(ART 1786)

CHAPTER 2 OBLIGATIONS OF THE PARTNERS OBLIGATIONS OF THE PARTNERS WITH RESPECT TO CONTRIBUTION OF PROPERTY
SECTION 1- OBLIGATIONS OF THE PARTNERS AMONG THEMSELVES 1. To contribute at the beginning of the partnership or at the stipulated time the money, property or
COMMENCEMENT OF PARTNERSHIP (ART 1784) industry, kung ano an yung pinangako nya na i-co-contribute nya sa partnership.
 A PARTNERSHIP BEGINS OR EXIST from the moment of execution of a contract. And perfected by 2. To answer for eviction ( to recover from a person through legal process) in case the partnership is
a mere consent, generally the contract already has a legal existence. It is necessary that the deprived of the determinate property contributed- It is a protection for the partnership in case one of
essential requisites of a contract of partnership are present kahit na wala pang actual na binigay na the partner didn’t fulfilled properly his obligation to contribute to the partnership or to that common
contribtutions yung mga partners or even yung conditions and details ng contract nila . fund.
EXECUTORY AGREEMENT OF PARTNERSHIP 3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from
EXCEPTION TO GENERAL RULE the date they should have been contributed up to the time of actual delivery-
 FUTURE PARTNERSHIP- The partners may stipulate that the partnership will begin at some other Liable si partner sa fruits of the property or contribution na na delay nya without the need of any demand.
date. In here, hindi pwedeng tawagin yung two or more person as partners hanggat hindi pa ADDITIONAL OBLIGATION
dumadating yung date kung kelan mag-uumpisa yung partnership. Therefore, pwedeing magkaron ng 4. To preserve said property with the diligence of a good father of a family pending delivery to the
future partnership, but it has no juridical existence yet. partnership.
 AGREEMENT TO CREATE PARTNERSHIP- In here the agreement is executory or the contract is 5. To indemnify the partnership for any damage caused to it by the retention of the same or by the delay
not yet fully performed or completed. So, it says here that If the agreement remains executory, then in its contribution.
there is no partnership can be said to exist. EFFECTS OF FAILURE TO CONTRIBUTE PROPERTY PROMISED
 FAILURE TO AGREE ON MATERIAL TERMS- It may prevent any rights or obligations from arising on 4. Liability as debtor to partnership- partnership needs a mutual contribution to common fund. Without
either side the contribution, the partnership will be useless. Therefore, any of the partners who failed to
contribute a property he promised to contribute, he shall be considered as a debtor of the partnership
(ART 1785) even in the absence of any demand.
AS A GENERAL RULE : Pag natapos na yung term ng contract, automatically mag di-dissolve narin 5. Remedy of other partners- The remedy is not the recession or cancellation of contract but an action
yun partnership. But if the business of the partnership is continuous, even if tapos na yung term, the for specific performance. The specific performance is the collection kung ano man ang pagkaka
general rule is yung partnership is magiging partnership at will na.Since yung continuation ng business utang ng partner sa partnership, kasama na yung mga damagaes and interest na incure from the
ng partnership is a prima facie evidence that the partnership will continue. time he should have complied with his obligation.
1. RIGHTS AND DUTIES OF PARTNERSHIP IN A PARTNERSHIP AT WILL - The rights and duties of PAG MAY FRAUD- IT ALLOWS RECISSION OR ANNULMENT OF A PARTNERSHIP CONTRACT ON
the partners remains the same.Kung ano yung duties nila bago matapos yung term ganun parin THE GROUND OF FRAUD OR MISREPRESENTATION COMMITED BY ONE OF THE PARTIES
yung duties nila hanggang sa maging partnership at will na yung partnership. THERETO.
2. DISSOLUTION OF THE PARTNERSHIP- Pag na tapos na yung term, mag di-dissolve na yung
partnership. But kappag nag continue parin yung business ng partnership even though terminated
na yung contract or dissolved na yung partnership,a new partnership will be made which is the
partnership at will.
3. POWER OR RIGHT OF A PARTNER TO TERMINATE PARTNERSHIP- Since partnership at will na
nga sya, any of the partners may dictate the dissolution of the partnership, but he should act in good
faith. *what if it was done in bad faith ? Will that prevent dissolution. Answer: No, the partner who
dissolves the partnership in bad faith will only be liable to the damages.
