PARTNERSHIP NOTES

CHAPTER 1
GENERAL PROVISIONS
Article 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.
CHARACTR!"T!C" #$ TH C#%TRACT
&. !t is consensual, nominate, principal, bilateral
or multilateral, onerous, and preparatory
'. (oney, property, and industry must be
contributed to a common fund
)credit and goodwill* economic goodwill or
commercial credit* may be contributed but not
political credit+
,. The ob-ect must be lawful
.. There must be an intention to divide the profit
among the partners since the firm is for the
common benefit or interest of the partners
/. There must be affection societas* the desire to
form active union with people among whom
there exist mutual confidence and trust
)delectus personarum+
0. A new personality must arise distinct from the
separate personality of each of the members
1ART%R"H!1 2 C#R1#RAT!#%
&. How created
A partnership is created by agreement of the
parties.
A corporation is created by the state in the
form of a special character or a general
enabling law
'. How long it exists
1* no time limit, except agreement of the
parties
C* not more than /3 years, may be reduced
but never extended
,. 4iability to strangers
1*may be liable with their private property
beyond their contribution to the firm
C* liable only for their payment of their
subscribed stoc5
.. Transferability of interest
1* the transfer of his interest to another does
not ma5e the transferee a partner unless all
other partners consent
C* transfer of interest ma5es the transferee a
stoc5holder, even without the consent of the
others
/. Ability to bind firm
1* generally, partners acting on behalf of the
partnership are agents thereof6 conse7uently
they can bind the firm and the partners
C* generally the stoc5holders cannot bind the
corporation since they are not agents thereof
0. (ismanagement
1* a partner can sue a partner who
mismanages
C* a stoc5holder cannot sue the board of
director who mismanages8 the action must be
in the name of the corporation
9. %ationality
1* national of the country it was created
C* national of the country under whose laws it
was incorporated, except for wartime purposes
or for the ac7uisition of land, natural resources
and the operation of public utilities
:. Attainment of legal personality
1* firm becomes a -uridical personality from
the time the contract begins
C* firm becomes a -uridical person from the
time it is registered with the "C and all
re7uisites have been complied with
;. <issolution
1* death, retirement, insolvency, civil
interdiction, or insanity of partner dissolves
the firm
C* such cause do not dissolve the firm
1ART%R"H!1 2 C1=
&. How created
'. 4aw that governs
,. 4egal personality
.. Commencement of the partnership
/. 1urpose
0. <ivision of profits
9. (anagement
:. <issolution
;. 4i7uidation of profits
1ART%R"H!1 2 C#* #>%R"H!1
&. CRAT!#%
'. ?uridical
,. 1urpose
.. Agency or representation
/. Transfer of interest
0. 4ength of existence if created by contract
9. 1rofits
:. <issolution
;. $orm
1ART%R"H!1 2 ?#!%T "T#C@ C#(1A%A
&. Composition
'. <ivision of capital
,. (anagement
.. 4iability
/. ffect of transfer of interest
1ART%R"H!1 2 "#C!A4 #R=A%!BAT!#%
&. Contribution
'. 4iability for debts
,. 1urpose or ob-ectives
.. 1ersonality
/.
1ART%R"H!1 2 BC"!%"" TRC"T
Business trust is created when certain person entrust
their property or money to other who will manage the
same for the former.
!nvestors are bound only to the extent of their
contribution.
1ART%R"H!1 2 T%A%CA
&. Agency
'. 1ersonality
1ART%R"H!1 2 A=%CA
1ART%R"H!1 2 ?#!%T A<2%TCRD ?#!%T ACC#C%T"
1ART%R"H!1 2 "A%<!CAT
CA1AC!TA T# BC#( A 1ART%R
&. =enerally, person capacitated to enter into
contract relations may become a partner
'. Cnemancipated minor cannot contract without
the consent of his parents
,. A married woman cannot contribute con-ugal
funds without her husbandEs consent
.. A partnership can form another partnership
/. A ma-ority view is that a corporation cannot
become a partner o the grounds of public
policy, otherwise people other than its officer,
may be able to bind it
"evilla v, CA
A partnership presupposes generally a parityof
standing between partners, in which each party
has an e7ual proprietary interest in the capital or
property contributed, and where each party
exercises e7ual rights in the conduct of business.
