1
PARTNERSHIP REVIEWER
Reyshanne Joy B. Marquez
PARTNERSHIP
it is a CONTRACT whereby two or more
persons (1) bind themselves to CONTRIBUTE
money, property, or industry to a COMMON FUND
(2) with the intention of dividing the PROFITS
among themselves or in order to EXERCISE a
PROFESSION
a STATUS and a FIDUCIARY RELATION
subsisting between persons carrying on a business
in common with a view on profit
CHARACTERISTICS OF THE CONTRACT OF
PARTNERSHIP
[C, C, L, I, AS, NP]
1. CONSENSUAL
perfected by mere consent
2. CONTRIBUTION of money, property or industry
to a COMMON FUND
3. object must be a LAWFUL one
4. INTENTION of DIVIDING the PROFIT among the
PARTNERS
5. AFFECTIO SOCIETATIS
the desire to formulate an ACTIVE
UNION, with people among whom there
exist a mutual CONFIDENCE and TRUSTS
6. NEW PERSONALITY
the object must be for profit and not
merely for the common enjoyment
otherwise only a co-ownership has been
formed. HOWEVER, pecuniary profit need
not be the only aim, it is enough that it is
the principal purpose
BUSINESS TRUSTS
when certain persons entrust their
property or money to others who will manage the
same for the former
RULES ON CAPACITY TO BECOME A PARTNER
1. a person capacitated to enter into
contractual relations may become a partner
2. an UNEMANCIPATED MINOR CANNOT
become a partner UNLESS his parent or
guardian consents
3. a MARRIED WOMAN, cannot contribute
conjugal funds as her contribution to the
partnership UNLESS she is permitted to do
so by her husband OR UNLESS she is the
administrator of the conjugal partnership,
in which the COURT must give its consent
authority
4. a PARTNERSHIP being a juridical person by
itself can form another partnership
5. a CORPORATION cannot become a partner
on grounds of public policy
a partner shares not only in profits but
also in the losses of the firm
RULE:
the partnership has a PERSONALITY
SEPARATE and DISTINCT from that of each
partner
CONSEQUENCES OF THE PARTNERSHIP BEING
A JURIDICAL ENTITY
1. its juridical personality is SEPARATE and
DISTINCT from that of each partner
2. the partnership CAN in GENERAL:
A) acquire and possess property of all
kinds
B) incur obligations
C) bring civil and criminal actions
D) can be adjudged insolvent even if
the individual members be each
financially solvent
3. unless he is generally sued, a partner has
no right to make a separate appearance in
court, if the partnership being sued is
already represented
LIMITATIONS ON ALIEN PARTNERSHIP
1) if 60% capital is not owned by Filipinos
the firm cannot acquire by purchase or
otherwise AGRICULTURAL Philippine lands
2) foreign partnership may lease lands provided
the period does not exceed 99 years
3) foreign partnership may be MORTGAGEES of
land
period of 5 years, renewable for another 5
years
they cannot purchase it in a foreclosure
sale
RULES IN CASE OF ASSOCIATIONS NOT
LAWFULLY ORGANIZED AS PARTNERSHIP
1. it possesses NO LEGAL PERSONALITY
it cannot sue as such HOWEVER, the
partners in their individual capacity CAN
2. one who enters into a contract with a
partnership as such cannot when sued
later on for recovery of the debt, allege the
lack of legal personality on the part of the
firm, even if indeed it had no personality
ESTOPPEL
whether a partnership has a juridical
personality or not depends on its PERSONAL LAW
of the partnership or the law of the place where the
partnership was organized
REQUISITES FOR EXISTENCE OF
PARTNERSHIP [I, CF, JI]
1. INTENTION to create a partnership
2. COMMON FUND obtained from
contributions
3. JOINT INTERESTS in the PROFITS

WHAT DO NOT ESTABLISH A PARTNERSHIP
1. mere co-ownership or co-possession
even with profit sharing
2. mere sharing of GROSS returns
even with joint ownership of the
properties involved
RULES TO DETERMINE THE EXISTENCE OF A
PARTNERSHIP
1. persons who are not partners to each other
are not partners as to third persons
EXCEPTION:
PARTNERSHIP BY ESTOPPEL
2. CO-OWNERSHIP of a property does not
itself establish a partnership, even though
the co-owners share in the profits derived
from the incident of joint ownership
3. SHARING OF GROSS RETURNS ALONE
does not indicate a partnership whether or
not the persons sharing them have a joint
or common right or interest in any property
from which the returns are derived
4. the receipt of the share in the profits is a
strong presumptive evidence of partnership
HOWEVER, no such inference will be
drawn if such profits were received in
payment
A) as a DEBT by installments or
otherwise
B) as WAGES of an employee
C) as RENT to a landlord
D) as an ANNUITY to a widow or
representative of a deceased partner
E) as INTEREST on a LOAN, though
the amount of payment vary with
the profits of the business
F) as the CONSIDERATION for the sale
of a GOOD WILL of a business or
other property or otherwise
creditors are not partners, for their
only interest in the sharing of profits is
the receipt or payment of their credits
in a partnership, the partners are
supposed to trust and have confidence
in all the partners
PARTNERSHIP BY ESTOPPEL
IF 2 persons not partners represent
themselves as partners to strangers, a partnership
by estoppel results
WHEN 2 persons, who are partners, in
connivance with a friend who is not a partner
inform a stranger that said friend is their partner,
a partnership by estoppel also result to the end
that the stranger should not be prejudiced
RULE: LAWFUL OBJECT or PURPOSE
a partnership must have LAWFUL
OBJECT or PURPOSE, and must be established for
the common benefit or interest of the partners
2
it must be within the commence of man,
possible and not contrary to law, morals, good
customs, public order or public policy
IF a partnership has SEVERAL
PURPOSES, one of which is UNLAWFUL, the
partnership can still validly exist so long as the
illegal purpose can be separated from the legal
purposes
NO need for JUDICIAL DECREE to
dissolve an unlawful partnership
VOID AB INITIO
one of the causes for the dissolution of a
partnership is any event which makes it unlawful
for the business of the partnership to be carried on
RULE:
when an UNLAWFUL PARTNERSHIP is dissolved
by a judicial decree, the PROFITS shall be
CONFISCATED in FAVOR of the STATE
G. R.
a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is contributed
2. REAL RIGHTS are contributed
* need for INVENTORY of
IMMOVABLES
** for EFFECTIVITY of the partnership
contract insofar as innocent third
persons are concerned the same must
be REGISTERED if REAL PROPERTIES
are INVOLVED
a partnership contract is NOT
CONVERED by the STATUTE of FRAUDS
an AGREEMENT TO FORM a partnership
does not itself create a partnership
when there are conditions to be fulfilled or
when a certain period is to lapse, the partnership
is not created till after the fulfillment of the
conditions or the arrival of the term and this is
true even if one of the parties has already
advanced his agreed share of the capital
RULE: if CAPITAL is P3,000 or more
REQUIRED:
1. PUBLIC INSTRUMENT
2. RECORDED S.E.C.
* FAILURE TO COMPLY shall not effect the
liability of the partnership and its members to
third persons
** IF REAL PROPERTIES have been contributed,
REGARDLESS of the VALUE, a public instrument
is needed for the attainment of legal personality
REQUIREMENTS WHERE IMMOVABLE / REAL
PROPERTY IS CONTRIBUTED
1. PUBLIC INSTRUMENT
2. INVENTORY signed and attached to the
P.I.
* applies regardless of the value of the
real property

