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KINDS OF PARTNERS

• As to contribution • As to third persons

• Capitalist partners • Ostensible partners
• Industrial partners • Secret partners
• Capitalist-industrial partners • Dormant partners
OBLIGATIONS OF THE PARTNERS
• As to liability • As to membership
• General partners • Real partners
• Limited partners • Partners by estoppel
Partnership – Chapter 2 – SECTION 1

• As to management • As to continuation of the business

• Managing partners affairs after dissolution
• Silent partners • Continuing partners
• Liquidating partners • Discontinuing partners

1 2

KINDS OF PARTNERS
OBLIGATION OF THE PARTNERS
AMONG THEMSELVES
• As to state of survivorship
• Surviving partners
• Deceased partners

• Legal relations created by a contract of partnership

• As to the effect of expulsion 1. Relations between partners
• Expelled partners 2. Relations between the partners on one hand and the partnership on the other hand; and
• Expelling partners 3. Relations between the partners on one hand and third persons on the other hand; and
4. Relations between the partnership and the third persons.

• As to the value of the contribution

• Majority partners
• Nominal partners

3 4

EXAMPLES OF OBLIGATIONS AND RIGHTS OF A PARTNER

Obligations of partners
To give their promised contribution
Not to convert partnership money to their own use.
To account and hold as trustee for any profits derived
without the consent of the other partners
Not to engage in any business which is of the kind in which
the partnership is engaged.
Obligation of the managing partners to credit to the
partnership the payment made by a debtor who owes them
and the partnership.
Obligation to share with the other partners the share of the Note: Limited partners have no right to participate in the
partnership credit which they have received from an
insolvent partnership debtor
Pay for damages suffered by the partnership through their
fault
Rights of partners ART. 1784. A PARTNERSHIP BEGINS FROM THE MOMENT OF
THE EXECUTION OF THE CONTRACT, UNLESS IT IS
Right to associate with another person in their share
OTHERWISE STIPULATED (1679)
Right to have access to and inspect and copy partnership
books
Right to demand a formal account
Right to ask for the dissolution of the partnership at the • GENERAL RULE
proper time
• A PARTNERSHIP BEGINS FROM THE MOMENT OF THE EXECUTION OF THE CONTRACT.
Property rights of partners
a. Rights in specific partnership property
b. Interest in the partnership
c. Right to participate in the management • EXCEPTION
• The partners can agree on some other date for the start of the partnership.
management.

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Art. 1785. When a partnership for a fixed term or
particular undertaking is continued after the termination of
such term or particular undertaking without any express
agreement, the rights and duties of the partners remain
the same as they were at such termination, so far as is
consistent with a partnership at will.
A continuation of the business by the partners or such of
them as habitually acted therein during the term, without
any settlement or liquidation of the partnership affairs, is
prima facie evidence of a continuation of the partnership.
(n)
7 8
Art. 1787. When the capital or a part thereof
which a partner is bound to contribute consists of
goods, their appraisal must be made in the manner
prescribed in the contract of partnership, and in
the absence of stipulation, it shall be made by
experts chosen by the partners, and according to
current prices, the subsequent changes thereof
being for account of the partnership. (n)
MANNER OF APPRAISAL:
1. BY STIPULATION; OR
2. IN THE ABSENCE OF STIPULATION, BY EXPERTS CHOSEN BY THE
PARTNERS ACCORDING TO CURRENT PRICES.
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ESSENCE OF PARTNERSHIP
• It is a settled rule that when a partner who has
undertaken to contribute a sum of money fails to do
so, he becomes a debtors of the partnership for
whatever he may have promised to contribute and for
interests and damages from the time he should have
complied with the obligation. Being a contract of
partnership, each partner must share in the profits and
losses of the venture.
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OBLIGATION OF EVERY PARTNER
• THE OBLIGATION TO CONTRIBUTE WHAT HAD BEEN PROMISED;
• THE OBLIGATION TO DELIVER THE FRUITS THEREOF; AND
• THE OBLIGATION TO WARRANT
ART 1786 EVERY PARTNER IS A DEBTOR OF THE PARTNERSHIP FOR WHATEVER HE MAY HAVE
PROMISED TO CONTRIBUTE THERETO.
HE SHALL ALSO BE BOUND FOR WARRANTY IN CASE OF EVICTION WITH REGARD TO
SPECIFIC AND DETERMINATE THINGS WHICH HE MAY HAVE CONTRIBUTED TO THE
PARTNERSHIP, IN THE SAME CASES AND IN THE SAME MANNER AS THE VENDOR IS BOUND
WITH RESPECT TO THE VENDEE. HE SHALL ALSO BE LIABLE FOR THE FRUITS THEREOF FROM
THE TIME THEY SHOULD HAVE BEEN DELIVERED, WITHOUT THE NEED OF ANY DEMAND.
Art. 1788. A partner who has undertaken to
contribute a sum of money and fails to do so
becomes a debtor for the interest and damages
from the time he should have complied with his
obligation.
The same rule applies to any amount he may have
taken from the partnership coffers, and his liability
shall begin from the time he converted the amount
to his own use. (1682)
CASES COVERED OF THE LIABILITY FOR DAMAGES AND INTEREST
1. Money promised by a partner is not given on time; and
2. Money on the partnership is converted to partners’ own use.
DEMAND IS NOT NECESSARY
• This case is an exception to the general principle
in the law or obligation which states: “there is no
default, if there is no demand.”
• In the case of contribution, because time is of the
essence, a partnership is formed precisely to make
use of the contributions, and this use should start
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CAPITALIST PARTNER VS INDUSTRIAL PARTNER

