GENERAL PROVISIONS principal purpose is to obtain profits even if there are moral or
spiritual ends.
1. 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
2. Element of delectus personae:
a. Form of voluntary and personal association
b. Creation and proof of existence
c. Other forms of association excluded
3. Particular partnership partnership formed for a particular
purpose at a certain moment of time
4. Secret partnership the existence of certain persons as partners is
not avowed or made known to the public by any of the partners
5. Universal partnership of profits (usufruct) partners possess the
movable and/or immovable properties at the time of the
celebration of the contract but the profits or income acquired from
the use of these properties are passed on to the partnership
5 essential features of a partnership contract:
Valid contract
Legal capacity
Mutual contribution
Object must be lawful
Primary purpose is to obtain profit and divide the profit among the
parties
Explain and illustrate: a partnership is a juridical person:
Like the corporation, a partnership duly formed under the law is a
juridical person to which the law grants a juridical personality
SEPARATE AND DISTINCT from that of each of the partners. In
partnership Baudelaire & Co., in which Klaus and Violet are the
partners, there are 3 distinct persons, namely: the partnership
Baudelaire & Co., Klaus, and Violet.
Give the cases when a person who is not a partner has a right to share in the
profits of a partnership.
The receipt by a person of a share of the profits of a business is
prima facie evidence that he is a partner. However, he is not if such
profits were received in payment of: debt, wages, rent, annuity to a
widow, interest on a loan, sale of a goodwill
What is the importance of giving publicity to the articles of partnership?
It is essential that the partners are fully informed not only the
agreement but of all matters affecting the partnership. If these are
not made known, the partnership is deprived of juridical personality
and are not partnerships and are merely relating to co-ownership.
Give the effects where a partnership is formed for an unlawful purpose:
1. Contract is void (never existed)
2. Profits shall be confiscated in favor of the government
3. Instruments/tools and proceeds of the crime shall also be
confiscated
4. Contributions of the partners are not confiscated unless they fall to
no. 3
Count Olaf, Klaus, and Violet formed a partnership to which they contributed
a total capital of 30,000. The partnership is not registered with the SEC. Does
the partnership have a juridical personality?
Yes, because failure to comply with the requirements does not
prevent the formation of the partnership and it still gives it a
juridical personality.
Same partnership. The partners agreed on the sharing of profits but not of
losses. Is there a valid partnership?
Yes, because subsequent stipulation which excludes one or more
partners from any share in the profits (or losses) will not affect its
existence and only the stipulation is void.
Same partnership. Among the purposes of the partnership is the promotion of
social and religious ends. Will this prevent the creation of a valid partnership
in view of Article 1767?
No, because its goal is not to obtain profit. Even an unprofitable
business can be a partnership provided its goal is to obtain profits.
However, the partnership mentioned above does not state that its
Same partnership. The partnership was orally formed without the contract
being put into writing signed by the partners. Is the contract of partnership
valid?
It depends because partnerships with capital of 3,000 or more
must comply with the requirements to make the contract appear in
a public instrument and be recorded/registered with the SEC.
However, failure to do so does not prevent the formation of the
partnership. Still, registration is necessary since it will keep an eye
out on tax liabilities of big partnerships and the public can also
determine more accurately their membership and capital before
dealing with them. The registration of the articles of partnership is
not for the purpose of giving the partnership a juridical personality
but to make the recorded instrument open to all to give notice
thereof to interested parties.
Mr. Poe donated a condominium unit to Count Olaf, Klaus, and Violet who
agreed among themselves to lease it to Sunny and share in the rentals. Are
Count Olaf, Klaus, and Violet partners?
No, because this shows that Count Olaf, Klaus, and Violet are
merely co-owners/co-possessors whether or not they share in the
profits made by the lease of the property. Co-ownership of property
does not of itself establish the existence of a partnership, although
it is an essential element of partnership. The profits must be
derived from the operation of the business or undertaking by the
members and not merely from property ownership.
CHAPTER 2: SECTION 1
SECTION 1. OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES
1. Partnership with a fixed term the term of its existence has been
agreed upon expressly or impliedly
2. Subpartnership partnership formed between a member of a
partnership and a third person for a division of the profits coming
to him from the partnership enterprise
3. Industrial partner one who contributes his industry, labor, or
services to the partnership
4. Eviction - to expel (a person, especially a tenant) from land, a
building, etc., by legal process, as for nonpayment of rent.
