Law on Partnership Art. 1767.

By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (1665a) Partnership - a contract whereby two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves, or in order to exercise a profession. CHARAACTERISTICS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Consensual Bilateral or multilateral Principal Nominate Onerous Preparatory Common Fund contribution Lawful Object Division of profits Affectio societis – desire to formulate an active union

is only subsidiary Legal personality: Distinct and separate from the partners Commencement: Unless stipulated otherwise, upon execution of contract Purpose: For profit (or exercise of profession) Division of profits: Equally, unless stipulated otherwise Management: Upon those appointed, otherwise, each partner is an agent Dissolution: Death, insanity, insolvency, retirement, civil interdiction of a partner or if in any way incapacitated; also by agreement Liquidation of profits: Possible even without dissolution of the partnership Partnership VS Co-ownership Partnership Creation: By consent only of partners Legal Personality: Separate and distinct from the partners Purpose: For profit (or exercise of profession Agency: As a rule, each partner is an agent, unless otherwise agreed Transferability of interest: Interest is assignable but not transferable

No distinct personality from the spouses Only on date of celebration of marriage Family life Equally although settlement may otherwise marriage provide

As a rule, administration and enjoyment of conjugal property belong to both spouses jointly As provided by law only

Partnership VS Corporation Partnership Creation: Consent (Voluntary agreement of Parties) Existence: Limited only by agreement Owners’ Liability to strangers: Unless a limited partner, even to beyond their contribution Transferability of interest: Assignable but not transferable. Agency: Every partner is an agent of the firm and may bind it unless the act is unauthorized, expressly or impliedly Owner’s standing in a suit against erring managers: A partner can sue a copartner who mismanage the firm Nationality: Country of creation Birth of personality: At the time the contract begins Dissolution: Death, insanity, retirement, civil of a partner or if incapacitated; agreement insolvency, interdiction in any way also by Corporation Thru a charter or a general enabling law (Corporation Code) Not more than 50 yrs (may be reduced but not extended) Limited only to the capital

Only after dissolution of the conjugal partnership

Co-ownership May be created by contract, operation of law, or a consequence events No legal personality distinct and separate from co-owners Mainly, collective enjoyment of property No mutual representation except in instances provided by law (e.g. during ejectment cases) Disposal of aliquot share allowed unless prejudicial the other co-owners impossible due indivisibility of shares is to or to

Transferable even without consent of other owners Stockholders are not agents at all

A stockholder has no standing to sue the erring member of the BOD. The suit must be in the name of the Corporation Generally, country whose law it incorporated under was

Existence: Limited only by agreement Profits: May be agreed upon Dissolution: Death, insanity, insolvency, retirement, civil interdiction of a partner or if in any way incapacitated; also by agreement Form: Valid in any form unless real property is contributed Partnership VS Agency

Up to 10 years renewable; 20 yrs if imposed by donee or testator Always proportionate aliquot share to

Upon proper registration provided all requisites are complied As provided by law; upon sufficient cause

Loss of thing, partition or division, acquisition by a coowner of all shares

No public instrument even if the object is a real property

ORDINARY Partnership VS CONJUGAL Partnership ORDINARY Creation: Consent (voluntary agreement) of parties Governing law: Agreement of parties; the law CONJUGAL Celebration of according to law Civil law marriage

Agency is, in a sense, broader since partnership is just a form of agency b. An agent never acts for himself but only for his principal; a partner is both a principal (for his own interest) and an agent (for the partnership and the other partners) Partnership VS Joint Adventure (Joint Accounts)

a.

Usually. 1770. d. (n) CONSEQUENCES of a Partnership Being a Juridical Entity a. a partnership generally relates to a continuing business of various transactions of a certain kind. the contract is voidable. the profits shall be confiscated in favor of the State. [Refer also to the rules on partnership by estoppel under Art 1829] Art. RULES in Case of Associations Not Lawfully Organized as Partnership a. the participating merchants can transact business under their own name. 3. If the firm is also guilty of a crime. provided no criminal prosecution has been instituted. the following must be proved: a. there would be nothing wrong in having the court dissolve the partnership as there may be a question of the lawfulness of the partnership. (4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. e.a. unless he/she is the administrator and the court gives its consent. b. but NOT their contributions. these rules shall apply: (1) Except as provided by Article 1825. persons who are not partners as to each other are not partners as to third persons. with no frim name and no legal personality. without prejudice to the provisions of the Penal Code governing the confiscation of the instruments and effects of a crime. A spouse cannot contribute conjugal property to a partnership without the other spouse’s consent. The partners forfeit the proceeds or profits. owners or co-possessors do or do not share any profits made by the use of the property. although the business of pursuing it to a successful termination may continue for a number of years. if a partnership has several purposes. to show the existence of a partnership. (1666a) The partnership object or purpose must be lawful. intention to create a partnership contribution to a common fund joint interest in the profits do not by themselves. it is void ab initio. It has no legal personality 2. a partner has no right to male a separate appearance in court. (3) The sharing of gross returns does not of itself establish a partnership. If all are minors and without consent of their parent or guardian. unless his parent or guardian consents. can be a partner in another partnership Per majority view. but no such inference shall be drawn if such profits were received in payment: (a) As a debt by installments or otherwise. In particular. if the partnership being sued is already represented. A judicial decree is not necessary to dissolve an unlawful partnership. Its juridical personality is distinct and separate from that of each partners The partnership can. (See Art 1830) CONSEQUENCES OF UNLAWFUL PARTNERSHIP 1. whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. b. . 1769. the contract is unenforceable. (c) As an annuity to a widow or representative of a deceased partner. A joint adventure (an American concept similar to our joint accounts) is a sort of informal partnership. Otherwise. However. it cannot acquire land by purchase They may lease land for not more than 99 years They may be mortgagees of land for 5 years. It possess no legal personality One who enter into contract with such “partnership” cannot later on allege the lack of legal personality of such “partnership” (Estoppel) VIEWPOINT of Private Int’l Law Whether a partnership has a juridical personality or not depends on its national law – the law of the place where the partnership was organized. and be individually liable therefore. establish a CAPACITY to become a Partner a. since there is no prohibition. b. whether such-co- . though the amount of payment vary with the profits of the business. Art. and must be established for the common benefit or interest of the partners. the RPC governs both the criminal liability and the forfeiture of the proceeds of the crime and the instruments or tools with which it was committed. If the partnership is not at least 60% owned by Filipinos. In determining whether a partnership exists. partnership: a. (2) Co-ownership or co-possession does not of itself establish a partnership. The partnership has a judicial personality separate and distinct from that of each of the partners. a joint adventure is limited to a single transaction. c. c. the partnership can still validly exist so long as the illegal purpose can be separated from the legal purpose(s). renewable for another 5 years but they cannot purchase the same in case of foreclosure. cannot be a partner. LIMITATIONS on ALIEN PARTNERSHIPS a. b. In general. However. all of its essential characteristics must be proved (see noted under Art 1767). In a joint account. A partnership must have a lawful object or purpose. 1768. b. cannot be a partner. b. (e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. but not necessarily. a corporation. co-ownership or co-possession sharing of gross returns (even with joint ownership of the properties involved) SHARING OF NET PROFITS a prima facie evidence that a person is a partner EXCEPT in the 5 instances under par 4 of Art 1769. Without such consent. even in case of failure to comply with the requirements of Article 1772. When an unlawful partnership is dissolved by a judicial decree. b. one of which is unlawful. (n) REQUISITES of Existence of Partnership In general. A partnership. any person capacitated to enter into a contract may become a partner A minor. c. c. (b) As wages of an employee or rent to a landlord. first paragraph. Art. in general: • Acquire and possess property • Incur obligations • Bring civil or criminal actions • Can be adjudged insolvent despite solvency of the partners Unless he is personally sued. (d) As interest on a loan. The following.