* applies even if only real rights over the
real property are
contributed
* applies if aside from real property, cash
or personal property is
contributed
TRANSFER of land to the partnership must be
duly recorded in the ROD to make the transfer
effective insofar as third persons are concerned
RULE:
any immovable property or an interest therein
maybe acquired in the partnership name
title so acquired can be conveyed only in the
partnership name
IF the partnership has ALIENS, it CANNOT OWN
LANDS, whether public or private or whether
agricultural or commercial EXCEPT through
HEREDITARY SUCCESSION
LIMITATIONS ON ACQUISITION
1. AGRICULTURAL LANDS 1024 HECTARES
2. lease of public lands (GRAZING) 2000
HAS.
RULES IF A) articles are kept secret among
the members
B) any one of the members may
contract in his own name with
third persons
1. NOT a partnership NOT a LEGAL
PERSON
2. it may be sued by third person under the
common name it uses
3. it cannot sue as such and cannot be
ordinarily be a party to a civil action
4. insofar as innocent third parties are
concerned
the parities can be considered as
members of a partnership
5. as between themselves or insofar as third
persons are prejudiced
only the rules of co-ownership must apply
EFFECT OF CERTAIN TRANSACTIONS
1. contracts entered into by a partner in his
own name may be sued upon still by him in
his individual capacity, not withstanding
the absence of a partnership
2. when two or more individuals, having a
common interests in a business bring a
court action, it should be presumed that
they prosecute the same in their individual
capacity as co-owners and not in behalf of a
partnership which does not exist in legal
contemplation
CLASSIFICATION OF PARTNERSHIPS
A) ACCORDING TO MANNER OF CREATION
1. ORALLY constituted
2. constituted in a PRIVATE INSTRUMENT
3. constituted in a PUBLIC INSTRUMENT
4. REGISTERED S.E.C.
B) ACCORDING TO OBJECT
1. UNIVERSAL
2. PARTICULAR
C) ACCORDING TO LIABILITY
1. LIMITED PARTNERSHIP
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2. GENERAL PARTNERSHIP
D) ACCORDING TO LEGALITY
1. LAWFUL OR LEGAL
2. UNLAWFUL OR ILLEGAL
E) ACCORDING TO DURATION
1. for a SPECIFIC PEIOD or FIXED
PERIOD
2. PARTNERSHIP AT WILL
F) ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP
2. PARTNERSHIP BY ETOPPEL
G) AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1. SECRET PARTNERSHIP
2. NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
2. PROFESSIONAL / NON-TRADING
GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their
individual properties, after the assets of the
partnership has been exhausted
LIMITED PATNERSHIP
one where at least one partner is a general
partner and the others are limited partners
one whose liability is limited only up to the
extent of his contribution
a partnership where all the partners are limited
partners cannot exist as a limited partnership
REFUSED REGISTRATION
IF it continuous as such, it will be considered
as a general partnership and all the partners
will be general partners
KINDS OF UNIVERSAL PARTNERSHIP
1. PARTNERSHIP OF ALL PRESENT
PROPERTY
2. PARTNERSHIP OF ALL PROFITS
*UNIVERSAL PARTNERSHIP OF ALL PRESENT
PROPERTY
CONTRIBUTION of
1. ALL the properties actually belonging to
the partners
2. the PROFITS acquired with said
property
BECOMES COMMON PROPERTY
EXCEPT all FUTURE PROPERTY
FRUITS of FUTURE PROPERTY
INCLUDED IF STIPULATED UPON
*UNIVERSAL PARTNERSHIP OF PROFITS
comprises all that the partners may acquire by
the INDUSTRY or WORK of the partners become
common property regardless of within said profits
were obtained through the usufruct contributed
EXCEPT PRIZES and GIFTS
RULE:
articles of universal partnership, entered without
specification of its nature, only constitute a
universal partnership of PROFITS

