Chapter II
& silent partners
Obligations of the Partners
KINDS OF PARTNERS
1. As to contribution
a. Capitalist partners –
contribute money or property
or both to the common fund
b. Industrial partners –
contribute only their
industry/labor/service to the
common fund
c. Capitalist-Industrial partners
– contribute money or
property and industry to the
common fund
2. As to liability
a. General partners – held liable
to third persons partnership
obligations even to the extent
of their separate property
b. Limited partners – cannot be
held liable to third persons
for partnership obligations
3. As to management
a. Managing partners – manage
actively the partnership
affairs
b. Silent partners – do not take
active part in the business
though they share in the
profits/losses
c. Liquidating partners – take
charge of the winding
up/liquidation of the
partnership affairs after
dissolution
4. As to third persons
a. Ostensible partners – take
active part and known to the
public
b. Secret partners – not known
as partner
c. Dormant partners – do not
take active part and not
known as partner; both secret
5. As to membership
a. Real partners – partners in an
existing legal partnership
b. Partners by Estoppel – not
really partners but represent
themselves, or consent to
another or others representing
them to anyone as partners
6. As to continuance of the business
affairs after dissolution
a. Continuing partners –
continue the partnership
business after dissolution
b. Discontinuing partners – do
not continue the partnership
business after dissolution
7. As to the nature of membership
a. Original partners – members
of the partnership from the
tome of its constitution
b. Incoming partners – became
members after its
establishment
c. Retiring partners – withdraw
from the partnership
8. As to state of survivorship
a. Surviving partners – continue
the partnership after its
dissolution by reason of
death
b. Deceased partners – who died
while being a member
9. As to the effect of expulsion
a. Expelled partners – who’s
expelled from the partnership
by the other partners for a
valid cause
b. Expelling partners – who
caused the expulsion of a
partner
10. As to value of the contribution
a. Majority partners –
represents the
majority/controlling interests
 b. Nominal partners –
represents the minority
interest
1. Relations created by a contract of
partnership
Legal relations created by a contract of
partnership:
1. Relations between partners
2. Relations between the partners and
the partnership
3. Relations between the partners and
third persons
4. Relations between the partnership
and the third persons
Obligations of a partners (duty)
1. To give their promised contributions
2. Not to convert partnership money to
their own use
3. To account and hold as trustee for
any profits derived without the
consent of the other partners
4. Not to engage in any business which
is of the kind which the partnership
is engaged
5. Managing partners to credit to the
partnership the payment made by a
debtor who owes them and the
partnership
6. Obligation to share of the partnership
credit which they have received from
an insolvent partnership debtor –
losses
7. Pay for the damages suffered by the
partnership through their fault
Rights of partners (privilege, entitlement)
1. To associate with another person in
their share
2. To have access to and inspect and
copy partnership books
3. Demand a formal account
4. To ask for the dissolution of the
partnership at the proper time
5. Property rights of partners:
a. Rights in specific partnership
property
b. Interest in the partnership
c. Right to participate in the
management
i. Limited partners have
no right in the
management
2. When does a partnership acquire a
separate juridical personality?
Art. 1784 A partnership begins from the
moment of the execution of the contract,
unless it is otherwise stipulated.
General: Juridical personality exists at the
moment of execution of contract
Exception: Partners can agree on some other
date for the start of the partnership
3. What constitutes prima facie of a
contribution of the partnership after the
expiration of its fixed term?
Art. 1785 When a partnership for a fixed
term or particular undertaking is continued
after the termination of such term or
particular undertaking without any express
agreement, the rights and duties of the
partners remain the same as they were at
such termination, so far as is consistent with
a partnership at will
A continuation of the business by the
partners or such of them as habitually acted
therein during the term, without any
settlement or liquidation of the partnership
affairs, is prima facie evidence of a
continuation of the partnership
Partnership with a fixed term – life/period of
existence has been agreed upon by the
partners
Partnership for a particular undertaking –
exist until the purpose is accomplished
Partnership at will – does not fix its term;
birth and life of a partnership is predicated
on the mutual desire and consent of the
partners
Very foundation and essence of partnership:
right to choose with whom a person wishes
to associate himself
4. In the preceding question, is there any
change in rights and duties of the
partners?
5. When is a partner considered a debtor
of the partnership?
6. Obligations of a partner with respect to
his promise to contribute property?
7. If the capital or part thereof which a
partner is bound to contribute consists of
goods, how shall said good be appraised?