For effectivity of the contract. A universal partnership of profits comprises all that the partners may acquire by their industry or work during the existence of the partnership. legacy. Art. Registered with the SEC As to OBJECT 1. (n) The requirement under the article is merely for license purposes and in no way affects the validity of the contract. and shall be governed by the provisions relating to coownership. (1674a) Art. (1669) Associations not Partnerships The absence of legal personality of the association cannot be invoked by a “partner” for purposes of evading compliance with obligations Insofar as innocent third parties are concerned. (1673) The contribution consists of: 1. Title so acquired can be conveyed only in the partnership name. Any immovable property or an interest therein may be acquired in the partnership name. Art. or insofar as third persons are prejudiced. capable of owning and possessing property. whenever immovable property is contributed thereto. and attached to the public instrument. as well as all the profits which they may acquire therewith. 1772. Art. 1774. the same must be registered if real properties are involved. 1773. regardless of the value of the contribution. Moreover. With all present property ii. except where immovable property or real rights are contributed thereto. A partnership may be constituted in any form. in money or property. 1771. 1777. 1779. Such agreement should be in writing so as to be enforceable under the statute of frauds if it is to be executed after one year from its making. Without a period ii. becomes the common property of all the partners. Particular As to LIABILITY 1. and wherein any one of the members may contract in his own name with third persons.common fund/property) acquired properties . Art. (1672) Art. as well as all the profits which they may acquire therewith. Associations and societies. no form is required. e. signed by the parties. The profits acquired with the said properties Art. (n) Although the article speaks only of immovables. shall appear in a public instrument. BUT as between themselves. “partners” can be considered as members of a partnership. Naked Title is by the partners and the partnership. but the property which the partners may acquire subsequently by inheritance. CLASSIFICATION OF PARTNERSHIPS a. Lawful or Legal 2. shall have no juridical personality. a partnership is either universal or particular. With all profits 2. c. f. whose articles are kept secret among the members. except the fruits thereof. Universal i. Partnership by Estoppel b. Constituted in a public instrument 3. General AS to LEGALITY 1. it also applies to personalty because the partnership is a juridical entity. (1671a) Art. if an inventory of said property is not made. a partnership may be general or limited. However. A stipulation for the common enjoyment of any other profits may also be made. Partnership at will i. The transfer of land to the partnership must be duly recorded in the Registry of Property to make the transfer effective insofar as third persons are concerned. A universal partnership may refer to all the present property or to all the profits. For a specific period OR till the purpose is accomplished 2. retained by each of (Subsequent properties should be the partners stipulated upon to form part of the Usufruct of after. As to CREATION 1. a PUBLIC INSTRUMENT is needed. Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. d. the partnership is void. in which case a public instrument shall be necessary. a contrary view is offered that only the absence of said inventory will invalidate a partnership contract in case immovables are contributed. 1780. 1778. Movable or immovable property which each of the partners may possess at the time of the celebration of the contract shall continue to pertain exclusively to each. 1775. [Note: the rules for limited partnerships are different] An agreement to form a partnership does not of itself create a partnership. In a universal partnership of all present property. Every contract of partnership having a capital of three thousand pesos or more. Limited 2. only the usufruct passing to the partnership. there must be an inventory of the immovables or else. All the properties actually belonging to the partners 2. (1668a) It has been advanced that both a public instrument embodying the contract and the inventory of the immovables are required to make the contract valid. or donation cannot be included in such stipulation. Constituted in a private instrument 4. the property which belongs to each of the partners at the time of the constitution of the partnership. only the rules on co-ownership must apply. which must be recorded in the Office of the Securities and Exchange Commission. insofar as third persons are concerned. As to its object. A contract of partnership is void. with the intention of dividing the same among themselves.Art. 1776. A partnership of all present property is that in which the partners contribute all the property which actually belongs to them to a common fund. Unlawful or illegal As to DURATION 1. Art. With a period but continued AS to REPRESENTATION to Others 1. Orally constituted 2. As regards the liability of the partners. (1667a) FORMALITIES in a partnership contract General Rule For validity and enforceability of the contract. Exception When real property or real rights in real property is contributed. (1675) Universal Partnership Of All Profits VS Of All Present Property All Profits All Present Property ONLY USUFRUCT of the All property actually belonging to properties are each partner is contributed and contributed to the becomes common property owned firm. Ordinary partnership 2.

A partnership is consensual. 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. Art. If a partner authorized to manage collects a demandable sum which was owed to him in his own name. Duty to contribute what has been promised 2. the remedy is to collect what was owing. Duty to deliver fruits of what should have been delivered 3. it shall be made by experts chosen by the partners. Articles of universal partnership. without any settlement or liquidation of the partnership affairs. to contribute additional capital 3.Obligations of the Partners Among Themselves Art.Subject to formalities required An agreement to form a partnership does not of itself results in a partnership. If there is no agreement to the contrary. however. plus damages Exception – when the defaulting partner is dead Art. Art. the subsequent changes thereof being for account of the partnership. (n) Art. 1790. (n) WHEN capitalist (not industrialist) partner obliged to sell interest to other partners. When there is no term. (n) Art. 1783. (n) Partnership at will. may be subject to contrary stipulation. (subject to requirements on formalities. A partnership begins from the moment of the execution of the contract. 1785. (1676) Reason: Less obligation is imposed in universal partnership of profits since naked ownership is retained by each partner. 1786. 1784. (1677) Examples: a. 1782. he refuses deliberately. any partner who refuses to contribute an additional share to the capital. Duty to warrant WHEN a partner FAILS to contribute within specified time General Rule – the contract cannot be rescinded. When a firm is continued beyond the term or after the purpose has been accomplished . express or implied 2. The same rule applies to any amount he may have taken from the partnership coffers. 1792. 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. Those guilty of the same criminal offense IF the partnership was entered into in consideration of the same – Art 739 Partnerships violating Art 1782 are null and void. unless the partnership expressly permits him to do so. 1789. 1791. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto. of course) Art. so far as is consistent with a partnership at will. Husband and wife – (Art 133) b.may be included by stipulation. (1678) CHAPTER 2 OBLIGATIONS OF THE PARTNERS SECTION 1. except an industrial partner. Those guilty of adultery and concubinage (Art 739) c. Properties subsequently acquired by inheritance. aside from the properties contributed. in the same cases and in the same manner as the vendor is bound with respect to the vendee. in case of an imminent loss of the business of the partnership. Otherwise at legal rate – 6% Art. (n) Unlike a capitalist partner who cannot engage in a business that would compete with the partnership’s business. the industrialist partner is prohibited to engage in any business for himself. the rights and duties of the partners remain the same as they were at such termination. It may be created even if the contributions are not yet given. from a person who owed the partnership Art. These. and if he should do so. only profits of said properties contributed becomes common property. When the capital or a part thereof which a partner is bound to contribute consists of goods. He shall also be liable for the fruits thereof from the time they should have been delivered. Unless there is a stipulation to the contrary. the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision. BUT the fruits thereof can be included in the stipulation. Art. All profits acquired by the industry or work of each partner becomes common property regardless of whether or not said profits were obtained thru the usufruct contributed (income may be excluded if there’s stipulation to that effect) AS A RULE. is prima facie evidence of a continuation of the partnership. their appraisal must be made in the manner prescribed in the contract of partnership. unless it is otherwise stipulated. 1781. . 1788. only constitute a universal partnership of profits. An industrial partner cannot engage in business for himself. Art. and in the absence of stipulation. A continuation of the business by the partners or such of them as habitually acted therein during the term. and its nullity may be raised anytime. their use or fruits. 1787. legacy. A particular partnership has for its object determinate things. with a right to damages in either case. shall he obliged to sell his interest to the other partners. the partners shall contribute equal shares to the capital of the partnership. entered into without specification of its nature. REGUISITES 1. and his liability shall begin from the time he converted the amount to his own use. or donation. to save the venture. or the exercise of a profession or vocation. No legal personality was ever acquired. there is no agreement to the contrary Art. cannot be included in the stipulation. (1679) . and according to current prices. 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. without the need of any demand. (1682) Interest is at the agreed rate. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership. of two kinds: 1. there is imminent loss of the business 2. (1681a) Three duties of a partner relative to contribution: 1. or specific undertaking. NOTE: Profits from other sources may become common ONLY IF there is a stipulation to such effect.

