Chapter 1
, the
I. Definitions
Partnership – two or more persons bind
themselves to contribute money, property, or
industry to a common fund, with the intention of
dividing the profits among themselves
Element of delectus personae - where the right
of one partner is to approve or disapprove of a
new partner
Particular partnership – has for its object
determinate things, their use of or fruits, or a
specific undertaking, or the exercise of a
profession/vocation
Neither universal partnership for all present
property nor a universal partnership for all profits
Secret partnership – one wherein the existence
of certain persons as partners is not avowed or
made known to the public by any of the partners
Universal partnership of profits – comprises all
that the partners may acquire by their industry or
work during the existence of the partnership
II. Discussion
1. 5 essential features of partnership contract
(1) Valid contract
(2) Legal capacity
(3) Mutual contribution of money, property,
or industry
(4) Lawful
(5) Purpose to obtain profits
Why is a partnership characterized as a
preparatory contract?
Because it entered into as a means to an end, the
realization of profits.
2. Explain & illustrate: a partnership is a
juridical person
A partnership duly formed under the law is a
juridical person to which grants a juridical
personality separate and distinct from that each
of the partners.
For example:
If A and B form a partnership with X & Co.
property of X & Co. is not A and B’s property and
likewise, A and B’s property is not X & Co.’s
Consequences of being a juridical person:
-Can sue and be sued
-Acquire any kind of property
-Insolvency of a partnership does not mean that
the partners themselves are insolvent
3. Give a case when a person who is not a
partner has a right to share in the profits of a
partnership
The receipt by a person of a share in the profits
of a business is prima facie evidence that he is
partner in the business, but no such inference
shall be drawn if such profits were received in
payment.
For example:
(1) Debt by installments
(2) Wages of an employee or rent
(3) Interest on loan
(4) Sale of a goodwill of a business
4. What is the importance of giving publicity
to the articles of partnership?
For the protection not only of the members
themselves but also third persons from fraud and
deceit to which they would otherwise be easy
victims.
5. Give the effects where a partnership is
formed for an unlawful purpose
(1) The contract is void ab initio and the
partnership never existed in the eyes of
the law
(2) Profits shall be confiscated in favor of the
government
(3) Instruments or tools and proceeds of the
crime shall also be forfeited in favor of the
government
III. Problems
1. X, Y, and Z formed a partnership to which
they contributed a total capital of 10,000
pesos. The partnership is not registered with
the Securities and Exchange Commission.
Does the partnership have a juridical
personality?

