BA 162 Reviewer- PARTNERSHIP

I. NATURE A. Definition and Elements Art. 1767. Partnership is the association and binding of persons with the presence of the three elements: (a) Two or more persons decided to bind themselves, (b) Contribution- money, property or industry to the common fund of the partnership, and (c) Intention- to divide the profits among themselves and/or exercise of profession. In practice, the two intentions are not mutually exclusive, meaning one partnership can be for the exercise of profession while dividing the profit among its members. B. Juridical Personality Art. 1768. Partnership has a juridical personality which is separate and distinct from its partners, even if it fails to comply with the requirements enumerated in article 1772. Art. 1772. Partnership with capital of more than Three thousand pesos (P3000), whether its money or property, should: (a) Appear in Public Instrument- Notary public or official authorized to administer oath, and (b) Recorded in the Securities and Exchange Commission (SEC) For the tax liability purposes, and for the public to determine their membership and the capital before entering into a contract with the partnership. Non-compliance does NOT result to any juridical personality because the law recognizes the impracticality and inconvenience for small businesses to comply with the requirements. Furthermore, it is to protect third persons who transact with the partnership, wherein having no juridical personality cannot be ground for evading liability. Consequence (a) Art. 1774. Any immovable property or an interest may be acquired or conveyed by a partnership through its own name. Partnership has a separate and distinct personality from its partners. Each partner who acts in behalf of the partnership is merely AGENT of the partnership. (b) Art. 1775. Associations and societies that possesses the following have NO JURIDICAL PERSONALITY and shall be governed by COOWNERSHIP provisions: (i) Articles are kept secret to its members, and (ii) Partner may contract to third persons with in its own name Principle of mutual trust and confidence, therefore it is necessary for a partner to be fully informed of things that affect the partnership. C. Rules on the Determination of the Existence of a Partnership Art. 1769. When there is ambiguity, the following are ways to determine whether there is really a partnership: (1) Not partners to each other are not partners to third persons, EXCEPT the situation provided by article 1825 (partnership by estoppel) Partnership is a matter of intention. (2) Co-ownership or co-possession does NOT establish partnership, whether or not co-owners or co-possessors share profits made by the use of property Profits must be derived from the operation of the business and the undertakings of the members, and not just incidental to the property (intention to realize and divide profits). Sharing of profits triggers confusion (legally external) since the property is difficult to separate (3) Sharing of gross income does NOT establish partnership, whether or not the co-owners have a joint or common interest in the property There is no sharing of profits contemplated since its the sharing of gross returns that was agreed upon. Furthermore, partnership liability is not yet satisfied. Gross return is based on profits while profit is the value after expenses.

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(4) Receipt of the profits is the prima facie evidence of being a partner, but NOT a partner if the receipt is for the payment of the following (acknowledge rebuttable): (a) Debt by instalment (b) Wage of employees or payment for rent (c) Annuity for the deceased partner (d) Interest on a loan (e) Consideration for the sale of goodwill or other partnership property All the cases dont share the profits as partner; instead there is other purpose and some other respects. In general, partnership has something to do with the mutual contribution and purpose (profit). Art. 1825. Partnership by estoppel Persons who represents or allows to be consented to be a partner in an existing or non-existing (apparent) partnership, in oral or written words or in conduct, to a third person shall be liable, provide that the requisites are present. (a) Action and mode, (b) Faith on the representation, and (c) Credit base on the belief This is without regard whether or not the document is made through public manner. * Public Manner means the document is revealed or announced to others through the notary or other authorized personnel. (1) (a) With EXISTING partnership, All partners consented to the representation: PARTNERSHIP liability (Solidary- right to demand the entire compliance) All the partners are aware of the representation. Solidary since there is an actual partnership. (solidary is less favourable than the joint) (b) With EXISTING partnership, NOT all partners consented to the representation: PARTNERSHIP liability (Joint) Joint because not all the partners consented to the representation (2) (a) NO existing partnership (apparent partnership), All partners consented to the representation: PARTNERSHIP liability (Joint/ Pro-rata- liable proportionately) All the partners acted as if there is an existing partnership. Jointly liable since in actuality, there is no partnership. (b) NO existing partnership (apparent partnership), SOME partners consented to the representation: SEPARATE liability (ones who consented) Separate liability that includes only those partners who consented to the representation. (3) With EXISTING partnership or APPARENT partnership, Partner who has NO knowledge or NO consent has NO liability. Separate liability for the partner who represents himself without the consent of other partners. Furthermore, partners dont have knowledge or consent to the representation. * Partnership by estoppel does not create partnership, since contract is needed to formulate it. D. Distinction from Other Contracts Art. 1770. Partnership must have: (limitations) (a) Lawful object or purpose Object- purpose, intangible Prestation- required in the contract Object of the Prestation- item that is involved (b) Common benefit or interest of the partners- Principle of fiduciary Dissolution of an unlawful partnership by judicial decree: (a) Provisions of the Penal Code with regards to the confiscation of the instruments and effects of a crime (b) Profits confiscated on favour of the State without prejudice to (a). II. Kinds A. Contribution- one of the three elements (together with intention and persons binding) for a partnership to exist 1. Capitalist- money or property; tangible contribution 2. Industrialist- industry, work or service; put in skills or talents B. Term

