PARTNERSHIP (2020-2021) | LMR

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DEFINITION Valid Contract
Legal Capacity to enter into the contract
Article 1767. By the contract of partnership two or more Mutual contribution of money, property, or industry
persons bind themselves to contribute money, property, or to a common fund
industry to a common fund, with the intention of dividing the Object must be lawful
profits among themselves. Intention to gain and distribute profits
CONTRIBUTION OF PARTNERS CHARACTERISTICS
COMMON FUND – Contributions of partners; consists of CONSENSUAL
money, property, or industry ONEROUS
MONEY – Currency which is the legal tender in the NOMINATE
Philippines; a promissory note or bill of exchange PRINCIPAL
PREOARATORY
*A promissory note is not money until encashed
BILATERAL
PROPERTY – Real or personal COMMUTATIVE
INDUSTRY – Service of a partner
WHERE (WHEN) DOES PARTNERSHIP
NUMBER OF PARTIES BEGIN?
From the moment the partnership is created. GR: Intention of
the parties prevail
INTENTION OF PARTNERS / PURPOSE OF
PARTNERSHIP WHAT IS THE TERM OF PARTNERSHIP
(HOW LONG?)
The intention of the partnership is to gain and distribute profits
No limitation

ELEMENTS PARTNERSHIP AT WILL

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Partnership at will – the partnership has an indefinite term and A partnership is a person, a juridical person. The law grants
it would be dissolved only when an act or cause of dissolution that juridical personality. That juridical person is an artificial
happens or arises. person, not natural. Its existence depends upon the law.

PARTNERSHIP WITH A FIXED PERIOD WHAT IS A JURIDICAL PERSONALITY

Partnership with a fixed period or Partnership for a Particular A juridical personality is one that is granted by the law. This
Undertaking – the partnership is automatically dissolved upon means that a person has a juridical personality when the law
the expiration of the stipulated term or the achievement of the grants him the same.
particular undertaking stipulated in the contract of partnership.
WHO SHALL MANAGE THE
PARTNER BY ESTOPPEL PARTNERSHIP? (RIGHT OF PARTNERS
A person who represents himself as a partner of an existing TO MANAGE – MANAGEMENT POWER)
partnership with or without the consent of the partnership
Management power is vested upon one or more or all partners;
HOW IS A PARTNERSHIP CREATED? – even a third person. If there is no agreement, all shall exercise.
CONTRIBUTION WITH REAL OR
IMMOVABLE
A partnership is created by mere agreement of the parties,
whether orally or in writing

WHEN DOES JURIDICAL PERSONALITY

PARTNERSHIP PROPERTY ASSIGNABLE?
BEGIN?
EXECUTION? GARNISHMENT?
From the moment the partnership begins
SUPPORT?
WHY IS PARTNERSHIP A JURIDICAL Article 1811. A partner is co-owner with his partners of
PERSON? specific partnership property.

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The incidents of this co-ownership are such that: Profits and losses are distributed among the partners by
agreement, if there is none; it is based on their contributions.
(1) A partner, subject to the provisions of this Title and to any
agreement between the partners, has an equal right with his IS AN INDUSTRIAL PARTNER
partners to possess specific partnership property for partnership
purposes; but he has no right to possess such property for any
EXEMPTED FROM LOSSES? LIABILITY?
other purpose without the consent of his partners; Industrial partners are exempted from losses but not from
(2) A partner's right in specific partnership property is not liabilities
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.
WHAT IS THE DOCTRINE OF LIMITED
WHICH PROPERTY IS ASSIGNABLE? LIABILITY? UNLIMITED LIABILITY?
A partner's right in specific partnership property is not Article 1826. – Subsequently admitted partners cannot be held
assignable except in connection with the assignment of rights liable for the partner’s debt before joining. The liability is
of all the partners in the same property; limited only for his contribution to the common fund at the
time of his admission, except when it is stipulated.
HOW ARE PROFITS AND LOSSES
Article 1816. All partners, including industrial ones, shall be
DISTRIBUTED AMONG PARTNERS?
liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts which

