Partnership

Law
Atty. Matt Palu-ay
Article 1767
 Bythe contract of partnership two or
more persons bind themselves to
contribute money, property, or industry to
a common fund,
 with the intention of dividing the profits
among themselves
 Twoor more persons may also form a
partnership for the exercise of a profession
Characteristic elements of
partnership
 1. consensual
 perfected by mere consent
 2. nominate
 Has a special name
 3. Bilateral
 Entered into by two or more persons
 4. Onerous
 The giving of something to procure a
benefit
 5. Commutative
 Undertaking of each of the partner is
considered as the equivalent of that of the
others
 6. Principal
 Does not depend for its existence or validity
upon some other contract
 7. Preparatory
 It is entered into as a means to an end (which is
to realize profit)
Essential Features of
Partnership
 1. There must be a valid contract
 2. Parties must have legal capacity to enter
into a contract
 3. There must be mutual contribution of
money, property or industry to a common
fund,
 4. the object must be lawful
 5. The purpose must be to obtain profits and
to divide the same among the parties
1. Existence of a valid contract
 Partnership is a form of voluntary
association entered into by the associates
 It is a personal relation in which the
element of delectus personae exists.
 No one can become a member of the
partnership association without the
consent of all the other associates
2. Legal Capacity to enter into
a contract
 General Rule: Any person may be a
partner if he is capable under the law of
entering into contractual relations
 Exception:
 Minors
 Insane or demented persons
 Deaf mutes who do not know how to read
and write
3. Mutual Contribution to a
Common Fund
 Each partner must contribute to a
common fund. Hence, each partner has
a proprietary or financial interest in the
partnership.
 Form of contribution:
 1. money- must be legal tender
 2. property- may be real or personal
 3. industry- means work or services. May be
manual efforts or intellectual efforcts
4. Legality of Object
 The object of a partnership is unlawful
when it is contrary to law, morals, good
customs, public order or public policy
(Article 1306-oblicon)
 If the object is unlawful, the partnership is
void ab initio.
5. Intention to realize and
divide profits
 Thevery reason for the existence of
partnership is:
 To gain profit, and
 To divide said profit amongst the partners
 Division of profit may not necessarily be in
equal shares.
 Sharing of losses is implied in the sharing of
profits. Hence, even if there is no agreement
as to sharing of losses, parties are still liable for
losses.
Quiz # 1
 What are the essential features of a
partnership? (1-5)
 Give 4 characteristics of a Partnership (6-
9)
 No one can become a member of the
partnership association without the
consent of all the other associates
because of this principle
Answers # 1
 What are the essential features of a partnership? (1-5)
1. Valid Contract
 2. Legal Capacity of parties
 3. Mutual Contribution of Money, Property or Industry
 4. Object must be lawful
 5. Purpose is to obtain profits and divide the said profits amongst the
partners
Please give
 Give 4 characteristics of a Partnership (6-9)
transmuted
 Consensual
grade.
 Nominate
10- 100
 Bilateral
9-90
 Onerous
8-85
 Commutative
7-75
 Principal
6-below is 70
 Preparatory
 No one can become a member of the partnership association
without the consent of all the other associates because of this
principle
 Delectus Personae
Article 1768
 Thepartnership has a juridical personality
separate and distinct from that of each of
the partners, even in case of failure to
comply with the requirements of Article
1772, first paragraph
 Whatdo you mean by juridical
personality?
 Entity (such as a firm) other than a
natural person(human being) created by
law and recognized as a legal entity having
distinct identity, legal personality, and
duties and rights.
 Also called artificial person, juridical entity,
juristic person, or legal person
 Example:
 A and B are partners who set up a
partnership called X & Co.
 In this case there are three distinct persons:
 A, B and X. & Co.
 As a juridical person, X & Co. may
 sue.
 Be sued.
 Enter into contracts under its own name
 Effectof failure to comply with Article
1772 does not invalidate the juridical
personality of the partnership.
 What is Article 1772?
 Every contract of partnership having a
capital of three thousand pesos or more, in
money or property, shall appear in a public
instrument, which must be recorded in the
SEC.
 Failure to comply with the requirement shall
not affect the liability of the partnership and
the members thereof to third persons.
Article 1769
 Indetermining whether a partnership
exists, these rules shall apply:
 (1) Except as provided by Article 1825,
persons who are not partners as to each
other are not partners as to third persons.
 (2) Co-ownership or co-possession does not
itself establish a partnership, whether such
co-owners or co-possessors do or do not
share any profits made by the use of the
property.
 (3) The sharing of gross returns does not of itself
establish a partnership, whether or not the persons
sharing them have a joint or common right or
interest in any property from which the returns are
derived.
 (4) The receipt by a person of a share of the profits
of a business is prima facie evidence that he is a
partner in the business, but no such inference shall
be drawn if such profits received in payment:
 (a) as a debt
 (b) as wages of an employee or rent to a landlord
 (c) as an annuity to a widow or representative of a
deceased partner
 (d) as interest on a loan
 (e) as consideration for the sale of a goodwill of a
business
 (1) Persons not partners as to each other
 Persons who are partners between themselves
are partners as to third persons.
 Conversely, persons who are not partners
between themselves are NOT partners as to
third persons.
 Exception. Partnership by estoppel. (article
1825). This is where 2 people misrepresent
themselves to be partners as to a third person.
Here, even there is no partnership between the
2 people, the fact that they misrepresented that
they are partners, they will be liable as partners
as to all people who, in good faith, dealt with
them.
 Example:
 A and B are not partners as to each other.
 However, A with the consent of B,
represents to C (a third person) that they
are partners.
 In this case, A and B will be considered as
partners as to C, and they will be liable as
partners, even though they are not really
partners.
 (2) Co-ownership or co-possession
 Co ownership is wherein ownership of an
undivided right or thing belongs to different
persons
 Example:
A and B inherited from their father an
apartment.
 This apartment is leased to C, a third person.
 Are A and B partners?
 Example
 A and B put up money to buy sweepstakes
tickets for the sole purpose of dividing
equally the prize money which they may
win.
 Is there a partnership here?
 (2) Co-ownership or co-possession
 Co ownership is wherein ownership of an
undivided right or thing belongs to different
persons
 Example:
A and B inherited from their father an
apartment.
 This apartment is leased to C, a third person.
 Are A and B partners?
 No. they are merely co-owners or co-possessors
whether they share in profits made by the lease
of the property.
 They cannot be partners in the absence of a
contract
 Example
 A and B put up money to buy sweepstakes
tickets for the sole purpose of dividing
equally the prize money which they may
win.
 Is there a partnership here?
 Yes.
 The parties (A and B)
 Contributed money in a common fund
 With the purpose of dividing the prize money
they may win amongst themselves
 (3)Sharing of Gross return alone does not
indicate a partnership

 The partners share profits after satisfying all

partnership liabilities.

