Article 1784.
A partnership begins from the moment of the execution of the contract, He shall also be bound for warranty in case of eviction with regard to specific and
unless it is otherwise stipulated. (1679)
Article 1784
• Commencement of Term of Partnership
- A partnership is consensual contract; hence it is exist from the moment the celebration
of the contract by the partners.
- by just saying yes to the contract
-For example, nanligaw yung boy sa girl. By just saying yes sa proposal ni boy, official
dating na sila. By mere consent ni girl, may relationship ng nabuo
• Validity of future partnership
-The partners may stipulate some other date for the commencement of partnership like a
person who have entered into a contract to become partners at some future time or the
happening of some condition like natural disaste
-Example is yung nag yes ka sa contract but meron ka munang need tapusin na another
contract.
Article 1785. When a partnership for a fixed term or particular undertaking is continued
after the termination of such term or particular undertaking without any express
agreement, the rights and duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
Partnership at will is one in which no term of existence has been fixed and which may
be terminated at the will of the partners.
1785. Partnership at will
Eto yung walang agreement na naganap kung kailan matatapos
Fixed term is merong napag usapan na date kung kailan matatapos, example tayo nag
tayo ng bilihin ng souvenir sa isang event, tas after ng event na yon sa school or what
madami padin bumibili. Ayon yung Partnership at will kasi tapos na yung termination ng
agreement.
Prima Facie Evidence- first facts permits
Article 1786. Every partner is a debtor of the partnership for whatever he may have
promised to contribute thereto.
determinate things which he may have contributed to the partnership, in the same
cases and in the same manner as the vendor is bound with respect to the vendee. He
shall also be liable for the fruits thereof from the time they should have been delivered,
without the need of any demand. (1681a)
Article 1786
• Obligations of partner as debtor:
1. Contribute money, property or industry.
(Shall deliver at the beginning of the partnership or, if a different date has been agreed
upon, at the stipulated time the properties he agreed to contribute)
(The failure to contribute is to make the partner a debtor of the partnership even if there
is no demand. This is an exception to the general rule that there is no delay when there is
no demand.)
Example. Daniel promised to contribute land to Kathniel Partnership. The land is located
new office premises. Thus, an ideal location to build a fast food restaurant. Agreed date of
delivery of the land is on or before June 30, 2022.
If after June 30, 2022, Daniel failed to deliver said land to the partnership, Daniel
automatically become a debtor of of the partnership even in the absence of demand.
(Unlike in oblico where demand is necessary, in this case, bound na agad si daniel to
comply with his obligation.)
2. Answer for eviction
(Shall answer for eviction, in case the partnership is deprived of the ownership of any
specific property he contributed)
(The partner is bound in the same cases and in the same manner as the vendor is bound
with respect to the vendee with regard to specific and determinate things which he may
have contributed. This matter is governed by the law on sales)
Ex. Daniel complied the said date of delivery and the operation started after 2 months. If
after 6 months, brother of daniel cam and claiming that the land was his and not Daniel,
daniel then became liable to the partnership.
(Related to law of sales. There are 2 kinds of warranty- warranty against hidden defect
and warranty against eviction. Even though there is no oral or written agreement on
warranty, this is an implied obligation of the seller. In the example, daniel is bound to the
warranty to the partnership.
3. Answer for the fruits
(No demand is necessary to put the partner at fault
The fruits referred to are those arising from the time they should have been delivered,
without the need of any demand.
If the partner is in bad faith, he is liable not only for the fruits actually produced, but also
for those that could have been produced.
If money has been promised and that partner failed to do so, he becomes a debtor for the
interest and damages from the time he should have complied with his obligation.)
(Like na delay sa pagdilever si partner, tas during that time may customers na dapat sila
(assuming a civil fruit). So yung kikitain dapat nila, si partner mananagot?)
4. Preserve property
(To preserve said property with the diligence of a good father of a family pending delivery
in its contribution)
Same ex:
Daniel agreed to contribute the land and building to partnership insteadn a land lang, On
june 20,2022, the building was on fire. Because of the fire, the building can no longer be
used.
Here, daniel has an preserve the land and building with a diligence of a good father.
5. Indemnify for damages
(Indemnify the partnership for any damage caused it by the retention of said properties or
by the delay in their contribution)
Same sa example kanina:
Daniel will then indemnify (compensate) the partnership for any damages. Because the
building can no longer be used because of the fire, pwedeng si daniel and sumagot sa
renovation.
Failure to comply the partner of said contribution does not necessarily results to
rescission or cancellation of the partnership but an action for specific performance with
damages.
Article 1787
• Manner of appraising of Goods
Art. 1787. When the capital or part thereof which a partner is bound to contribute
consists of goods, their appraisal must be made in the manner prescribed in the
contract of partnership, and in the absence of stipulation, it shall be made by experts
chosen by the partners, and according to current prices, the subsequent changes
thereof being for the account of the partnership.
The appraisal of the value of the goods contributed is necessary to determine how
much has been contributed by the partners. In the absence of stipulation, the share of
each
partner in the profits and losses is in proportion to what he may have contributed.
How the appraisal is made?
1. In the manner prescribed in the contract of partnership
2.In the absence of stipulation, by experts chosen by the partners and according to
current prices.
After the goods have been contributed, the partnership bears the risk or gets the benefit
of subsequent changes in their value.
-Example: Suppose Kathryn contributed Land worth 5M while Daniel contributed delivery
truck worth 3M to their partnership.
After a year, the value of the land appraised to 5.5M while the delivery truck depreciated
by 100k.
Question, who will shoulder the gain and loss of the land
and delivery truck?
Obviously, it is the partnership. PeroWhat if in the above sample, they form a UNIVERSAL
PARTNERSHIP OF GAINS?
In that case, their properties
belong to the partners. The gain and loss will account by the partners. Kahit mawala pa
ang delivery truck ni Daniel, yung loss shoulder niya ng solo.
Art. 1788. A partner who has undertaken to contribute a sum of money and fails to do
so becomes a debtor for the interest and damages from the time he should have
complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers,
and his liability shall begin from the time he converted the amount to is own use.
Article 1788
• Effect if was money promised but not given on time
-For example, let's say Kathryn and Daniel formed a partnership para mag-operate ng
xerox/photocopy service in front of school. Kathryn and Daniel agreed to contribute 100k
each on or before May 26, 2020. On May 25,
2020 nag comply si Kathryn sa agreed amount na 100k. On the same day, may customer
na sana sila and estmated 10k ang income nila with that customer. But because Daniel did
not yet contributed the agreed amount, hindi pa sila nakabili ng photocopier machine,
they lost their client on that day.
On May 27,2020 may another client sila of which estimated 30k ang estimated income ng
partnership. But the partnership again lost the customer because Daniel still not yet
complied with his contribution. Daniel contributed the agreed amount on May 31,2020.
