TITLE IX – PARTNERSHIP
Chapter 1 – General Provisions
Art. 1767
Contract of partnership is when:
- 2 or more people
- Bind themselves to
- Contribute money, property, or industry to a common
fund
- With the intention of dividing the profits among
themselves
Two or more persons may also form a partnership for the exercise
of a profession
Art. 1768
A partnership has a separate juridical personality separate and
distinct from the personality of each of the partners
This is true even if the requirements of Art. 1772 is not complied
with
Art. 1772:
Art. 1769
To determine whether a partnership exists, the following rules
apply:
1. Persons who aren’t partners to each other are not
partners as to 3rd persons (except Art. 1825)
a. Art. 1825
2. Co-ownership or co-possession DOESN’T BY ITSELF
establish a partnership, even if the co-owners or co-
possessors share/do not share in the profits made by the
use of the property
3. Sharing gross returns DOESN’T BY ITSELF establish a
partnership, whether or not the persons sharing the
gross returns have a joint or common interest in the
property from which the returns come from
4. A person who receives a share in the profits of the
business is prima facie evidence that he is a partner in
the business EXCEPT if the profits received are:
a. In payment as a debt by installments or
otherwise
b. In payment as wages of an employee or rent
to a landlord
c. In payment as annuity to a widow or
representative of a deceased partner
d. In payment as interest on a loan, though the
amount of payment varies with the profits of
the business
e. In payment as consideration for sale of
goodwill of a business or other property by
installments or otherwise
Art. 1770
Partnership’s object or purpose – must be lawful and for the
common benefit or interest of the partners
If the partnership is unlawful and dissolved by judicial decree =
profits are confiscated in favor of the State and follow Penal Code
provisions on confiscation and effects of the crime
Art. 1771
GR: Partnership can be constituted in ANY form
EXP: if immovable property or real rights are contributed, a public
instrument is necessary
1
Art. 1772
If the capital of the partnership is 3k or more, in money or
property, the partnership shall appear in a public instrument,
recorded in the SEC
Failure to do this shall not affect the liability of the partnership
and the members TO THIRD PERSONS.
Art. 1773
If an immovable property is contributed, the properties must be
inventoried, signed by the parties, and attached to the public
instruments
Otherwise, the CONTRACT of partnership is VOID.
Art. 1774
The partnership, through the partnership name, can acquire an
immovable property or an interest in it. But the title acquired
should only be in the partnership name.
Art. 1775
Associations and societies where:
- Articles are kept secret among the members
- Any one of the members can contract with third persons
in their own name
Effect: has no juridical personality and is governed by rules on co-
ownership
Reason: to prevent partners from defrauding each other and to
preserve equality of each partners.
Notes: secret stipulation between partners or with third persons
that DOESN’T produce this effect is VALID
Art. 1776
Partnerships can be universal or particular (as to object)
Partnerships can be general or limited (as to liability of partners)
Art. 1777
Universal partnership = refers to ALL the present property or to
ALL the profits
Art. 1778
Partnership of ALL present property = partners contribute ALL the
property which actually belongs to them to a common fund + with
the intention of dividing the profits among themselves as well as
all profits they may acquire
Art. 1779
In universal partnership of ALL present property = ALL of the
property of each of the member at the time the partnership was
constituted BECOMES THE COMMON PROPERTY OF ALL
PARTNERS, as well as the profits they may acquire after
GR: The partners can make a stipulation stating a common
enjoyment of the property and profits
EXP: property which the partners may acquire SUBSEQUENTLY
through INHERITANCE, LEGACY, OR DONATION, can’t be included
in the common enjoyment EXCEPT the fruits from it
Art. 1780
In a universal partnership of PROFITS = comprises of profits each
partner may acquire through their industry or work DURING the
existence of the partnership
If the partners possess immovable or movable properties at the
time of the perfection of the contract, those will pertain to each of
the partners exclusively EXCEPT the usufruct (fruits) which will go
to the partnership
Art. 1781
Articles of partnership entered into without specifying its nature
only constitute a universal partnership of PROFITS
Art. 1782
If you’re someone who can’t give any donation or advantage, you
can’t enter into a universal partnership
Art. 1783
Particular partnership – object is determinate things, their use or
fruits, or a specific undertaking, or the exercise of a profession or
vocation
Chapter 2 – Obligations of the Partners
Section 1 – Obligations of the Partners among Themselves
Art. 1784
GR: Partnership begins from the moment the contract is executed
EXP: Contrary stipulation
Art. 1785
When a partnership with a fixed term or a particular undertaking
is continued without any express agreement, even after the
expiration of the term or when the undertaking is completed =
rights and duties of the partners remain the same, so far as
consistent with a partnership at will
There is a prima facie evidence of continuation of partnership
when the business is continued by the partners or those who
habitually acted in the partnership, without liquidation of the
partnership affairs
Art. 1786
Every partner is a debtor of the partnership with whatever he has
promised to contribute.
The partner who contributed a specific and determine thing to
the partnership is bound for warranty in case of eviction, in the
same manner the vendor is bound with respect to the vendee
The partner is liable for the fruits of the specific and determinate
thing contributed from the time it should have been delivered. No
need for demand.
Art. 1787
If what a partner contributes are goods, the goods must be
appraised in the manner prescribed in the contract of partnership.
If there is none, it shall be made by experts chosen by the partners
and according to the current prices. The subsequent changes to
the price is for the account of the partnership
Art. 1788
If a partner promises to contribute a sum of money and failed to
do so, he is liable for the interest and damages from the time he
should’ve complied with it
If a partnership takes money from the partnership coffers, he is a
debtor also for the interest and damages from the time he
converted the amount to his own use
2
Art. 1789
GR: An industrial partner can’t engage in business for himself
EXP: if the partnership authorizes him
If he does engage in business for himself, the capitalist partners
can either:
- Exclude him from the firm or
- Avail themselves of the benefit the industrial partner got
from engaging in the business for himself
Both includes damages
Art. 1790
GR: All partners shall contribute equal shares to the capital of the
partnership
EXP: Unless there’s a stipulation to the contrary
So, the partner’s contribution to the capital need not be equal
Art. 1791
GR: If there is an imminent loss of the business of the partnership,
the partners (except the industrial partner) should contribute
additional shares to the capital to save the venture
EXP: if there’s a stipulation to the contrary
If a partner refuses to contribute, he is obliged to sell his interest
to the other partners
Art. 1792
Art. 1793
If a partner received his share in the partnership credit (whether
whole or in part) when the other partners haven’t collected theirs
yet, is obliged to put what he received into the partnership capital
(even if he gave a receipt for his share only), if the debtor has
become insolvent.
Art. 1794
If the partnership suffers damages through the fault of a partner,
that partner is responsible for the damages but he cannot use the
profits and benefits which he may have earned for the partnership
to pay for the damages
But the court can lessen the responsibility of that partner if
unusual profits have been realized through the extraordinary
efforts of that partner for the partnership
Art. 1795
If what’s contributed are specific and determinate things, which
are not fungible, and only their use and fruits may be for the
partnership, the risk will be borne by the partner who owns of the
thing
If what’s contributed are things which are fungible or those that
deteriorates if not used, the risk is borne by the partnership
If there’s no stipulation, the risk of things borne and appraised in
the inventory is borne by the partnership. Claims for it are based
on the value which they are appraised

Art. 1796
If a partner disburses amounts on behalf of the partnership, the
partnership is responsible to every partner for the amount
disbursed and the interest, counted from the time the expenses
are made
The partnership is also responsible for the obligations contracted
by the partner in good faith in the interest of the partnership
business, and for the risks and consequences of its management.
Art. 1797
Rules on profits and losses:
1. Shall be distributed based on agreement
2. If only the share in profits is agreed on, the share in
losses is the same proportion of the share in profits
3. If there’s no agreement, share in profits and losses is in
proportion to their contribution
4. Except, in an industrial partner:
a. Not liable for losses
b. For the profits, he shall receive what is just
and equitable based on circumstances
c. If he contributed capital, he receives profits in
proportion to his capital
Art. 1798
Partners can entrust the designation of the share in the profits and
losses to a 3rd person. They can impugn the shares designated by
the 3rd person if it’s manifestly inequitable.
But partners can’t complain about the decision if they didn’t
impugn it within 3 months from the time they knew about it or if
the partners already begun to execute the decision of the 3 rd
person.
The designation of the profits and losses can’t be entrusted to one
of the partners.
Art. 1799
Partners can’t exclude another partner in sharing in the profits
and losses. A stipulation on this is void.
Art. 1800
A partner designated as manager may perform all acts of
administration even if opposed by the other partners EXCEPT if the
partner designated as manager acts in bad faith
Revocation
- Power as manager is irrevocable without just or lawful
cause.
- To revoke the partner’s managerial power, it needs the
vote of the partners who have controlling interest
A power granted after the partnership has been constituted may
be revoked at any time.
Art. 1801
If 2 or more partners are appointed as managers of the
partnership
- Without specifying each of their duties or
- Without stipulating that each of them needs the consent
of the other
Effect  each may separately execute ALL acts of administration
3
EXP: if any of the partners oppose, the decision of majority will
prevail. If there’s a tie, the decision of the majority with the
controlling interest shall prevail
Art. 1802
If it’s stipulated that each of the managing partners should act
with the consent of the other, then the CONCURRENCE OF ALL is
needed for the managing partner’s acts to be valid.
Absence or disability of any of the partners can’t be used as a
defense, EXP for imminent danger of grave or irreparable injury to
the partnership
Art. 1803 – rules on management
If the manner of management hasn’t been agreed upon, the
following are the rules:
1. All partners are considered agents of the partnership.
Thus, their acts bind the partnership and its partners.
But Art. 1801 is followed still
a. (that if there’s no stipulation as to the
respective duties of the appointed managing
partners, each of them can act separately for
the partnership, but if any of the other
partners oppose, then the vote of majority will
prevail)
2. GR: For alteration of immovable property of the
partnership, even if it’s useful to the partnership 
cannot be done without consent of other partners
EXP: if refusal is manifestly prejudicial to the interest of
the partnership, court’s intervention can be sought
Art. 1804
A partner CAN associate another person in his share (whether a
managing partner or not) in the partnership, but this person
associated will NOT be considered admitted into the partnership
EXCEPT if all partners consent.
Art. 1805 – partnership books
Partnership books shall be kept at the principal place of the
business of the partnership (except if agreed otherwise). Any
partner can have access to the books at reasonable hours and can
copy and inspect them.
Art. 1806
Partners shall render to any partner or their legal representative
(if deceased or have legal disability), on demand, the true and full
information on all things affecting the partnership
Art. 1807 – obligation to account
Every partner must account for and be a trustee for:
- any benefit received from the partnership;
- any profit derived by him without the consent of the
other partners from any transaction connected with the
formation, conduct, or liquidation of the partnership or
- from use by him of the partnership property
Art. 1808
GR: Capitalist partners can’t engage in for their own account, any
operation of a kind of business similar with what the partnership is
engaged in
EXP: stipulation
CONSEQUENCE: If a capitalist partner does engage in this
prohibition, they shall bring into the common funds any profits
accruing to him from his transactions, and shall personally bear all
the losses.
Art. 1809 – right to accounting
ANY partner shall have the right to a formal accounting of the
partnership affairs:
1. If he is wrongfully excluded from the partnership
business or possession of its property by his co-partners
2. Right is under the terms of agreement
3. As stated in Art. 1807
4. If circumstances show that it’s just and reasonable
Section 2 – Property Rights of a Partner
Art. 1810 – property rights of a partner
The property rights of a partner are:
1. Rights in specific partnership property
2. Interest in the partnership
3. Right to participate in the management
Art. 1811 – rights in specific partnership property (co-owner)
A partner is a co-owner with his partners of the specific
partnership property
The incidents of this co-ownership are such that:
1.
Art. 1812 – rights in the interest of the partnership
A partner’s interest in the partnership is his share of the profits
and surplus
Art. 1813
If a partner conveys his whole interest in the partnership, this
doesn’t dissolve the partnership or entitle the assignee to (except
if contrary stipulation):
- interfere in the management or administration of the
partnership business
- Accounting of the partnership transactions
- Inspect the partnership books
Conveyance to assignee merely entitles the assignee to (during the
partnership):
- Receive the profits which the assigning partner is
entitled to
- May avail himself of the remedies in cases there is fraud
in the management of the partnership
In case of dissolution of the partnership, the assignee is entitled
to:
- Receive his assignor’s interest
- Require an account from the date only of the last
account agreed to by all the partners
Art. 1814
If a judgment creditor of a partner applies with the court to
satisfy the judgment payment, the court:
1. Can charge the interest of the debtor partner with
payment of the unsatisfied amount of the judgment
debt with interest
2. May appoint a receiver of his share of the profits or of
any other money due or will fall due to him in respect of
the partnership
3. Can make all other orders, directions, accounts, and
inquiries which the debtor partner might have made, or
which the circumstances may require
4
The interest charged (on the judgment payment to the judgment
creditor of a partner) may be redeemed at any time BEFORE
foreclosure, or if there is a sale ordered by the court, can be
purchased without causing dissolution:
1. With separate property, by any one or more of the
partners; or
2. With partnership property, by any one or more of the
partners, with consent of all other partners whose
interest are not charged or sold
A partner still has the right under the exemption laws as regards
his intertest in the partnership
Section 3: Obligations of the Partners with Regard to Third
Persons
Art. 1815
Every partnership shall operate under a firm name which may or
may not include the name of one or more of the partners.
If a person who’s not a member of the partnership include their
name in the firm name, they will be liable as a partner.
Art. 1816 – unlimited liability
All partners, including industrial ones, shall be liable pro rata with
all their property and after exhausting all partnership assets, for
the contracts entered into in the name and for the account of the
partnership, and those entered into by an authorized person to act
for the partnership.
However, any partner may enter into a separate obligation to
perform a partnership contract.
Art. 1817
Any stipulation contrary to the pro rata liability of partners shall
be void AS TO THIRD PERSONS, but NOT among the partners.
Art. 1818 – mutual agency
Every partner is an agent of the partnership for the purpose of its
business. The act of every partner to carry on in the usual wat the
business of the partnership which he is a member of bind the
partnership
EXCEPT if that partner has no authority to act for the partnership
in a particular manner AND the person with whom he
dealt/transacted with KNOS that he had no authority
An act of a partner NOT for the carrying on of the business of the
partnership doesn’t bind the partnership EXCEPT if authorized by
the other partners
One or more but less than all the partners have NO AUTHORITY to
do the following EXCEPT if they were authorized by the other
partners OR the business has been abandoned
1. Assign the partnership property in trust for creditors or
on the assignee’s promise to pay the debts of the
partnership (assign the partnership property)
2. Dispose of the goodwill (name/reputation) of the
business
3. Do acts which makes it impossible to carry on the
ordinary business of the partnership
4. Confess a judgment
5. Enter into a compromise regarding a partnership claim
or liability (when a 3rd person claims
interest/credit/payment)
6. Submit a partnership claim or liability for arbitration
7. Renounce a claim of the partnership