 There must be a sharing not only of profits

but also of liabilities
 Example:
A is an owner of a passenger jeepney.
 A agrees with B, a driver, that he (A) shall
have full control and use of the jeepney to
carry passengers, pay the cost of repairs and
other expenses, and that the gross receipts
are to be divided between them.
 Is there a partnership here?
 Example:
A is an owner of a passenger jeepney.
 A agrees with B, a driver, that he (B) shall
have full control and use of the jeepney to
carry passengers, pay the cost of repairs and
other expenses, and that the gross receipts
are to be divided between them.
 Is there a partnership here?
 There is no partnership here because there is
no sharing of losses.
Partnership Co-ownership
1. Created by: contract 1. Created generally by law
2. juridical personality: Yes 2. None
3. Purpose: profit 3. Common enjoyment of a
thing or right
4. duration: no limit 4. An agreement to keep
the thing undivided for more
than 10 years is not allowed
5. Disposal of interest: not 5. allowed.
allowed. Delectus personae
6. Power to act with third 6. A co-owner cannot
persons: a partner may represent the co-ownership.
represent the partnership. All must agree.
7. Effect of death: dissolves 7. Does no necessarily
the partnership dissolve the co-ownership
Quiz #2. true or false
 1. The partnership has a juridical personality separate and distinct
from that of each of the partners
 2. Non-compliance with the requirements of Article 1772, will
invalidate the partnership
 3. A partnership may sue and be sued.
 4. A partner is a co-owner.
 5. Co-ownership by itself establishes a partnership
 6. Sharing of Gross return alone does not indicate a partnership
 7. Death dissolves a partnership
 8. A co-owner may sell his share without the consent of his co-
owners.
 9. the purpose of a co-ownership is profit.
 10. identify. This is where 2 people misrepresent themselves to be
partners as to a third person. Here, even there is no partnership
between the 2 people, the fact that they misrepresented that they
are partners, they will be liable as partners as to all people who, in
good faith, dealt with them.
Quiz #2. true or false
 1. The partnership has a juridical personality separate and distinct
from that of each of the partners - TRUE
 2. Non-compliance with the requirements of Article 1772, will
invalidate the partnership- FALSE
 3. A partnership may sue and be sued. TRUE
GRADE
 4. A partner is a co-owner. FALSE
 5. Co-ownership by itself establishes a partnership FALSE 10- 100
 6. Sharing of Gross return alone does not indicate a partnership 9-90
TRUE 8-85
 7. Death dissolves a partnership TRUE 7-75
6-below is
 8. A co-owner may sell his share without the consent of his co- 70
owners. TRUE
 9. the purpose of a co-ownership is profit. FALSE
 10. identify. This is where 2 people misrepresent themselves to be
partners as to a third person. Here, even there is no partnership
between the 2 people, the fact that they misrepresented that they
are partners, they will be liable as partners as to all people who, in
good faith, dealt with them. – PARTNERSHIP BY ESTOPPEL
Article 1770
A partnership must have a lawful object
or purpose, and must be established for
the common benefit or interest of the
partners
 When an unlawful partnership is dissolved
by a judicial decree, the profits shall be
confiscated in favor of the State.
 The above provision of Article 1770
reiterates two essential elements of a
contract of partnership:
 1. Legality of object, and
 2. Community of benefit or interest of the
parties
 Effect of an unlawful partnership:
 1. contract is void ab initio
 2. profits confiscated in favor of the
government
 3. instruments or tools of the crime shall also
be forfeited in favor of the government
Article 1771
A partnership may be constituted in any
form, except where immovable property
or real rights are contributed thereto, in
which case, a public instrument shall be
necessary
 As a general rule, no special form is
required for the validity or existence of the
contract of partnership.
 The contract may be made orally or in
writing.
 Exception to this rule is when an
immovable property or real right is
contributed, in which case, Article 1773
requires the execution of a public
instrument.
Article 1772
 Every contract of partnership having a
capital of P3,000.00 or more, in money or
property, shall appear in a pubic
instrument, which must be recorded in the
SEC.
 Failure to comply with the requirements of
the preceding paragraph shall not affect
the liability of the partnership and the
members thereof to third persons
Article 1773
A contract of partnership is void,
whenever immovable property is
contributed thereto, if an inventory of said
property is not made, signed by the
parties, and attached to the public
instrument.
Article 1774
 An immovable property or any interest
therein may be acquired in the
partnership name.
 Title so acquired can be conveyed only in
the partnership name
A partnership has a juridical personality,
separate and independent from that of
the persons or members composing it,
hence it can acquire property in its
partnership name.
 As such, it can also sell property in its
name.
Article 1775
 Associationsand societies, who articles
are kept secret among the members, and
wherein anyone of the members may
contract in his own name with third
persons, shall have no juridical personality,
and shall be governed by the provisions
relating to co-ownership.
Article 1776
 Asto its object, a partnership is either
universal or particular

 As
regards the liability of the partners, a
partnership may be general or limited.
 As to its object:

 1. Universal Partnership
 One which refers to:
 all the present property (article 1778) or
 all profits (article 1780)

 2. Particular Partnership
 This is defined in Article 1783
 As to the liability of partners:
 1) General Partnership
 One consisting of general partners who are
liable pro rata and subsidiarily, sometimes
solidarily, with their separate property for
partnership debts

 2) Limited Partnership
 One formed by two or more persons having
as members one or more general partners
and one or more limited partners, the latter
not being personally liable for the obligations
of the partnership.
Article 1777
A universal partnership may refer:
 To all the present property or
 to all the profits
Article 1778
A partnership of all present property is that
in which the partners contribute all the
property which actually belongs to them
to a common fund, with the intention of
dividing the same among themselves, as
well as the profits they may acquire
therewith.
Article 1779
 In a universal partnership of all present property,
the property which belonged to each of the
partners at the time of the constitution of the
partnership, becomes the common property of all
the partners, as well as all the profits which they
may acquire therewith.

