Syllabus for Law on Partnership

By: Atty. Arnel A. Santiago

I. Contract of Partnership
a. Definition (Art. 1767 of the New Civil Code of the Philippines (NCC))
Article 1767. 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.
(1665a)

b. Nature of Partnership

 i. Separate Juridical Personality - (Art. 1768, NCC)

Art. 1768. The partnership has a judicial personality separate and distinct from that
of each of the partners, even in case of failure to comply with the requirements of
Article 1772, first paragraph. (n)
 ii. Purpose - (Art. 1767, 1770 NCC)
Article 1767. 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. (1665a)
Art. 1770. A partnership must have a lawful object or purpose, and must be
established for the common benefit or interest of the partners.
 iii. Fiduciary Relationship Among Partners
– Read: Tocao v. CA GR 127504, October 4, 2000
A relationship in which one individual owes another a fiduciary duty to act in the
other's interest. Certain interactions may give rise to a fiduciary relationship,
regardless of the parties' intent.
 iv. Liability of Partners
Art. 1776. As to its object, a partnership is either universal or particular. As regards the
liability of the partners, a partnership may be general or limited. (1671a)

c. Formation

 Birth
 Membership (Art. 1767, NCC)
Art. 1767. 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.
 Object of Partnership (Art. 1767, 1770, 1776 NCC)
Article 1767. 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. (1665a)
Art. 1770. A partnership must have a lawful object or purpose, and must be established for
the common benefit or interest of the partners.
 Art. 1776. As to its object, a partnership is either universal or particular. As regards the liability
of the partners, a partnership may be general or limited. (1671a)
 Nature of Contributions (Art. 1767, NCC)
Article 1767. 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. (1665a)
 Formal Requisites (Art. 1771-1774, NCC)
Art. 1771. 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.
(1667a)
Art. 1774. 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. (n)
 Registration (Art. 1772, NCC)
Art. 1772. 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.

D. Classes of Partnership

 i. General Partnership v Limited Partnership – (Art. 1843, NCC)

Art. 1843. A limited partnership is one formed by two or more persons under the provisions of
the following article, having as members one or more general partners and one or more
limited partners. The limited partners as such shall not be bound by the obligations of the
partnership.
 ii. Universal Partnership v. Particular Partnership - (Art. 1777-1783, NCC)
Art. 1777. A universal partnership may refer to all the present property or to all the profits.
(1672)
Art. 1783. A particular partnership has for its object determinate things, their use or fruits, or
specific undertaking, or the exercise of a profession or vocation. (1678)
 iii. Universal Partnership of Present Property v. Universal Partnership of all
Profits - (Art. 1778-1782, NCC)
Art. 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. (1673)
Art. 1782. Persons who are prohibited from giving each other any donation or advantage
cannot enter into universal partnership. (1677)
 iv. Professional Partnership - (Art. 1767, NCC)
Article 1767. 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. (1665a)
  v. Partnership by Estoppel – (Art. 1825, NCC)
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:

e. Kinds of Partners

 Silent
 Dormant
 Capitalist
 Industrial
 General
 Limited

f. Contract of Partnership in Comparison with

 Corporation
o Supreme Court Case: Guy v. Gacott, GR 206147, January 13, 2016
 Joint Venture
 Trusts
 Agency

g. Rules of Management (Art. 1800-1803, NCC)

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. (1692a)
Art. 1801. If two or more partners have been intrust with the management of the partnership without
specification of their respective duties, or without a stipulation that one of them shall not act without
the consent of all the others, each one may separately execute all acts of administration, but if any of
them should oppose the acts of the others, the decision of the majority shall prevail. In case of a tie,
the matter shall be decided by the partners owning the controlling interest. (1693a)
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 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. (1694)
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. (1695a)

h. Obligations of the Partners

 To the Partnership (Art. 1783 NCC)

o As to his contribution (Art. 1786-1790, NCC)
o As to Losses (Art. 1791, 1795, NCC)
o As to Partnership Credits (Art. 1792-1793, NCC)
Art. 1792. If a partner authorized to manage collects a demandable sum which was
owed to him 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 other debtor by Article 1252, but only if the personal credit of the
partner should be more onerous to him. (1684)
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. (1685a)
o As to Damages (Art. 1794, NCC)
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 this responsibility if through the partner's extraordinary efforts in
other activities of the partnership, unusual profits have been realized. (1686a)
 To the Partners
o Render Accounting (Art. 1807, NCC)
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.
o Capitalist Partners (Art. 1808, NCC)
Art. 1808. 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.
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.
 To Third Persons
o General Liability (Art. 1816, NCC)
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.
 Partners as Agents of Partnership (Art. 1818, NCC)
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.
 Effects
 Doctrine of Apparent Authority
 Stipulation to Limit Liability (Art. 1817, NCC)
o Transaction under the Partnership Name (Art. 1815, NCC)
o Conveyance of Partnership Properties (Art. 1819, NCC)
o Admission and Representation of Partners (Art. 1819, NCC)
o Notice to Partners (Art. 1820, NCC)
o Liability of New Partner (Art. 1826, NCC)

i. Obligation of the Partnership

 To Partners
o As to Advances (Art. 1796, NCC)
o As to Distribution of Profits/Losses (Art. 1797-1799, NCC)
o Partnership Books (Art. 1805, NCC)
o Request for Accounting (Art. 1809, NCC)
o Property Rights
 Property Rights (Art. 1810, NCC)
 Nature of Ownership (Art. 1811, NCC)
 Incidents of Ownership (Art. 1811, NCC)
 To Third Persons
 o Losses caused by Partners (Art. 1822, NCC)
 Who shall shoulder the losses? (Art. 1824, NCC)
o Partnership by Estoppel (Art. 1825, NCC)
o Liability of New Partner (Art. 1826, NCC)

j. Dissolution and Winding Up

 Dissolution v. Winding Up – Art. 1828-1829, NCC)

 Grounds for Dissolution
o Voluntary - (Art. 1830, NCC)
o Involuntary – (Art. 1831, NCC)
 Effects of Dissolution – (Art. 1832, 1834-1835, NCC)
o Remaining Affairs
o On Partners
o Third Persons
o Involuntary Dissolution – (Art. 1833, NCC)
o Division on Remaining Properties –
 Transfer of Liability of Insolvent Partners –
 Order of Preference – Liability (Art. 1839, NCC)

k. Limited Partnership

 In Comparison with a General Partnership

o Definition – (Art. 1843, NCC)
o Composition – (Art. 1843, NCC)
o Formal Requisites – (Art. 1844, NCC)
o Nature of Contributions
 Limited Partner
 General Partner
 Rights and Obligations of Partners
o General
 Rights (Art. 1850, NCC)
 Obligations
o Limited
 Rights (Art. 1851, 1854 NCC)
 Obligations
 Order of Preference in Winding Up of Affairs and Liability (Art. 1862,NCC)