Agency and Partnership - UP

UP LAW BOC AGENCY CIVIL LAW
CIVIL LAW
AGENCY
364
I. Definition of Agency or actions; and on the part of the agent there

must be an intention to accept the
appointment and act on it, and in the absence
A. AS A TYPE OF CONTRACT of such intent, there is generally no agency.
[Victorias Milling v. CA]
Art 1868. By a contract of agency, a person
binds himself to render some service or to do A.3. BEING A CONTRACT, IT HAS COC
something in representation or on behalf of (1) Consent
another, with the consent or authority of the
But the legal relationship may still arise
latter.
even without consent
A.1. ELEMENTS (STATUTORY): (2) Object: the performance of acts by the
agent in representation of the principal
(a) A person binds himself to render some
(3) Cause: it is presumed to be for
service or to do something
compensation
(b) In representation or on behalf of
another
(c) With the consent or authority of the B. AS A LEGAL RELATIONSHIP
latter
It is possible for an agency to arise even
A.2. ELEMENTS (JURISPRUDENTIAL) without a contract. In such cases, an agency is
(a) There is consent, express or implied of more properly described as a legal
the parties to establish the relationship relationship.
(b) The object is the execution of a juridical
act in relation to a third person It is (a relationship) whereby one party, called
(c) The agent acts as a representative and the principal, authorizes another, called the
not for himself agent, to act for and in his behalf in
(d) The agent acts within the scope of his transactions with third persons. [Rallos v. Felix
authority Go Chan]
Note: the first two elements reflect the C. EFFECTS OF AGENCY

elements given by 1868, while the last two
elements merely limit the acts of the agent, i.e. C.1. INTEGRATION (MERGER) OF THE
violation of these elements does not mean that PERSONALITY OF THE PRINCIPAL AND
no agency was created. THE AGENT
There must be a showing of consent on the C.2. EXTENSION (REPRODUCTION) OF

part of an alleged principal to allow an alleged THE PERSONALITY OF THE PRINCIPAL
agent to act on her behalf. [Bordador v. Luz] THROUGH THE AGENT
Mere closeness of relationship is not
C.3. CONSEQUENCES
tantamount to an agency relationship. [Apex v.
(1) Merger
Southeast Mindanao Mining]
In an agency relationship, the agent, by legal
fiction, becomes the principal, authorized to
(MUTUAL INTENT) On the part of the principal,
perform all acts which the latter would have
there must be an actual intention to appoint or
him do. [Orient Air Services v. CA]
an intention naturally inferable from his words
365
(2) Agent is not a real party in interest

II. Powers
The agent is not a party to the contract
between the principal and the third person. He A. RIGHTS OF AGENTS
is not a real party in interest and cannot
therefore sue in his own behalf on a contract A.1. COMPENSATION
for his principal, except if he is an assignee of
such contract. [Uy and Roxas v. CA] Art. 1875. Agency is presumed to be for a
compensation, unless there is proof to the
(3) Imputed Knowledge contrary.
Knowledge of facts acquired or possessed by
an officer or agent of a corporation in the The effect of this presumption is that an agent
course of his employment, and in relation to does not need to prove that the agency is for a
matters within the scope of his authority, is fee, while the principal must prove that it is not
notice to the corporation, whether he if he contests it.
communicates such knowledge or not.
[Francisco v. GSIS] Art 1909. The agent is responsible not only for
fraud, but also for negligence, which shall be
judged with more or less rigor by the courts,
The theory of imputed knowledge ascribes
according to whether the agency was or was
knowledge of the agent to the principal, not not for a compensation.
the other way around. [Sunace Internation v.
NLRC] Note that an agent is judged with less rigor
when there is no compensation.
The general rule is that the principal is
chargeable with and bound by the knowledge (1) Procuring Cause
of or notice to his agent, received while the
latter was acting as such. The well-established To be entitled to compensation, the agent’s
exception is where the conduct and dealings of services must be the procuring cause of the
the agent are such as to raise a clear transaction, i.e., it must contribute towards
presumption that he will not communicate to bringing about such transaction. [Danon v.
the principal the facts in controversy. [Cosmic Brimo]
Lumber v. CA]
On the other hand, brokers must only show
(4) Bad faith of the Agent is Bad faith of the that they “set the sale in motion” in order to be
Principal [Caram v. Laureta] entitled to their commission. [Tan v. Gullas]
The agent is entitled to commission even if the

(transaction) is consummated after the
revocation of his authority, if the revocation
was done in bad faith by the principal to avoid
payment of commission. [Infante v. Cunanan]
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(2) Test Power:

The Agent may himself be the lender to his
Even if the agent is not the procuring cause of Principal.
the transaction, he may still be awarded a sum
of money if he is “somehow instrumental in (2) Lend Money To
bringing the parties together again and finally Conditions:
consummating the transaction.” [Prats v. CA] (a) The agent is authorized to lend money
at interest
When there is a close, proximate and causal (b) The principal consents
connection between the agent’s efforts and Power:
labor and the principal’s sale of his property, The Agent may himself borrow the money
the agent is entitled to commission. [Manotok at interest.
Brothers v. CA]
Note: The language of the provision is
(3) Forfeiture of Right to Commission mandatory. The Agent cannot therefore lend
the money to the Agency at a higher rate of
An agent who takes a secret profit without interest or borrow from it without the
revealing the same to his principal is guilty of a Principal’s consent.
breach of his loyalty to the principal and
forfeits his right to collect the commission from A.3. APPOINT A SUBSTITUTE
his principal, even if the principal does not
suffer any injury, or he obtained better results, Art. 1892. The agent may appoint a substitute
or the agency is gratuitous, or that usage or if the principal has not prohibited him from
custom allows it. The rule is to prevent the doing so; but he shall be responsible for the
possibility of any wrong, not to remedy an acts of the substitute:
(1) When he was not given the power to
actual damage. [Domingo v. Domingo]
appoint one
(2) When he was given such power, but
A.2. LEND MONEY TO / BORROW
without designating the person, and the
MONEY FROM THE AGENCY
person appointed was notoriously
incompetent or insolvent.
Art. 1890. If the agent has been empowered to All acts of the substitute appointed against the
borrow money, he may himself be the lender at
prohibition of the principal shall be void.
the current rate of interest. If he has been
authorized to lend money at interest, he
cannot borrow it without the consent of the Art. 1893. In the cases mentioned in Nos.1 and
principal. 2 of the preceding article, the principal may
furthermore bring an action against the
substitute with respect to the obligations
(1) Borrow Money From
which the latter has contracted under the
Conditions: substitution.
(a) The agent is empowered to borrow
money (1) When Allowed: when the principal does
(b) The agent must borrow at the current not prohibit it.
rate of interest Presumption: the agent is authorized to
appoint a substitute
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(2) Responsibility for the Substitute The law on agency allows the appointment by
General Rule: If the Agent validly appoints an agent of a substitute in the absence of an
a substitute, the Principal is liable for the express agreement to the contrary. (An agent’s
Substitute’s acts act of entrusting jewelry to a substitute is
therefore not an abuse of confidence such as to
Exception: [1892] constitute estafa) [Serona v. People]
(a) If the agent appoints a substitute
although he was not given the power A.4. RETAIN IN PLEDGE THE OBJECTS
to appoint one OF AGENCY
(b) If the agent was given the power to
appoint a substitute, and the principal Art. 1914. The agent may retain in pledge the
did not designate the person he can things which are the object of the agency until
appoint, but he appoints someone who the principal effects the reimbursement and
is notoriously incompetent or insolvent. pays the indemnity set forth in the two
preceding articles.
(3) Validity of the Substitute’s acts Art 1912. The principal must advance to the
agent, should the latter so request, the sums
necessary for the execution of the agency.
If the principal prohibits the agent from
appointing a substitute, then all the acts of the Should the agent have advanced them, the
substitute are void. principal must reimburse him therefore, even if
the business or undertaking was not
What may a third person who has contracted successful, provided the agent is free from
fault.
with a prohibited Substitute do?
(a) If the principal is aware that a Substitute The reimbursement shall include interest on
is acting on his behalf without authority the sums advanced, from the day on which the
yet he fails to repudiate the substitute’s advance was made.
acts, then there may be implied agency
(act will not be void) Art. 1913. The principal must also indemnify
(b) If the principal was not aware of the acts, the agent for the damages which the execution
or that when he became aware he of the agency may have caused the latter,
repudiates the acts, then the Agent may without fault or negligence on his part.
be held liable.
(1) Two scenarios under which the Agent may
retain in pledge the objects of the agency:
(4) The Substitute is an Alternate, not a
(a) if the agent advances funds for the
Delegate
execution of the agency, or
(b) if the agent has suffered injury caused
An agent cannot delegate to another the same
by the execution of the agency
agency. Potestas delegate non delegare
potest. Re-delegation is detrimental to the
principal as the second agent has no privity of
contract with the principal... Article 1892
allows the agent to appoint a substitute (not a
delegate). [Baltazar v. Ombudsman]
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B. OBLIGATIONS OF AGENTS for P5,000,000 to a third person, then that

would be an advantageous act.
B.1. ACT WITHIN SCOPE OF AUTHORITY
But the principal may later contest whether
Art. 1881. The agent must act within the scope such act is indeed advantageous to him.
of his authority. He may do such acts as may be
conducive to the accomplishment of the
purpose of the agency. (1714a) However, if a special power of attorney is
required for the transaction, then the agent
(1) In General must obtain it. Advantageous and conducive
An agent can bind his principal if he acts within acts do not apply if a SPOA is required. [c.f.
the scope of authority granted to him. Woodchild v. Roxas]
Powers of attorney are generally construed (4) Collateral Acts

strictly. The general rule is that the power of (The agent has the implied authority) to do all
attorney must be pursued within legal of the collateral acts which are the natural and
strictures, and the agent can neither go beyond ordinary incidents of the main act or business
it; nor beside it. The act done must be legally authorized. [Guinhawa v. People]
identical with that authorized to be done.
[Woodchild v. Roxas] (5) With Respect to Third Persons
(2) Conducive Acts Art. 1900. So far as third persons are

Acts “conducive to the accomplishment of the concerned, an act is deemed to have been
purpose of the agency” are deemed to be performed within the scope of the agent's
within the agent’s authority. authority, if such act is within the terms of the
power of attorney, as written, even if the agent
has in fact exceeded the limits of his authority
The power of attorney does not need to list
according to an understanding between the
everything the agent is allowed to do and the principal and the agent. (n)
agent does not need to go to the principal for
authorization for each new act he seeks to The Situation: the principal provided
perform. limitations to the authority of the agent orally
or through a document other than the written
(3) Advantageous Acts power of attorney.
Art. 1882. The limits of the agent's authority Rule: The third person can rely completely on
shall not be considered exceeded should it the written power of attorney to determine
have been performed in a manner more
whether the agent’s act is within the limits of
advantageous to the principal than that
specified by him. (1715) his authority.
The agent may do acts more advantageous to Exception: If the third person is aware of the
the principal than what is indicated in the secret understanding between the principal
power of attorney. and the agent.
For example, if the agent was authorized to
sell a car for P2,500,000 but was able to sell it
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(6) Authority of Corporate Officers Art. 1885. In case a person declines an agency,
The general principles of agency govern the he is bound to observe the diligence of a good
relation between the corporation and its father of a family in the custody and
officers or agents, subject to the articles of preservation of the goods forwarded to him by
the owner until the latter should appoint an
incorporation, bylaws, or relevant provisions of agent or take charge of the goods. (n)
law. [San Juan v. CA]
Art. 1899. If a duly authorized agent acts in
A corporate officer intrusted with the general accordance with the orders of the principal, the
management and control of its business, has latter cannot set up the ignorance of the agent
implied authority to make any contract or do as to circumstances whereof he himself was, or
any other act which is necessary or appropriate ought to have been, aware. (n)
to the conduct of the ordinary business of the
corporation. As such officer, he may, without If the Principal was aware of certain
any special authority from the Board of circumstances, and the agent simply followed
Directors, perform all acts of an ordinary the former’s instructions without being aware
nature, which by usage or necessity are of those circumstances thereby causing injury
incident to his office... to a third person, then the principal cannot
Where similar acts have been approved by the blame the agent later on.
directors as a matter of general practice,
custom and policy, the general manager may B.3. CARRY OUT THE AGENCY
bind the company without formal
authorization of the board of directors. [Board (1) In General
of Liquidators v. Kalaw]
Art. 1884 par. 1 The agent is bound by his
B.2. ACT IN ACCORDANCE WITH acceptance to carry out the agency, and is
liable for the damages which, through his non-
INSTRUCTIONS performance, the principal may suffer.
Art. 1887. In the execution of the agency, the The agent is bound to carry out his duties as
agent shall act in accordance with the agent once he accepts the authorization
instructions of the principal.
granted by the principal. Else, he is liable for
In default thereof, he shall do all that a good damages if the principal suffers injury.
father of a family would do, as required by the
nature of the business. (1719) (2) Continuing Business
The agent must act within the specific limits of Art. 1884 par. 2 He must also finish the
his authority (See B.1.) and perform the acts in business already begun on the death of the
the manner dictated by the principal. principal, should delay entail any danger.
(1718)
If the principal did not provide instructions as
(3) In case of Withdrawal
regards the manner, then the agent must do
all that a good father of a family would do.
Art. 1929. The agent, even if he should
withdraw from the agency for a valid reason,
What if a person refuses to be an agent but must continue to act until the principal has
goods have already been forwarded to him? had reasonable opportunity to take the
necessary steps to meet the situation. (1737a)
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Note: Agency is a fiduciary relationship. A

Even if the agent withdraws, he must continue breach of that relationship will expose the
to act until the principal “has had reasonable agent to liability for damages.
opportunity to take the necessary steps to
meet the situation.” The wording now is more (2) Over Property Being Administered
forgiving for the agent because in the old Civil
Code, the agent had to wait for the principal “is Art. 1491. The following persons cannot acquire
able to take the necessary measures to fill his by purchase, even at a public or judicial
place.” Now it’s sufficient that the principal auction, either in person or through the
had opportunity to appoint without actually mediation of another:
(2) Agents, the property whose administration
doing so. or sale may have been intrusted to them,
unless the consent of the principal has been
(4) Agent not required to carry out given;
Art. 1888. An agent shall not carry out an The relations of an agent to his principal are
agency if its execution would manifestly result fiduciary and it is an elementary and very old
in loss or damage to the principal. (n) rule that in regard to property forming the
subject matter of the agency, he is stopped
Example: If the Agent is obliged to buy palay from acquiring or asserting a titled adverse to
whose price suddenly spiked and, if bought, that of the principal. His position is analogous
will lead to the principal’s ruin, then the agent to that of a trustee and he cannot consistently,
may not carry out the agency. with the principles of good faith, be allowed to
create in himself an interest in opposition to
B.4. ADVANCE FUNDS that of his principal or cestui que trust.
[Severino v. Severino]
Art. 1886. Should there be a stipulation that
the agent shall advance the necessary funds, (3) Double Sales
he shall be bound to do so except when the
principal is insolvent. (n)
Art. 1916. When two persons contract with
Conditions: regard to the same thing, one of them with the
agent and the other with the principal, and the
(a) There is a stipulation stating that the agent two contracts are incompatible with each
shall advance the necessary funds, and other, that of prior date shall be preferred,
(b) The principal must be solvent without prejudice to the provisions of article
1544. (n)
B.5. PREFER THE PRINCIPAL’S
INTEREST OVER HIS OWN Art. 1917. In the case referred to in the
preceding article, if the agent has acted in
good faith, the principal shall be liable in
(1) In General damages to the third person whose contract
must be rejected. If the agent acted in bad
Art. 1889. The agent shall be liable for faith, he alone shall be responsible. (n)
damages if, there being a conflict between his
interests and those of the principal, he should Art. 1544. If the same thing should have been
prefer his own. (n) sold to different vendees, the ownership shall
be transferred to the person who may have first
taken possession thereof in good faith, if it
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should be movable property.

