CHAPTER 2 OBLIGATIONS OF THE PARTNERS

SECTION 1. OBLIGATIONS OR THE PARTNERS AMONG THEMSELVES

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RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP

A. Relations among partners themselves

B. Relations of the partners with the partnership

C. Relations of the partnership with the third persons with whom it contracts

D. Relations of the partners with such third persons

These 4 are relationships created when you enter into a contract of partnership

COMMENCEMENT OF A PARTNERSHIP (Article 1784

Before we proceed to the duties we have first to know kailan nagsisimula ang partnership

A. GENERAL RULE
- From the moment of celebration of the contract
● Being a consensual contract from the time that the parties give their consent there is
already a partnership formed. E.g pumayag si A, pumayag si B there is already a
partnership even if teh details are not yet specified.

● The only exception to this is a limited partnership which requires a registration with the
SEC, pagka na register na sa SEC and the SEC issued a certificate, then thats only the
time the limited partnership will commence.

● In cases of partnerships where immovables are contributed, magsisimula palang ang

partnership if there is already a written public instrument that is executed by the partners
and also there is an inventory attached with the public instruments. In the absence of
any of these, the partnership here is VOID.

B. EXCEPTION
- When there is a contrary stipulation that the partnership is to be formed at some
future time or on the happening or fulfillment of some condition or future
contingency.

So pag dumating yung period stipulated that is the only time where the partnership will begin
Also the partnership will start upon the happening of a future and uncertain event. Pag nangyari
na yung condition
DURATION OF A PARTNERSHIP (Article 1785
Depends on what kind of partnership it is

Partnership at Will
Duration is dependent upon the agreement of the parties, pag ayaw na nila then the partnership
will be dissolve in accordance with the will of the partners. Here there is no time limit that is
fixed.

- A partnership is unlimited as to its duration in the sense taht no time limit is fixed by law.
The duration may be agreed upon - expressly, as when there is a definite period or
impliedly, as when a particular enterprise is undertaken - it being understood taht the
firm ends as soon as its purpose has been achieved.

Partnership is for a fix term

Ang duration niya ay hanggang dun sa fixed term

Partnership is for a specific undertaking

Duration hanggang sa accomplishment ng undertaking
As soon as the undertaking is accomplished, then the partnership will end

OBLIGATIONS OF THE PARTNERS

OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES AND TO THE PARTNERSHIP

(Article 1786

A. DUTY TO CONTRIBUTE

- The contribution must be made ordinarily at the time the partnership is entered
into, unless a different period is stipulated. Failure to contribute would make the
partner automatically liable as a debtor of the partnership and in default even
without demand.

● Usually the contribution is made ordinarily at the moment of the celebration of the
contract, but it can be made later on, so if a different period is stipulated yun ang
susundin.

● The important thing to remember is dapat meron talagang contribution. There Is a

obligation of a partner to contribute, failure to do so, the partner is automatically liable as
a debtor

● . Hindi na kailangan mag demand ng partnership na magbigay siya ng contribution,

automatic debtor na siya, automatic in default na siya.
 From the discussion in RFBT1, in order para masabi na in default, kailangan may
demand but the general rule doesn't apply here, HINDI na kailangan ng demand, as long
as the time has come to give the contribution, the debtor/partner will be in a default.

B. DUTY TO WARRANT AGAINST EVICTION

- The warranty in case of eviction refers to specific and determinate things already
contributed.

● If a partner donates to the partnership a specific or determinate object, the partner also
has an obligation to the partner na i maintain siya sa possession of the object.

● Kailangan yung partnership will remain in the possession and ownership of the object.

● If that partnership ay naalis sa possession and ownership of the object contributed by a

partner it is as if the partner did not contribute anything. It is the violation of the duty to
warrant against eviction.Wala na kasi itong contribution

C. DUTY TO DELIVER FRUITS

- A partner shall be liable for the fruits thereof from the time they should have been
contributed to the time of actual delivery, without the need of any demand.

D. DUTY TO PRESERVE PROPERTY

- The partner must exercise due diligence in preserving the property to be contributed,
before he actually contributed the same; otherwise, he can be held liable for losses and
deterioration. (in relation to Article 1163

Kailangan mag exercise ng due diligence in preserving the property, yung partner who intends
to contribute the property.

E. DUTY TO INDEMNIFY FOR DAMAGES

- Damages in case the contribution is retained without justifiable reason or contribution is
delayed. (in relation to Articles 1170 and 1788

In case the contribution is retained or delayed without justifiable reason magbabayad ng

damages ang isang partner
RULES REGARDING CONTRIBUTIONS

EXTENT OF CONTRIBUTION (Article 1790

- Contribution shall be in equal shares unless so stipulated. In the absence of proof, the
shares are presumed equal.