(Summary) On May 26,2020
naging debtor na si Daniel sa partnership. Daniel is also liable on the amount lost on May
27,2020 amounting to 30k. Hindi maka-operate ang partnerhip dahil sa failure ni Daniel sa
contribution niya sa partnerhip.
• Effect if partnership money was converted to personal use
- For example, let's say nag start ang operation ng partnership nila Kathryn and Daniel on
June 01,2020. On June 30,2020, nanguha si Daniel sa partnership coffers to buy ng pang
maintenance sa photocopier machine amounting to 50k. While on his way, may tumawag
kay Daniel at may emergency sa family nila. Daniel then used the money for his family. On
the above sample, Daniel becomes the debtor of the partnership. He converted the
amount for his own use.
Article 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, 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, with a right to damages in either
case. (n)
Article 1789
• Obligations of industrial partners
• Prohibition against engaging in business
• Remedies where industrial partner engages in business
———————————————-
Industrial partner- is one who contributes his industry or labor in the partnership.
Industrial partner barred for, engaging in business.
To prevent any conflict of interest between the industrial and the partnership, and to
insure faithful compliance by said partner with his prestation.
Example: K and A entered into a partnership that engaged music tuturial for kids. K is the
industrial partner while A is the capitalist. K’s shift ends at 5 in the afternoon.
In the example, di pwedeng mag engage si K sa music tuturial past 5pm as part time. If
that’s the case, A can exclude him from the firm with a right to damage or avail for the
benefits which may have obtained with a right to damage.
The partnership has the exclusive right to her industry, industrial partner is also prohibited
from engaging in business to any kind unless the partnership has expressly permitted her
to do so.
What if A invest as capitalist partner sa isang cosmetic business? If that’s the case, A does
not violate the partnership with K, Capitalist partner are prohibited from engaging similar
businesses only.
Art. 1790. Unless there is a stipulation to the contrary, the partners shall contribute
equal shares to the capital of the partnership.
• Extent of contribution to partnership capital
-The partners can stipulate the contribution of unequal shares to the common fund, but in
the absence of such stipulation, the presumption is that their contribution shall be in
equal shares.
Example: Clara and Maria decide to form a partnership and agree to contribute to the
capital in the ratio of 60:40 meaning if their partnership capital is combined total of
10,000.00 then Clara contributed 6,000.00 and Maria contributed 4,000.00.
Art. 1791. If there is no agreement to the contrary, in case of an imminent loss of the
business of the partnership, any partner who refuses to contribute an additional share
to the capital, except an industrial partner, to save the venture, shall be obliged to sell
his interest to the other partners.
• Obligation of capitalist partner to contribute additional capital
As a general rule, a capitalist partner is not bound to contribute to the partnership more
than what he agreed to contribute.
In case, however, of an imminent loss of the business, and there is no agreement to the
contrary, he is under obligation to contribute an additional share to save the venture, If he
refuses to contribute, he shall be obliged to sell his interest to the other partner.
In case of imminent loss of the partnership, hindi mandatory kay industrial partner to
contribute additional share. Simply because, they already give the 100% of their industry.
Sa case naman ni Capitalist partner, meron natural obligation sila a mag contribute ng
additional shares to save the business. Unless Capitalist partner is insolvent or may
agreement. If the solvent Capitalist partner refuses to contribute, then they must sell their
interest to the other partners na willing.
Article 1792. If a partner authorized to manage collects a demandable sum which was
owed to him in his own name, from a person who owed the partnership another sum
also demandable, the sum thus collected shall be applied to the two credits in
proportion to their amounts, even though he may have given a receipt for his own
credit only; but should he have given it for the account of the partnership credit, the
amount shall be fully applied to the latter.
The provisions of this article are understood to be without prejudice to the right granted
to the other debtor by article 1252, but only if the personal credit of the partner should
be more onerous to him. (1684)
Article 1792
• Obligation of managing partner who collects debt
• Requisites:
1. At least two (2) debts
2. Both debts are demandable
3. Collected by managing partner
• Reason of the rule?
• Right of the debtor to application of payment
Obligation of managing partner who collects debt.
A person may be separately indebted to the partnership and to the managing partner at
the same time. Any sum received by the managing partner shall be applied to the two
credits in proportion to their amounts.
The exception is where the managing partner received the sum for the account of the
partnership, in which case, the whole sum shall be applied to the partnership credit only.
————————-
Obligation of managing partner who collects debt.
Where a person is separately indebted to the partnership and to the managing partner at
the same time, any sum received by the managing partner shall be applied to the two
credits in proportion to their amounts, except where he received it for the account of the
partnership, in which case the whole sum shall be applied to the partnership credit only.
(1) Requisites for application of rule. — The following are the requisites for the application
of this article:
(a) There exist at least two debts, one where the collecting partner is creditor, and the
other, where the partnership is the creditor;
(b) Both debts are demandable; and
(c) The partner who collects is authorized to manage and actually manages the
partnership.
EXAMPLE:
A and B are partners in X and Co., with A as the managing partner. C is indebted to A in
the sum of P2,000.00. C is also indebted to the partnership in the sum of P4,000.00. Both
debts are demandable. A collects the amount of P1,500.00 from C.
If A issues a receipt to the effect that it is in payment of his (A’s) credit, P500.00 will be
applied only to his credit, the partnership being entitled to a proportionate amount of
P1,000.00 in the payment made by C. But if A gives a receipt for the account only of the
partnership credit, the amount of P1,500.00 will be fully applied to the latter.
(2) Reason for applying payment to partnership credit. — The law safeguards the interests
of the partnership by preventing the possibility of their being subordinated by the
managing partner to his own interest to the prejudice of the other partners. Good faith
demands that the partner vested with the management of the partnership attend more to
the interest of the partnership than to his own and he should not intentionally fail to
effect the collection of the credit of the partnership in order to effect the collection of his
own. (11 Manresa 351.)
The article does not apply where the partner who collects for his own credit only is not
authorized to manage, for there can be no ground for suspicion that he may have acted
improperly create an undue advantage to himself. However, where the manner of
management has not been agreed upon and all the partners participate in the
management of the partnership (see Art. 1803.), then every partner shall be considered a
managing partner for purposes of Article 1792.
(3) Right of debtor to application of payment. — Under the second paragraph, the debtor
is given the right to prefer payment of the credit of the partner if it should be more
onerous to him in accordance with his right to application of payment. (Art. 1252.6)
EXAMPLE:
In the example given above, if the obligation in favor of A bears 18% interest per annum
while that in favor of the partnership is 16% interest per annum, the credit of A being
more onerous or burdensome, the law allows C to prefer the payment of A’s credit in case
he so desires.
Art. 1792
In this case, pwedeng yung taong may utang is parehas na may utang sa partnership at sa
partner. Example, si Nadine may utang sa Kathnierl partnership na 10k at kay kathryn na
5k. Kung nagbayad si Nadine ng 12k at niresibuhan niya si Kathryn for oayment para sa
utang niya rito, only 4k ang maapply sa credit niya, the rest is sa partnership.