RULE:
persons who are prohibited from giving each
other any donation or advantage cannot enter into
universal partnership
WHO:
1. HUSBAND and WIFE
2. those guilty of ADULTERY or
CONCUBINAGE
3. those guilty of the same criminal offense if
the partnership was entered into in
consideration of the same
while spouses cannot enter into a universal
partnership, they can enter into a particular
partnership or be members thereof
a universal partnership is virtually a donation to
each other of the partners properties or at least
their usufruct
PARTICULAR PARTNERSHIP
a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS their use or
fruits
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION
OBLIGATIONS OF THE PARTNERS
RULE:
a PARTNERSHIP BEGINS from the moment of the
EXECUTION of the CONTRACT
* even if contributions have not yet been made
the firm already exists, for partnership is a
consensual contract
DURATION OF PARTNERSHIP
UNLIMITED
* MAY BE AGREED UPON
1. EXPRESSLY definite period
2. IMPLIEDLY upon achievement of its
purpose
PARTNERSHIP AT WILL
a partnership wherein its continued existence
really depends upon the will of the partners or
even on the will of any of them
2 KINDS:
1. when there is no term, express or implied
2. when it is continued by the habitual
managers although the period has ended or
the purpose has been accomplished
3 IMPORTANT DUTIES OF EVERY PARTNER [C,
D-F, W]
1. duty to CONTRIBUTE what had been
promised
2. duty to DELIVER the FRUITS of what
should have been delivered
3. duty to WARRANT
RIULES ON THE DUTY TO CONTRIBUTE
1. the contribution must be made at the time
the partnership is entered into UNLESS a
different period is stipulated
2. no demand is needed to put the partner in
default
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3. the partner must exercise due diligence in
preserving the property to be contributed
before he actually contributes the same
4. a partner who promises to contribute to the
partnership becomes a promissory debtor of
the partnership
RULES ON THE DUTY TO DELIVER THE FRUITS
1. IF property has been promised, the fruits
thereof should also be given
2. the fruits referred to are those arising from
the time they should have been delivered,
without a need of any demand
3. IF the partner is in BAD FAITH, he is liable
not only for the fruits actually produced,
BUT also for those that could have been
produced
4. IF MONEY HAS BEEN PROMISED,
INTEREST and DAMAGES from the time he
should have complied with his obligation
should be given
5. NO DEMAND is needed to put the partner
in default
6. it is DELIVERY, actual or constructive that
TRANSFERS OWNERSHIP
RULES ON THE DUTY TO WARRANT
1. the warranty in case of eviction refers to
specific and determinate things already
contributed
2. there is EVICTION whenever by a final
judgment based on a right prior to the sale
or an act imputable to the partner, the
partnership is deprived of the whole or a
part of the thing purchased
RULE WHEN CONTRIBUTION CONSISTS OF
GOODS
APPRAISAL of VALUE is needed to determine
how much was contributed
HOW APPRAISAL MADE
1. as PRESCRIBED in the CONTRACT
2. in default, by EXPERTS chosen by the
partners, and at CURRENT PRICES
* necessity of the INVENTORY
APPRAISAL
RULE on RISK of LOSS
after goods have been contributed, the
partnership bears the risk of subsequent
changes in the value
RULE:
a partner who has undertaken to contribute a
sum of money and fails to do so becomes a
debtor for the interest and damages from the
time he should have complied with his
obligation
CAPITALIST PARTNER
one who FURNISHES CAPITAL
* NOT EXEMPTED from LOSSES

* he can engage in other business
PROVIDED there is no competition between
the partnership and his business
* share in the profits according to
agreements
INDUSTRIAL PARTNER
one who FURNISHES INDUSTRY or LABOR presumed to be equal
* he is EXEMPTED from LOSSES as
between the partner BUT liable to strangers
without prejudice to reimbursement from the
capitalist partner
* he CANNOT engage in any other
BUSINESS WITHOUT the express CONSENT of
the other partners, OTHERWISE
1. he can be EXCLUDED from the firm
- plus damages OR
2. the BENEFITS he obtains from the other
businesses CAN BE AVAILED of by the
other partners
- plus damages
whether or not there is COMPETITION
* in computing always look for ----- NET
PROFITS
----- NET *RULE if MANAGING PARTNER COLLECTS A
LOSSES
CAPITALIST INDUSTRIALIST PARTNER REQUISITES:
one who contributes BOTH CAPITAL and
INDUSTRY
GENERAL PARTNER
one who is liable beyond the extent of his
contribution
LIMITED PARTNER
one who is liable only to the extent of his the two credits in
contribution
*** an industrial partner can only be a general RULE:
partner, never a limited partner
MANAGING PARTNER
one who manages actively the firms affairs
SILENT PARTNER
one who does not participate in the management,
though he shares in the PROFITS or LOSSES
LIQUIDATING PARTNER
one who winds up or liquidates the affairs of the
firm after it has been dissolved
OSTENSIBLE PARTNER
one whose connection with the firm is public and
open
SECRET PARTNER
one whose connection with the firm is concealed
or kept secret
DORMANT PARTNER
one who is both a secret (hidden) and silent (not
managing) partner
NOMINAL PARTNER
one who is not really a partner BUT who may
become liable as such insofar as third persons are
concerned
RULE:
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partners shall CONTRIBUTE EQUAL SHARES to
the capital of the partnership
* it is permissible to contribute UNEQUAL
SHARES IF there is a stipulation to this effect
* in the absence of proof, the shares are
CONDITIONS before a capitalist partner is
obliged to sell his shares / interest to the other
partners [IL, RC, NA]
1. if there is IMMINENT LOSS of the
BUSINESS of the partnership
2. he REFUSES to CONTRIBUTE an
ADDITIONAL SHARE to the CAPITAL
3. there is no agreement to the contrary
* INDUSTRIAL PARTNER IS EXEMPTED
CREDIT
1. existence of at least 2 debts ----
PARTNERSHIP
---- PARTNER
2. both sums are demandable
3. the collecting partner is the managing
partner
* the sum thus collected shall be applied to
proportion to their amounts
* where a partner receives his share in the
partnership credit
CONDITIONS:
1. a partner has received his share in the
partnership credit in whole or in part
2. the other partners have not collected their
part of the credit
3. the debtor subsequently becomes
INSOLVENT
RULE: - the partner shall be obliged to bring to
the partnership
capital what he received even though he may
have given receipt for
his share only
* DOES NOT APPLY when debt was collected after
dissolution of the partnership
RULE:
* every partner is responsible to the partnership
for damages suffered by it through his fault
* he cannot compensate them with the
profits and benefits, which he may have earned for
the partnership by his industry
* the courts may equitably lessen his
responsibility