Should it be immovable property, the Art. 1891. Every agent is bound to render an
ownership shall belong to the person acquiring account of his transactions and to deliver to
it who in good faith first recorded it in the the principal whatever he may have received by
Registry of Property. virtue of the agency, even though it may not be
owing to the principal.
Should there be no inscription, the ownership
shall pertain to the person who in good faith Every stipulation exempting the agent from the
was first in the possession; and, in the absence obligation to render an account shall be void.
thereof, to the person who presents the oldest (1720a)
title, provided there is good faith. (1473)
If an agent receives a secret gift from a client,
The Situation: the principal and the agent each he must report it and deliver it to the principal.
contracts with different people for the same The law imposes upon the agent the absolute
thing, and the contracts are incompatible. obligation to make a full disclosure or
complete account to his principal of all his
Parsed: transactions and other material facts relevant
(1) General Rule: the contract “of a prior date” to the agency. If he makes a secret profit, he is
shall prevail IF guilty of breach of his loyalty, and he forfeits
(a) None of the buyers had obtained his right to his commission. [Domingo v.
possession over the movable, or Domingo]
(b) None of the buyers had recorded,
possessed or has title over the B.7. PAY INTEREST
immovable
BUT IF Art. 1896. The agent owes interest on the sums
(a) The property is a movable, then the he has applied to his own use from the day on
person who takes first possession in which he did so, and on those which he still
good faith (PGF) prevails owes after the extinguishment of the agency.
(b) The property is immovable, then the (1724a)
person who first records it in good faith
in the register of deeds prevails. If Note: The agent may only borrow funds from
there is no record, the PGF prevails. If the agent if he has been authorized to lend
there is no PGF, then the person who money at interest [Art 1890]. If he does borrow,
has the oldest title. (record > PGF > then he should pay interest for the amount he
title) borrowed.
Liability B.8. LIABLE FOR FRAUD/NEGLIGENCE

(a) If the Agent was in good faith, then the
principal is liable for damages to the Art. 1909. The agent is responsible not only for
third person whose contract won’t be fraud, but also for negligence, which shall be
honoured judged with more or less rigor by the courts,
according to whether the agency was or was
(b) If the Agent was in bad faith, then he is not for a compensation. (1726)
liable for damages to the third person
and to the principal [see Art 1889] To whom should the fraud or negligence be
directed? Art 1909 does not say. But it has
B.6. RENDER ACCOUNT/DELIVER been applied against an agent for negligence
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which caused damage against itself, thereby b. The agent exceeded the scope of
preventing it from recovering from the his authority
principal what it lost. [see Metrobank v. CA c. The agent undertook to secure the
1991] principal’s ratification, and
d. The principal did not ratify the
C. LIABILITY OF AGENTS contract
If the agent acts beyond the scope of his
C.1. WHEN SOLIDARY authority, the third person can recover from
either the principal or the agent but not from
Art. 1894. The responsibility of two or more both. [Eurotech v. Cuizon]
agents, even though they have been appointed
simultaneously, is not solidary, if solidarity has (2) Acts in His Own Name
not been expressly stipulated. (1723)
Art. 1883. If an agent acts in his own name, the
(1) Each of the agents can be held solidarily principal has no right of action against the
liable for the non-fulfilment of the agency or persons with whom the agent has contracted;
for injuries caused by fault or negligence IF: neither have such persons against the
(a) The principal simultaneously appoints principal.
more than one agent, and
In such case the agent is the one directly
(b) There is an express stipulation that bound in favor of the person with whom he has
such agents are solidarily liable contracted, as if the transaction were his own,
(2) Not solidarily liable IF except when the contract involves things
The fellow agents acted beyond the scope of belonging to the principal.
their authority.
The provisions of this article shall be
understood to be without prejudice to the
C.2. WHEN PERSONAL actions between the principal and agent. (1717)
(1) Expressly Bound or In Excess of Authority This is called an “Agency with an undisclosed
General Rule: the agent who transacts as an principal.
agent is not personally liable to the third
person for the obligation entered into If the agent enters contract without notice to
the third party that he was acting as an agent,
Exceptions: the agent is directly bound as a party to the
(a) When the agent expressly binds contract, and the principal and the third
himself person have no right of action against one
(b) When the agent exceeds the limits of another.
his authority without giving the person
he is transacting with sufficient notice What if the contract “involves things belonging
of his powers [Art 1897] to the principal?” Does the agent go away
scot-free?
(c) When all of the ff are present: The exception under Art 1883 “does not say
a. The person transacting with the that (a third party) does not have, and cannot
agent is aware of the limits of the bring an action against the agent also.”
agent’s authority [Beaumont v. Prieto]
373
III. Express vs Implied Requisites:

(a) The alleged principal should be aware of
Agency the acts of the alleged agent
(b) The alleged principal has had reasonable
opportunity under the circumstances to
A. EXPRESS repudiate the acts of the alleged agent
(c) A third party has transacted with the
Art. 1869. Agency may be express, or implied alleged agent without being made aware
from the acts of the principal, from his silence of the alleged agent’s lack of authority
or lack of action, or his failure to repudiate the
(d) There were no facts or circumstances
agency, knowing that another person is acting
on his behalf without authority. which may raise any suspicion on the part
of the third person that the agent was not
Agency may be oral, unless the law requires a authorized
specific form. (1710a)
Where no third party was prejudiced, and it
The manner by which consent to establish the was emphasized in no uncertain terms to the
agency is manifested may be express or alleged agent that no agency exists (therefore
implied. both principal and agent knew that the agent
had no authority) then Art 1869 has no room
It is express when the principal expressly for operation. [Uniland Resources v. DBP]
authorizes the agent and the agent expressly
accepts such authority. B.2. ACTS OF THE AGENT
Acceptance of the agent may be implied from
B. IMPLIED (1) His acts which carry out the agency
(2) His silence or inaction according to the
Art. 1870. Acceptance by the agent may also circumstances
be express, or implied from his acts which carry
out the agency, or from his silence or inaction Art. 1871. Between persons who are present,
according to the circumstances. (n) the acceptance of the agency may also be
implied if the principal delivers his power of
Articles 1869 and 1870 show that an agency attorney to the agent and the latter receives it
relationship may be implied from the acts of without any objection. (n)
the principal or those of the agent.
Art. 1872. Between persons who are absent,
B.1. ACTS OF THE PRINCIPAL the acceptance of the agency cannot be
implied from the silence of the agent, except:
(1) When the principal transmits his power of
The act of the principal which constitutes
attorney to the agent, who receives it
consent may be in the form of silence, lack of
without any objection;
action, or failure to repudiate the agency
(2) When the principal entrusts to him by
knowing that another person is acting on his letter or telegram a power of attorney with
behalf without authority. [See Art 1869]
respect to the business in which he is
habitually engaged as an agent, and he did
not reply to the letter or telegram. (n)
374
(1) Difference: A.1. TWO MODES

Under Art 1871, the agent impliedly accepts the
agency in the presence of the principal. (1) Specific Information
Under Art 1872, they are both “absent,” i.e. If a person specially informs another that he
they are not within the presence of each other. has given a power of attorney to a third person,
Generally, there is no implied acceptance then that third person becomes his agent with
except for the 2 cases. respect to the person who received the special
information.
(2) 1871 Conditions
(a) The principal delivers his power of (2) Public Advertisement
attorney to the agent If a person states by public advertisement that
(b) The agent receives it without any he has given a power of attorney to a third
objection, and
(c) The agent must be aware of the person, then that third person becomes his
contents of the document containing agent with respect to any person.
the powers of attorney
Only then will the agent be deemed to have A.2. HOW RESCINDED
impliedly accepted.
Art. 1873 par.2. The power shall continue to be
(3) Art 1872 Conditions in full force until the notice is rescinded in the
General Rule: there is no implied acceptance same manner in which it was given. (n)
from the silence of the agent if the principal
and the agent are not within each other’s Note: This is agency by estoppel and not
presence. implied agency because no acceptance by the
agent is required.
Exceptions:
(a) The principal transmits the power of
attorney B. BASED ON JURISPRUDENCE
(b) The principal entrusts the power of
attorney by letter or telegram, and the By remaining silent and thereby clothing the
power of attorney pertains to a business alleged agent with authority, the alleged
that the agent is habit principal is barred from questioning the
alleged agent’s authority. [Pahud v. CA,
applying estoppel in general]
IV. Agency by Estoppel
B.1. REQUISITES
A. BASED ON STATUTE The requisites for agency by estoppel to exist
are:
Art. 1873 par.1. If a person specially informs (a) The principal manifested a representation
another or states by public advertisement that of the agent’s authority or knowingly
he has given a power of attorney to a third allowed the agent to assume such
person, the latter thereby becomes a duly
authority
authorized agent, in the former case with
respect to the person who received the special (b) The third person, in good faith, relied upon
information, and in the latter case with regard such representation
to any person.
375
(c) Relying upon such representation, such To be a General Agent, it is sufficient that the
third person has changed his position to listed authorized transactions apparently cover
his detriment. all that is required to run the business of the
principal. It is not necessary that the power
Agency by estoppel is similar to the doctrine of granted actually says “all the business of the
apparent authority. It requires proof of reliance principal.” [Dominion Insurance v. CA]
upon the representation and that the
representation predated the action which B. SPECIAL AGENCY
relied on the representation. [Litonjua v.
Eternit] If the agent handles only specific aspects of the
principal’s business and not all of it, the he is a
With respect to hospitals in relation to special agent. [See Art 1876]
physicians who are independent contractors,
General Agency Special Agency
there are only two requisites [Nogales v.
Capitol Medical]: The Agent handles all The Agent only
(a) (Representation) The hospital acted in a of the business of the handles specific
manner which would lead a reasonable principal. aspects of the
person to conclude that the individual who business.
was alleged to be negligent was an
employee or agent of the hospital
(b) (Reliance) The plaintiff acted in reliance
upon the conduct of the hospital or its
VI. Agency Couched In
agent, consistent with ordinary care and
prudence
General Terms (ACGT)
This refers to a type of authority granted to the
V. General vs. Special agent, not to the scope.
Agency If the power granted refers to acts of

administration, then the agency is properly
A. GENERAL AGENCY called an ACGT.
Art. 1876. An agency is either general or General Agency ACGT

special.
This refers to the scope This refers to the type
The former comprises all the business of the of the agency, i.e. it of authority granted,
principal. The latter, one or more specific comprises all of the i.e. only acts of
transactions. (1712) business. administration.
Whether an agency is general or special

depends on the scope of the agency.
If the agency comprises all the business of the

principal, the agency is general. Else, it is
special.
376
VII. Agency Requiring A Special Power of Attorney (SPOA) is not a

Special Power of document. Instead it pertains to the nature of
the power granted to the agent.
Attorney
What matters is the specificity of the authority
granted, not the name given to the instrument.
A. IN GENERAL If a power of attorney is denominated as a
Like ACGT, this also refers to a type of “general power of attorney” but it contains a
authority granted to the agent, i.e. acts of strict specific power to sell, then there is no need to
dominion. execute a separate SPOA to confer such power
to sell. [Veloso v. CA]
Article 1878. Special powers of attorney are
necessary in the following cases:
The requirement of a SPOA refers to the nature
(1) To make such payments as are not usually
considered as acts of administration; of the authorization, not its form. A SPOA may
(2) To effect novations which put an end to be oral or written, but if it is oral, it must be
obligations already in existence at the time the duly established by evidence. [Lim Pin v. Liao
agency was constituted; Tan]
(3) To compromise, to submit questions to Art. 1879. A special power to sell excludes the
arbitration, to renounce the right to appeal power to mortgage; and a special power to
from a judgment, to waive objections to the mortgage does not include the power to sell.
venue of an action or to abandon a prescription (n)
already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the
Art. 1880. A special power to compromise does
not authorize submission to arbitration. (1713a)
ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable
consideration; B. EFFECT OF ABSENCE OF SPECIFIC
(6) To make gifts, except customary ones for AUTHORITY
charity or those made to employees in the
business managed by the agent;
(7) To loan or borrow money, unless the latter B.1. IN GENERAL
act be urgent and indispensable for the If an agent performs a transaction under Art
preservation of the things which are under 1878 without specific authority therefor, the
administration; transaction is unenforceable. However, the
(8) To lease any real property to another person agent can still seek the principal’s ratification.
for more than one year;
[Dungo v. Lopena]
(9) To bind the principal to render some service
without compensation;
(10) To bind the principal in a contract of B.2. SALE OF LAND OR ANY INTEREST
partnership; THEREIN
(11) To obligate the principal as a guarantor or
surety;
Art. 1874. When a sale of a piece of land or any
(12) To create or convey real rights over
interest therein is through an agent, the
immovable property;
authority of the latter shall be in writing;
(13) To accept or repudiate an inheritance;
otherwise, the sale shall be void. (n)
(14) To ratify or recognize obligations
contracted before the agency;
(15) Any other act of strict dominion. (n)
377
Elements: (3) In case of certain necessity or emergency,

(a) Sale an agency by necessity may arise. [De
(b) Of land or any interest therein Leon]
Required:
The authorization must be
IX. Rights and
(a) Written, and
(b) Specific
Obligations of Principal
Only specific authorization is required: A. OBLIGATIONS
(a) If the contract is a sale of an immovable
other than land A.1. COMPLY WITH THE OBLIGATIONS
(b) If the contract transmits ownership over an CONTRACTED BY THE AGENT
immovable other than land
(c) If the contract transmits ownership over Art. 1910. The principal must comply with all
land thru a transaction other than a sale the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has
B.3. EFFECT OF SPECIFIC
exceeded his power, the principal is not bound
AUTHORIZATION except when he ratifies it expressly or tacitly.
(1727)
Where an instrument specifies and defines
powers and duties, all such powers and duties If the agent acts within the scope of his
are limited and confined to those which are authority, then the principal must comply.
specified and defined, and all other powers Otherwise, the principal is bound to comply
and duties are excluded. [BPI v. De Coster] only if he ratifies the agent’s act that was done
beyond the scope of his authority.
VIII. Agency By
(1) Acts Within the Scope of Authority
Operation of Law (a) Those expressly specified in the power
of attorney
(b) Conducive acts
Normally, an agency is established only if there
(c) Advantageous acts
is mutual intent on the part of the principal (d) Collateral acts
and agent to establish the agency. [Victorias
Milling v. CA] (2) Ratified Acts
An agency may be established by operation of Art. 1901. A third person cannot set up the fact
law, however, in the following cases: that the agent has exceeded his powers, if the
(1) In a partnership, every partner is an agent principal has ratified, or has signified his
of the partnership for the purpose of its willingness to ratify the agent's acts. (n)
business [Art. 1818];
(2) Agency by estoppel (both statutory and If the principal ratifies or signifies to ratify the
jurisprudential), where the principal’s act of the agent, then that effectively binds the
actions would reasonably lead a third third person to the unauthorized act of the
person to conclude that an agency exists; agent. The principal, by implication, also
378
becomes bound to the act simply by signifying Art. 1918. The principal is not liable for the
his willingness to ratify. expenses incurred by the agent in the following
cases:
By benefitting from the unauthorized act of an (1) If the agent acted in contravention of the
agent, the principal is said to have ratified the principal's instructions, unless the latter
acts of the agent and is estopped from denying should wish to avail himself of the benefits
said authority. [Filipinas Life v. Pedroso] derived from the contract;
(2) When the expenses were due to the fault of
In some cases, the mere acceptance of benefits the agent;
is not tantamount to ratification by the (3) When the agent incurred them with
principal. The principal must have full knowledge that an unfavorable result
knowledge at the time of ratification of all the would ensue, if the principal was not aware
material facts and circumstances relating to thereof;
the unauthorized act of the person who
assumed to act as agent. If the material facts (4) When it was stipulated that the expenses
were suppressed or unknown, there can be no would be borne by the agent, or that the
ratification. [Manila Memorial v. Linsangan] latter would be allowed only a certain sum.
(3) When Estoppel Applies (n)
Art. 1911. Even when the agent has exceeded General Rule: the principal must advance or
his authority, the principal is solidarily liable reimburse (with interest) the sums necessary to
with the agent if the former allowed the latter execute the agency.
to act as though he had full powers. (n)
Exceptions:
Even if there was no express authority, the (1) Expenses incurred through acts which
principal is still solidarily liable because he contravene the principal’s instructions, and
allowed the agent to act as if he had authority. the principal does not want to derive
(This is not actually estoppel, but implied benefit therefrom
agency.) (2) Expenses due to the fault of the agent
(3) Expenses incurred by the agent with the
A.2. ADVANCE OR REIMBURSE SUMS knowledge that an unfavourable result
NECESSARY would ensue, and the principal was
unaware
Article 1912. The principal must advance to the (4) If there is a stipulation that expenses would
agent, should the latter so request, the sums be borne by the agent or that he would be
necessary for the execution of the agency. allowed only a certain sum
Should the agent have advanced them, the