Pero kung ang 12k payment ni Nadine is for the amount of Kathniel, the full amount will
be fully applied to kathniel.
That’s the essence of the partnership. Like when you enter into a relationship. Di mo
pwedeng u ahin sarili mo. Once na may natanggap ka para sayo, para sa inyong dalawa
yun. Pero kung may natanggap siya pra sa kaniya, sa kaniya lang din yun.
Pero sa 2nd paragraph ng art., may right si nadine na i-apply yung payment niya sa utang
niya kay kathryn kung yung utang niya kay kath ay mas mabigat (remember oblicon).
For example, ang utang ni nad kay kath bears 15% per annum while and utang niya sa
partnership is 14% per annum. In this case, the law allows nad to prefer the payment of
kath’s credit in case she so desire.
Art. 1793. A partner who has received, in whole or in part, his share of a partnership
credit, when the other partners have not collected theirs, shall be obliged, if the debtor
should thereafter become insolvent, to bring to the partnership capital what he
received even though he may have given receipt for his share only.
Article 1793
• Obligation of Partner who receives share of partnership credit
-The case contemplated under this article is different from that referred to in Article 1792,
which treats of two distinct credits, one in favor of the partnership and another in favor of
the managing partner.
- In the present article, there is only one credit- credit in favor of the partnership.
-Futhermore, the present article applies whether the partner who receives his share of
the partnership credit is authorized to manage or not.
- For example, Si Nadine ay may utang sa Kathniel partnership amounting to 25,000.00. Si
Kathryn, na-receive na niya "yung share niya amounting to 5,000 ahead of Daniel. When
Daniel collects his share, Nadine was already insolvent (unable to pay)
In the above case, Kathryn is required to share the 5,000.00
with Daniel. Kahit na si Kathryn is given a receipt for her share only
• Requisites:
1. A partner received his share of the partnership credit
2. Other partners not collected their shares
3. Partnership debtor has become insolvent
-Reasons for imposing obligation to return.
The debt of D becomes a bad debt. It would be unjust or unfair for A not to share in the
loss with B less.
The above provision is based on the community of interest among the partners which is
one of the underlying principles of the contract of partnership.
Art. 1794. Every partner is responsible to the partnership for damages suffered by it
through his fault, and he cannot compensate them with the profits and benefits which
he may have earned for the partnership by his industry. However, the courts may
equitably lessen this responsibility if through the partner’s extraordinary efforts in other
activities of the partnership, unusual profits have been realized.
Partner liable for damages caused the partnership
Art. 1794 follows the general rule of contracts that where a person is at fault in the
fulfillment of his obligations he shall be liable for the payment of damages. The partner’s
fault, however, must be determined in accordance with the circumstances of person, time
and place.
Liquidation necessary to ascertain damages
It is first necessary that a liquidation of the business thereof be made to the end that the
profits and losses may be known and the causes of the latter and the responsibility of the
defendant as well as the damages which each partner may have suffered, may be
determined.
Article 1794
• Damage suffered through partner’s fault
This article follows the general rule applicable to all contracts that any person guilty or
negligence or fault in the fulfillment of his obligation, shall be liable for damages. (Art.
1170.)
The partner’s fault, however, must be determined in accordance with the nature of the
obligation and the circumstances of the person, the time, and the place. (Art. 1173)
Compensation of damages with profits earned for partnership by guilty partner.
Damages not generally subject to set-off. – As a general rule, the damages caused by a
partner to the partnership cannot be compensated or offset by the
profits or benefits which he may have earned for the partnership by his industry.
Exception – If unsual profits are realized through the extraordinary efforts of the partner
at fault, the courts are authorized by the law to equitably mitigate or lessen his liability for
damages. This rule rests on equity. Note that eveven in this case the partner at fault is not
allowed to compensate the
damages suffered by the profits earned.
Case Sample:
A partnership between Riz And Anne is engaged in an autoshop business. A customer
bought a car to be painted yellow but Riz bought red paint instead and the car is painted
red. Damages are suffered by the partnership for 30,000.00 due to the repainting.
FROM WATTPAD
First of all, ginawa ang partnership to earn profit at para hindi i compensate sa damages
caused by the partner. Hindi kayo nagtayo ng business just to pay sa damages.
But in every rule there's an exemption. If unusual profit derived from extraordinary effort
of the partner at fault, the court may lessen the partner's responsibility. Take note of the
word lessen. Still hindi ito pwede i-compensate.
For example, Daniel accidentally caused the fire in the Kathniel warehouse. Because of
that, yung caterings na clients nila this coming month, cancelled. Estimated 500k ang loss
nila including 'yung nasira sa warehouse at kikitain sana sa catering clients. Because of
what happened, naghanap ng way si Daniel para kumita ng mas malaki ang partnership
para makabawi
ito. He worked overnight advertising the Kathniel
restaurant. He even used his connection to network the
business. Nag hire rin siya ng artista to advertise the
business. Used the radio and television. After a week, naging hit ang business and after a
month, agad nabawi ng partnership ang loss na 500k
In the above case, Is Daniel's responsibility compensated?
-No, it's not compensated. The efforts in other activites that Daniel did to derived unusual
profits to the partnership will only lessen the responsibility.
Article 1795. The risk of specific and determinate things, which are not fungible,
contributed to the partnership so that only their use and fruits may be for the common
benefit, shall be borne by the partner who owns them.
If the things contribute are fungible, or cannot be kept without deteriorating, or if they
were contributed to be sold, the risk shall be borne by the partnership. In the absence of
stipulation, the risk of the things brought and appraised in the inventory, shall also be
borne by the partnership, and in such case the claim shall be limited to the value at which
they were appraised. (1687)
——————————————-
Article 1795
• Who bears the risk of loss in the following situations:
1. Specific and determinate things which are not fungible where only the use is
contributed
2. Specific and determinate things the ownership of which is transferred to the
partnership
3. Fungible things which cannot be kept without deteriorating even if they are
contributed only for the use of the partnership
4. Things contributed to be sold
5. Things brought and appraised in the inventory
—————————————-
(From study guide)
Risk of Specific and determinate things-
The risk of specific and determinate things which are not fungible, like a boat, only the use
of which is contributed, shall be borne by the partner as the ownership thereof is not
transferred to the partnership. This follows the general rule that the thing perished with
the owner.
Things fungible or perishable-
If the things contributed are fungible or cannot be kept without deteriorating (perishable)
like wine, oil, etc., even if they are contributed only for the use of the partnership, the risk
of loss shall be for the account of the partnership for the latter cannot make use of them
without their getting consumed or presumed.
Things contributed to be sold-
If the things contributed are to be sold, the partnership bears the risk of loss, for obviously
the partnership is the intended owner; otherwise, the firm cannot make the sale.