5. Future partnership partnership that is formed by person who have
the intention of becoming partners at a future time and do not
become as such unless the agreed time has arrived. There can be a
future partnership which at the moment has no juridical existence
yet.
Illustrate the relations created by a contract of partnership.
Relations among the partners
Relations of the partners with the partnership
Relations of the partners with third persons
Relations of the partnership with such third person
State the 5 obligations or a partner with respect to property he promised to
contribute.
1. To contribute at the beginning of the partnership
2. To answer for eviction in case the partnership is deprived of the
determinate property contributed
3. To answer to the partnership for the fruits of the property the
contribution of which he delayed
4. To preserve said property with the diligence of a good father of a
family
5. To indemnify the partnership for any damages caused to it by the
retention of the same
Give the requisites before a capitalist partner may be obliged to sell his
interest in a partnership to the other partners
There is imminent loss of the business
Majority of the capitalist partners agree to contribute to save the
business
The capitalist partner refuses (deliberately) to contribute additional
share
 There is no agreement that even in case of an imminent loss the
partners are not obliged to contribute
Why is appraisal of the value of the goods or property contributed by a partner
required? How shall it be made?
It is necessary in order to determine how much has been
contributed by the partners. In the absence of stipulation, the share
of each partner in profits and losses is in proportion to their
beginning capital balances. The appraisal is made in the manner
prescribed by the contract of partnership. In the absence of
stipulation, by experts chosen by the partners. After the goods have
been contributed, the partnership bears the risk or gets the benefit.
In case of immovable property, the appraisal is made in the
inventory of said property.
State the liability of a partner if he fails or delays his obligation with respect to
contribution of property. What is the reason for the role?
He shall be bound for warranty in case of eviction with regard to
specific and determinate things. He shall also be liable for the fruits
thereof from the time they should have been delivered. This is the
consequence because the partner fails to deliver what he should
deliver to the partnership thus depriving the partnership the
benefits which the said contribution ought to produce and
prejudicing the common purpose of obtaining from them the
greatest possible profits.
Sunny, a partner in a partnership, upon arriving from abroad, demands a
formal accounting of partnership affairs. Has Sunny the right to insist on his
demand if the other partners, Klaus and Violet, refuse?
It depends. If Sunny truly believes that these books are kept true
and correct by the managing or active partner responsible for this
act, then she has no reason to demand thus making it
unreasonable to demand. However, according to law, each partner
has the right to a formal account as to partnership affairs and can
access these books anytime during business hours.
Same partnership. The partnership is engaged in the grocery business.
a) Can Sunny also engage in the same business?
It depends. If Sunny is a capitalist partner, she cannot
engage in the same business other than her original
partnership with Klaus and Violet unless there is a
stipulation to the contrary.
b) Give the reason why Sunny may be prohibited from engaging in a
business for himself.
The reason is that the relationship between the partners
is fiduciary and if she engages in the same business that
is other than her original partnership, there will be a
conflict of interest and an existence of competition will
rise. In lieu to this, it seems perfectly clear that she is
only thinking of her own benefit and not of the partners
and the original partnership.
Same partnership. Sunny is appointed manager in the articles of partnership.
May Klaus and Violet, who represent the controlling interest, revoke the power
given to Sunny if the latter insists on executing a contract for the partnership
which Klaus and Violet oppose?
It depends. Sunny may administer any acts even though Klaus and
Violet oppose as long as it is in good faith. However, if she acted in
bad faith and there is a just and lawful cause, the vote of the
partners representing the controlling interest shall be necessary to
revoke her power.
Same partnership. The liabilities of the partners are as follows: Sunny
P50,000; Klaus P30,000; Violet P20,000
a) How shall the profits of P15,000 be distributed?
It shall be distributed according to their agreement. In
the absence of any agreement, the ratio is based on
capital contribution.
b) Suppose Count Olaf is an industrial partner. What shall be his
share?
Same partnership. The partners stipulate that Violet shall not be liable for
losses. Is the stipulation valid?
It depends. If Violet is an industrial partner, then she is not liable to
the losses. However, if she is not an industrial partner and they
stipulated that she will not be liable for any losses, then the
stipulation is void.
CHAPTER 2: SECTION 2
1. Partners interest in a partnership consists of his proportionate
share in the profits during the life of the partnership as a going
concern