Yes because Art 1768 states that partnership has
a juridical personality separate and distinct from
that of each of the partners, even in case of failure
to comply with the requirements of Art 1772.
Art 1772 states that failure to comply with the
requirements of the preceding paragraph shall
not affect the liability of the partnership and the
members thereof to third persons, therefore the
contract is still void. When the property is
immovable, then the contract of partnership is
void.
2. Same partnership. The partners agreed on
the sharing of profits but not losses. Is the
partnership valid?
Yes losses shall be shared according to Article
1799. Absent to such agreement, the share of
losses shall be in accordance of profit-sharing
ratio. Absent to profit-sharing ratio, losses shall
be borne by partners in proportion to their capital
contribution.
Chapter 2
I. Definitions
Partner with a fixed term – is one in which the
term of its existence has been agreed upon
expressly (there is a definite period) or impliedly.
Subpartnership – Art 1804: Every partner may
associate another person with him in his share,
but the associate shall not be admitted into the
partnership without the consent of all the
partners, even if the partners having an associate
should be a manager
Industrial partner – is one who contributes his
industrial labor, or services to the partnership
II. Discussion
1. Illustrate the relations created by a contract
of partnership.
A contract of partnership gives rise to at least four
distinct juridical relations, namely:
(1) Relations among the partners
themselves
(2) Relations of the partners with the
partnership
(3) Relations of the partners with third
persons with the partners with whom it
contracts
(4) Relations of the partners with such third
persons
2. State 5 obligations of a partner with respect
to property he promised to contribute
(1) To contribute at the beginning of the
partnership or at a stipulated time the
money, property, or industry which he
may have promised to contribute
(2) To answer for eviction in case the
partnership is deprived of the
determinate property contributed
(3) To answer to the partnership for the fruits
of the property the contribution of which
he delayed, from the date they should be
contributed up to the time of actual
delivery
(4) To preserve such property with diligence
of a good father of a family pending
delivery to the partnership
(5) To indemnify the partnership for any
damage caused to it by the retention of
the same or by the delay in its
contribution
3. Give the requisites before a capitalist
partner may be obliged to sell his interest in a
partnership to the other partners
The following are the requisites before a capitalist
partner may be obliged to sell his interest to the
others:
(1) There is an imminent loss of the
business of the partnership
(2) The majority of the capitalist partners are
of the opinion that an additional
contribution to the common fund would
save the business
(3) The capitalist partner refuses
(deliberately not because of his financial
inability to do so) to contribute an
additional share to the capital
(4) There is no agreement that even in case
of an imminent loss of the business the
partners are not obliged to contribute
4. Why is appraisal of the value of the goods
or property contributed by a partner required?
How shall it be made?
The appraisal of the value of the goods
contributed is necessary to determine how much
has been contributed by the partners.
Their appraisal must be made in a manner
prescribed in the contract of partnership. Without
stipulation, it shall be made by experts chosen by
the partners, and according to current prices, the
subsequent changes thereof being for the
account of the partnership.
5. State the liability of a partner if he fails or
delays his obligation with respect to
contribution of property. What is the reason
for the rule?
Obligations:
To answer to the partnership for the fruits of the
property the contribution of which he delayed,
from the date they should have been contributed
up to the time of actual delivery
To indemnify partnership for any damage caused
to it by the retention of the same or by the delay
in its contribution
Effect:
Partners becomes ipso jure “by operation of law”
a debtor of the partnership even in the absence
of any demand
Remedy of the other partner is not rescission but
specific performance with damages from
defaulting partner
III. Problems
1. X, a partner in a partnership, upon arriving
from abroad, demands a formal accounting of
partnership affairs. Has X the right to insist on
his demand if the other partners Y and Z
refuse?
Yes because according to Article 1809, an
example under No. 4:
“Whenever other circumstances renter just and
reasonable”
Where a partner has been assigned abroad for a
long period of time in connection with the
partnership business and the partnership books
during such period being in the possession of the
other partners. The right of a partner to demand
accounting without bringing about dissolution is
necessary result to his right to share in the profits.
2. Same partnership. The partnership is
engaged in the grocery business.
(a) Can X also engage in the same
business?
(b) Give the reason why X may be
prohibited from engaging in business
for himself
Yes, X can also engage in the same business if
he is with the partnership.
Article 1789: X may be prohibited from engaging
in the business for himself when he is an
industrial partner unless the partnership
expressly permits him to do so.
3. Same partnership. X is appointed manager
in the articles of partnership. May Y and Z who
represent the controlling interest, revoke the
power given to X if the latter insists on
executing a contract for the partnership which
Y and Z oppose?
Yes, his power is revocable only upon just and
lawful cause and upon vote of the partners
representing the controlling interest.
4. Same partnership. The liabilities of the
partnership as follows:
X – P50,000 Y – P30,000 Z – P20,000
(a) How shall the profits of P15,000 be
distributed?
(b) Suppose W is an industrial partner.
What shall be his share?
The partners share the profits according to their
agreement without violating Article 1799.
Absent to such agreement, share shall be
proportioned to their capital contribution.
The share of W shall be satisfied first before the
capitalist partners divide the profits.
5. Same partnership. The partners stipulate
that Z shall not be liable for losses. Is the
stipulation valid?
No because Article 1799 states:
A stipulation which excludes one or more
partners from any share in the profits or losses is
void.
The partnership must exist for the common
benefit and interest of the partners but the
partnership is still valid.
Section 2
I. Definitions
Partner’s interest in a partnership
DURING operations, the partner’s interest is his
share in profits and losses
AFTER
operations/LIQUIDATION/DISSOLUTION, his
interest is in the surplus of partnership assets
after all debts have been cleared.
Profit – excess of returns of expenditure in a
transaction or series of transactions
(2) To avail himself of the usual remedies
provided by law in the event of fraud in
the management
(3) To receive the assignor’s interest in case
of dissolution
(4) To require an account of partnership
affairs in case the partnership is
dissolved
4. What is considered as the extent of a
partner’s interest in a partnership?
It is impossible to determine the extent of interest.
Nothing is to be considered as the share of a
partner but his proportion of the residue or
balance after an account has been taken of the
debts and credits.
III. Problems

Surplus – assets of the partnership after 1. X, Y, and Z are partners in a partnership

partnership debts and liabilities are paid and which owns a parcel of land. May X transfers
settled and the rights of the partners among his right as a partner to said property to Y?
themselves are adjusted

Partnership capital

II. Discussions
1. What are the property rights of a partner in
a partnership?
(1) His rights in specific partnership property
(2) His interest in the partnership
(3) His right to participate in the
management
2. Same partnership. X is liable to W, creditor,
who obtained a court judgment against X for
a sum of money. What remedy is given by law
to W for the satisfaction of his credit against
X?

2. What rights are not acquired by an assignee

or transferee of a partner who conveys all his
interest in a partnership?

1. Rights withheld from assignee

 To interfere with the management
 To require any information or account
 To inspect any of the partnership books 3. Same problem. What may the other
partners, Y and Z, do to protect the interest of
2. Status and rights of assignor in partnership the partnership?
unaffected

3. What are the only rights acquired by said

assignee or transferee?