Things brought and appraised in inventory-
The partnership bears the risk of loss of things brought and appraised in the inventory as
this has the effect of an implied sale thus making the partnership the owner of said things.
——————————————-
(From deleon)
Risk of loss of things contributed.
There are five cases contemplated by the present article for the determination of the risk
of the things contributed to the partnership, namely:
(1) Specific and determinate things which are not fungible where only the use is
contributed. — The risk of loss is borne by the partner because he remains the owner of
the things (like car);
(2) Specific and determinate things the ownership of which is transferred to the
partnership. — The risk of loss is for the account of the partnership, being the owner;
(3) Fungible7 things or things which cannot be kept without deteriorating even if they are
contributed only for the use of the partnership. — The risk of loss is borne by the
partnership for evidently the ownership was being transferred since use is impossible
without the things (e.g., oil, wine) being consumed or impaired;
(4) Things contributed to be sold. — The partnership bears risk of loss for there cannot be
any doubt that the partnership was intended to be the owner; otherwise, the partnership
could not effect the sale; and
(5) Things brought and appraised in the inventory. — The partnership bears the risk of loss
because the intention of the parties was to contribute to the partnership the price of the
things contributed with an appraisal in the inventory. There is thus an implied sale making
the partnership owner of the said things, the price being represented by their appraised
value.
The above presuppose that the things contributed have been delivered actually or
constructively to the partnership. Before delivery, the risk of loss is borne by the partner
since he remains their owner. He is a debtor of the partnership for whatever he may have
promised to contribute. (Art. 1786; see Arts. 712, 1164, 1262, 1263.) If the loss is due to
the fault of any of the partners, he shall be liable for damages to the partnership in
accordance with the provision of the preceding article.
——————————————-
(From domingo)
Risk of loss
1. Specific and determinate things which are not fungible
What was contributed here is only the use of the object.
For example, a partner contributes only the use of his
delivery truck. Hence, it is the partner who bears the risk of loss
because the partner did not transfer the ownership to the
partnership.
2. Fungible things
It is the partnership who bears the risk of loss as there wa
transfer of ownership after delivery of the fungible things.
3. Things contributed to be sold
It is the partnership who bears the risk of loss as there wa
transfer of ownership after delivery of the things that were contribute
to be sold.
4, Things brought and appraised in the inventory
It is the partnership who bears the risk of loss as there wa
transfer of ownership after delivery of the things brought and appraise!
in the inventory.
————————————————
(From wattpad)
Im the above case, Ang pag determine kung sino mag borne ng risk is kung sino ang
owner.
(May sample din sa wp, pero check niyo na lang)
To sum it up, 5 things to remember in this art,
1. Specific and determinate thing tapos use lang ang contributed, owner is the oartner,
the risk is partner din.
2. Specific and determinate thing tapos ownership transferred to the partnership.
Obviously, the partnership borne the risk.
3. Fungible things, the risk will be borne by the partnership. Kahit na use lang contributed.
4. Things contributed to be sold. Obviously, the ownership transferred to the partnership
so is the risk.
5. Things brought and appraised in the inventory. In this case, there is implied sale making
in the partnership. Thus the owner is the partnership, the risk will be borne also by the
latter.
Article 1796. 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,
from the time the expense are made; 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 for risks in consequence of its management. (1688a)
——————-
Article 1796
• Reimbursement to the partner
—————-
Responsibility of the partnership to a partner
If a partner has advanced funds for the partnership, he is entitled to recover the amounts
advanced by him with interest. This must be so for the reason that a partner is a mere
agent of the partnership and under the rules of agency, an agent who advances funds for
his principal may recover the same interest.
—————
Obligation of the partnership to every partner
1. To refund the amounts a partner may have disbursed on behalf of th partnership plus
the interest from the time the expenses were made.
Example:
A and B formed AB partnership. Subsequently B purchased
office supplies in the amount of P20,000 out of his own money with the
consent of A on August 1, 2020.
In this case, AB partnership must reimburse the amount of
P20,000.
What if AB partnership reimbursed B only on October 1, 2020?
In this case, AB partnership must also be liable for legal interest for two
months (from August 1, 2020 to October 1, 2020).
2. To answer to each partner for obligations, he may have contracted into
in good faith in the interest of the partnership, and for the risks in
consequence of its management.
Example:
A and B formed AB partnership to engage in car repair shop.
Subsequently B purchased, on credit, car accessories from X Corp. in the
amount of P400,000. In this case, AB partnership is answerable to X
Corp. for its accounts payable amounting to P400,000.
————
Article 1797. The losses and profits shall be distributed in conformity with the
agreement. If only the share of each partner in the profits has been agreed upon, the
share of each in the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits and losses shall be
in proportion to what he may have contributed, but the industrial partner shall not be
liable for the losses. As for the profits, the industrial partner shall receive such share as
may be just and equitable under the circumstances. If besides his services he has
contributed capital, he shall also receive a share in the profits in proportion to his
capital. (1689a)
————-
Article 1797
Partnership liability (losses & profits)
————-
Rules in profit sharing:
1. The partners share the profits in accordance with the ratio established by their
contract.
2. If there is no such stipulation in the partnership contract, then:
1. If all are capitalist partners they
have the profits in proportion to
their capital contributions;
2. If there are capitalist as well as industrial partners, the industrial
partner get a share each that is just and equitable while the capitalist partners divide the
remainder in proportion to their capital contributions; and
3. If there is a capitalist-industrial partner, he gets a share in the profits as an industrial
partner and an additional share in proportion to his capital contribution to be determined
as in (b), above.
Rules in loss sharing:
1. The stipulation in the partnership agreement regarding loss sharing must be followed.
2. If there is no such agreement, but the contract provides for a profit sharing ration, the
profit sharing ratio shall also be the loss sharing ration.
3. In the absence of loss sharing and profit sharing stipulations in the contract, then the
loss shall be borne by the partners in proportion to their capital contributions; but a
purely industrial partner is exempted from participation in the loss.
Share of industrial partner in profits and losses
Unless agreed upon, the industrial partner shall receive such share in the profits as may
be just and equitable under the circumstances. As for the losses, the industrial partner is
not liable. However, under Art. 1816, if the partnership has a contractual debt and it
cannot pay, the industrial partner equally with the capitalist partners, can be compelled
by the creditor to pay his pro rata share out of his own property or assets.
———
1. Profit sharing shall be distributed according to agreement. Kung walang agreement sa
loss sharing, gagamitin yung proportion sa profit sharing.
2. If no agreement, the profit and losses sharing shall be proportion to the capital
contribution. Basta always remember na hindi liable si industrial partner sa sharing ng
losses. Industrial partner already contributed his/her industry. Parang yun na ang naging
share niya ng loss, effort. And as for the profit sharing, the industrial partner shall receive
a just and equitable share. Kung may capital contribution pa si industrial partner bukod sa
industry niya, he/she will also share the profits in proportion to his capital.