Article 1768.
The partnership has a -uridical personality separate
and distinct from that of each of the partners, even in
case of failure to comply with the re7uirements of
article &99', first paragraph.
(Article 1772. Every contract of partnership having a
capital of three thousand pesos or more, in money or
property, shall appear in a public instrument, which
must be recorded in the Office of the ecurities and
E!change "ommission.#
The partnership in general can8
&. Ac7uire and possess property of all 5inds
'. !ncur obligations
,. Bring civil and criminal actions
.. Be ad-udged insolvent even if the individual
member are financially solvent
Cnless he is personally sued, a partner has no right to
ma5e a separate appearance in court, if the
partnership being sued in already represented.
!f an association is not lawfully organiFed as a
partnership, it possesses no legal personality therefore
, it cannot sue as such.
#ne who enters into a contract with a GpartnershipH as
such cannot when sued later on for recovery of the
debt allege the lac5 of legal personality on the part of
the firm, even if indeed it has no personality.
)borrower as the case may be is in estoppel+
$rom the viewpoint of private international law,
whether the partnership has -uridical personality or not
depends on its personal law. The personal law of the
partnership is the law of the place where the
partnership was recogniFed.
Article 1769.
!n determining whether a partnership exists, these
rules shall apply8
)&+ xcept as provided by article &:'/, persons who
are not partners as to each other are not partners as
to third persons6
)'+ Co*ownership or co*possession does not of itself
establish a partnership, whether such*co*owners or co*
possessors do or do not share any profits made by the
use of the property6
),+ The sharing of gross returns does not of itself
establish a partnership, whether or not the persons
sharing them have a -oint or common right or interest
in any property from which the returns are derived6
).+ The receipt by a person of a share of the profits of
a business is prima facie evidence that he is a partner
in the business, but no such inference shall be drawn if
such profits were received in payment8
)a+ As a debt by installments or otherwise6
)b+ As wages of an employee or rent to a landlord6
)c+ As an annuity to a widow or representative of a
deceased partner6
)d+ As interest on a loan, though the amount of
payment vary with the profits of the business6
)e+ As the consideration for the sale of a goodwill
of a business or other property by installments or
otherwise.
1R##$ %<< T# "TAB4!"H A 1ART%R"H!1
%o definite criterion can be set up except that all
the characteristics of the contract must be proved
as being present.
Article 1770.
A partnership must have a lawful ob-ect or purpose,
and must be established for the common benefit or
interest of the partners.
>hen an unlawful partnership is dissolved by a -udicial
decree, the profits shall be confiscated in favor of the
"tate, without pre-udice to the provisions of the 1enal
Code governing the confiscation of the instruments and
effects of a crime.
Cnlawful ob-ect* void ab initio
Article 1771.
A partnership may be constituted in any form, except
where immovable property or real rights are
contributed thereto, in which case a public instrument
shall be necessary.
(Article 1$%7. &f the law re'uires a document or other
special form, as in the acts and contracts enumerated
in the following article, the contracting parties may
compel each other to observe that form, once the
contract has been perfected. (his right may be
e!ercised simultaneously with the action upon the
contract.
Article 1$%). (he following must appear in a public
document*
(1# Acts and contracts which have for their ob+ect the
creation, transmission, modification or e!tinguishment
of real rights over immovable property, sales of real
property or of an interest therein are governed by
articles 1-.$, /o. 2, and 1-.%,
(2# (he cession, repudiation or renunciation of
hereditary rights or of those of the con+ugal
partnership of gains,
($# (he power to administer property, or any other
power which has for its ob+ect an act appearing or
which should appear in a public document, or should
pre+udice a third person,
(-# (he cession of actions or rights proceeding from an
act appearing in a public document.
