PARTNERSHIP  Article 1769
o In determining whether a partnership
CHAPTER 1 and 2
Partnership
 Two or more persons
 Contribute money, property or industry
 Divide the profits among themselves
 Article 1776
o By the contract of 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.
Two or more persons may also form a
partnership for the exercise of a
profession.
 Consensual Contract
o Perfected by mere consent
 Bilateral
o It is entered into by two or more persons
and the rights and obligations therein are
always reciprocal.
 Commutative
o The undertaking of each partner is
considered as the equivalent of that of
the others.
 Nominate
o It has a special name and designation
 Onerous
o Each party aspire to procure for himself a
benefit through the giving of something.
 Principal and Preparatory
o It does not depend upon a validity of
another contract and it is entered into as
a means to an end.
A partnership has a separate and distinct personality
from the partners.
A partnership must have a lawful purpose.
 Article 1768
 Article 1770
o The partnership has a juridical personality
o A partnership must have a lawful object
separate and distinct from that of each of
the partners, even in the case of failure to
comply with the requirements in Article
1772, first paragraph.
exists, these rules shall apply:
1. Except as provided by article 1825,
persons who are not partners as to
each other are not partners as to third
persons;
2. Co-ownership or co-possession does
not of itself establish a partnership,
whether such co-owners or co-
possessors do or do not share any
profits made by the use of the
property;
3. The sharing of gross returns does not
of itself establish a partnership,
whether or not the persons sharing
them have a joint or common right or
interest in any property from which
the returns are derived;
4. The receipt by a person of a share of
the profits of a business is prima facie
evidence that he is a partner in the
business, but no such inference shall
be drawn if such profits were received
in payment:
a. As a debt by installments or
otherwise;
b. As wages of an employee or rent
to a landlord;
c. As an annuity to a widow or
representative of a deceased
partner;
d. As interest on a loan, though the
amount of payment vary with the
profits of the business;
e. As the consideration for the sale
of a goodwill of a business or
other property by installments or
otherwise.
or purpose, and must be established for
the common benefit or interest of the
partners. When an unlawful partnership is
dissolved by a judicial decree, the profits
shall be confiscated in favor of the State,
 without prejudice to the provisions of the
Penal Code governing the confiscation of
the instruments and effects of a crime.
 Article 1771
o A partnership may be constituted in any
form, except where immovable property
or real rights are contributed thereto, in
which case a public instrument shall be
necessary.
o Form of partnership contract
1. General Rule – no special form is
required for the validity or existence
of the contract of partnership.
2. Where immovable property or real
rights are contributed – “a public
instrument shall be necessary.”
3. When partnership agreement covered
by Statute of Frauds – an agreement
to enter in a partnership at a future
time, which “by its terms is not to be
performed within a year from the
making thereof” is covered by the
Statute of Frauds. Such agreement is
unenforceable unless the same be in
writing or at least evidenced by some
note or memorandum thereof
subscribed by the parties.
o Partnership implied from conduct
1. Binding effect
2. Ascertainment of intention of parties
3. Conflict between intention and terms
of contract
 Article 1772
o Every contract of partnership having a
capital of three thousand pesos or more,
in money or property, shall appear in a
public instrument, which must be
recorded in the Office of the Securities
and Exchange Commission.
o 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.
o Registration of partnership
1. Partnership with capital of P3,000 or
more – there are two requirements
where the capital of the partnership is
P3,000 or more, in money or
property, namely:
a. The contract must appear in a
public instrument; and
b. It must be recorded or registered
with the Securities and Exchange
Commission.
2. Purpose of Registration
3. When partnership considered
registered
 Article 1773
o A contract of partnership is void,
whenever immovable property is
contributed thereto, if an inventory of
said property is not made, signed by the
parties, and attached to the public
instrument.
 Article 1774
o Any immovable property or an interest
therein may be acquired in the
partnership name. title so acquired can be
conveyed only in the partnership name.
 Article 1775
o Associations and societies, whose articles
are kept secret among the members, and
wherein any one of the members may
contact in his own name with third
persons, shall have no juridical
personality, and shall be governed by the
provisions relating to co-ownership.
A partnership may be Universal or Particular. As to
the partners liability, either limited or general.
 UNIVERSAL PARTNERSHIP
o A universal partnership may refer to all
the present property or to all profits.
 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 the profits they may
acquire.
 A universal partnership of profits
comprises all that the parties may
acquire by their industry or work
during the existence of the
partnership.
 Articles of universal partnership
entered into without specification of
its nature, only constitute a universal
partnership of profits.
 PARTICULAR PARTNERSHIP
o 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.
Obligations of the Partners
 Partnerships begin from the moment the
contract of partnership is executed.
o Every partner is a debtor of the
partnership for whatever he may have
promised to contribute thereto.
o He shall also be bound for warranty in
case of eviction with regard to specific
and determinate things which he may
have contributed to the partnership, he is
also liable for the fruits of the property
from the tine they should have been
delivered without the need of demand.
Industrial Partners
 Article 1787
o When the capital or a part thereof which
a partner is bound to contribute consists
of goods, their appraisal must be made in
the manner prescribed in the contract of
partnership, and in the absence of
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.
 Partner liable for interest and damages to
the partnership
o Article 1788
 A partner who has undertaken to
contribute a sum of money and fails
to do so becomes a debtor for the
interest and damages from the time
he should have complied with his
obligation.