principal must reimburse him therefor, even if A.3. INDEMNIFY THE AGENT FOR INJURY
the business or undertaking was not
successful, provided the agent is free from all Art. 1913. The principal must also indemnify
fault. the agent for all the damages which the
execution of the agency may have caused the
The reimbursement shall include interest on latter, without fault or negligence on his part.
the sums advanced, from the day on which the (1729)
advance was made. (1728)
379
The Situation: the agent suffers damage as a the agent for all the consequences of the
result of performing his duties as an agent, agency. (1731)
and such damage did not result from the
agent’s fault or negligence If several principals appoint an agent for a
common transaction, then they are all
solidarily liable to the agent.
A.4. COMPENSATE THE AGENT
B.3. IF THE CONTRACT INVOLVES
Art. 1875. Agency is presumed to be for a THINGS BELONGING TO THE PRINCIPAL
compensation, unless there is proof to the
contrary. (n) Art. 1883. If an agent acts in his own name, the
principal has no right of action against the
Steps to determine whether the agent is persons with whom the agent has contracted;
entitled to compensation: neither have such persons against the
(1) Determine whether the person is an agent principal.
or a broker
In such case the agent is the one directly
(2) If he is an agent, determine whether he is bound in favor of the person with whom he has
the procuring cause, i.e. if there is a close, contracted, as if the transaction were his own,
proximate and causal relation between the except when the contract involves things
agent’s efforts and the sale belonging to the principal.
The provisions of this article shall be

B. LIABILITY OF THE PRINCIPAL understood to be without prejudice to the
actions between the principal and agent. (1717)
B.1. IN GENERAL
The principal is bound and liable for the acts of General Rule: If the agent acts in his own
the agent done within the scope of his name, then the contract is between the agent
authority (express, conducive, advantageous, and the third person. Neither the third person
and collateral acts), for unauthorized acts nor the principal has a right of action against
which the principal has ratified and for acts the other.
which is estopped from denying.
Except: If the contract involves things
B.2. BE SOLIDARILY LIABLE belonging to the principal, then the principal is
also liable to the third party. (Agency with an
Art. 1911. Even when the agent has exceeded Undisclosed Principal) It is not the case that
his authority, the principal is solidarily liable the agent escapes liability by simply
with the agent if the former allowed the latter contracting things belonging to the principal.
to act as though he had full powers. (n)
There are two effects of the exception,
If the principal allowed the agent to act as if he
according to jurisprudence:
had full powers, then the principal is solidarily
(1) Principal and third persons now have a
liable with the agent even he exceeds his
right of action against each other. [Syjuco
authority.
v. Syjuco]
(2) The principal is not bound by the contract
Art. 1915. If two or more persons have if the act is beyond the scope of the agent’s
appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to
380
authority. [PNB v. Agudelo] This operates A mere statement in the power of attorney that
as an exception to the exception. it is coupled with an interest is not enough. The
X. Irrevocable Agency power of attorney must state what that interest

is. [Del Rosario v. Abad]
Art. 1920. The principal may revoke the agency Lim v. Saban enumerates certain rules with
at will, and compel the agent to return the respect to an agency coupled with an interest:
document evidencing the agency. Such
(1) It is one where there is mutual benefit on
revocation may be express or implied. (1733a)
the part of the principal and agent, or the
principal and third person
Art. 1927. An agency cannot be revoked if a
bilateral contract depends upon it, or if it is the (2) The agency coupled with an interest
means of fulfilling an obligation already cannot be revoked for as long as the
contracted, or if a partner is appointed interest of the agent or third person exists
manager of a partnership in the contract of (3) The agent’s interest must be “the subject
partnership and his removal from the matter of the power conferred and not
management is unjustifiable. (n) merely an interest in the exercise of the
power because it entitles him to
Art. 1930. The agency shall remain in full force
compensation.”
and effect even after the death of the principal,
if it has been constituted in the common (4) If the agent’s interest is limited to
interest of the latter and of the agent, or in the compensation, then it is not an agency
interest of a third person who has accepted the coupled with an interest. [Lim v. Saban]
stipulation in his favor. (n)
The agency coupled with an interest is
General Rule: The principal may revoke the irrevocable because ”the agency becomes part
agency at will and compel the agent to return of another obligation or agreement. It is not
the power of attorney solely the rights of the principal but also that
of the agent and third persons which are
Exception: An agency cannot be revoked if: affected. [Republic v. Evangelista]
(1) A bilateral contract depends upon it; or
(2) It is the means of fulfilling an obligation An agency coupled with an interest can still be
already contracted; or revoked, but only for just cause, i.e. bad faith,
(3) A partner is appointed manager of a breach of confidence, or betrayal of trust.
partnership in the contract of partnership [Coleongco v. Claparols]
and his removal from the management is
unjustifiable;
(4) If it is an agency couple with an interest
(a) If the agency was constituted in the
common interest of the principal and
of the agent, or
(b) If the agency was constituted in the
interest of a third person who has
accepted the stipulation in his favour.
381
XI. Modes of The principal can revoke the agency even if the
period fixed in the contract has not yet expired.
Extinguishment [CMS Logging v. CA]
The contract of agency can subsist only so long

A. IN GENERAL as the principal has confidence in his agent,
because from the moment such confidence
Art. 1919. Agency is extinguished: disappears, the principal has the perfect right
(1) By its revocation; to revoke the power. [Barreto v. Santa Maria]
(2) By the withdrawal of the agent;
(3) By the death, civil interdiction, insanity or
insolvency of the principal or of the agent; Art. 1925. When two or more principals have
(4) By the dissolution of the firm or corporation granted a power of attorney for a common
which entrusted or accepted the agency; transaction, any one of them may revoke the
(5) By the accomplishment of the object or same without the consent of the others. (n)
purpose of the agency;
(6) By the expiration of the period for which the Qualifications: The right of the principal to
agency was constituted. (1732a) terminate the authority of his agent is absolute
and unrestricted, except that he is liable for
The provision enumerates only those which are damages in case:
peculiar to agency and is, therefore, not (1) He revokes the agency in bad faith [Danon
exclusive. Agency may also be extinguished by v. Brimo (1921)]; or
the modes of extinguishment of obligations in (2) He revokes the agency before the
general [De Leon (2010)] expiration of the period stipulated in the
agency contract.
The modes of extinguishment may be
classified into three: Exception: Agency cannot be revoked if it is
(1) By agreement (Nos. 5 and 6); coupled with an interest, such that:
(2) By subsequent acts of the parties: (1) A bilateral contract depends upon it;
(a) By the act of both parties or by mutual (2) It is the means of fulfilling an obligation
consent; or already contracted; or
(b) By the unilateral act of one of them (3) A partner is appointed manager of a
(Nos. 1 and 2); partnership in the contract of partnership
(3) By operation of law (Nos. 3 and 4). and his removal from the management is
unjustifiable.
B. REVOCATION
B.1. IN GENERAL
Art. 1920. The principal may revoke the agency

at will, and compel the agent to return the
document evidencing the agency. Such
revocation may be express or implied. (1733a)
General Rule: The principal may revoke the

agency at will.
382
B.2. WHEN REVOCATION IS NOT B.4. DIRECT MANAGEMENT BY THE

BINDING ON THIRD PERSONS PRINCIPAL
(1) When Notice is Required Art. 1924. The agency is revoked if the principal
directly manages the business entrusted to the
Art. 1921. If the agency has been entrusted for agent, dealing directly with third persons. (n)
the purpose of contracting with specified
persons, its revocation shall not prejudice the If the principal believes that the agent is in
latter if they were not given notice thereof. breach of the contract and thereby decides to
(1734) deal with the business directly, then the
agency is said to be revoked. [CMS Logging v.
(2) When a Third Person in Good Faith Has No CA] The mere act of direct management by the
Knowledge of Revocation principal is not enough to revoked the agency.
Art. 1922. If the agent had general powers, B.5. SPECIAL AUTHORITY REVOKES THE
revocation of the agency does not prejudice
third persons who acted in good faith and GENERAL AUTHORITY WHERE A
without knowledge of the revocation. Notice of SPECIAL MATTER IS INVOLVED
the revocation in a newspaper of general
circulation is a sufficient warning to third Art. 1926. A general power of attorney is
persons. (n) revoked by a special one granted to another
agent, as regards the special matter involved
What does “agent with general powers” mean? in the latter. (n)
Most likely, it is an agent authorized to
transact with the general public in Art. 1926 refers to a general agency (entirety of
contradistinction to the agent who contracts business) and special agency (only aspects of
with specified persons under Art. 1921. the business).
B.3. APPOINTMENT OF NEW AGENT If Agent 1 is given a general agency, and Agent
2 is later given a special agency, then Agent 1
Art. 1923. The appointment of a new agent for can no longer perform the powers granted to
the same business or transaction revokes the Agent 2 under the special agency.
previous agency from the day on which notice
thereof was given to the former agent, without B.6. WHEN AGENCY CANNOT BE
prejudice to the provisions of the two
preceding articles. (1735a)
REVOKED
Revocation takes effect when notice is given to Art. 1927. An agency cannot be revoked if a
the former agent, not when the new agent is bilateral contract depends upon it, or if it is the
means of fulfilling an obligation already
appointed. contracted, or if a partner is appointed
manager of a partnership in the contract of
partnership and his removal from the
management is unjustifiable. (n)

383
if it has been constituted in the common D.2. EXCEPTIONS

interest of the latter and of the agent, or in the
interest of a third person who has accepted the 1. Agency Coupled with an Interest.
Please refer to the Chapter X. Irrevocable
Agency. if it has been constituted in the common
interest of the latter and of the agent, or in the
C. WITHDRAWAL BY THE AGENT interest of a third person who has accepted the
Art. 1928. The agent may withdraw from the
agency by giving due notice to the principal. If 2. Contract between Agent without
the latter should suffer any damage by reason knowledge of Death and Third Person in
of the withdrawal, the agent must indemnify Good Faith
him therefor, unless the agent should base his
withdrawal upon the impossibility of Art. 1931. Anything done by the agent, without
continuing the performance of the agency knowledge of the death of the principal or of
without grave detriment to himself. (1736a) any other cause which extinguishes the
agency, is valid and shall be fully effective with
General Rule: The agent may withdraw so long respect to third persons who may have
as he gives due notice to the principal. If the contracted with him in good faith. (1738)
principal suffers damage because of the
withdrawal, then the agent must indemnify 3. Unfinished business
him, except if the basis of his withdrawal is
because continuing the performance of the Art. 1884 par.2. He must also finish the
agency is impossible without grave detriment business already begun on the death of the
to the agent. principal, should delay entail any danger.
(1718)
If the Agent files a complaint against his
D.3. DEATH OF AGENT
principal, then he is understood to have
If the agent dies, his heirs must:
renounced the agency because hi act was more
(1) Notify the principal thereof; and
expressive than words and could not have
(2) In the meantime adopt such measures as
caused any doubt. [Valera v. Veloso]
the circumstances may demand in the
interest of the latter [Article 1932].
D. DEATH, CIVIL INTERDICTION,
INSANITY OR INSOLVENCY E. DISSOLUTION /
ACCOMPLISHMENT / EXPIRATION
D.1. IN GENERAL
By reason of the very nature of the relationship
Art. 1919. Agency is extinguished:
between the principal and agent, agency is xxx
extinguished by the death of the principal or (4) By the dissolution of the firm or corporation
the agent. Any act of an agent after the death which entrusted or accepted the agency;
of his principal is void ab initio unless the same (5) By the accomplishment of the object or
falls under the exceptions provided for in the purpose of the agency;
aforementioned Articles 1930 and 1931. (6) By the expiration of the period for which the
agency was constituted. (1732a)
384
Accomplishment
The fulfillment of the purpose for which agency
was created ipso facto terminates agency even
though it was expressly made irrevocable. If
the purpose has not been accomplished, the
agency continues indefinitely for as long as the
intent to continue is manifested through words
or actions of the parties.
Dissolution
The dissolution of a partnership or corporation
which entrusted (principal) or accepted (agent)
the agency extinguishes its juridical existence,
except for the purpose of winding up its affairs.
It is equivalent to death.
Expiration
(1) If created for fixed period, expiration of the
period extinguishes agency even if the
purpose was not accomplished.
(2) If no time is specified, the courts may fix
the period as under the circumstances
have been probably contemplated by the
parties [Art. 1197]. Otherwise, the agency
terminates at the end of a reasonable
period of time. Either party can terminate
the relationship at will by giving notice to
the other [De Leon (2010)].
The period contemplated may be implied from
terms of agreement, purpose of agency, and
the circumstances of the parties.
385
THE FOLLOWING MAY BE SAFELY ERASED ii. Mere closeness of relationship is

As a type of contract: not tantamount to an agency
a. Art 1868. relationship. [Apex v. Southeast
i. A person binds himself to render some Mindanao Mining]
service or to do something iii. Without mutual intent, there is
ii. In representation or on behalf of generally no agency. [Victorias
another Milling v. CA]
iii. With the consent or authority of the 1. The principal must have the
latter intention to appoint, thru his
b. Being a contract, it has COC words or acts
i. Consent 2. The agent must have the
But the legal relationship may still intention to accept the
arise even without consent appointment and to act upon it
ii. Object: the performance of acts by the b. The object is the execution of a juridical
agent in representation of the principal act in relation to a third person
iii. Cause: it is presumed to be for i. Representation is the subject
compensation matter and basis of agency.
ii. Even if the parties never intended
As a legal relationship (Common law or true for there to be an agency, but they
agency) later acted as if they were principal
a. It is characterized by and agent, there is an agency.
i. Fiduciary relationship [Tuazon v. Heirs]
An agency is a fiduciary relationship c. The agent must act as a representative
such that the agent is stopped from and not for himself
asserting a title adverse from the i. If the agent acts for himself, it does
principal [Severino v. Severino] not invalidate the contract of
ii. Control agency, but the agent will only be
liable for breach of contract
Elements of Agency ii. Note: the agency relationship can
(1) Under the Civil Code (1868) be established even if the agent
a. A person must bind himself to render never acts as an agent
some service or to do something in d. The agent must act within the scope of
representation or on behalf of another his authority
person i. This is not a condition for the
b. It is with the consent or authority of the existence of the contract of agency,
other person but only a consequence of the
(2) By jurisprudence agency relationship
a. There must be consent to establish the ii. An agency may exist even if the
relationship agent acts beyond the scope of his
i. There must be a showing of authority
consent on the part of an alleged (3) In reality, there are only two elements:
principal to allow an alleged agent consent to establish the agency + object
to act on her behalf. [Bordador v.
Luz]
386
Effects of Agency whether such knowledge is