Equality is the general rule

APPRAISAL OF GOODS

Yung mga value ng ghoods na icocontribute, kailangan malaman yung value nito so that you
know how much a partner is contributing to the partnership. Appraisal of the goods is definitely
necessary

- Necessary to determine how much has been contributed by the partners in order to
determine the share of each partner in the profits and losses in proportion to what he
has contributed in the absence of any stipulation of the contrary

Kailangan malaman yung appraisal value of goods for us ti determine yung basis ng profit or
loss

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 CHAPTER 2: OBLIGATIONS OF THE PARTNERS
SECTION 1: OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES
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RULES REGARDING CONTRIBUTIONS

HOW APPRAISAL IS MADE (Article 1787)

A. As prescribed by the contract of partnership.

B. In default of the first, by experts chosen by the partners; and at current prices.

DUTY TO INDEMNIFY FOR INTEREST AND DAMAGES (Article 1788)

• In cases when there is failure to contribute or in cases when a partner takes money from the partnership
coffers.
• The guilty partner is liable for both interest and damages from the time he should have complied with
his obligation or from the time he converted the amount to his own use.
• Remember na magbabayad siya ng interest and damages pag’ka nahuli yung kaniyang
contribution from the time na dapat i-deliver or number 2 naman, he will be liable for interest
and damages from the time he takes the money and converts it to his personal use so doon
magsisimula ang pagbibilang ng interest and damages.

OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF MONEY AND MONEY CONVERTED TO PERSONAL USE
(Article 1788)

A. To contribute on the date due the amount he has undertaken to contribute to the partnership.

B. To reimburse any amount he may have taken from the partnership coffers and converted to his own
use.

C. 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.

• Also to pay interest, remember here that the interest will be paid because he failed to contribute
on time or he takes any amount from the common fund.

D. To indemnify the partnership for the damages caused to it by the delay in the contribution or the
conversion of any sum for his personal benefit.

• Also to indemnify the partnership for the damages caused to it by the delay in the contribution
or the conversion of partnership funds to his own benefit.

DUTY TO CONTRIBUTE ADDITIONAL CAPITAL (Article 1791)

• Additional capital may be contributed by capitalist partners, kung industrial ka they will not ask
you to contribute capital syempre ang cino-contribute mo nga lang is industry, and obviously they
cannot ask you to contribute additional industry kasi nga lahat ng industry mo as an industrial
partner binibigay mo na sa isang partnership.

• In case of an imminent loss of the business and there is no contrary agreement, a capitalist partner is
obliged to give additional contributions to save the business. If he refuses to contribute, he shall be
obliged to sell his interest to the other partners.
• In case of an imminent loss, malapit ng malugi ang isang business and there is no agreement
by the partners that they will not give additional contribution, kung walang ganung
agreement, capitalist partner is oblige to give additional contributions if it will save the
business. So if he does not want to give additional contributions he will be forced to sell his
interest to the other partners who are interested in actually saving the partnership.
DUTY TO BEAR RISK OF LOSS

• Before delivery of the thing to be contributed by a partner, the risk of loss is borne by the partner.
(Articles 712, 1164, 1262 and 1263.
- Pagka-before delivery, it is obvious that it is the partner who will bear the risk of loss so bago niya i-
deliver itong object that he will contribute and nawala, remember the risk of loss is to be shouldered by
the partner, because if the object is loss it is as if again he has no contribution so hindi na kasalanan ng
partnership yan kung walang contribution ang partner.

RULES REGARDING RISK OF LOSS OF THINGS CONTRIBUTED OR DELIVERED (Article 1795)

A. SPECIFIC AND DETERMINATE THINGS WHICH ARE NOT FUNGIBLE WHERE ONLY THE USE IS CONTRIBUTED

- The risk is borne by the partner because he remains the owner of the things.

- Ang na-contribute lang is gamit but the ownership remains with the partner obviously the partner will
bear the risk of loss, here it follows the general rule of res perit domino (owner bears the risk of loss)
that is why it is the partner who will bear the risk of loss. Here also, that if the object is destroyed it is
as if the partner did not contribute anything.

B. SPECIFIC AND DETERMINATE THINGS THE OWNERSHIP OF WHICH TRANSFERRED TO THE PARTNERSHIP

- The risk is for the account of the partnership, being the owner.

- So if the partnership is the owner already obviously it is the partnership who will bear the risk of loss,
again res perit domino.

C. FUNGIBLE THINGS OR THINGS WHICH CANNOT BE KEPT WITHOUT DETERIORATING EVEN IF THEY ARE
CONTRIBUTED ONLY FOR THE USE OF THE PARTNERSHIP

- The risk of loss is borne by the partnership evidently the ownership was being transferred since use is
impossible without the things being consumed or impaired.

- The risk of loss is borne by the partnership because here there is an obvious transfer of ownership kasi
nga pagka-ginamit mo ang fungible things na to they have to be consumed or impaired, example: rice or wine
etc. So if you contribute rice to the partnership obviously hindi siya pwedeng gamitin ng hindi siya nauubos, so
pagka-ginamit mo siya mauubos siya, kapag nawala yung object na to partnership will bear the risk of loss kasi
nga nung ginamit mo siya, nawala siya.

D. THINGS CONTRIBUTED TO BE SOLD

- The partnership bears risk of loss for there cannot be any doubt that the partnership was intended to
be the owner.