1799. (1689a) Profit distribution 1. it shall also answer to each partner for the obligations he may have contracted in good faith in the interest of the partnership business. and in such case the claim shall be limited to the value at which they were appraised. If the partners have agreed to intrust to a third person the designation of the share of each one in the profits and losses. (1685a) Unlike Art 1793. the amount shall be fully applied to the latter. 44 Phil 1172) Art. to bring to the partnership capital what he received even though he may have given receipt for his share only. (1690) When designation by third party cannot be impugned by a partner even if manifestly inequitable: 1. A power granted after the partnership has been constituted may be revoked at any time. and his power is irrevocable without just or lawful cause. If the things contribute are fungible. or cannot be kept without deteriorating. both sums are demandable 3. the industrial partner shall receive such share as may be just and equitable under the circumstances. shall be obliged. As for the profits.” (Soncuya v De Luna. 67 Phil 646) “If the negligent partner is already dead. suit for recovery may be had against his estate. but should he have given it for the account of the partnership credit. Art. “Before a partner sues another for alleged fraudulent management and resultant damages. complain of such decision. The article does not apply after dissolution of the firm. The designation of losses and profits cannot be intrusted to one of the partners. 1800. Per Agreement 2. 1793. The provisions of this article are understood to be without prejudice to the right granted to the other debtor by Article 1252. Art. he shares according to rules on profit sharing. the share of each in the losses shall be in the same proportion. 1796.requires good faith on the partners . 1797. in whole or in part. the sum thus collected shall be applied to the two credits in proportion to their amounts.applies even if there is failure of the enterprise entered into. but only if the personal credit of the partner should be more onerous to him. the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership. he does not share in the losses UNLESS there is contrary stipulation. The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners. mitigation is allowed in case of unusual profits caused. his share of a partnership credit. or if they were contributed to be sold. liquidation must first be effected to know the extent of the damage. or who has not impugned the same within a period of three months from the time he had knowledge thereof. when the other partners have not collected theirs. aggrieved partner has already begun to execute it. even though he may have given a receipt for his own credit only. (1692a) . OR 2. if the debtor should thereafter become insolvent. unless he should act in bad faith. unusual profits have been realized. contributed to the partnership so that only their use and fruits may be for the common benefit. the share of each partner in the profits and losses shall be in proportion to what he may have contributed. there is only one credit and any partner is concerned not just a managing one. such designation may be impugned only when it is manifestly inequitable. In no case may a partner who has begun to execute the decision of the third person. he shall also receive a share in the profits in proportion to his capital. the risk of the things brought and appraised in the inventory. and for risks in consequence of its management. Things Contributed and appraised in the inventory UNLESS there is contrary stipulation Art. Per contribution. and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. In the absence of stipulation. he has not impugned the same within three months from his knowledge thereof Art. but the industrial partner shall not be liable for the losses. A stipulation which excludes one or more partners from any share in the profits or losses is void. If only the share of each partner in the profits has been agreed upon. so long as there is good faith Art. the collecting partner is a managing partner *Art 1252 is on application of payment – a right granted to a debtor. The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest. (1691) The industrialist partner is exempeted from losses UNLESS there is contrary stipulation Art. specific and determinate thing where only usufruct is contributed FIRM bears risk: 1. Things contributed to be sold 3. Art.another sum also demandable. shall also be borne by the partnership. Based on Profit sharing agreement 3. (1686a) Rule – no offsetting of loss and profits caused by a partner BUT. 1794. The vote of the partners representing the controlling interest shall be necessary for such revocation of power. (1688a) .FIRM’s (2) responsibilities to the partners . the debtor owes the firm AND a partner 2. (1687) PARTNER (ONWER) bears risk of loss: 1. Per contribution INDUSTRIALIST PARTNER’S SHARE In profits – a just and equitable share IF he is also a capitalist partner. which are not fungible. However. In the absence of stipulation. 1798. The losses and profits shall be distributed in conformity with the agreement. If besides his services he has contributed capital. Per agreement (but should not be iniquitous) 2. Every partner is responsible to the partnership for damages suffered by it through his fault. HOWEVER. Fungible or deteriorable things 2. (1684) Requisites for application: 1. A partner who has received.” (Po Yeng Cheo v Lim Ko Yam. from the time the expense are made. The risk of specific and determinate things. the risk shall be borne by the partnership. shall be borne by the partner who owns them. here. if no agreement Loss sharing 1. 1795.

is manifestly prejudicial to the firm. 1807. subject to any agreement between the partners. the concurrence of all shall be necessary for the validity of the acts. (2) None of the partners may. vote of the controlling (financial) interest is required . each partner is. (or for an unjust one). legal representative of a partner under legal disability Art. 1806. the following rules shall be observed: (1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership. Partnership books constitute an admission of the facts stated therein. and the absence or disability of any one of them cannot be alleged. but if any of them should oppose the acts of the others. (n) . (n) A capitalist partner may also engage in competitive business if expressly allowed by the other partners or even impliedly as in where all of them violate the rule. unless there is ratification of his act or there is implied acquiescence. 1804. (1695a) WHEN manner of management is not agreed upon. without prejudice to the provisions of Article 1801. but the associate shall not be admitted into the partnership without the consent of all the other partners. which of course must be proved. The capitalist partners cannot engage for their own account in any operation which is of the kind of business in which the partnership is engaged. When the manner of management has not been agreed upon. 1802. Every partner may associate another person with him in his share.Duty and right of partners to give true information Who may demand information: 1. If two or more partners have been intrusted with the management of the partnership without specification of their respective duties. he can do all acts of ADMINISTRATION. the matter shall be decided by the partners owning the controlling interest. he does not manage being a limited partner only. generally. majority prevails In case of tie. The only way out is to prove that the entries had been places therein as a result of fraud or mistake. he does not bind the partnership. legal representatives of a dead partner 3. However. he can be removed Art. generally. (1693a) Applicability of the Article: Rules 1. (1696) .IF he acts in GOOD FAITH. and every partner shall at any reasonable hour have access to and may inspect and copy any of them. Unanimity is required for alteration of immovable but if the refusal to give consent. in the articles of partnership 2.IF he acts in BAD FAITH. even if the partner having an associate should be a manager. or without a stipulation that one of them shall not act without the consent of all the others. damages are recoverable from them under Art 19 and 20 (b) Extent of power As long as he is manager. (n) . in another instrument or orally Appointed in the Articles of Partnershp (a) Power is irrevocable without just or lawful cause . Art. opposition should be before the acts produce legal effects insofar as third persons are concerned Art. court intervention may be sought.the controlling interest should not abuse such right. unanimity is required (including his own vote) (b) extent of power: . he may do all acts of ADMINISTRATION despite opposition of other partners . In case of a tie.Appointment of Manager. HOWEVER. conduct. any partner 2. 1801.applies only to a “going partnership” and not to one pending dissolution (where right depends on court’s discretion) nor to one already dissolved. the decision of the majority shall prevail. with or without just cause. Art. those with the controlling interest prevail provided they are also managers the interest of the partnership. without the consent of the others. majority prevails. and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation. Every partner must account to the partnership for any benefit. and he persists. otherwise. 1808.to remove him for JUST cause. But if the refusal of consent by the other partners is manifestly prejudicial to . make any important alteration in the immovable property of the partnership. or liquidation of the partnership or from any use by him of its property. even if it may be useful to the partnership.Partner’s Duty to account Trust relations end with the death of the firm UNLESS the foundation for the breach of trust tool place even during the existence of the firm. he may not do so (opposition of other partners is justified and he may not do the act so opposed) Appointment in other mode (a) Power to act may be revoked at anytime. the court's intervention may be sought. When a partner acts in his own name. In case it should have been stipulated that none of the managing partners shall act without the consent of the others.removal is by vote of controlling (financial) interest . Any capitalist partner violating this prohibition shall bring to the common funds any profits accruing to him from his transactions. at the principal place of business of the partnership. and shall personally bear all the losses. express or implied. an agent of the firm and of all partners. Art.to remove him WOTHOUT CAUSE. If a partner who is a limited partner in another competitive business is not covered by the prohibition for in the competitive business. 2.right of a partner to have an associate in his share Art. 2 Modes: 1. two or more managing partners no specification of respective duties no stipulation requiring unanimity Each may perform all acts of ADMINISTRATIONS If there is opposition. . unless there is a stipulation to the contrary. The partnership books shall be kept. (1694) Art. (n) . each one may separately execute all acts of administration. unless there is imminent danger of grave or irreparable injury to the partnership. but if the others oppose. if there is opposition. Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability. 1803. 1805.