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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.
EXTENT OF LIABILITY OF PARTNERS?
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so received is misapplied by any partner while it is in the
custody of the partnership. (n)
Article 1824. All partners are liable solidarily with the
partnership for everything chargeable to the partnership under
articles 1822 and 1823

(1816, 1822-1824)
Article 1816. All partners, including industrial ones, shall be
liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts which
may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to
LIMITED PARTNER VS GENERAL
act for the partnership. However, any partner may enter into a PARTNER
separate obligation to perform a partnership contract.
LIMITED GENERAL
Article 1822. Where, by any wrongful act or omission of any PARTNER PARTNER
partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or As to contribution No industry Contributes
injury is caused to any person, not being a partner in the contributed money, property,
partnership, or any penalty is incurred, the partnership is liable and industry
therefor to the same extent as the partner so acting or omitting As to firm name GR: Name must May include the
to act. (n) not appear in the name of one,
Article 1823. The partnership is bound to make good the loss: firm name some, or all
partners, or maybe
(1) Where one partner acting within the scope of his apparent a different name
authority receives money or property of a third person and
misapplies it; and As to liability Limited partners General partners
cannot be held can be held liable
(2) Where the partnership in the course of its business receives liable beyond his beyond their
money or property of a third person and the money or property contribution contributions if

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the capital of the
partnership is
exhausted

As to Not allowed to One or more or all

management manage the general partners,
partnership even a third
person CONTRIBUTIONS OF A CAPITALIST
PARTNER? INDUSTRIAL PARTNER?
As to business Allowed to Not allowed to
engage in other engage in other CAPITALIST PARTNER - Contributes money
businesses businesses
INDUSTRIAL PARTNER – Contributes industry/services
especially those
similar to the firm CAN AN INDUSTRIAL PARTNER BE A
LIMITED PARTNERSHIP VS GENERAL CAPITALIST PARTNER AT THE SAME
PARTNERSHIP TIME?
An industrial partner can be a capitalist partner at the same
Limited Partnership General Partnership time if he contributes both capital and industry. In such cases,
he will be called a capitalist-industrial partner.
Composed of at least one Composed of all general
general partners partners
MAY A NOT PARTNER BE HELD LIABLE
FOR PARTNERSHIP OBLIGATIONS?
WHY?
Article 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,

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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. (nYes.
*If he is either of the following:
a. Partner by estoppel
b. His name appears on the partnership name
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WHAT IS PARTNERSHIP BY ESTOPPEL?
PARTNER BY ESTOPPEL?
Article 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
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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.
SUBSEQUENTLY ADMITTED PARTNER
BE HELD LIABLE?
Article 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.
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Article 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.
CAN AN INDUSTRIAL PARTNER
ENGAGE IN BUSINESS? CAN A
CAPITALIST PARTNER ENGAGE IN
OTHER BUSINESS? GIVE REASONS
Article 1789. An industrial partner cannot engage in business
for himself, unless the partnership expressly permits him to do
so; and if he should do so, the capitalist partners may either
exclude him from the firm or avail themselves of the benefits
which he may have obtained in violation of this provision, with
a right to damages in either case.

DUTIES OF PARTNERS – DUTY TO

CONTRIBUTE FRUITS, PROPERTY HE
CAN A SUBSEQUENTLY ADMITTED PROMISED TO CONTRIBUTE
PARTNER BE HELD LIABLE OF Article 1786. Every partner is a debtor of the partnership for
PARTNERSHIP OBLIGATION BEFORE HE whatever he may have promised to contribute thereto.
BECOMES A PARTNER? WHY? He shall also be bound for warranty in case of eviction with
regard to specific and determinate things which he may have
EXCEPTIONS?
contributed to the partnership, in the same cases and in the