RES PERIT DOMINO
*RULES ON WHO BEARS THE RISK OF LOSS
1. if SPECIFIC and DETERMINATE THINGS
NOT FUNGIBLE whose USUFRUCT is
enjoyed by a firm
the PARTNER who OWNS it bears the
loss for ownership was never transferred to the
firm
2. FUNGIBLE or DETERIORABLE
FIRM bears the loss for it is evident
ownership was transferred
3. THINGS CONTRIBUTED to be SOLD
FIRM bears the loss for evidently the firm
was intended to be the owner
4. CONTRIBUTED under APPRAISAL
FIRM bears the loss because this has the
effect of an implied sale
RULE on RESPONSIBILITY of the FIRM
1. to REFUND amounts disbursed on behalf of
the firm plus legal interest from the time
expenses where made
2. to ANSWER to each partner for
OBLIGATIONS he may have entered into in
good faith in the interest of the partnership,
as well as the risks in consequence of its
management
* REFUND must be made even in case of failure of
the enterprise entered into, provided the partner is
not at fault
* AMOUNT DISBURSED does not refer to the
ORIGINAL CAPITAL
*HOW PROFITS ARE DISTRIBUTED
1. according to AGREEMENT
2. IF NONE, according to amount of
CONTRIBUTION
*HOW LOSSES are DISTRIBUTED
1. according to AGREEMENT as to losses
2. IF NONE, according to agreement as to
PROFITS
3. IF NONE, according to amount of
CONTRIBUTION
* an INDUSTRIAL PARTNER shall receive a JUST
and EQUITABLE share in the profits
*RULE on INDUSTRIAL PARTNERS LIABILITIES
- may be held liable by third persons BUT he may
recover what he has paid from the other capitalist
partners
*RULE on DESIGNATION by THIRD PERSON of
SHARES in PROFITS and LOSSES
* third person is NOT a PARTNER -- appointed to
only distribute shares
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* the designation of shares by third persons may
be IMPUGNED, IF it is MANIFESTLY
INEQUITABLE
* the designation of shares by third persons
CANNOT be IMPUGNED EVEN IF MANIFESTLY
INEQUITABLE IF:
1. the aggrieved partner has already BEGUN
to EXECUTE the decision
2. the aggrieved partner has not IMPUGNED
the distribution within 3 months he had
knowledge
*RULE IF APPOINTMENT OTHER THAN in the
ARTICLES of PARTNERSHIP
1. power to act may be REVOKED at ANY
TIME with or without just cause
REMOVAL should be done by the controlling
interest
2. EXTENT of POWER
as long as he remains manager, he can
perform all acts of administration
BUT if others oppose and he persists, he can
be removed
*RULE WHEN there are 2 or MORE MANAGERS
CONDITIONS:
1. 2 or more partners are managers
2. there is no specification of respective duties
3. there is no stipulation requiring
UNANIMITY
SPECIFIC RULES:
1. each may separately execute all acts of
administration
UNLIMITED POWER to ADMINISTER
2. IF any of the managers OPPOSE
MAJORITY RULE
IN CASE OF A TIE
- persons owning controlling interest
prevail provided they are also managers
* right to oppose is not given to NON-MANAGERS
* OPPOSITION should be done BEFORE the acts
produce legal effects insofar as third persons are
concerned
RULE WHEN UNANIMITY is REQUIRED
1. the CONCURRENCE of all shall be
necessary for the validity of the acts
2. the ABSENCE or DISABILITY of ANYONE of
them CANNOT BE ALLEGED UNLESS there
is imminent danger of grave or irreparable
injury to the partnership
RULE ON DUTY of THIRD PERSONS
third persons are not required to inquire as to
whether or not a partner with whom he transacts
has the consent of all the managers
*RULES to be observed when the manner of
management has not been agreed upon:
1. all the partners are considered AGENTS
whatever any one of them may do alone
shall not bind the partnership
2. IF the acts of one are opposed by the rest,
the majority shall prevail

3. when a partner acts in his OWN NAME, he
does not bind the partnership
4. authority to bind the firm does not apply if
somebody else has been given authority to
manage in the articles of organization or
through some other means
5. ALTERATIONS REQUIRE UNANIMITY
- IMMOVABLE partnership property
- BUT if the refusal to consent by the others
is prejudicial to the interest of the
partnership
- COURTS INTERVENTION may be sought
RULES on ASSOCIATE of PARTNER
1. every partner may associate another person
with him in his share
2. for a partner to have an associate in his
share
consent of all the other partners is NOT
REQUIRED
3. for the associate to become a partner
ALL MUST CONSENT
RULES on PARTNERSHIP BOOKS
1. kept at the principal place of business of
the partnership
2. at any reasonable hour, every partner shall
have access to and may inspect and copy
any of them
DUTY of PARTNERS TO GIVE INFORMATION
good faith not only requires that a partner should
not make any FALSE CONCEALMENT, BUT he
should abstain from all concealment
DUTY to ACCOUNT [B, P, U-P]
every partner must account to the partnership
1. any benefit acquired
2. any profits received
3. any use of partnership property
RIGHT TO DEMAND a FORMAL ACCOUNT
any partner shall have the right to a formal
account as to partnership affairs
1. if wrongfully excluded from partnership
BUSINESS
2. if wrongfully excluded from partnership
PROPERTY by his co-partners
3. if the right exists under the terms of
agreement
4. if the other partner receives other benefits,
profits or uses partnership property
5. whenever other circumstances render it
just and reasonable
* the right to demand an accounting exists as
long as the partnership exists
* prescription begins to run only upon the
dissolution of the partnership when the final
accounting is done
PROPERTY RIGHTS OF PARTNERS [P, I, M]
1. rights in specific PARTNERSHIP
PROPERTIES
2. INTERESTS in the PARTNERSHIP
7
3. right to PARTICIPATE in the
MANAGEMENT
RULE:
* a partner is CO-OWNER with his partners of
SPECIFIC PARTNERSHIP PROPERTY
* RIGHTS of a PARTNER in SPECIFIC
PARTNERSHIP PROPERTY
1. he has equal rights with his partners to
POSSESS the property BUT only for
PARTNERSHIP PURPOSES
he may possess such property for other
purposes PROVIDED the other partners
expressly or impliedly gives their CONSENT
2. he CANNOT ASSIGN his right to the
property EXCEPT if all the other partners
assign their rights in the same property
3. his right to the property is NOT SUBJECT
to ATTACHMENT or EXECUTION, EXCEPT
on a claim against partnership
4. his right to the property is NOT SUBJECT
to LEGAL SUPPORT
* if there is PARTNERSHIP DEBT, the specific
property can be attached
RULE:
* a PARTNERS INTEREST in the partnership is
his SHARE of the PROFITS and SURPLUS
IT CAN BE: [A, A, LS]
1. ASSIGNED
2. ATTACHED
3. be subject to LEGAL SUPPORT
*EFFECTS of CONVEYANCE by PARTNER of his
INTEREST in the PARTNERSHIP
1. IF he conveys his WHOLE INTEREST
A) partnership may still remain
B) partnership may be dissolved
* mere conveyance does not dissolve
the partnership
2. the ASSIGNEE does not necessarily become
a partner
the ASSIGNOR is still the partner, with a
right to demand accounting and settlement
3. the ASSIGNEE CANNOT interfere in the
MANAGEMENT or ADMINISTRATION of the
firm
the ASSIGNEE CANNOT also DEMAND [I,
A, I]
A) INFORMATION
B) ACCOUNTING
C) INSPECTION of partnership books
*** while a partners INTEREST in the firm may be
CHARGED or LEVIED upon, his INTEREST in a
specific firm PROPERTY CANNOT be attached.
RIGHTS of the ASSIGNEE
1. to get whatever profits the assignor-partner
would have obtained