8. The liabilities of the partner who has
undertaken to contribute a sum of money
and fails to do so
9. Rule in the event a partner converts
partnership money to his personal use
Art 1786 Every partner is a debtor of the
partnership for whatever he may have
promised to contribute thereto
Obligation of every partner
1. Obligation to contribute what had
been promised
a. First test in order to have a
contract of partnership
b. Failure to contribute make
the partner a debtor
c. Exception: no delay when
there is no demand
d. Remedy is specific
performance with interest and
damages occasioned thereby
and not rescission
 Rescission – to end officially
2. Obligation to deliver the fruits
thereof
a. If property has been
contributed, fruits thereof
should also be given
b. Fruits – arising from the time
they should have been
delivered, without the need of
any demand
c. Partner is in bad faith – liable
for the fruits actually
produced and those that could
have been produced
d. If money is contributed –
debtor for the interest and
damages from the time he
should have complied with
his obligation
3. Obligation to warrant
a. Warranty in case of eviction
refers only to specific
determinate things which a
partner contributed to the
partnership
Manner of appraisal:
1. By stipulation
2. Absence of stipulation, by experts
chosen by the partners according to
current prices
Essence of a partnership – each partner must
share in the profits and losses of the venture
Cases covered of the liability for damages
and interest:
1. Money promised by a partner is
given on time
2. Money of the partnership is
converted to partnership’s own use
Demand is not necessary: (there’s no
default, if there’s no demand)
1. In case of contribution:
 a. Formed precisely to make use Industrial
Capitalist Partners
of the contributions, and this Partners
use should start from its Contribution
formation, unless a different Money or property Industry
period has been set; Prohibition to engage in other business
otherwise the firm is General Rule: Cannot General Rule:
necessarily deprived of the engage in the same Cannot engage
benefits thereof. Thus, injury kind of business in business for himself
is constant which the partnership Exception: If the
2. In case of conversion: is engaged partners expressly
a. Even if no actual injury Exception: stipulation permits him to do
results, the liability exists, authorizing him so
because the Article is Profits
absolute 1. As to Agreement 1) As to agreement
2. No Agreement – in 2) No agreement –
10. May industrial partner engage in
proportion to his just and equitable
business for himself?
contribution (pro- under the
11. Does this prohibition apply to a rata) circumstances
business the same as the business of the Losses
partnership? General Rule: General Rule:
1) As to 1) As to agreement,
12. The remedies available to the agreement if any
partnership if an industrial partner 2) No agreement 2) Absence of
engages in business for himself without – agreement agreement – shall
the express permission of the partnership. as to profits not be liable for
Exception: Absence losses
Art 1789 An industrial partner cannot of agreement as to
engage in business for himself, unless the profit and losses, in
partnership expressly permits him to do so; proportion to his
and if he should do so, the capitalist partners contribution
may either exclude him from the firm or
avail themselves of the benefits which he
may have obtained in violation of this Remedies of Capitalist partners against and
provision, with a right to damages in either industrial partner who engaged in business
case. for himself
Capitalist Partners – contribute money or 1) Capitalist partner may exclude the
property or both to the common fund industrial partner from the
partnership plus damages; or
Industrial Partners – contribute only
2) The capitalist partners may avail
industry, labor or service to the common
themselves of the benefits which the
fund
industrial partner may have obtained
Capitalist-Industrial Partners – contribute plus damages.
money or property and industry or both
Note: An action for specific performance to
money, property, and industry to the
compel the partner to perform the promised
common fund
industry is not available as a remedy
because this will lead to the prohibition on
involuntary servitude under the Philippine
Constitution.
13. If A, B and C form a partnership
stipulating that the capital shall be
P150,000.00 without specifying the share
of each partner, how much shall each
partner contribute?
Art 1790 Unless there is a stipulation to the
contrary, the partners shall contribute equal
shares to the capital of the partnership
14. In case of imminent loss of the
business of the partnership, which
partners are required to contribute
additional capital to save the business of
the partnership?
15. The remedy in case a capitalist
partner refuses to contribute additional
fund when he is bound to do so?
16. Which partner is not bound to
contribute additional fund despite
imminent loss of the business of the
partnership?
Art 1791 If there is no agreement to the
contrary, in case of an imminent loss of the
business of the partnership, any partner who
refuses to contribute an additional share to
the capital, except an industrial partner, to
save the venture, shall be obliged to sell his
interest to the other partners.
Obligation of capitalist partners to
contribute additional capital
General Rule: Capitalist partners are not
bound to contribute additional capital
Exception:
1) Stipulation
2) in case of an imminent loss of the
business of the partnership, any partner
who refuses to contribute an additional
share to the capital, except an industrial
partner, to save the venture, shall be
obliged to sell his interest to the other
partners who are willing to contribute
additional capital
Note: Contract of partnership is governed by
the principle of fiduciary relationship, that is
trust and confidence.
17. A and B are partners in A and
Company. A is the managing partner. X
owes A and Company P50,000.00 and A,
in his personal credit, another sum of
P50,000.00. Both debts are due and
demandable. If A collects the amount of
P50,000.00 form X, how shall such
payment be applied?
Art 1792 If a partner authorized to manage
collects a demandable sum which was owed
to in his own name, from a person who
owed the partnership another sum also
demandable, the sum thus collected shall be
applied to the two credits in proportion to
their amounts, even though he may have
given a receipt for his own credit only; but
should he have given it for the account of
the partnership credit, the amount shall be
fully applied to the latter.
The provisions of this article are understood
to be without prejudice to the right granted
to the debtor by Article 1252, but only if the
personal credit of the partner should be more
onerous to him.