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Art. 1784. General Rule: The partnership commences on the moment of the execution of the contract (signed the contract). Exception: Otherwise, there is a stipulation to the contrary-- future partnership, suspensive condition where there is a possibility of having a partnership in the future though currently non-existent. Strictly speaking, the partnership begins after the meeting of minds (agreement) of the partners, though partnership not actually consummated. 1. Fixed Term- term of existence has been agreed by the partners, and upon expiration of the specified date or particular undertaking means partnership dissolution 2. At Will- after termination, the partnership is continued from the external and internal perspective without a definite time Partnership at will can be terminated by the partners any time they want-- personal right of the partner and nobody can force him if he wishes to exit the contract. Art. 1785. When the partnership fixed term or particular undertaking expired, the partners can still continue the business, and without any express agreement, the rights and duties will be assumed to be the same before the termination, and the partnership is in consistent with the partnership at will. The prima evidences of partnership at will are, without any settlement or liquidation of partnership affairs: (a) Continuation of the business, or (b) Partners habitually acted. Partnership with a fixed term becomes a partnership at will to protect the third party who deals with the partnership-- if the partnership still operates after the expiration of its terms. C. Object Art. 1776. Object (what you put in the partnership common fundphysical, as an item) can either be: 1. Universal Art. 1777. Universal partnership can be: a. Profits- general ruleonly the profits (dont include those acquired by chance) and usufruct of the property (fruits subsequently acquired dont belong to the partnership) are transferred to the partnership, meaning present and future property still belongs to respective partners. Art. 1780. Universal partnership of profits comprises all the things acquired through the partners industry or work during the existence of the partnership. These properties, may be movable or immovable possessed during the contract celebration, will continue to be owned exclusively by the partners, and only the usufruct shall be pass to the partnership. * Usufruct is the enjoyment of the property not owned with the obligation of preserving its form and substance. b. Present Property- exceptionall the current properties of the partners and the acquired profits Art. 1778. Universal partnership of all present property includes the contribution of all the property of partners that belongs to them and profits that may be acquired to the common fund, with the intention of dividing the same among them. Art. 1779. All the properties that belong to the partner at the time of the constitution, and the profits that may be acquired will belong to the partnership common fund. The common enjoyment of profits from other sources (not result from the property acquired) can be stipulated; but not the properties subsequently acquired through inheritance, legacy, and donation, only the fruits can be stipulated. Universal partner is just like the position of a donor, and donations cant know future property, and also this is to respect the giver of the said donations. * Legacy- gifts that are movable and personal right transmitted through a will. * Devise- gifts that is immovable. Art. 1781. Without specifications of the nature of the universal partnership, its articles will be that of a universal partnership of profits. Universal partnership of profits imposes fewer obligations because partners preserve the ownership of their separate property.