Article 1798. If the partners have agreed to intrust to a third person the designation of
the share of each one in the profits and losses, 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, or who has not impugned the same within a period of
three months from the time he had knowledge thereof, complain of such decision.
The designation of losses and profits cannot be intrusted to one of the partners. (1690)
——-
Article 1798
Designation of shares by third person
———
Reason for the provision
Admittedly, the designation of profits and losses cannot be entrusted to one of the
partners as the fulfillment of a contract cannot be left to one of the contracting parties. It
may, however, be entrusted to a third person by common interest.
——-
Designation by a third person of share in profits and losses.
(1) Delegation to a third person. — The designation of the share in the profits and losses
may be delegated to a third person by common consent. This article speaks of a third
person, not a partner, following the general rule in contracts that the fulfillment of a
contract cannot be left to the will of one of the contracting parties alone. (Arts. 1308,
1309.)
The prohibition in the second paragraph (Art. 1798.) is necessary to guarantee the utmost
impartiality in the distribution of shares in the profits and losses. (11 Manresa 375.)
(2) Binding force of designation by third person. — The desig- nation by the third person
would generally be binding unless manifestly inequitable. Even then, a partner who has
begun to execute the decision of the third person or who fails to impugn the same within
three months from the time he had knowledge of it can no longer complain. In such case,
the partner is guilty of estoppel or is deemed to have given his consent or ratification to
the designation.
The reason behind the comparatively short period of three months within which to
impugn the designation is to forestall any paralyzation in the operations of the
partnership. (Ibid.)
----------
Third Person Designating the Share of Partners in the Profits
and Losses
General rule:
It is valid.
Exception:
It is not valid and it may be questioned if it is manifestly inequitable;
unless:
1. A partner began to execute the decision of the third person; or
2.A partner has not questioned the said decision of the third person
within a period of 3 months from the time he had knowledge thereof.
Art. 1799. A stipulation which excludes one or more partners from any
share in the profits or losses is void. (1691)
------
In the above article, pwedeng walang agreement as to p&l sharing but mag intrust sila ng
third party for the profit loss sharing. And ang pag appoint ng 3rd person is dapat agreed
by all the partners. Contract cannot be left to the will of one of the contracting parties
alone. Kaya nga siya tinawag na partnership, dapat lahat ng decision, galaw mo, is alam ng
partner mo. You cannot call it a pertner if you decide and take action alone.
Pero may right ang partners na magcomplain/impugned king ang designation ng 3rd party
is inequitable.
Impugned- to question the validity. But the complain must be made within 3 months. The
reason for the short period of within 3 months to impugned the designation is to prevent
the paralyzation in the operations of the partnership.
Art. 1799. A stipulation which excludes one or more partners from any share in the
profits or losses is void.
———
Article 1799 Void stipulation
———
Stipulation to exclude a partner from profits and losses is void
The law does not allow a provision in the contract of partnership excluding one or more
partners from sharing in the profits and losses. The reason is that a partnership is
organized for the common benefit or interest of the partners.
Reason for exclusion of industrial partner
An industrial partner is not liable for losses because if the partnership fails to realize any
profits, the industrial partner would have contributed his labor in vain. Furthermore, the
industrial partner cannot withdraw the work already done by him for the partnership.
——-
General rule:
A stipulation excluding one or more partners from any share in the profits and losses is
void. Take note that what is void is the stipulation only and not the contract of
partnership. Hence, the profits and losses shall be distributed as if there was no
agreement as discussed in the preceding article.
Also, let it be noted that one of the tests in order to have a partnership is the intent of the
contracting parties to divide the profits among themselves.
Exception:
An industrial partner is not liable for losses unless he waived this right.
Rationale: Why an Industrial Partner is not liable for losses?
While capitalist partners can withdraw their capital, the industrial partner cannot
withdraw any labor or industry he had already exerted. Moreover, in a certain sense, he
already has shared in the losses in that, if the partnership shows no profit, this means that
he has labored in vain.*3
——
The very reason kung bakit nag eexist and partnership is to earn profit. Kaya kung e-
exclude ang one of the partners sa share ng profit, then the partner is void. Mali. Ang
agreement and void. Hindi na dapat siya sinama as partner kung hindi naman pala siya
isasma sa profit sharing. That is the general rule. Then what will happen to the partners
and the partnership? The profits and losses shall be apportioned a if there is no stipulation
of the same. Ibig sabihin, continue parin ang operation ng partnership.
Pero what if in the agreement, expressly stipulated na walang magiging liable sa losses,
what will be the status of the partnership? Since sabi naman sa previous articles, it is valid
na walang agreement sa losses sharing since ang purpose naman ng partnership is to earn
profits. Is the partnership valid? No. Kung papasok ka sa isang partnership, dapat willing
ka ring mag take ng risk.
If expressly stipulated that there shall be no liable for losses, or not intend to share in the
losses, no partnership exists.
Remember, magkaiba ang expressly stipulated sa agreement.
In the case yung industrial partner and ini-exlude sa share ng loss, the agreement is valid.
As mentioned in the previous article, larang ang share na niya na loss is yung effort niya.
And one thing, hindi niya pwede i-wothdraw ang work o labor niya na already contributed
in the partnership.
Article 1800. The partner who has been appointed manager in the articles of
partnership may execute all acts of administration despite the opposition of his
partners, unless he should act in bad faith; and his power is irrevocable without just or
lawful cause. The vote of the partners representing the controlling interest shall be
necessary for such revocation of power.
A power granted after the partnership has been constituted may be revoked at any
time. (1692a)
——-
Article 1800
Management of Partnership
——-
Example of an act of administration
A managing partner of a partnership may execute all acts of administration including the
right to sue debtors of the partnership in case of their failure to pay their obligation when
it became due and demandable.
Who shall manage the partnership?
Either one, some or all of the partners designated as managing partner/s either in the In Kathniel partnership, since Kathryn is the managing partner, she has the right on the
articles of partnership or after the contract of. partnership had already been constituted. administraive related sa business. Ano-ano nga ba itong administrative role? Ito 'yung
If there is no agreement. support sa may business. Like Accounting, human resource, etc. Basta tandaan na lang lagi
management is vested in all of the partners. na every act must be in good faith. Dapat faithful ka sa partner mo.