or the representatives of a deceased partner. In case of a dissolution of the partnership. (3) A partner's right in specific partnership property is not subject to attachment or execution. A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership. 1811. the assignee may avail himself of the usual remedies. A partner is co-owner with his partners of specific partnership property. (2) His interest in the partnership. (n) Generally. However. or (2) With partnership property. (n) Such share can. The assignor still is the partner. the court which entered the judgment. (n) An assignment in violation of Par (2) is VOID Art. can properly apply. Partnership creditors have preference in partnership assets a. during the continuance of the partnership. Thus: a. to interfere in the management or administration of the partnership business or affairs. Art. as against the other partners in the absence of agreement. by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold.AS to the effect of violation. to demand accounting if the partnership is dissolved but only covering the period from the date of the last accounting made RULE in case of Mortgage Art 1813 also covers a case when the partner merely mortgage his interest. may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon. This is. or in case of a sale being directed by the court. (n) Conveyance (sale. Without prejudice to the preferred rights of partnership creditors under Article 1827. Assignee cannot interfere in the management or administration of the partnership business/affairs Assignee cannot demand: a. assigned. or. and (3) His right to participate in the management. entitle the assignee. inspection of the partnership books *subject to exception (infra) SECTION 2. But said interest is not alienated. (n) The article provides for the charging of the interest of a partner in favor of a personal creditor of said partner. 1814. An accounting made cannot be questioned if accepted without objection UNLESS fraud and error are alleged and proved. and may then or later appoint a receiver of his share of the profits. but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. in case of fraud in the management RIGHTS of assignee to get whatever profits the assignor-partner would have obtained b. Any partner shall have the right to a formal account as to partnership affairs: (1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners. may be purchased without thereby causing a dissolution: (1) With separate property. . (4) Whenever other circumstances render it just and reasonable.Property Rights of a Partner Art. subject to the provisions of this Title and to any agreement between the partners. 1812. (2) If the right exists under the terms of any agreement. but he has no right to possess such property for any other purpose without the consent of his partners. and make all other orders. and of any other money due or to fall due to him in respect of the partnership. to avail himself of the usual remedies in case of fraud in management c. The assignee does not become a partner. . or subject to legal support. etc. 1813. without prejudice to the right of partnership creditors. has an equal right with his partners to possess specific partnership property for partnership purposes. of the partnership. When partnership property is attached for a partnership debt the partners. cannot claim any right under the homestead or exemption laws. Art. Nothing in this Title shall be held to deprive a partner of his right. (3) As provided by article 1807. accounting* c. assignment. except on a claim against the partnership. by any one or more of the partners. to ask for annulment of assignment in case his consent was procured by vice d. The incidents of this co-ownership are such that: (1) A partner. as regards his interest in the partnership. donation) by a partner of his whole interest may or may not dissolve a partnership but generally. Art 1809 provides the exception. The property rights of a partner are: (1) His rights in specific partnership property. A partner's interest in the partnership is his share of the profits and surplus. or any of them. Art. no formal accounting is demandable till after dissolution. and the rules on securities for loans. be attached. accounts and inquiries which the debtor partner might have made. meaning. if any. or any other court. on due application to a competent court by any judgment creditor of a partner. information b. it remains. 1810. or to inspect the partnership books. (n) Art. the assignee is entitled to receive his assignor's interest and may require an account from the date only of the last account agreed to by all the partners. (2) A partner's right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property. directions. The interest charged may be redeemed at any time before foreclosure. partnership creditors are prioritized over partner’s personal creditors who shall only receive after all firm creditors are paid. under the exemption laws. however. or to require any information or account of partnership transactions. it is submitted that any losses shall be deducted from profits before they are delivered to the firm. (4) A partner's right in specific partnership property is not subject to legal support under Article 291. or which the circumstances of the case may require. 1809. it is merely given as security. in general.

a conveyance executed by a partner. Every partnership shall operate under a firm name. unless the partner so acting has in fact no authority to act for the partnership in the particular matter. Even the industrial partner shall pay but he can recover from the capitalist partners unless there is contrary agreement. other partners do not object despite when the act is for “apparently carrying on in the usual way the business of the partnership and the third party is in good faith WHEN ACT OF PARTNER DOES NOT BIND THE FIRM a. b. he is not so as regards liability to third persons. (7) Renounce a claim of the partnership. unless the purchaser or his assignee. Those who. 1818. 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. FC provisions) a. Art.Obligations of the Partners With Regard to Third Persons Art. include their names in the firm name. only after partnership assets have been exhausted. passes the equitable interest of the partnership. and the record does not disclose the right of the partnership. any partner may convey title to such property by a conveyance executed in the partnership name. . (2) Dispose of the good-will of the business. has exceeded his authority. including the execution in the partnership name of any instrument. under its signature and by a person authorized to act for the partnership. shall be subject to the liability of a partner. in his own name. 1819. (n) Redemption of Interest charged The charge may be redeemed or bought at any time BEFORE foreclosure b. (5) Enter into a compromise concerning a partnership claim or liability. (3) Do any other act which would make it impossible to carry on the ordinary business of a partnership. (n) Harmonized with Art 1799: It is permissible to stipulate that as among partners. a capitalist partner will be exempted from liability in excess of his original capital contribution but will not be exempted insofar as his capital is concerned. 2. Except when authorized by the other partners or unless they 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. All partners. is a holder for value. any partner may enter into a separate obligation to perform a partnership contract.e. provided the act is one within the authority of the partner under the provisions of the first paragraph of Article 1818. without knowledge. Where title to real property is in the name of one or more but not all the partners. which may or may not include the name of one or more of the partners. The court MAY appoint a receiver of the partner’s share in the PROFITS or other MONEY due him The receiver is entited to any relief necessary to conserve the partnership assets for partnershippurposes An act of a partner which is not apparently for the carrying on of business of the partnership in the usual way does not bind the partnership unless authorized by the other partners. Any stipulation against the liability laid down in the preceding article shall be void. the liability of the other partner’s shall not be affected.g. (n) While an industrial partner is exempted from losses. (4) Confess a judgment. However. b. Art. (6) Submit a partnership claim or liability to arbitration. not being members of the partnership. Where title to real property is in the partnership name. it may still be “bought” with separate property (of any partner(s)) OR with partnership property (with consent of all the OTHER partners) Note that with respect to his INTEREST in the partnership (not interest in partnership property) a partner may avail himself of exemption laws (e. The liability of the partners is subsidiary and joint. 1815. Every partner is an agent of the partnership for the purpose of its business. AFTER foreclosure. when he is expressly or impliedly authorized when he acts in behalf and in the name of the partnership Instances of implied authorization: 1. including industrial ones. 1817. for the contracts which may be entered into in the name and for the account of the partnership. 1816. except as among the partners. The 7 Acts enumerated in Art 1818 are acts of ownership and therefore requires that the authority be unanimous except if the business has been abandoned. he knows the lack of authority of the acting partner) When the act is not for “apparently carrying on in the usual way the business of the firm AND the partner acting has no authority b. Where title to real property is in the name of the partnership. and the person with whom he is dealing has knowledge of the fact that he has no such authority. WHEN A PARTNER CAN BIND THE PARTNERSHIP a. but the partnership may recover such property if the partners' act does not bind the partnership under the provisions of the first paragraph of Article 1818. shall be liable pro rata with all their property and after all the partnership assets have been exhausted. Art. (n) The non-members referred to in par (2) do not have rights of a partner. Partners will be personally liable.b. . in making the conveyance. and the act of every partner. not principal and solidary. Separate or individual creditors have preference over separate or individual properties RECEIVERSHIP a. while the act is “apparently for carrying on in the usual way the business of the firm” but the third party is in bad faith (i. insolvency laws. or unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner. jointly or pro rata. but the partnership may recover such property unless the partner's act binds the partnership under the provisions of the first paragraph of article 1818. If a partner share in the liability is remitted. Art. for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership. SECTION 3. the partners in whose name the title stands may convey title to such property.

