Summary
2. **Court Powers:**
In summary, Article 1862 provides creditors of
- The court has the authority to: limited partners a legal framework to seek
repayment of debts by charging the limited
- Appoint a receiver to manage the limited partner's interest in the partnership. It grants
partner's interest in the partnership. courts the power to appoint receivers and
issue necessary orders while ensuring that the
- Make any other necessary orders or partnership's assets remain protected.
directions that fit the circumstances of the Additionally, it clarifies that these remedies
case, allowing for flexible and appropriate are not exclusive and that limited partners
responses to various situations. retain certain statutory exemptions.
Art. 1863. In setting accounts after

dissolution the liabilities of the
3. **Redemption of Interest:**
partnership shall be entitled to
payment in the following order:
- The interest of the indebted limited partner
may be redeemed using the separate property
(1) Those to creditors, in the order of
of any general partner, but it cannot be
priority as provided by law, except
redeemed using partnership property. This
those to limited partners on account of
distinction is important because it protects the
their contributions, and to general
partners;
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(2) Those to limited partners in respect partners regarding their contributions and
to their share of the profits and other general partners.
compensation by way of income on
their contributions;
(3) Those to limited partners in respect 2. **Limited Partners - Profits and

to the capital of their contributions; Compensation**:
(4) Those to general partners other - Limited partners are next in line to receive
than for capital and profits; payments concerning their share of profits
and any other compensation related to their
(5) Those to general partners in respect contributions.
to profits;
(6) Those to general partners in respect

to capital. 3. **Limited Partners - Capital
Contributions**:
Subject to any statement in the
certificate or to subsequent agreement, - After settling profits, limited partners are
limited partners share in the entitled to payment in relation to their initial
partnership assets in respect to their capital contributions to the partnership.
claims for capital, and in respect to
their claims for profits or for
compensation by way of income on
4. **General Partners - Other Claims**:
their contribution respectively, in
proportion to the respective amounts of - Payments to general partners for liabilities
such claims. not associated with capital or profits are
settled next.
**Article 1863** outlines the order in which
the liabilities of a partnership are settled after
its dissolution. This is crucial for ensuring that
creditors and partners receive their due 5. **General Partners - Profits**:
amounts fairly and systematically. Here’s a
detailed breakdown of the provisions: - General partners then receive payments
pertaining to their share of the profits.
### Order of Payment for Partnership

Liabilities 6. **General Partners - Capital
Contributions**:
- Finally, general partners are paid for their

1. **Creditors**: capital contributions to the partnership.
- Payments to external creditors take

priority, following the order established by
law. This excludes claims from limited ### Proportional Sharing
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- Limited partners share in the partnership (7) There is a false or erroneous

assets concerning their claims (both capital statement in the certificate;
and profit) in proportion to the amounts of
those claims unless stated otherwise in the (8) There is a change in the time as
partnership certificate or agreed upon later. stated in the certificate for the
dissolution of the partnership or for the
return of a contribution;
### Summary (9) A time is fixed for the dissolution of

the partnership, or the return of a
In summary, Article 1863 establishes a clear contribution, no time having been
hierarchy for settling partnership liabilities specified in the certificate, or
upon dissolution. Creditors are paid first,
followed by limited partners for profits and (10) The members desire to make a
capital, and then general partners in various change in any other statement in the
categories. This structure ensures a fair and certificate in order that it shall
orderly distribution of partnership assets, accurately represent the agreement
protecting the rights of all parties involved. among them.
Art. 1864. The certificate shall be **Article 1864** details the circumstances
cancelled when the partnership is under which the certificate of a limited
dissolved or all limited partners cease partnership must be canceled or amended.
to be such. This article plays a crucial role in ensuring
that the partnership’s legal status and
A certificate shall be amended when: operational framework remain accurate and
reflective of its current situation.
(1) There is a change in the name of the
partnership or in the amount or
character of the contribution of any
limited partner; ### Cancellation of the Certificate
(2) A person is substituted as a limited - The certificate of limited partnership is

partner; **canceled** in two scenarios:
(3) An additional limited partner is 1. **Dissolution of the Partnership**: This

admitted; occurs when the partnership ceases to exist.
(4) A person is admitted as a general 2. **Loss of Limited Partner Status**: This

partner; happens when all limited partners cease to
hold their status as limited partners.
(5) A general partner retires, dies,
becomes insolvent or insane, or is
sentenced to civil interdiction and the
business is continued under Article ### Amendments to the Certificate
1860;
The certificate must be **amended** in the
(6) There is a change in the character of following situations:
the business of the partnership;
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7. **Correction of False Statements**:
1. **Change in Partnership Name or - When there is a false or erroneous