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same manner as the vendor is bound with respect to the vendee.
He shall also be liable for the fruits thereof from the time they
should have been delivered, without the need of any demand.
Three Important Duties of Every Partner
The Article speaks of three things:
a) the duty to contribute what had been promised;
b) the duty to deliver the fruits of what should have been
delivered; and
c) the duty to warrant.
Obligations with respect to contribution of property
The above article deals with the obligations of the partners
among themselves and to the partnership with respect to
contribution of property. They are as follows:
a) contribute at the beginning of the partnership or at the
stipulated time the money, property, or industry which
he may have promised to contribute;
b) To answer for eviction in case the partnership is
deprived of the determinate property contributed; and
c) 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.
In addition, the partner has the obligation:
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d) To preserve said property with the diligence of a good
father of a family pending delivery to the partnership
(Art. 1163.); and
e) To indemnify the partnership for any damage caused to
it by the retention of the same or by the delay in its
contribution.b(Arts. 1788, 1170.)
WARRANTY AGAINST EVICTION
The Duty to Warrant
- The warranty in case of eviction refers to “specific and
determinate things” already contributed. (See Art. 1786,
Civil Code).
- There is “eviction” whenever by a fi nal judgment
based on a right prior to the sale or an act imputable to
the partner, the partnership is deprived of the whole or a
part of the thing purchased. The parties may however
suppress, increase, or diminish this legal obligation.
(See Art. 1548, Civil Code). The partner who made the
contribution should be summoned in the suit for
eviction, at the instance of the partnership. (Art. 1558,
Civil Code).
PROPERTY RIGHTS
Article 1816. All partners, including industrial ones, shall be
liable pro rata with all their property and after all the
partnership assets have been exhausted, for the contracts which
may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to
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act for the partnership. However, any partner may enter into a WILL THAT MAKE THE TRANSFEREE A
separate obligation to perform a partnership contract.
PARTNER
RIGHT TO MANAGE THE FIRM, RIGHT IS No. In whole or in part, the transferee will not be a partner.
ASSIGNABLE?
IS HE ENTITLED TO RIGHTS?
Article 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 WHEN CAN HE CLAIM FOR HIS RIGHTS?
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.
CAN HE BECOME A PARTNER BECAUSE
OF TRANSFER OF INTEREST?
Once a person transfers his share, that would not make the third
person a partner because once he transfers his shares, that
partnership is dissolved and a new one is created once all of the
partners agrees (trust and confidence)
DISSOLUTION, TERMINATION, WINDING
UP
Article 1828. The dissolution of a partnership is the change in
the relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding
up of the business. (n)
Article 1829. On dissolution the partnership is not terminated,
but continues until the winding up of partnership affairs is
completed. (n)
Article 1830. Dissolution is caused:
(1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular
undertaking specified in the agreement;

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(b) By the express will of any partner, who must act in good
faith, when no definite term or particular is specified;
(c) By the express will of all the partners who have not
assigned their interests or suffered them to be charged for their
separate debts, either before or after the termination of any
specified term or particular undertaking;
(d) By the expulsion of any partner from the business bona fide
in accordance with such a power conferred by the agreement
between the partners;
(2) In contravention of the agreement between the partners,
where the circumstances do not permit a dissolution under any
other provision of this article, by the express will of any partner
at any time;
(3) By any event which makes it unlawful for the business of
the partnership to be carried on or for the members to carry it
on in partnership;
(4) When a specific thing which a partner had promised to
contribute to the partnership, perishes before the delivery; in
any case by the loss of the thing, when the partner who
contributed it having reserved the ownership thereof, has only
transferred to the partnership the use or enjoyment of the same;
but the partnership shall not be dissolved by the loss of the
thing when it occurs after the partnership has acquired the
ownership thereof;
(5) By the death of any partner;
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(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article. (1700a and
1701a)
Article 1831. On application by or for a partner the court shall
decree a dissolution whenever:
(1) A partner has been declared insane in any judicial
proceeding or is shown to be of unsound mind;
(2) A partner becomes in any other way incapable of
performing his part of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in
matters relating to the partnership business that it is not
reasonably practicable to carry on the business in partnership
with him;
(5) The business of the partnership can only be carried on at a
loss;
(6) Other circumstances render a dissolution equitable.
On the application of the purchaser of a partner's interest under
article 1813 or 1814:
(1) After the termination of the specified term or particular
undertaking;
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(2) At any time if the partnership was a partnership at will A stipulation for the common enjoyment of any other
when the interest was assigned or when the charging order was profits may also be made; but the property which the partners
issued may acquire subsequently by inheritance, legacy, or donation
cannot be included in such stipulation, except the fruits thereof.
(1674a)