If a partner does acts in contravention with authority given to him,
it doesn’t bind the partnership to be the person the partner
transacted who knew of the lack of authority/restriction of the
partner.
Art. 1819
(1) Title over real property is in the partnership name and
conveyed under the partnership name
If the title over a real property is under the partnership name, any
partner can convey that real property executed under the
partnership name
But the partnership can recover the property EXCEPT
- if the act of the partner who conveyed it is binding upon
the partnership (Art. 1818 – partner is authorized and
it’s for the partnership business)
- OR the real property has been conveyed to an innocent
purchaser for value (didn’t know that the partner
exceeded his authority)
(2) Title over real property is in the partnership name but
conveyance is made under the partner’s own name
Effect: The conveyance executed under the partner’s name passes
the equitable interest of the partnership AS LONG AS THE ACT IS
IN THE AUTHORITY OF THE PARTNER under 1818, par. 1
(3) Title over real property is in the name of one or more but not
all the partners, and the records don’t disclose the right of the
partnership
Effect: the partners whose name are in the title over the real
property may convey title to such property BUT the partnership
can recover it if the partner’s act doesn’t bind the partnership
(under Art. 1818, par 1) EXCEPT if the title to the property is an
innocent purchaser for value = partnership can’t recover it
(4) Title over real property is in the name of one or more but not
all the partners or a third person in trust for the partnership
EFFECT:
 A conveyance executed by a partner in the name of the
partnership or in his own name only passes equitable
interest of the partner- ship, only when the partner
conveying acted with authority
 A conveyance executed by a partner in the name of the
partnership or in his own name does not even pass
anything (not even equitable interest of the partnership)
when the partner so conveying acted without authority
(5) Title to real property is in the names of all the partners
Effect: a conveyance executed by all the partners passes all their
rights in such property = meaning: the will of the partner is the will
of the partnership
Art. 1820
Admission or representation made by any partner concerning
partnership affairs is evidence against the partnership
Note: Meaning – the admission of a parter made during the
existence of a partnership binds the partnership ONLY if it involves
matters concerning partnership affairs and made WITHIN scope of
his authority.
Art. 1821
Notice to or knowledge of any partner on any matter relating to
partnership concerning partnership affairs is notice against the
partnership
5
EXP: in the case of a fraud on the partnership, committed by or
with consent of that partner.
3 cases of knowledge:
1. Knowledge of the partner acting in the particular matter
acquired while a partner
2. Knowledge of the partner acting in the particular matter
then present to his mind
3. Knowledge of any other partner who reasonably could
and should have communicated it to the acting partner.
Art. 1822-1824 – when the partners and the partnership are
solidarily liable to 3rd persons (because general rule is pro rata
liability)
Art. 1822 – wrongful act or omission
If a partner does a wrongful act or omission which causes injury or
loss to third person while acting in the ordinary course of business
of the partnership OR with authority of his co-partners, the
partnership is liable to the same extent as the partner so acting or
omitting to act.
Art. 1823 - torts
The partnership is liable for the losses when:
1. A partner, acting within the scope of his apparent
authority receives money or property of a third person
and misapplies it
2. Where money or property is given by a third person to
the partnership and the partner misapplies it while in it’s
in the custody of the partnership.
Art. 1824
All partners are liable solidarily with the partnership for
everything chargeable to the partnership under Art. 1822 and
1823.
Art. 1825 – partner by estoppel
When a person, through his spoken or written words, or his
conduct, represents himself as a partner in an existing
partnership, is liable to the person relying on such representation
made by him who, gives credit to the actual or apparent
partnership, whether or not the representation has been
communicated to the person or with the knowledge of the
apparent partner making the representation or consenting to its
being made:
1. When the partnership liability results, he is liable as
though he were an actual member of the partnership
2. When no partnership liability results, he is liable pro-
rata with the other persons who consented to the
contract or representation as to incur liability, if any. If
there’s none, separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same
manner as though he were a partner in fact, with respect to
persons who rely upon the representation. When all the members
of the existing partnership consent to the representation, a
partnership act or obligation results; but in all other cases it is the
joint act or obligation of the person acting and the persons
consenting to the representation.
Art. 1826
If a person is added as a partner into an existing partnership, he is
liable for ALL obligations incurred even before he was admitted as
a partner, as if he were already a partner when the obligation was
incurred BUT this liability is satisfied only out of the partnership
property (unless there’s a stipulation to the contrary)

Art. 1827
Partnership creditors are preferred compared to separate
creditors of partners regarding partnership property.
Remedy of separate partner creditors: ask the attachment and
public sale of the share of the individual partner in the partnership
assets

Rules on hierarchy of claims

Constitutes dissolution ipso jure

6
Chapter 3 – Dissolution and Winding Up
Art. 1828
Dissolution of a partnership changes the relation of the partners.
This is caused by any partner ceasing to be associated with
carrying on the partnership as distinguished from the winding up
of the business.
Art. 1829
On dissolution, the partnership is NOT terminated but continues
on until the winding up of partnership affairs is completed.
Art. 1830-1831
The following causes dissolution of the partnership:
1. DISSOLUTION IPSO JURE WITHOUT COURT DECREE
a. WITHOUT BREACH
i. Term of partnership expired
ii. Specific undertaking for the
partnership already fulfilled
iii. Dissolution effected by the will of the
partner (in a partnership at will
where there is no definite term of
particular undertaking specified)
iv. Mutual withdrawal by all partners
v. Expulsion of a partner bona fide
(lawful) under powers granted in the
partnership agreement
b. WITH BREACH = remedy of damages against
breaching partner
i. Partnership term hasn’t expired
ii. Particular undertaking hasn’t been
terminated/fulfilled
iii. Dissolution effected by will of the
partner in bad faith, in a partnership
at will
c. BY FORCE MAJEURE OR OUTSIDE WILL OF
PARTNERS
i. Loss of specific thing promised to be
contributed
ii. Partnership business becomes
unlawful
iii. Death, insolvency, or civil
interdiction of any partner
iv. Insolvency of partnership
2. DISSOLUTION THROUGH COURT DECREE
a. Judicially declared insane or shown to be of
unsound mind
b. Partner becomes incapacitated to perform the
partnership contract
c. Partner’s acts are prejudicial in carrying out
the partnership business
d. Partner willfully or persistently commits a
breach of the partnership agreement or makes
it impossible to carry on the partnership
business with him
e. Partnership business can only be carried on at
a loss
f. Other circumstances that render the
dissolution equitable
g. If a purchaser of a partner’s interest applies to
the court:
i. After the termination of specified
term of the partnership
ii. After termination of the particular
undertaking
iii. At any time, in a partnership at will
7
Art. 1832-1838 – Legal effects of dissolution in general
Art. 1832 – General rule
Effect of dissolution: terminates all authority of any partner to act
for the partnership:
1. With respect to the partners:
a. When the dissolution is not by the act,
insolvency or death of a partner; or
b. When the dissolution is by the act, insolvency
or death of a partner, in cases where Art. 1833
requires
2. With respect to persons not partners, as declared in Art.
1834
Art. 1833 - Authority of partners among themselves (inter se) to
act for the partnership
When the dissolution is by such act, insolvency, or death of a
partner, each partner is liable to his co-partners for his share of
any liability as a result of that partner acting for the partnership
as if the partnership has not been dissolved (like entering into new
contracts)
EXP: each partner is NOT liable to his co-partner if the person
acting for the partnership:
- had knowledge of the dissolution OR
- had knowledge of the death or insolvency of a partner
Art. 1834 – authority of partner to bind a dissolved partnership ti
third persons
After dissolution, a partner can bind the partnership:
1. For the purposes of winding up partnership affairs or
completing transactions unfinished at dissolution
2. By any transaction which would bind the partnership if
dissolution hasn’t taken place, provided the other party
to the transaction:
a. Extended credit to the partnership before the
dissolution or didn’t know about the
dissolution
b. Though he didn’t extend credit, he knew the
partnership before dissolution and didn’t
receive any notice of dissolution since the fact
of dissolution wasn’t advertised in a
newspaper of general circulation in the place
where the partnership business was regularly
carried on.
The liability arising from the transactions with a 3 rd person after
dissolution will be satisfied using partnership assets alone when
the partner, prior to the dissolution, had been:
1. Unknown as a partner to the person with whom he
contracted with
2. He is so unknown and inactive in the partnership affairs
that the business reputation cannot be due to him
A partner’s action in no way binds the partnership after dissolution
if:
1. The partnership is dissolved because it’s unlawful to
carry on the business UNLESS the act of the partner is
necessary to wind up the business
2. Partner has become insolvent
3. Partner has no authority to wind up partnership affairs
EXCEPT in transactions with a person who:
a. Extended credit to the partnership before
dissolution and didn’t know of the partner’s
lack of authority
b. Though he didn’t extend credit, he knew the
partnership before dissolution and didn’t
 receive any notice of the partner’s lack of
authority
Nothing in this article affects the liability of a partner in estoppel
Art. 1835
Dissolution, by itself, doesn’t extinguish the liability of any partner
A partner is discharged from their existing liability through an
agreement between himself, the partnership creditor, and the
persons/partnership continuing on with the business.
This agreement may be inferred from the course of dealing
between the creditor having knowledge of the dissolution and the
person/partnership continuing the business
The estate of the deceased partner is liable for all obligations of
the partnership incurred while he was a partner, but his separate
debts shall be paid first.
Art. 1836
Those who have the right to wind-up the partnership affairs are:
1. Partners who didn’t wrongfully dissolve the partnership
2. Legal representative of last surviving partner
3. Partners who are not insolvent
Any partner, his legal representative or assignee may obtain
winding up by the court (upon showing cause)
Art. 1837
When dissolution is based on any ground except those in breach of
the partnership agreement, each partner may have the
partnership property applied to discharge its liabilities and the
excess applied to pay (in cash) the net amount owing to the
respective partners.
If dissolution is caused by expulsion of a partner and such partner
is discharged from all partnership liabilities, either because he
paid already or by agreement under Art. 1835, that partner
expelled will only receive in cash the net amount due him from the
partnership.
When dissolution is caused in contravention of the partnership
agreement, the rights of the co-partners are:
1. If the partner didn’t cause the dissolution wrongfully:
a. Can have the partnership property applied to
discharge its liabilities and the excess applied
to pay (in cash) the net amount owing to the
respective partners.
b. Right to damages for breach of agreement
against the breaching partner
2. If the partner/s didn’t cause the dissolution wrongfully
and wants to continue the business can:
a. Possess partnership property, provided that
they secure payment by bond approved by the
court; or
b. Pay to any partner who has caused the
dissolution wrongfully, the value of his interest
in the partnership at the dissolution minus
damages and indemnify him against all
present and future partnership liabilities
3. The partner who caused the dissolution wrongfully shall
have:
a. If business is NOT continued: all the rights of a
partner under the 1st paragraph (have the
partnership property applied to discharge its
liabilities and the excess applied to pay (in
cash) the net amount owing to the respective
partners) subject to liability for damages
8
b. If business is continued:
i. right to have the value of his
interest in the partnership minus
damages ascertained and paid to
him in cash or payment secured by a
bond approved by the court (value of
goodwill not considered in
computation)
ii. Right to be released from all existing
liabilities of partnership
Art. 1838
If the partnership is rescinded (annulled) due to fraud or
misrepresentation of one of the parties thereto, the party entitled
to rescind (annul) (the one who is injured due to fraud or
misrepresentation) is entitled:
1. To retain the surplus of the partnership property for
any sum paid by him to purchase an interest in the
partnership and for capital or advances contributed by
him
2. To stand in place of the creditors of the partnership
for any payment made by him for partnership liabilities
3. To receive indemnity from the person guilty of fraud
or misrepresentation against all debts and liabilities of
the partnership
Art. 1839 – manner of settling accounts among the partners
(SUBJECT TO ANY AGREEMENT TO THE CONTRARY)
1. Assets of the partnership. — They are:
a. Partnership property (including goodwill); and
b. Contributions of the partners necessary for
the payment of all liabilities in accordance
with Article 1797.
2. Order of application of the assets. — The partnership
assets shall be applied to the satisfaction of the liabilities
of the partnership in the following order:
a. First, those owing to partnership creditors;
b. Second, those owing to partners other than for
capital and profits (such as loans given by the
partners or advances for business expenses;)
c. Third, those owing for the return of the capital
contributed by the partners; and
d. Finally, if any partnership assets remain, they
are distributed as profits to the partners in the
proportion in which profits are to be shared.
Rules:
1. Assets in shall be applied in order stated in #1
2. All partners shall contribute the amount necessary to
satisfy all liabilities. This can be enforced by:
a. An assignee of the creditor
b. By any partner or his legal representative to
the extent of the amount he paid in excess of
his share in the liability (pro rata)
3. If the partner is deceased, his individual property shall
be contributed to satisfy partnership liabilities
4. If the partnership property and individual properties
are in the possession of the court, the partnership
creditors have priority
5. If a partner is insolvent/estate is insolvent, the claims
against his separate property shall rank as follows:
a. Owing to separate creditors
b. Owing to partnership creditors
c. Owing to partners by way of contribution (if a
co-partner has advanced his share)
Art. 1840
In the following cases, the creditors of the dissolved partnership
are also creditors of the partnership continuing the business: Art. 1842
The right to accounting of his interest shall accrue to any partner,
1. When (1) a new partner is admitted into an existing or his legal representative as against the winding up partners or
partnership or (2) partner retires (or dies) and assigns the surviving partners or the person or partnership continuing the
(representative assigns) his right in the partnership to 2 business at the date of dissolution, in the absence of any
or more partners, (3) to one or more of the partners agreement to the contrary.
and one or more 3rd persons, IF BUSINESS IS
CONTINUED WITHOUT LIQUIDATION OF PARTNERSHIP Effect of dissolution among partners inter se
AFFAIRS When dissolution is caused
2. All partners retire except one and they (retiring 1. Not in breach
partners) assign their rights to the remaining partner, 2. By bona fide expulsion of a partner
who continues the business without liquidation of 3. Because of breach
partnership affairs, either alone or with other 4. By rescission of the partnership agreement due to fraud
3. Any partner retires or dies and the business of the or misrepresentation (ie by judicial decree)
dissolved partnership continues as in No. 1 and No. 2,
WITH THE CONSENT of the retired partners (or reps), Effect of dissolution of the partnership liabilities existing or
but without any assignment of his right in partnership accrued at the time of dissolution
property
4. All partners or their reps assign their rights to one or Effect of dissolution on partnership liabilities contracted or
more 3rd persons who promise to pay the debts and incurred AFTER dissolution
who continue the business of the dissolved partnership
5. When any partner wrongfully causes a dissolution and
the remaining partners continue the business under
Art. 1837 (If the partner/s didn’t cause the dissolution
wrongfully and wants to continue the business), either
or alone, without liquidation of partnership affairs
6. When a partner is expelled and the remaining partners
continue the business either alone or with others
without liquidation of affairs