Contributions**: statement in the existing certificate that needs
to be corrected.
- If there is a change in the name of the
partnership or in the amount or type of
contribution made by any limited partner.
8. **Changes in Timelines**:
- If there is a change in the timeline stated in

2. **Substitution of Limited Partner**: the certificate for either the dissolution of the
partnership or for the return of a contribution.
- When a new limited partner is substituted
for an existing one.
9. **Fixing a Timeline**:
3. **Admission of Additional Limited - When a time is fixed for the dissolution of

Partners**: the partnership or the return of contributions
when none was specified in the original
- If one or more additional limited partners certificate.
are admitted to the partnership.
10. **Other Desired Changes**:

4. **Admission of General Partner**:
- If the partners wish to make any other
- When a new general partner is admitted to changes in the certificate to ensure it
the partnership. accurately represents their current agreement.
5. **Changes Among General Partners**: ### Summary
- If a general partner retires, dies, becomes In summary, Article 1864 stipulates that the
insolvent, becomes insane, or is subjected to certificate of a limited partnership must be
civil interdiction, and the business continues canceled when the partnership dissolves or
under Article 1860. when all limited partners lose their status. It
must be amended in various situations,
including changes in partners, contributions,
the business's nature, and correcting
6. **Change in Business Character**:
inaccuracies. This article ensures that the
- If there is a change in the nature or partnership’s legal documentation is up to
character of the business that the partnership date and accurately reflects its current state
conducts. and agreements among partners.
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AC2103
Art. 1865. The writing to amend a Commission, where the certificate is

certificate shall: recorded:
(1) Conform to the requirements of (1) A writing in accordance with the

Article 1844 as far as necessary to set provisions of the first or second
forth clearly the change in the paragraph, or
certificate which it is desired to make;
and (2) A certified copy of the order of the
court in accordance with the provisions
(2) Be signed and sworn to by all of the fourth paragraph;
members, and an amendment
substituting a limited partner or adding (3) After the certificate is duly amended
a limited or general partner shall be in accordance with this article, the
signed also by the member to be amended certified shall thereafter be
substituted or added, and when a for all purposes the certificate provided
limited partner is to be substituted, the for in this Chapter.
amendment shall also be signed by the
**Article 1865** outlines the procedures for
assigning limited partner.
amending or canceling a certificate of limited
The writing to cancel a certificate shall partnership. This article is essential for
be signed by all members. maintaining the accuracy and legality of the
partnership’s documentation in response to
A person desiring the cancellation or various changes.
amendment of a certificate, if any
person designated in the first and
second paragraphs as a person who
### Amending a Certificate
must execute the writing refuses to do
so, may petition the court to order a
To amend a certificate, the following
cancellation or amendment thereof.
conditions must be met:
If the court finds that the petitioner has
a right to have the writing executed by a
person who refuses to do so, it shall 1. **Conformance to Article 1844**:
order the Office of the Securities and
Exchange Commission where the - The writing must adhere to the
certificate is recorded, to record the requirements of Article 1844, which details
cancellation or amendment of the what information must be included in the
certificate; and when the certificate is certificate. It should clearly specify the
to be amended, the court shall also changes being made.
cause to be filed for record in said office
a certified copy of its decree setting
forth the amendment.
2. **Signatures Required**:
A certificate is amended or cancelled
- The amendment must be signed and sworn
when there is filed for record in the
to by all members of the partnership.
Office of the Securities and Exchange
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- If the amendment involves substituting a

limited partner or adding a new limited or
general partner, the following additional ### Recording Changes
signatures are required:
A certificate is considered amended or
- The new or substituted limited partner canceled when the following is filed for record
must sign. in the SEC:
- If a limited partner is being substituted,

the original limited partner (the assignor)
1. **Writing for Amendment or
must also sign.
Cancellation**:
- A writing that conforms to the provisions

### Canceling a Certificate for amending or canceling the certificate, as
specified above.
To cancel a certificate:
2. **Certified Copy of Court Order**:

- The writing must be signed by all members
of the partnership. - A certified copy of the court's order if
applicable, which must also conform to the
requirements.
### Court Petition for Cancellation or