(1) Personality communicated [Francisco v. GSIS]
a. Integration d. GR: The principal is chargeable with
i. The personality of the principal and and bound by knowledge of or notice
the agent are merged. to the agent
b. Extension E: where the conduct and dealings of
i. The personality of the principal is the agent are such as to raise a clear
reproduced thru the agent. presumption that the agent will not
(2) Authority to Act communicate to the principal the facts,
a. The agent becomes the principal by there is no imputed knowledge.
legal fiction, authorized to perform all (5) Bad faith on the part of the agent is bad
acts which the principal would have faith on the part of the principal. [Caram v.
him do. Laureta]
b. NA: personal acts (e.g. right to vote,
make a will, take an oath)
(3) The Agent is not a Real-Party-In-Interest
a. The agent is only an extension of the
principal’s personality
i. 3rd party –(1)-- Agent –(2)—
Principal
1. If there is a breach of contract
(1), then only the 3rd party and
the Principal may seek
enforcement against one
another.
ii. Exception: If the agent is an
assignee of the contract, then the
agent may bring an action on a
contract made for the principal
iii. GR: The principal is the proper
party to a case
BUT the agent is not excuse from
criminal liability [Ong v. CA]
(4) Notice to the Agent is Notice to the
Principal
a. Otherwise known as “Imputed
knowledge” [Sunace v. NLRC]
b. But the reverse is not true (i.e. notice to
the principal is not notice to the agent).
c. Knowledge of facts by an officer or
agent of a corporation in the course of
his employment in relation to matters
within the scope of his authority is
notice to the corporation regardless
387
Nature of Agency: General and Special i. The transaction entered into by the
(1) General Agency agent is unenforceable
a. To be a General Agent, it is sufficient 1. But the agent may still have the
that the listed authorized transactions principal ratify it
apparently cover all that is required to ii. If the principal is a corporation, then
run the business of the principal. It is the specific authorization must come
not necessary that the power granted in the form of a Board resolution
actually says “all the business of the 1. Except to the extent that such
principal.” [Dominion Insurance v. CA] power is given to the agent
b. General Agency refers to the scope of expressly or by reasonable
the business covered, not to the extent implication from the
of discretion or responsibility given to circumstances [Vicente v
the Agent Geraldes]
(2) Agency Couched in General Terms iii. If the transaction is sale of a piece of
a. A type of agency that only grants the land, then there must be a written
agent power to perform acts of and specific authorization to sell
administration 1. Else, the sale is void
b. Test: if the nature of the business
requires performance of certain acts
repeatedly and without express
authorization, then those are acts of
administration
(3) Specific Agency
a. Refers to the scope of the agent’s
authority
b. The agency must comprise of one or
more specific transactions, short of the
entire business
c. Cf. General Agency
(4) Special Power of Attorney (SPA)
a. It is not merely the name of a
document but a description of the
power granted to an agent
b. Certain transactions require a SPA,
and these transactions usually involve
acts of strict dominion (i.e. acts of
ownership)
c. If the power is couched in general
terms, then the agent may do only acts
of administration; if the power is
couched in specific terms then the
agent is empowered to perform such
specific act of strict dominion
d. Effect of Lack of SPA
388
UP LAW BOC PARTNERSHIP CIVIL LAW
CIVIL LAW
PARTNERSHIP
389
I. Contract of Partnership Generally, the Supreme Court has liberally

A. DEFINITION construed the concept of the common
Article 1767. By the contract of partnership two fund.
or more persons bind themselves to contribute
money, property, or industry to a common Even if one of the parties argues that it did
fund, with the intention of dividing the profits not bind itself to contribute, but did in fact
among themselves. contribute to the common fund, that lone
Two or more persons may also form a is sufficient to constitute the common
partnership for the exercise of a profession. fund. [Philex Mining v CIR]
(1665a) (2) Intention to Divide Profits
A.1. ELEMENTS (STATUTORY):
If the common fund’s work is
(1) Two or more persons bind themselves to
“indispensable, beneficial and
contribute money, property, or industry to
economically useful to the business” of the
a common fund,
partners and the profit motive is the
(2) with the intention of dividing the profits
primordial reason to establish the
among themselves
partnership, even if there are no actual
A.2. ELEMENTS (JURISPRUDENCE) profits, then there is partnership. [AFISCO
(1) There must be an agreement to contribute
v CA]
money, property or industry [Evangelista v B. ESSENTIAL FEATURES
CIR], or (1) There must be a valid contract;
(2) The fact of contribution [AFISCO v CIR], (2) The parties must have legal capacity;
and (3) There must be a mutual contribution of
(3) There is the intention to divide profits money, property, or industry to a common
[Evangelista v CIR], or fund;
(4) There is a joint interest in the profits (4) The object must be lawful;
[AFISCO v CIR] (5) The primary purpose must be to obtain
profits and to divide the same among the
The two sets of elements are generally the parties;
same: common fund + intention to divide (6) The partnership has a juridical personality
profits. separate from individual partners [Article
(1) Common Fund 1768].
The Civil Code requires the parties “bind B.1. LAWFUL PURPOSE
themselves to contribute” to a common Article 1770 (1). A partnership must have a
fund. The partnership may therefore exist lawful object or purpose, and must be
even before the common fund is created. established for the common benefit or interest
The common fund may not even come of the partners.
from the partners themselves but may be If there is no lawful purpose, then the
borrowed from third persons. [Lim Tong partnership agreement is void ab initio.
Lim v Philippine Fishing Gear] Contracts whose purpose is contrary to law are
The form of the common fund may not void from the beginning. [Art1409 (1)].
even be cash or property; it can be in the
form of credit or industry.
390
Article 1770 (2). When an unlawful partnership (3) Insane or demented persons;
is dissolved by a judicial decree, the profits (4) Deaf-mutes who do not know how to write;
shall be confiscated in favor of the State, (5) Incompetents who are under guardianship.
without prejudice to the provisions of the Penal
Code governing the confiscation of the Exceptions : The capacity of the following
instruments and effects of a crime. persons to enter into a contract of partnership,
though capacitated to contract generally, are
Upon the dissolution of an unlawful limited:
partnership, the profits are simply confiscated (1) Those who are prohibited from giving each
by the State. The previous rule is to give such other any donation or advantage cannot
profits to a charitable institution. enter into a universal partnership [Article
1782];
Art 1770 (2) talks of “profits.” When it comes (2) A corporation cannot enter into a
to the original contributions of the partners, partnership in the absence of express
the same must be reimbursed to them. [Arbes authorization by statute or charter.
v Polistico]
B.2. COMMON BENEFIT Although a corporation cannot enter into a
partnership contract, it may, however, engage
Article 1770. A partnership must have a lawful
in a joint venture with others [Aurbach vs.
object or purpose, and must be established for
Sanitary Wares Manufacturing Corp]
the common benefit or interest of the partners.
On the other hand, there is no prohibition

A partnership must be established for the
against a partnership being a partner in
common benefit of the partners. Is “common
another partnership [De Leon (2010)].
benefit” always pecuniary? Yes, based on Art
1799. D. OBJECT
D.1. OBJECT OF UNIVERSAL
Article 1799. A stipulation which excludes one PARTNERSHIP
or more partners from any share in the profits A universal partnership may refer to:
or losses is void. (1) All present property :
(a) The partners contribute all the
B.3. JURIDICAL PERSONALITY
property which belongs to them to a
Article 1768. The partnership has a juridical
common fund, with the intention of
personality separate and distinct from that of
dividing the same among themselves,
each of the partners, even in case of failure to
as well as the profits they may acquire
comply with the requirements of article 1772,
therewith [Article 1778].
first paragraph. [n]
(b) The property contributed includes all
C. PARTIES those belonging to the partners at the
General rule: Any person capacitated to time of the constitution of the
contract may enter into a contract of partnership.
partnership. (c) A stipulation for the common
enjoyment of any other profits may
The following persons cannot enter into a also be made. However, the property
contract of partnership: which the partners may acquire
(1) Those suffering from civil interdiction; subsequently by inheritance, legacy or
(2) Minors; donation cannot be included in such
391
stipulation, except the fruits thereof (b) Attached to such instrument must be
[Article 1779]. an inventory, signed by the parties, of
(2) All the profits: the property contributed [Articles 1771
(a) It comprises all that the partners may and 1773];
acquire by their industry or work during (2) Where the capital is at least P3,000, in
the existence of the partnership. money or property:
(b) Only the usufruct over the property of (a) The contract must appear in a public
the partners passes to the partnership instrument; and
[Article 1780]. (b) It must be recorded in the Office of the
Securities and Exchange Commission
When the articles of universal partnership do (SEC).
not specify its nature (all present property or
all the profits), the partnership will be As to the second, failure to comply with these
considered as one only of all the profits [Article requirements, however, does not affect the
1781]. liability of the partnership and the partners to
D.2. OBJECT OF PARTICULAR third persons [Articles 1768 and 1772].
PARTNERSHIP
A particular partnership has for its object F. DURATION
determinate things, their use or fruits, or a F.1. COMMENCEMENT
specific undertaking, or the exercise of a Art 1784. A partnership begins from the
profession or vocation [Article 1783]. moment of the execution of the contract,
D.3. EFFECT OF UNLAWFUL OBJECT unless otherwise stipulated
If the partnership has an unlawful object or
purpose: F.2. TERM
(1) The contract is void ab initio [Article As to period, a partnership may either be:
1409(1)]. (1) For a fixed term or particular undertaking;
(2) Once dissolved by judicial decree: or
(a) The profits shall be confiscated by (2) At will, the formation and dissolution of
favor of the State; which depend on the mutual desire and
(b) The instruments or tools and proceeds consent of the parties. Any one of the
of the crime shall also be forfeited in partners may, at his sole pleasure, dictate
favor of the State [Article 1770]. the dissolution of the partnership, even in
(3) The contributions of partners shall not be bad faith, subject to liability for damages
confiscated unless they are instruments or [Ortega v. CA [(995)].
tools of the crime [De Leon (2010)].
F.3. EXTENSION
E. FORM A partnership term may be extended by:
General rule: The contract may be constituted (1) Express renewal; or
in any form [Article 1771]. (2) Implied renewal, when these requisites
Exceptions: concur:
(1) Where immovable property or real rights (a) The partnership is for a fixed term or
are contributed: particular undertaking;
(a) The contract must appear in a public (b) It is continued after the termination of
instrument; and the fixed term or particular
392
undertaking without any express (2) Partnership de facto is one which failed to
agreement [Article 1785]. so comply.
G.RULES TO DETERMINE EXISTENCE H.2. AS TO ITS OBJECT:

When the intent of the parties is clear, such (1) Universal partnership:
intent shall govern. When it does not clearly (a) Of all present property;
appear, the following rules apply: (b) Of profits;
(1) Persons who are not partners to each other (2) Particular partnership.
are not partners as to third persons,
subject to the provisions on partnership by H.3. AS TO ITS DURATION:
estoppel. (1) For a fixed term or particular undertaking;
(2) Co-ownership or co-possession does not of (2) At will.
itself establish a partnership, even when
there is sharing of profits in the use of the H.4. AS TO THE LIABILITY OF THE
property. PARTNERS:
(3) Sharing of gross returns does not of itself (1) General partnership, consisting of general
establish a partnership, even when the partners only, who are liable pro rata for
parties have joint or common interest in partnership obligations with all their after
any property from which the returns are exhaustion of partnership assets;
derived. (2) Limited partnership, includes, aside from
(4) The receipt by a person of a share in the general partner/s, limited partners, who
profits of a business is prima facie evidence are not personally liable for partnership
that he is a partner. obligations.
As to the fourth, no such inference is drawn if H.5. AS TO ITS PUBLICITY:

the profits are received in payment: (1) Secret partnership, where the existence of
(1) As a debt by installments or otherwise; certain persons as partners is not made
(2) As wages of an employee of rent to a known by the partners;
landlord; (2) Open or notorious partnership, the
(3) As an annuity to a widow or representative existence of which is made known to the
of a deceased partner; public by the partners.
(4) As interest on a loan, though the amount
of payment vary with the profits of the H.6. AS TO ITS PURPOSE:
business; 1. Commercial or trading partnership, for
(5) As the consideration for the sale of a transaction of business;
goodwill of a business or other property by 2. Professional or non-trading partnership, for
installments or otherwise [Article 1769]. the exercise of profession.
H. KINDS OF PARTNERSHIPS A profession has been defined as “a group of

H.1. AS TO THE LEGALITY OF ITS men pursuing a learned art as a common
EXISTENCE: calling in the spirit of public service – no less a
(1) Partnership de jure is one which has public service because it may incidentally be a
complied with all the requisites for its means of livelihood” [In the Matter of the
lawful establishment; Petition for Authority to Continue Use of Firm
name “Sycip, Salazar, etc.”/“Ozaeta, Romulo,
393
etc.” (1979)]. A professional partnership is a (16) Incoming partner, who is about to be taken
particular partnership [Article 1783]. as a member into an existing partnership;
I. KINDS OF PARTNERS (17) Retiring partner, who is withdrawing from
(1) Capitalist partner, whose contribution is the partnership.
money or property;
(2) Industrial partner, contribution is only his Industrial Capitalist
industry; partner partner
(3) General partner, whose liability to third Form of contribution
persons extends to his separate property;
(4) Limited partner, whose liability to third Industry Money or property
persons is limited to his capital Share in profits
contribution; Just and equitable According to
(5) Managing partner, who was designated to share agreement; if none,
manage the affairs or business of the in proportion to
partnership; contribution
(6) Liquidating partner, who takes charge of
the winding up of partnership affairs; Share in losses
(7) Partner by estoppel, who is not really a Exempted as to According to
partner but is liable as such for the losses as between agreement; if none,
protection of innocent third persons; partners, but liable in the same
(8) Continuing partner, who continues the to third persons, proportion as the
business after dissolution of the without prejudice to agreed share in
partnership by admission of a new partner, reimbursement profits; if none, in
or retirement, death or expulsion of from capitalist proportion to
existing partners; partners contribution
(9) Surviving partner, who remains a partner Engagement in business
after dissolution by death of any partner;
(10) Subpartner, who is not a member of the Cannot engage in Cannot engage, for
partnership but contracts with a partner business for himself, his own account, in
with regard to the share of the latter in the unless the the same kind of
partnership; partnership business as that of
(11) Ostensible partner, who takes active part expressly permits the partnership,
in the business of the partnership and is him to do so; should unless there is a
known by the public; he do so without stipulation to the
(12) Secret partner, who takes active part in the permission, the contrary; should he
business, but is unknown to the third capitalist partners do so, he shall bring
persons as a partner; may: [1] exclude him to the common fund
(13) Silent partner, who does not take active from the firm; or [2] any profits accruing
part in the business, but may be known to avail themselves of to him from his
be a partner by third persons; the benefits transactions and
(14) Dormant partner, who does not take active obtained in violation shall personally
part in the business and is not known or of the prohibition, bear all the losses
held out as a partner; with right to [Article 1808]
(15) Original partner, who has been a partner damages in either
since the constitution of the partnership; case [Article 1789]
394
of a partner of a co-owner does

J. PARTNERSHIP, DISTINGUISHED dissolves the not dissolve the co-
FROM OTHER CONTRACTS partnership ownership
Partnership Joint venture A partner cannot A co-owner can
Operates with firm Operates without dispose of his dispose of his share
name and legal firm name and legal interest, so as to without consent of
personality personality make the assignee a others
partner, without
Generally relates to Usually limited to a consent of others
a continuing single transaction
business of various
transactions of a Partnership Corporation
certain kind Has juridical personality separate and
Corporations may Corporations may distinct from its individual members
not enter into a enter into joint Can only act through agents
partnership ventures Composed of an aggregate of individuals
Distributes its profits to those who
Under Philippine law, a joint venture is a form
contributed capital to the business
of partnership and should thus be governed by
the laws of partnership [Auerbach vs. Sanitary Can only be organized where there is a law
Wares Manufacturing Corp. [(989)]. authorizing its organization
Taxable as in a corporation
Partnership Co-ownership Created by Created by
Generally created by Generally created by agreement operation of law
either express or law and may exist Involves at least two Except for
implied contract even without a persons corporation sole,
contract requires at least five
Has a separate Has no separate incorporators
juridical personality juridical personality Personality Personality
Generally, the The purpose is the commences from commences from
purpose is to obtain common enjoyment the moment of the issuance of
profits of a thing or right execution of the certificate of
Duration has no An agreement to contract incorporation
limitation keep a thing Can exercise any Can exercise only
undivided for more power authorized by powers conferred by
than ten years is not partners the Corporation
allowed, but may be Code or by its
extended articles of
There is mutual There is no mutual incorporation, and
agency between representation such as are
partners among co-owners necessary or
incidental to the
Death or incapacity Death or incapacity exercise of such
395
powers marriage and any