Liability of the 3rd person who becomes a partner in the continued

business to creditors of the dissolved partnership shall be satisfied
out of the partnership property only, unless stipulation to the
contrary.

The partnership creditors of the dissolved partnership, as against

the separate creditors of the retiring or dead partner, have a prior
right to any claim of the retired partner or the representative of
the deceased partner against the person or partnership continuing
the business.

Nothing in this article shall be held to modify any right of creditors

to set aside any assignment on the ground of fraud.

The use by the person or partnership continuing the business of

the partnership name or the name of the deceased partner shall
not make the individual property of the deceased partner liable for
any debts contracted by continued business

Art. 1841
When any partner retires or dies and the partnership is continued
under the conditions of the previous article, or 1837 (par. 2),
WITHOUT any settlement of accounts as between him or his
estate and the person/partnership continuing the business  the
dead or retired partner (or legal rep) may (1) have the value of his
interest ascertained (at the date of dissolution) and (2) receive as
an ordinary creditor an amount equal to the value of his interest in
the dissolved partnership with interest OR;

At his/rep’s option, instead of the interest, it will be the profits

attributable to the use of his right in the property of the dissolved
partnership PROVIDED that the creditors of the dissolved
partnership as against the separate creditors/reps of the retired or
deceased partner, will have priority in their claims

9
[LIMITED PARTNERSHIPS]
Art. 1843
A limited partnership is one having formed by 2 or more persons
Having as members one or more general partners AND
One or more limited partners
The limited partnership shall not be bound by the obligations of
the partnership.
Art. 1844
2 or more partners desiring to form a limited partnership shall:
1. Sign and swear to a certificate, which shall state:
a. Name + word “Limited”
b. Character of business
c. Location of principal place of business
d. Name + address of each member, designate
whether general or limited partner
e. Term of partnership’s existence
f. Amount of cash, description and agreed value
of other property contributed by each limited
partner
g. Additional contributions, if any, of the limited
partners, and when (time or event) they shall
be made
h. Time when contribution of each limited
partner shall be returned
i. The share in the profit or other compensation
that the limited partner will receive as
income because of his contribution
j. The right, IF GIVEN, of a limited partner to
substitute an assignee as contributor in his
place + terms and conditions
k. The right, IF GIVEN, of partners to admit
additional limited partners
l. The right, IF GIVEN, of one or more limited
partners, to priority over other limited
partners, as to contributions or compensation
by way of income, and nature of such priority.
m. The right, IF GIVEN, of the general partners to
continue the business if general partner dies,
retires, is civilly interdicted, becomes insane or
insolvent.
n. The right, IF GIVEN, of the limited partners to
request for property instead of cash in return
for his contribution.
2. Register with the SEC
A limited partnership is formed if there’s substantial compliance
in good faith with the foregoing requirements.
Art. 1845
Limited partners CAN contribute cash or property but NOT
services.
Art. 1846
GR: Surname of limited partner shouldn’t appear in the
partnership name
EXP:
1. It’s also the surname of a general partner
2. His surname has already been used even before he
became a limited partner
If a limited partner’s surname does appear in the partnership
name, he is liable as a general partner to partnership creditors
who extend credit to the partnership who doesn’t know that he
is NOT a general partner.
10
Art. 1847
If the certificate of limited partnership is false, the person who is
injured because of his reliance on the false certificate can hold
liable ANY PARTY who knew the statement as false:
1. At the time he signed the certificate; or
2. Subsequently but within sufficient time before the
statement was relied upon to be able to cancel or
amend the certificate or file a petition to cancel or
amend it.
Art. 1848
GR: A limited partner shall NOT become a liable as a general
partner
EXP: He takes part in the control of the business in addition to his
rights as a limited partner
Art. 1849
To add additional limited partners, file an amendment to the
original certificate in accordance with Art. 1865
*Art. 1850
A general partner shall have all the rights and powers and is
subject to all restrictions and liabilities of a partnership without
limited partners.
But, a general partner needs the written consent or ratification of
a specific act from ALL the limited partners or else he has no
authority to:
1. Act in contravention of the certificate
2. Do any act which makes it impossible to to carry on the
ordinary course of business of the partnership
3. Confess a judgment against the partnership
4. Possess partnership property, assign their rights in
specific partnership property for purposes OTHER THAN
the partnership
5. Admit a person as general partner
6. Admit a person as limited partner (except if the right to
admit is already in the certificate)
7. Continue business using partnership property upon the
death, civil interdiction, insolvency, insanity, retirement,
of a general partner (unless allowed by the certificate)
*(1) violates partnership agreement as contained in the
certificate, (2-4) prejudicial to the rights of the limited partners,
(5-6) based on highly fiduciary nature of the partnership, (7)
dissolves the partnership
*CLV notes:
- For #6 – still need consent of all limited partners since
it’s stated in the rules on amending the certificate of
limited partnership
- If any of these are done by the general partner without
the written consent of all the limited partners, the act
would be VOID insofar as the parties but NOT the 3rd
persons dealing in good faith with the partnership.
*These are the acts that a general partner must get the consent of
the limited partner before doing. In essence, outside of these, the
limited partner DOESN’T have a say in
Art. 1851
The limited partner has the same rights as a general partner to:
1. Have the partnership books at the principal place of
business and to inspect & copy it within reasonable
hours
 2. Demand true and full information about the partnership
and a formal accounting of the partnership affairs
3. Dissolve and wind up the partnership through judicial
decree
A limited partner has the right to receive shares in the profit or
other compensation (as income) and to receive his contribution
back
*Art. 1852
A person who contributes to the capital of a business and
erroneously believes that he has become a limited partner in a
limited partnership, is NOT a general partner with the person or in
the partnership carrying on the business, is NOT bound by the
obligations of the person or partnership
PROVIDED that once he knew of the mistake, he promptly
renounces his interest in the profits of the business or other
compensation by way of income.
NOTES:
Situation: a person contributes capital to a business and
erroneously believed himself to be a limited partner in a limited
partnership or general partnership thinking it’s a limited
partnership
 so, it’s either his name is designated as a general partner or his
name is not in the certificate at all but he contributed to the
capital
 this article presupposes that there is a partnership business but
not created through a medium of limited partnership
Effect: exempted from being liable as a general partner provided
that he:
1. Promptly renounces his interest (sell his interest to
general partners) BEFORE the partnership becomes
liable to 3rd persons
2. Doesn’t take part in the control of the business/does
any act of a general partner
3. Erroneous belief should be in good faith
Art. 1853*
A person can both be a general and limited partner in the same
partnership at the same time, but this must be stated in the
certificate
If such were the case, that person has all the rights, powers, and
limitations of a general partner EXCEPT that he has the right
against the other members in respect to his contribution
Art. 1854
A limited partner can loan money to and transact other business
with the partnership.
A limited partner who is also a general partner can receive a pro
rata share of the assets on account of resulting claims against the
partnership with general creditors
A limited partner CANNOT:
1. Receive or hold as collateral security any partnership
property
2. Receive from a general partner or partnership any
payment, conveyance, or release from liability, if at the
time it was received the assets of the partnership are
NOT sufficient to discharge the liabilities to persons NOT
claiming as general or limited partners (this is in fraud of
the partnership creditors)
11
Art. 1855
If there are more than 1 limited partner, they can agree that some
of them have priority over the other in terms of:
- Return of their contribution
- As to their income
- Any other matter
But this shall be specifically stated in the certificate or else all of
them are in equal footing
Art. 1856
A limited partner can receive shares in the partnership profits as
their income (this must be stipulated in the certificate)
BUT they can only receive such if the partnership assets are in
excess of the partnership liabilities (partnership is not insolvent)
except the liabilities to the limited partners on account of their
contribution and to general partners.
NOTE: So, may right naman ang limited partners to receive shares
in the partnership profits (as their income) but dapat binigay
ito/ibibigay at the time na may excess pa sa partnership assets
after discharging of the liabilities of the partnership to 3 rd persons.
*Art. 1857 – rules on receiving back any part of his contribution
A limited partner can’t receive any part of his contribution until:
1. All liabilities of the partnership, except those owing to
general and limited partners, have been paid or there’s
still partnership assets left to pay them
2. All the members consented (except if it can be rightfully
demanded by the limited partner)
3. The certificate is cancelled or amended to allow the
withdrawal or reduction
A limited partner has the right to demand the return of his
contribution:
1. On the dissolution of a partnership
2. A date is specified in the certificate for its return has
arrived
3. If no time is specified, the limited partner gave 6
months’ written notice to all members to return the
contribution or dissolve the partnership
If any of the foregoing is absent in the certificate or the consent of
all members, the limited partner can only demand and receive
CASH in return of his contributions.
A limited partner can have the partnership dissolved and wound
up when:
1. He is not able to receive the return of his contribution
(after rightfully demanding it)
2. He is entitled to the return of the contribution even if the
other liabilities of the partnership has not been paid or
the partnership property is insufficient to pay them (?)
*SUMMARY:
The following must exist before a limited partner can receive his
contribution back:
1. All liabilities of the partnership have been paid. This
doesn’t include the liabilities owing to the general and
limited partners (in consideration of their contribution)
OR there are still partnership assets sufficient to pay the
partnership liabilities
2. All members consented to it EXP if the limited partner
has a right to demand the return of his contribution (but
it’s still required that all partnership liabilities have been
paid or there remains partnership assets to pay for it):
a. On the dissolution of the partnership
 b. Arrival of the date specified in the certificate
as the date of return
c. After the expiration of the 6 month notice in
writing (if no time is stipulated)
3. The certificate has been amended to reflect the
withdrawal or reduction
a. Naturally, this needs the consent of the
partners but in the event that they still refuse
even after the 6-month rule, the limited
partner who wants to opt out has the option
of going to court,
Art. 1858*
A limited partner is liable to the partnership for:
1. The difference between his contribution made and that
stated in the certificate as having been made (so, yung
hindi niya nabigay na contribution)
2. Any unpaid contribution which he agreed to in the
certificate to make in the future and on certain
conditions
A limited partner is a trustee for the partnership:
1. The specific property stated in the certificate as
contributed but were not actually contributed OR those
that the limited partner wrongfully received
2. Money or other property wrongfully paid or conveyed to
him on account of his contribution
The liabilities of a limited partner can be waived so long as all
partners consent BUT this shall not affect partnership creditors
who extended credit or whose claims arose before the cancellation
or amendment of the certificate
If a contributor has rightfully received his contribution (in whole or
part), he is still liable to the partnership for any sum (the sum
shouldn’t be in excess of the return with interest) necessary to
discharge its liabilities to ALL creditors who extended credit or
whose claims arose before the return.
Art. 1859
A limited partner can assign his interest.
The assignee can either be a substituted limited partner or a mere
assignee who doesn’t become a substituted limited partner.
A substituted limited partner has all the rights of a limited partner
who has died or assigned his interest. He has all the rights,
powers, liabilities of his assignor EXCEPT those he is not aware of
at the time he signed on as a limited partner and which can’t be
ascertained in the certificate
To become a substituted limited partner:
- all members must consent OR the assignor is given such
right as stated in the certificate
- The certificate is property amended to state that a mere
assignee became a substituted limited partner
The assignee who doesn’t become a substituted limited partner
has no right to:
- Information on the partnership
- Account of the partnership
- Inspect the partnership books
The assignee is only entitled to receive the shares of the profits or
other compensation OR return of his (assignor’s) contribution
12
But the assignment of a limited partner doesn’t release the
assignor from his liabilities under 1847 (certificate of limited
partnership is false) and 1858 (limited partner’s liabilities)
Art. 1860
The partnership is dissolved if a general partner dies, retires,
becomes insolvent or insane UNLESS the other general partners
continues with the business:
1. This right is stated in the certificate
2. With the consent of all members
Art. 1861
If a limited partner dies, his executor or administrator has the
rights of a limited partner FOR THE PURPOSE OF SETTLING HIS
ESTATE, and those powers the dead limited partner gave his
assignee as substituted limited partner
The estate of the limited partner is liable for all his liabilities as a
limited partner
Art. 1862 – liability of limited partners to separate creditors
Upon application of the limited partnership creditor, the court can
charge the interest of the indebted limited partner in order to pay
the claims of the creditor. The court can also appoint a receiver
and make all other directions, orders, which circumstances may
require.
The interest can be redeemed by the limited partner from the
separate property of the general partner but not that of the
partnership property.
Remedies here are not exclusive. Others can be used.
This doesn’t take away a limited partner’s statutory exemption.
Art. 1863 – rules as to the settlement of accounts after
dissolution
After dissolution, the liabilities of the partnership shall be paid in
the following order:
1. Those owing to creditors, in order of priority provided by
law, EXCEPT those to limited partners on account of
their contributions and general partners (so, partnership
creditors first)
2. Those owing to limited partners as their share in profits
by way of income (income on the contribution of the
limited partners)
3. Those owing to limited partners as to the capital of their
contributions (return of the capital contribution of the
limited partners)
4. Those owing to general partners NOT for capital or
profit
5. Those owing to general partners as their profit
6. Those owing to general partners as to their capital
Subject to the statements in the certificate or subsequent
agreement, limited partners share in the partnership assets is in
proportion to the respective amounts of such their claims for
capital, profits, or income)
Art. 1864
The certificate is cancelled when the partnership is dissolved or all
limited partners cease to be a limited partner
The certificate is amended when:
1. Change in name of partnership or amount or nature of
contribution of the limited partner
2. Additional limited partner
3. Person admitted as general partner
 4. General partner dies, retires, becomes insolvent or
insane, civil interdiction sentence, and business is
continued
5. Change in character of business
6. False or erroneous statements
7. Change in time for the dissolution or return of
contribution
8. Time is fixed for dissolution of the partnership or return
of contribution
9. Any change in statement in the certificate