2. Profit excess of returns over expenditures
3. Surplus assets of the partnership after partnership debts and
liabilities are paid and settled
4. Partnership capital represents the aggregate of the individual
contributions made by the partners
What are the property rights of a partner in a partnership?
Right to:
1. specific partnership property
2. His interest in the partnership
3. participate in the management
4. reimbursement for amounts advanced to partnership
5. access and inspect partnership books
6. true and full information affecting partnership
7. a formal account of partnership affairs
8. have the partnership dissolved
What rights are not acquired by an assignee or transferee of a partner who
conveys all his interest in a partnership?
Rights withheld:
To interfere in the management
To require any information or account
To inspect any of the partnership books
What are the only rights acquired by said assignee or transferee?
Right to:
Receive the profits accruing to the assignor
Avail himself of the usual remedies provided by law in
case of fraud
Receive the assignors interest in case of dissolution
Require an account of partnership affairs only if
partnership is dissolved
What is considered as the extent of a partners interest in a partnership?
Nothing is to be considered as the share of a partner but his
proportion of the residue or balance after an account has been
taken of the debits and credits. Until that occurs, it is impossible to
determine the extent of his interest.
Klaus, Violet, and Sunny are partners in a partnership which owns a parcel of
land. May Klaus transfer his right as a partner to said property to Violet?
It depends. Violet, Klaus, or Sunny cannot assign each of their right
to the land but all of them can assign their rights in the same
property. A partners right in specific partnership property is not
assignable because it is impossible to determine the extent of his
beneficial interest in the property until after the liquidation of
partnership affairs.
Same partnership. Klaus is liable to Dr. Montgomery, creditor, who obtained a
court judgment against Klaus for a sum of money. What remedy is given by law
to Dr. Montgomery for the satisfaction of his credit against Klaus?
A separate creditor of a partner cannot attach/levy upon specific
partnership property for the satisfaction of his credit. He can,
however, secure a judgment on his credit and then apply to the
court for a charging order subjecting the interest of the debtor-
partner in the partnership with the payment of the unsatisfied
amount of such judgment with interest.
Same problem. What may the other partners, Violet and Sunny, do to protect
the interest of the partnership?
It is fine if the interest of debtor-partner is redeemed by the other
partners using a separate property of one or more partners or the
partnership property but with the consent of all partners.
 CHAPTER 2: SECTION 3
1. Pro rata liability equally/jointly and not proportional because it
is based on the number of partners and not on the amount of their
contributions
2. Subsidiary liability partners become personally liable only after
all the partnership assets have been exhausted
3. Equitable interest or title right or interest in property which is
imperfect and unenforceable at law but which under well-
recognized equitable principles should and is convertible into a
legal right or title
4. Estoppel a bar which precludes a person from denying or
asserting anything contrary to that which has been established as
the truth by his own deed or representation
May a partnership continue to use in its firm name the name of a partner who
has died?
It is clear in the provisions of a partnership that it is dissolved by
the death of any partner so the names in a firm name of a
partnership must either be those of living. However, this ruling has
been abandoned and replaced by a provision of the Supreme Court
that using a deceased persons name in the partnership name is
allowed as long as no false, misleading, or assumed name shall be
used and that it communicates that said partner is deceased.
In what cases are partners solidarily liable with the partnership to third
persons?
1. When the partner is guilty of a wrongful act
2. When he is acting in the ordinary course of business or with the
authority of his co-partners even if the act is not connected with the
business
Can Count Olaf who is not a partner in a partnership be held liable as a
partner? Explain.
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 person to
whom such representation has been made and acted in good faith.
Give the rule governing the liability of a partner for partnership contract.
The general rule is that a partner has the right to make all partners
liable for contracts he makes for the partnership in the name and
for the account of the partnership. A partner, however, may assume
a separate undertaking in his name with a third party to perform a
partnership contract or make himself solidarily liable on a
partnership contract.
Violet, Klaus, and Sunny are partners engaged in the grocery business. Each
contributed 50,000. It was stipulated that the liability of Violet shall not
exceed her capital contribution. After partnership assets have been
exhausted, the partnership has an unpaid balance of 12,000 in favor of Count
Olaf. Settle the rights of the parties.
Same partnership. Is the sale of the automobile of the partnership by Violet
who is the manager of the partnership binding on the partnership?
