PARTNERSHIP

POINTERS TO REVIEW:
Nature; Elements ; Forms; Partnership vs. Corporation; Types (including Limited Partnership) ; Rules of
Management

NATURE
Partnership – a partnership is a contract of two or more persons who 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. (Art. 1767.
It’s both:

1. A contract (Art. 1768)

2. A business organization
- it is a juridical entity which has a personality separate and distinct from that of each of the
partners. (Art. 1768). It begins from the moment of the execution of the contract, unless it is otherwise
stipulated.

Characteristics of a contract of partnership

1. Consensual
2. Principal
3. Bilateral or multilateral – rights are reciprocal
4. Nominate
5. Preparatory – other contracts will be entered into as partnership pursues its business.
6. Onerous – the partners contribute money, property or industry to a common fund.

ESSENTIAL ELEMENTS
1. There must be a valid contract – There must be a voluntary agreement. The partnership formation
cannot be impose upon a person because a partnership is a fiduciary relationship. A fiduciary is a person
who holds a legal or ethical relationship of trust with one or more other parties (person or group of
persons). Typically, a fiduciary prudently takes care of money or other assets for another person. It
operates under the doctrine of delectus, where a person is free to choose those whom he wants to be
associated with in partnership.

https://en.wikipedia.org/wiki/Fiduciary

2. There must be a mutual contribution of money, property, or industry to a common fund – the property
that may be contributed: real, personal, tangible or intangible (goodwill or incorporeal rights such as
credit rights

Incorporeal rights are rights that can't be seen or touched, but are still enforceable by law. Generally, incorporeal
rights have to do with intangible property such as copyrights, licenses, rights-of-way* and easements*.

*Rights of way - is "the legal right, established by usage or grant, to pass along a specific route through grounds or
property belonging to another", or "a path or thoroughfare subject to such a right".
https://en.wikipedia.org/wiki/Right_of_way

*Easement - a right to cross or otherwise use someone else's land for a specified purpose.

3. It must be lawful object of purpose – if unlawful, the partnership is void. The partners will be criminally
persecuted and the profits and effects and instruments of the crime will be confiscated in favour of
government.

4. The partnership must be established for the common benefit or interest of the partners which is to
obtain profits and divide the profits among the partners. However, if the partnership is formed for the
practice of a profession, its primary purpose is not to obtain profits but to render service to the public

PARTNERSHIP DISTINGUISHED FROM CORPORATION

1. Manner of Creation A partnership is created by mere agreement of the partners while a

2. Number of persons
3. Commencement of
Juridical Personality
4. Management
5. Extent of Liability
6. Right of Succession
7. Terms of Existence
corporation is created by operation of law
Two or more persons may form a partnership; in a corporation, at least
five (5) persons, not exceeding fifteen (15).
In a partnership, juridical personality commences (begin) from the
execution of the articles of partnership; in a corporation, from the
issuance of certificate of incorporation by the Securities and Exchange
Commission.
In a partnership, every partner is an agent of the partnership if the
partners did not appoint a managing partner in a corporation,
management is vested on the Board of Directors.
In a partnership, each of the partners except a limited partner is liable
to the extent of his personal assets; in a corporation, stockholders are
liable only to the extent of their interest or investment in the
corporation.
In a partnership, there is no right of succession*; in a corporation has
the capacity of continued existence regardless of the death,
withdrawal, insolvency or incapacity of its directors or stockholders.
In a partnership, for any period of time stipulated by partners; in a
corporation, not exceed fifty (50) years but subject to extension.

*Succession - the action or process of inheriting a title, office, property, etc

FORMS
A partnership contract may be constituted in any form, i.e., oral or written, except as follows:

1. Where immovable property or real rights are contributed to the partnership (regardless of the amount
thereof)
a. The partnership contract must be in a public instrument; and
b. An inventory of the said property must be made signed by the parties and attached to the public
instrument. (Art. 1773)
Effect if the above requirements are not complied with.

a. The partnership is void. (Art. 1773)

b. The partnership will not have any juridical personality.