- It is the partnership who will bear the risk of loss because there is again an implied transfer of
ownership to the partnership here, bakit? Kase cinontribute mo sa partnership and the partnership will sell it
to another person and remember here that the partnership cannot sell what it does not own. So obviously there
is an implied transfer of ownership here that’s why the partnership will bear the risk of loss kase impliedly,
nilipat na sa kanila yung ownership ng things contributed to be sold.

E. THINGS BROUGHT AND APPRAISED IN THE INVENTORY

- The partnership bears the risk of loss because the intention of the parties was to contribute to the
partnership the price of the things contributed with an appraisal in the inventory.

- Again noong cinontribute itong object na to with an appraisal, ang parang cinontribute dito is the price
of the thing that’s why partnership will bear the risk of loss. Implied same again to the partnership.
DUTY NOT TO ENGAGE IN ANY BUSINESS

DUTY NOT TO ENGAGE IN ANY BUSINESS (Article 1789)

– An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to
do so. Consequently, if he engages in business for himself, such act is considered prejudicial to the interest of
the other partners.

- Industrial partner cannot engage in business for himself, unless there is an EXPRESSED permission from
the partnership to do so. Pagka ang partner na ito ay nag-engage sa business na iba or other business
which is not the partnership business remember the act is prejudicial to the interest of the other partners
there is actually here a conflict of interest. Kasi nga sa isang partnership kapag industrial ang may-ari ng
services mo ay ang partnership. Remember that you cannot give your service to another business kasi
nga meron ng may-ari ng service mo, it is the partnership.

EFFECT OF VIOLATION (Article 1789)

A. The capitalist partner, even industrial ones, can exclude said partner from the firm.

B. The partnership can avail themselves of the benefits from the illegal business.

C. The partnership has a right to damages in either case.

RULES REGARDING CREDIT

DUTY OF THE MANAGING PARTNER TO CREDIT TO THE PARTNERSHIP, PAYMENT MADE BY A DEBTOR WHO
OWES HIM PERSONALLY AND THE PARTNERSHIP (Article 1792)

• When a debtor is separately indebted to the partnership and to the managing partner, any sum received
by the managing partner shall be applied to the two credits pro rata except when such sum was received
for the account of the partnership, in which the whole sum shall be applied to the partnership credit
only.
- There is only one debtor, that one debtor is indebted to partnership and also to the managing partner,
in short meron siyang dalawang utang, now the managing partner successfully collects a sum from the
debtor. Let’s say the sum collected from the debtor by the managing partner is a sum for his own
personal account, under the law in Art. 1792 the managing partner has an obligation to share the sum
collected with the partnership so hindi niya pwedeng solohin to, but the sum collected will be applied to
the two credits pro rata, it will be applied to the debt of the debtor to the partnership and also to the
debt of the debtor to the managing partner. Kailangan niyang i-share, bakit ganon eh kinolekta na nga
niya for his own personal account, bakit kailangan pang i-share sa partnership? Remember in 1792 ang
prinoprotektahan niya is yung interest of the partnership. The Interest of the partnership comes first
kaysa sa personal na interest nang mga managing partners, bawal daw unahin ng managing partner ang
sarili niya. So if the managing partner collects a demandable sum and it is collected for his own account,
remember na hindi niya makukuha ng buo yan he has to share a portion of it to the partnership.
 Partnerships Chapter 2 Section 1- OBLIGATIONS OF THE PARTNERS AMONG
THEMSELVES
TIME: (30:01- 40:00)

DUTY OF PARTNERSHIP TO PARTNER

THREE DUTIES OF THE PARTNERSHIP TO THE PARTNERS (Article 1796)
C. DUTY TO ANSWER FOR RISKS
- These are risks as a consequence of the management of the partnership.
- personal losses to the partner who manages the partnership because sa duty
niya nga to manage the partnership. Let as say na there is a loss of the property of the
manager and it happened because of his duty to manage the partnership. Remember
that the partnership will be answerable for the risk taken by the manager para lang sa
management ng partnership.
PROFITS AND LOSSES
- Again in case of a partnership, a partner not only shares in the profit but also
shares in the losses
RULES IN DISTRIBUTION OF PROFITS (Article 1797)
A. According to agreement subject to article 1799.
- Kung ano yung napagusapan kung pano yung profit sharing yun yung susundin.

B. If there be no such agreement:

1. The share of each capitalist partner shall be in proportion to his capital
contribution.
- Tignan kung ano capital contribution, kung 10% of capital kinontribute niya ang
profits na makukuha niya nun is 10% din ng profits
2. The industrial partner shall receive such share as may be just and equitable
under the circumstances.
- First to remember is dapat yung industrial partner is given first yung just and
equitable share under circumstances before yung share ng mga capitalist partner
is ibibigay. Let as say there is a profit of 100k tapos yung isang partner is
industrial for the service of that is 20k yun yung magiging share niya, yun muna
dapat yung isettle. Then yung other will distribute na to capitalist partners in
proportion to capital contribution.