Amendment
3. **Validity of Amended Certificate**:
If any member required to sign the
amendment or cancellation refuses: - After the certificate is duly amended, the
amended certificate is treated as the official
certificate for all purposes as provided in this
chapter.
- The person desiring the cancellation or
amendment may petition a court to order it.
- If the court finds that the petitioner has a ### Summary

right to have the document executed and the
required person refuses, it will: In summary, Article 1865 provides a clear
framework for the amendment and
- Order the Office of the Securities and cancellation of a limited partnership
Exchange Commission (SEC), where the certificate, including necessary signatures and
certificate is recorded, to record the conditions. It allows for court intervention
cancellation or amendment. when necessary and specifies the procedures
for recording changes with the SEC, ensuring
- If amending the certificate, the court will the partnership's legal documents are always
also file a certified copy of its decree that current and valid.
specifies the amendment.
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Art. 1866. A contributor, unless he is a They can only engage in legal actions when it
general partner, is not a proper party to directly relates to enforcing their rights or
proceedings by or against a liabilities within the partnership context. This
partnership, except where the object is provision protects the partnership from being
to enforce a limited partner’s right burdened by individual limited partners’ legal
against or liability to the partnership. issues while still allowing limited partners to
assert their rights when necessary.
**Article 1866** addresses the legal standing
of contributors in relation to partnership Art. 1867. A limited partnership formed
proceedings. Here's a breakdown of its main under the law prior to the effectivity of
points: this Code, may become a limited
partnership under this Chapter by
complying with the provisions of Article
1844, provided the certificate sets forth:
### Key Provisions of Article 1866
(1) The amount of the original
contribution of each limited partner,
and the time when the contribution was
1. **Limited Participation in Legal
made; and
Proceedings**:
(2) That the property of the partnership
- A contributor (i.e., a limited partner) is
exceeds the amount sufficient to
generally not considered a proper party in
discharge its liabilities to persons not
legal actions involving the partnership. This
claiming as general or limited partners
means that they cannot initiate or be sued in
by an amount greater than the sum of
lawsuits that involve the partnership as a
the contributions of its limited
whole.
partners.
A limited partnership formed under the

2. **Exceptions**: law prior to the effectivity of this Code,
until or unless it becomes a limited
- The only exception to this rule occurs when partnership under this Chapter, shall
the legal action aims to **enforce the limited continue to be governed by the
partner's rights** against the partnership or provisions of the old law.
address their **liabilities** to the partnership.
This means that if a limited partner needs to **Article 1867** addresses the transition of
claim their rights or address obligations, they limited partnerships formed under previous
can participate in the proceedings. laws to comply with the current legal
framework established by this Code. Here’s a
breakdown of its key points:
### Summary
In essence, Article 1866 limits the ### Key Provisions of Article 1867
involvement of contributors in legal
proceedings concerning the partnership,
recognizing their position as limited partners.
1. **Transition to Current Code**:
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AC2103
- A limited partnership that was established partnership's certificate to ensure financial

under the law before the implementation of stability and compliance. Until this transition
this Code can convert to a limited partnership occurs, the limited partnerships remain
under the current legal structure. To do so, it subject to the old legal provisions.
must adhere to the requirements set forth in
**Article 1844**.
2. **Certificate Requirements**:
- For the transition to be valid, the certificate

must include:
- **(1)** The amount of the original

contribution from each limited partner and
the date when this contribution was made.
- **(2)** Confirmation that the

partnership's assets exceed its liabilities to
outside creditors by more than the total
contributions made by the limited partners.
This ensures that the partnership is financially
sound before it can fully transition under the
new law.
3. **Governance Under Old Law**:
- If the limited partnership does not

complete the transition to the new structure as
outlined, it will continue to be governed by the
provisions of the old law. This means that the
existing limited partnership retains the legal
framework under which it was originally
formed until it complies with the new
requirements.
### Summary
In summary, Article 1867 provides a pathway

for limited partnerships established before the
enactment of this Code to transition to the
current legal framework. It requires specific
information to be included in the
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Partnership and Corporation Law

1. **Debtor of the Partnership:** Each partner is

2. **Warranty in Case of Eviction:** If a partner

**Example:** - **Stipulation to the Contrary:** If the partners

failing, all partners, except industrial partners (who

**Explanation in Simple Terms:** - **Full Application to Partnership Debt:** If John

**Explanation in Simple Terms:** - **No Agreement:**

agreed upon, losses follow the same proportion.

- **Tie Scenario:** If Mark and Jane support a

This article outlines how management decisions **Summary:**

- **Changes to Property:** If Lisa wants to **Example:**

meaning Alex will share in John’s portion of

**Explanation in Simple Terms:** **Explanation in Simple Terms:**

1. **Location of Books:** 1. **Obligation to Provide Information:**

Imagine Sarah, Tom, and Mia run a bakery **Example:**

2. **Trustee Role:** This article addresses the restrictions on capitalist

co-partners; (2) If the right exists under the

Capitalist partners cannot engage in similar - **Wrongful Exclusion:** If Daniel is excluded

from partnership activities without reporting them,

2. **Interest in the Partnership:**

(1) His rights in specific partnership 3. **Right to Participate in Management:**