Art. 1865
Writing to amend a certificate shall:
1. Conform to requirements in Art. 1844
2. Signed and sworn by all members (in case of substitude
limited partner, need the signature of the assigning and
assigned partner)

The writing to cancel the certificate shall be signed by all members

The court may order, upon petition, the person designated to

execute in writing the cancellation/amendment of the certificate if
such person refuses to do so. Can also order the SEC to
amend/cancel the certificate and record the new one in the SEC.

The certificate is considered amended or cancelled when there’s a

record of it in the SEC

Art. 1866
A contributor, unless he be a general partner as well, is not the
proper party to file an action against the partnership UNLESS if the
object of the action is to enforce a limited partner’s right against
or liability to the partnership

Art. 1867
If a limited partnership is formed prior to the effectivity of this
code, can become a limited partner by complying with Art. 1844,
provided that the certificate also states:
1. Amount of original contribution of each limited partner,
and time when contribution was made
2. That the partnership property exceeds the amount
sufficient to discharge their liabilities to persons claiming
as general or limited partners by an amount greater
than the sum of the contribution of the limited partners

If a limited partnership is formed prior to the effectivity of this

code continues to be a limited partner under the old law if it
doesn’t become a limited partner under this Law.

13
TO REMEMBER: LIMITED PARTNERSHIP

General Partners in a Limited Partnership

- ”A general partner shall be subject to all the restrictions
and liabilities of a partnership without limited partners”
o Meaning: general partners are bound by their
duty of loyalty; that he cannot engage in
business that conflicts with the business of the
limited partnership (unlike a limited partner
who CAN)
o If the general partner is also an industrial
partner, he is disqualified from engaging in
any business venture.
o The basis of this fiduciary duty is the business
trust: general partners become trustees of the
limited partners who are the beneficiaries of
the partnership’s business venture
- Management of the business and responsibility over the
partnership liabilities is with the general partner. This
serves the beneficial interest of the limited partners
who has a share in the profits of the business.

14
TO REMEMBER:
CHAPTER 2: TRI-LEVEL EXISTENCE OF A PARTNERSHIP
Partnership as a contract
- Partnership is a contract thus they are governed by the
rules on contracts
Partnership as a separate juridical entity
- Once there’s perfect of partnership (through a meeting
of the minds) then this results in a separate juridical
personality with the following effects:
o Makes the partnership able to be a medium to
doing business
o Can incur obligations, bring actions, acquire
property
- Juridical personality can be extended even beyond the
original term fixed by the mere act of continuing with
the business in such, even without any formal
settlement or liquidation
- If the facts show that the juridical personality of a
partnership is used as a means only to evade the law, or
for fraudulent, unfair, or illegal purposes, the court can
pierce the veil of the separate juridical personality and
treat each partner directly liable
- A partnership becomes a juridical person through the
meeting of the minds of the partners or a private
contract of partnership between members, not even
needed to register its existence with the state
Partnership as a business enterprise/going concern
- The assumption of the obligation to contribute money,
proeprty, and insudtry to a common fund, represents
the pursuit of a “business enterprise” where the
partners are “owners” or “equity holders” who are
entitled to the profits and assumes the risks and losses
- Importance of being aware of the partnership as a
business enterprise is because this will determine the
rights of the partners to specific partnership property,
share in the profits and losses, and right to manage
CHAPTER 3: ATTRIBUTES OF A PARNTERSHIP
Informal/non-solemn/consensual juridical personality
- Juridical personality can be extended even beyond the
original term fixed by the mere act of continuing with
the business in such, even without any formal
settlement or liquidation (1785)
- Purpose of informal/consensual juridical personality: to
make dealings with the public easier, more efficient, and
even cheaper
- GR: Partnership may be constituted in any form
- EXP: 1772 (capital contribution NOT real property is 3k
or more), 1771 (contributed immovable/real rights),
1773 (contributed immovable/real rights), 1834 (limited
partnership), 1844
o For capital contribution, not complying with
public instrument recording doesn’t affect
validity
o For real property contribution, not complying
= partnership is void
Mutual Agency
- Each partner is an agent of the partnership and other
partners in pursuit of business affairs
- Mutual agency defines the prerogative of each partner
to participate in the management of the partnership
15
Delectus Personae
- Contract of partnership creates the most personal
relationship between and among partners which when
broken, also breaks the bond of the partnership
- Embodiment of principle of relativity (privity in
contracts; contracts take effect only between the
parties, their assigns and heirs) where the privity in a
contract of partnership is only among the partners
themselves at the point of perfection, and such privity
can’t be extended beyond the original partners (without
each of their consent)
- Contract of partnership is fiduciary in character or the
most confidential = once the trust is broken, the
contract is deemed breached or at an end
Unlimited liability (except for limited partners in a limited
partnership)
- Every partner is liable personally for his other property
NOT contributed to the partnership for partnership
debts. Each partner stands to be liable personally for the
debts and obligations contracted even in the
partnership name
- Since the partners are collective owners of a business
enterprise and are agents of the partnership and the
partners in partnership affairs,
1. If there’s no stipulation as to the specific universal
partnership, it will be universal partnership for profits
2. Every professional partnership or joint venture is a
particular partnership = since the object of a particular
partnership is a determine thing, their use or fruits,
specific undertaking or exercise of profession or
vocation
3. Universal partnership is NEVER presumed so the default
rule is: Unless the partners so stipulate that they are
entering into a universal partnership, it would be
presumed that they are in a particular partnership
CHAPTER 4: THE CONTRACT OF PARTNERSHIP
Consent
- Each person must consent to enter into a partner = bind
themselves to (1) contribute money, property or
industry into a common fund (2) with the intention of
sharing in the profits and losses
- A person can’t be deemed a member of a partnership
unless each member consents
- Consent must be given by persons who have a legal
capacity to contract
Subject matter: pursuit of business enterprise
- The meeting of the minds of the partners must be upon
the joint pursuit of a business enterprise
- Co-ownership/co-possession doesn’t necessarily
constitute a partnership
o Without the intention of actually intending to
enter into a business enterprise where each
will contribute and share in the losses and
profits
o If the division of profits is only incidental and
not the original intention, not a partnership
- Receipt by a person on the share of the net-profits is
prima facie evidence of being a partner in the business
EXCEPT if the receipt of the profits is based NOT based
 on being an equity holder but on the following
contractual basis:
o Installment payment for debts
o Wages
o Rentals
o Annuity to a widow or representative of a
deceased partner
o Consideration of a sale of a goodwill or other
property
- What brings about the contract of partnership is an
agreement to constitute a common fund with the
intention of dividing the profits and losses
- Existence of a going concern may support the existence
of a partnership
o Because prior to the liquidation and winding
up of the business, where partners still have
obligations, uncollected receivables, or others,
there is still a partnership
- Doctrine of attributes of a proprietorship (such as
contributing expert advice, preside over meeting, sign
documents, having proprietary interest) can prove the
existence of a partnership but this is only a collaborative
evidence of partnership since it is still the meeting of the
minds that principally determines the existence of a
partnership

Cause or consideration: promised contributions

- The consideration of entering into a partnership is that
each partner will undertake to contribute money,
property or industry in a common fund (to the business
venture)

Other essential elements of a partnership:

- (1) Purpose of entering into a partnership is to engage in
a business venture
- (2) element of joint control
o Is a specified property right to participate in
the management

16
 Art. 46
Partnership What can juridical persons do:
II. Nature and Attributes of Partnership Acquire and possess property of all kinds
1. Definition of Partnership (1767) Incur obligations
Art. 1767 Bring civil or criminal actions
Two or more persons *Must be in conformity with laws and regulations of
Bind themselves to contribute money, property, or their organizations
industry to a common fund
With the intention of dividing the profits among Art. 1774
themselves Any immovable property and interest in it may be
acquired in the partnership name
Two or more persons may also form a partnership for Title acquired can be conveyed only in the partnership
the exercise of profession name