All other contracts where the amount involved e!ceeds
five hundred pesos must appear in writing, even a
private one. 0ut sales of goods, chattels or things in
action are governed by articles, 1-.$, /o. 2 and
1-.%.#
(Article 1-.$. (he following contracts are
unenforceable, unless they are ratified*
(1# (hose entered into in the name of another person
by one who has been given no authority or legal
representation, or who has acted beyond his powers,
(2# (hose that do not comply with the tatute of
1rauds as set forth in this number. &n the following
cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing, and
subscribed by the party charged, or by his agent,
evidence, therefore, of the agreement cannot be
received without the writing, or a secondary evidence
of its contents*
(a# An agreement that by its terms is not to be
performed within a year from the ma2ing thereof,
(b# A special promise to answer for the debt, default,
or miscarriage of another,
(c# An agreement made in consideration of marriage,
other than a mutual promise to marry,
(d# An agreement for the sale of goods, chattels or
things in action, at a price not less than five hundred
pesos, unless the buyer accept and receive part of
such goods and chattels, or the evidences, or some of
them, of such things in action or pay at the time some
part of the purchase money, but when a sale is made
by auction and entry is made by the auctioneer in his
sales boo2, at the time of the sale, of the amount and
2ind of property sold, terms of sale, price, names of
the purchasers and person on whose account the sale
is made, it is a sufficient memorandum,
(e# An agreement for the leasing for a longer period
than one year, or for the sale of real property or of an
interest therein,
( f # A representation as to the credit of a third person.
($# (hose where both parties are incapable of giving
consent to a contract.
Article 1-.%. "ontracts infringing the tatute of
1rauds, referred to in /o. 2 of article 1-.$, are ratified
by the failure to ob+ect to the presentation of oral
evidence to prove the same, or by the acceptance of
benefit under them.#
Article 1772.
very contract of partnership having a capital of three
thousand pesos or more, in money or property, shall
appear in a public instrument, which must be recorded
in the #ffice of the "ecurities and xchange
Commission.
$$CT #$ %#%*R=!"TRAT!#%*
* partnership is still a valid one, and therefore
has legal personality
* if registration is needed or desired, any of the
partners of a valid partnership can compel he
others to execute the needed public instrument
and subse7uently cause its registration
Article 1773.
A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and
attached to the public instrument.
RIC!R(%T >HR !((#2AB41R#1RTA !"
C#%TR!BCT<
&. there must be a public instrument regarding
the partnership
'. the inventory of the realty must be made,
signed by the parties, and attached to the
public instrument
The transfer of the land to the partnership must be
duly recoded in the Registry of 1roperty to ma5e the
transfer effective insofar as the third person is
concerned.
Article 1774.
Any immovable property or an interest therein may be
ac7uired in the partnership name. Title so ac7uired can
be conveyed only in the partnership name.
"A( CA% A114A A4"# T# 1R"#%A4TA.
A4!%" CA%%#T #>% 4A%<", >HTHR 1CB4!C #R
1R!2AT, JC1T THR#C=H HR<!TAA
"CCC""!#%.
4!(!TAT!#% !% ACIC!"!T!#%8
A partnership cannot8
&. ac7uire, lease or hold public agriculutural lands
in excess of &3'. hectares
'. lease public lands adapted for graFing in excess
of '333 hectares
Article 177.
Associations and societies, whose articles are 5ept
secret among the members, and wherein any one of
the members may contract in his own name with third
persons, shall have no -uridical personality, and shall
be governed by the provisions relating to co*
ownership.
Article 1776.
As to its ob-ect, a partnership is either universal or
particular.
As regards the liability of the partners, a partnership
may be general or limited.
Article 1777.
A universal partnership may refer to all the present
property or to all the profits.
Article 1778.