When management Management is stipulation to the
is not agreed upon, vested in the board contrary is void
every partner may of directors or Share in profits may Share in profits is
act for the trustees be stipulated; equal
partnership otherwise, in
Partners are Stockholders are proportion to
generally liable for liable only to the contribution
partnership debts extent of their Management Administration
shares shared by all belongs to the
A partner cannot A stockholder has partners, unless spouses jointly, but
dispose of his the right to transfer otherwise agreed decision of husband
interest, so as to his shares without upon prevails in case of
make the assignee a consent of others disagreement
partner, without Partner can dispose Spouse cannot
consent of others of interest even dispose of interest
Duration has no The term limit is 50 without consent of during marriage,
limitation years, but may be others even with consent
extended
May be dissolved at May only be
any time by one or dissolved with the
all of the partners consent of the state
Conjugal
Partnership
partnership of gains
Created by Arises in case the
voluntary spouses, of opposite
agreement of two or sex, agree before
more partners of marriage
either sex
Governed by Governed by law
agreement
Has juridical Has no juridical
personality personality
Commencement Commencement is
date may be on the date of the
stipulated celebration of the
396
Voluntary (a) To warrant against eviction in the same

Partnership manner as a vendor; and
association
(b) To deliver to the partnership the fruits
Has juridical Has no juridical
of the property promised to be
personality personality
contributed, from the time they should
Organized for profit Not always have been delivered, without need of
organized for profit demand [Article 1786];
Capital is Capital is not (3) In case a sum of money is to be
contributed contributed, contributed, or in case he took any amount
although fees are from the partnership coffers, to indemnify
collected from the partnership for:
members (a) Interest; and
(b) Damages, from the time he should
The partnership is The members are
have complied with his obligation, or
primarily liable; the liable individually
from the time he converted the amount
partners are liable for debts which they
to his own use, respectively [Article
only subsidiarily authorized or
1788].
ratified
Share in profits may Share in profits is I. AMOUNT OF CONTRIBUTION
be stipulated; equal General rule: Partners are to contribute equal
otherwise, in shares to the capital of the partnership.
proportion to
contribution Exception: When there is an agreement to the
contrary, the contribution shall follow such
II. Rights and Obligations agreement [Article 1790].
of the Partnership II. ADDITIONAL CAPITAL CONTRIBUTION

Requisites:
A. RIGHT TO CONTRIBUTION
(1) There is an imminent loss of the business
The partnership has a right to the contribution
of the partnership;
(or the partners are obliged to contribute). The
(2) The majority of the capitalist partners are
money or property thus contributed, or their
of the opinion that an additional
use or fruits, become the property of the
contribution to the common fund would
partnership.
save the business;
A.1. CONTRIBUTION OF MONEY OR (3) The capitalist partner refuses deliberately
PROPERTY [not because of financial inability] to
With respect to contribution of property, a contribute an additional share to the
partner is obliged to: capital; and
(1) To contribute, at the beginning of the (4) There is no agreement that even in case of
partnership or at the stipulated time, the imminent loss of the business, the partners
money, property or industry which he are not obliged to contribute.
undertook to contribute;
(2) In case a specific and determinate thing is Any partner who refuses to contribute an
to be contributed: additional share to the capital, except an
industrial partner, to save the venture, shall be
397
obliged to sell his interest to the other (2) When the debtor declares, pursuant to
partners, unless there is an agreement to the Article 1252, at the time of making the
contrary [Article 1791]. payment, to which debt the sum must be
applied, it shall be so applied [Article
A.2. CONTRIBUTION OF INDUSTRY 1792].
An industrial partner is obliged to contribute
his industry at the stipulated time. C. RIGHT TO RETURN OF CREDIT
RECEIVED
General rule: An industrial partner cannot A partner, authorized to manage or not, who
engage in business for himself. Should he do already received, in whole or in part, his share
so, the capitalist partners, as well as industrial of a partnership credit, is obliged to bring to
partners [De Leon (2010)] may either: the partnership capital what he received when:
(1) Exclude him from the firm; or (1) The other partners have not collected their
(2) Avail themselves of the benefit which he shares; and
may have obtained. (2) The partnership debtor has become
insolvent.
Exception: He may engage in business for
himself when the partnership expressly permits This obligation exists even when he issued a
him to do so [Article 1789]. receipt for his share only [Article 1793].
B. RIGHT TO APPLY PAYMENT Ratio: In this case, the debt becomes a bad
RECEIVED TO PARTNERSHIP CREDIT debt. It would be unfair for the partner who
General rule: A partner authorized to manage, already collected not to share in the loss of the
who collects a demandable sum owed to him other partners.
in his own name from a person who also owes
the partnership a demandable sum, is obliged D. RIGHT TO INDEMNITY FOR
to apply the sum collected to both credits pro DAMAGES
rata, even if he issued a receipt for his own Every partner is responsible to the partnership
credit only. for damages suffered by it through his fault.
B.1. REQUISITES: D.1. SET-OFF OF LIABILITY

(1) There exist at least two debts, one where General rule: The liability for damages cannot
the collecting partner is creditor, and the be set-off or compensated by profits or
other, where the partnership is the benefits which the partner may have earned for
creditor; the partnership by his industry.
(2) Both debts are demandable; and
(3) The partner who collects is authorized to Ratio: The partner has the obligation to secure
manage and actually manages the the benefits for the partnership. As such, the
partnership. requirement for compensation, that the
partner be both a creditor and a debtor of the
B.2. EXCEPTIONS: partnership at the same time, is not complied
(1) In case the receipt was issued for the with [Article 1278; De Leon (2010)].
account of the partnership credit only,
however, the sum shall be applied to the
partnership credit alone.
398
Exception : The court may equitably lessen the partner having an associate is a managing
liability if, through his extraordinary efforts in partner [Article 1804].
other activities of the partnership, unusual
profits were realized [Article 1794]. Note, This arrangement refers to a contract of
however, that there is still no compensation in subpartnership, which is a partnership within a
this case. partnership, distinct and separate from the
main partnership. It is considered a
D.2. SUIT FOR DAMAGES modification of the original contract [De Leon
Before a partner may sue another for alleged (2010)].
fraudulent management and resultant
damages, liquidation must first be effected to B. RIGHT TO INSPECT PARTNERSHIP
determine the extent of the damage. Without BOOKS
liquidation of partnership affairs, a partner The partnership books shall be kept:
cannot claim damages [Soncuya v. De Luna (1) At a place agreed upon by the partners;
(1939)]. (2) When there is no such agreement, at the
principal place of business of the
E. RESPONSIBILITY TO PARTNERS partnership.
In the absence of any stipulation to the
contrary, every partner is an agent of the Every partner shall, at any reasonable hour,
partnership for the purpose of its business. As have access to and may inspect and copy any
such, it is responsible to every partner: of them.
(1) For amounts, and the corresponding
interest from the time the expenses were Any reasonable hour means reasonable hours
made, which he may have disbursed on on business days throughout the year [Pardo v.
behalf of the partnership; Lumber Co. (1925)].
(2) For obligations he may have contracted in
good faith in the interest of the partnership C. RIGHT TO A FORMAL ACCOUNT
business; and General rule: The right to a formal account of
(3) For risks in consequence of the partnership affairs accrues only when the
management of the partnership [Article partnership is dissolved.
1796].
Exceptions: In the special and unusual cases
mentioned in Article 1809, formal accounting
III. Rights and may be demanded by any partner even before
dissolution:
Obligations of Partners (1) If he is wrongfully excluded from the
partnership business or possession of its
among Themselves property by his co-partners;
A. RIGHT TO ASSOCIATE ANOTHER (2) If the right exists under the terms of any
agreement;
IN SHARE
(3) If, without his consent, a partner has
Every partner may associate another person
derived profits from any transaction
with him in his share. The admission of the
connected with the formation, conduct, or
associate to the partnership, however, requires
liquidation of the partnership or from any
consent of all the other partners even if the
use of partnership property;
399
(4) Whenever other circumstances render it

just and reasonable [Article 1809]. F. RIGHTS IN SPECIFIC PROPERTY
(1) The partners have equal rights to possess
D. PROPERTY RIGHTS OF PARTNERS partnership property for partnership
D.1. IN GENERAL purposes.
The property rights of a partner are: (2) For other purposes, the consent of his
(1) Rights in specific partnership property; partners is necessary.
(2) Interest in the partnership; and (3) If the partner is excluded, he may ask for:
(3) Right to participate in the management (a) Formal accounting [Article 1809]; or
[Article 1810]. (b) Dissolution by judicial decree [Article
1831].
D.2. PROPERTY AND CAPITAL (4) A partner’s right in such property is not
DISTINGUISHED assignable, except when all the partners
assign their rights in the same property;
Partnership
Partnership capital (5) The right is not subject to attachment or
property
execution, except on claim against the
With constant value Value varies with partnership. In case of such attachment,
market conditions the partners, or any of them, or the
Includes only Includes the representatives of a deceased partner,
actually contributed contributions and cannot claim any right under the
and promised property acquired homestead or exemption laws.
capital by the partnership (6) The right is not subject to legal support
under Article 291 [Article 1811].
E. OWNERSHIP OF CERTAIN
G. INTEREST IN THE PARTNERSHIP
PROPERTIES
A partner’s interest in the partnership is his
(1) The ownership of property used by the
share of the profits and surplus [Article 1812].
partnership depends on the intention of the
parties, which may be drawn from an
express agreement or their conduct.
G.1. ASSIGNMENT OF INTEREST
(a) A partner may allow the property to be Assignment by a partner of his whole interest
used by the partnership without in the partnership, of itself:
transfer of ownership, contributing (1) Does not dissolve the partnership; or
only the use or enjoyment thereof. (2) Does not entitle the assignee to:
(b) He may also hold title to partnership (a) Interfere in the management or
property, without acquiring ownership administration of the partnership
thereof [Article 1819]. business or affairs;
(2) Property acquired by a partner with (b) Require information or account of
partnership funds is presumed to be partnership; or
partnership property. (c) Inspect the partnership books.
(3) The same presumption also arises when
the property is indicated in the partnership It merely entitles the assignee to:
books as partnership asset. (1) Receive the profits to which the assigning
(4) Other factors may be considered to partner was entitled;
determine ownership of the property. (2) In case of fraud in management, avail
himself of the usual remedies;
400
(3) In case of dissolution:

(a) Receive his assignor’s interest; and H.1. POWERS OF A MANAGING PARTNER
(b) Require an accounting from the date General rule: The partner designated as
only of the last account agreed to by all manager in the articles may execute all acts of
the partners [Article 1813]. administration despite opposition by the other
partners.
G.2. CHARGING OF INTEREST BY
PERSONAL CREDITORS Exception: He cannot do so when he acts in
General rule: Partnership creditors are bad faith.
preferred over the personal creditors of the
partners as regards partnership property. H.2. REVOCATION OF POWER OF
MANAGING PARTNER
Exception: On due application by any judgment The powers of the managing partner may be
creditor of a partner, a competent court may: revoked:
(1) Charge the interest of the partner for the (1) If appointed in the articles of partnership,
satisfaction of the judgment debt; when:
(2) Appoint a receiver of the share of the (a) There is just or lawful cause for
profits and of any other money due or to revocation; and
fall due to the partner; and (b) The partners representing the
(3) Make all other orders, directions, accounts controlling interest revoke such power.
and inquiries, which the debtor partner (2) If appointed after the constitution of the
might have made, or which the partnership, at any time and for any cause
circumstances may require. [Article 1800].
The interest charged may be redeemed before H.3. MANAGEMENT BY TWO OR MORE
foreclosure or, in case of sale directed by the PARTNERS
court, may be purchased without causing When there are two or more managing
dissolution: partners appointed, without specification of
(1) With separate property, by one or more of their duties or without a stipulation on how
the partners; or each one will act:
(2) With partnership property, by one or more (1) Each one may separately execute all acts
of the partners, will consent of all, except of administration.
the debtor partner [Article 1814]. (2) If any of them opposes the acts of the
others, the decision of the majority
H. RIGHT TO PARTICIPATE IN prevails.
MANAGEMENT (3) In case of a tie, the partners owning the
Management of the partnership is primarily controlling interest will decide [Article
governed by the agreement of the partners in 1801].
the articles of partnership. It may be stipulated
that the partnership will be managed by: Requisites:
(1) All the partners; or (1) Two or more partners have been appointed
(2) A number of partners appointed as as managers;
managers, which may be appointed: (2) There is no specification of their respective
(a) In the articles of partnership; or duties; and
(b) After constitution of the partnership.
401
(3) There is no stipulation that one of them is evidence against the partnership [Article
shall not act without the consent of all the 1820].
others. (3) Notice to any partner of any matter
relating to partnership affairs is notice to
H.4. STIPULATION OF UNANIMITY the partnership [Article 1821].
In case there is a stipulation that none of the (4) Wrongful act or omission of any partner
managing partners shall act without the acting for partnership affairs makes the
consent of others, the concurrence of all is partnership liable [Article 1822].
necessary for the validity of the acts. (5) Partnership is bound to make good losses
The absence or disability of one cannot be for wrongful acts or misapplications of
alleged, unless there is imminent danger of partners [Article 1823].
grave or irreparable injury to the partnership
[Article 1802]. I. RIGHT TO PROFITS AND
OBLIGATION FOR LOSSES
H.5. MANAGEMENT WHEN MANNER I.1. RULES FOR DISTRIBUTION OF
NOT AGREED UPON PROFITS AND LOSSES
When there is no agreement as to the manner The distribution of profits and losses shall be in
of management, the following rules apply: accordance with the following rules:
(1) All the partners are considered agents (1) They shall be distributed in conformity with
[mutual agency]. Whatever any one does the agreement.
alone binds the partnership, unless there is (2) If only the share in profits has been
a timely opposition to the act, under Article stipulated, the share in the losses shall be
1801. in the same proportion.
(2) Any important alteration in the immovable (3) In the absence of any stipulation:
property of the partnership, even if useful (a) The share in the profits of the capitalist
to the partnership, requires unanimity. If partners shall be in proportion to their
the alteration is necessary for the contributions.
preservation of the property, however, (b) The losses shall be borne by the
consent of the others is not required [De capitalist partners, also in proportion
Leon (2010)]. to the contributions.
(c) The share of the industrial partners in
If the refusal is manifestly prejudicial to the the profits is that share as may be just
partnership, court intervention may be sought and equitable. If he also contributed
[Article 1803]. capital, he will receive a share of the
profits in proportion to his
H.6. MUTUAL AGENCY contribution; and
In addition to the Article 1801, there is (d) The industrial partner, who did not
effectively a mutual agency in the following contribute capital, is not liable for
cases: losses [Article 1797].
(1) Partners can dispose of partnership
property even when in partnership name I.2. EXCLUSION OF PARTNER FROM SHARE
[Article 1819]. General rule: A stipulation excluding one or
(2) An admission or representation made by more partners from any share in the profits or
any partner concerning partnership affairs losses is void [Article 1799].
402
Exception: A stipulation exempting an General rule: The partners may adopt any firm
industrial partner from losses is valid, since, if name desired.
the partnership fails to realize profits, he can
no longer withdraw his work or labor [De Leon Exceptions:
(2010)]. (1) They cannot use a name which is “identical
or deceptively or confusingly similar to an
J. OBLIGATION TO RENDER existing or corporation [or partnership] or
INFORMATION to any other name already protected by
Partners shall render on demand true and full law or is patently deceptive, confusing or
information of all things affecting the contrary to existing laws” [Section 18,
partnership to: Corporation Code].
(1) Any partner; (2) Use of names of deceased partner in law
(2) The legal representative of any deceased firms is “permissible provided that the firm
partner; or indicates in all its communications that
(3) The legal representative of any partner said partner is deceased” [Rule 3.02, Code
under legal disability [Article 1806]. of Professional Responsibility].
K. OBLIGATION TO ACCOUNT AND B. LIABILITY OF PARTNERS FOR