Rationale:
Art 1792 is not applicable to a partner who
is not a managing partner because there is no
basis for the suspicion that the partner is in
bad faith.
Obligation of a managing partner who
collects debt
Requisites:
 1) Existence of at least 2 debts
(managing partner-creditor,
partnership-creditor)
2) Both sums are demandable
18. The obligation of a partner who has
received in whole or in part, his share of a
partnership credit when the other
partners have not collected their share
and the partnership debtor thereafter
become insolvent?
Art 1793 A partner who has received, in
whole or in part, his share of a partnership
credit, when the other partners have not
collected theirs, shall be obliged, if the
debtor should thereafter become insolvent,
to bring to the partnership capital; what he
received even though he may have given
receipt for his share only.
Rationale:
Equity demands proportionate share in the
benefits and losses.
19. If the partnership suffers loss or
damage due to the fault or negligence of a
partner, who shall be responsible?
20. Can the partner who is responsible for
the damage compensate them with the
profits and benefits which he may have
earned for the partnership by his
industry?
Art 1794 Every partner is responsible to the
partnership for damages suffered by it
through his fault, and he cannot compensate
them with the profits and benefits which he
may have earned for the partnership by his
industry. However, the courts may equitably
lessen the responsibility if through the
partner’s extraordinary efforts in other
activities of the partnership, unusual profits
have been realized.
General Rule:
Damages suffered by the partnership
through the fault or negligence of a partner
are not generally subject to set-off with the
profits and benefits which that partner may
have earned for the partnership by his
industry.
Rationale:
It is the obligation of a partner to earn
benefits and profits for the partnership and it
is also his obligation not to cause damages
through negligence for the partnership.
These are two distinct obligations that
cannot be set-off. Moreover, in the law on
obligation, only a right and an obligation are
required to be compensated or set-off.
Mitigation of liability by the courts
In case of a partner’s extraordinary efforts in
other activities of the partnership, unusual
profits have been realized. This principle
rests on equity.
21. Who shall bear the risk of loss of
things contributed to the partnership?
Art 1975 The risk of specific and
determinate things, which are not fungible,
contributed to the partnership so that only
their use and fruits may be for the common
benefit, shall be borne by the partner who
owns them.
If the things contributed are fungible, or
cannot be kept without deteriorating, or if
they were contributed to be sold, the risk
shall be borne by the partnership. In the
absence of stipulation, the risk of the things
brought and appraised in the inventory, shall
also be borne by the partnership, and in such
case the claim shall be limited to the value at
which they were appraised.
Risk of loss:
 1) Specific and determinate things
which are not fungible –
PARTNERS
2) Fungible things – PARTNERSHIP
3) Things contributed to be sold –
PARTNERSHIP
4) Things brought and appraised in the
inventory – PARTNERSHIP
22. Who shall be answerable for the
amounts disbursed and for the obligations
a partner may have contracted in good
faith in the interest of the partnership
business and for risks in consequence of
its management?
Art 1796 The partnership shall be
responsible to every partner for the amounts
he may have disbursed on behalf of the
partnership and for the corresponding
interest, from the time the expenses are
made; it shall also answer to each partner for
the obligations he may have contracted in
good faith in the interest of the partnership
business, and for risks in consequence of its
management.
Obligation of the partnership to every
partner:
1) To refund the amounts a partner may
have disbursed on behalf of the
partnership plus the interest from the
time the expenses were made.
2) To answer to each partner for
obligations, he may have contracted
into in good faith in the interest of
the partnership, and for the risks in
consequence of its management.
23. How shall be the profits and losses be
distributed among the partners?
Art 1797 The losses and profits shall be
distributed in conformity with the
agreement. If only the share of each partner
in the profits has been agreed upon, the
share of each in the losses shall be in the
same proportion.
In the absence of stipulation, the share of
each partner in the profits and losses shall be
in proportion to what he may have
contributed, but the industrial partner shall
not be liable for the losses. As for the
profits, the industrial partner shall receive
such share as may be just and equitable
under the circumstances. If besides his
services he has contributed capital, he shall
also receive a share in the profits in
proportion to his capital.
Rules for distribution of profits and losses of
a partnership
1) Distribution of profits:
a. Agreement
b. No agreement
i. Capitalist Partner -
pro-rata
ii. Industrial Partner –
just and equitable
2) Distribution of losses:
a. Agreement
b. No agreement
i. Capitalist Partner –
pro-rata
ii. Industrial Partner –
not liable for losses
unless he waives his
right
Note: Excludes an industrial partner from
the losses, but he is not exempted from
liability insofar as third persons are
concerned. He may, however, recover what
he has given to third persons from the other
partners because as to him and his partners,
that will no be treated as a loss.
Liability – obligation towards third persons
Losses – obligation as among the partners
*** When a thing goes out of commerce of
man, such way cannot be recovered
24. Can the designation of the share of the
partners in profits and losses be entrusted
to a third person?
25. If the decision of the third person is to
be impugned, within what time shall it be
brought?