A partnership of all present property is that in which
the partners contribute all the property which actually
belongs to them to a common fund, with the intention
of dividing the same among themselves, as well as all
the profits which they may ac7uire therewith.
Article 1779.
!n a universal partnership of all present property, the
property which belonged to each of the partners at the
time of the constitution of the partnership, becomes
the common property of all the partners, as well as all
the profits which they may ac7uire therewith.
A stipulation for the common en-oyment of any other
profits may also be made6 but the property which the
partners may ac7uire subse7uently by inheritance,
legacy, or donation cannot be included in such
stipulation, except the fruits thereof.
Article 1780.
A universal partnership of profits comprises all that the
partners may ac7uire by their industry or wor5 during
the existence of the partnership.
(ovable or immovable property which each of the
partners may possess at the time of the celebration of
the contract shall continue to pertain exclusively to
each, only the usufruct passing to the partnership.
<!"T!%CT!#% B>% TH T># @!%<" #$
C%!2R"A4 1ART%R"H!1
A44 1R#$!T" A44 1R"%T 1R#1RTA
#nly the usufruct of the
properties of the partners
becomes C#((#%
1R#1RTA )owned by
them and the
partnership+6 na5ed
ownership is retained by
each of the partners
All the property actually
belonging to the partners
are C#%TR!BCT< K and
said properties become
C#((#% 1R#1RTA
)owned by all the
partners and by the
partnership
All profits ac7uired by the
industry or wor5 of the
partners become common
property )regardless of
whether or not said profits
were obtained through
the usufruct contributed+
As a rule aside from the
contributed properties
only the profits of said
contributed C#((#%
1R#1RTA )not other
profits+
RA"#%" >HA $CTCR 1R#1RT!" CA%%#TB
(A<8
&. contracts regarding successional rights cannot
be made
'. a partnership demands that the contributed
things be determinate, 5nown and certain
,. universal partnership of all present properties
really implies a donation, and it is well 5nown
that generally future property cannot be
donated
Article 1781.
Articles of universal partnership, entered into without
specification of its nature, only constitute a universal
partnership of profits.
Article 1782.
1ersons who are prohibited from giving each other any
donation or advantage cannot enter into universal
partnership.
1R"#%" >H# T#=THR CA%%#T $#R( A
1ART%R"H!1
&. husband and wife )spouses however can enter
into particular partnership and be members
therof+
'. those guilty of the crime of concubinage and
adultery
,. those guilty of the same criminal offense, if the
partnership was entered into in consideration
of the same
A partnership violating this article is null and void. %o
legal personality is ac7uired.
Article 1783.
A particular partnership has for its ob-ect determinate
things, their use or fruits, or a specific underta5ing, or
the exercise of a profession or vocation.
#B?CT#$ 1ART!CC4AR 1ART%R"H!1
&. determinate things
'. their use or fruits
,. specific underta5ing
.. exercise of profession or vocation
CHAPTER 2
O!LIGATIONS O" THE PARTNERS
SECTION 1
O!LIGATIONS O" THE PARTNERS A#ONG
THE#SELVES
"#( #B4!=AT!#%" #$ A 1ART%R
&. to give his contribution
'. not to convert firm money or property for his
own use
,. not to engage in unfair competition with his
own firm
.. to account for and hold as trustee
unauthoriFed personal profits
/. pay for damages caused by his fault
0. duty to credit to the firm payment made by a
debtor who owes him and the firm
9. to share with the other partners the share of
the partnership credit which he has received
from and insolvent debtor
"#( R!=HT" #$ A 1ART%R
&. property rights
a. rights in specific partnership property
b. interest in the partnership
c. right to participate in the management
'. right to associate with another person in his
share
,. right to inspect and copy partnership boo5s
.. right to command formal account
/. right to as5 for the dissolution of the firm at
the proper time
Article 1784.
A partnership begins from the moment of the
execution of the contract, unless it is otherwise
stipulated.
Article 178.