Article 1773
A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said
property is not made, signed by the parties, and attached to the public instrument.

*The contract is declared void by law when no such inventory is made.

Art. 1773 – Where real property is contributed

• Requirements where real property is contributed

1. There must be a public instrument regarding the partnership;
2. The inventory of the realty must be made, signed by the parties, and attached to the publicinstrument

Applicability
• Applies regardless of the value of the property
• Applies even if only real rights over real property are contributed.
•Applies also if cash or personal property is contributed

Registration

– transfer of the land to the partnership must be duly recorded in the Registration of Property to make the transfer
effective insofar as third persons are concerned.

2.) Where the capital of partnership is P3, 000.00 or more, in money or property.
a. The partnership contract must be in public instrument, and
b. Registered with the Securities and Exchange Commission. (SEC). (Art. 1771)

Article 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.

• If a partnership’s capital is P3,000.00 or more (in any form), it must be in a public instrument, recorded with the
SEC and note that property referred here (in Article 1171) is immovable property.

Effect if the above requirements are not complied with.

a.) The partnership contract is still valid. Accordingly, the partnership still acquires juridical personality.
(Arts. 1768, 1772)

b.)The liability of the partnership and the members thereof to third persons are not affected (Art. 1772)
Article 1772
Every contract of partnership having a capital of P3,000.00 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.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership
and the members thereof to third persons.

*Article 1772 – Partnership with capital of Php 3,000 or more – Registration with SEC
• If a partnership’s capital is P3,000.00 or more (in any form), it must be in a public instrument, recorded with the
SEC and notethat property referred to here is MOVABLE since immovable property is covered by Article 1771.

Reason for the registration with the SEC

Recording with the SEC is a condition for the issuance to the partnership of a business license to engage
in business. This will enable both the local government and the Bureau of Internal Revenue district where
the partnership will operate to assess its tax liabilities. In addition, registration will enable third persons to
determine both the composition of the firm and its capital before dealing with it hand and its members.

3.) If the partnership is a limited partnership, a certificate signed under oath by partners and the recorded
with the Securities and Exchange Commission is required.

Effect if requirements are not complied with

The partnership will be considered as a general partnership.

KINDS
1. As to object
A. Universal partnership
a. Universal partnership of all present property – this is a partnership all the partners contribute all the
present property which actually belonged to them to the common fund, with the intention of dividing
the same among themselves, as well as the profits which they acquired therewith. (Art. 1778)

Property which shall belong to the common fund

a) Property belonging to the partnership at the time of the constitution of the partnership (present
property)
b) Profits that may be acquired from the present property
c.) Property acquired by each partner after the formation of the partnership but only if stipulated. (Art.
1779). This property shall include:
(1) The property itself except that the stipulation shall not include property acquired by inheritance,
legacy, or donation.
(2) The profits and fruits therefrom including those from property acquired by inheritance, legacy or
donation. (Art. 1779)

2. Universal partnership of profits - this comprises all that the partners may acquire by their work or
industry during the existence of the partnership (Art. 1780)

Profits/ property which shall belong to the partnership

a) Profits obtained by the partners by their work or industry during the existence of the partnership.
Accordingly, profits acquired by the partners without the exertion of physical or intellectual efforts, such
as those acquired by chance or lucrative title are excluded.
b) The usufruct (the use) of the property belonging to each partner at the time of the constitution of the
partnership. The ownership of the property (whether movable or immovable) belonging to each partner
at the time of the constitution of the partnership shall continue to pertain exclusively to each partner as
only the usufruct is passed on the partnership.
c.) The profits and fruits from the properties aforementioned (items “a” and “b”).
d.) Profits and fruits, if stipulated, of property acquired by each partner after the constitution of the
partnership.

B. Particular Partnership – a particular partnership has for its OBJECT determinate things, their use or
fruits, or a specific undertaking*, or the exercise of profession. (Art. 1783)

*The term “Particular”*

*Undertaking - a formal pledge or promise to do something

Examples: (1) Real estate partnership whereby partner A contributed a parcel of land and partner B a
building. (2) A real estate lessor partnership whereby A contributed cash and B the use and lease (rent) of
his building. (3) A partnership formed for the exercise of law profession.