• Art. 1789. An industrial partner cannot
engage in business for himself, unless the CAPITALIST PARTNER INDUSTRIAL PARTNER
partnership expressly permits him to do so;
and if he should do so, the capitalist CONTRIBUTION MONEY OR PROPERTY INDUSTRY
partners may either exclude him from the
firm or avail themselves of the benefits PROHIBITION TO ENGAGE GEN. RULE: Cannot engage in the same kind of Gen. Rule: cannot engage in business for himself.
IN OTHER BUSINESS business in which the partnership is engaged. Exception: If the partnership expressly permits him
which he may have obtained in violation of
EXCEPTION: stipulation authorizing him. to do so.
this provision, with a right to damages in
either case. (n)
PROFITS Shares in the profits according to agreement; if there is Shares in the profits according to agreement; if there
no agreement, in proportion to his contribution. is no agreement, he shall receive such share as may be
• capitalist partners just and equitable under the circumstances.
• industrial partners
• capitalist-industrial partners LOSSES Gen. Rule: the agreement as to losses; if any. Gen. Rule: the agreement as to losses; if any.
However, if there is no agreement, then the agreement Exception: in the absence of agreement, the
as to profits. industrial partner shall not be liable for losses.
Exception: in the absence of agreement as to profits
and losses, in proportion to his contribution.

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REMEDIES OF C APITALIST PARTNERS

AGAINST AN INDUSTRIAL PARTNER WHO A RT. 1 7 9 0 . U N L E S S T H E R E I S A ST I P U L AT I O N TO T H E C O N T R A RY, T H E
PA RT N E R S S H A L L C O N T R I B U T E EQ U A L S HA R E S TO T H E C A P I TA L O F T H E
ENGAGED IN BUSINESS FOR HIMSELF PA RT N ER SHI P. ( N )

• The capitalist partners may exclude the industrial partner from the
partnership plus damages; or
• The capitalist partners may avail themselves of the benefits which the industrial
partner may have obtained plus damages.
A RT. 1 7 9 1 . I F T H E R E I S N O A G R E E M E N T TO T H E C O N T R A RY, I N C A S E O F A N
I M M I N E N T L O S S O F T H E B U S I N E S S O F T H E PA RT N E R S H I P, A N Y PA RT N E R W HO
• An action for specific performance to compel the partner to perform the promised R E F U S E S TO C O N T R I B U T E A N A D D I T I O N A L S H A R E TO T H E C A P I TA L , E X C E P T A N
industry is not available as a remedy because this will lead to the prhobition on I N D U S T R I A L PA RT N E R , TO S AV E T H E V E N T U R E , S H A L L H E O B L I G E D TO S E L L H I S
involuntary servitude under the Philippine Constitution I N T E R E S T TO T H E O T H E R PA RT N E R S . ( N )

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A RT. 1 7 9 2 . I F A PA RT N E R A U T H O R I Z E D TO M A N A G E C O L L E C T S A D E M A N D A B L E ART. 1793. A PARTNER WHO HAS RECEIVED, IN WHOLE

