IV.

BUSINESS ORGANIZATIONS The partnership has a juridical personality otherwise;

Partnership separate and distinct from that of each of the b. As wages of an employees or rent to
partners, even in case of failure to comply with a landlord;
the requirements of Article 1772, first paragraph. c. As an annuity to a widow or Page |
General Provisions representative of a deceased partner; 1
Article 1769 d. As interest on a loan, though the
Article 1767 of the Civil Code amount of payment vary with the
In determining whether a partnership exists, these profits of the business;
By the contract of partnership two or more e. As the consideration for the sale of
rules shall apply:
persons bind themselves to contribute money, goodwill of a business or other
property or industry to a common fund, with the property by installments or otherwise.
1. Except as provided by Article 1825,
intention of dividing the profits among persons who are not partners as to each
themselves. other are not partners as to third persons; Article 1770.

Two or more persons may also form a partnership 2. Co-ownership or co-possession does not A partnership must have a lawful object or
for the exercise of a profession. itself establish a partnership, whether purpose, and must established for the common
such co-owners or co-possessors do or do benefit or interest of the partners.
Elements of partnership: not share any profits made by the use of
the property; When an unlawful partnership is dissolved by a
a. An agreement to contribute money, judicial decree, the profits shall be confiscated in
property or industry to a common fund, 3. The sharing of gross returns does not of favor of the State, without prejudice to the
and itself establish a partnership, whether or provisions of the Penal Code governing the
b. Intent to divide the profits among the not the persons sharing them have a joint confiscation of the instruments and effects of a
contracting parties. or common right or interest in any crime.
property from which the returns are
Characteristics of partnership: derived; Article 1771.

a. Partnership has a juridical personality 4. The receipt by a person of a share of the A partnership may be constituted in any form,
separate and distinct from that of each of profits of a business is prima facie except where immovable property or real rights
the partners. evidence that he is a partner in the are contributed thereto, in which case a public
b. Consensual contract; valid even though business, but no such inference shall be instrument shall be necessary.
not in writing drawn if such profits were received in Article 1772
c. payment:
Article 1768 Every contract of partnership having a capital of
a. As a debt by installments or P3,000 or more, in money or property, shall
appear in a public instrument, which must be or particular.
recorded in the Office of the Securities and Movable or immovable property which each of
Exchange Commission. As regards the liability of the partners, a the partners may possess at the time of the
partnership may be general or limited. celebration of the contract shall continue to Page |
Failure to comply with the requirements of the pertain exclusively to each, only the usufruct 2
preceding paragraph shall not affect the liability passing to the partnership.
of the partnership and the members thereof to Article 1777.
third persons. Article 1782.
A universal partnership may refer to all the
Article 1773. present property or to all profits. Persons who are prohibited from giving each
other any donation or advantage cannot enter into
A contract of partnership is void, whenever Article 1778. universal partnership.
immovable property is contributed thereto, if an
inventory of said property is not made, signed by A partnership of all present property is that in Take Note:
the parties, and attached to the public instrument. which the partners contribute all the property
which actually belongs to them to a common DQ from entering universal partnership 
Article 1774. fund, with the intention of dividing the same persons who are prohibited from giving each
among themselves, as well as all the profits they other any donation or advantage
Any immovable property or an interest therein may acquire therewith.
may be acquired in the partnership name. Title so Article 739 provides that the following donations
acquired can be conveyed only in the partnership Article 1779. shall be void:
name.
In a universal partnership of all present property, a. Those made between persons who are
Article 1775. the property which belonged to each partners at guilty of adultery or concubinage at the
the time of the constitution of the partnership, time of the donation;
Associations and societies, whose articles are kept becomes the common property of all the partners, b. Those made between persons found
secret among the members, and wherein any one as well as all the profits which they may acquire guilty of the same criminal offense, in
of the members may contract in his own name therewith. consideration thereof;
with third persons, shall have no juridical c. Those made to a public officer or his
personality, and shall be governed by the Article 1780. wife, descendants or ascendants, by
provisions relating to co-ownership. reason of his office.
A universal partnership of profits comprises all
Article 1776 that the partners may acquire by their industry or  H&W  cannot enter a universal
work during the existence of the partnership. partnership; but can enter a limited
As to its object, a partnership is either universal partnership or be members thereof.
 dependent on the constancy of that organization formed for some temporary
Article 1783 mutual resolve, along with each partner’s purpose, a JV is likened to a particular
capability to give it, and the absence of a partnership or one which :has for its object
A particular partnership has for its object cause for dissolution provided by the law determinate things, their use or fruits or a Page |
determinate things, their use or fruits, or a itself. specific undertaking, or the exercise of a 3
specific undertaking, or the exercise of a profession or vocation”
profession or vocation. Partnership by estoppel
Professional partnership
Partnership term: Goquiolay v. Syeip July 26, 1960
i. Management
Article 1785. The widow of the managing partner who was Article 1800
authorized by the other partner to manage the
When a partner for a fix term or particular partnership is a partner by estoppel. By The partner who has been appointed manager in
undertaking is continued after the termination of authorizing the widow of the managing partner to the articles of partnership may execute all acts of
such term or particular undertaking without any manage the partnership property (which a ltd administration despite the opposition of his
express agreement, the rights and duties of the partner could not be authorized to do) the other partners, unless he should act in bad faith; and his
partners remain the same as they were at such general partner recognized her as a general power is irrevocable without just or lawful cause.
termination, so far as is consistent with a partner, and is not in estoppel to deny her position The vote of the partners representing the
partnership at will. as a general partner, with authority to administer controlling interest shall be necessary for such
and alienate partnership property. revocation of power.