Lessor. Refers to any private individual, partnership, cooperative, association, or corporation having
absolute ownership over the real estate or venue to be leased.

See: https://www.gppb.gov.ph/issuances/Guidelines/08-LeaseVenue.pdf (IMPLEMENTING GUIDELINES FOR LEASE

OF PRIVATELY-OWNED REAL ESTATE AND VENUE)

2. As to liability
A. General Partnership
B. Limited Partnership

3. As to duration
A. Partnership for a fixed term – fixed duration
B. Partnership for a particular undertaking – certain undertaking, when attained, will cause termination of
partnership.
C. Partnership at will – no period is fixed; if a partnership for a fixed term or partnership for a particular
undertaking is continued after the expiration of the said term or the attainment of the said undertaking
without any express agreement, the partnership becomes partnership at will.

4. As to representation to others
a. Ordinary partnership – one which actually exists among the partners as well as to third persons
b. Partnership by estoppel – one which in reality is not a partnership but is considered as one with respect
to those who, by reason of their conduct* or admission*, are precluded (prevented) from denying its
existence.

*Conduct – behaviour (the way in which one acts or conducts oneself, especially toward others).
*Admission - a statement acknowledging the truth of something.

A partnership by estoppel may arise through any of the following means:

1.) When a person represent himself as a partner in an existing partnership
2.) When a person represents himself as a partner in non-existing partnership – no partnership arises but
the person who made the misrepresentation and all persons who consented to it are jointly or pro-rata.
RULES OF MANAGEMENT

1. When a partner has been appointed manager in the articles of partnership

a. Scope of authority
The managing partner may execute all acts of administration despite the opposition of his partners
unless he acts in bad faith (Art. 1800)

b. Revocation* of his appointment of managing partner

1) With just or lawful cause – His appointment can revoked by the vote of the partners owning the
controlling interest (Art. 1800)
2) Without just or lawful cause – His appointment can be revoked only with the consent of all partners
including the managing partner because such revocation would be a novation of the terms thereof.

*Revocation - the official cancellation of a decree, decision, or promise.

2. When a partner has been appointed manager after the partnership has been constituted.
a. Scope of authority
He may execute all acts of administration but in case of opposition by the other partners, the
partners owning the controlling interest may resort to voting for his removal as manager. (see Art. 1800)

b. Revocation of his appointment as managing partner

He may be removed with or without just or lawful cause by the vote of the partners owning the
controlling interest. (Art. 1800). This is so because such partner is only an agent whose authority may be
revoked at any time by his principal which is the partnership

3. When two or more partners have been appointed as managers

a. When there is a specification of their respective duties
1) Scope of authority
Each managing partner shall perform only the duties specified in his appointment

b. When there is no specification of their respective duties or there is no stipulation that one shall not act
without the consent of the others.
1) Scope of authority
Each one may separately execute all acts of administration (Art. 1801)

2) Rule in case of opposition of the other managers

a) The decision of the majority of the managing partners shall prevail (per head)
b) In case of tie, the decision of the managing partner/s owning the controlling interest shall prevail. (Art.
1801)
c) When there is a stipulation that none of the managing partners shall act without the consent of the
others.

1) Vote required
 The concurrence of all of them shall be necessary for the validity of the acts.

2) Rule in case of absence or disability of one of the managing partners

The absence or disability of one managing partner cannot be alleged, i.e., the other managing
partners are not authorized to act for the partnership unless there is imminent danger of grave or
irreparable injury to the partnership. (Art. 1802)

4. When the manner of management has not been agreed upon

a. All partners shall be considered agents of the partnership, i.e., all of them are managers. However,
none of them 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 refusal to give consent by
the other partners is manifestly prejudicial to the interest of partnership, the court’s intervention may be
sought.
b. Whatever any one of them may do alone shall bind the partnership.
c. Rule in case of opposition of the other partners.
1) The decision of the majority shall prevail.
2) In case of tie, the decision of the partners owning the controlling interest shall prevail (Art. 1801,
1803).