It depends. Every partner is an agent of the partnership for the
purpose of its business and the act of every partner for carrying on
in the usual way of business. Unless Violet has in fact no authority
to act for the partnership in that particular matter and the person
with whom she is dealing with has knowledge of the fact that he has
no authority. If she is not acting in the usual way of the business,
she cannot bind the partnership unless authorized by the other
partners.
Same partnership. Violet and Klaus, controlling partners, after informing
Sunny, agreed to reduce the debt of Count Olaf to the partnership from 10,000
to 9,000 otherwise Count Olaf would not pay any amount. May Sunny question
the reduction?
It depends. Except when authorized by the other partners or unless
they have abandoned the business, one or more but less than all
partners have no authority to ENTER INTO A COMPROMISE
CONCERNING A PARTNERSHIP CLAIM OR LIABILITY.
Same partnership. Klaus and Sunny contributed 15,000 each to the
partnership. Violet was subsequently admitted as a partner with a contribution
of 10,000. The partnership has an obligation of 45,000 in favor of Count Olaf.
Compute the liability of Violet, Klaus, and Sunny in case the obligation was
contracted.
1. Before Violet was admitted
Violet, Klaus, and Sunny are liable for all the obligations of
the partnership arising even before Violet was admitted in the
partnership.
2. After Violet was admitted
Shares of Violet: 10,000/40,000 x 45,000 = 11,250
Shares of Klaus and Sunny: 15,000/40,000 x 45,000 =
16,875
CHAPTER 3: DISSOLUTION AND WINDING UP
1. Dissolution - change in the relation of the partners caused by any
partner ceasing to be associated in the carrying on of the
business.
2. Termination that point in time when all partnership affairs are
completely wound up and finally settled
3. Knowledge of a fact not only when he has actual knowledge
thereof but also when he has knowledge of such other facts as in
the circumstances show bad faith
4. Notice of a fact when the person who claims benefit of the
notice states the fact to such person or delivers through mail or
other means of communication
5. Assets of the partnership partnership property and contributions
of the partners
Give the effect if the specific property to be contributed by a partner is lost:
a) Before delivery
If the specific thing to be contributed by a partner is lost
before deliver, the partnership is dissolved because there is
no contribution inasmuch as the thing to be contributed
cannot be substituted with another. There is, here, a failure of
a partner to fulfill his part of the obligation.
b) After delivery
If the loss occurred after the delivery of the thing promised,
then the partnership is not dissolved, but it assumes the loss
of the thing having acquired ownership thereof. The partners
may contribute additional capital to save the venture.
Enumerate the rights of a partner who has not caused the dissolution of a
partnership wrongfully when such dissolution is in violation of partnership
agreement.
Have partnership property applied for the payment of its liabilities
Be indemnified for damages caused by the partner guilty of
wrongful dissolution
Continue the business in the same name during the agreed term of
the partnership
Posses partnership property should they decide to continue the
business
Who are authorized to wind-up the affairs of a dissolved partnership?
1. Partners designated by the agreement
2. In the absence of such agreement, all the partners who have not
wrongfully dissolved the partnership
3. The legal representative of the last surviving partner (when all the
partners are already dead), not insolvent
Give the rights of an injured partner when a partnership is rescinded or
annulled on the ground of fraud or misrepresentation committed against him.
1. Right of a lien on the surplus of partnership property after satisfying
partnership liabilities for any sum of money paid or contributed by
him
2. Right to subrogation in place of partnership creditors after payment
of partnership liabilities
 3. Right of indemnification by the guilty partner against all debts and Same example. Suppose the liability of the partnership to Josephine is
liabilities of the partnership 335,000; Klaus is indebted to Monty (separate creditor) of 15,000; Sunny is
indebted to Justice Strauss (separate creditor) of 10,000.
Give at least four (4) grounds for the judicial dissolution of a partnership.
Separate property of Klaus and Sunny each amount only to 20,000 and
1. Insanity 10,000 respectively; and advance by Violet to partnership is 30,000.
2. Incapacity
3. Misconduct and persistent breach of partnership agreement Settle the accounts of the parties.
4. Business can be carried don only at a loss
335,000 320,000 15,000 (liability of partnership to Josephine) / 3 =
Violet, Klaus, and Sunny are partners in a partnership which was dissolved by 5,000 (personal liability of each partner to Josephine)
the withdrawal of Violet. Klaus who was notified by Sunny of Violets
withdrawal, entered into a new transaction with Justice Strauss in the name of Klaus and Sunny are liable to Josephine of 10,000 each. But separate
the partnership. creditors, Monty and Justice Strauss, have preference over separate property
of Klaus and Sunny. So: Violet gets only 5,000 from Klaus (20,000 - 15,000).
a) Is the partnership liable to Justice Strauss? Violet gets nothing from Sunny who remains liable to Klaus for 10,000.