ACT AS TRUSTEE PARTNERSHIP CONTRACTS
Every partner must (1) account to the The partnership is primarily liable for contracts
partnership for any benefit and (2) hold as entered into:
trustee for it any profits derived by him without (1) In its name and for its account;
the consent of the other partners: (2) Under its signature; and
(1) From any transaction connected with the (3) By a person authorized to act for it.
formation, conduct, or liquidation of the
partnership; or Upon exhaustion of its assets, all partners are
(2) From any use by him of its property [Article liable pro rata with all their property.
1807].
Any partner may enter into a separate
obligation to perform a partnership contract
IV. Obligations of [Article 1816].
Partnership / Partners B.1. NATURE OF INDIVIDUAL LIABILITY
to Third Persons I. SUBSIDIARY
General rule: The partners are liable
A. OBLIGATION TO OPERATE UNDER
subsidiarily. It only arises upon exhaustion of
A FIRM NAME partnership assets [Cia. Maritima v. Muñoz
Every partnership shall operate under a firm (1907)].
name, which may or may not include the name
of one or more of the partners. Exceptions:
Those who, not being members of the (1) A third person who transacted with the
partnership, include their names in the firm partnership can hold the partners solidarily
name, shall be subject to the liability of a [rather than subsidiarily] liable for the
partner [Article 1815]. whole obligation if the case falls under
Articles 1822 or 1823 [Muñasque v. CA
403
(1985)]. The provisions refer to wrongful General rule: Any act of a partner which is
acts or omission and misapplication of apparently for the carrying on of the usual
money or property by a partner in the business of the partnership binds the latter,
ordinary course of business. including the execution of any instrument in
(2) A person admitted as a partner into an the partnership name.
existing partnership is liable for all the
obligations of the partnership arising Exception: The partnership is not bound when
before his admission, except that his the following concur:
liability shall be satisfied only out of (1) The partner has in fact no authority to act;
partnership property, unless there is a and
stipulation to the contrary [Article 1826]. In (2) The person with whom he deals has
other words, he is not personally liable. knowledge of such fact [Article 1818 (1)].
C.2. ACTS NOT APPARENTLY FOR

CARRYING ON OF THE USUAL BUSINESS
II. PRO RATA General rule: Acts of a partner which is not
The partners are liable pro rata. apparently for carrying on of the usual
This liability is not increased even when a business does not bind the partnership.
partner:
(1) Has left the country and the payment of his Exception: The partnership is bound if the
share of the liability cannot be enforced other partners authorized him to do the act
[Co-Pitco v. Yulo (1907)]; or [Article 1818, 2nd par.].
(2) His liability is condoned by the creditor
[Island Sales v. United Pioneers (1975)]. C.3. ACTS OF STRICT DOMINION
General rule: One or some of the partners have
B.2. LIABILITY OF AN INDUSTRIAL no authority to do the following acts of strict
PARTNER dominion:
An industrial partner, who is not liable for (1) Assign the partnership property in trust for
losses, is not exempt from this liability. creditors or on the assignee’s promise to
However, he can recover the amount he has pay the debts of the partnership;
paid from the capitalist partners, unless there (2) Dispose of the goodwill of the business;
is a stipulation to the contrary [Cia. Maritima v. (3) Do any other act which makes it impossible
Muñoz (1907)]. to carry on the ordinary business of the
partnership;
B.3. STIPULATION AGAINST INDIVIDUAL (4) Confess a judgment;
LIABILITY (5) Enter into a compromise concerning a
Any stipulation against this liability is: partnership claim or liability;
(1) Void against third persons; but (6) Submit a partnership claim or liability to
(2) Valid among the partners [Article 1817]. arbitration;
(7) Renounce a claim of the partnership.
C. LIABILITY OF PARTNERS FOR
Exceptions: They may do so if:
PARTNERSHIP CONTRACTS
(1) Authorized by all the partners; or
C.1. ACTS APPARENTLY FOR THE (2) The other partners have abandoned the
CARRYING ON OF USUAL BUSINESS business [Article 1818, 3rd par.].
404
(b) Without knowledge that the act

C.4. ACTS IN CONTRAVENTION OF A exceeded authority [Article 1819, 3rd
RESTRICTION par.].
Any act of a partner in contravention of a
restriction on authority does not bind the Where the title is in the name of one or more or
partnership to persons having knowledge of all the partners, or in a third person in trust for
the restriction [Article 1818, 4th par.]. the partnership a partner authorized to carry
on the usual business may convey equitable
D. CONVEYANCE OF PARTNERSHIP title in the partnership name or in his own
name [Article 1819, 4th par.].
REAL PROPERTY
Where the title is in the names of all the
D.1. TITLE IN PARTNERSHIP NAME partners, a conveyance executed by all of them
Any partner may convey the real property in passes all the rights to the property [Article
the name of the partnership. 1819, 5th par.].
The partnership can recover it, except when:
(1) The act of the partner binds the
E. LIABILITY OF THE PARTNERSHIP
partnership, when he has authority to carry
out the usual business of the partnership, FOR ADMISSION BY A PARTNER
under Article 1818, 1st par.; or An admission or representation by any partner
(2) If not so authorized, the property has been may be used as evidence against the
conveyed by the grantee, or a person partnership when:
claiming under him, to a holder for value (1) It concerns partnership affairs;
and without knowledge that the partner (2) Such affairs are within the scope of his
exceeded his authority [Article 1819, 1st authority [Article 1820].
par.].
F. LIABILITY OF THE PARTNERSHIP
A partner authorized to carry out the usual FOR WRONGFUL ACTS OF A
business may convey, in his own name, the PARTNER
equitable interest of the partnership [Article The partnership is solidarily liable with the
1819, 2nd par.]. partner who causes loss or injury to any person
not a partner, or incurs any penalty through
D.2. TITLE IN THE NAME OF OTHER any wrongful act or omission:
PERSONS (1) In the ordinary course of the business of
Where the title is in the name of one or more the partnership; or
but not all the partners, and the record does (2) Not in such ordinary course of business,
not disclose the right of the partnership: but with the authority of his co-partners
(1) The partners having title may convey title. [Article 1822].
(2) The partnership may recover it when the
partners conveying title have no authority G. LIABILITY OF THE PARTNERSHIP
to carry on the usual business of the
FOR MISAPPLICATION OF MONEY
partnership, unless the purchaser or his
assignee is:
OR PROPERTY
(a) A holder for value; and The partnership is liable for losses suffered by
a third person whose money or property was:
(1) Received by a partner:
405
(a) Acting within the scope of his apparent

authority; and II. PUBLIC REPRESENTATION
(b) Misapplied it; If he has made such representation or
(2) Received by the partnership: consented to its being made in a public
(a) In the course of its business; and manner, whether the representation has or has
(b) Misapplied by any partner while it is in not been [personally] made or communicated
the custody of the partnership [Article to such persons so giving credit by or with his
1823]. knowledge, and:
(1) Partnership liability results, he is liable as
H. LIABILITY OF THE OTHER though he were an actual member of the
PARTNERS UNDER ARTICLES 1822 partnership.
(2) No partnership liability results, he is liable
AND 1823
pro rata with the other persons, if any, so
All partners are solidarily liable with the
consenting to the contract or
partnership for its liabilities under Articles
representation.
1822 and 1823 [Article 1824].
(3) When there are no such other persons, he
is separately liable [Article 1825, 1st par.].
This is without prejudice to the guilty partner
being liable to the other partners. However, as
far as third persons are concerned, the
I.3. EFFECT ON EXISTING PARTNERSHIP
partnership is answerable [De Leon (2010)]. OR OTHER PERSONS NOT ACTUAL
PARTNERS
I. LIABILITY IN CASE OF (1) When a person has been represented to be
a partner (a) in an existing partnership, or
PARTNERSHIP BY ESTOPPEL
(b) with one or more persons not actual
I.1. PARTNER BY ESTOPPEL partners, he is an agent of the persons
A partner by estoppel is a person who, by consenting to such representation to bind
words spoken or written or by conduct [1] them to the same extent and in the same
represents himself as a partner or [2] consents manner as though he were a partner in
to another representing him to anyone as a fact, with respect to persons who rely upon
partner: the representation.
(1) In an existing partnership; or (2) When all the members of the existing
(2) With one or more persons not actual partnership consent to the representation,
partners [Article 1825, 1st par.]. a partnership act or obligation results.
(3) In all other cases, it is the joint act or
I.2. LIABILITY OF A PARTNER BY obligation of the person acting and the
ESTOPPEL persons consenting to the representation
I. PERSONAL REPRESENTATION [Article 1825, 2nd par.].
A partner by estoppel is liable to any such
persons: I.4. NATURE OF LIABILITY
(1) To whom such representation has been Summarizing Article 1825, a partner by
made; and estoppel is liable in the following manner:
(2) Who has, on the faith of such (1) He is liable as though he were a partner
representation, given credit to the actual or when:
apparent partnership [Article 1825, 1st (a) There is an existing partnership;
par.].
406
(b) All the partners consented to the (2) Knowledge of the partner acting in the
representation; and particular matter acquired while a partner;
(c) A partnership liability results. (3) Knowledge of the partner acting in the
(2) He is liable jointly and pro rata (as though particular matter then present to his mind;
he were a partner in fact) with those who or
consented to the representation when: (4) Knowledge of any other partner who
(a) There is an existing partnership but not reasonably could and should have
all the partners consented; or communicated it to the acting partner.
(b) There is no existing partnership and all These do not apply in case of fraud on the
those represented as partners partnership committed by or with the consent
consented to the representation. of the partner [Article 1821].
(3) He is liable separately when:
(a) There is an existing partnership but
V. Dissolution
none of the partners consented; or A. CONCEPTS
(b) There is no existing partnership and Dissolution – the change in the relation of the
not all of those represented as partners partners caused by any partner ceasing to be
consented to the representation. associated in the carrying on of the business. It
is different from the winding-up of the
J. LIABILITY OF AN INCOMING business [Article 1828]. It does not terminate
PARTNER the partnership, which continues until the
A person admitted as a partner is liable: winding up of partnership affairs is completed
(1) For obligations incurred subsequent to his [Article 1829].
admission as the other partners are liable;
(2) For obligations incurred before his Winding up – the actual process of settling the
admission, but will be satisfied only out of partnership business or affairs after
the partnership property, unless otherwise dissolution. It involves collection and
stipulated that he fully assumes such distribution of partnership assets, payment of
obligations. debts, and determination of the value of the
interest of the partners in the partnership.
Ratio:
(1) The new partner partakes of the benefits of Termination – the point in time when all
the partnership property and an already partnership affairs are completely wound up
established business. and finally settled. It signifies the end of the
(2) He has every means of obtaining full partnership life [De Leon (2010)].
knowledge of the debts of the partnership
and remedies that amply protect his B. CAUSES OF DISSOLUTION
interest [De Leon (2010)]. B.1. WITHOUT VIOLATION OF THE
AGREEMENT
K. NOTICE TO OR KNOWLEDGE OF (1) By the termination of the definite term or
THE PARTNERSHIP particular undertaking specified in the
The following operate as notice to or agreement;
knowledge of the partnership: (2) By the express will of any partner, who
(1) Notice to any partner of any matter must act in good faith, when no definite
relating to partnership affairs; term or particular is specified.
407
(3) By the express will of all the partners who (2) When a specific thing which a partner had
have not assigned their interests or promised to contribute, perishes before
suffered them to be charged for their delivery, or by the loss of the thing, only
separate debts, either before or after the the use or enjoyment of which has been
termination of any specified term or contributed; the loss of a specific thing,
particular undertaking; however, does not dissolve the corporation
(4) By the expulsion of any partner from the after its ownership has already been
business bona fide in accordance with such transferred to the partnership;
a power conferred by the agreement (3) By the death of any partner;
between the partners [Article 1830(1)]. (4) By the insolvency of any partner or of the
partnership;
If, after the expiration of the definite term or (5) By the civil interdiction of any partner;
particular undertaking, the partners continue
the partnership without making a new B.4. BY DECREE OF COURT
agreement, the firm becomes a partnership at A partner may apply for dissolution in court
will [Article 1785]. when:
(1) A partner has been declared insane in any
Any one of the partners may, at his sole judicial proceeding or is shown to be of
pleasure, dictate the dissolution of the unsound mind;
partnership at will. He must, however, act in (2) A partner becomes in any other way
good faith, not that the attendance of bad faith incapable of performing his part of the
can prevent the dissolution of the partnership partnership contract;
but that it can result in a liability for damages (3) A partner has been guilty of such conduct
[Ortega v. CA (1995)]. as tends to affect prejudicially the carrying
on of the business;
B.2. IN CONTRAVENTION OF THE (4) A partner willfully or persistently commits
AGREEMENT a breach of the partnership agreement, or
Where circumstances do not permit dissolution otherwise so conducts himself in matters
under any other provision of Article 1830, it relating to the partnership business that it
may also be dissolved by the express will of any is not reasonably practicable to carry on
partner at any time. the business in partnership with him;
Thus, even if there is a specified term, one (5) The business of the partnership can only
partner can cause its dissolution by expressly be carried on at a loss;
withdrawing even before the expiration of the (6) Other circumstances render a dissolution
period, with or without justifiable cause. If the equitable.
cause is not justified or no cause was given, the
withdrawing partner is liable for damages but A person who acquires the interest of a partner
in no case can he be compelled to remain in may likewise apply:
the firm [Rojas v. Maglana (1990)]. (1) After the termination of the specified term
or particular undertaking;
B.3. BY OPERATION OF LAW (2) At any time if the partnership was a
(1) By any event which makes it unlawful for partnership at will when the interest was
the business of the partnership to be assigned or when the charging order was
carried on or for the members to carry it on issued
in partnership;
408
B.5. OTHER CAUSES (b) Completing transactions unfinished at