S U M W H I C H WA S O W E D TO H I M I N H I S O W N N A M E , F R O M A P E R S O N W H O O W E D
T H E PA RT N E R S H I P A N O T H E R S U M A L S O D E M A N D A B L E , T H E S U M T H U S C O L L E C T E D OR IN PART, HIS SHARE OF A PARTNERSHIP CREDIT,
S H A L L B E A P P L I E D TO T H E T W O C R E D I T S I N P R O P O RT I O N TO T H E I R A M O U N T S ,
E V E N T H O U G H H E M AY H AV E G I V E N A R E C E I P T F O R H I S O W N C R E D I T O N LY; B U T
WHEN THE OTHER PARTNERS HAVE NOT COLLECTED
S H O U L D H E H AV E G I V E N I T F O R T H E A C C O U N T O F T H E PA RT N E R S H I P C R E D I T, T HE THEIRS, SHALL BE OBLIGED, IF THE DEBTOR SHOULD
A M O U N T S H A L L B E F U L LY A P P L I E D TO T H E L AT T E R . THEREAFTER BECOME INSOLVENT, TO BRING TO THE
T H E P R O V I S I O N S O F T H I S A RT I C L E A R E U N D E R S TO O D TO B E W I T H O U T P R E J U D I C E PARTNERSHIP CAPITAL WHAT HE RECEIVED EVEN
TO T H E R I G H T G R A N T E D TO T H E O T H E R D E B TO R B Y A RT I C L E 1 2 5 2 , B U T O N LY I F
T H E P E R S O N A L C R E D I T O F T H E PA RT N E R S H O U L D B E M O R E O N E R O U S TO H I M .
THOUGH HE MAY HAVE GIVEN RECEIPT FOR HIS SHARE
(1684) ONLY. (1685A)
Rationale: Rationale:
To prevent furtherance of the partner’s personal interest to the detriment of the partnership. This article is not Equity demands proportionate share in the benefits and losses.
applicable to a partner who is not managing partner because there is no basis for the suspicion that the partner
is in bad faith.

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ARTICLE 1792 VS. ARTICLE 1793
Article 1792
As to the number of There are two distinct
credits credits, that is, one in favor
of the partnership and
another in favor of the
managing partner
As to applicability Applies only if the partner
is a managing partner
As to debtor’s insolvency The debtor is not
insolvent
Article 1793
There is only one credit,
that is, in favor of the
partnership
Applies to any partner
The debtor has become
insolvent
ART. 1794. EVERY PARTNER IS RESPONSIBLE TO THE
PARTNERSHIP FOR DAMAGES SUFFERED BY IT THROUGH HIS
FAULT, AND HE CANNOT COMPENSATE THEM WITH THE PROFITS
AND BENEFITS WHICH HE MAY HAVE EARNED FOR THE
PARTNERSHIP BY HIS INDUSTRY. HOWEVER, THE COURTS MAY
EQUITABLY LESSEN THIS RESPONSIBILITY IF THROUGH THE
PARTNER'S EXTRAORDINARY EFFORTS IN OTHER ACTIVITIES OF
THE PARTNERSHIP, UNUSUAL PROFITS HAVE BEEN REALIZED.
(1686A)
RULE:
Damages suffered by the partnership through the fault or negligence of a
partner are not generally subject to set-off with the profits and benefits
which that partner may have earned for the partnership by his industry.

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RATIONALE:
It is the obligation of a partner to earn benefits and profits for the partnership and it
is also his obligation not to cause damages through negligence for the partnership.
These are two distinct obligations that cannot be set-off. Moreover, in the law on
obligation, only a right and an obligation are required to be compensated or set-off.
A RT. 1 7 9 5 . T H E R I S K O F S P E C I F I C A N D D E T E R M I N AT E T H I N G S , W H I C H A R E N O T
F U N G I B L E , C O N T R I B U T E D TO T H E PA RT N E R S H I P S O T H AT O N LY T H E I R U S E A N D F R U I T S
M AY B E F O R T H E C O M M O N B E N E F I T, S H A L L B E B O R N E B Y T H E PA RT N E R W H O O W N S
THEM.
IF THE THINGS CONTRIBUTE ARE FUNGIBLE, OR CANNOT BE KEPT WITHOUT
D E T E R I O R AT I N G , O R I F T H E Y W E R E C O N T R I B U T E D TO B E S O L D , T H E R I S K S H A L L B E
B O R N E B Y T H E PA RT N E R S H I P. I N T H E A B S E N C E O F S T I P U L AT I O N , T H E R I S K O F T H E
T H I N G S B R O U G H T A N D A P P R A I S E D I N T H E I N V E N TO RY, S H A L L A L S O B E B O R N E B Y T H E
PA RT N E R S H I P, A N D I N S U C H C A S E T H E C L A I M S H A L L B E L I M I T E D TO T H E VA L U E AT
WHICH THEY WERE APPRAISED. (1687)