 A stipulation for the common enjoyment of any

other profits may also be made; but the property
which the partners may acquire subsequently by
inheritance, legacy, or donation cannot be
included in such stipulations, except the fruits
thereof.
 Universal partnership of all present
property
 Is one which the partners contribute all the
properties which actually belong to each of
them at the time of the constitution of the
partnership to a common fund, with the
intention of dividing same among
themselves, as well as the profits which they
may acquire therewith.
 Example:
 A and B are partners in a partnership known as
X & Co.
 They agreed that they would contribute all their
properties to a common fund for the purpose of
dividing the same between themselves, as well
as the profits to be derived therefrom.
 A contributed all his properties consisting of two
big parcels of agricultural land, and a tractor.
 B contributed also his properties consisting of
P400,000 cash and farm implements.
 The partnership formed by the contract of A
and B is a universal partnership of all present
property.
Article 1780
A universal partnership of profits comprises
all that the partners may acquire by their
industry or work during the existence of
the partnership.
 Movable or immovable property which
each of the partners may possess at the
time of the celebration of the contract
shall continue to pertain exclusively to
each, only the usufruct passing to the
partnership.
 Universal partnership of profits explained.
 One which comprises all that the partners may
acquire by their industry or work during the
existence of the partnership and the usufruct of
movable or immovable property which each of
the partners may possess at the time of the
celebration of the contract.
 It is to be noted that in this class of partnership,
the partners retain their ownership over their
present and future property.
 What pass to the partnership are the profits or
income.
 Consequently, upon the dissolution of the
partnership, such property is returned to the
partners who own it.
 Example:
 A and B are partners in a partnership known
as X & Co.
 A and B agreed that they would retain the
ownership over their respective properties.
 They merely grant the partnership the right
to use (usufruct) their exclusive property.
 So here the ownership is not passed. What is
passed is merely the right to use the
property, or otherwise known as usufruct.
 Thereafter, profits obtained from the use will
form part of the net profit, which will then
be divided between the partners.
Article 1781
 Articles of Universal partnership, entered
into without specification of its nature,
only constitute a universal partnership of
profits.

 The reason for this is because it imposes

less obligations on the partners, since they
preserve the ownership of their separate
property.
Article 1782
 Persons
who are prohibited from giving
each other any donation or advantage
cannot enter into a universal partnership.

 Toallow this is to permit one to do

indirectly what the law expressly prohibits.
Article 1783
A particular partnership has for its object
determinate things, their use or fruits, or a
specific undertaking, or the exercise of a
profession.

 Thisdefines a particular partnership. It is

neither a universal partnership of present
property, or universal partnership of
profits.
Quiz #3
 1-3. Effects of an unlawful partnership:

 4-5. A partnership may be constituted in any form, except

where________________ or ____________are contributed
thereto, in which case, a public instrument shall be
necessary
 6. Every contract of partnership having a capital of
____________________, in money or property, shall appear in
a pubic instrument, which must be recorded in the SEC.
 7-8. As to its object, a partnership is either_________ or
_____________.
 9-10As regards the liability of the partners, a partnership
may be __________ or ____________.
 11-12. What are the two types of universal property?
 12-15. Who are prohibited from entering into a universal
partnership?
Quiz #3
 1-3. Effects of an unlawful partnership:
 1. contract is void ab initio
 2. profits confiscated in favor of the government
 3. instruments or tools of the crime shall also be forfeited in favor of
the government
GRADE
 4-5. A partnership may be constituted in any form, except where
immovable/real property or real rights are contributed thereto, in 15- 100%
which case, a public instrument shall be necessary 14-95%
 6. Every contract of partnership having a capital of P3,000.00 or 13-90%
more, in money or property, shall appear in a pubic instrument, 11to 12-85%
which must be recorded in the SEC. 9 to10-80%
 7-8. As to its object, a partnership is either universal or particular 7 to 8-75%
 9-10As regards the liability of the partners, a partnership may be 6-below is
general or limited. 70%
 11-12. What are the two types of universal property?
 Universal partnership of present property
 Universal partnership of profits
 12-15. Who are prohibited from entering into a universal
partnership?
 Spouses.
 Those guilty of adultery or concubinage.
 Those made by a public officer to his ascendants or descendants.
Partnership
3rd slide
Atty. Matias Monico G.
Palu-ay
Partnership
 Chapter 1- General Provisions

 Chapter 2- Obligations of the Partners

 Section 1- Obligations of the Partners among themselves
 Section 2- Property Rights of a Partner
 Section 3- Obligations of the Partners with regard to third persons

 Chapter 3- Dissolution and Winding up

 Chapter 4- Limited Partnership

Chapter 2- Obligations of the Partner

 Section 1- Obligations of the Partners

among themselves
 Article 1784-1809

 Section 2- Property Rights of a Partner

 Article 1810- 1815

 Section 3- Obligations of the Partners with

regard to third persons
 Article 1816-1827
Section 1- Obligations of the Partners among themselves
Article 1784-1809
1. 1784 (partnership term)

-General Rule: A partnership begins from the moment of

execution of the contract.

-Exception: Unless otherwise stipulated.

-A partnership is a consensual contract, hence it exist from the

instant that there was already a meeting of the minds.

-Even if contributions have not yet been made, there is already

a partnership.
Section 1- Obligations of the Partners among themselves
Article 1784-1809
2. 1785 (partnership term)

-Partnership with a fixed term is one in which the term of its existence has been
agreed upon expressly or impliedly.

-Normally, after the expiration of the term OR the accomplishment of the

particular undertaking will cause the automatic dissolution of the partnership.

-However, the partnership may extend by agreement of the parties by mere

continuation of the business.

-In such case, the rights and duties of the partners remain the same as they were
at such termination.

-In this case, the original partnership is dissolved, and a new one, a partnership at
will, will depend upon the will of the partners.

-ex.
A partnership with a fixed term was continued by the partners A, B, and C.
If their original agreement stated that the net profits shall be divided equally
and that C shall be the managing partner, the same profit ratio shall still govern
and C shall continue as managing partner.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

3. 1786 (Obligations of partners among themselves)

1) To contribute what he had promised.

-unlike promises made by your lover, here if your partner
doesn’t make good his/her promise, you can sue him/her
for specific performance + damages.

2) to warrant property contributed in case of eviction.

-the partner shall answer for eviction in case the partnership is
deprived of the determinate property contributed.

3) to deliver the fruits of the property from the time they should
have been delivered, without the need of any demand.
-remember, in oblicon, the rule is: No Demand, No Delay.
-here, it is not necessary to demand. If partner fails to
deliver on time, he is already considered in default.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

4. 1787 (Obligations of partners among themselves)

4) when contribution is in goods, the amount thereof must be
determined by a proper appraisal of the value at the time of
contribution.

-Why is there a need for appraisal?

Simple. Appraisal is there to determine how much has
been contribute by the said partner.

-Examples:
a) A car was contributed in a partnership. The same
must be appraised at the time of contribution
b) A land was contributed in a partnership. The same
must be appraised and indicated in the inventory at the
time of the contribution.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

5. 1788
5) To contribute on the date due the amount promised to be
given.
6) To reimburse any amount he may have taken from the
partnership coffers and converted to his own personal use.
7) To pay the agreed or legal interest if he fails to pay in due
time.
8) To indemnify the partnership for the damages caused to it
by the delay in the contribution or the conversion of any sum for
his personal benefit.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

6. 1789
-Industrial Partner- one who contributes his industry, labor or
services to the partnership.
-His contribution to the common fund are his services.

