a.

Kinds of Partners
i. Silent Partner who does not take an active part in the business, but maybe known to be
a partner by third persons;
ii. Dormant Partner who does not take an active part in the business and is not known or
held out as a partner;
iii. Capitalist Partner who contributes money or property;
iv. Industrial Partner who contributes only his industry, skills, or services;
v. General Partner whose liability to third persons extends to his separate property;
vi. Limited Partner whose liability to third persons is limited to his capital contribution.
b. Contract of Partnership in Comparison with
i. Corporation
- is a separate legal entity from its owners. It is owned by shareholders who elect a board of
directors to oversee the corporation’s management. The corporation’s profits are taxed
separately from its owners, and shareholders are not personally liable for the corporation’s
debts.
ii. Joint Venture
- is a contract between two or more businesses/enterprises to work together on a single
project or endeavor. Unlike a partnership, a joint venture is a formal agreement that spells
out the rights and responsibilities of each participant, and the profit and losses are
attributed to each business on a proportional basis.
iii. Trusts
- is an arrangement where one person (the trustee) holds property for the benefit of another
person (the beneficiary). The trustee manages the trust property according to the terms of
the trust agreement, which outlines how the trust property will be used and distributed.
iv. Agency
- An agency relationship exists when one person (the principal) hires another person (the
agent) to act on their behalf. The agent has the authority to make decisions and take actions
on behalf of the principal, subject to any limitations outlined in their agreement. The
principal is responsible for any actions taken by the agent within the scope of their authority.
c. Rules of Management (Art. 1800 – 1803, NCC)
Article 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)
Article 1801. If two or more partners have been entrusted with the management of the
partnership without specification of their respective duties, or without a stipulation that one
of 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)
 Article 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)
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 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)
d. Obligations of the Partners
i. To the Partnership (Art. 1783 NCC)
- 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. (1678)
1. As to his Contribution (Art. 1786 – 1790, NCC)
Article 1786. Every partner is a debtor of the partnership for whatever he may have
promised to contribute thereto. 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,
in the same cases and in the 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. (1681a)
Article 1787. 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. (n)
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. (1682)
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. (n)
Article 1790. Unless there is a stipulation to the contrary, the partners shall contribute equal
shares to the capital of the partnership. (n)
2. As to Losses (Art. 1791, 1795, NCC)
Article 1791. If there is no agreement to the contrary, in case of an imminent loss of the
business of the partnership, any partner who refuses to contribute an additional share to the
capital, except an industrial partner, to save the venture, shall be obliged to sell his interest
to the other partners. (n)
 Article 1795. The risk of specific and determinate things, which are not fungible, contributed
to the partnership so that only their use and fruits may be for the common benefit, shall be
borne by the partner who owns them.
If the things contribute are fungible, or cannot be kept without deteriorating, or if they were
contributed to be sold, the risk shall be borne by the partnership. In the absence of
stipulation, the risk of things brought and appraised in the inventory, shall also be borne by
the partnership, and in such case the claim shall be limited to the value at which they were
appraised. (1687)
3. As to Partnership Credits (Art. 1792 – 1793, NCC)
Article 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 sums also
demandable, the sum thus collected shall be applied to the two credits in proportion to their
amounts, even though he may have given a receipt for his own credit only; but should he
have given it for the account of the partnership credit, the amount shall be fully applied to
the latter. The provisions of this article are understood to be without prejudice to the right
granted to the debtor by article 1252, but only if the personal credit of the partner should be
more onerous to him. (1684)
Article 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)
4. As to Damages (Art. 1794, NCC)
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. 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)
ii. To the Partners
1. Render Accounting (Art. 1807, NCC)
Article 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. (n)
2. Capitalist Partners (Art. 1808, NCC)
Article 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. (n)
iii. To Third Persons
1. General Liability (Art. 1816, NCC)
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 act for the partnership. However, any partner may enter into a
separate obligation to perform a partnership contract. (n)
a. Partners as Agents of Partnership (Art. 1818, NCC)
Article 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; meiriw
(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. (n)

i. Effects

Binding Contracts: Partners have the authority to bind the partnership in contracts and
transactions with third parties. This means that when a partner enters into a contract
within the scope of the partnership's business, the partnership is bound by that
contract. The partnership becomes legally responsible for the obligations arising from
the contract.
Joint and Several Liability: Partners are jointly and severally liable for the partnership's
obligations. This means that each partner is individually responsible for the entire
amount of the partnership's debts and obligations. Creditors can choose to collect from
any or all of the partners to satisfy the partnership's debts.
Authority to Act: Unless there are restrictions specified in the partnership agreement,
any partner can generally act on behalf of the partnership in the ordinary course of
business. However, some acts, such as selling or encumbering partnership property, may
require the consent of all partners.

ii. Doctrine of Apparent Authority

The Doctrine of Apparent Authority is a legal principle that holds a partnership liable for
the actions of a partner when the partner appears to have the authority to act on behalf
 of the partnership, even if they don't have actual authority. This doctrine is based on the
idea that if a partnership allows a partner to hold themselves out as having the authority
to act on its behalf, and third parties reasonably rely on that representation, then the
partnership is bound by the actions of the partner.

b. Stipulation to Limit Liability (Art. 1817, NCC)

Article 1817. Any stipulation against the liability laid down in the preceding article shall
be void, except as among the partners. (n)
2. Transaction under the Partnership Name (Art. 1815, NCC)
Article 1815. Every partnership shall operate under a firm name, which may or may not
include the name of one or more of the partners. masero
Those who, not being members of the partnership, include their names in the firm name,
shall be subject to the liability of a partner. (n)
3. Conveyance of Partnership Properties (Art. 1819, NCC)
Article 1819. Where title to real property is in the partnership name, any partner may
convey title to such property by a conveyance executed in the partnership name; but the
partnership may recover such property unless the partner’s act binds the partnership under
the provisions of the first paragraph of article 1818, or unless such property has been
conveyed by the grantee or a person claiming through such grantee to a holder for value
without knowledge that the partner, in making the conveyance, has exceeded his authority.

Where title to real property is in the name of the partnership, a conveyance executed by a
partner, in his own name, passes the equitable interest of the partnership, provided the act
is one within the authority of the partner under the provisions of the first paragraph of
article 1818.
Where title to real property is in the name of one or more but not all the partners, and the
record does not disclose the right of the partnership, the partners in whose name the title
stands may convey title to such property, but the partnership may recover such property if
the partners’ act does not bind the partnership under the provisions of the first paragraph of
article 1818, unless the purchaser or his assignee, is a holder for value, without knowledge.

Where the title to real property is in the name of one or more or all the partners, or in a
third person in trust for the partnership, a conveyance executed by a partner in the
partnership name, or in his own name, passes the equitable interest of the partnership,
provided the act is one within the authority of the partner under the provisions of the first
paragraph of article 1818.
Where the title to real property is in the names of all the partners a conveyance executed by
all the partners passes all their rights in such property. (n)
4. Admission and Representation of Partners (Art. 1820, NCC)
Article 1820. An admission or representation made by any partner concerning partnership
affairs within the scope of his authority in accordance with this Title is evidence against the
partnership. (n)
5. Notice to Partners (Art. 1821, NCC)
Article 1821. Notice to any partner of any matter relating to partnership affairs, and the
knowledge of the partner acting in the particular matter, acquired while a partner or then
 present to his mind, and the knowledge of any other partner who reasonably could and
should have communicated it to the acting partner, operate as notice to or knowledge of the
partnership, except in the case of a fraud on the partnership, committed by or with the
consent of that partner. (n)
6. Liability of New Partner (Art. 1826, NCC)
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. (n)