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Art. 1782. Universal partnership is limited to persons who are prohibited from giving each other any donations or advantage. Persons such as husband and wife, guilty of crime or adultery, or public officers, because universal partnership virtually makes donation to the partnership, therefore allowing them to participate is indirectly in violation of the law. Furthermore, this is to discourage crime and prevent any avenue to put up illegal receipts. 2. Particular- undertaking for the exercise of certain profession Art. 1783. Particular partnership objects can be: (a) Determinate object (b) Use or fruits (c) Specific undertaking (d) Exercise of a provision or vocation In practice, particular partnership can be combined with universal partnership. D. Liability of Partners Art. 1776. Liability of the partners can be, either: 1. General- liable beyond the partnerships resources, if the same if no suffice. 2. Limited- liable only to the extent of the partners contributed capital. E. Partnership by Estoppel III. Requisites, In General A. Object- purpose Art. 1770. Partnership must have: (limitations) (a) Lawful object or purpose Object- purpose, intangible Prestation- required in the contract Object of the Prestation- item that is involved (b) Common benefit or interest of the partners- Principle of fiduciary Dissolution of an unlawful partnership by judicial decree: (a) Provisions of the Penal Code with regards to the confiscation of the instruments and effects of a crime (b) Profits confiscated in favour of the State without prejudice to (a). B. Consideration- cause of the partnership which is to realize profits or exercise profession Art. 1772. Failure to comply with the requirements (public instrument + SEC filing, capital > P3000) shall not affect the liability of the partnership and partners to third parties. C. Consent IV. Formalities A. General Rule and Exception (a) General Rule Art. 1771. Partnership can be constituted in any form, may in the oral or written form for it to be valid and existent, mere agreement is suffice. (b) Exceptionform should be in public document Art. 1772. The capital is more than P3000. Third parties have the knowledge of how much the business really has before dealing with them. Art. 1771. The property contributed is immovable or real rights. Art. 1773. The immovable inventory should be made, signed by the parties, and attached to public documents for it to be not void. Title assures that the property really belongs to the partner.
JURIDICAL PERSONALITY CAPITAL a. Public instrument b. SEC registration IMMOVABLE a. Public instrument b. Inventory made, signed and attached NO. Should appear in the registry YES. What if the partner actually contributed, unfair for him YES. To execute the document YES. Contributed name value YES. Still have the liability to third person (no concern) INTERNAL LIABILITY EXTERNAL LIABILITY

YES. Still liable to do the obligation

B. Registration and Recording Art. 1772. The capital is more than P3000.

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C. Commencement Art. 1784. General Rule: The partnership commences on the moment of the execution of the contract (signed the contract). Exception: Otherwise, there is a stipulation to the contrary-- future partnership, suspensive condition where there is a possibility of having a partnership in the future though currently non-existent. D. Continuation Art. 1785. When the partnership fixed term or particular undertaking expired, the partners can still continue the business, and without any express agreement, the rights and duties will be assumed to be the same before the termination, and the partnership is in consistent with the partnership at will. The prima evidences of partnership at will are, without any settlement or liquidation of partnership affairs: (a) Continuation of the business, or (b) Partners habitually acted. V. Obligations of a Partner A. To Contribute Capital Art. 1786. Any partner is a debtor of the partnership of the promised contribution. Demand to compel the partner to contribute its capital is not necessary: (a) Principles of fiduciary (b) Common interest (for the operation of the business) Action to specific performancein case of partner in default, partnership can enforce collection of what the partner owes. 1. Kinds Art. 1787. Capital contribution consists of goods. The manner of appraisal: (a) Prescribed by the contractstipulated (b) Made by experts chosen by the partners according to current pricesin the absence of such stipulation Appraisal is necessary to determine the value of the contribution. Art. 1788. Capital contribution is sum of money, and there is a failure to do the obligation. The partner becomes a debtor of the partnership for the: (a) Interest of the sum of money, and Opportunity cost for the delay in contribution (b) Damages Intangible aspect of the contractwhat ifs; from the time the obligation should been complied with. In case of amount taken from the partnership coffers, the partnership becomes debtor for: (a) Interest of the sum of money, and (b) Damages from the time the amount is converted to his own. Use the coffers for the designated or mandated partners personal usedoesnt own and entrusted by other partners. Amount Art. 1790. (At the beginning) General Rule: Partner shall contribute equal shares of capital to the partnership. Exception: There is stipulation to the contrary. Partners are deemed to have equal rights and obligation. Art. 1791. (At the middle) General Rule: In case of imminent loss and additional contribution is necessary to save the venture, any capitalist partner who refuses to give his share shall be obliged to sell his interest to other partners. Exception: There is agreement to the contrary. Refusal shows lack of interest for the continuance of the business, and it is unjust to be benefited by the effort of the others while the partner does nothing in returnpartner who refused is paid the value of his interest, and other partners is relieved from the association with him. Specific Obligations a. To Answer for Warranty in Case of Eviction Art. 1786. Partner who contributed a specific or determinate thing shall be bound for warranty against eviction in the same manner and cases as a vendor is bound with respect to the vendee.