>hen a partnership for a fixed term or particular
underta5ing is continued after the termination of such
term or particular underta5ing 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 li7uidation of the partnership
affairs, is prima facie evidence of a continuation of the
partnership.
Article 1786.
very 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.
, !(1#RTA%T <CT!" #$ A 1ART%R
&. to contribute what he had promised
'. to warrant against eviction
,. to deliver the fruits of what should have been
delivered
THR !" 2!CT!#% >H%2R by final -udgement
based on a right prior to the sale or an act imputable
to the partner, the partnership is deprived of the whole
or the part of the thing purchased
Article 1787.
>hen 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 subse7uent changes
thereof being for account of the partnership.
Article 1788.
A partner who has underta5en 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
ta5en from the partnership coffers, and his liability
shall begin from the time he converted the amount to
his own use.
Article 1789.
An industrial partner cannot engage in business for
himself, unless the partnership expressly permits him
to do so6 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.
Article 1790.
Cnless there is a stipulation to the contrary, the
partners shall contribute e7ual shares to the capital of
the partnership.
Article 1791.
!f 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.
>H% A CA1!TA4!"T !" #B4!=< T# "44 H!"
!%TR"T !% TH 1ART%R"H!1
&. if there is an imminent loss of the business of the
partnership,
'. he refuses to contribute an additional share to the
capital,
,. and provided further that there is no stipulation to
the contrary
!%<C"TR!A4 1ART%R !" J(1T<.
Article 1792.
!f a partner authoriFed 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 only6 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 pre-udice to the right granted to the other
debtor by article &'/', but only if the personal credit
of the partner should be more onerous to him. )&0:.+
(Article 12%2. 3e who has various debts of the same
2ind in favor of one and the same creditor, may
declare at the time of ma2ing the payment, to which of
them the same must be applied. 4nless the parties so
stipulate, or when the application of payment is made
by the party for whose benefit the term has been
constituted, application shall not be made as to debts
which are not yet due.
&f the debtor accepts from the creditor a receipt in
which an application of the payment is made, the
former cannot complain of the same, unless there is a
cause for invalidating the contract. (1172a##
RIC!"!T" $#R TH!" ART!C4 T# A114A
&. there must be ' debts
'. both sums are demandable
,. the collecting partner is the managing partner
<#" %#T A114A !$ TH 1ART%R C#44CT!%= !"
%#T A (A%A=!%= 1ART%R.
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. )&0:/a+
C#(1AR!"#%
Art &9;' Art &9;,
Two debts #ne debt only )firm
credit+
Applies only to managing
partner
Applies to any partner
Article 1794.
very 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 e7uitably lessen
this responsibility if through the partnerLs
extraordinary efforts in other activities of the
partnership, unusual profits have been realiFed.
)&0:0a+
B$#R A 1ART%R "C" A%#THR for alleged
fraudulent management and resultant damages in
li7uidation must first be effected to 5now the extent of
the damage.
!f a negligent partner is already dead, suit for recovery
may be had against his estate.
Article 179.
The ris5 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.
!f the things contribute are fungible, or cannot be 5ept
without deteriorating, or if they were contributed to be
sold, the ris5 shall be borne by the partnership. !n the
absence of stipulation, the ris5 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.
)&0:9+
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 made6 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 ris5s in conse7uence of
its management. )&0::a+
A 1ART%R >H# A<2%C" $C%<" from his own
poc5et for taxes on the partnership land, must be
reimbursed the same from the partnership assets. !f
the firm is insolvent, the other partners must
reimburse the paying partner except for the latterEs
proportionate share in the taxes.
Article 1797.
The losses and profits shall be distributed in conformity
with the agreement. !f 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.
