RISK OF LOSS

1) Specific thing before delivery and only the

partner
use is transferred

2) Specific thing after delivery and only the

partner
use is transferred

3) Specific things before delivery and

partner
ownership is transferred

4) Specific thing after delivery and the

Partnership
ownership is transferred

5) Fungible thing Partnership

6) Thing contributed is to be sold Partnership

7) Thing contributed was appraised Partnership

Generic things before delivery partner

The Pig Situation (Art. 1796)

A partner who incurred expenses for the benefit of the partnership is entitled to reimbursement.

SHARING OF PARTNERS

Rules on Contribution

Capitalist Partner Industrialist Partner

1) According to the agreement 1) All his industry necessary to the

2) No agreement – Equal partnership

Rules on Profit-Sharing

Capitalist Partner Industrialist Partner

1) According to the agreement

1) Just and equitable under the
2) No agreement – in proportion to their circumstances
contribution

Rules on Sharing of Loss

Capitalist Partner Industrialist Partner

1) According to the agreement

2) Presence of agreement as to profit-
sharing – apply the profit-sharing
ratio
3) No agreement – in proportion to their
contribution
1) No share in the losses
Rationale: By contributing his entire
industry it’s as if he already incurred
a loss

Situation 1: Situation 2:
Partners ----- Contribution ----- Profit Partners ----- Contribution ----- Profit
A 50% 40% A 90% 15%
B 40% 50% B 5% 80%
C 10% 10% C 5% 5%
In this situation, the sharing of profits is allowed. In this situation, the sharing of profits is no longer
 acceptable.

Rationale: INEQUALITY is not per se prohibited. However, if the inequality is so gross that it borders to the
exclusion of one partner to the profits such is VOID under the law.

Designation by a third person of share in profits and losses

Note: Designation of sharing in the profits and losses can never be intrusted to a partner. (Fairness)
GR: Designation of share of profits and losses can be intrusted to a third person.
E: It can be impugned when manifestly inequitable
E to the E: Could no longer be impugned when:
1) A Partner has begun executing the decision; or
2) It was not impugned within a period of three (3) months from the time of knowledge thereof.

On whom MANAGEMENT is vested?

GR: Partner designated either:
a) In the Articles of Partnership (more powerful); or
b) After the constitution of partnership.
E: If none, all partners are considered managers.

The BLACK Partnership – Partners can change the decision of the other partner such is not an act of
administration. Partner is not allowed to exercise acts of ownership.

Act of Administration – includes act of management, preserving and protecting the assets of the
partnership.

Questioning/Impugning the acts of managing partner (Revocation):

If MP is appointed by articles of partnership:
1) Existence of Just or Lawful cause, and Bad Faith;
2) Vote of the partners representing the controlling interest.

If MP is appointed after the partnership has been constituted:

1) With or without just or lawful cause
2) Vote of the partners representing the controlling interest.

Controlling interest – partner who owns more than 50% of the share in the partnership

Rule if there is no appointed Manager and there are two or more partners:
1) All partners are managers. To his own – partner is limited to his jurisdiction or specified role
2) If there is conflict – majority decides
3) In case of tie – decision of the partner representing the controlling interest
4) Unanimous decision – all must concur, otherwise the act is not valid
EXC: there is imminent danger of grave or irreparable injury to the partnership.
5) Manner of Management has not been agreed upon:
a) All partners shall be considered agent – act of one binds the whole partnership
b) None may make important alterations in the immovable property, even if useful to the
partnership
c) If refusal of consent is manifestly prejudicial – intervention of the court.

Associate (Art. 1805) – a person associated by a partner on the latter’s share in the partnership.
- He is also known as subpartner.
 - He does not become member of the partnership
- He does not acquire the rights of a partner nor liable for its debts.

Right of Access to partnership books:

1) If he is an associate, he cannot ask to inspect such books.
2) If he is a partner, he cannot be permitted to inspect at 1am.
A partner is only allowed to have access to such books and may inspect and copy any of them:
a) At the principal place of business of the partnership, and
b) At any reasonable hour (business hours of the partnership)
Duty to render information (Art. 1806)
Render true and full information of all things affecting the partnership. It must be coupled with
GOOD FAITH.
Prohibition against the Capitalist Partner
Capitalist partner to engage in business is RELATIVE – prohibited from engaging for his own account
in any operation which is the same or similar to the business which the partner is engaged.
Industrial partner is ABSOLUTELY prohibited from engaging in any kind of business.
If an Industrial partner violated the prohibition, remedies are either:
a) Exclude him from the firm + damages; or
b) Avail his benefits he may have + damages.
If a Capitalist partner violated the prohibition, remedies are:
a) He shall bring to the common funds any profits accrued from his transactions; and
b) He shall personally bear the loss.