2.

3.

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To ensure that the good quality of the product will be attained during the operation To Deliver the Fruits Art. 1786. Partner is also liable for the fruits from the time they should have been delivered, without the need of demand from the other partners. Contribution was not put in the common fund in time; therefore, it can be derived that the fruits should have been in the hands of the partnership if there was no failure in the compliance-- already contributed to the partnership. Rules on the Bearing of Risk of Things Contributed Art. 1795. The basis of ownership of the contributed capital:
RISK-BEARER RATIONALE Ownership remains in the hand of the partner Ownership transfer takes place Ownership is transferred since it is impossible to use without damaging the form and substance Intention of owning the property, otherwise sale is not effective Contribution

b.

2.

c.

SCENARIO 1. Specific + determinate + not fungible + use only (usufruct) 2. Specific + determinate + ownership transfer 3. Fungible + use + deterioration

Contributing partner

Partnership

Exception: Stipulation to the contrary Consequence when violated: Violation to this provision will result to: (a) Bringing to the common funds the accrued profits from the transactions, and (b) Personally bearing all the losses. The reason where there is RELATIVE prohibition for capitalist partners to engage in business is because of the partnership being fiduciary relation (trust and confidence)possible conflict of interests. Industrialist Partner Art. 1789. General Rule: The industrial partner cannot engage in any business for himself. Exception: Expressly permitted by the other partners Consequence: Any industrial partner who violates this provision, capitalist partners shall: (a) Exclude him from the firm + right to damages, or (b) Avail of themselves the benefits obtained in violation of this provision + right to damages The reasons for the prohibition are to prevent conflict of interest between the industrial partner and the partnership, and to insure faithful compliance with his obligation.
INDUSTRIALIST CAPITALIST Cant engage Relative (no to similar business). Conflict of interests.

Partnership

General Rule Rule Nature of Prohibition

4. To be sold Partnership

Cant engage Absolute (any business is not allowed). Conflict of interest, and physical commitment issue Expressly stated (oral or written) Exclude + damages, OR Avail benefits + damages

5. Brought + appraised

Partnership

Exception Form of Permission Remedies

Stipulation to the contrary Bring to common funds, AND Bear loss

* Specific object/ determinate- particular type, not generic Fungible object- interchange or can be exchanged B. To Refrain from Engaging in Business 1. Capitalist Partner Art. 1808. General Rule: Any capitalist partner shall be prohibited from engaging in business on his own account which has similar operations like the partnership.