2. to avail himself of the usual remedies in
case of fraud in the management
3. to ask for ANNULMENT of the contract of
assignment IF:
A) he was induced to enter into it through
any of the vices of consent OR
B) he himself was incapacitated to give
consent
4. to demand an accounting BUT only if the
partnership is dissolved
PREFERENTIAL RIGHTS of PARTNERSHIP
CREDITORS
* partnership creditors are entitled to PRIORITY
over partnership assets, including the partners
interest in the profits
** SEPARATE or INDIVIDUAL creditors have
PREFERENCE in separate or individual properties
* when the CHARGING ORDER is applied for and
granted, the court may appoint a receiver of the
partners share in the profits
the receiver appointed is entitled to any relief
necessary to conserve the partnership assets for
partnership purposes
* interest charged may be redeemed at any
time before foreclosure
* AFTER FORECLOSURE the interest may still be
redeemed by (without causing dissolution)
1. with separate property, by any one or more of
the partners OR
2. with partnership property, by any one or more
partners with the consent of all the partners whose
interests are not so charged or sold
* consent of the delinquent partner not needed
RULE:
every partnership shall operate under a FIRM
NAME
* the firm name may or may not include the
name of one or more of the partners
** STRANGERS who include their names in the
firm are liable as partners because of ESTOPPEL,
BUT do NOT have the RIGHTS of partners
** IF a LIMITED PARTNER includes his name in
the firm name, he has obligations BUT not the
rights of a general partner
RULE on LIABILITY for CONTRACTUAL
OBLIGATIONS
* all partners, including industrial ones, shall be
liable pro-rata with all their property and after all
the partnership assets have been exhausted
* NOT APPLICABLE for TORTS or CRIMES -----
LOSS
-----
INJURY
-----
MISAPPROPRIATION
** while an INDUSTRIAL PARTNER is exempted
by law from LOSSES as between the partners, he is
8
NOT EXEMPTED from liability insofar as third
persons are concerned
he may recover what he has paid from the
CAPITALIST partners
* under the law the liability of the partners is
subsidiary and joint NOT principal and solidary
*RULE on LIABILITY of a PARTNER who has
WITHDRAWN
1. a partner who withdraws is not liable for
liabilities contracted after he has withdrawn
2. if his interest has not yet been paid him
his right to the same is that of a mere
creditor
** a stipulation exempting liability to third
persons is VOID
* any partner may enter into a separate obligation
to perform a partnership contract
RULE:
* every partner is an agent of the partnership for
the purpose of its business
G.R.- the act of every partner for apparently
carrying on in the USUAL WAY the business of the
partnership of which he is member binds the
partnership
EXCEPT:
1. if he has NO AUTHORITY and
2. the person with whom he was dealing with HAS
KNOWLEDGE of the fact that he has no such
authority
RULE:
an act of a partner which is not apparently for
the carrying on of business of the partnership in
the usual way does not bind the partnership
UNLESS authorized by the other partners
* a partnership is a CONTARCT of MUTUAL
AGENCY, each partner acting as a principal on his
own behalf and as an agent for his co-partners or
the firm
REQUISITES on WHEN can a partner BIND the
partnership
1. expressly or impliedly AUTHORIZED
2. when he acts in BEHALF AND IN THE
NAME of the partnership
INSTANCES of IMPLIED AUTHORIZATION
1. when the other partners DO NOT OBJECT,
although they have knowledge of the act
2. when the act is for apparently carrying on
in the usual way the business of the
partnership
* this is binding on the firm even if the
partner was not really authorized PROVIDED
that the third party is in GOOD FAITH
RULE on UNUSUAL ACTS
one or more but less than all the partners HAVE
NO AUTHORITY TO:
[AP, DG, AI, CJ, EC, SA, RC]
1. ASSIGN the PARTNERS PROPERTY
2. DISPOSE of GOODWILL