 The same rule applies to any amount
he may have taken from the
partnership coffers, and his liability
shall begin from the time he
converted the amount to his own use.
o The following are the obligations of the
partners with respect to the partnership
capital under Article 1788:
1. To contribute on the date due the
amount he has undertaken to
contribute to the partnership;
2. To reimburse any amount he may
have taken from the partnership
coffers and converted to his own use;
3. To pay the agreed or legal interest, if
he fails to pay his contribution on
time or in case he takes any amount
from the common fund and converts
it to his own use; and
4. To indemnify the partnership for its
damages caused to it by the delay in
the contribution or the conversion of
any sum for his personal benefit.
 Who?
o These are partners who, instead of
contributing property to the partnership,
they contribute work, industry or labor for
the partnership.
 In what instance is he liable?
o If he engage in business for himself,
unless the partnership expressly permits
him to do so.
 How is he liable?
o If he engages in business for himself
without being permitted by the
partnership, the capitalist partners may
either exclude him from the firm or avail
 themselves of the benefits which he may
have obtained in violation of Article 1789,
 Article 1794
with a right to damages.
o Every partner is responsible to the
partnership for damages suffered by it
through his fault, and he cannot
Other Obligations of Partners
compensate them with the profits and
 Contribute equal shares to the capital benefits which he may have earned for
o Unless there is stipulation to the contrary, the partnership by his industry. However,
the parties shall contribute equal shares the courts may equitably lessen this
to the capital of the partnership. responsibility if through the partner’s
extraordinary efforts in other activities of
 Contribute additional shares to save the the partnership, unusual profits have
partnership been realized.
o If there is no agreement to the contrary,
in case of an imminent loss of the
business of the partnership, any partner Other Obligations of Partners
who refuses to contribute an additional
 Liability for Damages
share to the capital, except an industrial
o Every partner is responsible to the
partner, to save the venture, shall be
partnership for damages suffered by it
obliged to sell his interest to the other
through his fault, and he cannot
partners.
compensate them with the profits and
benefits which he may have earned for
 Liability of Managing Partners for Sum
the partnership by his industry.
Collected
o When a managing partner collects a sum
 Each partner shall bear the loss and receive
of money owning to him in his own name,
the profits incurred by the partnership in
from a person who also owes the
conformity with the agreement.
partnership which is also demandable, the
o The losses and profits shall be distributed
sum collected shall be applied to both
in conformity with the agreement.
debts in proportion of their amounts.
However, the industrial partner shall not
be liable for the losses.
 Article 1793
o A partner who has received, in whole or in
 Obligations of a managing partner.
part, his share of a partnership, when the
o The partner appointed as manager in the
other partners have not collected theirs,
articles of partnership may execute all
shall be obliged, if the debtor should
acts of administration despite the
thereafter become insolvent, to bring to
opposition of his partners, unless he
the partnership capital what he received
should act in bad faith; and his power is
even though he may have given receipt
irrevocable without just or lawful case.
for his share only.
o Requisites:
 Article 1795
1. A partner has received, in whole or in
o The risk of specific and determinate
part, his share of the partnership
things, which are not fungible,
credit;
contributed to the partnership so that
2. The other partners have not collected
only their use and fruits may be for the
their shares; and
common benefit, shall be borne by the
3. The partnership debtor has become
partner who owns them.
insolvent.
 o 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 risks of things
brought and appraised in the inventory,
shall also be bone by the partnership, and
in such case the claim shall be limited to
the value at which they were appraised.
 Article 1796
o 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.
 Article 1797
o 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.
o 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 circumstance. If besides his
services he has contributed capital, he
shall also receive a share in the profits in
proportion to his capital.
 Article 1798
o If the partners have agreed to intrust 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.
o The designation of losses and profits
cannot be intrusted to one of the
partners.
 Article 1799
o A stipulation which excludes one or more
partners from any share in the profits or
losses is void.
 Article 1800
o 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.
o A power granted after the partnership has
been constituted may be revoked at any
time.
Multiple Managing Partners
 If there is no specification of duties or
stipulation that neither shall act without the
others consent, each one may separately
execute all acts of administration. (Article
1801)
 If however, any of them should oppose the
acts of the others, the decision of the majority
shall prevail. In case of tie, the matter shall be
decided by the partners owning the
controlling interest. (Article 1801)
o Requisites
1. Two or more partners have been
appointed as managers;
2. There is no specification of their
respective duties; and
3. There is no stipulation that one of
them shall not act without the
consent of all the others.
 Article 1802
o 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
validity of the ats, and 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.
 Article 1803
o 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.
 Article 1804
o Every partner may associate another
person with him in his shares, 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.
 Partnership Books
o Subject to any agreement by the partners
the partnership books shall be kept in the
principal place of business and may be
examined and/or reproduced by any
partner at any reasonable hour.
 Account any Benefit
o Every partner must account to the
partnership for any benefit, and hold as
trust for it any profits derived by him
without the other partner’s consent.
 Render true and full info
o Upon demand the partners shall render
true and full information of all things
affecting the partnership to any partner or
the legal representative of a deceased
partner or who is under legal disability.
 Non-compete by capitalist partners
o Capitalist partners cannot engage for their
own account in any operation which is of
the kind of business in which the
partnership is engaged.
 Article 1805
o 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.
 Article 1806
o 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.
 Article 1807
o 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 form any use by him of its
property.
 Article 1808
o The capitalist partners cannot engage for
their own account in any operation which
is of the kind of business in which the
partnership is engaged, unless there is a
stipulation to the contrary.
o Any capitalist partner violating this
prohibition shall bring to the common
funds any profits accruing to him from his
 transactions, and shall personally bear all
the losses.

 Article 1809
o Any partner shall have the right to a
formal account as to partnership affairs:
1. If he is wrongfully excluded from the
partnership business or possession of
its property by his co-partners;
2. If the right exists under the terms of
any agreement;
3. As provided by Article 1807;
4. Whenever other circumstances
render it just and reasonable.