-General Rule: He is prohibited from engaging in other business,

whether the same business or any kind of business.
Reason: since his only contribution are his services, the
partnership acquires an exclusive right to avail itself of his industry.
There would be a conflict of interest if the industrial partner gives
his time in another business.

-Exception: the partnership expressly permits him to do so.

Section 1- Obligations of the Partners among themselves
Article 1784-1809

1790.
“Unless there is a stipulation to the contrary, the partners shall
contribute equal shares to the capital of the partnership.”

- this doesn’t apply to industrial partners.

- partners may stipulate on different percentage in the
contribution.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

1791.
-Obligation of a capitalist partner to contribute additional
capital.

General Rule: A capitalist partner is not bound to contribute

more than what he agreed to contribute.

Exception: In case of an imminent loss of the business:

-he must contribute an additional share to save
the venture.
-if he refuses, he shall be obliged to sell his
interest to the other partners.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

1792.
-When a person is separately indebted to the partnership, and the
managing partner at the same time, the sum received shall be
applied to the two credits in proportion to their amounts even though
the managing partner may have given receipt for his own credit only.
-However, if the whole amount is to be paid to the partnership, the
entire amount is to be applied to the partnership.

Ex: A and B are partners in X and Co. A is the managing partner. C

owes A P2,000.00, and owes X and Co. P4,000.00. Both debts are
demandable.
C pays P1,500 to A (in his capacity as the managing partner).
The law says, proportionate payment. So, P500 will only be applied to
C’s credit, while P1,000 will be applied to XandCo.’s credit. Notice that
the amount paid is 25% of the entire amoung.
C pays P1,500 to A to be applied to the partnership. Here,
the full amount of P1,500 will be applied entirely to the partnership.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

1793.
-Here, a partner has received his share of the partnership
credit. However, the other partners have not collected their
shares. Thereafter, the partnership debtor has become insolvent.

Example:
D owes Partnership X and Co. P4,500.00.
A, a partner, received a share of P1,500.00 ahead of B and C (the
two other partners).
When B and C tried to collect from D, D was already insolvent.
In this case, A is required to share his P1,500 with B and C.
Section 1- Obligations of the Partners among themselves
Article 1784-1809

1794.
-Damages caused by a partner to the partnership is not offset
by the profits which he may have earned for the partnership.

-Every partner is responsible to the partnership for damages

suffered by it through his fault.
-The said partner cannot compensate them with the profits
which he may have earned for the partnership by his industry.
However, courts may lessen his responsibility if through the
partner’s extraordinary efforts, unusual profits have been realized.
Section 1- Obligations of the Partners among themselves
Article 1784-1809
1795. Risk of loss of things contributed.

1. Specific and fungible things which are not fungible (only use is
contributed)
-borne by the partner since he still owns the thing.

2. Specific and determinate things the ownership of which is transferred to

the partnership
-borne by the partnership. It is the owner.

3. Fungible things
-borne by the partnership. It is impossible to use without the things
being consumed or impaired.

4. Things contributed to be sold

-borne by the partnership. Partnership is the presumed owner.

5. Things brought and appraised in the inventory

-borne by the partnership. Here, the things were already
contributed to the partnership.
 Quiz #4
1. General Rule: A partnership begins from the _____________________ of the contract.
2. A partnership is a _________ contract, hence it exist from the instant that there was
already a meeting of the minds.
3. A Partnership with a ___________is one in which the term of its existence has been
agreed upon expressly or impliedly.
4. To contribute what he ___________.
5. to __________ property contributed in case of eviction.
6. to deliver the ________ of the property from the time they should have been
delivered, without the need of any demand.
7. when contribution is in goods, the amount thereof must be determined by a
___________ of the value at the time of contribution.
8. To contribute on the _________ the amount promised to be given.
9. To __________ any amount he may have taken from the partnership coffers and
converted to his own personal use.
10. To pay the agreed or legal ________ if he fails to pay in due time.
11. To indemnify the partnership for the ___________ caused to it by the delay in the
contribution or the conversion of any sum for his personal benefit.
12. ___________- one who contributes his industry, labor or services to the partnership.
13. “Unless there is a stipulation to the contrary, the partners shall contribute
______________ to the capital of the partnership.”
14. Damages caused by a partner to the partnership is ________ by the profits which he
may have earned for the partnership.
15. A Fungible thing was contributed. Who bears the risk of loss?
 Quiz #4
1. General Rule: A partnership begins from the moment of execution of the contract.
2. A partnership is a consensual contract, hence it exist from the instant that there
was already a meeting of the minds.
3. A Partnership with a fixed term is one in which the term of its existence has been
agreed upon expressly or impliedly.
4. To contribute what he had promised.
5. to warrant property contributed in case of eviction.
6. to deliver the fruits of the property from the time they should have been delivered,
without the need of any demand.
7. when contribution is in goods, the amount thereof must be determined by a proper
appraisal of the value at the time of contribution.
8. To contribute on the date due the amount promised to be given.
9. To reimburse any amount he may have taken from the partnership coffers and
converted to his own personal use.
10. To pay the agreed or legal interest if he fails to pay in due time.
11. To indemnify the partnership for the damages caused to it by the delay in the
contribution or the conversion of any sum for his personal benefit.
12. Industrial Partner- one who contributes his industry, labor or services to the
partnership.
13. “Unless there is a stipulation to the contrary, the partners shall contribute equal
shares to the capital of the partnership.”
14. Damages caused by a partner to the partnership is not offset by the profits which
he may have earned for the partnership.
15. Fungible things -borne by the partnership.
Partnership
4th slide
Matias Monico G. Palu-ay
Partnership
 Chapter 1- General Provisions

 Chapter 2- Obligations of the Partners

 Section 1- Obligations of the Partners among themselves
 Section 2- Property Rights of a Partner
 Section 3- Obligations of the Partners with regard to third persons

 Chapter 3- Dissolution and Winding up

 Chapter 4- Limited Partnership

Chapter 2- Obligations of the Partner

 Section 1- Obligations of the Partners

among themselves
 Article 1784-1809

 Section 2- Property Rights of a Partner

 Article 1810- 1815

 Section 3- Obligations of the Partners with

regard to third persons
 Article 1816-1827
Section 1- Obligations of the Partners
among themselves

 Rules for Distribution of Profits and Losses

 1. Distribution of Profits
 Based on Agreement
 If no agreement, share of capitalist partner in
profits shall be in proportion to his capital
contribution
 If there is an industrial partner, pay him what is
just and equitable, and the balance to be
paid to the capitalist partner
Section 1- Obligations of the Partners
among themselves

 Rules for Distribution of Profits and Losses

 1. Distribution of Losses
 Based on Agreement
 If no agreement, distribution of losses will be
based on the profits.
 If no agreement as to losses, and no
agreement as to profits, the distribution of
losses should be based in proportion to the
capital contribution
Article 1799
A stipulation which excludes one or more
partners from any share in the profits or
losses is void.