MITIGATION OF LIABILITY BY THE COURTS

• RISK OF LOSS
In case of a partner’s extraordinary efforts in other activities of • Specific and determinate things which are not fungible
the partnership, unusual profits have been realized. This • Fungible things
principle rests on equity. • Things contributed to be sold
• Things brought and appraised in the inventory

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ART. 1797. THE LOSSES AND PROFITS SHALL BE DISTRIBUTED IN

ART. 1796. THE PARTNERSHIP SHALL BE RESPONSIBLE TO EVERY
CONFORMITY WITH THE AGREEMENT. IF ONLY THE SHARE OF EACH
PARTNER FOR THE AMOUNTS HE MAY HAVE DISBURSED ON BEHALF
PARTNER IN THE PROFITS HAS BEEN AGREED UPON, THE SHARE OF
OF THE PARTNERSHIP AND FOR THE CORRESPONDING INTEREST,
EACH IN THE LOSSES SHALL BE IN THE SAME PROPORTION.
FROM THE TIME THE EXPENSE ARE MADE; IT SHALL ALSO ANSWER
TO EACH PARTNER FOR THE OBLIGATIONS HE MAY HAVE
IN THE ABSENCE OF STIPULATION, THE SHARE OF EACH PARTNER IN
CONTRACTED IN GOOD FAITH IN THE INTEREST OF THE
THE PROFITS AND LOSSES SHALL BE IN PROPORTION TO WHAT HE
PARTNERSHIP BUSINESS, AND FOR RISKS IN CONSEQUENCE OF ITS
MAY HAVE CONTRIBUTED, BUT THE INDUSTRIAL PARTNER SHALL
MANAGEMENT. (1688A)
NOT BE LIABLE FOR THE LOSSES. AS FOR THE PROFITS, THE
INDUSTRIAL PARTNER SHALL RECEIVE SUCH SHARE AS MAY BE JUST
AND EQUITABLE UNDER THE CIRCUMSTANCES. IF BESIDES HIS
• Obligations of the partnership to every partner SERVICES HE HAS CONTRIBUTED CAPITAL, HE SHALL ALSO RECEIVE
• To refund the amounts of a partner may have disbursed on behalf of the A SHARE IN THE PROFITS IN PROPORTION TO HIS CAPITAL. (1689A)
partnership plus the interest from the time the expenses were made. • Being a contract of partnership, each partner must share in the profits and
• To answer to each partner for obligations, he may have contracted into in losses of the venture. That is the essence of a partnership.
good faith in the interest of the partnership, and for the risks in consequence
of its management.