LIMITED PARTNERSHIP

Limited partnership - is a partnership which has 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, (Art. 1843)
except up to the extent of their contribution.

a. Requirements for formation

• Stated in the certificate: Name of partnership with the word “Limited”, if there’s omission of the term
“limited” in the firm name, the partnership is consider to be a general partnership.
• A limited partner may contribute money or property but not services
• Register with SEC, if failure to comply, the partnership will consider a general partnership
• Other info: See Article 1844 in
https://philippinecivillaw.wordpress.com/tag/limited-partnership/ (Limited Partnership Article 1843-67)

b. Liability for false statement (Art. 1847)

c. Admission of additional limited partners after formation.

Additional limited partners may be admitted after formation by filing an amendment to the original
certificate. (Art. 1849).However, this right must be stated in the original certificate (Art. 1850)

d. Rights and liabilities of a general partner in a limited partnership

• A general partner has all the rights and powers of a general partner in a partnership without limited
partners. A general partner shall be subject to all restrictions and liabilities of a partner in a partnership
without a limited partner.
• More info: Art. 1850
e. Obligations of a limited partner
• Not to allow the inclusion of his surname in the partnership name unless it is also the surname of
general partner. (Art. 1846)
• To be liable as a general partner if he takes part in the control of the business (Art. 1848). To be liable
for the difference of his actual contribution and that stated in the certificate and for any unpaid
contribution which he agreed on the certificate. (Art. 1858)
• Other info: Art. 1858, Art. 1854

f. Rights of limited partner

• To have the partnership books kept at the principal place of the business of the partnership (Art. 1851)
• To inspect and copy the partnership books at a reasonable hour (Art. 1851)
• To have on demand a true and full information of all things affecting the partnership. (Art. 1806, 1851)
• To have on demand a formal account of partnership affairs whenever circumstances render it just and
equitable. (Art. 1809, 1851)
• To have the dissolution and winding up by decree of court. (Art. 1831, 1851, 1857)
• To receive a share of the profits or other compensation by way of income stipulated in the certificate.
(Art. 1851, 1856).
• To receive the return of his contribution provided partnership assets exceed the liabilities. • To loan the
money to the partnership (Art. 1851, 1857)
• To transact with the partnership. (Art. 1854)
• To receive, unless he is also a general partner, on account of resulting claims against the partnership,
with general creditors, a pro rata share of the asset.
• To agree with other limited partners that one or more of them shall have priority over the limited
partners as to return of their contributions, compensation by way of income and any other matter. This
agreement must be stated in the certificate. In the absence thereof, all the limited partners shall stand on
equal footing. (Art. 1855)

g. Status of person who has contributed to the capital of the partnership erroneously believing that he has
become a limited partner. (Art. 1848, 1852)
Such person is not, by reason of his exercise of the rights of a limited partner, a general partnership
provided:
1. On ascertaining the mistake, he promptly renounces his interest in the profits of the business or other
compensation by way of income.(Art. 1852), and
2. He does not take part in the control of the business. (Arts. 1848, 1852)

h. General-limited partner (Art. 1853)

A person may be a general partner and a limited partner at the same time provided that this fact is stated
in the certificate. He shall have all the rights and powers and subject to all restrictions of a general
partner; except that, in respect to his contribution, he shall all the rights of a limited partner.

i. Return of a limited partner’s contribution

See: Article 1857
j. Assignment of limited partner’s interest (Art. 1859)
Rule: A limited partner’s interest is assignable
Other info: See Art. 1859

See: https://www.slideshare.net/samanthaabalos92/buslaw2-partcor-reviewer (Business Law 2

Reviewer)

k. Retirement, death, civil interdiction, insanity, or insolvency of a partner (Art 1860)

• Effect: if the partner is a general partner , here, the partnership is dissolved.(Art. 1860) On the other
hand, if the partner is a limited partner ,here, the partnership is not dissolved except if there is no more
limited partner because in such case, the requirement that there must be at least one limited partner in a
limited partnership is no longer complied with (See Arts. 1843, 1864)
• Continuation of business: The business may be continued by the remaining general partners if (a) the
right to do is stated in the certificate, or (b) all the members consent. (Art. 1860).