A continuation of the business by the partners or
such of them as habitually acted therein during A third person has a right to presume that a A power granted after the partnership has been
the term, without any settlement or liquidation of general partner dealing with partnership property constituted may be revoked at any time.
the partnership affairs, is prima facie evidence of has the requisite authority from his co-partners.
a continuation of the partnership. Article 1801.
Partnership v. Joint Venture
Partnership at will  does not fix term; the birth If two or more partners have been intrusted with
and life of partnership at will on the mutual desire 1. As to definition- the management of the partnership without
and consent of the partners. Partnership is defined as two or more persons specification of their respective duties, or without
bind themselves together to contribute stipulation that one of them shall not act without
 The right to choose with whom a person money, property or industry with the the consent of all the others, each one may
wishes to associate himself is the very intention of dividing the profits among separately execute all acts of administration, but
foundation and essence of that themselves. if any of them should oppose the acts of the
partnership. others, the decision of the majority shall prevail.
 Its continued existence is, in turn, While joint venture understood to mean an In case of a tie, the matter shall be decided by the
partners owning the controlling interest. partnership and partners. capital of the partnership.

Article 1802. Article 1796 When does a partner become a debtor of the
partnership? Page |
In case it should have been stipulated that none of The partnership shall be responsible to every 4
the managing partners shall act without the partner for the amounts he may have disbursed on a. Every partner is a debtor of the
consent of the others, the concurrence of all shall behalf of the partnership and for the partnership for whatever he may have
be necessary for the validity of the acts, and the corresponding interest, from the time the promised to contribute thereto. (Article
absence or disability of any one of them cannot be expenses are made; it shall also answer to each 1786, par. 1)
alleged, unless there is imminent danger of grave partner for the obligations he may have contracted
or irreparable injury to the partnership. in good faith in the interest of the partnership b. A partner who has undertaken to
business, and for risks in consequence of its contribute a sum of money and fails to do
Article 1803. management. so becomes a debtor for the interest and
damages from the time he should have
When the manner of management has not been Article 1795 complied with his obligation.
agreed upon, the following rules shall be
observed: The risk of specific and determinate things, which c. The same rule applies to any amount he
are not fungible, contributed to the partnership so may have taken from the partnership
a. All the partners shall be considered that only their use and fruits may be for the coffers, and his liability shall begin from
agents and whatever any one of them may common benefit, shall be borne by the partners the time he converted the amount to his
do alone shall bind the partnership, who owns them. own use.
without prejudice to the provision of
Article 1801 If the things contributed are fungible, or cannot be Article 1786, par. 2 and 3
kept without deteriorating, or if they were
b. None of the partners may, without the contributed to be sold, the risk shall be borne by He shall also be bound for warranty in case of
consent of the others, make any important the partnership. In the absence of stipulation, the eviction with regard to specific and determinate
alteration in the immovable property of risk of things brought and appraised in the things which he may have contributed to the
the partnership, even if it may be useful inventory, shall also be borne by the partnership, partnership, in the same cases and in the same
to the partnership. But if the refusal of and in such case the claim shall be limited to the manner as the vendor is bound with respect to the
consent by the other partners is value at which they were appraised. vendee.
manifestly prejudicial to the interest of
the partnership, the court’s intervention Article 1790 He shall also be liable for the fruits thereof from
may be sought. the time they should have been delivered, without
Unless there is a stipulation to the contrary, the the need of any demand.
I. Rights and obligations of the partners shall contribute equal shares to the
Article 1794 Any capitalist partner violation this prohibition Article 1809.
shall bring to the common funds any profits
Every partner is responsible to the partnership for accruing to him from his transactions, and shall Any partner shall have the right to a formal
damages suffered by it through his fault, and he personally bear all the losses. account as to partnership affairs: Page |
cannot compensate them with the profits and 5
benefits which he may have earned for the Take note: a. If he is wrongfully excluded from the
partnership by his industry. However, the courts partnership business or possession of its
may equitably lessen this responsibility if through  If a person owes to the partnership and to property by his co-partners;
the partner’s extraordinary efforts in other the partner, tapos hi partner an b. If the right exists under the terms of any
activities of the partnership, unusual profits have kumarawat hn bayad, the sum collected agreement;
been unrealized. shall be applied to the 2 credits in c. As provided by Article 1807
proportion to their amounts, even though d. Whenever under circumstances render it
Take note: he may have given a receipt for his own just and reasonable.
credit. But if he have given it for the
 Each partner must share in the profits and account of partnership, the full amount Article 1797
losses of the venture. does to the partnership hehe
 A partner is entitled to recover share of The losses and profits shall be distributed on
profits actually realized by venture. Article 1793 conformity with the agreement. If only the share
of each partner in the profits has been agreed
Article 1789 A partner who has received, in whole or in part, upon, the share of each in the losses shall be in
his share of a partnership credit, when the other the same proportion.
An industrial partner cannot engage in business partners have not collected theirs, shall be
for himself, unless the partnership expressly obliged, if the debtor should thereafter become In the absence of stipulation, the share of each
permits him to do so; and if he should do so, the insolvent, to bring to the partnership capital what partner in the profits and losses shall be in
capitalist partners may either exclude him from he received even though he may have given proportion to what he may have contributed, but
the firm or avail themselves of the benefits which receipt for his share only. the industrial partner shall not be liable for the
he may have obtained in violation of this losses. As for the profits, the industrial partner
provision, with a right to damages in either case. Article 1806 shall receive such share as may be just and
equitable under the circumstances. If besides his
Article 1808. Partners shall render on demand true and full services he has contributed capital, he shall also
The capitalist partner cannot engage for their own information of all things affecting the partnership receive a share in the profits in proportion to his
account in any operation which is of the kind of to any partner or the legal representative of any capital.