Art 1798 If the partners have agreed to
entrust to a third person the designation of
the share of each one in the profits and
losses, such designation may be impugned
only when it is manifestly inequitable. In no
case may a partner who has begun to
execute the decision of the third person, or
who has not impugned the same within a
period of three months from the time he had
knowledge thereof, complain of such
decision.
The designation of profits and losses cannot
be entrusted to one of the partners.
Third person designating the share of the
partners in the profits and losses.
General Rule:
It is valid.
Exception:
Not valid and it may be questioned if it is
manifestly inequitable, unless (ma valid):
1) A partner began to execute the
decision of the third person; or
2) A partner has not questioned the said
decision of the third person within a
period of 3 months from the time he
had knowledge thereof.
Art 1799 A stipulation which excludes one
or more partners from any share in the
profits or losses is void.
Note: one of the tests in order to have a
partnership is the intent of the contracting
parties to divide the profits and losses
among themselves
Exception:
Unless the industrial partner waived his
right.
Rationale: Why an industrial partner is not
liable for losses?
While capitalist partners can withdraw their
capital, the industrial partner cannot
withdraw any labor or industry he had
already exerted. Moreover, he already has
shared in the losses in that, if the partnership
shows no profit, this means that he has
labored in vain.
26. The 2 distinct ways of appointing a
partner as managing partner.
27. What are the rights and obligations of
a managing partner whose appointment is
contained in the articles of co-
partnership?
Art 1800 The partner who has been
appointed manager in the Articles of
Partnership may execute all acts of
administration despite the opposition of his
partners, unless he should act in bad faith;
and his power is irrevocable without just or
lawful cause. The vote of the partners
representing the controlling interest shall be
necessary for such revocation of power.
A power granted after the partnership has
been constituted may be revoked at any
time.
Who shall manage the partnership?
Either one, some or all of the partners
designated as managing partners either in
the Articles of Partnership or after the
contract of partnership had already been
constituted. If there is NO AGREEMENT,
management is vested in all the partners.
Two modes of appointment:
1) Articles of Partnership; or
a. General Rule: power is
irrevocable without just or
lawful cause
b. Exception:
i. Remove for just cause,
vote of partners having
controlling interest is
necessary
ii. Remove for without just
cause, unanimity
including his own vote
1. Reason: represent a
change in the will of
the parties; change in
the terms if the
contract; a novation
(substitution of a
new legal obligation)
c. Extent of Power:
i. Acts in good faith –
may do all acts of
administration
ii. Acts in bad faith –
cannot do any act of
administration.
iii. Presumption: GOOD
FAITH
2) Made in an instrument other than the
Articles of Partnership
a. General Rule: power to act
may be revoked at any time,
with or without just cause by
the partners owning the
controlling interest
i. Reason: is a mere
delegation of power;
revocable any time
b. Extent of Power: do all acts
of administration
28. What are the powers if 2 or more
managing partners whose respective
duties are not specified?
Art 1801 If two or more partners have been
entrusted with the management of the
partnership without specification of their
respective duties, or without a stipulation
that one of the shall not act without the
consent of all the other, each one separate
execute all acts of administration, but if any
of them should oppose the acts of the others,
the decisions of the majority shall prevail. In
case of a tie, the matter shall be decided by
the partners owning the controlling interest.
When 2 or more managing partners have
been entrusted with the management
Requisites:
1) Two or more partners are managers;
2) There is no specification of
respective duties;
3) There is no stipulation requiring
unanimity, that is, that one of them
shall not act without the consent of
all the partners
General Rule:
Each one may separately execute all acts of
administration
Exception: If any of the managers should
oppose:
1) The decision of the majority (per
head) of the managing partners shall
prevail.
2) In case of a tie, the decision of the
managing partners owning the
controlling interest (more than 50%)
shall prevail.
Note: The right to oppose is not given to
non-managers because in appointing their
other partners as managers, they have
stripped themselves of all participation in
the administration.
29. How shall management be exercised
in case it is stipulated that none-of-the
managing partners shall act without the
consent of the others?
Art 1802 In case it should have been
stipulated that none of the managing
partners shall act without the consent of the
others, the concurrence of all shall be
necessary for the validity of the acts, and
there is the absence or disability of any one
of them cannot be alleged, unless there is
imminent danger of grave or irreparable
injury to the partnership.
Stipulation requiring unanimity of action
General Rule:
Unanimous consent of all the managing
partners (even if absent/incapacitated) shall
be necessary for the validity of the acts and
absence or disability of any managing
partner cannot be alleged.
Exception:
When there is an imminent danger or
irreparable injury to the partnership
Art 1802 NOT applicable to third person
Any of the two managing partners may
contract and sign in the name of the
partnership with the consent of the other,
undoubtedly creates an obligation between
the two partners, which consists in asking
the other’s consent before contracting for the
partnership. This obligation is not imposed
upon a third person who contracts with the
partnership. Neither it is necessary for the
third person to ascertain if the managing
partner with whom he contracts has
previously obtained the consent of the other.