 Note that it is only the stipulation which is

void, the partnership is still valid.

Astipulation exempting an industrial

partner however is valid.
Article 1800-managing partner
 Appointment as managing partner
 A managing partner performs all acts of
administration, notwithstanding the
opposition of the other partners.
 His power is revocable only upon showing
a just and lawful cause, AND the vote of
the partners representing the controlling
interest.
1801- two or more managing
partners
 GeneralRule: Each managing partner
may execute all acts of administration

 However, if one of them opposes the act

of the other, the decision of the majority
of the managing partners shall prevail.

 Incase of tie, the decision of the partners

having the controlling interest shall prevail.
1802- two or more managing
partners but with a stipulation
requiring unanimity of action
 This is the exception to the general rule
that one managing partner may execute
all acts of administration.

 Here,the requirement is all managing

partners must agree.
1803-no manner of
management agreed upon
 Ifthere was no agreement as to the
manner of management, there are only
two rules:
 1. each partner is considered an agent of
the partnership and his act alone binds the
partnership.
 2. unanimous consent is required however
to alter an immovable property.
1804-contract of sub-
partnership
 Each partner may associate another person with him
in his share.
 However, the said associate shall not be admitted
into the partnership without the consent of all other
partners.

 Ex. A, B and C are partners. Thereafter, A entered a

contract with D, wherein D will share in A’s profits.
 This is legal since this is in accordance with the
principle of freedom to contract, and the original
partnership is not in anyway altered.
 D has no right to intervene in the original partnership.
 As to the other partners, D is only an investor.
1805-Duty to keep
Partnership Books
 The partnership books shall be kept at the
principal place of business of the
partnership.
 Every partner shall at any reasonable hour
have access to and may inspect and
copy any of them
1806-Duty to render
information
 Partners shall render on demand true and
full information of all things affecting the
partnership to any partner
 This is under the principle in partnership of
mutual trust and confidence among
partners.
 There must be no concealment between
them in all matters affecting the
partnership.
1807- Partner accountable as
Fiduciary
 The relationship between the partners is
essentially fiduciary, that is, involving trust
and confidence.
 A partner who makes a secret profit out of
the operation of the partnership is duty
bound to account such profit or
commission.
1808-right of capitalist partner
to engage in business
 General Rule: A capitalist partner cannot
engage for their own account in any
operation which is of the kind of business
in which the partnership is engaged.

 Exception: if there is a stipulation to the

contrary.
Quiz 4
 1. If no agreement, share of capitalist partner in profits shall be in
proportion to his ________________________
 2. If there is an industrial partner, pay him what is _________________, and
the balance to be paid to the capitalist partner
 3. If no agreement, distribution of losses will be based on the _______.
 4. A stipulation which excludes one or more partners from any share in
the profits or losses is _______.
 5. A managing partner performs all acts of ____________.
 6. If there was no agreement as to the manner of management each
partner is considered ___________ of the partnership.
 7. Is a contract of sub-partnership allowed? ______
 8. where do you keep the partnership books? ____________________
 9. A capitalist partner ___________ engage for their own account in any
operation which is of the kind of business in which the partnership is
engaged.
 10. The relationship between the partners is essentially ___________.
Quiz 4
 1. If no agreement, share of capitalist partner in profits shall be in
proportion to his capital contribution.
 2. If there is an industrial partner, pay him what is Just and equitable, and
the balance to be paid to the capitalist partner
 3. If no agreement, distribution of losses will be based on the profits.
 4. A stipulation which excludes one or more partners from any share in
the profits or losses is void.
 5. A managing partner performs all acts of administration
 6. If there was no agreement as to the manner of management each
partner is considered an agent of the partnership.
 7. Is a contract of sub-partnership allowed? YES
 8. where do you keep the partnership books? PRINCIPAL PLACE OF
BUSINESS 10-100%
 9. A capitalist partner cannot engage for their own account in any 9-95%
operation which is of the kind of business in which the partnership is 8-90%
engaged. 7-85%
 10. The relationship between the partners is essentially fiduciary 6-80%
5 or below-
75%
Partnership (5th slide)

-Property rights of a
partner
-Obligations to 3rd
persons

By:
Matias Monico G. Palu-ay
Partnership
 Chapter 1- General Provisions

 Chapter 2- Obligations of the Partners

 Section 1- Obligations of the Partners among themselves
 Section 2- Property Rights of a Partner
 Section 3- Obligations of the Partners with regard to third persons

 Chapter 3- Dissolution and Winding up

 Chapter 4- Limited Partnership

Property rights of a Partner
Article 1810-1814
 Article 1810
 “The property rights of a partner are:
(1) his rights in specific partnership
property (Article 1811)
(2) his interest in the partnership (Article
1812), and
(3) his right to participate in management
(already discussed in Article 1803)
Property rights of a Partner
Article 1810-1814
 1811 talks about specific partnership property
or those property which is owned by the
partnership, as a juridical person.
 Ownership of the property may have been
acquired by the partnership through either
contribution by one of the parties, or actual
acquisition using partnership funds.
 Again, it is not the partners who own the
specific partnership property. Rather, it is the
partnership itself.
 The specific partnership property may
only be used for partnership purposes.
 Example:
 A, B, and C established a partnership. C
contributed the land to the partnership. The
partnership therefore owns the parcel of
land. This means that none of the partners
can possess and use the land other than for
“partnership purposes”.
 Even if it was C who contributed the land, C
is not allowed to mortgage the land if he
wanted to take a loan from the bank, since
he no longer owns the property.
Property rights of a Partner
Article 1810-1814
 1812
 “A partner’s interest in the partnership is his share
of profits and surplus.”

 Profits means the excess of returns over

expenditures. It also means the net income of the
partnership.
 Surplus refers to the assets of the partnership after
the partnership debts and liabilities are paid and
settled. This is the excess of assets over liabilities. If
liabilities exceed assets, then you have a loss.
However, if assets exceed liabilities, then you have
a surplus.
Property rights of a Partner
Article 1810-1814
 1813
 A conveyance by a partner of his whole interest in the
partnership does not itself dissolve the partnership.

 Assignee does not necessarily become a partner. He

cannot:
 1. Interfere in the management or administration
 2. Require information and accounting
 3. inspect the partnership books.

 However, he is entitled to:

 Receive profits
 Receive assignors interest in case of dissolution
Property rights of a Partner
Article 1810-1814
 1814.
 This applies when a partner owes a third
person money.
 However, he has no more assets to pay the
third person.
 The third person then may collect by
foreclosing his right in the partnership.
 However, the other partners has preference
to buy his share so that the partnership will
not be dissolved
 Example:
 A, B and C are partners.
 A is personally indebted to X for
P100,000.00.
 X filed for a complaint against A, and
obtained a court judgment in his favor.
 If A is insolvent, X can ask the same court
that A’s interest in the partnership be
attached for the payment of his debt.
 The other partners, B and C, however, may
purchase the interest of A before the
foreclosure sale without dissolving the
partnership.
 End of Property Rights of a Partner
Section 3- Obligations of the Partners with
regard to third persons (article 1815-1827)
 Article 1815. Firm Name.