RULES IN DISTRIBUTION OF LOSSES (Article 1797)

A. According to agreement- as to losses (but not iniquitously) subject to Article 1799
- Kapag losses tignan mun if may loss sharing agreement. Kapag meron you have
to follow that loss sharing agreement, and ang sabi ng law ang loss of sharing
agreement must not be UNFAIR, INIQUITOUS (for example yung isa is 99% loss
 then yung isa is 1% lang hindi pwede yung ganon agreement and sharing when it
comes to losses)

B. If there be no such agreement, but the contract provides for the share of the
partners in the profits, the share of each in the losses shall be in accordance with
the profit-sharing ratio, but the industrial partner shall not be liable for losses.
- Kapag walang loss of sharing agreement tignan naman if there is profit sharing
agreement and remember na yung sharing sa loss will be based on the profit
sharing agreement and yung industrial partner shall not be liable for losses

C. If there be no profit-sharing stipulated in the contract, the losses shall be borne

by the partners in proportion to their capital contributions, but the purely industrial
partner shall not be liable for the losses.
- If there is no loss of sharing and profit sharing agreement ang basis ng share sa
losses is capital contribution will be the basis of loss sharing depende sa
percentage ng shinare nila sa capital ganon yung percentage and again yung
industrial partner is not liable for losses

DESIGNATION BY THIRD PERSON OF SHARES IN PROFITS AND LOSSES

(Article 1798)

- May be made by common consent of the partners. The designation cannot be

made in favor of one of the partners.
(yung third person can designate the shared of the partners in profits and losses
as long as yung designation is made with the common consent of the partners.
Pero hindi pwedeng isang partner lang or isa sa mga partners ang magdesignate
ng sharing ng profits and losses.)

WHEN DESIGNATION BY A THIRD PARTY MAY BE QUESTIONED (Article

1798)
(If yung third person designates yung sharing ng profit or losses it may be
questioned by the partners or ang ginamit ng term ng law is impugn)
- When it is manifestly inequitable.
( profit and loss sharing is unfair and kapag ganon partners may question it
except when…)
WHEN DESIGNATION BY A THIRD PARTY CANNOT BE QUESTIONED EVEN IF
MANIFESTLY INEQUIUTABLE (Article 1798)
(Exception in the article 1798 that even it is manifestly inequitable the partners can no
longer impugn or question)
A. If the aggrieved party has already begun to execute the decision.
- Yung party suffers unfairness or yung nadehado tinanggap na niya yung
kanyang maliit na share, he already receive it or distribute it. Hindi na niya
pwedeng iquestion kasi sinunod na niya or ginawa na niya pano pa maqquestion.
 B. if he has not impugned the same within a period of three months from the time he
had knowledge thereof and not from the time of making of the designation.
- Not impugned within three months from the time he had made aware of the
making of the designation. Kapag sinabi ito yung share mo sa loss or profit tapos
feel niya unfair dahil for example ang share niya sa profit is 10% lang but yung
share niya sa loss is 90% magtataka siya but hindi niya qinuestion agad within 3
months there for hindi na niya pwedeng questionin pa.
EXCLUSION FROM PROFITS OR LOSSES (Article 1799)
(you can exclude a partner from profits or losses sabi sa article 1799 but that is just
an exception)
A. GENERAL RULE
- The law does not allow a stipulation excluding one or more partners from any
share in the profits and losses because the partnership must exist for the
common benefit and interest of all partners. Even if such stipulation is void, the
partnership is still valid and such stipulation will be disregarded.
-the general rule is there can be no exclusion sa share ng profit and losses dahil
sa common benefit and interest ng of all partners kailangan everybody will
participate sa profit and losses lahat may benefit and interest.
-also even the stipulation is void it will simply be disregarded and yung
partnership will continue as a valid partnership.
B. EXCEPTION
- The case of an industrial partner whom the law itself exclude from losses. (Article
1797. This is without prejudice to the rights of third persons. (article 1817)
- industrial partner may be excluded from losses kasi law na mismo ang nagsabi na sila
is excluded according sa art. 1817. Without prejudice to the rights of third person. Ito
tandaan sa 1797 in relation sa 1799 and 1817, industrial partner is exempted from
losses but not in liability. So if 3rd person or creditor will demand payment sa partnership
yung industrial must pay kasi liable padin siya however because an industrial partner is
exempted from losses kahit bayaran niya yung 3rd person/ creditor he can ask for
reimbursement from the capitalist partners. That is the reason nakahit liable padin siya
he is still excluded from losses kasi pwede padin siya humingi ng reimbursement from
capitalist partners.
MANAGEMENT OF A PARTNERSHIP (1800-1803)
- Pagdating sa management of a partnership when we talk about 1800-1802 we
are talking about partners who are appointed as managers. So if 3rd person is
appointed as a manager of a partnership this rule will not apply kasi 3rd person
yun not a member of partnership.
RIGHT AND DUTY TO MANAGE PARTNERSHIP
- Each partner has a right to an equal voice in the conduct of the partnership
business and this right is not dependent on the amount of the partner’s capital.
The partners also have a duty to manage the partnership.
- 1800-1803 partner has a right and duty to manage the partnership. Both right
and duty, it is right because partner have equal voice in the conduct of
partnership business kailangan makialam sila and gusto nila makialam sa
management ng partnership nila. It is a duty kasi alangan naman walang
mamanage sa partnership.
 CHAPTER 2: OBLIGATIONS OF THE PARTNERS
SECTION 1: OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES
Time 20:01-30:14
RULES REGARDING CREDIT