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4

RULES FOR DISTRIBUTION OF PROFITS
AND LOSSES OF A PARTNERSHIP
1. DISTRIBUTION OF PROFITS
a. According to agreement
b. If there is no agreement
1) Capitalist partners – in proportion to what he may have contributed to the
common fund.
2) Industrial partners – that which is just and equitable under the
circumstances
25
A RT. 1 7 9 8 . I F T H E
PA RT N E R S H AV E A G R E E D TO
I N T R U S T TO A T H I R D
P E R S O N T H E D E S I G N AT I O N
OF THE SHARE OF EACH
ONE IN THE PROFITS AND
L O S S E S , S U C H D E S I G N AT I O N
M AY B E I M P U G N E D O N LY
W H E N I T I S M A N I F E S T LY
I N E Q U I TA B L E . I N N O C A S E
M AY A PA RT N E R W H O H A S
B E G U N TO E X E C U T E T H E
DECISION OF THE THIRD
PERSON, OR WHO HAS NOT
IMPUGNED THE SAME
WITHIN A PERIOD OF THREE
MONTHS FROM THE TIME HE
H A D K N O W L E D G E T H E R E O F,
COMPLAIN OF SUCH
DECISION.
T H E D E S I G N AT I O N O F
LOSSES AND PROFITS
C A N N O T B E I N T R U S T E D TO
O N E O F T H E PA RT N E R S .
(1690)
27
A RT. 1 8 0 0 . T HE PA RT N ER
W HO H A S B E E N A P P O I N T E D
M A N A G E R I N T H E A RT I C L E S
O F PA RT N E R S H I P M AY
EXECUTE ALL ACTS OF
A D M I N I S T R AT I O N D ES P I T E
THE OPPOSITION OF HIS
PA RT NERS, U N LESS HE
S H O U L D A C T I N B A D FA I T H ;
AND HIS POWER IS
IRREVOCABLE WITHOUT
J U ST O R L AW F U L C A U SE.
THE VOTE OF THE
PA RT N E R S R E P R E S E N T I N G
THE CONTROLLING
INTEREST SHALL B E
NECESSARY F O R SU CH
R E V O C AT I O N O F P O W E R .
A POWER GRANTED AFTER
THE PA RT NERSHIP HAS B EEN
C O N S T I T U T E D M AY B E
R E V O K ED AT A N Y T I M E .
(1692A)
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RULES FOR DISTRIBUTION OF PROFITS
AND LOSSES OF A PARTNERSHIP
2. DISTRIBUTION OF LOSSES
a. According to agreement
b. If there is no agreement
1) Capitalist partners – in proportion to what he may have contributed to the
common fund.
2) Industrial partners – not liable for losses
26
• Gen. Rule:
• A stipulation excluding one or more partners from any share
• THIRD PERSON DESIGNATING THE SHARE OF ART. 1799. in the profits and losses is void. Take note that what is void is
PARTNERS IN THE PROFITS AND LOSSES A STIPULATION the stipulation only and not the contract of partnership.
Hence, the profits and losses shall be distributed as if there
WHICH was no agreement as discussed in the preceding article.
• GENERAL RULE: IT IS VALID EXCLUDES ONE
• EXCEPTION: IT IS NOT VALID AND IT MAY BE OR MORE • Exception:
QUESTIONED IF IT IS MANIFESTLY
INEQUITABLE: PARTNERS • An industrial partner is not liable for losses unless he waived
• Unless: FROM ANY the right.
• A partner began to execute the decision of the SHARE IN THE
third person; or
PROFITS OR • Rationale: Why an Industrial Partner is not liable for losses?
• A partner has not questioned the said decision
of the third person within a period of 3 months LOSSES IS • While capitalist partners can withdraw their capital, the
from the time he had knowledge thereof. VOID. (1691) industrial partner cannot withdraw any labor or industry he
had already exerted. Moreover, in a certain sense, he already
has shared in the losses in that, if the partnership shows no
profit, this means that he has labored in vain.
28
A RT. 1 8 0 1 . I F T W O O R
• Who shall manage the partnership?
M O R E PA RT N E R S H AV E B E E N • When two or more managing partners have
INTRUSTED WITH THE
• Either one, some or all of the partners designated as managing M A N A GEM EN T O F T HE been entrusted with the management
partner/s either in the articles of partnership or after the contract of PA RT N E R S H I P W I T H O U T
S P E C I F I C AT I O N O F T H E I R • GR: each one may separately execute all acts of
partnership had already been constituted. If there is no agreement,
management is vested in all of the partners. RESPECTIVE DUTIES, OR administration.
W I T H O U T A S T I P U L AT I O N
• TWO MODES OF APPOINTMENT T H AT O N E O F T H E M S H A L L • Exceptions: If any of the managers should
N O T A C T W I T HO U T T HE
1. Appointment as manager in the articles of partnership; or
CONSENT OF ALL THE oppose:
• GR: Power is irrevocable without just or lawful cause. O T H E R S , E A C H O N E M AY
SEPA RATELY EXECU T E ALL
• The decision of the majority (per head) of the
• Exception:
A C T S O F A D M I N I S T R AT I O N , managing partners shall prevail.
• To remove him for just cause, vote of partners having B U T I F A N Y O F T HEM
controlling interest is necessary; SHOULD OPPOSE THE ACTS • In case of a tie, the decision of the managing
• To remove him without just cause, there must be unanimity OF THE OTHERS, THE partners owning the controlling interest
including his own vote. DECISION OF THE MAJORITY
S H A L L P R E VA I L . I N C A S E O F (more than 50%) shall prevail.
2. Appointment as manager made in an instrument other than the A T I E , T H E M AT T E R S H A L L
articles of partnership. • Note: The right to oppose is not give to non-managers
B E D EC I D ED B Y T HE because in appointing their other partners as managers,
• Rule: The power to act may be revoked at any time, with or without PA RT N E R S O W N I N G T H E
C O N T R O L L I N G I N T E R E S T. they have stripped themselves of all participation in the
just cause by the partners owning the controlling interest.
(1693A) administration.
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ART. 1802. IN CASE IT A RT. 1 8 0 3 . W H E N T H E M A N N E R