TWO MODES OF APPOINTMENT (May kasunod pato pero inaantok nako itype, nasa wp)
1. Appointment as manager in the articles of partnership; or
2. Appointment as manager made in an instrument other than the articles Article 1801. If two or more partners have been intrusted with the management of the
of partnership. partnership without specification of their respective duties, or without a stipulation that
I. APPOINTMENT AS MANAGER IN THE ARTICLES OF PARTNERSHIP one of them shall not act without the consent of all the others, each one may separately
General Rule: execute all acts of administration, but if any of them should oppose the acts of the
Power is irrevocable without just or lawful cause. others, the decision of the majority shall prevail. In case of a tie, the matter shall be
Exception: decided by the partners owning the controlling interest. (1693a)
1.To remove him for just cause, vote of partners having controlling ——
interest is necessary;** Management of partnership
2. To remove him without just cause, there must be unanimity including ——-
his own vote. Each one may separately perform acts of administration
Reason: 1. If one or more of the managing partners
This represents a change in the will of the parties; a change in the shall oppose the acts of the others, then the decision of the majority of the managing
terms of the contract; a novation; so to speak, requiring unanimity.* partners shall prevail. Right to oppose can be exercise only by those entrusted with
Extent of power: management.
1. If he acts in good faith, he may do all acts of administration despite the 2. In case of tie, matter shall be decided by the vote of the partners owning the controlling
opposition of his partners. interest.
2. If he acts in bad faith, he cannot do any act of administration. It must be - Let’s say that they are 4 managing partners and tie of votes 2 of agree and 2 of oppose.
noted that the presumption in law is in favor of good faith. In case of a tie, decision of partners owning controlling interest shall prevail.
I]. APPOINTMENT AS MANAGER MADE IN AN INSTRUMENT OTHER REQUISITES FOR APPLICATION OF RULE
THAN THE ARTICLES OF PARTNERSHIP 1. Two or more partners have been appointed as managers;
Rule: 2. There is no specification of their
The power to act may be revoked at any time, with or without respective duties;
just cause by the partners owning the controlling interest. 3. There is no stipulation that one of them
Reason: shall not act without the consent of all the others.
Such appointment is a mere delegation of power; revocable at —-
any time.*®
Extent of power: ART. 1802 In case it should have been stipulated that none of the managing partner
The manager can do all acts of administration. shall act without the consent of the others, the concurrence of all shall be necessary for
—- validity of the acts, and the absence or disability of any one of them cannot alleged,
Sa case ng GPP(General Professional Partnership), every partner has the equal voice in the unless there is imminent danger of grave or irreparable injury to the partnership.
partners, , lalo na sa malalaking firms. ——
Management of partnership

When unanimity of action stipulated concurrence necessary for validity of acts t
he partners may stipulate that none of the managing partners shall act without the
consent of the others. In such a case, the unanimous consent of all the managing partners
shall be necessary for the validity of their acts. This consent is so indispensable that
neither absence nor disability of any one of them may allege as excuse to dispense with
requirement.
But if the managing partner's act is recurring, meaning, routine transaction purchase of
goods- as long as it is anything related to the normal operation of the business, there is no
need for the consent of the other partners
Exception: When there is imminent danger of grave or irreparable injury to the
partnership then a partner may act alone without consent of partner who is absent or
under disability.
Consent of managing partners not necessary in routine transactions
The requirement of written authority refers evidently to formal and unusual written
contracts.
Art. 1803. When the manner of management has not agreed upon, the following rules
shall observed
(1) All the partners shall be considered agents and whatever any one of them may do
alone shall bind the partnership, without prejudice to the provisions of Article 1801.
(2) None of the partners may, without the consent of the others, make any important
alteration in the immovable property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other partners is manifestly prejudicial to
the interest of the partnership, the court's intervention may be sought.
In the first rule, seems to be the same as in Article 1801. The only difference is that no
managing partner is appointed in Article 1803. In the article, each of the partners are
considered agents of partnership. They can all act as managing partners and their act is
binding. If there are any opposition in any of them, apply the rule in Article 1801.
On the second rule, when the alteration of immovable property is involved, unanimous
decision of the partners are required. Why? Alteration of immovable property is an act of
strict dominion. So even the managing partner cannot make an alteration without the
consent of other partners.
Is a written consent still needed for the alteration of immovable property? No, the
consent need not be express. Apparently the alteration was made and no one objected,
the act deemed binding.
But if one of the partners does not want to give consent, let's say he did it on purpose.
The intervention of the court may be sought for authority to make the necessary
alteration
But if the alteration of the immovable property is NECESSARY for its preservation, not
merely USEFUL, consent of the other partner is not needed.
EXAMPLE
Suppose before A builds the warehouse, he asks for the consent of the other partners,
who refuse to give it. When a tries to convince them and asks why they refuse to give
consent, they simply say that they do not want it to be there, making their objection
manifestly prejudicial, meaning, there is really no reason for their objection,
what then, is the remedy of A in this situation?
A may bring the matter to court. If the court finds the other partners of having no solid
reason to object, it may compel the other partners to give their consent.
For example, one of the immovable property-building of
Kathniel partnership, medyo luma na kaya may tumutulo everytime na ummulan. Since
kinakailangan i-repair ang buiding, nag hire si Kathryn ng laborers at nag order ng
materials to repair the Building. Since necessary naman ang act ni Kathryn- alteration of
the building, kaya kahit walang consent ang ibang partners, she can do such act and
binding ang kanyang act.
Pero what if wala namang tumutulo sa Building pero ang
interior design niya is too old for the latest generation, is the consent of the other
partners necessary kung maisapan ni Kathryn ipa-renovate ang building to attract more
customers?
-Yes the consent of the other partners are necessary, because changing the interior design
is an important alteration in immovable property even though it may be useful to the
partnership, unanimity is required.
Art. 1804. Every partner may associate another person with him in his share, but the
associates shall not admitted into the partnership without the consent of all other
partners, even of the partner having an associate should be a manager of
subpartnership nature
•Subpartner - Partner may associate another person with him/her in his share without
theconsent of the other partners
•Subpartnership–the partnership formed between a member of a partnership and a third
person for a division of the profits coming from the partnership.
For example,
Kathryn, a managing partner, associated Mamay with his share in the partnership.
Kailangan pa ba ng consent ng ibang partners sa para accepted si Maymay
as Kathryn's associate? The answer is no. Why do you think hindi kailangan ng consent ng
ibang partners sa pag associate ng another partner for his/her
share sa partnership?
The reason is, magiging subpartner lang siya. Ang subpartner doesn't have rights of the
partner. Kaya kahit managing partner si Kathryn, Maymay doesn't have right to manage
the partnership. Para maging admitted si Maymay sa partnership, kailangan ng consent of
ALL the partners. If that's the case, ano lang ang magiging role ni Maymay sa partnership?
Parang ang mangyayari na lang is a partnership within a partnership pero separate and
distinct.
Ang responsible pa rin sa utang is si Kathryn. Ang hahati sa partnership profits is si
Kathryn.
Art. 1805. The partnership books shall be kept, subject to any agreement between the
partners, at the principal place of the business of the partnership, and every partner
shall at any reasonable hour have access to and may inspect and copy any of them.
Each partner will have access to ALL partnership books.
• When will the partner be allowed to access the partnership
books?