business in which the partnership is engaged, deceased partner or of any partner under legal
unless there is a stipulation to the contrary. disability. Article 1799
A stipulation which excludes one or more execute the decision of the third person, or who property is not assignable except in
partners from any share in the profits or losses is has not impugned the same within a period of connection with the assignment of rights
void. three months from the time he had knowledge of all the partners in the same property;
thereof, complain of such decision. Page |
Article 1816 c. A partner’s right in specific partnership 6
The designation of losses and profits cannot be property is not subject to attachment or
All partners, including industrial ones, shall be intrusted to one of the partners. execution, except on a claim against the
liable pro rata with all their property and after all partnership. When partnership property is
the partnership assets have been exhausted, for Article 1810 attached for a partnership debt the
the contracts which may be entered into in the partners, or any of them, or the
name and for the account of the partnership, The property rights of a partner are: representatives of a deceased partner,
under its signature and by a person authorized to cannot claim any right under the
act for the partnership. However, any partner may a. His rights in specific partnership homestead or exemption laws;
enter into a separate obligation to perform a property;
partnership contract. b. His interest in the partnership; and d. A partner’s right in specific partnership
c. His right to participate in the property is not subject to legal support
Article 1817 management. under Article 291.

Any stipulation against the liability laid down in Article 1811

Article 1813.
the preceding article shall be void, except as
among the partners. A partner is co-owner with his partners of specific
A conveyance by a partner of his whole interest in
partnership property. The incidents of this co-
the partnership, or as against the other partners in
Article 1848 ownership are such that:
the absence of agreement, entitle the assignee,
during the continuance of the partnership, to
A limited partner shall not become liable as a. A partner, subject to the provisions of
interfere in the management or administration of
general partner unless, in addition to the exercise Title IX of the Civil Code (Partnership)
the partnership business or affairs, or to require
of his rights and powers as a limited partner, he and to any agreement between the
the any information or account of partnership
takes part in the control of the business. partners, has an equal right with his
transactions, or to inspect the partnership books;
Article 1798 partners to possess specific partnership
but it merely entitles the assignee to receive in
property for partnership purposes; but he
accordance with the contract the profits to which
If the partners have agreed to intrust to a third has no right to possess such property for
the assigning partner would otherwise be entitled.
person the designation of the share of each one in any other purpose without the consent of
However, in case of fraud in the management of
the profits and losses, such designation may be his partners
the partnership, the assignee may avail himself of
impugned only when it is manifestly inequitable.
the usual remedies.
In no case may a partner who has begun to b. A partner’s right in specific partnership
 The interest charge may be redeemed at any time liable pro rata with their property and after all the
In case of dissolution of the partnership, the before foreclosure, or in case of a sale being partnership assets have been exhausted, for the
assignee is entitled to receive his assignor’s directed by the court, may be purchased without contracts which may be entered into in the name
interest and may require an account from the date thereby causing a dissolution: and for the account of the partnership, under the Page |
only of the last account agreed to by all the signature and by a person authorized to act for the 7
partners. a. With separate property, by any one or partnership. However, any partner may enter into
more of the partners; or a separate obligation to perform a partnership
Article 1791. b. With partnership property, by any one or contract.
more of the partners with the consent of
If there is no agreement to the contrary, in case of all the partners whose interests are not so Example:
an imminent loss of the business of the charged or sold.
partnership, any partner who refuses to contribute a. Saludo Jr. v. PNB, Aug 20, 2018 – where
an additional share to the capital, except an Article 1804. the managing partner is the one who
industrial partner, to save the venture, shall be signed the contract of lease on behalf of
obliged to sell his interest to the other partners. Every partner may associate another person with the law firm;
him in his share, but the associate shall not be b. Guy v Gacott, 2016 – the sheriff cannot
Article 1814. admitted into the partnership without the consent levy the personal property of a general
of all the other partners, even if the partner having partner. The managing partner’s liability
Without prejudice to the preferred right of an associate should be a manager. would only arise after the properties of
partnership creditors under Article 1827, on due the partnership would have been
application to a competent court by any judgment Obligations of the partnership/partners to third exhausted.
creditor of a partner, the court which entered the persons.
judgment, or any other court, may charge the
interest of the debtor partner with payment of the Article 1815. Article 1817.
unsatisfied amount of such judgment debt with
interest thereon; and may then or later appoint a Every partnership shall operate under a firm Any stipulation against the liability laid down in
receiver of his share of the profits, and of any name, which may or may not include the name of Article 1816 of the Civil Code shall be void,
other money due or to fall due to him in respect of one or more of the partners. except as among the partners.
the partnership, and make all other orders, Those who, not being members of the partnership, Article 1818.
directions, accounts, and inquiries which the include their names in the firm name, shall be
debtor partner might have made or which the subject to the liability of a partner. Every partner is an agent of the partnership for
circumstances of the case may require. the purpose of its business, and the act of every
Article 1816. partner, including the execution of the partnership
How may the interest charged be redeemed? name of any instrument, for apparently carrying
All partners, including industrial ones, shall be on in the usual way the business of the
partnership of which he is a member binds the g. Renounce a claim of the partnership.
partnership, unless the partner so acting has in This last presumption is equally applicable to
fact no authority to act for the partnership in the No act of a partner in contravention of a contracts which have the force of law between the
particular matter, and the person with whim he is restriction on authority shall bind the partnership parties. Unless the contrary is shown, namely, Page |
dealing has knowledge of the fact that he has no to persons having knowledge of the restriction. that one of the partners did not consent to his co- 8
such authority. partner entering into a contract with a third
Take Note: person, and that the latter with knowledge thereof
An act of the partner which is not apparently for entered into said contract, the aforesaid
the carrying on of business of the partnership in Litton v Hill, April 25 1939 presumption with all its force and legal effects
the usual way does not bind the partnership unless should be taken into account.
authorized by the other partners. The stipulation in the AOP that any of the 2
managing partners may contract and sign in the Rules on conveyance on real property by one or
Except when authorized by the other partners or name of the partnership with the consent of the more partners
unless they have abandoned the business, one or other, undoubtedly creates an obligation between
more but less than all partners have no authority the 2 partners, which consists in asking the Article 1819
to: other’s consent before contracting the partnership.