A third person may and has a right to
presume that the partner with whom he
contracts has, in the ordinary and natural
course of business, the consent of his
copartner; for otherwise he would not enter
into the contract.
30. Who shall manage the partnership in
case no manner of management has been
agreed upon?
Art 1803 When the manner of management
has not been agreed upon, the following
rules shall be observed:
1) All the partners shall be considered
agents and whatever any one of them
may do alone shall bind the
partnership, without prejudice to the
provisions of Article 1801
2) None of the partners may, without
the consent of the others, make any
important alteration in the
immovable property of the
partnership, even if it may be useful
to the partnership. But if the refusal
of consent by the other partners is
manifestly prejudicial to the interest
of the partnership, the court’s
intervention may be sought.
Rules when manager of management has not
been agreed upon:
1) All the partners hall be considered as
managers. Consequently, all partners
can do all acts of administration. If
the acts of a partner are opposed by
the other partners, the majority (per
head) shall prevail. In case of tie (per
head), then the vote of the partners
representing the controlling interest
shall prevail.
2) For important alterations in
immovable property, unanimity is
required.
31. Can a partner associate another
person with him in his share in the
partnership without the consent of the
other partners?
32. Can the associate take part in the
management?
33. What will the associate share with the
partner?
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
other partners, even if the partner having an
associate should be a manager.
*Contract of Sub-partnership
 the consent of the other partners is
required
 Associate in his share or sub-partner
 cannot be admitted based on the ff
reasons:
1) Mutual trust
2) A change in membership is a
modification or novation of the
contract
34. Where shall be partnership books be
kept?
35. What are the rights of the partners
with respect to the books of the
partnership?
Art 1805 The partnership books shall be
kept, subject to any agreement between the
partners, at the principal place of business of
the partnership, and every partner shall at
any reasonable hour have access to and may
inspect and copy any of them.
** Reasonable hour- should be business
days throughout the year
** Every partner given right to access,
inspect and copy (AIC)
36. To whom shall partners be obligated
to render information of all things
affecting the partnership?
Art 1806 Partners shall render on demand
true and full information of all things
affecting the partnership to any partner or
the legal representative of any deceased
partner or of any partner under legal
disability.
 Violation of Art 1806 is concealment
Who can demand true and full information?
1) Any partner
2) Legal representative of any deceased
partner
3) Legal representative of any partner
under legal disability
37. When are partners accountable to the
partnership and are considered as
trustees for the partnership?
Art 1807 Every partner must account to the
partnership for any benefit, and hold as
trustee for it any profits derived by him
without the consent of the other partners
from any transaction connected with the
formation, conduct, or liquidation of the
partnership or from any use by him of its
property
 Rationale: fiduciary relationship
38. Can a capitalist partner engage in
business for his own account without the
consent of the other partners?
39. What is the liability of a capitalist
partner who engages in the same business
that of the partnership without the
consent of the other partners?
Art 1808 The capitalist partners cannot Industrial Partner Capitalist Partner
engage for their own account in any Prohibition
operation which is of the kind of business in ABSOLUTE RELATIVE
which the partnership is engaged, unless PROHIBITION PROHIBITION
there is a stipulation to the contrary. General Rule: General Rule: cannot
Cannot engage engage in the same
Any capitalist partner violating this business for kind of business as the
prohibition shall bring to the common funds himself partnership for his
any profits accruing to him from his Exception: own
transactions, and shall personally bear all the Expressly permits Exception: There’s a
losses. him to do so stipulation
 Rationale: Capitalist partner has already Remedy
acquired knowledge of the business secrets Capitalist partners Capitalist Partner,
may: who violated shall:
 Effects of the violation: 1) Exclude 1) Bring to the
him from common fund
1) Shall bring to the common fund any the firm any profits
profits accruing to him; and plus accruing to
2) Shall personally bears all the losses damages him from said
2) Avail transaction
40. Under what circumstances shall any themselves 2) Personally
partner demand a formal account as to of the bears all losses
partnership affairs? benefits
which he
Art 1809 Any partner shall have the right to may have
a formal account as to partnership affairs: obtained

Exceptions:
SECTION 2
(1) If he is wrongfully excluded from the
partnership business or possession of its Property Rights of a Partner
property by his co-partners;
1. What are the property rights of a
(2) If the right exists under the terms of any partner?
agreement;
Art 1810 The property rights of a partner
(3) As provided by article 1807; are:

(4) Whenever other circumstances render it (1) His rights in specific partnership
just and reasonable. property;

 No formal accounting is demandable (2) His interest in the partnership; and

until after the dissolution
(3) His right to participate in the
management
2. As regards specific partnership
property, what relationship exists
between and among the partners?
3. What are the incidents of this co-
ownership?
Art 1811 A partner is co-owner with his
partners of specific partnership property.