C. To Prefer the Credit of the Partnership Art. 1792. Two creditors: (a) Partnership creditor

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(b) Managing partners creditor wherein the credits are both demandable. Two possible scenarios may arise: (a) Debtor pays his debt to the creditor with the partners name in the receipt. Then the amount should be allocated in to the amount of the partners and partnerships credit. (b) Debtor pays his debt to the creditor with the name of the partnership in the receipt. Then the whole amount shall be accounted to the partnership credit only. Without prejudice to the right granted to the debtor by article 1252 (debtor may declare at the time that he is making the payment to which it is applicable), but only if the personal credit of the partner is more onerous to the debtor. The law safeguards the interests of the partnership from undue advantage of the managing partner. Art. 1793. Only one credit (partnerships)with regards to its partners: Debtor pays the share of a certain partner in the partnership credit in whole or part, when other partners have not yet receive their share and the debtor is declared insolvent, the payment shall be brought to the partnership capital even though the receipt is for his share only. The community of interestit is unfair and unjust for other partners since the debt became bad debt. D. To Be Responsible for the Damages to the Partnership Art. 1794. General Rule: Any partner cannot use his profits and benefits to compensate for the damages made to the partnership through his fault. Benefits and profits are obligation of each partner. And partner should exercise diligence in the conduct of his obligation. Exception: The court can mitigate the responsibility if through extraordinary efforts result in exceptional or unusual profits. Rests on equity E. To Share in the Profits and in the Losses Art. 1997. Profit and loss sharing set by partners: (1) Partnership agreement: (a) P/Lstipulation (b) Profit onlystipulation (loss should also be the same) (2) No stipulation: (a) P/Lshare of contribution (capitalist partners) (b) Profitjust and equitable under circumstance (industrial) Lossexempted from sharing the loss (industry) Industrialist contribution cant be withdrawn. If partnership fails, he just laboured in vain. If the industrialist also contributed capital, he is entitled to receive the proportion of his contribution, aside from his share coming from his service. Art. 1798. P/L sharing set by third persons: General Rule: The power of a third person who was intrusted of the sharing of P/L shall be revocable if there is manifestly inequitable. Exception: Partners cannot complain: (a) Decision was already executed, or The partner is presumed to have agreed. (b) Partner didnt impugn within the period three months after gaining the knowledge. May disrupt the operation of the business Sharing of P/L cannot be intrusted to one of the partners. To guarantee the outmost impartiality of the sharing Art. 1799. Total exclusion of a partner in the sharing of profits or losses in the stipulation is void. Partnership exists for the common benefit of the partners. Furthermore, stipulation of unequal share does not render the contract void. To Manage 1. One Partner was Appointed Manager Art. 1800. General Rule: Partner appointed in the articles of partnership to manage (managing partner) may and have: (a) Execute all acts of administration (opposite of acts of opposition), and (b) Irrevocable power Exception: (a) Appointee acts in bad faith, and (b) Power revoked due to just and lawful reason. Ways to revoke are (1) Vote that represents the controlling interest.

F.

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(2) No voting requirement if appointed in the middle of operation meaning, it can be revoked any time. Two Partners were Appointed Managers Art. 1801. Two or more managing partners are appointed, but no specifications as to their respective duties, or issue on working together. Consequence: Work separatelyexecute all acts of administration. In case of opposition: (a) Voting base on majority number (b) Partners owing the controlling interest (in case of tie in the first a) Art. 1802. Two or more managing partners, with the stipulation that none of them can act without the consent of the other. General Rule: Concurrence of all is necessary for the validity of the act (100%), and absence or disability cannot be alleged. Exception: Imminent danger of grave or irreparable injury Rules when the Manner of Management has not been Agreed Upon Art. 1803. If there is no designation for the management: (1) All are agents of the partnership and all actions shall be binding, without prejudice to article 1801 (if opposition exists, majority, then controlling interest) (2) Consent should be obtained if theres important alteration for immovable property of the partnershipcourts intervention if refusal is manifestly prejudicial to the partnership interest. Art. 1818. General Rule: Every partner is an agent of the partnership for the purpose of business operations. (a) Partners acts are binding to the partnership for apparently carrying on the usual course of business. Exception: Partner has no authority to act the particular action, and third person dealt with has knowledge of such lack of power (b) Partners acts are NOT binding to the partnership if it is NOT apparent for the usual course of business. Exception: Authorized by the other partners. (c) One or more but less than all of the partners have no authority to: (1) Assigning the partnerships property to creditors trust or the assignees promise to pay the debt (2) Disposing the goodwill of the business (3) Acting that would result to impossibility to carry on the usual course of business (4) Confessing the judgment (5) Compromising partnership claim or liability (6) Submitting partnership claim or liability to arbitration (7) Renouncing partnership claim. Exception: (a) Authorized by the other partners, or (b) Abandoned the business Actions in contravention of the restriction on authority shall NOT bind the partnership to third person having knowledge of the restriction. G. Not to Admit Associates into the Partnership Art 1804. Every partner has the right to associate his share to third person. But association does not mean that the third person is accepted in the partnership without the consent of the other partners. Partners associate is called subpartner, and he is stranger in the partnership. The reason is the mutual trust and confidence principles of delectus personae, and admission modifies the original contract of partnership. H. To Provide Access to the Partnership Books Art. 1805. Subject to any agreement of the partners, the books shall be: (a) Kept in the principal place of business, and (b) Accessed at any reasonable time and can be inspected and copied. Right to enable the partners to have true and full information of the partnership. Reasonable time means business days throughout the years. I. To Render True and Full Information of All the Partnership Art. 1806. Partners shall render on demand of true and full information of affairs affecting the partnership to:

2.

3.

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(a) Partner (b) Legal representative of a deceased partner, or (c) Any partner under legal disability. They are capable of asking information. No concealment under the principle of mutual trust and confidence. J. To Be Loyal Art. 1807. Every partner has the obligation to: (1) To account for any benefit (2) To hold as trustee: (a) For its profits derived without the consent of other partners (b) For any transaction of the business Partnership relationship is fiduciary; therefore, partners should act according to the common benefit of the partnership. K. To Render Formal Account as to Partnership Affairs Art. 1809. Any partner has the right to formal account in the following situations: (1) Wrongfully excluded from the business affairs, (2) Rights exist under the terms of any agreement, (3) Provided by article 1807, (4) Other just and reasonable circumstances. SUMMARY of Articles 1805-1807, 1809
RIGHTS 1. Partnership Books 2. True and full information 3. Formal Account Partners Any partner (the three enumerated in art. 1806) Any partner LIMITATIONS a. Time b. Place Qualify as one of the persons enumerated Four requirements or circumstances

VI. Obligations of the Partnership to a Partner Art. 1796. Every partner shall be responsible to the other partners to: (a) Refund the amount disbursed for the partnership expense (principal) (b) Refund the interest expense from the time the expense was made (c) Answer for the contract obligation entered (good faith + interest of the partnership)

(d) Answer for the risk (good faith + interest of the partnership). Partnership is not responsible if: (a) Partner acted in bad faith, AND (b) Not within the scope of his authority. VII. Obligations of Partners to Third Persons A. To Operate under a Firm Name Art. 1815. Partnership shall operate under a firm name, may or may not include name/s of the partner/s. Partnership is a juridical personality, and to protect third persons. Inclusion of a third person name not an actual partner shall be subject to the liability of a partner. Naming of the partnership can be: (a) Surnames of all the partners (b) Surnames of some of the partners (c) One of the partners Special Cases: (a) Misleading name-deceptive, identical to the name used by others, or contrary to law (b) Deceased persons: General Rule: Partnership cant use the name. Exception: Communication efforts that state that partnership is deceased. Consequence: Liability of the partner B. To Be Liable for Contracts Referred to in Article 1816 Art. 1816. General Rule: All partners shall be liable pro-rata after all the partnership assets are exhausted and their respective properties, for contract: (1) Entered into in the name of the partnership, (2) Account of the partnership, and (3) Acted by the person authorized. Exception: Any partner may enter into separate obligation to perform a partnership contract. Article 1816 is a contractual obligation. Art. 1817. General Rule: Stipulation against the liability laid down in the preceding article (1816) shall be void. Insofar as it affects third persons Exception: Not void among themselves

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Partners might have contractual agreement. an internal agreement (3) Acting that would result to impossibility to carry on the usual course of business (4) Confessing the judgment (5) Compromising partnership claim or liability (6) Submitting partnership claim or liability to arbitration (7) Renouncing partnership claim. Exception: (a) Authorized by the other partners, or (b) Abandoned the business Actions in contravention of the restriction on authority shall NOT bind the partnership to third person having knowledge of the restriction. In the conveyance
IN WHOSE NAME IT IS CONVEYED (Deed of Sale) CONVEYED BY WHOM What is conveyedTITLE OR EQUITABLE INTEREST? RULES ON RECOVERY BY THE PARTNERSHIP