DUTY OF THE MANAGING PARTNER TO CREDIT TO THE PARTNERSHIP, PAYMENT MADE BY A DEBTOR WHO
OWES HIM PERSONALLY AND THE PARTNERSHIP (Article 1792)

• When a debtor is separately indebted to the partnership and to the managing partner, any sum received
by the managing partner shall be applied to the two credits pro rata except when such sum was received
for the account of the partnership, in which the whole sum shall be applied to the partnership credit
only.
- There is only one debtor, that one debtor is indebted to partnership and also to the managing partner,
in short meron siyang dalawang utang, now the managing partner successfully collects a sum from the
debtor. Let’s say the sum collected from the debtor by the managing partner is a sum for his own
personal account, under the law in Art. 1792 the managing partner has an obligation to share the sum
collected with the partnership so hindi niya pwedeng solohin to, but the sum collected will be applied to
the two credits pro rata, it will be applied to the debt of the debtor to the partnership and also to the
debt of the debtor to the managing partner. Kailangan niyang i-share, bakit ganon eh kinolekta na nga
niya for his own personal account, bakit kailangan pang i-share sa partnership? Remember in 1792 ang
prinoprotektahan niya is yung interest of the partnership. The Interest of the partnership comes first
kaysa sa personal na interest nang mga managing partners, bawal daw unahin ng managing partner ang
sarili niya. So if the managing partner collects a demandable sum and it is collected for his own account,
remember na hindi niya makukuha ng buo yan he has to share a portion of it to the partnership.

- What if the managing partner collects a demandable sum for the account of the partnership ?
Remember that if it is for the account of the partnership the question is pwede bang makishare si
managing partner dyan? Ans. No,pag ang kinollect nang managing partner is for the account of the
partnership it will be applied only to the partnership credit so yung buong amount mapupunta lamang
sa partnership bakit ganon because the interest of the partnership is par amount mas mauuna ang
interest nang partnership

DUTY OF A PARTNER TO SHARE WITH THE OTHER PARTNERS, THE SHARE OF THE PARTNERSHIP CREDIT WHICH HE HAS
RECEIVED FROM AN INSOLVENT DEBTOR (Article 1793)

- The article applies whether the partner has received his share wholly or in part.

• There is only 1 debtor and one debt. The partnership has successfully collected only a portion of the debt and
that portion is already given to one of the partners. After the said partner received the share the debtor
becomes insolvent. So wala nang masisingil yung partner sa debtor kasi nga wala na the debtor become unable
to pay his obligation, now the partner who received his share in whole or in part is supposed to return the share
that he receive to the partnership para paghatian nila yung share na narecieve niya

• Ex. Si X (debtor) may utang na 9k sa isang partnership tas merong 3 partners sabihin naten na yung partnership
successfully collects 3k from the debtor and that 3k was recieved by partner A but then later on X become
insolvent there is no way for the partnership to collect the balance from the obligation. What will happen then?
A will have to return to the partnership what he had receive from the insolvent debtor yung kanyang share doon
sa credit and then the credit receive and returned to the partneship will be shared by all of the partners yung 3k
will be divided by all of the partners so tig 1k sila
DUTY TO PAY FOR DAMAGES

• Damages is caused by a fault of a partner obviously pagkasalanan mo you have to pay for damages, even if that
partner who caused damages to the partnership earns profit and benefit hindi pwede yung natanggap niyang
benefit or profit ang ipang-compensate niya (*take note of the concept of compensation)

• Compensation happens when both parties are in their own rights, creditors and debtors of one another so in
compensation may utang ako sayo may utang ka saakin alangan naman magbarayan pa tayo, qwits na lamang
wala nang bayaran na mangyayari. The obligation we have from one another is extinguish by operation of law

DUTY TO PAY FOR DAMAGES CAUSED BY HIS FAULT (Article 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.

– The courts may mitigate or lessen the liability for damages if through

extraordinary efforts, unusual profits were realized.

• the partner who causes damages to the partnership is not allowed to compensate with yung damages cause
with the profits and benefits earned by his industry

• Ex. Partner A causes damage to the partnership in a amount of 100k later on same partner who cause damages
to the partnership earns 200k from the partnership. Remember hindi pwede qwits nalang wala nalang bayaran
kung baga may balance nalang yung partner na 100k hindi pwede yon remember they cannot be compensated
against one another why? Reason for non compensation or not offsetting the damages with benefit kasi they are
both duties of the partner

WHY GENERAL DAMAGES CANNOT BE OFFSET BY BENEFITS

A. The partner has the duty to secure benefits for the partnership; on the other has, he

has the duty also not to be at fault.

• pereho duty nang partner na 1. to secure profit as well as 2. not to be at fault/not to be negligence/duty not to
cause damages

• Now kung parehong duty yan, the partner is the debtor in both instances that is why compensation cannot take
place. Hindi pwedeng maoffset and qwits nalamang sila because here in both instances the partner is the debtor
hindi sila nagpalit nang role that’s why not allowed however the court may mitigate or lessen the damages
which are to be paid by the partner when if the partner through his effort acquires profit for the partnership the
efforts here must be extraordinary effort. Babawasan lang yung liability hindi pwedeng totally alisin.