The incidents of this co-ownership are such
that:
(1) A partner, subject to the provisions of
this Title and to any agreement between the
partners, has an equal right with his partners
to possess specific partnership property for
partnership purposes; but he has no right to
possess such property for any other purpose
without the consent of his partners;
(2) A partner's right in specific partnership
property is not assignable except in
connection with the assignment of rights of
all the partners in the same property;
(3) A partner's right in specific partnership
property is not subject to attachment or
execution, except on a claim against the
partnership. When partnership property is
attached for a partnership debt the partners,
or any of them, or the representatives of a
deceased partner, cannot claim any right
under the homestead or exemption laws;
(4) A partner's right in specific partnership
property is not subject to legal support under
article 291.
4. What is the nature of a partner’s
interest in the partnership?
Art 1812 A partner's interest in the
partnership is his share of the profits and
surplus.
 Profit: excess of revenues over
expenditures in a business transaction
 Surplus: excess of receipts over
disbursements. Funds that remain after
dissolution and paid all debts
5. Can a partner assign his whole interest
in the partnership to another without the
consent of the other partners?
6. Will the assignee become a partner?
7. Will the conveyance of a partner of his
whole interest in the partnership dissolve
the partnership?
8. What are the rights of an assignee of a
partner’s interest?
9. What rights cannot be exercised by an
assignee?
Art 1813 A conveyance by a partner of his
whole interest in the partnership does not of
itself dissolve the partnership, or, as against
the other partners in the absence of
agreement, entitle the assignee, during the
continuance of the partnership, to interfere
in the management or administration of the
partnership business or affairs, or to require
any information or account of partnership
transactions, or to inspect the partnership
books; but it merely entitles the assignee to
receive in accordance with his contract the
profits to which the assigning partner would
otherwise be entitled. However, in case of
fraud in the management of the partnership,
the assignee may avail himself of the usual
remedies.
In case of a dissolution of the partnership,
the assignee is entitled to receive his
assignor's interest and may require an
account from the date only of the last
account agreed to by all the partners.
 Conveyance: voluntary transfer of a
right/property
 Effects of conveyance by partner of his
whole interst in the partnership:
1) If a partner conveys his whole
interest, it may still subsist (exist) or
may be dissolved
2) Assignee:
a. Cannot interfere in the
management
b. Cannot require information
or accounting of partnership
transactions
c. Cannot inspect partnership
books
 Rights of the Assignee:
1) To receive profits of the assigning
partner
2) In case of fraud in the management,
can avail himself of the usual
remedies provided by law
3) In case of dissolution, receive
assignor’s interest
4) In case of dissolution, may require
an account from the date only of
the last account agreed to by all the
partners
10. Is a partner’s interest in the
partnership subject to attachment or
execution for his personal debts?
11. May the interest so charged be
redeemed and with what property shall it
be redeemed?
12. What are other right may a partner
whose interest has been so charged avail
of?
Art 1814 Without prejudice to the preferred
rights of partnership creditors under article
1827, on due application to a competent
court by any judgment creditor of a partner,
the court which entered the judgment, or any
other court, may charge the interest of the
debtor partner with payment of the
unsatisfied amount of such judgment debt
with interest thereon; and may then or later
appoint a receiver of his share of the profits,
and of any other money due or to fall due to
him in respect of the partnership, and make
all other orders, directions, accounts and
inquiries which the debtor partner might
have made, or which the circumstances of
the case may require.
The interest charged may be redeemed at
any time before foreclosure, or in case of a
sale being directed by the court, may be
purchased without thereby causing a
dissolution:
(1) With separate property, by any one or
more of the partners; or
(2) With partnership property, by any one or
more of the partners with the consent of all
the partners whose interests are not so
charged or sold.
Nothing in this Title shall be held to deprive
a partner of his right, if any, under the
exemption laws, as regards his interest in the
partnership.
 Charging order: remedy available to a
judgment creditor of a debtor-partner to
charge the interest of the latter in the
partnership by means of court-order for the
purpose of satisfying the amount of the
judgment
 Appointment of a receiver: court may
appoint a receiver
 Redemption of interest charged:
 1) Before foreclosure: redeemed at any
time
2) After foreclosure: may still be
purchased without thereby causing a
dissolution:
a. With separate property of a
partner
b. With partnership property
with the consent of all the
partners whose interest are
not so charged/sold (less than
50%)
 Redemption: extinguishment of the
charge/attachment on the partner’s interest
in the profits
 Right of a partner under exemption laws:
1) Shall not be deprived of his right
(interest) under the exemption laws
2) Cannot avail himself of the
exemption laws insofar as his right
in specific partnership property
Section 3
Obligations of the Partners with Regards
to Third Persons
1. Under what name shall every
partnership operate?
2. Is there any limitation as to the firm
name a partnership may adopt?
3. What is the liability of a person, who
not being a partner includes his name in
the partnership’s name?
Art 1815 Every partnership shall operate
under a firm name, which may or may not
include the name of one or more of the
partners.
Those who, not being members of the
partnership, include their names in the firm
name, shall be subject to the liability of a
partner.