(1) When a new partner is admitted into an dissolution.
existing partnership; (2) He can also bind it by any transaction
(2) When any partner retires; which would bind the partnership as if
(3) When the other partners assign their rights dissolution had not taken place, provided
to the sole remaining partner; the other party to the transaction:
(4) When all the partners assign their rights in (a) Had extended credit to the partnership
the partnership property to third persons prior to dissolution and had no
[Article 1840]. knowledge or notice thereof; or
(b) Had not so extended credit but had
The statutory enumeration of the causes of known of the partnership prior to
dissolution is exclusive [De Leon (2010)]. dissolution, and having no knowledge
or notice of dissolution, the fact had
C. EFFECTS OF DISSOLUTION not been advertised in a newspaper of
C.1. ON AUTHORITY OF THE PARTNERS general circulation in the place [or in
In general, upon dissolution, the authority of each place if more than one] at which
the partners to represent the partnership is the partnership business was regularly
confined only to acts necessary to: carried on [Article 1834, 1st par.].
(1) Wind up partnership affairs; or
(2) Complete transactions begun but not then Note the character of the notice required:
finished [Article 1832, 1st. par.]. (1) As to persons who extended credit to the
partnership prior to dissolution, notice
must be actual.
C.1.A. WITH RESPECT TO PARTNERS
(2) As to persons who merely knew of the
The authority of partners to act for the
existence of the partnership, publication in
partnership is terminated, with respect to
a newspaper of general circulation in the
partners:
place of business of the partnership is
(1) When the dissolution is not by the act,
sufficient.
insolvency or death of a partner; or
(2) When the dissolution is by such act,
insolvency or death, when the partner
C.2. ON LIABILITY FOR TRANSACTIONS
acting for the partnership has knowledge AFTER DISSOLUTION
or notice of the cause [Articles 1832 and The liability of a partner, in general, is the
1833]. same as in ordinary contracts (pro rata and
subsidiary).
In other cases, each partner is still liable for his
share in the liability created by the partner In the following cases, however, the liability
acting for the partnership [Article 1833]. shall be satisfied out of the partnership assets
alone (i.e., there is no subsidiary liability):
C.1.B. WITH RESPECT TO THIRD 1. When the partner had been, prior to the
dissolution, unknown as a partner to the
PERSONS
person with whom the contract is made;
With respect to persons not partners:
2. When the partner had been, prior to the
(1) After dissolution, a partner can bind the
dissolution, so far unknown or inactive in
partnership by any act appropriate for:
partnership affairs that the business
(a) Winding up partnership affairs; or
reputation of the partnership could not
409
be said to have been in any degree due to for the partnership had knowledge or
his connection with it [Article 1834]. notice of the death or insolvency [Article
1833].
Any act of a partner after dissolution in no case
binds the partnership in the following cases: C.4. ON EXISTING LIABILITY OF
(1) Where the partnership is dissolved because PARTNERS
it is unlawful to carry on the business, General rule: Dissolution does not of itself
unless the act is appropriate for winding up discharge the existing liability of any partner.
partnership affairs;
(2) Where the partner has become insolvent; Exception: A partner may be relieved when
(3) Or, where the partner has no authority to there is an agreement to that effect between:
wind up partnership affairs, except by a (1) Himself;
transaction with one who: (2) The partnership creditor; and
(a) Had extended credit to the partnership (3) The person or partnership continuing the
prior to dissolution and had no business.
knowledge or notice of his want of
authority; or Such agreement may be inferred from the
(b) Had not extended credit to the course of dealing between the creditor having
partnership prior to dissolution, and, knowledge of the dissolution and the person or
having no knowledge or notice of his partnership continuing the business.
want of authority, the fact of his want
of authority has not been advertised In case of dissolution by death, the individual
[Article 1834]. property of a deceased partner is liable for
obligations of the partnership incurred while
Article 1834 does not affect the liability under he was a partner, after payment of his separate
Article1825 of any person who, after debts [Article 1835].
dissolution, represents himself or consents to
another representing him as a partner in a D. WINDING UP PARTNERS
partnership engaged in carrying on business D.1. WHO MAY WIND UP
[Article 1834]. The following partners have the right to wind
up the partnership affairs:
C.3. ON LIABILITY FOR CONTRACTS (1) Those designated in an agreement;
AFTER DISSOLUTION BY SPECIFIC (2) Those who have not wrongfully dissolved
CAUSES the partnership; or
General rule: A contract entered into by a (3) The legal representative of the last
partner acting for the partnership after surviving partner, who was not insolvent.
dissolution by act, death or insolvency of a
partner binds the other partners. Any partner or his legal representative or
assignee may obtain winding up by the court,
Exceptions: upon cause shown [Article 1836].
(1) The dissolution being by act of any partner,
the partner acting for the partnership had D.2. MANNER OF WINDING UP
knowledge of the dissolution; or 1. Extrajudicial, by the partners themselves;
(2) The dissolution being by death or or
insolvency of a partner, the partner acting
410
2. Judicial, under the control and direction (c) During the agreed term for the
of the proper court. partnership.
The action for liquidation of the partnership is For the purpose of continuing the business, the
personal. The fact that sale of assets, including said partners may possess the partnership
real property, is involved does not change its property provided:
character, such sale being merely a necessary (1) They secure the payment by bond
incident of the liquidation of the partnership, approved by the court; or
which should precede and/or is part of its (2) They pay any partner who has caused the
process of dissolution [Claridades v. Mercader dissolution wrongfully the value of his
(1966)]. interest in the partnership, less any
damages recoverable, and indemnity
E. RIGHTS OF PARTNERS IN CASE OF against all present or future partnership
DISSOLUTION liabilities [Article 1837(2)].
E.1. DISSOLUTION WITHOUT VIOLATION
II. PARTNER WHO CAUSED THE
OF THE AGREEMENT
Each partner may have:
DISSOLUTION
(1) The partnership property applied to The partner who caused the dissolution
discharge the partnership liabilities; and wrongfully has the following rights:
(2) The surplus applied in cash to the net (1) If the business is not continued, all the
amount owing to the respective partners. rights Article 1837, 1st par., subject to
liability for damages;
This is a right as against his co-partners and all (2) If the business is continued, the right, as
partners claiming through them in respect of against his co-partners and all claiming
their interests in the partnership. It cannot be through them, to:
availed if there is an agreement to the contrary (a) Ascertainment, without considering the
[Article 1837 (1)]. value of the goodwill of the business,
and payment to him in cash the value
of his partnership interest, less any
E.2. DISSOLUTION IN CONTRAVENTION
damage, or have the payment secured
OF THE AGREEMENT
by a bond approved by the court; and
I. PARTNER WHO DID NOT CAUSE THE (b) Be released from all existing liabilities
DISSOLUTION of the partnership [Article 1837(3)].
The partners who did not cause the dissolution
wrongfully has the following rights: The goodwill of a business may be defined to
(1) To demand the right under Article 1837, 1st be the advantage which it has from its
par.; establishment or from the patronage of its
(2) To be indemnified for damages for breach customers, over and above the mere value of
of the agreement against the partner who its property and capital. The goodwill [which
caused the dissolution wrongfully [Article includes the firm name] is part of the
1837(1)]; partnership assets and may be subject of sale
(3) To continue the business: [De Leon (2010)].
(a) In the same name;
(b) By themselves or jointly with others;
F. RIGHTS OF PARTNERS IN CASE OF
RESCISSION
411
A partner, who is induced by fraud or (1) The contribution shall be in conformity

misrepresentation to become such partner, with the agreement.
may rescind the contract. Without prejudice to (2) If only the share in profits has been
any other right, he is entitled: stipulated, the contribution shall be in the
(1) To a lien on, or right of retention of, the same proportion.
surplus of the partnership property after (3) In the absence of any stipulation, the
satisfying the partnership liabilities to third contribution shall be in proportion to the
persons for any sum of money paid by him capital contribution [Article 1797].
for the purchase of an interest in the
partnership and for any capital or advances G.3. ENFORCEMENT OF CONTRIBUTION
contributed by him; The following persons have the right to enforce
(2) To stand, after all liabilities to third the contributions:
persons have been satisfied, in the place of (1) An assignee for the benefit of creditors;
the creditors of the partnership for any (2) Any person appointed by the court; or
payments made by him in respect of the (3) To the extent of the amount which he has
partnership liabilities; and paid in excess of his share of the
(3) To be indemnified by the person guilty of partnership liability, any partner or his
the fraud or making the representation legal representative [Article 1839(5) and
against all debts and liabilities of the (6)].
partnership [Article 1838].
The individual property of a deceased partner
G. SETTLING OF ACCOUNTS shall be liable for the contributions [Article
BETWEEN PARTNERS 1839(7)].
Subject to any agreement to the contrary, the
following rules shall be observed in settling G.4. ORDER OF APPLICATION OF
accounts between partners after dissolution. ASSETS
The partnership liabilities shall rank, in order
G.1. COMPOSITION OF PARTNERSHIP of payment, as follows:
ASSETS (1) Those owing to creditors other than
(1) The partnership property; and partners;
(2) The contributions of the partners necessary (2) Those owing to partners other than for
for the payment of all the liabilities [Article capital and profits;
1839(1)]. (3) Those owing to partners in respect of
capital;
In accordance with the subsidiary liability of (4) Those owing to partners in respect of
the partners, the partnership property shall be profits [Article 1839(2).
applied first to satisfy any liability of the
partnership [Article 1839(3)]. G.5. DOCTRINE OF MARSHALING OF
ASSETS
G.2. AMOUNT OF CONTRIBUTION FOR When partnership property and the individual
LIABILITIES properties of the partners are in possession of
The rules for distribution of losses shall a court for distribution:
determine the contributions of the partners (1) Partnership creditors have priority on
[Article 1839(4)]. As such: partnership property;
412
(2) Separate creditors have priority on (e) Expulsion of a partner, and the
individual property, saving the rights of lien remaining partners continue the
of secured creditors. business, either alone or with others.
(3) Anything left from either shall be applied (2) When the cause of dissolution is the
to satisfy the other [Article 1839(8)]. retirement or death of any partner, and
business is continued with the consent of
G.6. DISTRIBUTION OF PROPERTY OF the retired partner or the representative of
INSOLVENT PARTNER the deceased partner, without assignment
Where a partner has become insolvent or his of their rights to partnership property.
estate is insolvent, the claims against his (3) When the cause of dissolution is the
separate property shall rank in the following assignment by all the partners or their
order: representatives of their rights in
(1) Those owing to separate creditors; partnership property to one or more third
(2) Those owing to partnership creditors; persons who promise to pay the debts and
(3) Those owing to partners by way of who continue the business of the
contribution [Article 1839(9)]. partnership [Article 1840, 1st par.].
H. RIGHTS OF CREDITORS OF H.2. LIABILITY OF A NEW PARTNER

The liability to the creditors of the dissolved
DISSOLVED PARTNERSHIP
partnership of a new partner in the partnership
H.1. AS CREDITORS OF THE NEW
continuing the business shall be satisfied out
PARTNERSHIP of the partnership property alone. However, he
In the following cases, creditors of the may, through agreement, assume individual
dissolved partnership are also creditors of the liability [Article 1840, 2nd par.].
person or partnership continuing the business:
(1) When the business is continued without
H.3. PRIORITY OF CREDITORS OF
liquidation, and the cause of dissolution is:
DISSOLVED PARTNERSHIP
(a) Admission of a new partner into the
Creditors of the dissolved partnership have
existing partnership;
prior right to any claim of the retired partner or
(b) Retirement or death of any partner,
the representative of the deceased partner
and his rights to partnership property
against the person or partnership continuing
are assigned to [1] two or more of the
the business [Article 1840, 3rd par.].
partners, or [2] one or more of the
This is without prejudice to the right of
partners and one or more third
creditors to set aside any assignment on the
persons;
ground of fraud [Article 1840, 4th par.].
(c) Retirement of all but one partner, and
their rights to partnership property are
assigned to the remaining partner, I. RIGHTS OF A RETIRED PARTNER
who continues the business, either OR A REPRESENTATIVE OF
alone or with others; DECEASED PARTNER
(d) Wrongful dissolution by any partner, Unless otherwise agreed upon, when any
and the remaining partners continue partner retires or dies, and the business is
the business, either alone or with continued without any settlement of accounts
others; as between him or his estate and the person or
partnership continuing the business, he or his
413
legal representative, as against such person or (2) The business is controlled or managed by
partnership, subject to the prior rights of one or more general partners, who are
creditors of the dissolved partnership: personally liable to creditors [Articles 1848
(1) May have the value of his interest at the and 1850].
date of dissolution ascertained; and (3) One or more limited partners contribute to
(2) Shall receive as an ordinary creditor: the capital and share in the profits but do
(a) An amount equal to the value of his not manage the business and are not
interest in the dissolved partnership personally liable for partnership
with interest; or obligations beyond their capital
(b) At his option or at the option of his contributions [Articles 1845, 1848 and
legal representative, in lieu of interest, 1856].
the profits attributable to the use of his (4) Obligations or debts are paid out of the
right in the property of the dissolved partnership assets and the individual
partnership [Article 1841]. property of the general partners [Article
1843].
J. RIGHT TO AN ACCOUNT (5) The limited partners may have their
In the absence of any agreement to the contributions back subject to conditions
contrary, the right to an account of his interest prescribed by law [Articles 1844 and 1957].
shall accrue to any partner, or his legal
representative at the date of dissolution, as A limited partnership has the following
against: advantages:
(1) The winding up partners; (1) For general partners, to secure capital
(2) The surviving partners; or from others while retaining control and
(3) The person or partnership continuing the supervision for the business;
business [Article 1842]. (2) For limited partners, to have a share in the
profits without risk of personal liability.
VI. Limited Partnership C. GENERAL AND LIMITED
A. DEFINITION
PARTNERS DISTINGUISHED
A limited partnership is:
(1) A partnership; General partner Limited partner
(2) Formed by two or more persons; Extent of liability
(3) Having as members: Personally, but Liable only to the
(a) One or more general partners; and subsidiarily, liable extent of his capital
(b) One or more limited partners. for obligations of contributions
the partnership
The limited partners as such shall not be
bound by the obligations of the partnership Right to participate in management
[Article 1843]. Unless otherwise No right to
agreed upon, all participate in
B. CHARACTERISTICS general partners management
(1) A limited partnership is formed by have an equal right
compliance with the statutory to manage the
requirements [Article 1844]. partnership
Nature of contribution
414
Cash, property or Cash or property Article 1844; and [2]

industry only, not industry file the certificate
Proper party in proceedings by or against for record in the SEC
partnership Composition
Proper party Not proper party, Only general One or more
unless [1] he is partners general, and one or
also a general more limited
partner; or [2] where partners
the object of the Firm name
proceedings is to
enforce his right Must contain the Must include the
against or liability to word “Company” word “Limited” [SEC
the partnership [SEC Memo Circ No. Memo. Circ. No. 14-
14-00], except for 00]
Firm name professional
Name may appear Name must not partnerships Must not include
in the firm name appear in the firm name of limited
name May or may not partners, unless: [1]
Prohibition to engage in other business include the name of it is also the
one or more of the surname of a
Prohibited [subject Not prohibited partners general partner, or
to qualifications] [2] prior to the time
Effect of retirement, death, insanity or when the limited
insolvency partner became
Dissolves Does not dissolve such, the business
partnership partnership; rights has been carried on
transferred to under a name in
executor or which his surname
administrator for appeared
selling his estate Rules governing dissolution
Assignability of interest Articles1828-1842 Articles 1860-1863
Not assignable Assignable
E. FORMATION
D. GENERAL AND LIMITED E.1. GENERAL REQUIREMENTS
Two or more persons desiring to form a limited
PARTNERSHIP DISTINGUISHED
partnership shall:
General Limited (1) Sign and swear to a certificate stating the
partnership partnership
items in Article 1844; and
Creation (2) File for record the certificate in the SEC
May be constituted Partners must: [1] [Article 1844].
in any form, subject sign and swear to a
to exceptions certificate in A limited partnership is formed if there is
compliance with substantial compliance in good faith with the
415
requirements. When there is failure to (2) Subsequently, but within a sufficient time
substantially comply with the requirements: before the statement was relied upon to
(1) In relation to third persons, the partnership enable him to cancel or amend the
is general, unless they recognized that the certificate, or to file a petition for its
firm is a limited partnership; and cancellation or amendment [Article 1847].
(2) As between the partners, the partnership
remains limited, since they are bound by REQUISITES:
their agreement [De Leon (2010)]. (1) The partner knew the statement to be
false:
E.2. PURPOSE OF FILING (a) At the time he signed the certificate; or
The purpose of filing the certificate in the SEC (b) Subsequently, but having sufficient
is: time to cancel or amend it, or file a
(1) To give actual or constructive notice to petition for its cancellation or
potential creditors or persons dealing with amendment, and he failed to do so;
the partnership; and (2) The person seeking to enforce liability has
(2) To acquaint them with its essential relied upon the false statement in
features, including the limited liability of transacting business with the partnership;
limited partners [De Leon (2010)]. and
(3) The person suffered loss as a result of
E.3. FIRM NAME reliance upon such false statement.
General rule: The surname of a limited partner
shall not appear in the partnership name. E.5. GENERAL AND LIMITED PARTNER
AT THE SAME TIME
Exceptions: A person may be a general and a limited
(1) It is also the surname of a general partner; partner in the same partnership at the same
or time. This fact must be stated in the certificate.
(2) Prior to the time when the limited partner A person who is a general, and also at the
became such, the business had been same time a limited partner, shall have all the
carried on under a name in which his rights and powers, and be subject to all the
surname appeared. restrictions of a general partner, except that, in
respect to his contribution as a limited partner,
A limited partner whose surname appears in a he shall have the rights against the other
partnership name contrary to this prohibition is members which he would have had if he were
liable as a general partner to partnership not also a general partner [Article 1853].
creditors who extend credit without actual
knowledge that he is not a general partner. F. MANAGEMENT
Only general partners have the right to
E.4. FALSE STATEMENT IN THE manage the partnership. If a limited partner
CERTIFICATE takes part in the control of the business, he
If the certificate contains a false statement, becomes liable as a general partner [Article
one who suffers loss by reliance thereon may 1848].
hold liable any party to the certificate who
knew the statement to be false: A general partner shall have the rights and
(1) At the time he signed the certificate; or powers and be subject to all restrictions and
liabilities of a partner in a partnership without
416
limited partners. Thus, he has general