l. Rights of executor/administrator on the death of a limited partner (Art.1861)

1. All the rights of a limited partner for the purpose of settling his estate.
2. To have the same power as the deceased had to constitute his assignee as a substituted limited
partner.

m. Charging of limited partner’s interest

1. Creditor’s right to charge (subject to attachment and execution).
2. Redemption. The interest charged may be redeemed with the separate property of any general partner,
but not with partnership property. (Art. 1862). This should be distinguished from the redemption of a
partner’s interest in a general partnership which may be redeemed not only with the property of one or
more general partners but also with partnership property. (See 1814)

n. Order of payment of liabilities (Art. 1863)

1. In settling accounts after dissolution, the liabilities of the partnership shall be entitled to payment in
the following order:
a. Those to creditors, including limited partners, in the order of priority as provided by law, except those
to limited partners on account of their contributions, and to general partners.
b. Those to limited partners by way of their share of the profits and other compensation by way of income
on their contributions.
c. Those to limited partners in respect to the capital of their contributions.
d. Those to general partners in respect to profits.
e. Those to general partners in respect to capital.

2. Sharing among limited partners in partnership assets

Limited partners share in the partnership assets in respect to their claim for capital, and in respect to
their claims for profits or for compensation by way of income on their contributions respectively in
proportion to the respective amounts of such claims unless other stated:
a. In the certificate; or
b. Subsequent agreement
o. Cancellation or amendment of certificate (Art. 1864)
• When cancelled: (a) When the partnership is dissolved (b) When all limited partners cease to be such.
• When amended*:
(a) When there is a change in the name of the partnership or in the amount or character of the
contribution of any limited partner
(b) When a person is substituted as a limited partner
(c) When an additional partner is admitted
(d) When a person is admitted as a general partner.
(e) When a general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction
and the business is continued by the remaining general partners:
1) Under a right to do so stated in the certificate
2) With the consent of all the members
(f) When there is a change in the character of the business of the partnership.
(g) There is a false or erroneous statement in the certificate.
(h) There is a change in the time as stated in the certificate for the dissolution
(i) When a time is fixed for the dissolution of the partnership, or the return of a contribution, no time
having been specified in the certificate
(j) When the members desire to make a change in any other statement in the certificate in order that it
shall accurately represent the agreement among them.

*amendment - make minor changes in (a text) in order to make it fairer.

*fair - in accordance with the rules

p. Requirements for amendment of certificate (Art. 1865)

1. The amendment must be in writing
2. It must be signed and sworn to by all members including
a. The assigning limited partner and the substituted limited partner, in case of substitution
b. The newly –admitted limited partner or partners
c. The newly- admitted general partner or partners
3. The amended certificate must be filed with the SEC.

q. Requirements for cancellation of certificate (Art. 1865)

1. The cancellation must be in writing.
2. It must signed by the parties.
3. It must be filed with the SEC

r. Limited partner, not a proper party to proceedings (Art. 1865)

1. A limited partner is not a proper party to proceedings (a) by partnership, or (b) against a partnership.
2. Exceptions:
(a) If he is also a general partner.
(b) Where the object of the proceedings is to enforce limited partner’s right against a partnership.
(c) Where the object of the proceedings is to enforce a limited partner’s liability to the partnership.
CONCEPTUAL

1. The minimum capital in money or property except when immovable property or real rights thereto are
contributed, that will require the contract of partnership to be in a public instrument and be registered with
the Securities and Exchange Commission (SEC).
a. P5,000
b. P10,000
c. P3,000
d. P30,000

Explanation/Verification:
See: Forms of Partnership above

2. Joseph and Edward entered into a universal partnership of all present property. At the time of their
agreement, Joseph had a four-door apartment which he inherited from his father 3 years earlier. Edward,
on the other hand, had a fishpond which he acquired by dacion en pago from Robert. During the first year
of the partnership, rentals collected on the four-door apartment amounted to P480,000 while fish
harvested from the fishpond were sold for P300,000. During the same period, Edward received by way of
donation a vacant lot from an uncle. The partners had a stipulation that future property shall belong to the
partnership. Which of the following does not belong to the common fund of the partnership?
a. Fish pond
b. Rental of P480,000
c. Apartment
d. vacant lot