OF MANAGEMENT HAS NOT Rules when manner of management has not been agreed
SHOULD HAVE BEEN • Gen. Rule: Unanimous consent of all the BEEN AGREED UPON, THE upon
STIPULATED THAT NONE FOLLOWING RULES SHALL BE
OF THE MANAGING managing partners (even if one of the managers O B S E RV E D : 1. All the partners shall be considered as managers.
( 1 ) A L L T H E PA RT N E R S S H A L L
PARTNERS SHALL ACT is absent or incapacitated) shall be necessary BE CONSIDERED AGENTS AND
Consequently, all partners can do all acts of
WITHOUT THE CONSENT W H AT E V E R A N Y O N E O F T H E M administration. If the acts of a partner are opposed
for the validity of the acts and absence or M AY D O A L O N E S H A L L B I N D by the other partners, the majority (per head) shall
OF THE OTHERS, THE T H E PA RT N E R S H I P, W I T H O U T
CONCURRENCE OF ALL disability of any managing partner cannot be PREJUDICE TO THE prevail. In case of tie (per head), then the vote of the
SHALL BE NECESSARY alleged. P R O V I S I O N S O F A RT I C L E 1 8 0 1 . partners representing the controlling interest shall
( 2 ) N O N E O F T H E PA RT N E R S
FOR THE VALIDITY OF M AY, W I T H O U T T H E C O N S E N T prevail.
OF THE OTHERS, MAKE ANY
THE ACTS, AND THE I M P O RTA N T A LT E R AT I O N I N
2. For important alterations in immovable property,
ABSENCE OR DISABILITY • Exception: When there is an imminent T H E I M M O VA B L E P R O P E RT Y unanimity is required.
OF ANY ONE OF THEM O F T H E PA RT N E R S H I P, E V E N
CANNOT BE ALLEGED, danger of grave or irreparable injury the I F I T M AY B E U S E F U L T O T H E 1. First, because of their comparative greater importance than
personalty
PA RT N E R S H I P. B U T I F T H E
UNLESS THERE IS partnership. REFUSAL OF CONSENT BY THE 2. Second, because in a proper case, they should be returned to the
O T H E R PA RT N E R S I S
IMMINENT DANGER OF M A N I F E S T LY P R E J U D I C I A L T O
partners in the same condition as when they were delivered to the
partnership.
GRAVE OR IRREPARABLE THE INTEREST OF THE
INJURY TO THE PA RT N E R S H I P, T H E C O U RT ' S Consent of the others may be expressed or implied (as when the
• Art 1802 NOT applicable to third person. I N T E RV E N T I O N M AY B E partners had knowledge of the alteration and no opposition was
PARTNERSHIP. (1694) S O U G H T. ( 1 6 9 5 A ) made by them)

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ART. 1804. EVERY CONTRACT OF SUB-PARTNERSHIP ART. 1805. THE

PARTNER MAY - The consent of the other partners is not required. PARTNERSHIP BOOKS
ASSOCIATE ANOTHER
Hence, all partners can have an associate in his share
SHALL BE KEPT, What is reasonable hour?
PERSON WITH HIM IN SUBJECT TO ANY
HIS SHARE, BUT THE It is a rule that no one can become a partner in a AGREEMENT BETWEEN The Supreme Court held that reasonable
ASSOCIATE SHALL NOT partnership without the consent of all the other THE PARTNERS, AT THE
BE ADMITTED INTO THE PRINCIPAL PLACE OF hour should be on business days
partners. Consequently, an associate or sub-partner shall
PARTNERSHIP WITHOUT not be admitted into the partnership without the BUSINESS OF THE throughout the year, and not merely during
THE CONSENT OF ALL PARTNERSHIP, AND
THE OTHER PARTNERS,
consent of all the other partners based on the following
EVERY PARTNER SHALL
some arbitrary period of a few days
reasons:
EVEN IF THE PARTNER AT ANY REASONABLE chosen by the directors (or managers as
HAVING AN ASSOCIATE 1. Mutual trust is the basis of partnership; and HOUR HAVE ACCESS TO
SHOULD BE A MANAGER. AND MAY INSPECT AND
regards partnership).
2. A change in membership is a modification or novation
(1696) COPY ANY OF THEM. (N)
of the contract.