2. Tri-level existence/legal relationships in a partnership NOTES

setting (1) Legal bases of the partnership juridical
a. Primarily, as a contractual relationship (1767^, personality
1771, 1784) - Perfection of a contract of partnership
Art. 1771 ipso jure brings about the constitution of
GR: a partnership may be constituted in any form a separate juridical person
EXP: for immovable property or real right, should be in - The juridical personality of a partnership
a. public instrument is inextricably linked with the perfection
of the underlying contract of partnership
Art. 1784 - Juridical personality of a partnership is
GR: A partnership begins from the moment of the weak compared to that of corporations
execution of the contract because it can be easily dissolved
EXP: unless otherwise stipulated (2) Underlying business ends of the
partnership juridical person
NOTES - Partnership having a separate juridical
- Partnership is a contract = subject to personality is to make the partnership an
doctrines of contracts in general efficient medium for several people to
- Different from contract since: partnership collectively pursue a business
is at the same time a medium of doing - “Person” in partnership
business or a device undertaking a o Legislative grant by
venture the State, a fiction
- Bears the doctrine of consensuality of law constituted
- Before there can be a partnership to achieve business
enterprise, it’s necessary that there is a and commercial
meeting of the minds ends
o Regulated by Law
b. A medium of doing business, through a on Partnership =
separate juridical personality, which is the thus denies
basis of creating multi-leveled contractual juridical personality
relations among the parties (1768, 44, 45, 46, for secret
1774) associations
Art. 1775
Art. 1768 (3) Doctrine of the “piercing the veil of
A partnership has a juridical personality that’s separate separate juridical fiction”
from the partners - The doctrine is the exception to the
Even in case of failure to comply with requirements of general rule that a juridical personality is
Art. 1772, 1st paragraph separate and district from the partners
(Art. 1768)
Art. 1772, 1st paragraph - If the juridical personality of a
Must be in a public instrument, recorded in the SEC  partnership is used as a means to evade
partnership with 3k or more capital, in money or the law, the courts will pierce the veil of
property its sperate juridical personality and treat
the partners directly liable for acts done
Art. 44 in the name of the partnership
The following are juridical persons: (4) Entitlement to constitutional rights and
(c) Corporations, partnerships, associations for private guarantees
interests or purposes or purposes which law grants to - Partnerships are entitled to due process,
juridical personality, separate from shareholder, equal protection, rights against
partner, or members unreasonable searches and seizures and
right against self-incrimination (?)
Art. 45
Partnerships and associations for private interests c. Partnership is a business enterprise

17
 - Underlying business enterprise (business
venture) as the primary objective; “a
going concern”
- Legal matters that refer to partnership
business enterprise
o Right of partners to
specific partnership
property
o Share in profits and
losses
o Right to manage
- Partners are “owners” of the business, or
are “equity holders” = partnership
established for the common benefit of
interest of the partners
3. Essential attributes of the partnership
a. Essential attributes:
i. Informal/consensual juridical
personality
ii. Mutual agency
iii. Delectus personae
iv. Partners burdened with unlimited
liability (except for limited partners
in a limited partnership)
b. Foremost, it is a contractual relationship
(1767, 1771, 1784)
Art. 1771
GR: a partnership may be constituted in any form
EXP: for immovable property or real right, should be in
a. public instrument
Art. 1785
If a partnership is continued even after the termination
of a fixed term or particular undertaking of the
partnership, without any express agreement, then the
rights and duties of the partners remain the same as
they were at such termination, so far as it is consistent
with a partnership at will.
A continuation of the business by the partners in a way
that they habitually acted during the term is prima facie
evidence that the partnership is continued.
NOTES
- The existence of a separate juridical
personality for a partnership is
conditioned on the perfection and validity
of a contract of partnership and that the
separate juridical personality arises ipso
jure upon the perfection of the contract
of partnership.
- Since the contract of partnership is
consensual, it follows that the contract of
partnership juridical personality is also
consensual.
- The civil law tradition of providing a
partnership with a juridical personality
separate from the partners is meant to
add to the commercial efficiency of the
partnership as a medium of association
and doing business, it clothes the
budinsess enterprise with a juridical
person to better deal with the public.
EXCEPTIONS TO THE
INFORMAL/CONTRACTUAL NATURE OF
PARTNERSHIP JURIDICAL PERSONALITY
18
Art. 1772
Must be in a public instrument, recorded in the SEC 
partnership with 3k or more capital, in money or
property.
Failure to comply with the requirements doesn’t affect
the liability of the partnership and its members to third
persons.
Art. 1773
A contract of partnership is void when:
- Immovable property is contributed
thereto
- Inventory of the property is not made,
signed by the parties
- Attached to the public document
Art. 1843
A limited partnership is formed by 2 or more persons
under the provisions of the following article
With members who are one or more general partners
and one or more limited partners
The limited partners aren’t bound by the obligations of
the partnership
NOTES:
- GR: contract of partnership is informal
and consensual in nature = no form
required
- EXP: the following are the only instances
when a contract of partnership must
assume a solemn/formal character
(1) Art. 1772: if capital is 3k or more,
must be recorded with the SEC
(2) Art. 1771 and 1773: where
immovable property or real rights or
contributed, a public document is
necessary and the partnership will
be void if inventory is not made,
signed by parties, and attached to
public instrument
(3) Art. 1843 and 1844: require the
provisions describing limited
partners in the articles of limited
partnership; must be registered with
SEC
PARTNERSHIPS HAVE A WEAK JURIDICAL PERSONALITY
- Because the partnership can be dissolved
without need of a formal dissolution
process and by the will of the partners,
any of them or all of them, or even by
chance.
*But authors believe that the weak
juridical personality serves its purpose: to
allow the partners and partnership
venture to attain their objectives, and set
the partnership aside when such
objectives are obstructed
- The partnership may be dissolved by:
(1) Express will of any or all
partners, in good faith or bad
faith
(2) Expulsion of any partner
(3) Event that makes the
partnership unlawful
 (4) Loss of property promised to be
contributed by a per before
delivery is made
(5) Death, insolvency, civil
interdiction of any partner
(6) Court decree – partner declared
insane, incapacitated, guilty of
conduct prejudicial to
partnership business, breach of
agreement
c. Bounded by attribute of “mutual agency”
Art. 1803
If manner of management is not agreed upon:
(1) All partners are considered agents and whatever
any of them does alone binds the partnership,
without prejudice to the provision of Art. 1801
Art. 1818
GR: Every partner is an agent of the partnership for the
purpose of the business. Thus, the act of every partner,
for carrying on in the usual way the business of the
partnership, bind the partnership
EXP: if the partner has no authority to act for the
partnership and the person he is dealing with knows
that the particular partner has not authority
GR: An act of the partner not carried on for the business
in the usual way doesn’t bind the partnership
EXP: Unless authorized by other partners
GR: One or more but less than all the partners have NO
authority to:
(1) Assign the partnership property in trust for
creditors or on the assignee’s promise to pay
the debts of the partnership
(2) Dispose of the goodwill of the business
(3) Do an act that makes it impossible for the
partnership to carry on their ordinary business
(4) Confess a judgment
(5) Enter into a compromise concerning a
partnership claim or liability
(6) Submit a partnership claim or liability to
arbitration
(7) Renounce claim of partnership
EXP: Unless authorized or other partners have
abandoned the business
No act of a partner in contravention of a restriction on
authority shall bind the partnership to persons having
knowledge of the restriction,
NOTES:
- Principle of mutual agency defines the
prerogative of every partner to
participate in the management of the
partnership business
- It manifests that the partners are not
mere investors or managers but are
owners and equity holders
d. Bounded by attribute of “delectus personae”
(selection of persons)
NOTES:
19
- The attribute is where one selects his
partners on the basis of their personal
qualifications and qualities. Thus, the
reason why a partnership creates the
most personal relationship, which when
broken, breaks the partnership as well.
- Doctrine can be viewed in 2 ways:
- (1) Embodies the principle of relativity or
privity in contracts – being a contractual
relationship, the privity created is
between the partners at the point of
perfection, and cannot extend beyond
the original partners without consent of
all.
- (2) Fiduciary in character – since
partnership is a mutual agency, there
exists a fiduciary relationship between
the partners, that when trust or
confidence is lost, the contract is deemed
breached
i. Assignment of share does not make
assignee a partner
e. Albeit, enterprise granted separate juridical
personality. Yet, partners are “unlimitedly
liable” to partnership debts
Art. 1816
GR: All partners (even industrial ones) are liable pro
rata (in proportion) with all their property and
after all the partnership assets have been
exhausted, for the contracts entered into for the
partnership, under its signature and by a person
authorized to act for the partnership
EXP: Any partner may enter into a separate
obligation to perform a partnership contract
Art. 1817
Any stipulation against the liability in the previous
article shall be void, except among the partners.
NOTES:
- The law makes partners personally liable
(unlimited liability) for partnership debts
contracted as a separate juridical person,
even if no such provision exists, because
partners essentially occupy the position
of sole proprietors, albeit associated with
other sole proprietors.
- Being sole proprietors, he controls the
business enterprise and all profits go to
him which he can devote to business or
non-business-related things. Thus, when
there is a liability with his business, his
non-business assets can be used as well.
- But in a partnership, though each partner
is a sole proprietor, they are sole
proprietors in a collective manner since
the partnership is wholly owned,
managed, and controlled by the partners
as collective proprietors. THUS, each
partner is liable personally for the debts
and obligations contracted even in the
partnership name.
4. Kinds of partnerships
Art. 1776
 Art. 1777
Art. 1778
Art. 1779
Art. 1780
Art. 1781
Art. 1782
Art. 1783
a. As to object
i. Universal partnership
 Contract of partnership encompasses either all the
present properties of the partners or to all of the
profits (Art. 1777)
 NOTES:
o The property that
belongs to each of the
partners in their
personal capacity, at the
time the partnership is
constituted, will belong
to a common fund of
the partnership,
including all the profits
they acquire after.
o EXP: property acquired
subsequently through
inheritance, legacy or
donation NOT part of
common fund EXP fruits
thereof
o Persons who are
prohibited from giving
each other donation
cannot enter into a
universal partnership
(spouses?)
ii. Particular partnership
1. Partnership which has for
its object determinate
things, their use or fruits,
or a specific undertaking,
or the exercise of a
profession or vocation
(such as professional
partnership or joint
venture agreement)
NOTES:
- Practical and legal importance of
distinguishing between the two:
(1) Statutorily, for persons who are
disqualified from donating to one
another can’t enter into a universal
partnership (spouses)
(2) Rights and obligations that may
arise from subsequent ventures
pursued by the partners will
depend on the kind of partnership
it is (Lyons case)
- Rule: unless the parties stipulate that
the partnership is universal, the default
is that the partnership is only particular.
b. As to duration
i. Partnerships fixed by terms –
automatically dissolved upon
expiration of the term
20
ii. Partnerships for a particular
undertaking - automatically
dissolved upon achievement of a
particular undertaking
iii. Partnership at will – indefinite term,
only will be dissolved when an act or
cause of dissolution happens
c. As to the nature of the liabilities of the
partners
i. General partnership – all partners
are unlimitedly liable
ii. Limited partnership – where there Is
one or more general partner who
are unlimitedly liable along with one
or more limited partners who are
liable for partnership debts only to
the extent of their stipulation
contributions under the articles of
partnership
5. Compared with other media of doing business
a. Joint venture
Joint venture Partnership
> Limited to a single > Undertakes a general
transaction and not and continuous
intended to pursue a business of a particular
continuous business kind
> property used > property of each is
remains undivided the property of the
property of its common fund
contributors > a partner, acting in
> co-ventures can’t bind pursuance to the
their co-adventurers business of the
> no need for a firm partnership, binds
name himself as principal and
agent
> required to operate
under a firm name

b. A co-ownership
Co-ownership Partnership
Merely a property In order to constitute a
relation where 2 or partnership, there must
more persons own be
pro diviso a property (1) Intent to form the
partnership or form
Not necessarily for a a business venture
business or mercantile (2) Generally
pursuit of the participating in both
property relation profits and losses
(3) There’s a community
No separate juridical of interest as far as
personality arises third persons are
concerned as
The fact that co- enables each party
owners happen to to make a contract,
share in the profits manage business
produced by the and dispose of the
property owner in whole property
common doesn’t 
make a partnership
because of the lack of
intent to pursue a
business venture
c. Sole proprietorship
d. Agency
 Agency Partnership directors or their duly agent of the
Agent is merely a legal Each partner is a mutual authorized agents can partnership (mutual
extension of the agent of one another bind the corporation agency), thus by his
personality of the own act can bind the
principal = under Partner binds not only Shares are freely partnership
complete control of other partners and the transferable
principal partnership but also Partner is non-
himself to pursue the transferable
Agent acts within the partnership
scope of his authority g. Cooperatives
and doesn’t bind Cooperatives Partnership
himself to the contract Generally, not organized Unlimited liability
he entered into for profit. Money
collected among Organized for
Agency – principle of Partnership – doctrine of themselves is for business / profit
representation mutual agency protection and not for
Agency’s subject Partners are entitled to profit. Primary objective
matter is service, the participate in the profits, is self-help: to provide
agent ears not because of the service goods and services to its
commission agreed rendered, but by their members, to enable
upon only when he is contributions/equity them to attain increased
able to fully render standing income and savings,
the service promote equitable
contracted Partner may enter into a distribution of net
partnership in their own sup;us through cost-
Agent enters into the name but if done for the sharing and risk-sharing
contract under the business venture, then
principal’s name, thus the partnership is bound. Has a juridical
he is not bound. personality separate and
distinct from members