1822. is generally an admission against the partnership under the ff conditions: a. he is liable to any such persons to Art. represents himself. the culprit may be any partner. Art. OR partner with knowledge though not acting in that particular matter could have communicated it to the partner acting on that particular matter. (here. and the knowledge of the . committed by or with the consent of that partner. nothing is acquired by the transferee. The only difference is that the realty is in the name of one or some (but not all) partners who were also the ones who conveyed the realty. passes the equitable interest of the partnership. their unanimous decision to convey is simply an act of their ownership and the firm could no longer recover said realty. (n) The partners. (n) Unlike in contractual obligations where liability of the partners is joint. 1824. without prejudice to their right to recover from the guilty partner. Admissions made BEFORE dissolution are binding only when the partner has authority to act on the particular matter Admissions made AFTER dissolution are binding only IF the admissions were necessary to wind up the business partner acting in the particular matter. Where the title to real property is in the name of all the partners a conveyance executed by all the partners passes all their rights in such property. or in his own name. knowledge must be acquired when already a partner) b.Where the title to real property is in the name of one or more or all the partners. 1823. and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner. notice to a partner is notice to the firm PROVIDED it relates to partnership affairs. not being a partner in the partnership. 1825. An admission or representation made by any partner concerning partnership affairs within the scope of his authority in accordance with this Title is evidence against the partnership. Par 2. except in the case of fraud on the partnership. is all interest which the partnership had except title. as a partner in an existing partnership or with one or more persons not actual partners. If the partner is not authorized. Art. as used in Art 1819. If the act or omission was committed after dissolution and not in connection with the process of winding up. KNOWLEDGE Knowledge of a partner is knowledge to the firm. When a person. as well as the firm. the partnership cannot recover the realty if the transferee subsequently transferred it to another purchaser for value and in good faith. the realty is treated as in the name of the firm even though the firm’s title was not disclosed in the records. in torts and crimes. (n) Equitable interest. the liability is solidary with the firm. (It does not matter whether he is acting in any particular matter or not. When the Firm and other partners (not guilty) are not liable: a. The transferee acquires nothing. Art. b. explained If the realty is in the name of all partners. or consents to another representing him to anyone. If act or omission is without authority or not done within the scope of the firm business If the act or omission is not wrongful If the act or omission did not make the partner concerned liable himself. Par 1. are liable in solidum. a conveyance executed by a partner in the partnership name. Art. d. Par 5. The effect are the same (see Art 1824) Art. explained The same rules apply as in Par 1. partner with knowledge is acting on the particular matter involved (knowledge may be acquired before or after having become a partner as long as such is still “present to his mind”). (n) NOTICE In general. in (2). 1821. by words spoken or written or by conduct. The presumption is that the firm has the beneficial interest of the realty granting the fact that it was contributed to it or acquired by it. Where. Only the equitable interest is passed. (n) Admission by a partner. Notice to any partner of any matter relating to partnership affairs. the frim may recovery the realty. admission concerns partnership affairs b. The partnership is bound to make good 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. Par 4. Otherwise. explained Since the realty is in the firm name. Exception: case of fraud on the firm committed by or with consent of said partner with notice. within the scope of admitting partner’s authority Restrictions a. b. by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of copartners. The realty is held in trust for the firm. Thus. then naturally. provided the act is one within the authority of the partner under the provisions of the first paragraph of Article 1818. or any penalty is incurred. not even equitable title is passed. and (2) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. (n) In par (1) misappropriation is by the receiving partner. 1820. All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823. title can never be passed to any person by coveyance in the name of an authorized partner. If he has no authority. not in the name of the firm. acquired while a partner or then present to his mind. If the partner is not even authorized. or in a third person in trust for the partnership. loss or injury is caused to any person. still. the partnership is liable therefor to the same extent as the partner so acting or omitting to act. Only the equitable title is passed to the transferee provided the partner so conveying has authority. Par 3. explained. operate as notice to or knowledge of the partnership. explained Only a partner authorized to convey the real property may convey it so but under the partnership name so as to effectively pass title to the transferee. c. PROVIDED: a.

(b) By the express will of any partner. Without prejudice to this right.whom such representation has been made. it becomes a partnership at will express will of a partner in good faith. (1) Without violation of the agreement between the partners: (a) By the termination of the definite term or particular undertaking specified in the agreement. termination of a. the private creditors of each partner may ask the attachment and public sale of the share of the latter in the partnership assets. (3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership. If a specific thing promised as contribution is lost before delivery b. A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred. paying of previous obligations. 1830. His separate properties cannot be affected UNLESS there is contrary stipulation. but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation. (n) Art. if the firm is continued. 1827. if there is no term or specific undertaking. either before or after the termination of any specified term or particular undertaking. Dissolution is caused: 3.is the point in time after all the partnership affairs have been wound up.is the change in the relation of the partners caused by any partner ceasing to be associated with the firm.is the process of settling business affairs after dissolution. unless there is a stipulation to the contrary. When all the members of the existing partnership consent to the representation. perishes before the delivery. (e.a partner expressly withdrawing despite an agreement (like term or undertaking). by the express will of any partner at any time. with respect to persons who rely upon the representation. 1826. The creditor or any person who alleges the existence of a partner or partnership by estoppel has the burden of proving such misrepresentations and his innocent reliance thereto. 2. Art. the partner by estoppel is liable to deceived people but acquires not rights as a partner. (2) When no partnership liability results. he is liable pro rata with the other persons. (d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners. (n) Partnership by estoppel and Partnership by estoppel Effects: 1. whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made: (1) When a partnership liability results. who must act in good faith. (5) By the death of any partner. in case there is truly an existing partnership. where the circumstances do not permit a dissolution under any other provision of this article. Without violation of agreement: a. The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. 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. On dissolution the partnership is not terminated. given credit to the actual or apparent partnership. if any. 1828. otherwise separately. (4) When a specific thing which a partner had promised to contribute to the partnership. collecting assets previously demandable) Termination . (if he insists on leaving in bad faith. (2) In contravention of the agreement between the partners. and if he has made such representation or consented to its being made in a public manner he is liable to such person. The creditors of the partnership shall be preferred to those of each partner as regards the partnership property. when the partner who contributed it having reserved the ownership thereof. he may be liable for damages) express will of all partners (except those who have assigned or cause there interest to be charged) expulsion of a partner in good faith (If in bad faith. except that this liability shall be satisfied only out of partnership property. (8) By decree of court under the following article. when no definite term or particular is specified. on the faith of such representation. Illegality of the business or illegality of the business in the form of a partnership 4. When a person has been thus represented to be a partner in an existing partnership. (n) Dissolution . the partner by estoppel as well as those who aided him in the misrepresentation. (7) By the civil interdiction of any partner. Art.g. Art. he is liable as though he were an actual member of the partnership. are also liable the liability to those who are deceived is joint or pro rata Winding up . has only transferred to the partnership the use or enjoyment of the same. but continues until the winding up of partnership affairs is completed. whether partners or not in an actual firm if there be one. d. 1829. (n) CHAPTER 3 DISSOLUTION AND WINDING UP Art. LOSS a. c. definite term b. Said partner is liable for damages 3. 2. a new partner is only liable thereto to the extent of his contribution. (6) By the insolvency of any partner or of the partnership. so consenting to the contract or representation as to incur liability. specific undertaking Here. (n) As regards firm obligations prior to his admission. in any case by the loss of the thing. (c) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts. there can also be eventual dissolution) b. who has. or with one or more persons not actual partners. Violation of Agreement. If only the usufruct of thing is contributed and the thing is lost before or after delivery . but the partnership shall not be dissolved by the loss of the thing when it occurs after the partnership has acquired the ownership thereof. a partnership act or obligation results. (1700a and 1701a) CAUSES OF FIRM DISSOLUTION 1.

