LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
CHAPTER II: Obligations of the Partners Persons who have entered
into a contract to become
Juridical relations created by a contract of partners at some future time
partnership or on the happening of some
1. Relation among the partners future contingency do not
themselves become partners until or
2. Relationship between the partners unless the agreed time has
and the partnership (partnership has arrived or the contingency has
a separate juridical personality happened.
distinct and separate from the
partners) ii. Agreement to create partnership
3. Relationship of the partnership as to Partnership is dependent upon
its creditor (wherein the partnership is a condition.
the debtor, and the 3rd person is the Kinds of condition:
creditor) Suspensive- happening
4. Relations between the creditor and of which will give rise
the partners themselves to the obligation
Resolutory- happening
Example: of which will extinguish
If A and B formed a partnership called X & Co., the obligation.
and it transacts business with Y, a third person,
the relations created will be as follows: (1) 1785. When a partnership for a fixed term or
relations between A and B; (2) relations between particular undertaking is continued after the
A and B on the one hand and X & Co. on the termination of such term or particular
other hand; (3) relations between X & Co. and Y, undertaking without any express agreement, the
and (4) relations between A and B on the one rights and duties of the partners remain the
hand and Y on the other hand. same as they were at such termination, so far as
is consistent with a partnership at will.
1784. A partnership begins from the moment of
the execution of the contract, unless it is A continuation of the business by the partners or
otherwise stipulated. such of them as habitually acted therein during
the term, without any settlement or liquidation
Emphasizes that a partnership is a consensual of the partnership affairs, is prima facie evidence
contract perfected by a “meeting of the minds”, of a continuation of the partnership.
the moment the parties agreed to contribute
money, property, or industry to a common fund Partnership with a fixed term
with the intention of dividing profit. (GN) Partnership in which the term of its existence
i. It is not required for the perfection to has been agreed upon expressly (definite
deliver the contribution to the period) or impliedly (particular enterprise or
partnership. It exists from the moment transaction is undertaken)
that there is already a meeting of minds.
Example
Except i. Agree to enter into a contract of
When it is stipulated by the partners partnership for 1 year beginning
i. Future partnership today
The partners may stipulate ii. The end of the agreed undertaking,
some other date for the iii. Or agree to have it until Dec 2022
commencement of the
partnership. The expiration of the term thus fixed or the
accomplishment of the particular undertaking
LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
specified will cause the automatic dissolution of partner has no right to the
the partnership. property, and the partnership will
be evicted to the land, then the
partner who contributed the land
Continuation of partnership beyond fixed term will be liable for his partners.
It will be converted into a partnership at will 3. To answer to the partnership for the
(not dependent upon a term, period or an fruits of the property the contribution of
undertaking) which he delayed, from the date they
i. Where the right and duties of the should have been contributed up to the
partners remain the same as they time of actual delivery.
were at such termination but only i. If A promise to contribute land on
insofar as is consistent with a Aug 1 and did not deliver it, from
partnership at will. Aug 1 until actual delivery of the
But if expressly, where partnership agreed land, the partnership is entitled of
that a partnership is only until Dec 2022 but the fruits of the property that is
decided to extend 1year Dec 2023, it is still a ought to be delivered.
partnership for a fixed term.
Kinds of Fruits
1785 is referring to the agreement not expressly (1) Natural, (2) Industrial, and (3) Civil
agreed upon but continued anyway
(continuation of an undertaking) and did not Delivery
stipulate until when the partnership will be Example: Partner promised to contribute a land
terminated. to the partnership
i. When should the partner deliver it?
1786. Every partner is a debtor of the a. It should be from the time the
partnership for whatever he may have promised contract is perfected unless
to contribute thereto. stipulated by the parties
(obligation with a period- where
He shall also be bound for warranty in case of the obligation will arise upon the
eviction with regard to specific and determinate agreed time)
things which he may have contributed to the
partnership, in the same cases and in the same Delay
manner as the vendor is bound with respect to GN: No demand, no delay
the vendee. He shall also be liable for the fruits It there is delay, the debtor is liable for
thereof from the time they should have been interest/fruits
delivered, without the need of any demand.
Exception to the rule:
Deals with the obligations of the partners When there is stipulation by the parties
among themselves and to the partnership with Provided by law without the need for any
respect to contribution of property. demand
Obligations: 4. To preserve said property with the
1. To contribute at the beginning of the diligence of a good father of a family
partnership or at the stipulated time the pending delivery to the partnership
money, property, or industry which he a. Obligation of the debtor to give a
may have promised to contribute. specific thing prior to delivery.
2. To answer for eviction in case the b. Wherein giving a specific thing
partnership is deprived of the must be taken care of with the
determinate property contributed diligence of a good father of a
i. A partner contributed a parcel of family.
land, and it turns out that a
LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
5. To indemnify the partnership for any Necessary in order to determine how
damage caused to it by the retention of much has been contributed by the
the same or by the delay in its partners. In the absence of stipulation,
contribution. the share of each partner in the profits
a. Property contributed by a partner and losses is in proportion to what he
becomes the property of the may have contributed.
partnership. The appraisal is made, firstly, in the
b. It is important to distinguished the manner prescribed by the contract of
assets of the partnership as compared partnership; secondly, in the absence of
to the partners themselves because a stipulation, by experts chosen by the
partnership has a personality separate partners and according to current prices.
and distinct from its partners. After the goods have been contributed,
the partnership bears the risk or gets the
Effects of failure to Contribute property benefit of subsequent changes in their
promised value.