General Rule: may use a firm name desired
Exception: cannot use an identical or
deceptively confusingly of any existing
partnership/corporations or any other name
already protected by law or patently
deceptive or contrary to existing laws
4. How are partners including industrial
ones be liable for contractual obligations
of the partnership?
5. What is meant by subsidiary liability of
the partners?
6. What is meant by the partner’s pro-
rata liability?
7. How do you reconcile the exception of
and industrial partner from loss and his
pro-rata and subsidiary liability of the
partners?
8. When is a partnership contractual
obligation incurred?
Art 1816 All partners, including industrial
ones, shall be liable pro rata with all their
property and after all the partnership assets
have been exhausted, for the contracts which
may be entered into in the name and for the
account of the partnership, under its
signature and by a person authorized to act
for the partnership. However, any partner
may enter into a separate obligation to
perform a partnership contract. (Liable to
partner not the partnership)
** Liability: as to third persons
** Losses: between partners
9. What is the effect of a stipulation
among the partners contrary to the pro-
rata and subsidiary liability of the
partners?
Art 1817 Any stipulation against the liability
laid down in the preceding article shall be
void, except as among the partners. (n)
10. In the absence of any agreement to the
contrary, who shall act as agent of the
partnership?
11. Classify the acts of a partner in the
partnership?
12. If a partner who has no authority
performs an act for apparently carrying
on in the usual manner the business of the
partnership, will such act be binding
upon the partnership?
13. Give examples for acts of strict
dominion.
14. When shall the partnership be bound
by any act of strict dominion?
Art 1818 Every partner is an agent of the
partnership for the purpose of its business,
and the act of every partner, including the
execution in the partnership name of any
instrument, for apparently carrying on in the
usual way the business of the partnership of
which he is a member binds the partnership,
unless the partner so acting has in fact no
authority to act for the partnership in the
particular matter, and the person with whom
he is dealing has knowledge of the fact that
he has no such authority.
An act of a partner which is not apparently
for the carrying on of business of the
partnership in the usual way does not bind
the partnership unless authorized by the
other partners.
Except when authorized by the other
partners or unless they have abandoned the
business, one or more but less than all the
partners have no authority to:
(1) Assign the partnership property in
trust for creditors or on the assignee's
promise to pay the debts of the
partnership;
(2) Dispose of the good-will of the
business;
(3) Do any other act which would make it
impossible to carry on the ordinary
business of a partnership;
(4) Confess a judgment;
(5) Enter into a compromise concerning a
partnership claim or liability;
(6) Submit a partnership claim or liability
to arbitration;
(7) Renounce a claim of the partnership.
No act of a partner in contravention of a
restriction on authority shall bind the
partnership to persons having knowledge
of the restriction.
1) Acts apparently for carrying on in
the usual way the business of the
partnership
2) Acts not apparently for the
carrying on in the usual way of
business of the partnership
a. Not binding, unless
authorized
3) Acts of ownership/Act of strict
dominion
4) Acts in contravention of a
restriction on authority
a. Not binding to the
partnership as to third
 persons having knowledge of
the restriction
15. Under whose name may real property
owned by the partnership be registered?
16. Where title to real property is in the
partnership name, who may convey title
to such property?
17. One title is conveyed may the
partnership recover such property?
18. Where title to real property is in the
name of the partnership, and a
conveyance is executed by a partner in his
own name, will title pass to the grantee?
19. Define equitable interest
20. When may conveyance of real
property of the partnership by a partner
in his own name pass title to the grantee?
21. Where title to real property is in the
name of one ore more or all the partners,
or in a third person in trust for the
partnership and is conveyed by a partner
in his own name or in the partnership
name, will title pass to the property?
22. If real property is registered in the
names of all the partners and is conveyed
by all the partners, what passes to the
grantee?
Art 1819 Where title to real property is in
the partnership name, any partner may
convey title to such property by a
conveyance executed in the partnership
name; but the partnership may recover such
property unless the partner's act binds the
partnership under the provisions of the first
paragraph of article 1818, or unless such
property has been conveyed by the grantee
or a person claiming through such grantee to
a holder for value without knowledge that
the partner, in making the conveyance, has
exceeded his authority.
Where title to real property is in the name of
the partnership, a conveyance executed by a
partner, in his own name, passes the
equitable interest of the partnership,
provided the act is one within the authority
of the partner under the provisions of the
first paragraph of article 1818.
Where title to real property is in the name of
one or more but not all the partners, and the
record does not disclose the right of the
partnership, the partners in whose name the
title stands may convey title to such
property, but the partnership may recover
such property if the partners' act does not
bind the partnership under the provisions of
the first paragraph of article 1818, unless the
purchaser or his assignee, is a holder for
value, without knowledge.
Where the title to real property is in the
name of one or more or all the partners, or in
a third person in trust for the partnership, a
conveyance executed by a partner in the
partnership name, or in his own name,
passes the equitable interest of the
partnership, provided the act is one within
the authority of the partner under the
provisions of the first paragraph of article
1818.
Where the title to real property is in the
name of all the partners a conveyance
executed by all the partners passes all their
rights in such property.