This obligation of course is not imposed upon a Where title to the real property is in the
a. Assign the partnership property in trust third person who contracts with the partnership. partnership name, any partner may convey title to
for creditors or on the assignee’s promise Neither is it necessary for the third person to such property by a conveyance executed in the
to pay the debts of the partnership ascertain if the managing partner, with whom he partnership name; but the partnership may
contracts, has previously obtained the consent of recover such property unless
b. Dispose of the goodwill of the business the other.
A. the partner’s act binds the partnership
c. Do any other act which would make it A third person may and has a right to presume under the provisions of the first paragraph
impossible to carry on the ordinary that the partner with whom he contracts has, in of Article 1818 of the Civil Code or
business of a partnership; the ordinary and natural course of business, the
consent of his co-partner; for otherwise he would B. unless such property has been conveyed
d. Confess a judgment; not enter into the contract. The third person would by the grantee or a person claiming
naturally not presume that the partner with whom through such grantee to a holder for value
e. Enter into a compromise concerning a
he enters into the transaction is violating the AOP without knowledge that the partner, in
partnership claim or liability
but, on the contrary, is acting in accordance making the conveyance, has exceeded his
therewith. And this finds support in the legal authority.
f. Submit a partnership claim or liability to
presumption that the ordinary course of business
arbitration
has been followed, and that the law has been Where title to real property is in the name of the
obeyed. partnership, conveyance executed by a partner, in
his own name, passes the equitable interest of the the knowledge of any other partner who act or omission of any partner acting in
partnership, provided the act is one within the reasonably could and should have communicated the ordinary course of the business of the
authority of the partner under the provisions of it to the acting partner, operate as notice to or partnership or with the authority of his
the first paragraph of Article 1818. knowledge of the partnership, except in the case co-partners, loss or injury is caused to Page |
of a fraud on the partnership, committed by or any person, not being a partnership in the 9
Where title to real property is in the name of one with the consent of that partner. partnership, or any penalty is incurred,
or more but not all the partners, and the record the partnership is liable therefor to the
does not disclose the right of the partnership, the Take note: same extent as the partner so acting or
partners in whose name the title stands may omitting to act.
convey title to such property, but the partnership Guy v Gacott 2016
may recover such property if the partner’s act Take Note:
does not bind the partnership under the provisions A careful reading of the provision shows that the
of the first paragraph of Article 1818, unless the notice to any partner, under certain J. Tiosejo Investment Corp v. Sps Ang, Sept 8,
purchaser or his assignee, is a holder for value, circumstances, operates as notice to or knowledge 2010
without knowledge. to the partnership only. Evidently, it does not
provide for the reverse situation, or that notice to A joint venture is considered in this jurisdiction
Where the title to real property is in the name of the partnership is notice to the partnership. as a form of partnership and is accordingly,
one or more or all the partners, or in a third governed by the law of partnerships.
person in trust for the partnership, a conveyance Article 1823
executed by a partner in the partnership name, or Article 1824 provides that all partners are
in his own name, passes the equitable interest of The partnership is bound to make good the loss: solidarily liable with the partnership for
the partnership, provided the act is one within the everything chargeable to the partnership,
authority of the partner under the provisions of a. Where one partner acting within the including loss or injury cause to a third person or
the first paragraph of Article 1818. scope of his apparent authority receives penalties incurred due to any wrongful act or
money or property of a third person and omission of any partner acting in the ordinary
Where the title to real property is in the name of misapplies it and course of the business of the partnership or with
all the partners, a conveyance executed by all the the authority of his co-partners. Whether innocent
partners passes all their rights in such property. b. Where the partnership in the course of its or guilty, all the partners are solidarily liable with
business receives money or property of a the partnership itself.
Article 1821 third person and the money and property
so received is misapplied by any partner Extent of liability of a person admitted as a
Notice to any partner of any matter relating to while it is in the custody of the partner in an existing partnership
partnership affairs, and the knowledge of the partnership.
partner acting in the particular matter, acquired Article 1826
while a partner or then present to his mind, and c. Article 1822 - Where, by any wrongful
A person admitted as a partner into an existing the business of the partnership to be
partnership is liable for all the obligations of the Dissolution is caused – carried on or for the members to carry it
partnership arising before his admission as though on in partnership.
he had been a partner when such obligations were 1. Without violation of the agreement Page |
incurred, except that this liability shall be between the partners: 4. When a specific thing, which a partner 10
satisfied only out of partnership property, unless had promised to contribute to the
there is a stipulation to the contrary. a. By the termination of the definite partnership, perishes before the delivery,
term or particular undertaking specified in any case by the loss of the thing, when
Article 1827 in the agreement the partner who contributed it having
reserved the ownership thereof, has only
The creditors of the partnership shall be preferred b. By the express will of any of the transferred to the partnership the use or
to those each partner as regards the partnership partner, who must act in good faith, when enjoyment of the same; but the
property. Without prejudice to this right, the no definite term or particular undertaking partnership shall not be dissolved by the
private creditors of each partner may ask the is specified loss of the thing when it occurs after the
attachment and public sale of the share of the partnership has acquired the ownership
latter in the partnership assets. c. By the express will of the thereof
partners who have not assigned their
Dissolution and Winding Up interests or suffered them to be charged 5. By the death of any partner
for their separate debts, either before or
after the termination of any specified 6. By the insolvency of any partner or the
Article 1828
term or particular undertaking; partnership
The dissolution of a partnership is the change in
d. By the expulsion of any partner 7. By the civil interdiction of any partner
the relation of the partners caused by any partner
ceasing to be associated in the carrying as from the business bona fide in accordance
8. By decree of the court under Article 1831
distinguished from the winding up of the with such a power conferred by the
of the Civil Code
business. agreement between the partners.