(ART. 1787) – It states that when the partners contribution is consist of goods, their appraisal must be made
in the manner prescribed in the contract of partnership. In the absence of stipulation, it shall be made by the 2. JUSTIFICATION FOR DOUBLE RERSPONSIBILITY- EXCEPTION TO THE GENERAL RULE
experts, chosen by the partners and according to current prices, *Harmony with the principle laid down in ART 1794 that every partner is responsible to the
APPRAISAL OF GOODS OR PROPERTY CONTRIBUTED partnership for damages suffered by it through his fault and is justified by the nature of the contract of
1. Need for appraisal- the appraisal of the value of the goods contributed is necessary to determine how partnership.
much has been contributed by the partners. A. THE INDEMNITY FOR DAMAGES SHALL BE ONLY THE PAYMENT OF THE INTEREST
A. In the absence of stipulation, the share in P/L of the partners are proportion to what they have AGREED UPON
contributed b. WITHOUT THE STIPULATION, UNG LEAGL INTEREST BA 6% (NOW 12%)
B. The appraisal is made first in the manner prescribed by the contract of partnership. Secondly,
in the absence of stipulation, the appraisal will be made by the experts chosen by the partners
and according to current prices. (ART. 1789) PERTAINS TO THE INDUSTRIAL PARTNER
C. After the goods have been contributed, the partners bears the risks or benefits of subsequent • An industrial partner cannot engage in business for himself, unless the partnership expressly permits him
changes in their value. to do so.
2. Property subject to appraisal- In case of immovable property, the appraisal is made in the inventory of if nag engage sya, the capitalist partner may either:
said property. Otherwise, it may be made as provided in Art. 1787. THERE IS NO REASON WHY THE 1. exclude him from the firm
RULE IN ART. 1787 SHOULD NOT APPLY WITH RESPECT TO OTHER KINDS OF PROPERTY. 2. avail themselves of the benefits which may have obtained in violation of his provision, with right
to a damages either case.
(ART. 1788) – There are 2 cases provided in this article OBLIGATION OF INDUSTRIAL PARTNER
1. Money promised but not given on time 1. To give his service to the partnership, this will serve as his contribution
2. Money converted to the personal use of the partner PROHIBITION AGAINST ENGAGING IN BUSINESS
THEREFORE, THE OBLIGATION OF THE PARTNERS WITH RESPECT TO THE PARTNERSHIP 2. As regards an industrial partner- this is absolute and applies whether the industrial partner is to engage
CAPITAL UNDER ART1788; in the same business in which the partnership is engaged or in any kind of business. The reason for the
1. To contribute on the due date he has promised to contribute to the partnership prohibition exist in both cases, which is to prevent any conflict of interest between the industrial partner
2. To reimburse any amount he may have taken from the partnership. and the partnership and to insure faithful compliance of the industrial partner with his obligation.
3. To pay the agreed or legal interest, if he fails to pay his contribution on time or in case he takes any 2. As regards to capitalist partners- the prohibition extends only to any operation which is of the same kind
amount from the common fund for his personal use. of business in which the partnership is engaged unless there is a stipulation to the contrary.
4. To indemnify the partnership for the damages caused to it by the delay of the contribution or the REMEDIES WHRE INDUSTRIAL PARTNER ENGAGES IN BUSINESS
damages caused by the conversion of any sum for his personal benefit. • If the industrial partner engages in any business, the capitalist partner may either excludes him or avail
LIABILLITY OF GUITY PARTNER FOR INTEREST AND DAMAGES the benefits that may have obtained by the violation of the industrial partner.
5. ACCRUAL OF LIABILITY- The guilty partners is liable both for the damages and interests not from the 1. In either case, the capitalist partner have a right to damages. TH PERMISSION IS NEEDED FOR THE
time judicial or extradudicial demand but from the time he should have complied with his obligation or INDUSTRIAL PARTNER TO ENGAGE TO ANY KIND OF BUSINESS TO EXCEMPT HIM FROM HIS
from the time he used sum of the common fund for his personal use. LIABILITY (DAMAGES)
*JUDICIAL- filing of action or complaint in court 2. ALTHOUGH YUNG CAPITALIST PARTNER LANG YUNG NA MENTION SA LAW, ENTITLED PARIN
*EXTRAJUDICIAL- beyond the authority of the court or against the usual procedure of YUNG INDUSTRIAL PARTNER SA REMEDY NA ITO, since they are equally prejudiced by the act of
justice. their co-partner engaging in business for himself.