 Title: legal evidence of a person’s
ownership rights in property; and instrument
that constitutes such evidence
 Equitable Interest: interest held by
virtue of an equitable title or claimed on
equitable grounds, held by a trust
beneficiary
 Real property may be registered or
owned in the name of:
1) Partnership
2) One or more but not all partners
3) One or more or all partners/third
person in trust
4) All the partners
23. When may admission or
representation made by a partner be
considered evidence against the
partnership?
Art 1820 An admission or representation
made by any partner concerning partnership
affairs within the scope of his authority in
accordance with this Title is evidence
against the partnership.
 Admission: a statement in which
someone admits that something is true or
done something wrong.
 Evidence against:
1) Partnership affairs
2) Within the scope of his authority
24. Under what cases may notice or
acknowledge of any partner of any matter
relating to partnership affairs operate as
notice to or knowledge of the
partnership?
Art 1821 Notice to any partner of any matter
relating to partnership affairs, and the
knowledge of the partner acting in the
particular matter, acquired while a partner or
then present to his mind, and the knowledge
of any other partner who reasonably could
and should have communicated it to the
acting partner, operate as notice to or
knowledge of the partnership, except in the
case of fraud on the partnership, committed
by or with the consent of that partner.
 Instances where knowledge of a partner
is considered knowledge of the partnership:
1) Acquired while a partner
2) Present to his mind
3) Who reasonably could and should
have communicated it to the acting
partner
 Exception: in case of fraud on the
partnership, committed by or with the
consent of that partner (selective)
** 25. How is a partnership tort
committed?
 Tort: a civil wrong that causes a
claimant to suffer loss or harm, resulting in
legal liability for the person who commits
the tortious act
Art 1822 Where, by any wrongful act or
omission of any partner acting in the
ordinary course of the business of the
partnership or with the authority of his co-
partners, loss or injury is caused to any
person, not being a partner in the
partnership, or any penalty is incurred, the
partnership is liable therefor to the same
extent as the partner so acting or omitting
to act.
Art 1823 The partnership is bound to make
good the loss:
(1) Where one partner acting within the
scope of his apparent authority receives
money or property of a third person and
misapplies it; and
(2) Where the partnership in the course of its
business receives money or property of a
third person and the money or property so
received is misapplied by any partner
while it is in the custody of the
partnership.
26. Who shall be charged liable for
partnership tort?
Art 1824 All partners are liable solidarity
with the partnership for everything
chargeable to the partnership under articles
1822 and 1823.
27. How does a person not a partner
become a partner by estoppel?
Art 1825 When a person, by words spoken
or written or by conduct, represents himself,
or consents to another representing him to
anyone, as a partner in an existing
partnership or with one or more persons not
actual partners, he is liable to any such
persons to whom such representation has
been made, who has, on the faith of such
representation, given credit to the actual or
apparent partnership, and if he has made
such representation or consented to its being
made in a public manner he is liable to such
person, whether the representation has or
has not been made or communicated to such
person so giving credit by or with the
knowledge of the apparent partner making
the representation or consenting to its being
made:
(1) When a partnership liability results, he is
liable as though he were an actual member
of the partnership;
(2) When no partnership liability results, he
is liable pro rata with the other persons, if
any, so consenting to the contract or
representation as to incur liability, otherwise
separately.
When a person has been thus represented to
be a partner in an existing partnership, or
with one or more persons not actual
partners, he is an agent of the persons
consenting to such representation to bind
them to the same extent and in the same
manner as though he were a partner in fact,
with respect to persons who rely upon the
representation. When all the members of the
existing partnership consent to the
representation, a partnership act or
obligation results; but in all other cases it is
the joint act or obligation of the person
acting and the persons consenting to the
representation.
 Partnership by Estoppel: arises if all
the partners consented to the
misrepresentation of a third person who is
not a real partner. Creates a partnership
obligation.
 Partner by Estoppel: a person who
represents himself, or consents to another or
other representing him to any one, as a
partner either in an existing partnership or in
one that is fictitious or apparent (not
consented by all partners)
28. If a person is admitted as a partner
into an existing partnership, shall he be
liable for all the obligations of the
partnership incurred by the partnership
before his admission?
29. For obligations of the partnership
incurred after he was admitted into the
partnership, to what extent shall he be
liable?
Art 1826 A person admitted as a partner into
an existing partnership is liable for all the
obligations of the partnership arising before
his admission as though he had been a
partner when such obligations were
incurred, except that this liability shall be
satisfied only out of partnership property,
unless there is a stipulation to the contrary.
** Note: Cannot go after the separate
property of the newly admitted partner

30. In respect to partnership assets

between the partnership creditors and the
creditors of the individual partners, who
shall be preferred?

Art 1827 The creditors of the partnership

shall be preferred to those of each partner as
regards the partnership property. Without
prejudice to this right, the private creditors
of each partner may ask the attachment
and public sale of the share of the latter in
the partnership assets.

 Preference of payment:

1) Partnership creditors
2) Partner creditors