Explanation/Verification:

Under as to object:

a. Universal partnership of all present property – this is a partnership all the partners contribute all the
present property which actually belonged to them to the common fund, with the intention of dividing
the same among themselves, as well as the profits which they acquired therewith. (Art. 1778)

Property which shall belong to the common fund

a) Property belonging to the partnership at the time of the constitution of the partnership (present
property)
b) Profits that may be acquired from the present property
c.) Property acquired by each partner after the formation of the partnership but only if stipulated. (Art.
1779). This property shall include:
(1) The property itself except that the stipulation shall not include property acquired by inheritance,
legacy, or donation.
(2) The profits and fruits therefrom including those from property acquired by inheritance, legacy or
donation. (Art. 1779)
3. Vincent and James entered into a universal partnership of profits. At the time of the execution of the
articles of partnership, Vincent had a two-door apartment which he inherited from his father 3 years
earlier. James, on the other hand, had a fleet of taxis which he purchased 2 years before. In the first year of
the partnership, Vincent earned P500,000.00 as a radio talent, while James won P1,000,000.00 in the lotto.
During the same period, rentals of P120,000.00 were collected from the agreement, while fare revenues of
P200,000 were realized from the operation of the fleet of taxis. Which of the following belongs to the
partnership?
a. Two-door apartment
b. Lotto winnings of P1,000,000.00
c. Salary of P500,000
d. Fleet of taxis

Explanation/Verification:

Under as to object:
Universal partnership of profits - this comprises all that the partners may acquire by their work or industry
during the existence of the partnership (Art. 1780)

Profits/ property which shall belong to the partnership

a) Profits obtained by the partners by their work or industry during the existence of the partnership.
Accordingly, profits acquired by the partners without the exertion of physical or intellectual efforts, such
as those acquired by chance or lucrative title are excluded.
b) The usufruct (the use) of the property belonging to each partner at the time of the constitution of the
partnership. The ownership of the property (whether movable or immovable) belonging to each partner
at the time of the constitution of the partnership shall continue to pertain exclusively to each partner as
only the usufruct is passed on the partnership.
c.) The profits and fruits from the properties aforementioned (items “a” and “b”).
d.) Profits and fruits, if stipulated, of property acquired by each partner after the constitution of the
partnership.

4. Three of the following contracts are void. Which one is not?

a. A universal partnership of all present property between husband and wife
b. A universal partnership of profits between a man and woman living together as husband and wife
without the benefit of marriage
c. A particular partnership between husband and wife
d. A universal partnership of profits between a private individual and a public officer.

Explanation/Verification:

Prohibition to enter into a universal partnership

Persons prohibited from giving any donation or advantage cannot enter into a universal partnership. (Art.
1782). This is so because in a universal partnership, the partners are in effect making a donation. Allowing
such persons to enter into a universal partnership will be a circumvention* of the prohibition on
donations between them. The following donations are void:

1) Donations BETWEEN spouses during the marriage except moderate gifts on the occasion of a family
rejoicing. These prohibition applies to persons living as husband and wife without the benefit of marriage.
(Art. 87, Family Code)

Article 87
Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be
void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The
prohibition shall also apply to persons living together as husband and wife without a valid marriage. (133a)

See: https://www.kapitbisig.com/philippines/the-family-code-of-the-philippines-chapter-2-donations-by-reason-of-
marriage-the-family-code-of-the-philippines_966.html

2) Those made between persons who were guilty of adultery* or concubinage* at the time of the
donation. (Art. 789)

3.) Those made between two persons found guilty of the same criminal offense, in consideration thereof.
(Art. 789)

4) Those made in public officer or his wife, descendants* or ascendants* by reason of his office. (Art. 789)