proof as t the existence of the firm must first be given. represents himself or consents to another In a suit for dissolution. (2) At any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued. having no knowledge or notice of dissolution. 1832. of the firm . The liability of a partner under the first paragraph. or (b) Though he had not so extended credit. had nevertheless known of the partnership prior to dissolution. (n) In a suit for dissolution. On the application of the purchaser of a partner's interest under Article 1813 or 1814: (1) After the termination of the specified term or particular undertaking. b. except by a transaction with one who: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of his want of authority. the partner acting for the partnership had knowledge of the dissolution. or b.there is automatic dissolution. Where the dissolution is caused by the act. or (b) Had not extended credit to the partnership prior to dissolution. and. The time of dissolution is at the time the judicial decree becomes final. Decree of court – by final judgment (see Art 1831) NOTE: the partners cannot decrease or limit the causes of dissolution Art. and. each partner is liable to his co-partners for his share of any liability created by any partner acting for the partnership as if the partnership had not been dissolved unless: (1) The dissolution being by act of any partner. a partner can bind the partnership. or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. No. 1831.there is no need for judicial decree of dissolution 7. death or insolvency of a partner. After dissolution. No. and (2) So far unknown and inactive in partnership affairs that the business reputation of the partnership could not be said to have been in any degree due to his connection with it. or (2) Where the partner has become insolvent. unless the act is appropriate for winding up partnership affairs. 2 (b). Term of the firm has expired. after dissolution. provided the other party to the transaction: (a) Had extended credit to the partnership prior to dissolution and had no knowledge or notice of the dissolution. or (3) Where the partner has no authority to wind up partnership affairs. On application by or for a partner the court shall decree a dissolution whenever: (1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind. or (b) When the dissolution is by such act. (n) General Rule: When the firm is dissolved. as declared in article 1834. (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business. insolvency or death of a partner. provided the requisites given are complied with: a. insolvency or death of a partner. Who Ca Sue for Dissolution: a. 1833. (5) The business of the partnership can only be carried on at a loss. 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. Art. (4) A partner wilfully or persistently commits a breach of the partnership agreement. Except so far as may be necessary to wind up partnership affairs or to complete transactions begun but not then finished. but no automatic termination Partial dissolution – business is continued by other partners Total dissolution – firm is terminated 6. Nothing in this article shall affect the liability under Article 1825 of any person who. the interest of the partner was assigned or charged (2) With respect to persons not partners. (2) A partner becomes in any other way incapable of performing his part of the partnership contract. except as provided in the third paragraph of this article: (1) By any act appropriate for winding up partnership affairs or completing transactions unfinished at dissolution. 1834. Art. 2. having no knowledge or notice of his want of authority. the court may appoint a receiver at its discretion. Death of any partner . any partner. If a partnership at will. The partnership is in no case bound by any act of a partner after dissolution: (1) Where the partnership is dissolved because it is unlawful to carry on the business. (2) By any transaction which would bind the partnership if dissolution had not taken place.5. the fact of his want of authority has not been advertised in the manner provided for advertising the fact of dissolution in the first paragraph. . (6) Other circumstances render a dissolution equitable. A partner for the first (6) causes enumerated A purchaser of a partner’s interest under Art 1813 and 1814. the fact of dissolution had not been advertised in a newspaper of general circulation in the place (or in each place if more than one) at which the partnership business was regularly carried on. in cases where article 1833 so requires. Art. a partner can no longer bind the partnership. Civil interdiction of any partner 8. the partner acting for the partnership had knowledge or notice of the death or insolvency. shall be satisfied out of partnership assets alone when such partner had been prior to dissolution: (1) Unknown as a partner to the person with whom the contract is made. OR b. or (2) The dissolution being by the death or insolvency of a partner. Insolvency of a.

representing him as a partner engaged in carrying business. When dissolution is caused in any way. to damages breach of the agreement. (3) The assets shall be applied in the order of their declaration in No. entitled: (1) To a lien on. provided they secure the payment by bond approved by the court. other partners. 1835. and the creditor. Unless otherwise agreed. however. except in contravention of the partnership agreement. partners who have not wrongfully dissolved the firm ii. but in ascertaining the value of the partner's interest the value of the good-will of the business shall not be considered. (n) WHO has right to wind up firm affairs a. (n) Art. or right of retention of. Lien or retention subrogation indemnification Art. (n) in a partnership Art. 1839. 1 (b). (2) The partners who have not caused the dissolution wrongfully. 2. 1 (b) of this article. the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him. No. (d) Those owing to partners in respect of profits. less any damage caused to his co-partners by the dissolution. and the surplus applied to pay in cash the net amount owing to the respective partners. the partnership creditor and the person or partnership continuing the business. not insolvent. OR legal representatives of the last surviving partner who is not insolvent b. 2. without prejudice to any other right.under the control and direction of the court. a person shall be appointed – a surviving partner Art. unless otherwise agreed. Where a partnership contract is rescinded on the ground of the fraud or misrepresentation of one of the parties thereto. (b) If the business is continued under the second paragraph. the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner. the party entitled to rescind is. as follows: (a) Those owing to creditors other than partners. either by payment or agreement under the second paragraph of Article 1835. (2) To stand. a partner may be discharged of his liability by agreement of him. A partner is discharged from any existing liability upon dissolution of the partnership by an agreement to that effect between himself. upon proper cause shown to the court. 1837. that any partner. and to be released from all existing liabilities of the partnership. the value of his interest in the partnership at the dissolution. 2. of this article. each partner. provided. Judicially . 3. The dissolution of the partnership does not of itself discharge the existing liability of any partner. No. he shall receive in cash only the net amount due him from the partnership. Extrajudicially: i. No. and (b) The right. or the payment secured by a bond approved by the court. subject to any agreement to the contrary: (1) The assets of the partnership are: (a) The partnership property. the right as against his copartners and all claiming through them in respect of their interests in the partnership. all the rights of a partner under the first paragraph. and such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business. (3) A partner who has caused the dissolution wrongfully shall have: (a) If the business is not continued under the provisions of the second paragraph. the following rules shall be observed. after all liabilities to third persons have been satisfied. 1836. of this article. bona fide under the partnership agreement and if the expelled partner is discharged from all partnership liabilities. The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner. (b) The contributions of the partners necessary for the payment of all the liabilities specified in No. 1838. as against his co-partners and all persons claiming through them in respect of their interests in the partnership. (2) The liabilities of the partnership shall rank in order of payment. and in like manner indemnify him against all present or future partnership liabilities. 1 of this article to the satisfaction of the liabilities. or pay any partner who has caused the dissolution wrongfully. Art. has the right to wind up the partnership affairs. if they all desire to continue the business in the same name either by themselves or jointly with others. In settling accounts between the partners after dissolution. (c) Those owing to partners in respect of capital. (b) Those owing to partners other than for capital and profits. subject to liability for damages in the second paragraph. his legal representative or his assignee. (n) Upon dissolution. may obtain winding up by the court. No. may have the partnership property applied to discharge its liabilities. during the agreed term for the partnership and for that purpose may possess the partnership property. less any damages recoverable under the second paragraph. But if dissolution is caused by expulsion of a partner. upon cause shown. as against each partner who has caused the dissolution wrongfully. ascertained and paid to him in cash. When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows: (1) Each partner who has not caused dissolution wrongfully shall have: (a) All the rights specified in the first paragraph of this article. may do so. . (n) Three Rights of a person who has right to “annul” the firm 1. and (3) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership. to have the value of his interest in the partnership. in the place of the creditors of the partnership for any payments made by him in respect of the partnership liabilities. 2. but subject to the prior payment of his separate debts.