Yes. Klaus had notice, not knowledge. Klaus was noticed by

Sunny that Violet was withdrawing and will thus dissolve the
partnership. Since he entered into a new transaction with
Justice Strauss, the new contract generally will bind the
partners and each of them is liable for his share of any liability
by Klaus as if the partnership had not been dissolved.

b) Are Violet and Sunny liable to Klaus for their share of the liability?

No.

Same partnership. Violet, acting for the partnership, bought a car from
Josephine which was being claimed by Mr. Poe. Klaus acquired knowledge of
the claim of Mr. Poe. Neither Josephine nor Klaus informed Violet of the claim.
Mr. Poe was able to recover the car. Is Josephine liable to the partnership
under Article 1821?

It depends. If Klaus had received the information and it is

reasonable to believe that he could and should have
communicated to Violet, Klaus knowledge also operates as
knowledge of the partnership. So, in this case, since Klaus
knowledge is the knowledge of the partnership, Josephine is not
liable to the partnership.

Same partnership. The term of existence of the partnership expired. This

notwithstanding, Violet enters into a contract with Josephine in the name of
the partnership.

a) Is the partnership liable to Josephine?

It depends. The partnership is not liable to Josephine if the

contract is:

appropriate for winding up of partnership affairs,

the other party had extended credit to the
partnership prior to dissolution and had no
knowledge or notice of the dissolution, or though
she had not so extended credit, had nevertheless
known of the partnership prior to dissolution, and,
having no knowledge or notice of dissolution, the
fact of dissolution had not been advertised in a
newspaper of general circulation in the place at
which the partnership was regularly carried on

b) What right, if any, is given to Klaus and Sunny?

Same partnership. The partnership was dissolved. Assume the following

information:

Partnership assets: 320,000;

Advances by Violet to partnership: 20,000;
Capital contribution of each partner: 30,000;
Liability of partnership to Count Olaf: 150,000

Compute the share of each partner in the profits.

320,000 150,000 = 170,000

170,000 20,000 = 150,000

150,000 90,000 [30,000 x 3] = 60,000 (profits)

60,000 / 3 = 20,000 (share in profits)