LIABILITY OF INDUSTRIAL PARTNER LEGAL BASIS Applicable provisions Parties involved General Rules Losses- Financial Articles 1797-1799 Capitalist and industrial with money and property involved 1. With stipulation (based on agreement) 2. No stipulation (contribution) 3. Third party designation None. Not provided by law Pure industrial partner Exclusion from loss (valid or void) 1. Capitalist partner- void 2. Industrial partner- it depends Liability- Contract Liability Article 1816-1817 Both parties 1. Exhaust partnership property 2. Pro-rata liability (partners)

2.
Partners assets No exception Against liability (valid or void) 1. As among the partnersvalid 2. In relation to third persons- voidagainst public policy

Remedy for general rule Exception Effect of counter-stipulation

PARAGRAPH

OWNER IN WHOSE NAME IT IS REGISTERED (Deed of Title)

Partnership

Partnership

Any partner

Title

C. To Bind the Partnership 1. In General Art. 1818. General Rule: Every partner is an agent of the partnership for the purpose of business operations. (a) Partners acts are binding to the partnership for apparently carrying on the usual course of business. Exception: Partner has no authority to act the particular action, and third person dealt with has knowledge of such lack of power (b) Partners acts are NOT binding to the partnership if it is NOT apparent for the usual course of business. Exception: Authorized by the other partners. (c) One or more but less than all of the partners have no authority to: (1) Assigning the partnerships property to creditors trust or the assignees promise to pay the debt (2) Disposing the goodwill of the business

2 3

Partnership > Some of the partners > No right indication for the partnership > Some or all of the partners > Trustee (third person) All the partners

Partner Any partner in whose name the title stands

Any partner Any partner

Equitable interest Title

GR: Yes. Property conveyed E: > Valid conveyance under 1818 > Holder for value (good faith + payment) None GR: Yes. Valid act under 1818 E: Holder for value- good faith None

Partnership name/ partner

Any partner

All of the partners

All partners

Equitable interest [within authority under 1818] Title and equitable interest

None

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* Title- property Equitable interest- share of profit or lesser ownership D. To Be Liable for Admissions or Representations Made Art. 1820. Admission or representation is evidence against the partnership, provide: (1) Admission or representation by any partner (2) Actions within the scope of the partners authority (3) Concerning partners affairs (4) In accordance with this Title (Law on Partnershipconsents required, things to be done) Requisites are needed to make sure that the partnership is really liable. E. To Be Liable for Notices to the Partnership Art. 1821. General Rule: The following operates as a notice or knowledge of the partnership: (1) Knowledge acquired while a partner relating to business affairs, (2) Knowledge acquired while present to his mind about a particular undertaking acquired, (3) Knowledge of any other partner who reasonably could and should have communicated it to the acting partner. Exception: (a) Case of fraud (b) Committed by or with the consent of that partner F. To Be Liable for Delicts and Torts Art. 1822. Actions of the partner result to partnership liability to the same extent as that of the partner who did the action, provided: (1) Wrongful act or omission of any partner (2) Actions affecting the ordinary course of business or consented by the other partners, and (3) Loss or injury to third persons. * Delicts are actions that involve wrongful acts from negligence and malicedirect responsibility Torts are actions done without malice or negligence which are actually not crimerespondat superior. Art. 1823. Partnership is bound to make the good loss (breach of contract): (1) One partner, within his power scope, received and misapplied the money or property of a third person, (2) Partnership, within the usual course of business, received money or property of a third person and misapplied by the partners while in the partnerships custody. Art. 1824. All partners are solidarily liable with everything chargeable to articles 1822 and 1823. Even the innocent partners are liable to the liability, but they also have the right to recover from the guilty partner. * Solidary means the creditor can advance to anyone of the partners to satisfy the account, while pro-rata means the liability is divided based on the number of partners and creditors cant charge partners who have already satisfied his account. Article 1822 covers the civil liability of the partnership.
Who is the recipient? What is the object received? What did the recipient do? Obligations of the partnership Nature of the liability Obligations involved Nature of liabilities of the partners ARTICLE 1823 (1) Any partner acting in his authority Money or property of third persons Misapplication Yes Solidary ARTICLES 1822-1824 Liability from quasi or tort Solidary ARTICLE 1823 (2) Partnership Money or property of third persons Misapplication by any partner Yes Solidary ARTICLE 1816 Contractual obligation name, account, authority Solidary or joint

G. Person Admitted into an Existing Partnership: To Be Liable for Existing Obligations of the Partnership Art. 1826. General Rule: Liability of an admitted partner shall include all the liabilities arising before admission. Exception: Liabilities to be satisfied with the personal assets of the partners.