(ART. 1790) Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the EXAMPLE: J and K are partners in JK guitar center, with J as the managing partner. L is a third party who
capital of the partnership. has a debt to J of P3,000 and to the partnership of P6,000. Both debts are demandable. After a month, J
EXTENT OF CONTRIBUTION TO THE PARTNERSHIP CAPITAL collects the amount of P2000 to L.
- As a general rule: the partners should contribute equal shares to the capital of the partnership. *If L issues a receipt to the effect that it is for payment to J, P667 (3k+6k=9K; 3k/9k x 2k =667) will apply to
- Exception: If the partners has a stipulation in terms of capital contribution. By that, they can stipulate J’s credit, while (6K/9K x 2k =1,333) P1,333 will be applied to partnership credit.
about the unequal share. *But if L gives a receipt for the account only of the partnership credit, then, the whole payment of P2,000
- The rule is not applicable to the industrial partner, unless hindi lang service yung contribution nya. Kundi will be applied to the partnership’s credit .
capital rin. REASON FOR APPLYING PAYMENT TO PARTNERSHIP CREDIT
• The law safeguards the interests of the partnership by preventing the possibility of their being
(ART 1791) If there is no agreement to the contrary, in case of an imminent loss of the business of the subordinated by the managing partner to his own interest to the prejudice of the other partners.
partnership, any partner who refuses to contribute an additional share to the capital, except an industrial • The good faith demands that the managing partner attends more to the interest of the partnership than
partner, to save the venture, shall be obliged to sell his interest to the other partners. to his own interest and he should not intentionally fail to effect the collection of the partnership credit in
REQUISITES FOR APPLICATION OF RULE order to effect the collection of his own.
FF. Requisites before a capitalist partner may be obliged to sell his interest to the others; * the rule will not apply if the partner is not a managing partner because he may have acted
1. There is an imminent loss of the business of the partnership improperly to create undue advantage to himself.
2. The majority of the capital partners are of the opinion that the additional contribution to the common *the manager is not agreed upon and all of the partners acts a managing partner, then every
fund would save the business; partner shall be considered a managing partner for purpose of Article 1792.
3. The capitalist partner refused to contribute an additional share to the capital
4. There is no agreement na kahit na magkaroon ng loss yung business ng partnership ay hindi obliged RIGHT OF DEBTOR TO APPLICATON OF PAYMENT
yung mga capitalist partner to contribute additional capital to the business. Under 2nd paragraph- the debtor is given the right to prefer payment of the credit of the partner if it should
REASON FOR THE SANCTION be more onerous to him in accordance with his right to application of payment.
• The refusal of the capitalist partner to contribute an additional capital to the business of the partnership
reflects his lack of interest in the continuance of the partnership. For example:
• It would be unjust to remain and reap the benefits if hindi sya nag contribute while the other partners If the obligation in favor of A bears 15% interest annually while that in favor of the partnership is 14%
contributed. interest annually, the credit of A being more onerous or burdensome, the law allows C to prefer the
(ART. 1792) payment of A’s credit in case he so desires.
OBLIGATION OF MANAGING PARTNER WHO COLLECTS DEBT
*Person may be separately indebted, to the partnership and to the managing partner at the same time. Any
sum received by the managing partner shall be applied to the two credits proportion to their amounts.
EXCEPTION: If the managing partner received the sum for the account of the partnership, in this case, the
whole sum shall be applied to partnership credit only.
REQUISITE FOR APPLICATION RULE
1. There exist atleast 2 debts. (1) one where collecting partner is the creditor (2) where the partnership is
the creditor.