*Circumvention - The action of overcoming a problem or difficulty, typically in a clever and surreptitious* way.
*Surreptitious - kept secret, especially because it would not be approved of.
*Descendants - a person who is related to you and who lives after you, such as your child or grandchild.
*Ascendants - rising in power or influence
*Adultery - voluntary sexual intercourse between a married person and a person who is not his or her spouse.
*Concubinage - is an interpersonal and sexual relationship in which the couple are not or cannot be married. The
inability to marry may be due to multiple factors such as differences in social rank status, an existing marriage,
religious or professional prohibitions (for example Roman soldiers), or a lack of recognition by appropriate
authorities. An interpersonal relationship is a strong, deep, or close association or acquaintance between two or
more people that may range in duration from brief to enduring.
* Acquaintance - a person one knows slightly, but who is not a close friend
* Non-sexual relationship - involving family, friends, or acquaintances.
https://en.wikipedia.org/wiki/Intimate_relationship

5. A partner can engage in business for himself without the consent of his co-partners if he is: (Advance
topic)
a. A capitalist partner whether or not the business he will engage in is of the same kind as or different
from the partnership business.
b. An industrial partner whether or not the business he will engage in is of the same kind as or different
from the partnership business
c. A capitalist partner and the business he will engage in is of kind different from the partnership business.
d. An industrial partner and the business he will engage in is of kind different from the partnership
business.

Explanation/Verification:

Rights of partner to engage in business

Capitalist partner
a. Kind of business capitalist partner may engage in
A capitalist partner may engage in business for his own account in the following:
1) The business he will engage in is of a kind different from the partnership business.
2) The business he will engage is in of the same kind as the partnership business, but there is a stipulation
allowing him to engage in that business. (See Art. 1808)

b. Reason for the prohibition to engage in the same kind of business

The capitalist partner will be unfairly competing with the partnership business by reason of the
information he has obtained from the partnership business.

c. Effect if a capitalist partner engages in the same kind of business without a stipulation allowing him to
engage in that business.
1) The capitalist partner shall bring to the common fund any profits accruing to him from his transaction,
and
2) He shall personally bear all the losses (Art. 1808)

6. The following statements pertain either to a partner appointed as manager in the articles of partnership
or through a document after the formation of the partnership.
I. He may be removed as manager only for a just or lawful cause by the vote of the partners owning the
controlling interest
II. He may be removed as manager with or without just or lawful cause by the vote of the partner owning
the controlling interest
III. He may perform all acts of administration despite the opposition of his partners provided he is in good
faith.
IV. He may perform all acts of administration in good faith but opposing partners may resort to his
removal if he persists.

Based on the foregoing:

A. I and III pertain to a partner appointed as manager in the articles of partnership
B. I and III pertain to a partner appointed as manager through a document after the formation of the
partnership
C. II and III pertain to a partner appointed through a document after the formation of partnership
D. I and IV pertain to a partner appointed as manager in the articles of partnership

Explanation/Verification:
1. When a partner has been appointed manager in the articles of partnership
a. Scope of authority
The managing partner may execute all acts of administration despite the opposition of his partners
unless he acts in bad faith (Art. 1800)

b. Revocation* of his appointment of managing partner

1) With just or lawful cause – His appointment can revoked by the vote of the partners owning the
controlling interest (Art. 1800)
2) Without just or lawful cause – His appointment can be revoked only with the consent of all partners
including the managing partner because such revocation would be a novation of the terms thereof.

*Revocation - the official cancellation of a decree, decision, or promise.

2. When a partner has been appointed manager after the partnership has been constituted.
a. Scope of authority
He may execute all acts of administration but in case of opposition by the other partners, the
partners owning the controlling interest may resort to voting for his removal as manager. (see Art. 1800)

b. Revocation of his appointment as managing partner

He may be removed with or without just or lawful cause by the vote of the partners owning the
controlling interest. (Art. 1800). This is so because such partner is only an agent whose authority may be
revoked at any time by his principal which is the partnership

Special credits to:

Notes In Business Law by Fidelito Soriano
Basic Accounting by Ballada