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Article 1826 Exception to the exception: Stipulation to the contrary. EXISTING CREDITOR SUBSEQUENT CREDITOR Yes. Yes. After property assets are exhausted. No. Because at the time the contract was made, he was not involved with it. Yes. Yes. After property assets are exhausted. Yes. Already involved in the transaction. only, agreed between partners, and subject to the provisions of this Title. (b) General Rule: Partners right to specific partnership liability is not assignable. Partnership property is belongs to the partnership who has juridical personality. Furthermore, the extent of ownership is difficult to quantify. Exception: In connection to the assignment of rights of all the partners in the same property. (c) General Rule: Partners right in specific partnership property is not subject to attachment or execution. Partnership property is belongs to the partnership who has juridical personality. Furthermore, the extent of ownership is difficult to quantify. Exception: Claim on the partnership Consequence: When the property is attached for the partnership debt, any partner cant claim any right under the homestead or exemption law. (d) Partners right in the specific partnership property is nor subject to legal support under article 291. Property belongs to the partnership. B. Interest in the Partnership Art. 1812. Partners interest in the partnership is: (a) Share of profits, and (during the life of the partnership) (b) Surplus (after the dissolution) Art. 1813. General Rule: Conveyance of a partners whole interest in the partnership does not mean: (1) Partnership is dissolved. (2) The assignee is entitled to: (a) Interfere with the partnership management during its continuance, (b) Require information that concerns partnership affairs or transactions, or (c) Inspect the partnership books. Principles of delectus personae. But, he is merely entitled to: (a) Receive the share of the profits that the assigning partner would have received should he not assigned his interest.

Partnership property Separate property of the old partner Separate property of the new partner

VIII.

Admitted partner partakes the benefit of the partnership and he has all the means to obtain full knowledge of the partnership. H. To Prefer the Creditors of the Partnership as regards the Partnership Property Art. 1827. With regards to partnership property, the priority is as follows: (1) Partnership creditors, then (2) Separate creditors of the partners. But they have the remedy to ask for the attachment and public sale of the share of the respective partner. Partnership has a juridical personality, therefore it is but radical to treat its creditors first. Rights of a Partner Art. 1810. Property rights of the partners: (1) Specific partnership property, (2) Interest in the partnership, and (3) Participate in the management. A. Rights in the Specific Partnership Property Art. 1811. Partners are co-owners of the partnership property. The incidents of co-ownership are: Co-ownership because of its characteristics, but in fact, partners are really co-managers of the partnership property. (a) Partner has the equal right to possess specific partnership property provided that the same is for the business purposes

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Exception: In case of fraud, the assignee may avail himself of the usual remedy. In case of dissolution, (b) Receive his assignors interest, and (c) Require an account form the date only of the last account agreed to by all the partners. Art. 1814. On due application of the judgment creditor (private creditor), the competent court may: (1) Charge the payments unpaid amount plus the interest, (2) Appoint the receiver of his share of the profits and other receivables, (3) Other orders that: (a) The debtor partner may have made, or (b) Circumstances of the case may have required. The interest may have redeemed without causing dissolution: (1) With the separate property, by one or more of the partners, or (2) With the partnership property, by one or more of the partners with the consent of all the partners whose interests are not charged or sold. Limitation: Redemption should take place at any time: (a) Before the foreclosure, or (b) Case of sale being directed by the court. Nothing in the Title (Law on Partnership) shall deprive of the rights, under the exemption law, as regards of his interest in the partnership. C. Right to Participate in the Management Reference: De Leon, Hector S.. The Law on Partnerships and Private Corporations. Philippiness: Rex Printing Company, 2010.