3. do any other act which would make it
impossible to carry on the ordinary
business of the partnership
4. CONFESS a judgment
5. ENTER into a COMPROMISE
6. SUBMIT to ARBITRATION
7. RENOUNCE to CLAIM
*RULES on CONVEYANCE of REAL PROPERTY
1. where title to real property is in the
partnership name
any partner may convey title to such
property by a conveyance executed in the
partnership name
* PARTNERSHIP MAY RECOVER SUCH
PROPERTY
EXCEPT:
1. if the firm is engaged in the buying
and selling of land (USUAL
BUSINESS)
2. if property was conveyed to a
HOLDER for VALUE and who had
NO KNOWLEDGE of the partners
LACK of AUTHORITY
2. where title is in the name of the partnership
and partner sold in his OWN NAME
IF DONE IN USUAL BUSINESS
buyer does not become owner BUT
ACQUIRES EQUITABLE INTEREST
IF NOT DONE IN USUAL BUSINESS
buyer does not become owner and is
not even entitled to equitable interest
3. where title is in the name of one or more BUT
not all the partners
partners in whose name the title is named
MAY CONVEY BUT the PARTNERSHIP may
RECOVER such property IF done not in its
USUAL BUSINESS EXCEPT if he had
transferred it to a Holder for value
4. when property held in trust by partner
a sale only conveys EQUITABLE
INTEREST
5. when title is in the name of all partners
conveyance executed by all partners
possess all rights of such property
EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED
OWNERSHIP
*RULE on ADMISSION or REPRESENTATION
MADE by a PARTNER
an admission by a partner is an admission
against the partnersip,under the following
conditions:
1. the admissions must concern partnership
affairs
2. must be within the scope of his authority
9
RESTRICTIONS ON THE RULE:
1. admissions made BEFORE DISSOLUTION
are binding only when the partner has
authority to act on the particular matter
2. admissions made AFTER DISSOLUTION are
binding only if the admissions were
necessary to WIND UP the business
3. an admission made by a former partner
made after he has RETIRED from the
partnership is not evidence against the firm
EFFECT of NOTICE to a PARTNER
notice to a partner is notice to the partnership
*notice to a partner, given while already a
partner is a notice to the partnership PROVIDED it
relates to partnership affairs
EFFECT of KNOWLEDGE ALTHOUGH NO
NOTICE WAS GIVEN:
* knowledge of the partner is also knowledge of
the firm PROVIDED THAT:
1. the knowledge was acquired by a partner
who is acting in the particular matter
involved;and
2. the partner having knowledge, had reason
to believe that the fact related to a matter
which had some possibility of being the
subject of the partnership business AND
he was so situated that he could
communicate it to the partner acting on
that particular matter
* SERVICE of PLEADINGS on the partner in a
law firm is also service on the whole firm and the
other partners
LOSS OR INJURY
RULE on WRONGFUL ACT or OMISSION of a
PARTNER (SOLIDARY LIABILITY)
* the partnership is solidarily liable with the
partner if the wrongful act or omission
1. the partner is acting in the ordinary course
of business of the partnership OR
2. with authority of his co-partners
* innocent partners have right to recover from the
guilty partner
* When the firm and other partners not liable:
1. if the wrongful act or omission was NOT
DONE
A) within scope of partnership
business
B) with authority of the other co-
partners
2. if the act or omission is NOT WRONGFUL
3. if the act or omission, although wrongful
did not make the partner concern liable
- DAMNUN ABSQUE INSURIA
4. if the wrongful act or omission was
committed after the firm had been dissolved

and the same was not in connection with
the process of winding up.
LIABILITY of PARTNERSHIP for
MISAPPROPRIATION (SOLIDARY LIABILITY)
1. RECEIVING PARTY MISAPPROPRIATES
2. ANY PARTNER MISAPPPROPRIATES
- money or property in custody of
partnership
PARTNER BY ESTOPPEL
a person who represents himself or consents to
another / others representing him to anyone as a
partner either in an existing partnership or in one
that is fictitious or apparent
PARTNERSHIP BY ESTOPPEL
when all the members of the existing
partnership consent to such representation of a
partner by estoppel
RULES AND SITUATIONS:
1. if a third person is misled and acts because
of such misrepresentation
the deceiver is a partner by estoppel
2. if the partnership consented to such
misrepresentation
partnership liability results
3. if the firm had not consented
no partnership liability results BUT the
deceiver is considered still as a partner by
estoppel with all the obligations but not
the rights of a partner
4. when a person represents himself as a
partner of a NON-EXISTENT partnership
NO partnership liability results BUT the
deceiver and all persons who may have
aided him in the misrepresentation are still
liable
liability would be JOINT or PRO-RATA
* when although there is misrepresentation, if
the third party is not deceived, the doctrine of
estoppel does not apply
BURDEN of PROOF
the creditor or whoever alleges the existence of a
partner or partnership by estoppel has the burden
of proving the existence of the
MISREPRESENTATION AND INNOCENT
RELIANCE on it
ENTRY OF A NEW PARTNER into an EXISTING
PARTNERSHIP
RULE:
* he shall be liable for all the obligations of the
partnership BUT his liability will extend only to his
share in the partnership property
* his own individual property shall be
excluded
* same liability of a limited partner
PREFERENCE of PARTNERSHIP CREDITORS
RULE:
10
* the creditors of the partnership shall be
preferred to those of such partner as regards the
partnership property
without prejudice to this right
the private creditors of each partner may ask
the attachment and public sale of the share of the
latter in the partnership assets
**IF a partner sells his share to a third party,
BUT the firm itself still remains SOLVENT,
partnership creditors CANNOT assail the validity of
the sale by alleging that it is made in fraud of
them, since they have not really been prejudiced
DISSOLUTION AND WINDING UP
the change in the relation of the partners
caused by any partner causing to be associated in
the carrying on of the business
it is the point of time the partners cease to carry
on the business together
WINDING UP
the process settling business affairs after
dissolution
TERMINATION
the point in time after all the partnership affairs
have been wound up
RULE ON DISSOLUTION
* on dissolution the partnership is not
terminated BUT continues until the winding up of
partnership affairs is completed
*EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this
does not necessarily mean that a partner
can evade previous obligations entered into
by the partnership
2. dissolution saves the former partners from
new obligations to which they have not
expressly or impliedly consented UNLESS
the same be essential for winding up
*CAUSES OF DISSOLUTION
1. without VIOLATION of the AGREEMENT
between the partners
A) TERMINATION of the DEFINITE
TERM or PARTICULAR
UNDERTAKING
B) EXPRESS WILL or ANY PARTY in
GOOD FAITH (PARTNERSHIP by
WILL)
C) EXPRESS WILL of ALL of the
PARTNERS except those who have
(interests) ASSIGNED or whose
interests have been (separate debts)
CHARGED
D) EXPULSION in good faith of a
member
2. in CONTRAVENTION of the agreement
between the partners
by the EXPRESS WILL of ANY PARTNER
at any time
3. UNLAWFULNESS of the BUSINESS
4. LOSS thing promised
A) SPECIFIC THING PERISHES
before delivery