33 34

ART. 1806.
ART. 1807. EVERY
PARTNERS SHALL Violation of this article is called PARTNER MUST
RENDER ON DEMAND
TRUE AND FULL
concealment. ACCOUNT TO THE
Rationale:
PARTNERSHIP FOR ANY
INFORMATION OF BENEFIT, AND HOLD AS
The partners are governed by
ALL THINGS TRUSTEE FOR IT ANY
AFFECTING THE Who can demand true and full PROFITS DERIVED BY fiduciary relationship, that is, mutual trust
information? HIM WITHOUT THE and confidence.
PARTNERSHIP TO ANY CONSENT OF THE
PARTNER OR THE OTHER PARTNERS FROM
LEGAL 1. Any partner;
ANY TRANSACTION
REPRESENTATIVE OF 2. Legal representative of any deceased CONNECTED WITH THE Note: This article refers only to any
ANY DECEASED partner; and
FORMATION, CONDUCT,
profits derived by a partner without the
PARTNER OR OF ANY OR LIQUIDATION OF THE
PARTNER UNDER 3. Legal representative of any partner PARTNERSHIP OR FROM consent of the other partners.
ANY USE BY HIM OF ITS
LEGAL DISABILITY. under legal disability. PROPERTY. (N)
(N)

35 36

6

A RT. 1 8 0 8 . T HE C A P I TA L I ST
PA RT N E R S C A N N O T E N G A G E
FOR THEIR OWN ACCOUNT
I N A N Y O P E R AT I O N W H I C H
IS OF THE KIND OF
B U SINESS IN W HICH THE
PA RT NERSHIP IS ENGAGED ,
U N LESS THERE IS A
S T I P U L AT I O N TO T H E
C O N T R A RY.
A N Y C A P I TA L I S T PA RT N E R
V I O L AT I N G T H I S
PROHIBITION SHALL BRING
TO T H E C O M M O N F U N D S
A N Y P R O F I T S A C C R U I N G TO
HIM F R OM HIS
TRANSACTIONS, AND SHALL
P E R S O N A L LY B E A R A L L T H E
LOSSES. ( N )
37
Rationale:
The capitalist partner has already
acquired knowledge of the business secrets
of the partnership; hence, it is unfair for him
to engage in a business which is of the kind of
business in which the partnership is engaged.
Effects of violation:
1. The capitalist partner shall bring to the
common fund any profits accruing to him;
and
2. The capitalist partner shall personally bear
all the losses.
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22/09/2022
A RT. 1 8 0 9 . A N Y PA RT N E R
S HA L L HAV E T HE R I GHT TO A
F O R M A L AC C O U N T A S TO GR: No formal accounting is demandable until
PA RT N E R S HI P A F FA I R S :
after the dissolution of the partnership.
( 1 ) I F H E I S W RO N G F U L LY
E X C L U D ED F RO M T HE Exceptions:
PA RT N E R S HI P B U S I N E S S O R
1. If a partner is wrongfully excluded from the
PO S S E S S I O N O F I T S
PRO PE RT Y B Y HI S C O - partnership business or possession of its
PA RT N E R S ;
property by his co-partners;
( 2 ) I F T HE R I GHT E X I S T S
U N D E R T HE T E R M S O F A N Y 2. If the right to demand for accounting exists
AGR E E M E N T; under terms of any agreement;
( 3 ) A S P ROV I D E D B Y A RT I C L E 3. As provided by article 1807; and
1807;
4. Whenever other circumstances render it just
( 4 ) W HE N E V E R OT HE R
C I R C U M STA N C ES R E N D E R I T and reasonable.
J U S T A N D R E A S O N A B L E. ( N )