### Explanation of Article 1810 – Property

This article outlines the concept of

The incidents of this co-ownership are

(2) A partner’s right in specific

**Example**: If a partnership owns a piece

3. **Exemption from Personal Claims:** Art. 1812. A partner’s interest in the

This article defines what is meant by a

1. **Share of the Profits:**

**Example**: If a partnership makes a profit

2. **Share of the Surplus:**

**Example**: If the partnership is dissolved, ### Explanation of Article 1813 – Conveyance

- If a partner transfers their whole interest in

3. **Exception in Case of Fraud:**

The interest charged may be redeemed

**Example**: If Partner A owes a personal

- The **interest charged** by the creditor

1. **Firm Name for the Partnership:**

This article explains the **liability** of all

1. **Pro Rata Liability of All Partners:** 3. **Separate Obligation by a Partner:**

- The partners’ **personal property** can be

**Example**: If a partnership owes ### Summary:

- While such an agreement is void when it

### Explanation of Article 1817 – Invalidity of

An act of a partner which is not This article outlines the **authority of

Except when authorized by the other

(4) Confess a judgment; **Example**: If Partner A signs a contract

(6) Submit a partnership claim or

### Explanation of Article 1818 – Agency and

lacks that authority, the partnership is not

- Certain actions require **unanimous

3. Any act that would **prevent the

- If a partner acts in violation of restrictions Where title to real property is in the

This article addresses how partners can

1. **Conveyance in Partnership Name:**

Let me know if you need more details or

### Explanation of Article 1820 – Admissions

- If the title is in a **third person in trust**

assertion) made by a partner about the partnership legally, especially in matters

- This applies as long as the partner was

1. Debtor of the Partnership: Each partner is

2. Warranty in Case of Eviction: If a partner

Example: - Stipulation to the Contrary: If the partners

Explanation in Simple Terms: - Full Application to Partnership Debt: If John

Explanation in Simple Terms: - No Agreement:

- Tie Scenario: If Mark and Jane support a

This article outlines how management decisions Summary:

- Changes to Property: If Lisa wants to Example:

Explanation in Simple Terms: Explanation in Simple Terms:

1. Location of Books: 1. Obligation to Provide Information:

Imagine Sarah, Tom, and Mia run a bakery Example:

2. Trustee Role: This article addresses the restrictions on capitalist

Capitalist partners cannot engage in similar - Wrongful Exclusion: If Daniel is excluded

2. Interest in the Partnership:

(1) His rights in specific partnership 3. Right to Participate in Management:

Example: If a partnership owns a piece

3. Exemption from Personal Claims: Art. 1812. A partner’s interest in the

1. Share of the Profits:

Example: If a partnership makes a profit

2. Share of the Surplus:

Example: If the partnership is dissolved, ### Explanation of Article 1813 – Conveyance

3. Exception in Case of Fraud:

Example: If Partner A owes a personal

- The interest charged by the creditor

1. Firm Name for the Partnership:

This article explains the liability of all

1. Pro Rata Liability of All Partners: 3. Separate Obligation by a Partner:

- The partners’ personal property can be

Example: If a partnership owes ### Summary:

(4) Confess a judgment; Example: If Partner A signs a contract

1. Conveyance in Partnership Name:

- If the title is in a third person in trust

Example: If Partner B, who has been

2. Knowledge of the Acting Partner: Example: If Partner E engages in

Example: If Partner C, who is managing Notice or knowledge received by any partner

1. Wrongful Acts or Omissions:

- If a partner commits a wrongful act Example: If Partner G, while conducting

- Article 1823 states that a partnership

Article 1824 emphasizes the concept of Example: If Partner J acts recklessly

1. Solidary Liability Defined:

4. Consent and Joint Obligations:

Example: Continuing from the - If all actual partners consent to the

- (2) No Partnership Liability Results:

Article 1826 addresses the liability of 3. Stipulation to the Contrary:

1. Liability for Prior Obligations:

Example: If Partnership Y had a debt of ### Summary:

2. Private Creditors' Rights:

- (c) Express Will of All Partners: If all

- Example: If the partnership 5. Death of a Partner:

- Example: If one of the partners in a

- Example: If a partner wants to - If a partner or the partnership itself

- Example: If the business consistently

- Example: If Partner C is consistently - If someone purchases a partner’s interest

4. Breach of Agreement: - (2) At any time if the partnership was

- Example: If a partnership dissolves,

- Exceptions: (b) Though he had not so extended

(a) Had extended credit to the 2. Unfinished Business: Transactions

### Explanation of Article 1834 - The partnership is not bound by any

3. Uninformed Third Parties: - Scenario 2: Carla, who was unknown to