B) USUFRUCT is lost EXCEPT if
ownership had been transferred to
the partnership
5. DEATH of ANY partner
6. INSOLVENCY of any partner or of the
partnership
7. CIVIL INTERDICTION of any partner
8. DECREE of COURT
*** if the cause is not justified or no cause was
given, the withdrawing partner is liable for
DAMAGES BUT in no case can he be compelled to
remain in the firm
* the insolvency need not be judicially declared,
it is enough that the assets be less than the
liabilities
DISSOLUTION by JUDICIAL DECREE WHEN
ALOWED:
(I, UM, I-PP, C, PB, BL, OC)
1. partner declared insane in any judicial
proceeding or is shown to be of UNSOUND
MIND
2. partner becomes INCAPABLE of performing
his part of the partnership contract
3. partner has been guilty of such CONDUCT
as tends to affect prejudicially the business
4. partners PERSISTENT BREACH of
agreement
5. the business of the partnership can only be
denied on at a loss
6. other circumstances which render
dissolution equitable
IN CASE OF PURCHASER of PARTNERS
INTEREST
1. after the termination of the specified term
or particular undertaking
2. AT ANY TIME, if the partnership was a
partnership at will when the interest was
assigned or when the charging ordered was
issued
* proof as to the existence of the firm must first
be given
* even if a partner has not yet been previously
declared insane by the court, dissolution may be
asked, as long as the insanity is duly proved in
court
* in a suit for dissolution, the court may appoint
a RECEIVER at its discretion
EFFECTS OF DISSOLUTION
RULE:
* when the firm is dissolved, a partner can no
longer bind the partnership
* a dissolved partnership still has the personality
for the winding up of its affairs
the firm is still allowed to collect previously
acquired credits
the firm is still bound to pay of its debts
DISSOLUTION CAUSED by A-I-D
RULE: (STILL BOUND) as to each partners
11
G.R. where the dissolution is caused by the
ACT, INSOLVENCY or DEATH of a partner, each
partner is liable to his co-partners for his share of
any liability created by any partner acting for the
partnership
EXCEPTION: - individual liabilities
1. if dissolution by ACT
the partner acting for the partnership HAD
KNOWLEDGE of the dissolution OR
2. if dissolution by DEATH or INSOLVENCY
the partner acting for the partnership HAD
knowledge or notice of the death or insolvency
* only the partner acting assumes liability
*AFTER DISSOLUTION, a partner can still
bind the PARTNERSHIP
(WU, UT, TB)
1. By any ACT appropriate for WINDING UP
partnership affairs
2. By COMPLETING transactions
UNFINISHED at dissolution
3. By any TRANSACTION which could bind
the partnership IF dissolution had not
taken place PROVIDED the other party is:
A) PREVIOUS CREDITOR and had NO
KNOWLEDGE or NOTICE of the
dissolution OR
B) NOT a PREVIOUS CREDITOR, had
NO KNOWLEDGE or NOTICE and
dissolution was NOT PUBLISHED
* if there was publication of the dissolution it
is presumed he already knows, regardless of
actual knowledge on non knowledge
WHEN is the PARTNERSHIP NOT BOUND
1. new business with third parties who are in
bad faith
2. firm dissolved because UNLAWFUL except
for acts of winding up
3. partner who acted became INSOLVENT
4. partner not authorized to wind up EXCEPT
if customer in good faith
* if after dissolution, if a stranger will represent
himself as a partner although he is not one he will
be a partner by estoppel
RULE:
* the dissolution of the partnership does not
itself discharge the existing liability of any
partner
NEED for an AGREEMENT BETWEEN
1. partner concerned
2. other partners
3. creditors
RULE:
* the INDIVIDUAL PROPERTY of a DECEASED
PARTNER shall be liable for all obligations of the
partnership incurred while he was a partner BUT
subject to prior payments of his separate debts
* IF there be a NOVATION of the OLD
PARTNERSHIP DEBTS and such novation is done
after one of the partners has retired and without
the consent of such partner

said partner cannot be held liable by
creditors who made the novation with knowledge of
the firms dissolution
EXTRAJUDUCIAL AND JUDICIAL WINDING-UP
EXTRAJUDICIAL:
1. by the partners who have not wrongfully
dissolved the partnership
2. by the legal representative of the last
surviving partners
JUDICIAL:
under the control and direction of the court,
upon proper cause that is shown to the court
* profits that will actually enter the firm after
dissolution as a consequence of transactions
already made before dissolution are included
because they are considered as profits existing at
the time of dissolution
* any other income earned after the time, like
interest or dividends on stock owned by the
partners or partnership at the time of dissolution
should not be distributed as profits BUT as merely
additional income to the capital
BETTER RIGHTS of INNOCENT PARTNERS
innocent partners have better rights than guilty
partners and that the guilty partners are required
to indemnify for the damages caused
* RIGHT of INOCENT PARTNERS TO CONTINUE
the BUSINESS
in essence this is a new partnership
can use the same firm name
can ask new members to join
BUT shall: for protection of guilty partners
1. give a BOND approved by the court
2. to PAY guilty partners his interests at the
time of dissolution MINUS DAMAGES
* a guilty partner who is EXCLUDED will be
indemnified against all present or future
partnership liabilities
RIGHT TO GET CASH
in case on non-continuance of the business, the
interest of the partner should if he desires be given
in cash
assets may be sold
a guilty partner, in ascertaining the value of his
interest is not entitled to a proportional share of
the value of GOOD WIL
RIGHTS OF INNOCENT PARTNERS IN CASE of
RESCISSION based on FRAUD AND
MISREPRESENTATION
1. Right to LIEN or RETENTION SURPLUS
CAPITAL
ADVANCES
2. Right of SUBROGATION as creditor
3. Right of INDEMNIFICATION
*ORDER of PAYMENT in WINDING-UP of
PARTNERSHIP LIABILITIES
GENERAL PARTNERSHIP: [C, R, C, P]
12
1. those owing to creditors other than
partners
2. those owing to partners other than for
capital or profits REIMBURSEMENTS
3. those owing to partners in respect to
CAPITAL
4. those owing to partners in respect to
PROFITS
* IF the partnership assets are insufficient, the
other partners must contribute more money or
property
PREFERENCE with RESPECT to the ASSETS
1. regarding partnership property
partnership creditors have preference
2. regarding individual properties of partners
individual creditors are preferred
RULE if PARTNER is INSOLVENT
- How INDIVIDUAL PROPERTY is DISTRIBUTED
ORDER OF PREFERENCE:
1. INDIVIDUAL or SEPARATE CREDITORS
2. PARTNERSHIP CREDITORS
3. those owing to other partners by way of
contribution
*When creditors of the dissolved partnership
are also creditors of the partnership
continuing business:
1. new partner is admitted without liquidation
2. a partner retires and assigns his rights IF
the business is continued without
liquidation of the partnership affairs
3. all but one partner retire without
liquidation
4. when all partner assign their right to a
person who will assume their debt
5. after wrongful dissolution, remaining
partners continue the business without
liquidation
6. when partner expelled and remaining
partners continue the business without
liquidation
* liability of third person becoming a partner in
the partnership continuing the business to the
creditors of the dissolved partnership shall be
satisfied out of the partnership property ONLY
G.R. when a partner retires, he is entitled what is
due him after liquidation BUT no liquidation is
needed if there is already a settlement at the date
of dissolution
JURISPRUDENCE
BASTIDA vs. MENZI
* articles of association by which 2 or more
persons obligate themselves to place in a common
fund any property, industry, or any of these things,
in order to obtain profit, shall be COMMERCIAL
BORJA vs. ADDISON
* a surviving husband may form a partnership
with the heirs of the deceased wife for the
management and control of the community
property