e. Business trust Limited liability

Business trust Partnership
Constituted by deed of III. Partnerships as primarily a contractual relationship
trust, not bound by any
legal requirements Art. 1769
Rules to determine whether a partnership exists:
Doesn’t give rise to a
separate juridical (1) Partners who are not partners as to each other
personality are not partners to third persons (Except 1825)
(2) Co-ownership or co-possession doesn’t
Governed by law on establish a partnership, whether such do or do
trust. No element of not share any profits made by the use of the
mutual agency or co- property
ownership (3) Sharing gross returns doesn’t establish a
partnership, whether or not the persons
Splits the properties sharing them have a joint or common right or
contributed of the legal interest in any property from which the returns
or naked title in the are derived;
trustee and beneficial (4) Receipt by a person of a share of the profits of
title to the beneficiary a business is prima facie evidence that he is a
partner of a business. But this doesn’t apply if
f. Corporations such profits were received in payment;
a. As a debt by installment or
Corporations Partnership otherwise;
Stronger legal Withdrawal, death, b. As wages of an employee or rent to
personality because of incapacity, etc. a landlord
the right of succession = dissolves the c. As an annuity to a widow or
can continue despite partnership representative
death. Incapacity, d. As interest on a loan, though the
withdrawal or Unlimitedly liable – amount of payment vary with the
insolvency what they have profits of the business
invested + personal e. As the consideration for the sale of a
Limited liability property goodwill business or other property
by installments or otherwise
Only the board of Every partner is an
1. Essential elements and purpose of the partnership
21
 a. Consent: “Partnership must necessarily arise
from a contractual relationship”
i. Persons who are not partners to one
another are not partners as to third
persons (Art. 1769[1])
ii. Except: Partnership by estoppel (Art.
1825)
NOTES:
- Since the agreement of two or more
persons to bind themselves to jointly
pursue a business is how a partnership
arises, no person can be considered a
partner unless he previously consented to
be a partner.
- Consent of each partners is needed to be
associated in a business
venture/partnership
- Legal capacity to contract
 Persons who are prohibited from giving each other
donations or advantage can’t enter into a universal
partnership
 A married woman may enter into a contract of
partnership even without husband’s consent
- Admission of a new partner into an
existing relationship
 Need the consent of all partners
 Art. 1804 – even in an already existing partnership, no
person shall be admitted without the consent of all
partners
b. Subject Matter: “Partners undertake to jointly
pursue a business enterprise (Art. 1767),
through their agreements to (1) contribute a
common fund; and (ii) divide the profits and
losses; EXCEPT: a professional partnership
i. Partners must be established for the
common benefit of the parties
NOTES
- Subject matter is the joint pursuit of a
business enterprise
 (1) an agreement to share profits and (2) losses in a
business venture
o Essence of this
agreement is to become
equity-holders in a
business  must be
ready to participate in
the profits and bear its
losses
- RULE: The contractual agreement to
share on the profits and losses of a
business venture must always be based
upon the assumption of equity interest in
the business enterprise so that such will
be considered a partnership
- Meeting of minds on establishing a
common fund is the essence of a
partnership contract
 What brings about the contract of partnership is a
meeting of the minds or an agreement to constitute a
common fund with the intention to diving the profits
and losses
 Important to know whether there is a partnership
between several people because of tax laws where a
partnership is treated like a corporate taxpayer whose
22
liable separately for income tax for the business
operations and individual income tax liabilities of each
partner
- Existence of a going concern may
support the existence of a partnership
 Meaning: there is still an ongoing existence of the
partnership not yet terminated as evidenced by facts
of the situation
 Examples: (1) the unsold goods and uncollected
receivables were presented to the trial court (Idos v
CA); (2) a party still received her overriding
commission even after being unceremoniously booted
out of the partnership (Tocao v CA)
- Doctrine of “Attributes of
Proprietorship” as a means to prove the
existence of a partnership
 Attributes of a proprietorship is a recognition that a
partnership arrangement is in essence a contractual
aggregation of sole proprietors who come together to
form a common venture, each acting very much as a
proprietor of the business venture, while at the same
time, as agents of one another.
 Only a suppletory doctrine. Also known as the
“doctrine of exercise of the prerogatives of a
proprietor” is merely a collaborative evidence of the
partnership relationship between the parties in a
business venture; in the end the existence of a
contract of partnership must be located in the actual
meeting of the minds to constitute a common fund
and divide the profits and losses.
 Personal note: There is a need to differentiate
between authorized acts of management (such as in
the case of a a manager) and a partnership because
the former can exist without being owners or partners
in a business venture.
- When the subject matter (business
venture) is unlawful or against public
policy
 Art. 1770 provides that the contract is void, which
means the purported partners have no right to
participate in the profits earned by the partnership,
and these shall be confiscated in favor of the state
 Partners must be reimbursed the amount of their
respective contributions. (Arbes v Polistico)
c. Cause or Consideration: Undertakings to
contribute money, property, or industry to a
common fund (Art. 1767)
NOTES:
- The consideration is the undertaking of
others to contribute money, property or
industry to a common fund.
 The contract is perfect upon agreement by the
partners to make such contribution (agrees to oblige
themselves to contribute or render service)
- This is shown though the ff. provisions:
 Every partner be a debtor of the partnership
regardless of what he contributed (1786)
 Liable for interest and damages for failing to
contribute the sum he was bound to pay (1787)
 Prohibited from engaging in the business for himself,
being that he bound himself to contribute service
(1789)
  Obligated to contribute equal shares among the
partners when there is no stipulation as to the
manner and amount of contribution (1790)
 When a partner had promised to contribute to the
partnership by delivering a specific thing, but it
perishes before delivery, the partnership is dissolved
(1840[4])
Partners must be reimbursed the amount of
their respective contributions. (Arbes v
Polistico
d. Rules on determining perfected partnership
(Art. 1769)
i. Co-ownership or co-possession does
not itself establish a partnership
even when profits are shared
1. There should be an
indication that the parties
to a co-ownership or co-
possession had intended to
entered into a partnership
to be considered such
(Navarro v CA)
2. In a case where there is a
division of net income, a
partnership is formed if
the pursuit for profit was
the original intention
(Reyes v CIR)
ii. Sharing in the gross return/receipts
of business does not create
partnership
iii. Receipt by a person of a share of the
profits of a business
1. This is prima facie
evidence that he is a
partner
2. Exception: when there is a
legal and contractual basis
for the receipt of the
profits other than as an
equity holder.
iv. When entitlement to net profits
doesn’t create presumption of
partnership:
1. As installment payments of
debt or interest thereof
2. As wages of an employee
3. As rent payments to a
landlord
4. As annuity to a widow or
representative of deceased
partner
5. As the consideration on
the sale of goodwill or
other property
2. Other essential elements of partnership
a. A purpose of a partnership must be to engage
in some business enterprise
b. There is joint control
i. Specified property right of a partner
under Art. 1810, to participate in the
management as well as the
confirmation of the attribute of
mutual agency under Art. 1818
3. Essential characteristics of a contract of partnership
(Art. 1767)
a. Nominate and principal
23
i. Has a specific name
ii. Can exist on its own upon the
essential coming together at the
time of perfection
iii. There is a set of rules (Law on
Partnership) that governs the
contract
iv. It is not material that the parties
failed to reach an agreement
regarding minor details of the
contract since these are just
accidental. What matters is that
there is a meeting of the minds as to
the mutual contribution to a
common fund and a joint interest in
the profits.
b. Consensual
i. Perfected upon the meeting of the
minds between the subject matter
(undertake a business venture) and
consideration (obligation to
contribute money, property, or
service)
ii. Failure to comply with the
undertaking to deliver the promised
contribution doesn’t render the
partnership void, just a ground to
dissolve it  since delivery doesn’t
perfect the contract.
c. Commutative
d. Onerous and Bilateral and Reciprocal
i. Existence depends on the agreement
of parties to create a common find
from the contributions of ALL
partners
ii. A partner becomes a debtor of the
partnership for whatever they may
have contributed
iii. All partners are bound to contribute
to a common fund
e. Preparatory and progressive
i. A contract of partnership is entered
into primarily to pursue a business
enterprise. Thus, it is merely the
base upon which other contracts
and transactions are pursued.
1. So, the clearest indication
of an intention to
contribute to a common
fund is the pursuit of a
business enterprise/profit.
2. Clearest indication: they
went into the business
venture even if there were
no specific details of the
partnership yet. It is of no
importance that the
parties have failed to reach
an agreement with respect
to the minor details of
contract. These details
pertain to the accidental
and not to the essential
part of the contract.
(Fernandez v Dela Rosa)
 ii. Once the elements of contribution
to a common fund and
understanding of share in the profits
are established, a contract of
partnership arises, and all other
incidents arising from it is
automatically produced even if the
parties haven’t decided upon the
details yet.
iii. Progressive – nothing is set in stone,
it evolves, so that the business will
grow as well.
FORMALITIES REQUIRED FOR THE CONTRACT OF PARTNERSHIP
1. A partnership begins from the moment of meeting of
minds to pursue a business jointly; unless otherwise
stipulated (Art. 1784)
2. Formalities required:
a. General Rule – being consensual in character,
a partnership may be constituted in any form
b. Except: When Capital contribution is P3,000 or
more
i. AoP must appear in a public
instrument
ii. Registered with SEC
But: Failure to comply with requirements shall
not affect the liability of the partnership and
its members to third persons (Art. 1784)
c. Except: Where immovable property or real
rights are contributed
i. AoP MUST be in a public instrument
ii. Would be void if the inventory of
property is not made, signed by the
parties, and attached to the public
instrument
d. Legal value of the formal requirements for
partnership
3. Other rules on the constitution of a partnership
a. A partnership must have a lawful object or
purpose
b. When articles kept secret among members
and one member may contract in his own
name
i. Shall have no separate juridical
personality
ii. Shall be governed by the provisions
relating to co-ownership
c. Rules on partnership name
i. Every partnership must operate
under a firm name
ii. Which may or may not include the
name of one or more partners
iii. A person who allows his name to be
in the firm name shall be subject to
the liability of a partner
iv. The use by the person or partnership
business of the partnership name, or
the name of a deceased partner (Art.
1840) last paragraph; shall not itself
make the individual property of the
deceased partner liable for any
debts contracted by such a person or
partnership
d. Rule 3.02 – Code of professional responsibility
24
RIGHTS, POWERS, & AUTHORITY OF PARTNERS
Property Rights of Every Partner
Art. 1810
The property rights of a partner are (proprietary rights):
1. Right to participate in the management 
Management power
2. Rights in specific partnership property  Co-ownership
power
3. For the interest in the partnership / The rights to profits
(and share the losses) of the business enterprise 
Equity interest
Rights and Authority of Properties
Proprietary Rights:
Preliminary notes:
- These property rights must be treated and transacted
separately given that these property rights are not
indivisible
Kinds of Partners:
1. Industrial and capitalist
2. Ostensible, nominal and dormant
3. Original and incoming
4. Managing and liquidating
5. General and limited
6. Retiring, surviving, and continuing
Property rights of partners
1. Co-ownership rights to specific partnership properties
(1810, 1811)
a. Equal right to possess but for the partnership
only
b. Non-assignable (1811[2])
c. Not subject to attachment/execution by
partners’ separate creditors not for a partner’s
legal support obligations (1811[3])
2. Mutual Agency: Right to participate in management of
partnership
a. General rule on agency
i. All partners shall be considered
agents and whatever any one of
them may do alone shall bind the
partnership (1803[1])
ii. Every partner is an agent of the
partnership for apparently carrying-
on the usual way the business of the
partnership (1818)
iii. Partnership shall answer to each
partner for the obligation a partner
may have contracted in good faith in
the interest of the partnership
business, and the risks in
consequence of its management
(1769)
b. Other powers or rights relating to mutual
agency:
i. Dispose of partnership property
even when in partnership name
(1819)
ii. Admission or representation made
by any partner concerning the
partnership affairs is evidence
against the partnership (1820)
 iii. Notice to any partner acting for
partnership affairs makes the
partnership liable (1822)
iv. Partnership bound to make good
losses for acts of misapplications of
partners (1823)
c. Acts requiring unanimous consent (1818)
d. Consent required in making alterations on
immovable property (1803[2])
e. Where there is designation of managing