2. Both debts are demandable
3. The partner who collects is authorized to manage and actually manages the partnership
(ART. 1793) OBLIGATION OF PARTNERS WHO RECEIVES SHARE OF PARTNERSHIP CREDIT
• It pertains only to one credit, which is credit in favor of the partnership. (ART. 1795) RISK OF LOSS OF THINGS CONTRIBUTED
• It applies whether the partner who receives his share of the partnership credit is authorized to manage or REASON
not. Specific and determinate things bear by the partner because he remains the owner
REQUISITES FOR APPLICATION OF RULE which are not fungible where of the things
1. A partner has received, in whole or in part, his share of the partnership credit; only the use is contributed
2. The other partners have not collected their shares; and
3. The partnership debtor has become insolvent. Specific and determinate things bear by the partnership partnership, being the owner;
For example: the ownership of which is
D is a debtor to Partnership ABC in an amount of 5,000 Pesos. A, is a partner who already received his transferred to the partnership-
share of the partnership credit in an amount of 2K ahead of B and C. When B and C were collecting the 5K Fungible things or things which borne by the partnership for evidently the ownership was
of debt to D, D is already insolvent, thus he can’t be able to pay for his debt. cannot be kept without being transferred since use is
In this case, even though A has only received his share only, Partner A is required to share the 2K to the deteriorating even if they are impossible without the things
other partners. contributed only for the use of being consumed or impaired.
REASON FOR IMPOSING OBLIGATION TO RETURN the partnership-
• The debt of D is already a bad debt, and it is unjust if A is not going to share in the loss with B and C.
Things contributed to be sold- borne by the partnership Because there cannot be any
(ART. 1794) OBLIGATION OF PARTNER FOR DAMAGES TO PARTNERSHIP doubt that the partnership was
intended to be the owner;
AS A GENERAL RULE: Any person guilty of negligence or fault in the fulfillment of his obligation, shall be otherwise, the partnership
liable for damages. could not effect the sale
*The partner’s fault must be determined in accordance with the nature of the obligation and the Things brought and appraised borne by the partnership Because the intention of the
circumstances of the person, the time, and the place. in the inventory parties was to contribute to the
COMPENSATION OF DAMAGES WITH PROFITS EARNED FOR PARTNERSHIP BY GUILTY PARTNER. partnership the price of the
1. Damages not generally subject to set-off- GENERAL RULE: The damages caused by a partner to the things contributed with an
partnership cannot be compensated or offset by the profits or benefits which he may have earned for appraisal in the inventory.
the partnership by his industry.
a. The partner has the obligation to secure benefits for the partnership.
b. He has also the obligation to exercise diligence in the performance of his obligation as a partner.
2. Exception to the general rule- In unusual profits are realized through the extraordinary efforts of the
partners at fault, the courts are authorized by the law to equitably mitigate or lessen his liability for
damages.
(ART. 1796) RESPONSIBILITY OF THE PARTNERSHIP TO PARTNERS
• Every partner is an agent of the partnership for the purpose of its business. Hence, the obligations of the
partnership to every partner; (ART. 1798) DESIGNATION OF SHARE IN PROFITS AND LOSSES BY A THIRDS PERSON
1. To refund amount disbursed by him in behalf of the partnership, plus the corresponding interest from • The designation of P/L share may be designated to a third person by common consent.
the time the expenses are made. • Bawal yung isa sa mga partner ang mag designate
*The law pertains to loans or advances made by a partner to the partnership other than capital
contributed by him. BINDING FORCE OF DESIGNATION BY THIRD PERSON
The designation by the third person would generally be binding unless manifestly inequitable. And
2. To answer for the obligation (Ex: purchase price of supplies needed by the partnership ) he may have kapag nag umpisa nang maexcute yung decision ng third person within 3 months from the time he had
contracted in good faith in the interest of the partnership business. knowledge to it, They can no longer complain.
3. To answer for risks in consequence of its management. In such case, the partner is deemed guilty of estoppel or to have given consent or ratification to
thedesignation.

(ART. 1797) RULES FOR DISTRIBUTION OF PORFITS AND LOSSES

2. Distribution of profits
a. The partners shares Profits according to their agreement
b. If there is no agreement;
1. Share of capitalist partner=his capital contribution
2. Industrial partner shall receive share first and then the capitalist partner. The amount
kung ano man yung natira, yun yung pag hahati hatian ng capitalist partners.
*The share of industrial partner is not fixed because it is difficult to ascertain the
value of the services pf a person .
2. Distribution of losses
a. The losses shall be distributed based to their agreement
b. If none;
1. Loss= Profit loss sharing ratio
2. Industrial partner is not liable to losses
3. If there is no P/L ratio stated, the losses=capital contributions