Two or more persons desiring to form a limited partnership shall: (1) Sign and swear to a certificate. as provided Article 1840. second paragraph. shall not of itself make the individual property of the deceased partner liable for any debts contracted by such person or partnership. the amount necessary to satisfy the liabilities. provided that the creditors of the dissolved partnership as against the separate creditors. shall have priority on any claim arising under this article. unless there is a stipulation to the contrary. (8) When partnership property and the individual properties of the partners are in possession of a court for distribution. (b) The character of the business. No. 1841. Nothing in this article shall be held to modify any right of creditors to set aside any assignment on the ground of fraud. the claims against his separate property shall rank in the following order: (a) Those owing to separate creditors. 2. (n) Art. to be made by each limited partner and the times at which or events on the happening of which they shall be made. or when any partner retires and assigns (or the representative of the deceased partner assigns) his rights in partnership property to two or more of the partners. The use by the person or partnership continuing the business of the partnership name. third paragraph. to the extent of the amount which he has paid in excess of his share of the liability. No. either alone or with others. (n) Art. or the name of a deceased partner as part thereof. general and limited partners being respectively designated. When any partner retires or dies. saving the rights of lien or secured creditors. who continues the business without liquidation of partnership affairs. 4. with the consent of the retired partners or the representative of the deceased partner. In the following cases creditors of the dissolved partnership are also creditors of the person or partnership continuing the business: (1) When any new partner is admitted into an existing partnership. or the representative of the retired or deceased partner. (3) When any partner retires or dies and the business of the dissolved partnership is continued as set forth in Nos. adding thereto the word "Limited". When the business of a partnership after dissolution is continued under any conditions set forth in this article the creditors of the dissolved partnership. (5) When any partner wrongfully causes a dissolution and the remaining partners continue the business under the provisions of article 1837. Art. (2) When all but one partner retire and assign (or the representative of a deceased partner assigns) their rights in partnership property to the remaining partner. and the business is continued under any of the conditions set forth in the preceding article. (6) Any partner or his legal representative shall have the right to enforce the contributions specified in No. or to one or more of the partners and one or more third persons. and shall receive as an ordinary creditor an amount equal to the value of his interest in the dissolved partnership with interest. but without any assignment of his right in partnership property. (5) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in the preceding number. to the creditors of the dissolved partnership shall be satisfied out of the partnership property only. (c) Those owing to partners by way of contribution. (n) CHAPTER 4 LIMITED PARTNERSHIP (n) Art. or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business. (e) The term for which the partnership is to exist. 1843. at his option or at the option of his legal representative. which shall state (a) The name of the partnership. (9) Where a partner has become insolvent or his estate is insolvent. having as members one or more general partners and one or more limited partners. at the date of dissolution. (6) When a partner is expelled and the remaining partners continue the business either alone or with others without liquidation of the partnership affairs. 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. 4. (4) When all the partners or their representatives assign their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the dissolved partnership. he or his legal representative as against such person or partnership may have the value of his interest at the date of dissolution ascertained. or. either alone or with others. (g) The additional contributions. 1844. (7) The individual property of a deceased partner shall be liable for the contributions specified in No. on account of the retired or deceased partner's interest in the dissolved partnership or on account of any consideration promised for such interest or for his right in partnership property.(4) The partners shall contribute. as provided by article 1797. in the absence of any agreement to the contrary. The right to an account of his interest shall accrue to any partner. The limited partners as such shall not be bound by the obligations of the partnership. . 1 and 2 of this article. 1840. A limited partnership is one formed by two or more persons under the provisions of the following article. under this article. the profits attributable to the use of his right in the property of the dissolved partnership. without any settlement of accounts as between him or his estate and the person or partnership continuing the business. or in Article 1837. partnership creditors shall have priority on partnership property and separate creditors on individual property. (f) The amount of cash and a description of and the agreed value of the other property contributed by each limited partner. (d) The name and place of residence of each member. if the business is continued without liquidation of the partnership affairs. (b) Those owing to partnership creditors. (c) The location of the principal place of business. 1842. as against the separate creditors of the retiring or deceased partner or the representative of the deceased partner. in lieu of interest. unless otherwise agreed. second paragraph. 2. The liability of a third person becoming a partner in the partnership continuing the business. and without liquidation of the partnership affairs. (n) Art. if any.

and also at the same time a limited partner. retirement. 1854. Art. conveyance. if given. Art. 1855. Art. by reason of his exercise of the rights of a limited partner. as to their compensation by way of income. or payment. but not services. or (2) Receive from a general partner or the partnership any payment. (6) Admit a person as a limited partner. 1851. A person who is a general. when the contribution of each limited partner is to be returned. civil interdiction. provided that this fact shall be stated in the certificate provided for in Article 1844. 1847. Art. a person who has contributed to the capital of a business conducted by a person or partnership erroneously believing that he has become a limited partner in a limited partnership. Art. one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false: (1) At the time he signed the certificate. or other compensation by way of income. A general partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. of the remaining general partner or partners to continue the business on the death. and the nature of such priority. unless he is also a general partner. and (n) The right. Art. of a limited partner to demand and receive property other than cash in return for his contribution. If such an agreement is made it shall be stated in the certificate. but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate. No limited partner shall in respect to any such claim: (1) Receive or hold as collateral security and partnership property. However. Art. (4) Possess partnership property. (i) The share of the profits or the other compensation by way of income which each limited partner shall receive by reason of his contribution. or release in violation of the foregoing provisions is a fraud on the creditors of the partnership. (2) File for record the certificate in the Office of the Securities and Exchange Commission. Art. A limited partner whose surname appears in a partnership name contrary to the provisions of the first paragraph is liable as a general partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner. A limited partner shall have the right to receive a share of the profits or other compensation by way of income. a general partner or all of the general partners have no authority to: (1) Do any act in contravention of the certificate. if given. or (2) Subsequently. 1856. or bound by the obligations of such person or partnership. (j) The right. if given. in addition to the exercise of his rights and powers as a limited partner. as to contributions or as to compensation by way of income. of one or more of the limited partners to priority over other limited partners. 1853. is not. insanity or insolvency of a general partner. unless the right so to do is given in the certificate. 1850. the business has been carried on under a name in which his surname appeared. or assign their rights in specific partnership property. for other than a partnership purpose. receive on account of resulting claims against the partnership. retirement. Art. (l) The right. and to the return of his contribution as provided in Articles 1856 and 1857.(h) The time. (3) Confess a judgment against the partnership. he shall have the rights against the other members which he would have had if he were not also a general partner. and (3) Have dissolution and winding up by decree of court. provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business. 1846. (7) Continue the business with partnership property on the death. except that. and in the absence of such a statement all the limited partners shall stand upon equal footing. or as to any other matter. if agreed upon. A person may be a general partner and a limited partner in the same partnership at the same time. After the formation of a lifted partnership. 1849. civil interdiction or insolvency of a general partner. insanity. Art. and the terms and conditions of the substitution. A limited partner shall not become liable as a general partner unless. A limited partnership is formed if there has been substantial compliance in good faith with the foregoing requirements. Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners as to the return of their contributions. Art. The surname of a limited partner shall not appear in the partnership name unless: (1) It is also the surname of a general partner. 1848. The contributions of a limited partner may be cash or property. with general creditors. or release from liability if at the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners. (2) Have on demand true and full information of all things affecting the partnership. and at a reasonable hour to inspect and copy any of them. if given. of a limited partner to substitute an assignee as contributor in his place. unless the right so to do is given in the certificate. and. of the partners to admit additional limited partners. (k) The right. A limited partner also may loan money to and transact other business with the partnership. or to file a petition for its cancellation or amendment as provided in Article 1865. 1852. a general partner with the person or in the partnership carrying on the business. shall have all the rights and powers and be subject to all the restrictions of a general partner. or (2) Prior to the time when the limited partner became such. Without prejudice to the provisions of Article 1848. (5) Admit a person as a general partner. A limited partner shall have the same rights as a general partner to: (1) Have the partnership books kept at the principal place of business of the partnership. in respect to his contribution. without the written consent or ratification of the specific act by all the limited partners. Art. he takes part in the control of the business. a pro rata share of the assets. A limited partner may receive from the partnership the share of the profits or the compensation by way of income . and a formal account of partnership affairs whenever circumstances render it just and reasonable. (m) The right. (2) Do any act which would make it impossible to carry on the ordinary business of the partnership. If the certificate contains a false statement. additional limited partners may be admitted upon filing an amendment to the original certificate in accordance with the requirements of Article 1865. 1845. if given. The receiving of collateral security. conveyance.