partner in the Articles of Partnership (1800
-1802)
3. Equity Rights: Right to shares in profits and losses
a. Void: stipulation excluding partner from
sharing in profits or losses
(1) CO-OWNERSHIP POWER: Partners Rights to Specific
Partnership Property
Art. 1811
GR: A partner is co-owners with his partners of a specific
partnership property. The following are the incidents of this co-
ownership:
1. A partner has an equal right with his partners to possess
the partnership property FOR PARTNERSHIP PURPOSES.
Thus, partner has no right to possess such property for
any other purpose without other partners’ consent.
2. Partner’s right over the partnership property cannot be
assigned EXCEPT if in connection with assignment of
rights of all the partners over the same property
3. Partner’s right over the partnership property cannot be
subject of attachment or execution EXCEPT on a claim
against the partnership. If partnership property is
attached for a partnership debt, the partners (or any of
them, or the representative of the deceased partner)
CANNOT claim any right under the homestead or
exemption laws
4. Partner’s right over the partnership property is not
subject to any legal support under Art. 291
Art. 291
The following are obliged to support each other to the whole
extent set forth in the preceding article:
(1) The spouses;
(2) Legitimate ascendants and descendants;
(3) Parents and acknowledged natural children and the
legitimate or illegitimate descendants of the latter;
(4) Parents and natural children by legal fiction and the
legitimate and illegitimate descendants of the latter;
(5) Parents and illegitimate children who are not
natural.
1. Partners’ specific right to partnership property limited to
pursuing the partnership business
o This article is actually an implementation of
the principle of mutual agency
2. Partners’ contributed property to the partnership can be
dealt with only for partnership purposes
(2) MANAGEMENT POWER: Partners Rights to Manage the
Partnership
Art. 1803
The following rules shall be applied if the manner of management
has not been agreed upon:
25
1. All partners are agents of each other so whatever one
does alone may bind the partnership (without prejudice
to Art. 1801 provisions) xxx
Art. 1818
GR: Every partner is an agent of the partnership for the purpose of
its business, and so every act of every partner, even executing in
the partnership name of any instrument, for carrying on in the
usual way of the partnership’s business which he is a partner binds
the partnership
EXP: If that partner doesn’t have authority to act for the
partnership in a particular matter AND the person he dealt with
KNOWS that he has no authority
GR: An act of a partner NOT for carrying on the business of the
partnership on the USUSAL way doesn’t bind the partnership
EXP: Authorized by other partners
EXP to EXP: When authorized by the other partners or they have
abandoned the business, one or more but less than all the
partners have no authority to:
1.) Assign the partnership property in trust for creditors or
on the assignee’s promise to pay the debts of the
partnership
2.) Dispose of the good will of the business
3.) Do any other act which would make it impossible to
carry on the ordinary course of business
4.) Confess a judgment
5.) Enter into a compromise concerning a partnership claim
or liability
6.) Submit a partnership claim or liability to arbitration
7.) Renounce a claim of partnership
No act of a partner in contravention of a restriction or authority
shall bind the partnership affairs within the scope of his authority
in accordance with this Title is evidence against the partnership.
Art. 1820
An admission or representation made by any partner about
partnership affairs within the scope of his authority is evidence
against the partnership.
Art. 2821
GR: Notice to any partner regarding anything relating to
partnership affairs, and the knowledge of that partner acquired
while he is a partner (or believes himself to be), and the
knowledge of any of the other partners who reasonably could and
should have communicated the partnership affair to the acting
partner, operates as notice or knowledge of the partnership
EXP: In case of fraud on the partnership, committed by or with the
consent of that partner
Art. 1822
Where an acting partner (the one who is not a partner in the
partnership but still acts as if he were) causes loss or injury to any
person by his wrongful act or omission done in the ordinary course
of business of the partnership or with the authority of the other
partners, or any penalty is incurred, the partnership is liable to the
same extent as the partner so acting or omitting to act.
Art. 1823
The partnership is bound to make good (pay/be liable) for the loss:
1.) Where one partner acting within the scope of his
apparent authority receives money or property of a third
person and misapplies it
2.) Where the partnership, in the course of its business,
receives money or property of a third person and the
 money or property received is misapplied by ANY
PARTNER while it’s in the custody of the partnership.
Art. 1824
All partners are solidarily liable with the partnership for everything
chargeable to the partnership under Art. 1822 and 1823.
1. General Rule on Partnership Management
a. Default rule: every partner has a right to
manage
 Prevailing doctrine now (overturned
Red Men Case) is every partner has
the apparent authority to act for and
in behalf of the partnership in
carrying on the ordinary course of
business of the partnership
 No need to be formally
executed nor registered in
the SEC since PH Law on
partnership is consensual
with no specific
formalities. Thus,
whatever is in the AoP on
the management of
partnership, registered or
not is binding on the
partners, but not the 3rd
parties who doesn’t have
actually knowledge of the
contents of the AoP
b. Effect of internal and non-public arrangement
of partnership management
 GR: Special management
arrangements can be done but even
those are formalized in the Articles
of Partnership, it will NOT bind third
persons acting in good faith without
actual knowledge of the contents of
the special arrangement.
 There is a general
presumption that each
individual partner is an
authorized agent of the
firm and has the authority
to bind the firm in carrying
on with partnership
transactions regarding the
ordinary course of
business
o Thus, 3rd persons
are NOT bound
to ascertain the
authority of the
partner whom
she is dealing
with
 Even if the Articles are
registered, it will NOT bind
the third persons acting in
good faith without actual
knowledge since the
Articles are, first and
foremost, is an intra-
partnership document.
2. Transactions not in the ordinary course of partnership
business
26
a. Rule: the following are transactions NOT in the
ordinary course of business, and thus requires
the consent of ALL the partners, and the
doctrine of apparent authority is NOT applied
to any of these:
i. Assigning of partnership property in
trust to the creditors or on the
assignee’s promise to pay the debts
of the partnership
ii. Disposition of the good will of the
business
iii. Do acts that makes it impossible to
do the ordinary business
iv. Confession of judgment
v. Enterining into a compromise
agreement or submitting to
arbitration a partnership claim or
liability
vi. Renouncing a partnership claim
b. Goquiolay v Sycip – distinguished between:
i. Ordinary course of business – may
involve only a sale of assets
ii. Extraordinary course of business –
disposes of the business enterprise
or has the effect of preventing the
pursuit of the business enterprise
3. Specific modifications on the power of management
Art. 1800
A partner appointed as manager in the articles of partnership
may execute all acts of administration despite opposition by
other partners, EXCEPT if he acts in bad faith.
This power is irrevocable without just cause or lawful cause.
The vote of the partners with the controlling interest is
necessary to revoke this power.
A power granted even after the partnership has been
constituted can be revoked at any time.
Art. 1801
If 2 or more partners are entrusted with management of the
partnership without specifying their specific duties, or
without any stipulation that they need to act with the
consent of all others, each of them may separately execute
all acts of administration
BUT if any of them (the partners entrusted with
management) should oppose the acts of the others, the
decision of the majority prevails.
In case of a tie, the matter shall be decided by the partners
with controlling interest
Art. 1802
If it’s stipulated that NONE of the managing parts shall act
without the consent of others, the concurrence of ALL is
necessary for the act to be valid
Absence or disability of any of the partners cannot be alleged
EXCEPT if there’s imminent danger of grave or irreparable
injury to the partnership
Notes:
- Through these provisions, it is shown that the
partnership law of PH allows the parties to expressly
contract without following the principle of mutual
agency (that the partners are all managers of the
partnership) since 1800 allows only one partner to be
the managing partner
 - But these provisions (1800, 1801 and 1802) should be
considered intramural rules that only governs the
relationship between the partners. Any breach would
result only in a cause of action against the breaching
partners NOT to be binding against 3rd persons acting in
good faith (because of the principle of apparent
authority in 1818)
4. Specific rules on dealings with immovable properties of
the partnership
Art. 1774
Any immovable property or an interest in it can be acquired
in the partnership name. The title acquired can only be
conveyed through the partnership name.
Art. 1803
The following rules shall be applied if the manner of
management has not been agreed upon:
1.) All partners are agents of each other so whatever
one does alone may bind the partnership (without
prejudice to Art. 1801 provisions)
2.) None of the partners may, without consent of the
others, make any important alteration in the
immovable property of the partnership, even if it
may be useful to the partnership. BUT of the refusal
of consent by the other partners is manifestly
prejudicial to the interest of the partnership, the
court’s intervention may be sought.
Art. 1819 – rules on how partners may bind real properties
of the partnership:
1.) If title is in the partnership name
a. Any partner may convey title to such
property by a conveyance executed in the
partnership name
i. Partnership may recover the
property only when the partner
who conveyed it actually
doesn’t have power to do so,
but not against a transferee in
good faith and for value
b. A partner who conveys the property in
his name passes equitable interest of the
partnership only when that partner has
authority to do so, otherwise, no title
passes to the transferee
c. This is consistent with the provision that
the property acquired under the
partnership can only be conveyed in the
partnership name
2.) If title is NOT in the partnership name (it’s in the
name of one or more, or all the partners, or a third
person in trust for the partnership)
a. A conveyance by a partner in the
partnership name or in his own name
ONLY passes equitable interest of the
partnership; if he had conveying
authority
b. It doesn’t pass anything, not even
equitable interest on the partnership, if
conveyed without authority
3.) If title is in the name of one or more but not all the
partners
a. If records disclose partnership interest –
partners in whose name the title stands
may convey the title and the partnership
27
can only recover the property when the
partners who conveyed had no authority
but without prejudice to the innocent
transferee
b. If records do not disclose partnership
interest – partners in whose name the
title stands may convey the title of the
property and partnership may recover
even with prejudice against the
transferee when the partners acted
without authority
4.) If title is in the name of ALL partners
a. Conveyance executed by all the partners
(in whoever’s name it is) passes all their
right in such property. In this case, the
will of all the partners is the will of the
partnership
Notes:
- GR: in the absence of a specific agreement on the
matter, all partners shall be considered agents and
whatever they made do alone for the ordinary course of
business of the partnership shall bind the partnership
- EXP: for immovable properties of the partnership, none
of the partners may, without the consent of the others,
make any important alteration in the immovable
property even if it is useful to the partnership
(3) EQUITY INTEREST: Equity Rights of Partners
Art. 1812
A partner’s interest in the partnership is his share in the profits
and surplus
Art. 1813
If a partner conveys his whole interest in the partnership, this
doesn’t itself dissolve the partnership. Or as against the other
partners in the absence of agreement, entitled the assignee to
interfere in the management or administration of the partnership
business or affairs (during the partnership), or to require any
information or account of partnership transactions, or to inspect
the partnership books
It merely entitles the assignee to receive, in accordance with his
contract, the profits to which the assigning partner would be
entitled to.
However, in case of fraud in the management of the partnership,
the assignee may avail himself of the usual remedies.
In case the partnership dissolves, the assignee is entitled to receive
his assignor’s interest and may require an account from the date
only of the last account agreed by all the partners
Art. 1814
On due application to a competent court by any judgment creditor
of a partner, the court (which entered the judgment or any other
court) may charge the interest of the debtor partner with payment
of the unsatisfied amount of such debt with interest thereon
Court may then or later appoint a receiver of his share of the
profits and of any other money due or to fall due to him in respect
of the partnership and make all other orders, directions, accounts,
and inquiries which the debtor partner might have made, or which
the circumstances of the case may require.
The interest charged may be deemed at any time before
foreclosure, or in case of a sale being directed by the court, may
be purchased without causing a dissolution:
 1.) With separate property, by any one or more of the
partners; or
2.) With partnership property, by any one or more of the
partners with the consent of all the partners whose
interests are not so charged or sold
Nothing in this title shall be held to deprive a partner of his right, if
any, under the exemption laws, as regards his interest in the
partnership