EXTRAJUDICIAL DISSOLUTION Article 1780. A universal partnership of profits

comprises all that the partners may acquire by their industry or
No judicial decree work during the existence of the partnership.

CAN ANY PARTNER DISSOLVE THE
PARTNERSHIP?
Article 1828. The dissolution of a partnership is the change in
the relation of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding
up of the business.
UNIVERSAL VS PARTICULAR
PARTNERSHIP
OBJECT
UNIVERSAL – Article 1778. A partnership of all
present property is that in which the partners contribute all the
property which actually belongs to them to a common fund,
with the intention of dividing the same among themselves, as
well as all the profits which they may acquire therewith.
Article 1779. In a universal partnership of all present
property, the property which belonged to each of the partners at
the time of the constitution of the partnership, becomes the
common property of all the partners, as well as all the profits
which they may acquire therewith.
Movable or immovable property which each of the partners
may possess at the time of the celebration of the contract shall
continue to pertain exclusively to each, only the usufruct
passing to the partnership.
PARTICULAR – Article 1783. A particular partnership
has for its object determinate things, their use or fruits, or a
specific undertaking, or the exercise of a profession or
vocation.
LIABILITY
GENERAL PARTNERSHIP – one where all partners
are general partners who are liable even with respect to their
individual properties, after the assets of the partnership have
been exhausted
LIMITED PARTNERSHIP – one formed by two or
more persons having as members one or more general partners
and one or more limited partners, the latter not being personally
liable for the obligations of the partnership

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(Firm names, under our custom, identify the more active and/or
more senior members or partners of the law firm.
DURATION
The firm name of the partnership, as distinguished from the
PARTNERSHIP AT WILL – the partnership has an
name of an individual, is an element of the partnership
indefinite indefinite term and it would be dissolved only when
enterprise, a substantial asset thereof, and passes with a sale of
an act or cause of dissolution happens or arises
the partnership property and goodwill)
PARTNERSHIP WITH A FIXED PERIOD –
automatically dissolved upon the expiration of the stipulated CAN THE NAME OF IP NAME APPEAR IN
term or the achievement of the particular undertaking stipulated THE FIRM NAME?
in the contract of partnership
Yes. Since an Industrial partner can be a general partner at the
RIGHT OF SUCCESSION IN same time and as to firm name, general partners may include
PARTNERSHIP the name of one, some, or all partners, or even a different
name,
There is no right of succession in partnership. Once a person
transfers his share, that partnership is dissolved. CAN A NON-PARTNER’S NAME APPEAR?
WHAT IS THE IMPORTANCE OF FIRM Persons who, not being partners, include their names in the
firm name do not acquire the rights of a partner (see Art. 1767.)
NAME? but under Article 1815, they shall be subject to the liability of a
A partnership must have a firm name under which it will partner (Art. 1816.) insofar as third persons without notice are
operate. A firm name is necessary to distinguish the partnership concerned.
which has a distinct and separate juridical personality (Art.
1768) from the individuals composing the partnership and from
other partnerships and entities. Under the Business Name Law
(Sec. 1, Act No. 3883, as amended.), such firm name must be
registered with the Bureau of Commerce (now with the
Intellectual Property Office created under R.A. No. 8293).

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