!n 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
-ust and e7uitable under the circumstances. !f besides
his services he has contributed capital, he shall also
receive a share in the profits in proportion to his
capital. )&0:;a+
H#> 1R#$!T" AR <!"TR!BCT<
&. according to agreement
'. if none, according to the amount of contribution
H#> 4#""" AR <!"TR!BCT<
&. according to agreement as to losses
'. if none, according to agreement as to profits
,. if none, according to the amount of contribution
!%<C"TR!A4 1ART%RE" 1R#$!T
* -ust and e7uitable share
!%<C"TR!A4 1ART%RE" 4#"""
* while he may be held liable by third persons,
still he can recover whatever he is made to
give them, from the other partners, for he is
J(1T< $R#( 4#""", with or without
stipulation
Article 1798.
!f 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 ine7uitable. !n 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
5nowledge thereof, complain of such decision.
The designation of losses and profits cannot be
intrusted to one of the partners. )&0;3+
Article 1799.
A stipulation which excludes one or more partners
from any share in the profits or losses is void. )&0;&+
#% JC1T!#% !" !% TH CA" of the industrial
partner whom the law itself excludes from loses
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 faith6 and his power is
irrevocable without -ust 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 revo5ed at any time. )&0;'a+
' (#<" #$ A11#!%T(%T #$ (A%A=R
&. appointment in the articles of the partnership
'. appointment made in an instrument other than
the articles of the partnership
* power under this may be revo5ed at any
time, with or without -ust cause
Article 1801.
!f 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 ma-ority shall
prevail. !n case of a tie, the matter shall be decided by
the partners owning the controlling interest. )&0;,a+
Article 1802.
!n 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 in-ury to the
partnership. )&0;.+
Article 1803.
>hen the manner of management has not been
agreed upon, the following rules shall be observed8
)&+ All the partners shall be considered agents and
whatever any one of them may do alone shall bind the
partnership, without pre-udice to the provisions of
article &:3&.
)'+ %one of the partners may, without the consent of
the others, ma5e 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 pre-udicial
to the interest of the partnership, the courtLs
intervention may be sought. )&0;/a+
MA4TRAT!#%E contemplates useful expenses, not
necessary ones.
Article 1804.
very 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. )&0;0+
Article 180.
The partnership boo5s shall be 5ept, sub-ect 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+
TH ART!C4 1R"C11#"" A Ggoing partnership,H not
one pending for dissolution, for here the right depends
on the courtEs discretion6 nor to one dissolved, for here
although the boo5s belong to all the partners, still no
single partner is duty bound to continue the place of
business for the benefit of the others.
Article 1806.
1artners 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.
very 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 li7uidation 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 5ind 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+
!%"TA%C" >H% THR !" %# 1R#H!B!T!#%
&. when it id expressly stipulated that the capitalist
partner can so engagehimself
'. when the other partners expressly allow him to
do so
,. when the other partners impliedly allowed him
to do so
.. when the company ceases to be engaged in
business
/. when the general* capitalist partner becomes
merely a limited partner in a competitive
enterprise for after all, a limited partner does
not manage
Article 1809.
Any partner shall have the right to a formal account as
to partnership affairs8
)&+ !f he is wrongfully excluded from the partnership
business or possession of its property by his co*
partners6
)'+ !f the right exists under the terms of any
agreement6
),+ As provided by article &:396
).+ >henever other circumstances render it -ust and
reasonable. )n+
SECTION 2
Pr$%ert& Ri'(t) $* + P+rt,er
Article 1810.
The property rights of a partner are8
)&+ His rights in specific partnership property6
)'+ His interest in the partnership6 and
),+ His right to participate in the management )n+
Article 1811.
A partner is co*owner with his partners of specific
partnership property.
The incidents of this co*ownership are such that8
)&+ A partner, sub-ect to the provisions of this Title and
to any agreement between the partners, has an e7ual
right with his partners to possess specific partnership
property for partnership purposes6 but he has no right
to possess such property for any other purpose without
the consent of his partners6
)'+ A partnerLs right in specific partnership property is
not assignable except in connection with the
assignment of rights of all the partners in the same
property6
),+ A partnerLs right in specific partnership property is
not sub-ect to attachment or execution, except on a
claim against the partnership. >hen partnership
property is attached for a partnership debt the
partners, or any of them, or the representatives of a
deceased partner, cannot claim any right under the
homestead or exemption laws6
).+ A partnerLs right in specific partnership property is
not sub-ect to legal support under article ';&. )n+
!$ TH!" RC4 !" 2!#4AT<, the assignment is 2#!<.