 “Every partnership shall operate under a firm name, which may

or may not include the name of one or more of the partners.”
 The name must not be misleading.
 The name may use a name of a deceased person provided
that the firm indicates in all its communication that the
named partner is deceased.
 Ex. “Quasha, Ancheta Pena and Nolasco Law Offices.
(William Quasha and Nolasco are already deceased)

 “Those who, not being members of the partnership, include their

names in the firm name, shall be subject to the liability of a
partner.”
 Discussed in Article 1816.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1816
 Liability for contractual obligations.
 All partners (including industrial partners) are
liable with all their property.
 This applies only in the event that the
partnership no longer has any assets to pay its
obligation, hence the partners are made to pay
said obligation.
 After all partnership assets have been
exhausted, partners are made to pay the
liability based on the number of partners, and
not based on the amount of their contribution.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1818
 General Rule: A partner is an agent of the
partnership. His act binds the partnership
 Exception: Partnership is not bound if:
 (1) said partner has in fact no authority and
 (2) the third person knows that the acting
partner has no authority.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1820.
 An admission or representation by a partner
concerning partnership affairs within the
scope of his authority is evidence against
the partnership.
 Example.
A borrowed P50,000 from B wherein he
executed a promissory note. A represented
that he was borrowing from the partnership of
which he is a partner of. Such representation
is evidence against the partnership.
Obligations of the Partners with
regard to third persons (article 1815-
1827)
 1821.
 Notice to a partner is notice to the partnership.

 A third person need not inform each and every

partner, he just needs to inform one partner.

 If notice is delivered to a partner, that is an

effective communication to the partnership,
notwithstanding the failure of the partner to
communicate such notice to his co-partners.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1822-1823. Liability arising from a partner’s
negligence resulting to damage, or breach of
trust.
 The partnership is liable to a third person in the
event that a partner, in the ordinary course of
business, caused to a third person loss or injury.
(partner’s wrongful act or omission)

 The partnership is liable to a third person when

one partner receives the money of the third
person and misapplies it for himself. (partner’s
breach of trust)
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1824.
 All partners are solidarily liable with the
partnership for liability under article 1822 and
1823.
 What does solidarily liable mean?
 Solidarily liable means that the creditor may
claim the entire amount from one party alone.
Of course, such party who is made to pay the
entire amount, may ask for reimbursement from
the other partners.
 Here, even the innocent partners may be made
to pay for the liability caused by the guilty
partner.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1825. Partner by Estoppel
 What does Estoppel mean?
 Estoppel is a bar which precludes a person from
denying or asserting anything contrary to that
which has been established as the truth by his
own earlier representation.
 A partner by estoppel is not an actual partner in
the partnership. However, he represents himself
to third persons that he is a partner.
 As such, he is liable as a partner.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1826.
 Liability of incoming partners for partnership
obligations
 When a person is admitted as a partner into
an existing partnership, he is liable for all
obligations existing at the time of his
admission as though he was already a
partner when such obligations were
incurred.
Obligations of the Partners with regard to
third persons (article 1815-1827)
 1827.
 Preference of partnership creditors in partnership
property.
 This contemplates two creditors:
 A creditor of a partnership, and
 A creditor of a partner
 In the event of dissolution, the creditor of the
partnership must be paid first, as he is the
preferred creditor.
 Thereafter, the remaining assets will be distributed
to the partners.
 The creditor of a partner may then claim against
the said partner for his share.
 End of:
 Section 2 – Property Rights of a Partner, and
 Section 3- Obligations of the Partners with
regard to Third Persons.

 We shall discuss:
 (1) Dissolution and Winding Up - next week
(Tuesday), and
 (2) Limited Partnership – next week (Friday)

 Then we shall have prelims next next week.

 For the meantime, we shall have a quiz.

Quiz #5

1. 1The specific partnership property may be used for

______________________
2. _________ means the excess of returns over expenditures.
3. __________refers to the assets of the partnership after the
partnership debts and liabilities are paid and settled.
4. A conveyance by a partner of his whole interest in the
partnership _________ dissolve the partnership.
5. May a firm name use the name of a deceased partner?
6. A partner is a/an _______ of the partnership.
7. True or False. Notice to a single partner is notice to the entire
partnership.
8. True or False. The other partners are liable to a third person for an
injury/loss caused by one partner in the ordinary course of
business.
9. True or False. The other partners are not liable to a third person
when one partner receives money and decides to spend it for
himself.
10. What do you call a person who is not an actual partner but
misrepresents himself to be a member of the partnership?
Quiz #5 Answers

1. 1The specific partnership property may be used for partnership

purposes only.
2. Profits means the excess of returns over expenditures.
3. Surplus refers to the assets of the partnership after the partnership
debts and liabilities are paid and settled.
4. A conveyance by a partner of his whole interest in the
partnership does not dissolve the partnership.
5. May a firm name use the name of a deceased partner? Yes.
6. A partner is an agent of the partnership.
7. True or False. Notice to a single partner is notice to the entire
partnership. True
8. True or False. The other partners are liable to a third person for an 10-100%
injury/loss caused by one partner in the ordinary course of 9-95%
business. True
8-90%
9. True or False. The other partners are not liable to a third person
when one partner receives money and decides to spend it for 7-85%
himself. False 6-80%
10. What do you call a person who is not an actual partner but
misrepresents himself to be a member of the partnership? Partner 5 or below-
by Estoppel 75%

Absent-
65%
Partnership
6th slide

Dissolution and
Winding up

Atty. Matt Palu-ay

Partnership
 Chapter 1- General Provisions

 Chapter 2- Obligations of the Partners

 Section 1- Obligations of the Partners among themselves
 Section 2- Property Rights of a Partner
 Section 3- Obligations of the Partners with regard to third persons

 Chapter 3- Dissolution and Winding up

 Chapter 4- Limited Partnership

Dissolution and Winding up
Articles 1828-1842
 Article1828. Definition.

 Dissolution of a partnership- is the change in the relation of

the partners caused by any partner ceasing to be
associated in the carrying on of the business.
 The partnership although dissolved, continues to exist until its
termination.
 The partnership after dissolution must wind up its affairs.

 Winding up- is the process of settling the business or

partnership affairs after dissolution.
 Debts of the partnership are paid.
 Partnership assets are partitioned, and distributed to the
partners.