2. In contravention of the agreement

Article 1829 Article 1831
between the partners, where the
circumstances do not permit a dissolution
On dissolution, the partnership is not terminated, On application by or for a partner, the court shall
under any other provision of this article,
but continues until the winding up of partnership decree a dissolution whenever:
by the express will of any partner at any
affairs is completed. a. A partner has been declared insane in any
time;
judicial proceeding or is shown to be of
Article 1830 unsound mind;
3. By any event which makes it unlawful for
 insolvency of a partner, the partner acting
b. A partner becomes in any other way Except as so far as may be necessary to wind up for the partnership had knowledge or
incapable of performing his part of the partnership affairs or to complete transactions notice of the death or insolvency.
partnership contract; begun but not then finished, dissolution Page |
terminates all the authority of any partner to act Article 1834 11
c. A partner has been guilty of such conduct for the partnership:
as tends to affect prejudicially the After dissolution, a partner can bind the
carrying on of the business a. with respect to the partners, partnership
1. when the dissolution is not by the act,
d. A partner willfully or persistently insolvency or death of partner; or a. by any act appropriate for winding up
commits a breach of the partnership 2. when the dissolution is by such act, partnership affairs or completing
agreement or otherwise so conducts insolvency or death of a partner, in cases transactions unfinished at dissolution
himself in matters relating to the where Article 1833 so requires
partnership business that it is not b. with respect to persons not partners, as b. by any transaction which would bind the
reasonably practicable to carry on the declared in Article 1834. partnership if dissolution had not taken
business in partnership with him place, provided the other party to the
Liability of one partner to his co-partners for his transaction:
e. The business of the partnership can only share of any liability created by any partner acting
be carried on at a loss for the partnership as if the partnership has not 1. had extended credit to the partnership
been dissolved – prior to dissolution and had no
f. Other circumstances render a dissolution knowledge or notice of the
equitable Article 1833 dissolution

On the application of the purchaser of a partner’s 2. Though he had not so extended

Where the dissolution is caused by the act, death,
interest under Article 1813 or 1814: credit, had nevertheless known of the
or insolvency of a partner, each partner is liable to
his co-partners for his share of any liability partnership prior to dissolution, and
a. After the termination of the specified having no knowledge or notice of
created by any partner acting for the partnership
term or particular undertaking dissolution, the fact of dissolution
as if the partnership had not been dissolved
unless: had not been advertised in a
b. At any time if the partnership was a newspaper of general circulation in
partnership at will when the interest was the place (or in each place if more
a) the dissolution being by act of any
assigned or when the charging order was than one) at which the partnership
partner, the partner acting for the
issued business was regularly carried on.
partnership had knowledge of the
dissolution or
Article 1832 The liability of a partner under the first paragraph
b) the dissolution being by the death or
No. 2, shall be satisfied out of partnership assets the first paragraph, No. 2 (b)
alone when such partner had not been prior to Unless otherwise agreed, the partners who have
dissolution: Nothing in this article shall affect the liability not wrongfully dissolved the partnership or the
under Article 1825 of any person who after legal representative of the last surviving partner, Page |
1. Unknown as a partner to the person with dissolution represents himself or consents to not insolvent, has the right to wind up the 12
whom the contract is made and another representing him as a partner in a partnership affairs, provided, however, that any
2. So far as unknown and inactive in partnership engaged in carrying on business. partner, his legal representative, or his assignee,
partnership affairs that the business upon cause shown, may obtain winding up by the
reputation of the partnership could not be Effect partnership dissolution to the existing court.
said to have been in any degree due to his liability of a partner.
connection with it.
Article 1835 Partnership property applied in cases of
The partnership in no case bound by any act of a dissolution that are not in contravention to the
partner after dissolution: The dissolution of the partnership does not of partnership agreement
itself discharge the existing liability of any
1. Where the partnership is dissolved partner. Article 1837
because it us unlawful to carry on the
business, unless the act is appropriate for A partner is discharged from any existing liability When the dissolution is caused in any way, except
winding up partnership affairs or upon the dissolution of the partnership by an in contravention of the partnership agreement,
2. Where the partner has become insolvent agreement to that effect between himself, the each partner, as against his co-partners and all
3. Where the partner has no authority to partnership creditor and the person or partnership persons claiming through them in respect of their
wind up partnership affairs, except by a continuing the business; and such agreement may interests in the partnership, unless otherwise
transaction with one who – be inferred from the course of dealing between agreed, may have the partnership property applied
the creditor having knowledge of the dissolution to discharge its liabilities, and the surplus applied
a. Had extended the credit to the and the person or partnership continuing the to pay in cash the net amount owing to the
partnership prior to dissolution and business. respective partners. But if dissolution is cause by
had no knowledge or notice of his expulsion of a partner, bona fide under the
want of authority The individual property of a deceased partner partnership agreement and if the expelled partner
b. Had not extended credit to the shall be liable for all obligations of the is discharged from all partnership liabilities,
partnership prior to dissolution, and, partnership incurred while he was a partners, but either by payment or agreement under the second
having no knowledge or notice of his subject to the prior payment of his separate debts. paragraph of Article 1835, he shall receive in cash
want of authority, the fact of his want only the net amount due him from the partnership.