Article 1812.
A partnerLs interest in the partnership is his share of
the profits and surplus. )n+
Article 1813.
A conveyance by a partner of his whole interest in the
partnership does not of itself dissolve the partnership,
or, as against the other partners in the absence of
agreement, entitle the assignee, during the
continuance of the partnership, to interfere in the
management or administration of the partnership
business or affairs, or to re7uire any information or
account of partnership transactions, or to inspect the
partnership boo5s6 but it merely entitles the assignee
to receive in accordance with his contract the profits to
which the assigning partner would otherwise be
entitled. However, in case of fraud in the management
of the partnership, the assignee may avail himself of
the usual remedies.
!n case of a dissolution of the partnership, the
assignee is entitled to receive his assignorLs interest
and may re7uire an account from the date only of the
last account agreed to by all the partners. )n+
$$CT #$ C#%2AA%C BA 1ART%R #$ H!"
!%TR"T !% TH 1ART%R"H!1
a. if a partner conveys his >H#4 interest in the
partnership, either may happen8
&. partnership will remain
'. partnership may be dissolved
b. the assignee does not become a partner, assignor is
still the partner with the right to demand, accounting,
and settlement
c. the assignee cannot even interfere in the
management or administration of the partnership
business or affairs
d. the assignee cannot also demand8
&. information6
'. accounting6
,. inspection of the partnership boo5s.
R!=HT" #$ TH A""!=%
&. to get whatever profits the assignor* partner would
have obtained
'. to avail himself of the usual remedies in case of
fraud in the management
,. to as5 for annulment of the contract of assignment
if he was induced to enter into it thru any of the
vices of consent or if he himself was incapacitated
to give consent
.. to demand accounting
Article 1814.
>ithout pre-udice to the preferred rights of partnership
creditors under article &:'9, on due application to a
competent court by any -udgment creditor of a
partner, the court which entered the -udgment, or any
other court, may charge the interest of the debtor
partner with payment of the unsatisfied amount of
such -udgment debt with interest thereon6 and may
then or later appoint a receiver of his share of the
profits, and of any other money due or to fall due to
him in respect of the partnership, and ma5e all other
orders, directions, accounts and in7uiries which the
debtor partner might have made, or which the
circumstances of the case may re7uire.
The interest charged may be redeemed at any time
before foreclosure, or in case of a sale being directed
by the court, may be purchased without thereby
causing a dissolution8
)&+ >ith separate property, by any one or more of the
partners6 or
)'+ >ith partnership property, by any one or more of
the partners with the consent of all the partners whose
interests are not so charged or sold.
%othing in this Title shall be held to deprive a partner
of his right, if any, under the exemption laws, as
regards his interest in the partnership. )n+
(Article 1)27. (he creditors of the partnership shall be
preferred to those of each partner as regards the
partnership property. 5ithout pre+udice to this right,
the private creditors of each partner may as2 the
attachment and public sale of the share of the latter in
the partnership assets. (n##
SECTION 3
O-li'+ti$,) $* t(e P+rt,er) .it( Re'+r/ t$
T(ir/ Per)$,)
Article 181.
very partnership shall operate under a firm name,
which may or may not include the name of one or
more of the partners.
Those who, not being members of the partnership,
include their names in the firm name, shall be sub-ect
to the liability of a partner. )n+
Article 1816.
All partners, including industrial ones, shall be liable
pro rata with all their property and after all the
partnership assets have been exhausted, for the
contracts which may be entered into in the name and
for the account of the partnership, under its signature
and by a person authoriFed to act for the partnership.
However, any partner may enter into a separate
obligation to perform a partnership contract. )n+
Article 1817.