to enforce such liabilities. or (3) After he has six months' notice in writing to all other members. The interest may be redeemed with the separate property of any general partner. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership. The remedies conferred by the first paragraph shall not be deemed exclusive of others which may exist. In the absence of any statement in the certificate to the contrary or the consent of all members. On the death of a limited partner his executor or administrator shall have all the rights of a limited partner for the purpose of setting his estate. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor. he is only entitled to receive the share of the profits or other compensation by way of income. 1861. if no time is specified in the certificate. insolvency. provided that after such payment is made. but which was not contributed or which has been wrongfully returned. (5) Those to general partners in respect to profits.stipulated for in the certificate. (2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions. or the partnership property is insufficient for their payment as required by the first paragraph. Art. have been paid or there remains property of the partnership sufficient to pay them. An assignee. and such power as the deceased had to constitute his assignee a substituted limited partner. Art. gives the assignee that right. 1862. whether from property of the partnership or that of a general partner. 1859. (3) Those to limited partners in respect to the capital of their contributions. he is nevertheless liable to the partnership for any sum. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner. A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until: (1) All liabilities of the partnership. and is subject to all the restrictions and liabilities of his assignor. the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of such claim. except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. limited partners share in the partnership assets in respect to their claims for capital. 1857. a limited partner. irrespective of the nature of his contribution. The liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent of all members. has only the right to demand and receive cash in return for his contribution. a limited partner may rightfully demand the return of his contribution: (1) On the dissolution of a partnership. and make all other orders. When a contributor has rightfully received the return in whole or in part of the capital of his contribution. Art. A limited partner is liable to the partnership: (1) For the difference between his contribution as actually made and that stated in the certificate as having been made. not in excess of such return with interest. and the limited partner would otherwise be entitled to the return of his contribution. in the order of priority as provided by law. necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return. Art. and to general partners. Art. and (3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction. Art. In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order: (1) Those to creditors. 1858. and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate. or the return of his contribution. On due application to a court of competent jurisdiction by any creditor of a limited partner. and in respect to their claims for profits or for compensation by way of income on . (4) Those to general partners other than for capital and profits. 1863. directions and inquiries which the circumstances of the case may require. to which his assignor would otherwise be entitled. No. has no right to require any information or account of the partnership transactions or to inspect the partnership books. Subject to any statement in the certificate or to subsequent agreement. except liabilities to general partners and to limited partners on account of their contributions. A limited partner holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him. Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption. A limited partner's interest is assignable. but a waiver or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate. the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and to general partners. and (2) Money or other property wrongfully paid or conveyed to him on account of his contribution. insanity or civil interdiction of a general partner dissolves the partnership. except those to limited partners on account of their contributions. 1. being thereunto empowered by the certificate. A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution. unless the business is continued by the remaining general partners: (1) Under a right so to do stated in the certificate. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under Articles 1847 and 1848. (6) Those to general partners in respect to capital. or (2) When the date specified in the certificate for its return has arrived. 1860. unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph. and may appoint a receiver. The substituted limited partner has all the rights and powers. or (2) The other liabilities of the partnership have not been paid. either for the return of the contribution or for the dissolution of the partnership. or (2) With the consent of all members. who does not become a substituted limited partner. Art. Subject to the provisions of the first paragraph. An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with Article 1865. (2) The consent of all members is had. but may not be redeemed with partnership property. The retirement. death.

Art. no time having been specified in the certificate. the court shall also cause to be filed for record in said office a certified copy of its decree setting forth the amendment. becomes insolvent or insane. A limited partnership formed under the law prior to the effectivity of this Code. (7) There is a false or erroneous statement in the certificate. (3) An additional limited partner is admitted. is not a proper party to proceedings by or against a partnership. A person desiring the cancellation or amendment of a certificate. until or unless it becomes a limited partnership under this Chapter. where the certificate is recorded: (1) A writing in accordance with the provisions of the first or second paragraph. and when the certificate is to be amended. and an amendment substituting a limited partner or adding a limited or general partner shall be signed also by the member to be substituted or added.their contribution respectively. (4) A person is admitted as a general partner. unless he is a general partner. (6) There is a change in the character of the business of the partnership. and (2) That the property of the partnership exceeds the amount sufficient to discharge its liabilities to persons not claiming as general or limited partners by an amount greater than the sum of the contributions of its limited partners. may petition the court to order a cancellation or amendment thereof. The writing to amend a certificate shall: (1) Conform to the requirements of Article 1844 as far as necessary to set forth clearly the change in the certificate which it is desired to make. may become a limited partnership under this Chapter by complying with the provisions of Article 1844. or the return of a contribution. to record the cancellation or amendment of the certificate. the amended certified shall thereafter be for all purposes the certificate provided for in this Chapter. If the court finds that the petitioner has a right to have the writing executed by a person who refuses to do so. dies. The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such. and the time when the contribution was made. (5) A general partner retires. if any person designated in the first and second paragraphs as a person who must execute the writing refuses to do so. it shall order the Office of the Securities and Exchange Commission where the certificate is recorded. (3) After the certificate is duly amended in accordance with this article. in proportion to the respective amounts of such claims. (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution. A limited partnership formed under the law prior to the effectivity of this Code. or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them. and when a limited partner is to be substituted. . Art. 1865. A certificate is amended or cancelled when there is filed for record in the Office of the Securities and Exchange Commission. 1864. provided the certificate sets forth: (1) The amount of the original contribution of each limited partner. 1866. The writing to cancel a certificate shall be signed by all members. A contributor. shall continue to be governed by the provisions of the old law. the amendment shall also be signed by the assigning limited partner. A certificate shall be amended when: (1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner. except where the object is to enforce a limited partner's right against or liability to the partnership. and (2) Be signed and sworn to by all members. (2) A person is substituted as a limited partner. (9) A time is fixed for the dissolution of the partnership. or (2) A certified copy of the order of the court in accordance with the provisions of the fourth paragraph. or is sentenced to civil interdiction and the business is continued under Article 1860. Art. Art. 1867.

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