B. Since both are duties, compensation should not take place, the partner being the

debtor in both instances. Compensation requires two persons who are reciprocally

debtors and creditors of each other.

DUTY OF PARTNERSHIP TO PARTNERS

THREE DUTIES OF THE PARTNERSHIP TO THE PARTNERS (Article 1796)

A. DUTY TO REFUND

– The partnership has the duty to refund amounts disbursed on behalf of the firm

plus legal interest from the time expenses were made.

• pagmay inabonohan ang partner the partnership must refund or reimburse the partner who advance any
amount on behalf of the partnership. Remember this is legal interest
B. DUTY TO ANSWER FOR OBLIGATIONS OR GIVE EFFECT TO CONTRACTS

– The partnership is obliged to recognize or give effect to contracts entered into by

a partner in good faith in the interest of the partnership business with authority

from the partnership.

• pagkapumasok sa contract ang isang partner and if he is sufficiently authorize by the partnership
remember that the partnership has a duty to the partner to recognize the transaction or obligation na
pinasukan nung partner.

C. DUTY TO ANSWER FOR RISKS

– These are risks as a consequence of the management of the partnership

• this are personal losses to the partner who manages the partnership because of his duty to manage the
partnership. Let say lost of the property of the manager and it happen because of his duty to manage the
partnership remember that the partnership will be answerable for the risk taken by the managers.
 MANAGEMENT OF A PARTNERSHIP
- Management is discussed under 1800 up to 1803 of the civil code. Remember, pagdating
sa management of a partnership when we talk about 1800 up to 1802, we are talking
about partners who are appointed as managers. So, if a third person is appointed as a
manager of a partnership these rules will not apply kasi nga third person - not a member
of the partnership. In 1800 up to 1803, a partner has a right and a duty to manage the
partnership. So this is both a right and a duty to manage the partnership - both a right and
duty at the same time.

RIGHT AND DUTY TO MANAGE PARTNERSHIP

- Each partner has a right to an equal voice in the conduct of the partnership business and
this right is not dependent on the amount of the partner's capital. The partners also have
a duty to manage the partnership.
- Both a right and a duty at the same time.

TWO DISTINCT CASES OF APPOINTMENT (Article 1800)

(ito yung dalawang paraan kung papaano i-appoint ang isang managing partner)

A. APPOINTMENT AS MANAGER IN THE ARTICLES OF PARTNERSHIP

- The partner appointed by common agreement in the articles of partnership.

- Here in 1800, managing partner can be appointed in the articles of partnership or contract
of partnership.
- The appointment as manager in the articles of partnership is a part of the stipulation in the
contract of partnership. Yung partners, they agree that one of them will become a
managing partner and nakalagay yan sa articles of partnership or sa contract of
partnership.
- Remember, the managing partner here is appointed by common agreement and it is a
stipulation in the articles of partnership.
- What you have to remember in number 1, if you are appointed as manager in the articles
of partnership. Being a part of the partnership contract, yung appointment mo, it is not
easily revocable, hindi pwedeng basta-basta na lang nilang bawian yung power na binigay
nila sayo as managing partner especially since it is a stipulation in the contract of
partnership.
- Dahil ito ay stipulation in the contract of partnership, to remove a managing partner who
is appointed in this manner, there must be a just and lawful cause and there must be the
vote of the partners representing the controlling financial interest so that is 51% of the
financial interest at least.

B. APPOINTMENT AS MANAGER AFTER CONSTITUTION OF THE PARTNERSHIP OR

ORALLY
- Appointment is a mere delegation of power, revocable at any time.
 - Obviously, here in number 2, meron ng partnership as a on-going concern, na-establish
na yung partnership then afterwards the partners will agree na one of them will become a
manager of the partnership.
- In case of appointment as manager after constitution of the partnership or verbally, it is a
mere delegation of power, it is revocable at any time kasi nga hindi naman ito part ng
partnership contract, that is why you can be removed anytime if you are appointed in this
manner.

EXTENT OF POWER OF A MANAGING PARTNER

A. GENERAL RULE
- A partner appointed as manager has all the necessary and incidental powers to
carry out the object of the partnership in the transaction of its business.

- Lahat ng necessary, lahat ng incidental, all acts of administration actually

is included in the powers of a managing partner.

B. EXCEPTIONS
1. When the powers of the manager are specifically restricted or expressly withheld.

- Hanggang dito lang ang pwede mong gawin or bawal mong gawin yan.
Yun ang exceptions, di nilang pwedeng gawin yan, it is outside the scope
of their powers.

2. Managing partners cannot also exercise powers that are neither necessary nor
incidental to carry out the object of the partnership.

- Outside na ito ng powers given to your managing partners

TWO OR MORE MANAGERS WHOSE DUTIES ARE UNSPECIFIED AND UNANIMITY IS

NOT REQUIRED (Article 1801)
- In 1801 and 1802, two or more managers are appointed. So the appointment of the
managers may be in the articles of partnerships or subsequently, after the constitution or
even verbally. But in 1801 and 1802, what you have to remember is that there is a plurality
of managers - two or more ang appointed. If there are two or more managers, their duties
are unspecified meaning kahit ano pwede gawin and unanimity is not required meaning
the consent of the other partners in order to act. Pwede gawin kahit ano, unspecified kasi
ang duties nila and pwede silang dumiskarte magisa.