Any stipulation against the liability laid down in the
preceding article shall be void, except as among the
partners. )n+
Article 1818.
very partner is an agent of the partnership for the
purpose of its business, and the act of every partner,
including the execution in the partnership name of any
instrument, for apparently carrying on in the usual way
the business of the partnership of which he is a
member binds the partnership, unless the partner so
acting has in fact no authority to act for the
partnership in the particular matter, and the person
with whom he is dealing has 5nowledge of the fact that
he has no such authority.
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 authoriFed
by the other partners.
xcept when authoriFed by the other partners or
unless they have abandoned the business, one or more
but less than all the partners have no authority to8
)&+ Assign the partnership property in trust for
creditors or on the assigneeLs promise to pay the debts
of the partnership6
)'+ <ispose of the good*will of the business6
),+ <o any other act which would ma5e it impossible to
carry on the ordinary business of a partnership6
).+ Confess a -udgment6
)/+ nter into a compromise concerning a partnership
claim or liability6
)0+ "ubmit a partnership claim or liability to
arbitration6
)9+ Renounce a claim of the partnership.
%o act of a partner in contravention of a restriction on
authority shall bind the partnership to persons having
5nowledge of the restriction. )n+
>H% CA% A 1ART%R B!%< TH 1ART%R"H!1
RIC!"!T"8
&. when he is expressly authoriFed or impliedly
authoriFed
'. when he acts in behalf and in the name of the
partnership
!nstances of implied authoriFation8
a. when the other partners do not ob-ect, although
they have 5nowledge of the act6
b. when the act is for Gapparently carrying on in
the usual way the business of the partnership.H
) This is binding upon the firm even if the
partner was not authoriFed, provided that the
third party is in good faith.+
>H% >!44 TH ACT #$ TH 1ART%R %#T B!%< TH
1ART%R"H!1
&. when although for Gapparently carrying on in the
usual way the business of the partnership,H still the
party has in fact %# ACTH#R!TA, and the ,
rd
party
5nows that the partner has no authority.
'. when the act in not for Gapparently carrying on in
the usual way the business of the partnership,H and
the partner has no authority. )Here, whether or not
the ,rd party 5nows of the lac5 of authority is not
important. As long as there was really no authority,
the firm is not bound.+
Article 1819.
>here title to real property is in the partnership name,
any partner may convey title to such property by a
conveyance executed in the partnership name6 but the
partnership may recover such property unless the
partnerLs act binds the partnership under the
provisions of the first paragraph of article &:&:, or
unless such property has been conveyed by the
grantee or a person claiming through such grantee to a
holder for value without 5nowledge that the partner, in
ma5ing the conveyance, has exceeded his authority.
>here title to real property is in the name of the
partnership, a conveyance executed by a partner, in
his own name, passes the e7uitable interest of the
partnership, provided the act is one within the
authority of the partner under the provisions of the
first paragraph of article &:&:.
>here title to real property is in the name of one or
more but not all the partners, and the record does not
disclose the right of the partnership, the partners in
whose name the title stands may convey title to such
property, but the partnership may recover such
property if the partnersL act does not bind the
partnership under the provisions of the first paragraph
of article &:&:, unless the purchaser or his assignee, is
a holder for value, without 5nowledge.
>here the title to real property is in the name of one
or more or all the partners, or in a third person in trust
for the partnership, a conveyance executed by a
partner in the partnership name, or in his own name,
passes the e7uitable interest of the partnership,
provided the act is one within the authority of the
partner under the provisions of the first paragraph of
article &:&:.
>here 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. )n+
Article 1820.
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. )n+
R"TR!CT!#%" #% TH RC48
&. an admission 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.
>H% !" A 1R2!#C" A<(!""!#% #$ A 1ART%R
A<(!""!B4 !% 2!<%C A=A!%"T TH
1ART%R"H!1N
* >hen it was made within the scope of the
partnership, and during its existence, provided
of course that the existence of the partnership
is first proved by evidence other than such act
or declaration