The partner is allowed to access partnership books during
REASONABLE HOURS OF BUSINESS (8am-5pm), according to the law. The one who is
keeping the partnership books cannot state when it can be inspected.
Laging tatandaan na ang partnership is under the principle of MUTUAL TRUST and
confidence among the partners.
Kaya ang libro ng partnership is hindi dapat tinatago within the partners. Ano ba 'yung
libro na tinutukoy dito? Ito 'yung financial transactions g business. Kung ang tindahan may
listahan, ang Partnership may Partnership books. Basta books ng isang Company,
confidential 'yan. Hindi mo pwede i-disclose sa labas. Per if ever na naghihinala 'yung isa
sa mga partner, pwede sila mag ask ng copy ng libro at i- inspect nila yun. Another thing,
ano ang ibig sabihin kapag sinabing reasonble hour? We may also say na within the
business hours 'yan. Kung maisipan mo tignan ang libro ng madaling araw, tulog na lahat
ng tao, 'yun yung time na mag demand ka sa mga kasama mo g copy ng libro.
Article 1806. 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. (n)
Art. 1806. 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. Duty to render information, there must be no
concealment between partners in all matters affecting the partnership. Information must
use only for partnership purpose. Not just on demand but partner also has duty of
voluntary disclosure. However, duty to render info does notarise with respect to matters
appearing in partnership books since each partner has the right to inspect those. Good
faith not only requires that a partner should not make a false statement but also that he
should abstain from any false concealment.
The article does not mean that the partners need wait for demands before disclosing
information, when they get hold of the information, they should disclose it immediately,
although additional details may be demanded.
If information is not disclosed and it is found out later on, the partner/s who did not
disclose such will be held liable for it and be charged for misrepresentation.
The violation of this article refers to concealment.
Who can demand true and full information?
-Any partner
-Legal representative of any deceased partner;
and
-Legal representative of any partner under legal disability.
Example:
Suppose A, B and C are in a partnership wherein A is sent to
inspect partnership property in Mindanao. A realizes that the
property contains oil deposits and does not disdose this information to B and C. He also
lies and says that the property is completely useless for their business and offers to buy B
and C's interests in the partnership. When A is the
only one holding the business, he develops the land and gains substantial profits from the
oil deposits. B and C later on learn about the information A kept hidden from them and
demand that they be given their shares in the oil profits.
The question now is, can B and C, after having sold their interests in the partnership, still
share in the profits?
-Yes, they will be allowed to share in the profits because the information regarding oil
deposits was present when they sold their share to A, just that it was hidden from them.
Every partner is bound to disclose the status of the Partnership to the partner. Hindi
porket sinabi sa article na on demand', tsaka ka lang mag disclose ng information
about sa status ng business. Dapat volunteer ang act na
'yan. "Yung tipong hindi ka pa tinatanong, sinasabi mo na
agad kung ano nangyayari sa business. Parang nangyayri,
as a team lagi ang galaw niyo.
Hindi pwedeng ayaw mo mag-alala ang partner mo kaya hindi mo dinisclose. Tsaka mo
lang sasabihin kapag okay na ang lahat.
Article 1807.
Every partner must account to the partnership for any benefit, 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, conduct, or liquidation of the partnership
or from any use by him of its property.
-A partner who receives benefits or profits derived without consent of others shall
account for it as the partnerships.
-If particular property is mortgaged and foreclose, the
partner who uses personal funds is able to get the property back will not become the new
owner, he will only be its trustee.
- If the partner gets the property back after ONE year from the 3rd party involved, then it
shall become his as it was a private transaction, so long as he uses his own funds)
Example:
A and B are partners engaged in the operation of a cinema
business. The theater was mortgaged to C who foreclosed
the mortgaged debt. A, in his own behalf, redeemed the property with his own private
funds. Subsequently, A files a petition for the cancellation of the old title of the
partnership and the issuance of a new title in HIS name alone.
Did A become the absolute owner of the property?
-No, the law says that he will only hold the property as the trustee and will be entitled to
reimbursement plus interest
from the time he redeemed the property.
Art. 1808. 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, unless there is a
stipulation to the contrary. Any capitalist partner violating this prohibition shall bring to
the common funds any profit accruing to him from his transactions, and shall personally
bear all the losses
Is the capitalist partner allowed to engage in other businesses aside from the one he has
with the partnership?
-Yes, as long as the business he engages in is something dissimilar or different from the of
the partnership's.
What will happen if the capitalist partner violates the law regarding his ability to engage in
other businesses?
-Then he shall have to bring the profits he gained from the other business to the
partnership and be liable for losses suffered by the partnership.
-The capitalist partner can engage in a business similar to the partnership if there was a
stipulation in the contract of partnership and if the business he operates exists in a
different area or place.
For example,
Sa Kathniel partnership. Daniel, as capitalist partner, nag invest siya sa Karjon partnership
(Karina and
Aljon as existing partners) as capitalist partner. Karjon partnership engages in English
Tutorial for kids. Is Daniel as partner in Kathniel, invested in Karjon partnership valid?
Yes. Capitalist partner may engage in other partnership as
long as magkaiba ang line of business ng both invested
partnership.
What if Karjon is also a restaurant partnership. Isa sa malaking rival ng Kathniel
partnership. Para walang ma- incurr na loss si Daniel, nag invest din siya sa Karjo
partnerhsip as capitalist partner. Para kahit ano sa dalawang partnership ang manguna,
walang lug sa part ni Daniel.
According to Article 1808, Capitalist partner CANNOT
engage for their own account in any operation which is of the kind of business in which
the partnership is engaged Pero may unless pa sa sentence. Since the problem is silent.
Walang stipulation.
Sa second paragraph, any capitalist partner violating this
prohibition shall bring to the common fund any profits accruing to him from his
transactions, and shall personally bear the losses.
Art. 1809.
Any partner shall have the right to a formal account as partnership affairs:
1. If he is wrongfully excluded from the partnership business or possession of its
property by his co-partner;
2. If the right exists under the terms of any agreement;
3. Provided by article 1807;
4. Whenever other circumstances render it just and reasonable, Right of the partner to a
formal account.
General rule: During existence of partnership, a partner is not entitled to a formal account
of partnership affairs. Reason: rights of partner amply protected in arts1805 and 1806. In
addition, it would cause much inconvenience and unnecessary waste of time.
Exception: In the special and unusual situations enumerated under art. 1809. Right of
partner to demand an accounting w/o bringing about dissolution is a necessary corollary
to right to share in profits. A formal account is a necessary incident to the dissolution of
the partnership.
Parang summary lang ito sa previous articles. The relation between the partners is
essentially fiduciary, that is involving trust and confidence. Kaya walang dapat ilihim sa
partnership affairs.
If any of the four enumerated occurs, the partner have the right to a formal account as to
partnership affairs.