(1) To receive in accordance with his

contract he profits accruing to the
assigning partner
Section 3
I. Definitions
Pro rata liability – the term must be understood
to mean equally or jointly and not proportionately
which is its literal meaning because the pro-rating
is based on the number of partners and not on the
amount of their contributions to the common fund
subject to adjustment among the partners
Subsidiary liability – partners become
personally liable only after all the partnership
assets have been exhausted
Equitable interest or title
Estoppel
II. Discussions
1. May a partnership continue to use in its firm
name the name of a partner who has died?
No because the Supreme Court has ruled that a
partnership cannot continue to use in its firm
names of deceased partners for such use will run
counter to Article 1815.
2. In what cases are partners solidarily liable
with the partnership to third persons?
Article 1824 states that all partners are liable
solidarily with the partnership for everything
chargeable to the partnership under Articles 1822
and 1823.
3. Can W who is not a partner in a partnership
be held liable as a partner? Explain.
4. Give the rule governing the liability of a
partner for partnership contract.
III. Problems
1. X, Y, and Z are partners engaged in the
grocery business. Each contributed 50k. It
was stipulated that the liability of X shall not
exceed his capital contribution. After
partnership assets have been exhausted, the
partnership has an unpaid balance of 12k in
favor of W. Settle the rights of the parties.
X – 50,000 4,000
Y – 50,000 4,000
Z – 50,000 4,000
2. Same partnership. Is the sale of the
automobile of the partnership by X who is the
manager of the partnership binding on the
partnership?
3. Same partnership. X and Y, controlling
partners, after informing Z, agreed to reduce
the debt of W to the partnership from 10k to
9k otherwise W would not pay any amount.
May Z question the reduction?
4. Same partnership. Y and Z contributed 15k
each to the partnership. X was subsequently
admitted as a partner with a contributed of
10k. The partnership has an obligation of 45k
in favor of W. Compute the liability of X, Y, and
Z in case the obligation was contracted.
(a) before X was admitted
(b) after X was admitted
Chapter 3
I. Definitions
Dissolution – the change in the relation of the
partners caused by any partner ceasing to be
associated
Termination – point in time when all partnership
affairs are completely wound up and finally
settled. Signifies the end of the partnership life
Knowledge of a fact – he has actual knowledge
thereof but also when he has knowledge of such
other facts as in the circumstances show bad faith
Notice of a fact – person who claims the benefit
of the notice:
(a) States the fact to such person or
(b) Delivers thru mail or by other means of
communication
Assets of the partnership
II. Discussions
1. Give the effect if the specific property to be
contributed by a partner is lost:
a. before delivery
b. after delivery
2. Enumerate the rights of a partner who has
not caused the dissolution of a partnership
wrongfully when such dissolution is in
violation of partnership agreement.
3. Who are authorized to wind-up the affairs of
a dissolved partnership?
(1) The partners designated by the
agreement
(2) In the absence of such agreement, all the
partners who have not wrongfully
dissolved the partnership
(3) The legal representative of the last
surviving partner (when all partners are
already dead), not insolvent
4. Give the rights of an injured partner when a
partnership is rescinded or annulled on the
group of fraud or misrepresentation
committed against him.
5. Give at least four grounds for the judicial
dissolution of a partnership.
Chapter 4
I. Definitions
Limited partnership – is formed by two or more
persons under the provision of the following
article, having as members one or more general
partners and one or more limited partners
Shall not be bound by the obligations of the
partnerships
Substituted limited partner
Presumption of general partnership
Contributor
Preferred limited partner
II. Discussions
1. What are the characteristics of a limited
partner?
(1) Formed by compliance with the statutory
requirements
(2) One or more general partners control
the business and are personally liable to
creditors
(3) One or more limited partners contribute
to the capital and share in the profits but
do not participate in the management of
the business and are not personally
liable for partnership obligations beyond
their capital contributions
(4) Limited partners may ask for the return
of their capital contributions under the
conditions prescribed by law
2. Give the cases when a limited partner is
liable as a general partner.
A limited partner is liable as a general partner for
the firm’s obligations if he becomes involved in
the management of the firm’s business.
3. Give at least four differences between a
general partner and limited partner.
Liability
GP – Personally liable for partnership
obligations
LP – Extends only to his capital contribution

Management
GP – Equal right in the management of the
business
Whether or not has made any capital
contribution
LP – Has no share in the management
Rights limited to Article 1851

Contribution
GP – Money, property, industry
LP – Cash or property not services

Prohibition
GP – Prohibited from engaging in the same kind
of partnership business if he is a capitalist
partner or any business for himself if an
industrialist partner
LP – No prohibition who is considered as a mere
contribution to the partnership

4. What conditions must exist before the

contribution of a limited partner may be
returned to him?

5. Give at least four specific rights of a

limited partner.

(1) To require that the partnership books be

kept at the principal place of business of
the partnership
(2) To inspect and copy at a reasonable
hour partnership books or any of them
(3) To demand true and full info of all things
affecting the partnership
(4) To demand a formal account of
partnership affairs whenever
circumstances render it just and
reasonable
(5) To ask for dissolution and winding up by
decree of court
(6) To receive a share of the profits or other
compensation by way of income
(7) To receive the return of his contribution,
provided the partnership assets in
excess of all its liabilities.