BUT in the absence of the formalities prescribed
by the Civil Code, knowledge of the existence of the
new partnership or community of property must at
least be brought home to third persons dealing
with the surviving husband in regard to the
community real property in order to bind them by
the community agreement
KIEL vs. SABERT
* the declarations of one partner, not made in
the presence of his co-partner, are not competent
to prove the existence of a partnership between
them as against such partner
* the existence of a partnership cannot be
established by general reputation, rumor or
hearsay
EVENGELISTA vs. C.I.R.
* By the contract of partnership 2 or more
persons bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among themselves
ESSENTIAL ELEMENTS of a PARTNERSHIP
1. an agreement to CONTRIBUTE money,
property, or industry to a COMMON FUND
2. intent to divide the profits among the
contracting parties
* when our internal Revenue Code includes
partnerships among the entities subject to the
tax on corporations, said code which are not
necessarily partnerships in the technical sense of
the term
* PARTNERSHIPS includes a SYNDICATE,
GROUP, POOL, JOINT VENTURE, or other
unincorporated organization, through or by the
means of which any business, financial operation,
or venture is carried on
* a joint venture need not be undertaken in any
of the standard forms,
or in conformity with the usual requirements of the
law on partnerships, in order that one could be
deemed constituted for purposes of the TAX on
corporations
PASCUAL vs. C.I.R.
* co-ownership or co-possession does not itself
establish a partnership, whether such co-owners
or co-possessors do or do not share any profits
made by the use of the property
* the sharing of gross returns does not itself
establish a partnership, within the persons sharing
them have a joint or common right or interest in
any property from which the returns are derived
* aside from the circumstances of profit, the
presence of other elements constituting partnership
is necessary, such as:
1. the clear intent to form a partnership
2. the existence of a juridical personality
different from that of the individual
partners AND
3. the freedom to transfer or assign any
interest in the property by one with the
consent of the others
13
* an isolated transaction whereby 2 or more
persons contribute funds to buy certain real estate
for profit in the absence of other circumstances
showing a contrary intention cannot be considered
a partnership
* persons who contribute property or funds for a
common enterprise and agree to share the gross
returns of that enterprise in proportion to their
contribution, BUT who severally retain the title to
their respective contribution, are not thereby
rendered partners
they have no common stock or capital and
no community of interest as principal proprietors
in the business itself which the proceeds derived
* a joint purchase of land, by two does not
constitute a co-partnership in respect thereto, NOR
does an agreement to share the profits and losses
on the sale of land create a partnership
* in order to constitute a PARTNERSHIP
INTER SESE there must be:
A) an intent to form the same
B) generally participating in both
profits and losses AND
C) such a community of interest, as far
as third persons are concerned as
enables each party to make a
contract, manage the business, and
dispose of the whole property
* the common ownership of property does not
itself create a partnership between the owners,
though they may use it for the purpose of making
gains AND they may without becoming partners,
agree among themselves as to the management
and use of such property and the application of the
proceeds therefrom
* the sharing of returns does not in itself
establish a partnership within the persons sharing
therein have a joint or common right or interest in
the property
there must be:
1. clear intent to form a partnership
2. the existence of a juridical personality
different from the individual partners
AND
3. the freedom of each party to transfer or
assign the whole property
DUTERTE vs. RALLOS
* an agreement between 2 persons to operate a
cockpit, by which one is to contribute his services
and the other to provide the capital, the profits to
be divided between them, constitutes a partnership
DELUAO vs. CASTEEL
* a contract of partnership to exploit a fishpond
pending its award to any qualified party or
applicant is VALID BUT a contract of partnership
to divide the fishpond after such award is ILLEGAL
* one of the causes of dissolution is any event
which make it unlawful for the business of the
partnership to be carried on or for the members to
carry it on in partnership
 14
C.I.R. vs. SUTER
* a UNIVERSAL PARTNERSHIP requires either
that the object of the association be:
1. all the present property of the partners as
contributed by them to the common fund
OR
2. all that the partners may acquire by their
industry or work during the existence of the
partnership

* the subsequent marriage of the partners could

not operate to dissolve the partnership because it
is not one of the causes provided for dissolution by
law with regards to limited partnerships

* partnership has distinct and separate

personality from that of its partners

* a husband and wife may not enter into a

contract of general co-partnership/ UNIVERSAL
partnership

ACOAD vs. MABATO

* a partnership may be constituted in any form
EXCEPT where immovable property or real rights
are contributed thereto, in which case a public
instrument shall be necessary

* A CONTRACT of PARTNERSHIP is VOID

whenever immovable property is
contributed thereto, if inventory of said property
is not made, signed by the parties and attached to
the public instrument

EVANGELISTA vs. ABAD SANTOS

* an INDUSTRIAL PARTNER cannot engage in
BUSINESS FOR HIMSELF, UNLESS the
partnership expressly permits him to do so
IF HE SHOULD DO SO, the capitalist partners
may either:
1. EXCLUDE him from the firm OR
2. AVAIL themselves of the benefits which he
may have obtained in violation of this
provision
with a right to DAMAGES in either case

* the prohibition against an industrial partner

engaging in business for himself seeks to prevent
any conflict of interest between the industrial
partner and the partnership and to ensure faithful
compliance by said partner with his prestation