 Termination- that point in time when all partnership affairs

are completely wound up and settled.
Dissolution and Winding up
Articles 1828-1842
 Article 1829. Partnership not terminated by
Dissolution.

 “On dissolution the partnership is not terminated,

but continues until the winding up of partnership
affairs is completed.”

 Dissolution is not extinguishment of the partnership.

 The significance of dissolution is that no new
partnership business should be undertaken, but
the affairs should be liquidated and distributed to
those entitled to the partner’s interest.
Dissolution and Winding up
Articles 1828-1842
 Article 1830- Extrajudicial Dissolution
 Dissolution without going to court.

 Article 1831- Judicial Dissolution

 Dissolution through a court judgment
Dissolution and Winding up
Articles 1828-1842
 Article 1830- Extrajudicial Dissolution
 1. without violation of the agreement
 By termination of the term or fulfilment of the specified
undertaking.
 By express will of any partner, who must act in good faith,
 By express will of all the partners
 By expulsion of any partner

 2. in contravention of the agreement, where

circumstances do not permit dissolution- by express
will of any partner, at any time.
 A partner may withdraw at any time. With his withdrawal,
the number of members is decreased, hence the
dissolution.
 Any partner may cause the dissolution of the partnership
at any time, even without the consent of his co-partners.
Dissolution and Winding up
Articles 1828-1842
 3. by any event which makes it unlawful for the business
to be carried on.
 Ex. The business of selling sex toys. Suddenly a law says you cant
sell sex toys.
 Ex. You are partners with a foreign national. Suddenly there was a
declaration of war, and that nationals from that foreign country
are not allowed to own their business here in the Philippines.
 Ex. A is a lawyer. He is a partner in a law office. Suddenly, he was
appointed as Judge. A judge is prohibited from private practice.

 4. when a specific thing to be contributed perishes

BEFORE delivery.
 5. death of any partner
 6. insolvency of any partner
 7. civil interdiction of any partner
Dissolution and Winding up
Articles 1828-1842
 1831. Judicial Dissolution.
 On application by a partner:
 Insanity. Must be through a court order.
 Incapacity.
 Misconduct and persistent breach of
partnership agreement
 Business can be carried on only at a loss
 On application by a purchaser of a partner’s
interest
 After the termination of the specified term or
particular undertaking
 At any time, if partnership at will
Dissolution and Winding up
Articles 1828-1842
 1832-1834. Effect of Dissolution on Authority of a
Partner.

 General Rule:
 Dissolution is not by act, insolvency, or death (AID) of a
partner = terminates all authority of any partner to act for
the partnership.

 Exception:
 1. Acts necessary to wind up partnership.
 2. Acts necessary to complete transactions begun but
unfinished.
 3. If dissolution is by act, insolvency, or death of a partner
= authority of the partner to act is terminated only when
such partner has knowledge of the said AID.
Dissolution and Winding up
Articles 1828-1842
 Article
1835. Effect of dissolution on
partner’s existing liability.

 The dissolution of a partnership does not

discharge the existing liability of a partner
 The liability of a partner still exists even if the
partnership has already been dissolved.
Dissolution and Winding up
Articles 1828-1842
 Article 1836.
 Manner of winding up.
 Judicially-under the control of a court.
 Extrajudicially-without intervention of the court

 Persons authorized to wind up.

 Partners designated by the agreement
 Partners who have not wrongfully dissolved the
partnership, or
 The legal representative of the last surviving
partner
Dissolution and Winding up
Articles 1828-1842
 1837. Right of a partner upon dissolution
 Dissolution not in contravention of the
partnership agreement.
 Have partnership property applied to
partnership liabilities.
 Receive in cash his share of the surplus.
Dissolution and Winding up
Articles 1828-1842
 1838.Right of Partner to Rescind Contract
of Partnership.
 If one is induced by fraud or
misrepresentation to become a partner, the
contract is voidable or annulable.
 If the contract is annulled, the injured party
is entitled to restitution (Article1398)
 Here, the fraud or misrepresentation vitiates
consent (Article 1330)
Dissolution and Winding up
Articles 1828-1842
 1839.Liquidation and Distribution of Assets
of Dissolved Partnership.
 Order of payment:
 Pay first the creditors of the partnership
 Pay second the partners who gave loans to
the partnership
 Pay third the partners, if there is a return of the
capital initially contributed,
 Pay last, the partners if there are profits
remaining.
Dissolution and Winding up
Articles 1828-1842
 1840.
Dissolution of Partnership by change
in membership.
 Any change in membership dissolves a
partnership and creates a new partnership.
 This may take place when:
A new partner is admitted
 A partner retires
 A partner dies
 A partner withdraws or
 A partner is expelled, etc.
Dissolution and Winding up
Articles 1828-1842
 1841. Rights of a retiring or legal representative
of a deceased partner when business is
continued.
 When any partner retires or dies, and the business
is continued without settlement of accounts, the
retiring partner or the legal representative (of the
deceased partner) shall have the right:
 (1) to have the value of the interest of the
retiring/deceased partner ascertained as of the
date of dissolution.
 (2) to receive an amount equal to the value of his
share in the dissolved partnership with interest.
Dissolution and Winding up
Articles 1828-1842
 1842.Partner’s right to account of his
interest
 The right to demand an accounting of the
value of his interest accrues to any partner
after dissolution.
 Liquidation is necessary to determine
partner’s share in profits and the
partnership.
Quiz 6
1. _________________- is the change in the relation of
the partners caused by any partner ceasing to be
associated in the carrying on of the business.
2. _________________- is the process of settling the
business or partnership affairs after dissolution.
3. _________________- that point in time when all
partnership affairs are completely wound up and
settled.
4. ______________________ - Dissolution without going
to court.
5. ______________________ - Dissolution through a court
judgment
6-15. 10 Ways to dissolve a partnership.
Quiz 6
1. Dissolution of a partnership- is the change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on of the business.
2. Winding up- is the process of settling the business or partnership affairs after dissolution.
3. Termination- that point in time when all partnership affairs are completely wound up
and settled.
4. Extrajudicial Dissolution- Dissolution without going to court.
5. Judicial Dissolution- Dissolution through a court judgment
6-15. 10 Ways to dissolve a partnership :
1. Termination of a term
2. Fulfilment of the specified undertaking.
3. Will of any partner 15-100%
4. Will of all the partners 14-97%
5. Expulsion of a partner 13-94%
6. Business becomes unlawful to be carried on 12-90%
7. Thing to be contributed lost before delivery 11-86%
8. Death, 10-83%
9. Insolvency, or 9-80%
10. civil interdiction, 8-76%
11. Insanity. 7below is 75%
12. Incapacity
13. Misconduct . Breach of partnership agreement Absent 65%
14. Business can be carried on only at a loss
Partnership
7th slide
Limited
Partnership

Atty. Matt Palu-ay

Partnership
 Chapter 1- General Provisions

 Chapter 2- Obligations of the Partners

 Section 1- Obligations of the Partners among themselves
 Section 2- Property Rights of a Partner
 Section 3- Obligations of the Partners with regard to third persons

 Chapter 3- Dissolution and Winding up

 Chapter 4- Limited Partnership

Limited Partnership
Article 1843-1867
 Article 1843
 “A limited Partnership is one formed by 2 or
more persons, having as members:
 1. One or more general partners and
 2. One or more limited partners.”