Ang sample sa pang apat is, when one of the partners assigned sa ibang bansa. Since
malayo siya sa partnership head office, pag dating niya sa bansa, may right siya to a formal
account of partnership affairs.
A formal account is necessary incident to the dissolution of a partnership.
CHAPTER 2 Obligations of the Partners
SECTION 1
Obligations of the Partners Among Themselves
Article 1784. A partnership begins from the moment of the execution of the contract,
unless it is otherwise stipulated. (1679)
Article 1785. When a partnership for a fixed term or particular undertaking is continued
after the termination of such term or particular undertaking without any express
agreement, the rights and duties of the partners remain the same as they were at such
termination, so far as is consistent with a partnership at will.
A continuation of the business by the partners or such of them as habitually acted therein
during the term, without any settlement or liquidation of the partnership affairs, is prima
facie evidence of a continuation of the partnership. (n)
Article 1786. Every partner is a debtor of the partnership for whatever he may have
promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard to specific and
determinate things which he may have contributed to the partnership, in the same cases
and in the same manner as the vendor is bound with respect to the vendee. He shall also
be liable for the fruits thereof from the time they should have been delivered, without the
need of any demand. (1681a)
Article 1787. When the capital or a part thereof which a partner is bound to contribute
consists of goods, their appraisal must be made in the manner prescribed in the contract
of partnership, and in the absence of stipulation, it shall be made by experts chosen by
the partners, and according to current prices, the subsequent changes thereof being for
account of the partnership. (n)
Article 1788. A partner who has undertaken to contribute a sum of money and fails to do
so becomes a debtor for the interest and damages from the time he should have complied
with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers, and
his liability shall begin from the time he converted the amount to his own use. (1682)
Article 1789. An industrial partner cannot engage in business for himself, unless the
partnership expressly permits him to do so; and if he should do so, 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, with a right to damages in either case. (n)
Article 1790. Unless there is a stipulation to the contrary, the partners shall contribute
equal shares to the capital of the partnership.
(n)
Article 1791. If there is no agreement to the contrary, in case of an imminent loss of the
business of the partnership, any partner who refuses to contribute an additional share to
the capital, except an industrial partner, to save the venture, shall he obliged to sell his
interest to the other partners. (n)
Article 1792. If a partner authorized to manage collects a demandable sum which was
owed to him in his own name, from a person who owed the partnership another sum also
demandable, the sum thus collected shall be applied to the two credits in proportion to
their amounts, even though he may have given a receipt for his own credit only; but
should he have given it for the account of the partnership credit, the amount shall be fully
applied to the latter.
The provisions of this article are understood to be without prejudice to the right granted
to the other debtor by article 1252, but only if the personal credit of the partner should be
more onerous to him. (1684)
Article 1793. A partner who has received, in whole or in part, his share of a partnership
credit, when the other partners have not collected theirs, shall be obliged, if the debtor
should thereafter become insolvent, to bring to the partnership capital what he received
even though he may have given receipt for his share only. (1685a)
Article 1794. Every partner is responsible to the partnership for damages suffered by it
through his fault, and he cannot compensate them with the profits and benefits which he
may have earned for the partnership by his industry. However, the courts may equitably
lessen this responsibility if through the partner's extraordinary efforts in other activities of
the partnership, unusual profits have been realized. (1686a)
Article 1795. The risk of specific and determinate things, which are not fungible,
contributed to the partnership so that only their use and fruits may be for the common
benefit, shall be borne by the partner who owns them.
If the things contribute are fungible, or cannot be kept without deteriorating, or if they
were contributed to be sold, the risk shall be borne by the partnership. In the absence of
stipulation, the risk of the things brought and appraised in the inventory, shall also be
borne by the partnership, and in such case the claim shall be limited to the value at which
they were appraised. (1687)
Article 1796. 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, from
the time the expense are made; 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 for risks
in consequence of its management. (1688a)
Article 1797. The losses and profits shall be distributed in conformity with the agreement.
If only the share of each partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion.
In the absence of stipulation, the share of each partner in the profits and losses shall be in
proportion to what he may have contributed, but the industrial partner shall not be liable
for the losses. As for the profits, the industrial partner shall receive such share as may be
just and equitable under the circumstances. If besides his services he has contributed
capital, he shall also receive a share in the profits in proportion to his capital. (1689a)
Article 1798. If the partners have agreed to intrust to a third person the designation of the
share of each one in the profits and losses, 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, or who has not impugned the same within a period of three
months from the time he had knowledge thereof, complain of such decision.
The designation of losses and profits cannot be intrusted to one of the partners. (1690)
Article 1799. A stipulation which excludes one or more partners from any share in the
profits or losses is void. (1691)
Article 1800. The partner who has been appointed manager in the articles of partnership
may execute all acts of administration despite the opposition of his partners, unless he
should act in bad faith; and his power is irrevocable without just or lawful cause. The vote
of the partners representing the controlling interest shall be necessary for such revocation
of power.
A power granted after the partnership has been constituted may be revoked at any time.
(1692a)
Article 1801. If two or more partners have been intrusted with the management of the
partnership without specification of their respective duties, or without a stipulation that
one of them shall not act without the consent of all the others, each one may separately
execute all acts of administration, but if any of them should oppose the acts of the others,
the decision of the majority shall prevail. In case of a tie, the matter shall be decided by
the partners owning the controlling interest. (1693a)
Article 1802. In case it should have been stipulated that none of the managing partners
shall act without the consent of the others, the concurrence of all shall be necessary for
the validity of the acts, and the absence or disability of any one of them cannot be
alleged, unless there is imminent danger of grave or irreparable injury to the partnership.
(1694)
Article 1803. When the manner of management has not been agreed upon, 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,
without prejudice to the provisions of article 1801.
(2) None of the partners may, without the consent of the others, make any important
alteration in the immovable property of the partnership, even if it may be useful to the
partnership. But if the refusal of consent by the other partners is manifestly prejudicial to
the interest of the partnership, the court's intervention may be sought. (1695a)
Article 1804. Every partner may associate another person with him in his share, but the
associate shall not be admitted into the partnership without the consent of all the other
partners, even if the partner having an associate should be a manager. (1696)
Article 1805. The partnership books shall be kept, subject to any agreement between the
partners, at the principal place of business of the partnership, and every partner shall at
any reasonable hour have access to and may inspect and copy any of them.

(n)
Article 1806. 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. (n)
Article 1807. Every partner must account to the partnership for any benefit, 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, conduct, or liquidation of the partnership
or from any use by him of its property. (n)
Article 1808. 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, unless there is a
stipulation to the contrary.
Any capitalist partner violating this prohibition shall bring to the common funds any
profits accruing to him from his transactions, and shall personally bear all the losses. (n)
Article 1809. 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; (2) If the right exists under the terms of any agreement;
(3) As provided by article 1807;
(4) Whenever other circumstances render it just and reasonable. (n)