of authority has not been advertised Right to Wind up the Partnership Affairs
in the manner provided for Partnership property applied in cases of
advertising the fact of dissolution in Article 1836 dissolution that are in contravention to the
partnership agreement – satisfying the partnership liabilities to
1. If the business is not continued under third persons for any sum of money paid
When the dissolution is caused in contravention the provisions of the second by him for the purchase of an interest in
of the partnership agreement the rights of the paragraph, No. 2 of Article 1837, all the partnership and for any capital or Page |
partnership shall be as follows: the rights of the partner under the first advances contributed to him. 13
paragraph, subject to liability for
a. Each partner who has not caused damages in the second paragraph, No b. To stand, after all liabilities to third
dissolution wrongfully shall have: 1(b) of Article 1837 persons have been satisfied, in the place
of the creditors of the partnership for any
1. All the rights specified in the first 2. If the business is continued under the payments made by him in respect of the
paragraph of Article 1837 or the Civil second paragraph No 2 of Article partnership liabilities; and
Code; and 1837, the rights as against his co-
2. The right, as against each partner who partners and all claiming through c. To be indemnified by the person guilty of
has caused the dissolution them in respect of their interests in the fraud and making the representation
wrongfully, to damage for breach of the partnership, to have the value of against all debts and liabilities of the
the agreement. his interest in the partnership, less partnership.
any damaged caused to his co-
b. The partners who have not caused the partners by the dissolution, Take note:
dissolution wrongfully, if they all desire ascertained and paid to him in cash,
to continue the business in the same name or the payment secured by a bond Magdusa v. Albaran, June 30, 1962
either by themselves or jointly with approved by the court, and to be
others, may do so, during the agreed term released from all existing liabilities of A partner’s share cannot be returned without first
for the partnership and for that purpose the partnership; but in ascertaining dissolving and liquidating the partnership, for the
may possess the partnership property, the value of the partner’s interest the return is dependent on the discharge of the
provided they secure the payment by value of the goodwill of the business creditors, whose claims enjoys preference over
bond approved by the court, or pay any shall not be considered. those of the partners; and it is self-evident that all
partner who has caused the dissolution members of the partnership are interested in its
wrongfully, the value of his interest in the Article 1838 assets and business, and are entitled to be heard in
partnership at the dissolution, less any the matter of the firm’s liquidation and the
damages recoverable under the second Where a partnership contract is rescinded on the distribution of its property.
paragraph, No. 1(b) of Article 1837, and ground of the fraud or misrepresentation of one of
in like manner indemnity him against all the parties thereto, the party entitled to rescind is, Unless a proper accounting and liquidation of the
present or future partnership liabilities. without prejudice to any other right, entitled: partnership affairs is first had, the capital shares
c. A partner who has caused the dissolution a. To a lien on, or right of retention of, the of the retiring partners cannot be repaid, for the
wrongfully shall have: surplus of the partnership property after firm’s outside creditors have preference over the
assets of the enterprise. (Article 1839) and the 2. Those owing to partners other than his separate property shall rank in the
firm’s property cannot be diminished to their for capital and profits following order:
prejudice. 3. Those owing to partners in respect of
capital 1. Those owing to separate creditors Page |
Bonnevie v. Hernandez, May 31, 1954 4. Those owing to partners in respect of 2. Those owing to partnership creditors 14
profits 3. Those owing to partners by way of
As a general rule, when a partner retires from the contribution
partnership, he is entitled to the payment of what c) The assets shall be applied in the order of
may be due him after a liquidation. But no their declaration in No.1 of Article 1839 When creditors of the dissolved partnership be
liquidation is necessary where there is already to the satisfaction of the liabilities also creditors of the person or partnership
settlement or agreement as to what the retiring d) The partners shall contribute, as provided continuing the business –
partner shall receive, and the latter was in fact by Article 1797, the amount necessary to
reimbursed pursuant to the agreement satisfy liabilities Article 1840
e) As assignee for the benefit of creditors or
Rules to be observed in settling accounts between any person appointed by the court shall a. When any new partner is admitted into an
the partners after dissolution – have the right to enforce the contributions existing partnership, or when any partner
specified in the preceding number retires and assigns (or the representative
Article 1839 f) Any partner or his legal representative of the deceased partner assigns) his rights
shall have the right to enforce the in the partnership property to two or more
In settling accounts between the partners after contributions specified in No. 4 of Article of the partners, or to one or more of the
dissolution, the following rules shall be observed, 1839, to the extent of the amount which partners and ne or more third persons, if
subject to any agreement to the contrary: he has paid in excess of his share of the the business is continued without
liability liquidation of the partnership affairs.
a) The assets of the partnership are: g) The individual property of a deceased
partner shall be liable for the contrbutions b. When all but one partner retire and
1. The partnership property; specified in No. 4 Article 1838 assign (or the representative of a deceased
2. The contribution of the property of the h) When partnership property and the partner assigns) their rights in partnership
partners is necessary for the payment of individual properties of the partners are in property to the remaining partner, who
all liabilities specified in No. 2 of Article possession of a court for distribution, continues the business without liquidation
1839 partnership creditors shall have priority of partnership affairs, either alone or with
on partnership property and separate others.
b) The liabilities if the partnership shall rank creditors on individual property, saving
in order of payment, as follows: the rights of lien or secured creditors. c. When any partner retires or dies and the
1. Those owing to the creditors other i) Where a partner has become insolvent or business of the dissolved partnership is
than partners; his estate is insolvent, the claims against continues as set forth in Nos. 1 and 2 of
 Article 1840, with the consent of the up the partnership affairs. The transfer of the
retired partners or the representative of As to the amount to be refunded by EquiTea, it is possession of the parcels of land and the
the deceased partner, but without any limited to the total assets the partnership has in its improvements thereon to B was only for a
assignment of his right in partnership coffers. specific purpose: the winding up of partnership Page |
property. affairs, and the partition and distribution of the 15
However, before the partners can be paid their net partnership assets as provided by law.