authority over the business. He holds as trustee for the partnership:
However, written consent or ratification by all (1) Specific property stated in the certificate as
limited partners is necessary to authorize the contributed by him, but which was not
general partners to: contributed or which has been wrongfully
(1) Do any act in contravention of the returned; and
certificate; (2) Money or other property wrongfully paid or
(2) Do any act which would make it impossible conveyed to him on account of his
to carry on the ordinary business of the contribution [Article 1858, 2nd par.].
partnership;
(3) Confess a judgment against the These liabilities can be waived or compromised
partnership; only by the consent of all members. Such
(4) Possess partnership property, or assign waiver or compromise, however, shall not
their rights in specific property, for other affect the right to enforce said liabilities of a
than a partnership purpose; creditor:
(5) Admit a person as a general partner; (1) Who extended credit; or
(6) Admit a person as a limited partner, unless (2) Whose claim arose, after the filing or
the right to do so is given in the certificate; before a cancellation or amendment of the
(7) Continue the business with partnership certificate, to enforce such liabilities
property on the death, retirement, insanity, [Article 1858, 3rd par.].
civil interdiction or insolvency of a general
partner, unless the right so to do is given in Even after a limited partner has rightfully
the certificate received the return in whole or in part of his
capital contribution, he is still liable to the
G. OBLIGATIONS OF A LIMITED partnership for any sum, not in excess of such
PARTNER return with interest, necessary to discharge its
G.1. OBLIGATIONS RELATED TO liabilities to all creditors:
CONTRIBUTION (1) Who extended credit; or
The contributions of a limited partner may be (2) Whose claims arose before such return
cash or other property, but not services [Article [Article 1858, 4th par.].
1845].
A limited partner is liable for partnership A person who has contributed capital to a
obligations when he contributes services partnership, erroneously believing that he has
instead of only money or property to the become a limited partner, but his name
partnership [De Leon (2010)]. appears in the certificate as a general partner
or he is not designated as a limited partner, is
A limited partner is liable to the partnership: not personally liable as a general partner by
(1) For the difference between his actual reason of his exercise of the rights of a limited
contribution and that stated in the partner, provided:
certificate as having been made; and (1) On ascertaining the mistake, he promptly
(2) For any unpaid contribution which he renounces his interest in the profits of the
agreed in the certificate to make in the business or other compensation by way of
future at the time and on the conditions income [Article 1852];
stated in the certificate [Article 1858, 1st
par.].
417
(2) He does not participate in the A limited partner shall have the same rights as
management of the business [Article a general partner to:
1848]; and (1) Require that the partnership books be kept
(3) His surname does not appear in the at the principal place of business of the
partnership name [Article 1846]. partnership;
(2) To inspect and copy any of them at a
G.2. LIABILITY TO PARTNERSHIP reasonable hour;
CREDITORS (3) To demand true and full information of all
General rule: A limited partner is not liable as a things affecting the partnership;
general partner. His liability is limited to the (4) To demand a formal account of
extent of his contributions [Article 1843]. partnership affairs whenever
circumstances render it just and
Exceptions: The limited partner is liable as a reasonable;
general partner when: (5) To ask for dissolution and winding up by
(1) His surname appears in the partnership decree of court;
name, with certain exceptions [Article (6) To receive a share of the profits or other
1846, 2nd par.]. compensation by way of income; and
(2) He takes part in the control of the business (7) To receive the return of his contribution
[Article 1848]. provided the partnership assets are in
excess of all its liabilities [Article 1851].
G.3. LIABILITY TO SEPARATE
CREDITORS H.2. RIGHT TO TRANSACT BUSINESS
On due application to a court of competent WITH THE PARTNERSHIP
jurisdiction by any separate creditor of a A limited partner may:
limited partner, the court may: (1) Loan money to the partnership;
(1) Charge his interest with payment of the (2) Transact other business with the
unsatisfied amount of such claim; partnership; and
(2) Appoint a receiver; and (3) Receive a pro rata share of the partnership
(3) Make all other orders, directions and assets with general creditors if he is not
inquiries which the circumstances of the also a general partner [Article 1854, 1st
case may require. par.].
The interest so charged may be redeemed with Limitations: A limited partner, with respect to
the separate property of any general partner, his transactions with the partnership, cannot:
but may not be redeemed with partnership (1) Receive or hold as collateral security any
property [Article 1862]. partnership property; or
(2) Receive any payment, conveyance, or
Note: In a general partnership, the interest release from liability if it will prejudice the
may be redeemed with partnership property right of third persons [Article 1854, 1st
with the consent of all the partners whose par.].
interests are not charged [Article 1814].
Violation of the prohibition is considered a
fraud on the creditors of the partnership
H. RIGHTS OF A LIMITED PARTNER [Article 1854, 2nd par.].
H.1. IN GENERAL
418
H.3. RIGHT TO SHARE IN PROFITS

A limited partner may receive from the General rule: A limited partner, irrespective of
partnership the share of the profits or the the nature of his contribution has only the right
compensation by way of income stipulated for to demand and receive cash in return for his
in the certificate. contribution.
This right is subject to the condition that
partnership assets will still be in excess of Exceptions: He may receive his contribution in
partnership liabilities after such payment a form other than cash when:
[Article 1856]. The partnership liabilities being (1) There is a statement in the certificate to
referred to exclude the liabilities to the limited the contrary; or
and general partners. (2) All the members of the partnership
consent [Article 1857, 3rd par.].
Ratio: Otherwise, he will receive a share to the
prejudice of third-party creditors. H.5. PREFERENCE OF LIMITED
PARTNERS
H.4. RIGHT TO RETURN OF General rule: The limited partners stand on
CONTRIBUTION equal footing.
A limited partner may have his contributions
withdrawn or reduced when: Exception: By an agreement of all the partners
(1) All the liabilities of the partnership, except [general and limited] in the certificate, priority
liabilities to general partners and to or preference may be given to some limited
limited partners on account of their partners over others with respect to:
contributions, have been paid or there (1) The return of contributions;
remains property of the partnership (2) Their compensation by way of income; or
sufficient to pay them; (3) Any other matter [Article 1855].
(2) The consent of all members is had, unless
the return may be demanded as a matter H.6. RIGHT TO ASSIGN INTEREST
of right; and The interest of a limited partner is assignable.
(3) The certificate is cancelled or so amended The assignee may become:
as to set forth the withdrawal or reduction (1) A substituted limited partner; or
[Article 1857, 1st par.]. (2) A mere assignee.
The return of his contributions may be A substituted limited partner is a person

demanded, as a matter of right [i.e., even when admitted to all the rights of a limited partner
not all the other partners consent], when (1) who has died or has assigned his interest in a
and (2) above are complied with: partnership. He has all the rights and powers,
(1) On the dissolution of the partnership; and is subject to all the restrictions and
(2) Upon the arrival of the date specified in the liabilities of his assignor, except those
certificate for the return; or liabilities which:
(3) After the expiration of a 6-month notice in (1) The assignee was ignorant of; and
writing given by him to the other partners, (2) Cannot be ascertained from the certificate
if no time is fixed in the certificate for: [Article 1859, 2nd and 6th pars.i.
(a) The return of the contribution; or
(b) The dissolution of the partnership An assignee is only entitled to receive the share
[Article 1857, 2nd par.]. of the profits or other compensation by way of
419
income, or the return of contribution, to which

the assignor would otherwise be entitled. He Upon the death of a limited partner, his
has no right: executor or administrator shall have:
(1) To require any information or account of (1) All the rights of a limited partner for the
the partnership transactions; purpose of settling his estate; and
(2) To inspect the partnership books [Article (2) The power to constitute an assignee as a
1859, 3rd par.]. substituted limited partner, if the deceased
was so empowered in the certificate.
An assignee has the right to become a
substituted limited partner if: The estate of a deceased limited partner shall
(1) All the partners consent thereto; or be liable for all his liabilities as a limited
(2) The assignor, being empowered to do so by partner [Article 1861].
the certificate, gives him that right [Article
1859, 4th par.]. J. SETTLEMENT OF ACCOUNTS
J.1. ORDER OF PAYMENT
An assignee becomes a substituted limited In settling accounts after dissolution, the
partner when the certificate is appropriately liabilities of the partnership shall be
amended [Article 1859, 5th par.]. entitled to payment in the following order:
(1) Those to creditors, including limited
H.7. RIGHT TO ASK FOR DISSOLUTION partners except those on account of their
A limited partner may have the partnership contributions, in the order of priority as
dissolved and its affairs wound up when: provided by law;
(1) He rightfully but unsuccessfully demands (2) Those to limited partners in respect to their
the return of his contribution; or share of the profits and other
(2) He has a right to contribution but his compensation by way of income in their
contribution is not paid because the contributions;
partnership property is insufficient to pay (3) Those to limited partners in respect to the
its liabilities [Article 1857, 4th par.]. capital of their contributions;
(4) Those to general partners other than for
I. DISSOLUTION capital and profits;
A limited partnership is dissolved in much the (5) Those to general partners in respect to
same way and causes as an ordinary profits;
partnership [De Leon (2010)]. (6) Those to general partners in respect to
capital [Article 1863, 1st par.].
General rule: The retirement, death, insolvency,
insanity or civil interdiction of a general partner Note: In settling accounts of a general
dissolves the partnership. partnership, those owing to partners in respect
to capital enjoy preference over those in
Exception: It is not so dissolved when the respect to profits.
business is continued by the remaining general
partners: J.2. SHARE IN THE PARTNERSHIP
(1) Under a right to do so stated in the ASSETS
certificate; or The share of limited partners in respect to their
(2) With the consent of all members [Article claims for capital, profits, or for compensation
1860].
420
by way of income, is in proportion of their K.3. REQUIREMENTS FOR AMENDMENT

contribution, unless: OR CANCELLATION
(1) There is a statement in the certificate as to To amend or cancel a certificate:
their share in the profits; or (1) The amendment or cancellation must be in
(2) There is a subsequent agreement fixing writing;
their share [Article 1863]. (2) It must be signed and sworn to by all the
members including the new members, and
K. AMENDMENT OR CANCELLATION the assigning limited partner in case of
OF CERTIFICATE substitution or addition of a limited or
K.1. CANCELLATION OF CERTIFICATE general partner; and
The certificate shall be cancelled when: (3) The writing to amend (with the certificate,
(1) The partnership is dissolved; or as amended) or to cancel must be filed for
(2) All limited partners cease to be such record in the SEC.
limited partners.
When a person required to sign the writing, a
K.2. AMENDMENT OF CERTIFICATE person desiring the cancellation or
A certificate shall be amended when: amendment may petition the court to order
(1) There is a change in the name of the cancellation or amendment. The court shall
partnership or in the amount or character order the SEC to record the cancellation or
of the contribution of any limited partner; amendment if it finds that the petitioner has a
(2) A person is substituted as a limited right to have the writing executed.
partner;
(3) An additional limited partner is admitted; From the moment the amended
(4) A person is admitted as a general partner; certificate/writing or a certified copy of a court
(5) A general partner retires, dies, becomes order granting the petition for amendment has
insolvent or insane, or is sentenced to civil been filed, such amended certificate shall
interdiction and the business is continued; thereafter be the certificate of partnership
(6) There is a change in the character of the [Article 1865].
business of the partnership;
(7) There is a false or erroneous statement in
the certificate;
(8) There is a change in the time as stated in
the certificate for the dissolution of the
partnership or for the return of a
contribution;
(9) A time is fixed for the dissolution of the
partnership, or the return of a contribution,
no time having been specified in the
certificate; or
(10) The members desire to make a change in
any other statement in the certificate in
order that it shall accurately represent the
agreement among them [Article 1864].
421

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UP LAW BOC AGENCY CIVIL LAW

I. Definition of Agency or actions; and on the part of the agent there

Note: the first two elements reflect the C. EFFECTS OF AGENCY

There must be a showing of consent on the C.2. EXTENSION (REPRODUCTION) OF

(2) Agent is not a real party in interest

The agent is entitled to commission even if the

(2) Test Power:

B. OBLIGATIONS OF AGENTS for P5,000,000 to a third person, then that

Powers of attorney are generally construed (4) Collateral Acts

(2) Conducive Acts Art. 1900. So far as third persons are

Note: Agency is a fiduciary relationship. A

should be movable property.

Liability B.8. LIABLE FOR FRAUD/NEGLIGENCE

III. Express vs Implied Requisites:

(1) Difference: A.1. TWO MODES

Agency If the power granted refers to acts of

Art. 1876. An agency is either general or General Agency ACGT

Whether an agency is general or special

If the agency comprises all the business of the

VII. Agency Requiring A Special Power of Attorney (SPOA) is not a

Elements: (3) In case of certain necessity or emergency,

Should the agent have advanced them, the

The provisions of this article shall be

X. Irrevocable Agency power of attorney must state what that interest

The contract of agency can subsist only so long

Art. 1920. The principal may revoke the agency

General Rule: The principal may revoke the

B.2. WHEN REVOCATION IS NOT B.4. DIRECT MANAGEMENT BY THE

Art. 1930. The agency shall remain in full force

if it has been constituted in the common D.2. EXCEPTIONS

THE FOLLOWING MAY BE SAFELY ERASED ii. Mere closeness of relationship is

Effects of Agency whether such knowledge is

I. Contract of Partnership Generally, the Supreme Court has liberally

On the other hand, there is no prohibition

G.RULES TO DETERMINE EXISTENCE H.2. AS TO ITS OBJECT:

As to the fourth, no such inference is drawn if H.5. AS TO ITS PUBLICITY:

H. KINDS OF PARTNERSHIPS A profession has been defined as “a group of

of a partner of a co-owner does

powers marriage and any

Voluntary (a) To warrant against eviction in the same

of the Partnership II. ADDITIONAL CAPITAL CONTRIBUTION

B.1. REQUISITES: D.1. SET-OFF OF LIABILITY

(4) Whenever other circumstances render it

(3) In case of dissolution:

K. OBLIGATION TO ACCOUNT AND B. LIABILITY OF PARTNERS FOR

C.2. ACTS NOT APPARENTLY FOR

(b) Without knowledge that the act

(a) Acting within the scope of his apparent

B.5. OTHER CAUSES (b) Completing transactions unfinished at

A partner, who is induced by fraud or (1) The contribution shall be in conformity

H. RIGHTS OF CREDITORS OF H.2. LIABILITY OF A NEW PARTNER

Cash, property or Cash or property Article 1844; and [2]

limited partners. Thus, he has general

H.3. RIGHT TO SHARE IN PROFITS

The return of his contributions may be A substituted limited partner is a person

income, or the return of contribution, to which

by way of income, is in proportion of their K.3. REQUIREMENTS FOR AMENDMENT

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