- Each managing partner may separately perform acts of administration.

- Kasi nga unspecified and duty and unanimity is not required.
RULES IN CASE OF OPPOSITIONS
- Pagka-two or more kayo, there are times that the managing partners will not see eye-to-
eye, so there will be oppositions. What you have to remember in case of opposition is only
managing partners have the right to oppose.

A. If one or more of the managing partners shall oppose the acts of the others, then the
decision of the majority (per head) of the managing partners shall prevail. Note that the
right to oppose can be exercised only by those entrusted with the management of the
partnership and not by any partner.
- Decision of the majority will prevail. Let us say there are three managing partners
- A, B & C are the managing partners in a partnership which include also E and F
- not managing partners. Let us say si A may ginawang act and the act of ‘A’ is
opposed by ‘B’. So how will they resolve the conflict since there is an opposition
here. Remember, it will be resolve on majority or per head voting. Let us say ‘A’,
meron siyang action, ‘B’ opposed, ‘C’ kumampi kay ‘B’. Then, the decition of ‘B’
will prevail or the opposition of ‘B’ will prevail - per head ang voting. So, tatlo sila
obviously very easy to break the tie.

If in case there are four managing partners - A, B, C, and D are managing partners. Tapos may
action si ‘A’ opposed by ‘B’ and syempre i-resolve by per head voting. Si ‘C’ kumampi kay ‘B’
and si ‘D’ kumampi kay ‘A’, so two is to two there is a tie:
B. In case of tie, the matter shall have to be decided by the vote of the partners owning the
controlling (financial) interest.
- Meaning isasama na yung ibang partners, hindi lang managing partners ang
boboto kasama na yung ordinary or non-managing partner sa pagboto. And
remember, that the matter will be decided by the financial interest of the partner.
So titignan na natin kung magkano ang contributions nila kung ilang percent
tapos i-aadd na naten yan at doon mad’determine kung ano ang decision ng
partners.
In 1801, if there is a specification of the duties ibig sabihin may toka yung mga managing
partners. “Ikaw dito, Ikaw dito, Ikaw dito, Ikaw sa accounting, ikaw sa hiring ng employees, etc.”
So- if managing partner hires this employee - kasi yan ang designation ng kanyang duty - hindi
pwede magoppose yung isa kasi may specification ng duties here. Kung sino nakatoka sa duty
na yon, siya lang ang may right to decide as long as he is in good faith, hindi pwede i-oppose
yan.

TWO OR MORE MANAGERS WHERE UNANIMITY IS REQUIRED (Article 1802)

A. GENERAL RULE
- Unanimity is required even if one of the managers is absent or incapacitated as it is not
an excuse
- Meaning the managers cannot act without the consent of other managing
partners. Wala silang magagawa kung hindi nila nakuha ng lahat. That is the
general rule in 1802. If unanimity is required, even the absence or incapacity of
the other managing partners is not an excuse. You have to get the consent of all
before you can enact anything. Bago ka makakilos to do any action, you have to
get the consent of all of the managing partners because in 1802, unanimity is
required meaning the vote of all is required. That is the general rule, absent,
incapacitated or they are in abroad, you still have to get their vote.
B. EXCEPTION

When there is imminent danger of grave or irreparable injury to the partnership. A partner may act alone
without the consent of the partner who is absent or under disability without prejudice to the former’s
liability for damages under Article 1794.

Here, let us say sa isang partnership mayroon silang building. And yung building nila is about to be
foreclosed by the bank o malapit na siyang maremata. So itong managing partner balak niyang tubusin
yung property na mareremata na ng bangko. Remember, here even if he didn’t get the consent of the
other managing partner, let us say they are in abroad, because irreparable injury to the partnership will
be caused if hindi niya natubos ito, pwede niya itong tubusin kasi nga he can act alone because if in action
will caused irreparable injury to the partnership, the law allows him to act alone kasi nga kapag nawala
yung property ng partnership, grave or injury irreparable will occur.

RULES WHEN THE MANNER OF MANAGEMENT HAS NOT BEEN AGREED UPON (Article 1803)

A. ALL PARTNERS ARE CONSIDERED MANAGERS

All of them shall be considered managers and agents (Article 1818) and whatever any of them may do
alone shall bind the partnership subject, however, to the provision of Article 1801.
Here, let us say lima sila and lahat sila ay managers tapos mayroong act yung isa so any of the four
can oppose because they are considered managers. Incase of oppositions, the rules in 1801 will apply.
So kung ito mayroon siyang action and ito nag oppose so nagkaroon ng per head voting and if
nagkaroon ng tie, controlling financial interest vote of all partners considered.

B. UNANIMOUS CONSENT REQUIRED FOR ANY IMPORTANT ALTERATION IN IMMOVABLE PROPERTY OF

PARTNERSHIP
The unanimous consent of all partners is necessary for any important alteration in the immovable
property of the partnership.