d. When all the partners or their shares, the creditors of the partnership must first
representatives assign their rights in be compensated, as provided in Article 1839 of It must be stressed too, that although B acquired
partnership property to one or more third the New Civil Code. After all the creditors have the possession of the lands and the improvements
persons who promise to pay the debts and been paid, whatever left of the partnership assets thereon, the said lands and improvements
who continue the business of the disslved becomes available for the payment of the remained partnership property, subject to the
partnership. partner’s shares. rights and obligations of the parties, inter se, of
the creditors and of third parties under Article
e. When any partner wrongfully cause a Primelink Properties and Development 1837 and 1838 of the NCC, absent any agreement
dissolution and the remaining partners Corporation v. Lazatin-Magat, June 27, 2006 of the parties in their JVA to the contrary.
continue the business under the
provisions of Article 1837, 2nd paragraph Appeal has no merit. Yu v. NLRC, June 30, 1993
No 2 either alone or with others, and
without liquidation of the partnership A JVA is a form of partnership, and as such is to the legal effect of the changes in the membership
affairs. be governed by the laws on partnership. When the of the partnership was the dissolution of the old
RTC rescinded the JVA on complaint of partnership which has hired Edward and the
f. When a partner is expelled and the
respondents based on the evidence on record that emergence of a new firm composed of Jennie and
remaining partners continue the business
petitioners willfully and persistently committed a Lisa.
either alone or with other without
breach if the JVA, the court thereby
liquidation of the partnership affairs.
dissolved/cancelled the partnership. With the The occurrence of events which precipitate the
rescission of the JVA on account of petitioners’ legal consequence of dissolution of a partnership
Take note: fraudulent acts, all authority of any partner to act do not however, automatically result in the
for the partnership it terminated except so far as termination of the legal personality of the old
Villareal v. Ramirez, July 14, 2003 may be necessary to wind up the partnership partnership. In the ordinary course of events, the
affairs or to complete transactions begun but not legal personality of the expiring partnership
Daphne has no right to demand from Anna and yet finished. persists for the limited purpose of winding up and
Beth the return of her equity share. It is the closing of the affairs of the partnership.
EquiTea partnership which has a separate According to Article 1836, unless otherwise
juridical personality that holds the equity of the agreed upon, the parties who have not wrongfully In the case at bar, the business of the old
retiring partners, not Anna and Beth. dissolved the partnership have the right to wind partnership was simply continued by the new
partner, without the old partnership undergoing became such, the business had been have no authority to:
the procedures relating to dissolution and winding carried on under a name in which his
up of its business affairs. Both the retiring surname appeared. a. Do any act in contravention of the
partners (ABCD) and the new partnership itself certificate Page |
which continued the business of the old, Liability of a limited partner (LP) whose surname b. Do any act which would make it 16
dissolved, one are liable for the debts of the was included in the partnership name impossible to carry on the ordinary
preceding partnership. Under Article 1840 business of the partnership
creditors of the old partnership are also creditors A limited partner whose surname appears in a c. Confess a judgment against the
of the new partnership which continued the partnership name contrary to the provision of the partnership
business of the old one without the liquidation of 1st paragraph is liable as a general partner (GP) to d. Possess partnership property, or assign
the partnership affairs. partnership creditors who extend credit to the their rights in specific partnership
partnership without actual knowledge that he us property, for other than partnership
Limited Partnership not a general partner. purpose
e. Admit a person as a GP
Article 1843 Article 1848 f. Admit a person as a LP, unless the right
so to is given in the certificate
A limited partnership is one formed by two (2) or Legal effect when LM is taking part in the control g. Continue the business with partnership
more persons under the provisions of the of the business property on the death, retirement,
following article, having as members one or more insanity, civil interdiction, or insolvency
general partners and one or more limited partners. The LM becomes liable as GP of a GP, unless the right so to do is given
The limited partners as such shall not be bound by in the certificate.
the obligations of the partnership. Article 1849
Article 1851
Article 1845 After the formation of a limited partnership,
additional LPs may be admitted upon filing an A LP shall have the same rights as the GP to:
The contributions of a limited partner may be amendment to the original certificate in
cash or property but not services. accordance with the requirements of Article 1865. a. Have the partnership books kept at the
principal place of business of the
Article 1846 Acts which require the written consent or partnership, and at a reasonable hour to
The surname of the limited partner shall not ratification by all LPs inspect and copy any of them
appear in the partnership name unless:
Article 1850 b. Have on demand true and full
a. It is also the surname of a general partner information of all things affecting the
or Without the written consent or ratification of the partnership, and a formal account of
b. Prior to the time when the limited partner specific act by all LPs, a GP or all of the GPs partnership affairs whenever
 circumstances render it just and Article 1854 income, or as to any other matter. If such an
reasonable and agreement is made it shall be stated in the
A LP also may loan money to and transact other certificate, and in the absence of such a statement
c. Have dissolution and winding up by business with the partnership, and unless he is all the LPs shall stand on equal footing. Page |
decree of court. also a GP, receive on account of resulting claims 17
against the partnership, with general creditors, a Article 1856
Article 1852 pro rata shares of the assets.
A LP shall not receive from a GP or out of
Without the provisions of Article 1848, a person Prohibitions on a LP in respect to his authority to partnership property any part of his contributions
who has contributed to the capital of a business loan money or transact other business – until:
conducted by a person or partnership erroneously
believing that he has become a LP in a limited No LP shall in respect to any such claim: a. All liabilities of the partnership, except
partnership, is not by reason of his exercise of the liabilities to GPs and to LPs on account
rights of a LP, a GP with the person or in the a. Receive or hold as collateral security any of their contributions, have been paid or
partnership carrying on the business, or bound by partnership property, or ther remains property of the partnership
the obligations of such person or partnership; sufficient to pay them;
provided that on ascertaining the mistake he b. Receive from a GP or the partnership any
promptly renounces his interest in the profits of payment, conveyance or release from b. The consent of all members is had unless
the business, or other compensation by way of liability, if at the time the assets of the the return of the contribution may be
income. partnership are not sufficient to discharge rightfully demanded under the provisions
partnership liabilities to persons not of the 2nd paragraph, and
Article 1853 claiming as GP or LP
c. The certificate is cancelled or so amended
A person may be GP and a LP in the same as to set forth the withdrawal or
partnership at the same time, provided that this The receiving of collateral security or payment, reduction.
fact shall be stated in the certificate provided in conveyance or release in violation of the
Article 1844. foregoing provisions is a fraud on the creditors of Article 1857
the partnership.