Notes:
- Art. 1812
o A partner’s interest in the partnership defines
his equity position as co-proprietor of the
partnership enterprise, which entitles him ipso
facto to share in the profits and to share in the
losses of the venture
o Profits – excess of receipts over expenses or
the excess value of returns over the value of
advances
o Surplus– excess of assets over liabilities
o Interest of a partner in the partnership is the
net balance remaining to him

1. Assignment of a partner’s equity rights

a.
2. Right to participate in profits of the obligation to share
in losses
Art. 1797
Art. 1798
Art. 1799
a. No guarantee as to profits
b. When the right to profits accrues

Other Rights of a Partner

1. Right to inspect partnership books and records (1805)
2. Right to demand true and full information (1806)
3. Right to demand accounting (1809)
4. Right to be reimbursed for expenses incurred on behalf
of the partnership (1796)
5. Delectus Personae: Right to dissolve the partnership
(1830[2])

Obligations of the Partnership to Third Parties

1. Liability arising from the firm name
2. Liability arising from the acts of the agent

28
[Dissolution, Winding-up and Termination of Partnership] ii. Partnership business continues with the
remaining partners
1. Types and Causes of Dissolution c. When dissolution is in contravention of partnership
a. Non-Judicial/Ipso Jure Dissolution agreement:
i. Without violation of the partnership agreement i. Each non-breaching partner shall have the right
(without breach) to:
1. Expiration of the partnership term or 1. Liquidate the partnership
achievement of undertaking 2. Recover damages against each
2. By the express will of a partner acting breaching partner
in good faith in a partnership at will
3. Mutual assent of the partners to
dissolve or accept a new partner
4. Expulsion of a partner pursuant to an
agreement granting such
ii. In contravention of agreement (Art. 1830[2]):
Where circumstances do not permit dissolution
under any other provisions, by express will of
any partner at any time
iii. By operation of law (Art. 1830)
1. Supervening illegality of the
partnership business
2. Loss of specific thing contributed
3. Death, insolvency, or civil interdiction
of a partner
b. By judicial decree of dissolution
i. A partnership with an unlawful object or
purpose may be dissolved by judicial decree,
and the profit confiscated in favor of the state
(1770)
ii. By decree of a court on application by or for
partner (1831)
1. Partner judicially declared insane or
shown to be of sound mind
2. Partner becomes in any other way
incapable of performing his contract
3. A partner has been guilty of such
contract as tends to affect prejudicially
the carrying on of the partnership
business
4. A partner willfully or persistently
commits a breach of the agreement
that It is not reasonably practicable to
carry-on the partnership business with
him
5. When partnership business can only be
carried-on at a loss
6. Other circumstances that render a
dissolution equitable
7. Assignee of partner’s interest may seek
court order
(1) Upon termination of the
specified term or of the
particular undertaking; or
(2) At any time in a partnership
will
2. Options arising by reason of dissolution
a. When dissolution is without contravention of
partnership agreement: Each partner may demand
for the winding-up of the partnership (1837)
i. Partnership properties applied to discharge
liabilities, and surplus applied to pay in cash the
net amount owing to the respective partners
b. When dissolution caused by bona fide expulsion of a
partner who is discharged from partnership liabilities
(1837)
i. When expel partner shall receive in cash only
net amount due him i.e. less damages
29
[Dissolution, Winding-up, and Termination of Partnership]
II. TYPES OF DISSOLUTION
1. Non-judicial/ipso jure dissolution
i. Without breach of partnership agreement
1. Partnership term expires or undertaking
has been achieved
2. Express will of a partner acting in good
faith
3. Partners mutually assent to dissolve or
accept a new partner
4. A partner is expelled pursuant to an
agreement granting such right
ii. In contravention of the agreement between
partners, where the circumstances don’t permit
a dissolution, by the express will of any partner
at any time
1. A partner who withdraws his partnership
in contravention of the partnership
agreement = liable for damages (which
may be deducted from his partnership
account), and loses right to wind-up
i. Liable for damages because of
mutual agency and doctrine of
delectus personae
iii. By operation of the law (1830)
1. Partnership business became illegal
(supervening)
2. Loss of specific thing contributed
3. Death, insolvency, or civil interdiction of a
partner
i. Death
i. Dissolves the partnership
(absent a stipulation that
says that it will continue)
ii. Liquidation of deceased
partner’s affairs is handled
by the surviving partners,
no executors
iii. The heirs of the deceased
partner will have rights over
what results in the
liquidation, nothing more
iv. If a continuation of the
partnership is desired, there
must be a clear meeting of
the minds made
ii. Equity
i. Surviving partners are
treated as trustees
regarding the interest of the
deceased partner.
ii. Surviving partners must
account of the performance
of their trust to the relatives
of the deceased partner,
pay to them the share of
deceased partner.
2. By judicial decree of dissolution
i. Partnership with an unlawful object or purpose
1. Dissolved by judicial decree
2. Profits confiscated in favor of the state
(1770)
ii. Through a decree by the court on application by
or for a partner 1831)
30
1. Partner judicially declared insane or of
unsound mind
2. Partner becomes incapable of performing
his contract
3. Partner is guilty of conduct that is
prejudicial to carrying the partnership
business
4. Partner willfully or persistently breaches
the agreement that its reasonably not
practicable to carry the partnership
business with him
5. When the partnership business can only
be carried on at a loss (?)
 If the partnership will only mean
sustaining the losses, then a
dissolution is valid
6. Other circumstances that renders a
dissolution of the partnership equitable
7. Assignee of a partner’s interest sought
court order but only:
i. Upon termination of the
specified term of undertaking
ii. At any time in a partnership at
will
o Courts can dissolve a partnership WITHOUT A
FORMAL APPLICATION if continuing on the
partnership will only be inequitable
III. OPTIONS ARISING BY REASON OF DISSOLUTION
1. Without contravention  each partner may demand
to wind-up partnership (1837)
i. Partnership properties applied to discharge
liabilities
ii. Surplus is applied to pay, in cash, the net amount
owing to the respective partners
2. Dissolution caused by expelling a partner who is
discharged from partnership liabilities (1837)
i. Expelled partner  receives only net amount
due to him minus the damage caused
ii. Partnership business continues with remaining
partners (do you still need a new meeting of the
minds?)
3. With contravention of agreement
1. Each non-breaching partner
i. Right to liquidate the partnership
(partnership properties apply to
liabilities and receive share in
excess) (Same as (II)(1)
ii. Recover damages against each
breaching partners
2. All non-breaching partners, if they want,
may continue the business
i. In the same name, either by
themselves or jointly with others
ii. Can continue the partnership
business during the agreed term
iii. Can possess the partnership
property provided that:
i. Should secure the payment
by bond approved by the
court; or
ii. Pay to breaching partner
the value of his interest in
the partnership dissolution,
net the damages (minus any
damages recoverable), and
indemnity him against all
 present and future
partnership liabilities
3. All breaching partners are limited (1837)
i. If partnership business is NOT
continued
i. Receive their net share in
the surplus after payment
of all liabilities
ii. If partnership business is
continued
i. Have the net value (minus
the damages already) of
their interests ascertained
(excluding value of the
goodwill of business)
ii. Has the right against co-
partners (and those
claiming through them)
regarding their respective
interest in the partnership
iii. Payment is made in cash or
secured by a bond approved
by the court
iv. To be released from all
existing liabilities of the
partnership.
4. Dissolution through operation of the law
i. When a partner retires or dies and business is
CONTINUED but WITHOUT settlement of
accounts (between deceased/retired partner or
his estate and person or partnership continuing
the business)  the retired partner or legal
representative has the right, against the
partnership:
1. Have the value of his interest in the
dissolution ascertained
2. Receive, as an ordinary creditor, an
amount equal to the value of his interest
in the dissolved partnership (with
interest) OR, if he wants, the profits
attributable to the use of his right in the
partnership property
3. **Partnership creditors prevail over
partner’s separate creditor
5. If dissolution is because the partnership contract is
rescinded due to fraud or misrepresentation of one of
the parties. (1838)  party entitled to rescind has the
right to the following (after payment of all partnership
liabilities to 3rd persons):
i. To a lien on, or right of retention of, the surplus
of the partnership property for any sum paid by
him to purchase an interest in the partnership
and for capital or advances contributed by him
ii. To stand in place of the creditors of the
partnership for any payment made by him for
partnership liabilities
iii. To receive indemnity from the person guilty of
fraud or misrepresentation against all debts and
liabilities of the partnership
Case notes:
- If a partner who withdrew from the partnership/wants
to withdraw from it, fails to publish his/her withdrawal
and agrees to the continuation of the partnership
business by the remaining partners (even if one in good
faith)  this doesn’t relieve her from her liability to the
partnership creditors.
31
- If partnership continues with new partners, they are
liable for the existing liabilities of the business
enterprise EVEN those incurred under the old
partnership BUT they are not compelled to retain the
managers and employees
- Remedy of partner who wants to recover the money he
furnished for the partnership is a civil action arising from
the partnership contract’s liquidation NOT estafa
o Except if they were deceived by fraud to invest
in a venture when they didn’t have any
intention to invest
IV. NATURE AND EFFECT OF DISSOLUTION
1. Between and among the partners
i. Changes the relationship of the partners because
of a partner who ceased to be associated in
carrying on the partnership (1828)
ii. Terminates all authority of any partner to act for
the partnership
 Except those necessary to wind-up
the partnership affairs or to
complete transactions begun but not
finished (1832)
iii. Right to an accounting of his interest  accrues
to any partner (or his representative) as against
the winding-up partners, surviving partners, or
those continuing with the partnership business
 Right to an accounting period of
prescription stars when partnership
is dissolved and final accounting is
done
2. On the partnership itself
i. Partnership continues only for purposes of
winding-up (1829) (so, on dissolution, the
partnership is not terminated until all the
winding-up is finished)
1. Except if the non-breaching partners
decides to continue with the business
partnership with a new partnership
ii. Notes:
o An action to dissolve the partnership and to
appoint a receiver must include the
partnership so they can be heard in matters
affecting their existence and appointment of
receiver
o Legal personality of a partnership continues
for the limited purpose of winding-up the
affairs
3. On the authority of the partners
i. Dissolution terminates all the partner’s authority
to bind the partnership, except for winding-up
(1832)
ii. A partner can still bind the partnership (1834)
1. By any act or contract for winding-up of
the partnership affairs
2. By any transaction that would bind the
partnership (if there was no dissolution)
and:
i. A 3rd person extended credit to
the partnership prior to
dissolution and in good faith (no
knowledge or notice of the
dissolution)
ii. A 3rd party, though didn’t extend
credit, knew about the
partnership prior to its
dissolution but no knowledge or
 notice of the dissolution because
it wasn’t advertised in a
newspaper of GC
o Liability of a partner under (2)(i)-(ii) shall be
satisfied out of partnership assets alone if that
partner, prior to the dissolution, (2) is an
unknown partner and (2) inactive in
partnership affairs that the business
reputation couldn’t have been due to him
iii. Dissolution caused by act, death, or insolvency of
a partner (1833)
1. Each partner is liable to his co-partners
for his share in any liability created by
any partner acting for partnership as if
the partnership hasn’t been dissolved
UNLESS:
i. If dissolution is by act  partner
acting for the partnership had
knowledge of the dissolution
ii. If dissolution is by death or
insolvency  partner acting for
the partnership had knowledge
or notice of death or insolvency
iv. Dissolution’s effect on existing liabilities of
partners (1834)
1. GR: Dissolution itself doesn’t discharge
existing liability of any partner
2. EXP: partner is discharged by reason of an
express agreement between the
continuing partners and the creditors
V. WINDING-UP AND TERMINATION OF THE PARTNERSHIP BUSINESS
ENTERPRISE
Preliminary Notes:
 Winding-up = process of settling business affairs after
dissolution. It includes:
o Paying of previous obligations
o Collecting of assets previously demandable
 Termination – point in time after all the partnership
affairs have been wound up
1. Partner’s authority would only be for winding-up
purposes (1834)
2. Authority to wind-up (1836)  only with the partners
who haven’t wrongfully dissolved the partnership or
the legal representative of the last surviving partners,
not insolvent
i. Unless otherwise agreed
ii. Provided that any partner, his legal
representative or assignee, upon cause shown,
may obtain winding up by the court
3. Upon dissolution: (1839[4] and [7])
i. Partners shall contribute the amounts necessary
to satisfy the partnership debts not covered by
partnership assets (for the deceased partner, it
will be covered by his individual property)
1. HOWEVER, the separate creditors of the
deceased partners have priority over his
separate properties (1835)
4. Rules for settlement of liabilities and partnership
claims (subject to any agreement to the contrary):
i. The assets of the partnership are:
1. Partnership property
2. Contributions of the partners necessary
for the payment of all liabilities in No.
2/(ii)
32
ii. Liabilities of the partnership shall be ranked in
order of payment as follows
1. Owing to creditors other than partners
2. Owing to partners other than for capital
and profits
3. Owing to partners’ capital
4. Owing to partners’profits
iii. Assets are to be applied in the order of their
declaration in No. 1/(i) (Partnership property
then contribution of the partners) in the amount
necessary to satisfy any liability
iv. Partneers shall contribute amount necessary to
satisfy their liabilities
v. Assignee of creditors or those appointed by the
court has the right to enforce the contributions
of the partners to satisfy the partner’s liability
vi. Any partner or his legal representative has the
right to enforce the contributions of the partner
to satisfy his liability up to the amount which he
has paid in excess of his share of the liability
vii. To satisfy the dead partner’s liability, his
contribution will be from his individual property
viii. If the partnership assets (partnership property
and individual property of partners) are in the
possession of the court for distribution 
partnership creditors are prioritized over
separate creditors on individual property
ix. If a partner/his estate has become insolvent,
claims against his separate property is ranked as
follows:
1. Owing to separate creditors
2. Owing to partnership creditors
3. Owing to partners by way of contribution
5. Condensed version of ^
i. Partnership assets (partnership property and
partners’ required contribution) are covered by
the unlimited liability rule
ii. Partnership liabilities shall be paid in the
following order of payment:
1. Owing to creditors other than partners
i. Partnership creditors first then
separate individual creditors
(except if partner has become
insolvent, then first is separate
creditors then partnership
creditors)
2. Owing to partners other than for capital
and profits
3. Owing to partners in respect of capital
4. Owing to partners in respect of profits
------------
Villareal Case – dissolution; partnership
Fiduciary obligation - Every partner has the right to demand from
the other partners an accounting and the assets of the partnership
that’s with the other partners.
Unlimited liability – happens only upon dissolution
- Every partner except the limited partner shall be
personally liable (pro-rata) with their non-invested
assets/properties for all partnership debts and
obligation, not exempt from execution, after the
exhaustion of the partnership assets.
- 1st step: identify what the partnership assets are
- 2nd step: once exhausted, that’s the only time the
partner’s property/assets become liable
Hierarchy of Claims: (Ar. 1839)
1. Partnership creditors
2. Partners, aside from capital and profits  transactions
effected by all partners (this is not the same in a limited
partnership)
3. Partner’s capital contribution 
4. Partner’s profits of the partnership 

Why is there a need of hierarchy of 3 and 4

capital is a definite amount, profit is not

In limited partnership, profits first then capital, and those owing

to the limited partners first
 the accommodations of limited partners are in it for profit even
with the risk of losing all their contributions

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JOINT VENTURE AGREEMENT

3 types of JV covered by law

1. Informal JVA
2. Formal JVA
3. JV Corporation
a.

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