RIGHT TO APPOINT AN ASSOCIATE (Article 1804)

A partner may associate another person with him in his share. The associate does not acquire the rights
of a partner nor he is liable for its debts.
So here isa kang partner so pwede kang mag appoint or mag associate ng third person dun sa share mo.
So yung share mo will received by this associate. So here the associate is only concerned with the share
of the partner who appointed him.

DUTY TO ADMIT ASSOCIATE (Article 1804)

The partnership must admit the third person as an associate.

RIGHT TO INSPECT AND COOY PARTNERSHIP BOOKS (Article 1805)

The partnership books should be kept at the principal place of business and subject to inspection during
reasonable hours.
Reasonable hour should be on business days throughout the year, and not merely during the capricious
or arbitrary period selected by the managers.
So here hindi pwedeng sabihin ng managers na pwede mo lang iinspect yan ng August to September every
year, hindi pwedeng ganun basta ang limitation lang is reasonable hours (business hours).
DUTY TO KEEP PARTNERSHIP BOOKS (Article 1805)
The duty to keep true and correct books showing the firm’s account, such books being at all times open
to inspection of all members of the firm, primarily rests on the managing or active partner.

DUTY TO GIVE INFORMATION (Article 1806)

There must be no concealment between the parties in all maters affecting the firm’s interest. This is
required by good faith. Thus, this duty to give on demand “true and full information.”

WHO CAN DEMAND INFORMATION (Article 1806)

A. Any partner.
B. Legal representative of a dead partner.
C. Legal representative of any partner under legal disability.

FIDUICIARY DUTIES (Article 1807)

A. DUTY TO ACT FOR COMMON BENEFIT

It is the obligation of a partner to act for the common benefit of all in all transactions relating to the
partnership business or affairs.

B. DUTY TO ACCOUN FOR SECRET AND SIMILAR PROFITS

A partner who makes a secret profit out of the operation of the partnership, or who accepts a secret
commission from a third person dealing with the partnership, is duty bound to account such profit or
commission with other partners.
So here bawal yung mga kickback and konting kinita on the side. Remember, kailangan mo parin yang
ideclared sa partnership.

C. DUTY TO ACCOUNT FOR EARNINGS ACCURING AFTER TERMINATION OF PARTNERSHIP

The duty of a former partner to share profits with his former associates may extend to earnings
accruing after the termination of the partnership.
So here if mayroon paring na collect na profit or earnings after the partnership was already been
disolved, kailangan paring ishare ng collecting partner to the other partners even if yung earnings is
realized after the dissolution of the partnership.

D. DUTY TO MAKE FULL DISCLOSURE OF INFORMATION AFFECTING PARTNERSHIP

A partner cannot, to the detriment of the other parties, apply exclusively to his own benefit the results
of the knowledge and information gained in the character of partner.
Here, any knowledge na nakuha ng partner during his time as a partner must be fully disclosed to the
partnership so kailangan niyang sabihin sa mga partners yung information as long as the information
is gathered at the time that he is a partner in the partnership.

DUTY NOT TO ENGAGE IN UNFAIR COMPETITION WITH HIS OWN FIRM (Article 1808)
A capitalist partner is prohibited from engaging for his own account in any operation “which is of the kind
of business in which the partnership is engaged” (same or similar business that may result in competition)
(2 blanco 426). The competition may become unfair in view of the knowledge by the capitalist partner of
the firm’s husiness secrets. (2 Blanco 426).
Remember 1808 in relation to 1789, here sabi industrial partner cannot engage in any business which is
not the partnership business because there is a conflict of interest as it is the partnership who is the owner
of the industry of the industrial partner. However, in case of a capitalist partner, they have a duty not to
engage in unfair competition so pwede siyang mag engage in another business but he cannot engage in a
business which is of the same kind or nature and nature as the business of the partnership. So kung ang
business ng partnership is buy and sell ng cellphones itong capitalist partner can engage in any business
except the buying and selling of cellphone kasi if mag eengage siya jn the same business there is an unfair
competition dahil magagamit niya yung knowledge na nakuha niya sa partnership business para gamitin
sa personal na business and this would be unfair on the part of the partnership.

EFFECT OF VIOLATION (Article 1808)

A. The violator shall bring to the partnership all the profits illegally obtained.
B. However, he shall personally bear all the losses.
C. The violator can be ousted from the firm on the ground of loss or trust and confidence, particularly if
the violation is repeated after due warning. This would of course result in the dissolution of the firm.

RIGHT TO DEMAND A FORMAL ACCOUNT (Article 1809)

A. GENERAL RULE
No formal accounting is demandable until after discussion because after all there is access to the
books.
B. EXCEPTIONS (WAPO)
1. If he is wrongfully excluded from the partnership business or possession of its property by his
co-partners.
Here, ayaw isama itong partner na ito. Hindi siya pinapasama sa mga meeting, etc. hindi siya
makaparticipate sa business he can ask for a formal account para malaman kung ano ba ang
nangyari sa partnership.

2. If the right exists under the terms kf any agreement.

3. As provided by Article 1807 as when a partner has derived profits from any transaction
connected with the formation, conduct, or liquidation of the partnership or from any use by
him of its property.