 “the limited partners shall not be bound by

the obligations of the partnership.”
 The limited partner:
 1. Merely contributes to the capital and
share in the profits.
 2. BUT does not participate in the
management of the business.
 3. He may contribute CASH or other
PROPERTY but not service.
 4. Is not personally liable beyond his capital
contribution. (in this sense, he is similar to a
holder in a stock corporation.)
Limited Partnership
Article 1843-1867
 1844.
 Essential Requirements for the formation of a
limited partnership:

 1. A certificate or articles of limited partnership

which states the details in 1844.
 The name should have “limited” at the end.
 Location, type of business, partner’s name, term of
partnership, etc.

 2. Such certificate or articles must be registered

with the SEC.
 If you don’t register it, the partnership is presumed
as a General Partnership.
Limited Partnership
Article 1843-1867
 1845.

 “The contributions of a limited partner may

be cash or other property, but not services.”
Limited Partnership
Article 1843-1867
 1846.

 General Rule: The surname of a limited partner

shall not appear in the partnership name.
Otherwise, he shall be liable as a general
partner.

 Exceptions:
 1) it is also the surname of a general partner, or
 2) prior to the entry of a limited partner, the
business had already been carried on under a
name in which his surname appeared.
Limited Partnership
Article 1843-1867
 1847.
 If the certificate/articles contains a false statement,
the partner may be liable to 3rd persons who suffered
loss because of reliance on such statement.

 Ex 1. A, a limited partner, appeared as a general

partner in the articles. If the partnership is sued he
cannot use as a defense that he is merely a limited
partner.

 Ex 2. The contribution of A is erroneously stated as

Php15k, instead of P10k. He may be made to pay the
additional P5k under this article.
Limited Partnership
Article 1843-1867
 1848.

 General Rule: A limited partner shall not

become liable as a general partner.

 Except: if he takes part in the control of the

business.
Limited Partnership
Article 1843-1867
 1849.
 After a limited partnership has been
formed, additional limited partners may be
admitted.
 All partners (including the new limited
partner) must simply amend, sign, notarize
the certificate/articles, and then file it with
the SEC.
Limited Partnership
Article 1843-1867
 1850.
 General Rule: a General partner shall have all
management rights.
 Exception: (A General partner must obtain the
written consent of the all the limited partners to:)
 1. Admit another general partner
 2. Admit another limited partner
 3. Do any act in contravention of the
certificate/articles.
 4. Confess judgment against the partnership.
Limited Partnership
Article 1843-1867
 1851.
 A limited partner shall have the same rights
as a general partner to:
 1. examine the partnership books,
 2. demand full information of all things
affecting the partnership
 3. have dissolution and winding up by decree
of court.
 4. have the right to receive share of the profits
and/or return of his contribution.
Limited Partnership
Article 1843-1867
1853.
 A limited partner may also be a general
partner at the same time.
 This means that he may have the right to
manage the partnership.
 However, as a natural consequence of
being a general partner, the said
partner’s liability will now extend to his
personal property.
Limited Partnership
Article 1843-1867
 1854.
 Prohibited transactions- A limited partner is
prohibited from:
 1) receiving or holding as collateral security
any partnership property, or
 2) receiving from a partner (or the
partnership) any payment if the assets of the
partnership are not sufficient to discharge
partnership liabilities.
Limited Partnership
Article 1843-1867
 1855.

 If there are several limited partners, they

may agree that one or more limited
partners may have preference of payment
over other limited partners.

 This agreement must be stated in the

certificate.
Limited Partnership
Article 1843-1867
 1856.

 A limited partner has the right to receive a

share in the profits (by way of income),
provided that the partnership assets
exceeds partnership liabilities after
payment.
Limited Partnership
Article 1843-1867
 1857.
 A limited partner has the right to the return
of his contribution, provided that:
 1) the liabilities of the partnership have been
paid, OR partnership assets are sufficient to
pay partnership liabilities, and
 2) the consent of all the partners have been
obtained.
Limited Partnership
Article 1843-1867
 1858.
 Liability of a Limited Partner
 Forthe difference between his contribution
actually made and that stated in the
certificate.
 Simply, his unpaid contributions to the
partnership.
Limited Partnership
Article 1843-1867
 1859.
 A limited partner’s interest is assignable.
 A substituted limited partner is a person
admitted to all the rights of a limited
partner who:
 has died, or
 has assigned his interest.

(A substituted limited partner simply steps in the

shoes of the original limited partner)
Limited Partnership
Article 1843-1867
 1860.
 General Rule: the retirement, death, insolvency,
insanity, or civil interdiction of a general partner
dissolves the partnership.

 Exception: If it is a limited partnership, the

remaining general partners may continue the
partnership IF:
 1) it has a right to do so under the certificate, or
 2) with the consent of all the other partners.
Limited Partnership
Article 1843-1867
 1861.
 When a limited partner dies:
 1) his executor or administrator shall have the
right to settle his estate
 2) the estate of the deceased partner shall be
liable for all his liabilities as a limited partner.
Limited Partnership
Article 1843-1867
 1862.
 The creditors of a limited partner may sue
for a Court Order charging the limited
partner’s interest in the partnership for the
payment of any unsatisfied amount of his
claim.
Limited Partnership
Article 1843-1867
 1863.
 Order of priority in payment of the liabilities
of a limited partnership:
 1. pay creditors first
 2. Pay limited partners(profits)
 3. Pay limited partners (capital)
 4. Pay general partners (other than profits and
capital)
 5. Pay general partners (profits)
 6. Pay general partners (capital)
Limited Partnership
Article 1843-1867
 1864.
 The Certificate/Articles shall be cancelled
when:
 1. the partnership is dissolved, or
 2. all limited partners cease to be such.
Limited Partnership
Article 1843-1867
 1865.

 Amendment of Certificate or Articles of

Partnership must be signed and sworn to by
all the partners, including the new
partner/s.
Limited Partnership
Article 1843-1867
 1866.
 A limited partner is merely a contributor.
 He is practically a stranger in the
partnership.
 He has no right to participate in
management and control of the business.
 As such, creditors have not right against the
limited partners.
Limited Partnership
Article 1843-1867
 1867.
 A limited partnership formed under the
former law (Code of Commerce) may
become a limited partnership by complying
with the rules provided here in the Civil
Code.