A partner who is a GP and also at the same time a Subject to the provision of the 1st paragraph, a LP
LP, shall have all the rights and powers and be Article 1855 may rightfully demand the return of his
subject to all the restrictions of a GP; except that contribution:
in respect to his contribution, he shall have the Where there are several LP the members may
rights against the other members which he would agree that one or more LPs shall have a priority a. On the dissolution of a partnership
have had if he were not also a GP. over other LPs as to the return of their b. When the specified in the certificate for
contributions, as to their compensation by way of its return has arrived and
 c. After he has given 6 months notice in of his assignor, except those liabilities of which
writing to all other members, if no time is a. For the difference between his he was ignorant at the time he became a LP and
specified in the certificate, either for the contribution as actually made and that which could not be ascertained from the
return of the contribution or for the stated in the certificate as having been certificate. Page |
dissolution of the partnership. made, and 18
The substitution of the assignee as a LP does not
Article 1857 b. For any unpaid contribution which he release the assignor from liability to the
agreed in the certificate to make in the partnership under Articles 1857 and 1858.
A LP may have the partnership dissolved and its future at the time and on the conditions
affairs wound up when: stated in the certificate. Article 1863

a. He rightfully but unsuccessfully demands Assignment of interest by the LP In settling accounts after dissolution, the
the return of his contribution, or liabilities of the partnership shall be entitled to
Article 1859 payment in the following order:
b. The other liabilities of the partnership
have not been paid, or the partnership A substituted LP is a person admitted to all the a. Those to creditors, in the order of priority
property is insufficient for their payment rights of a LP who has died or has assigned his as provided by law, except those to
as required by the 1st paragraph No 1 of interest in a partnership. limited partners on account of their
Article 1857, and the LP would otherwise contributions, and to GP
be entitled to the return of his An assignee, who does not become a substituted
contribution. LP, has no right to require any information or b. Those to LP in respect to their share of
account of the partnership transactions or to the profits and other compensation by
Take Note inspect the partnership books; he is only entitled way of income on their contributions
to receive the share of the profits or other
A partner cannot demand the return of his share to compensation by way of income, or the return of c. Those to LP in respect to the capital of
the capital of the partnership, but only to the net his contribution, to which his assignor would their contributions
profits from the partnership business during the otherwise be entitled.
life of the partnership period. If he is a LP, d. Those GP other than for capital and
however, he may ask for the return of his An assignee shall have the right to become a profits
contributions as provided in Articles 1856 and substituted LP if all the members consent thereto
e. Those of GP in respect to profits
1857. or if the assignor, being thereunto empowered by
the certificate, gives the assignee that right.
f. Those to GP in respect to capital
Article 1858
The substituted LP has all the rights and powers
Subject to any statement in the certificate or to
A LP is liable to the partnership: and is subject to all the restrictions and liabilities
subsequent agreement, LPs share in the contribution the court to order a cancellation or amendment
partnership assets in respect to their claims for thereof.
capital, and in respect to their claims for profits or i. A time is fixed for the dissolution of the
for compensation by way of income on their partnership or the return of a contribution If the court finds that the petitioner has a right to Page |
contribution respectively, in proportion to the no time having specified in the certificate have the writing executed by a person who 19
respective amounts of such claims. refuses to do so, it shall order the Office of the
j. The members desire to make a change in Securities and Exchange Commission where the
Article 1864 any other statement in the certificate in certificate us recorded to record the cancellation
order that it shall accurately represent the or amendment of the certificate; and when the
A certificate shall be amended when: agreement among them certificate is to be amended, the court shall also
cause to be filed for record in said office a
a. There is a change in the name of the Article 1860 certified copy of its decree setting forth the
partnership or in the amount or character amendment.
of the contribution of any LP The writing to amend a certificate shall:
A certificate is amended or cancelled when there
b. A person is substituted as LP a. Conform to the requirements of Article is filed for record in the OSEC, where the
1844 as far as necessary to set forth certificate is recorded:
c. An additional LP is admitted clearly the change in the certificate which
it is desired to make and a. A writing in accordance with the
d. A person is admitted as GP provisions of the first and second
b. Be signed and sworn to by all members, paragraph, or
e. A GP retires, dies, becomes insolvent, or and an amendment substituting a LP or
insane or is sentenced to civil interdiction adding a LP/GP shall be signed also by b. A certified copy of the order of court in
and the business is continued under the member to be substituted or added, accordance with the provisions of the
Article 1860 and when a LP is to be substituted, the fourth paragraph,
amendment shall also be signed bu the
f. There is a change in the character of the c. After the certificate is duly amended in
assigning LP.
business of the partnership accordance with this article, the amended
The writing to cancel a certificate shall be signed certificate shall thereafter be for all
g. There is a false or erroneous statement in by all members. purposes the certificate provided for in
the certificate
this Chapter. (Limited Partnership)
A person desiring the cancellation or amendment
h. There is a change in the time as stated in
of a certificate, if any person designated in the
the certificate for the dissolution of the
first and second paragraphs as a person who must
partnership or for the return of a
execute the writing refuses to do so, may petition