1. 1786 emphasizes the obligation of the In the case of immovable property, the
partner to contribute money, property, or appraisal is made in the inventory of said
industry to the common fund. Such property (1773, 1795.); otherwise, it may
contribution is the essence of the be made as provided in Article 1787.
contract of partnership.
a. Remedy: 1788. A partner who has undertaken to
i. The partnership can contribute a sum of money and fails to do so
demand for specific becomes a debtor for the interest and damages
performance for it to be from the time he should have complied with his
delivered. obligation.
ii. Liability for the damages
and the fruits. The same rule applies to any amount he may
have taken from the partnership coffers, and his
Liability of partner in case of eviction liability shall begin from the time he converted
The party who contributed property that the amount to his own use.
he has no right, will be liable for the
damages Two distinct cases:
1. 1st paragraph
Liability when it comes to delay a. Refers to money promised but not
Partner will be liable for the fruits given on time
No demand is necessary to put the nd
2. 2 paragraph
partner in default because it is an a. Partnership money converted to
exception provided by law. the personal use of the partner.
1787. When the capital or a part thereof which a Obligations of the partners with respect to
partner is bound to contribute consists of goods, partnership capital under 1788
their appraisal must be made in the manner 1. Obligation to contribute the sum of
prescribed in the contract of partnership, and in money on the due date the amount he
the absence of stipulation, it shall be made by has undertaken to contribute it.
experts chosen by the partners, and according to i. A partner promised to deliver the
current prices, the subsequent changes thereof money on Aug 31, but failed to do
being for the account of the partnership. so, he will be liable of interest
from Sept 1, until he actually
Appraisal of goods or property distributed delivers the same.
LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
ii. If without stipulation, he will be b. Reason for prohibition: to prevent
liable from the time the contract any conflict of interest between
has been perfected. the industrial partner and the
iii. The partner becomes the debtor partnership and to ensure faithful
of the partnership for interest and compliance by said partner with
damages without need of his prestation.
demand. 2. As regards capitalist partners
2. To reimburse any amount he may have
taken from the partnership coffers and
converted to his own use Capitalist partner
i. The guilty partner is liable for Only prohibited from engaging for his
interest (legal interest= 6% per own account in any operation which is
annum) and damages from the the same as or similar to the business in
time he converted the amount for which the partnership is engaged and
his own use or benefit. which is competitive with the said
business (1808)
1789. An industrial partner cannot engage in a. In case of violation, he shall bring
business for himself unless the partnership to the common fund any profits
expressly permits him to do so; and if he should accruing to him from his
do so, the capitalist partners may either exclude transactions, and shall personally
him from the firm or avail themselves of the bear all the losses.
benefits which he may have obtained in violation
of this provision, with a right to damages in Capitalist VS Industrial Partner
either case. If the partnership has a coffee shop
business, then the capitalist partner
Industrial partner wants to build a car repair shop- it is okay
One who contributes his industry, labor, or since they are not in the same business.
services to the partnership. BU, if he is an industrial partner of a
He is considered the owner of his coffee shop and he also wants to engage
services, which is his contribution to the in another business (car repair shop)- it is
common fund. prohibited even though it is different
In effect, the partnership acquires an business as covered in article 1789.
exclusive right to avail itself of his
industry. Capitalist Partner Industrial Partner
Contributes money or Contributes industry
GN: Cannot engage in business for himself unless property
the partnership expressly permits him to do so;
and if he should do so, the capitalist partners Prohibition extends Prohibition extends to
may either: only to any operation any kinds of business.
i. Exclude him from the firm with which is of the same
damages or kind of business in
ii. Avail themselves of the benefits which the partnership
which he may have obtained in is engaged
violation of this provision, with a
right to damages Receives profits in Receives profits in
accordance to their accordance to their
Prohibition against engaging in business agreement or pro-rata agreement or his just
1. As regards to an industrial partner to his contribution and equitable share
a. GN: He cannot engage in any kinds
of business (absolute) Shares in the losses in Exempted from losses
LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
accordance to the as to partners but not a. If he refuses to contribute, he
stipulation, or profit- as to 3rd persons shall be obliged to sell his interest
sharing or pro-rata to (subject to reimburse to the other partners.
his contribution ments from the other
partners) Requisites for application of the rule
Requisites before a capitalist partner may be
obliged to sell his interest
1. There is an imminent loss of the business
1790. Unless there is a stipulation to the of the partnership
contrary, the partners shall contribute equal 2. The majority of the capitalist partners are
shares to the capital of the partnership. of the opinion that an additional
contribution to the common fund would
Capital contribution of the partners save the business
How much? 3. The capitalist partner refuses deliberately
1. Stipulation or agreement of the parties (not because of his financial inability to
a. Partners can stipulate the do so), to contribute an additional share
contribution of unequal shares to to the capital;
the common fund a. By refusal, he actually has the
2. In the absence of such stipulation, the means but just don’t want to
presumption is that their contribution contribute
shall be in equal shares. b. If he wants to contribute but don’t
have the means (money), article
Presumption is only applicable to capitalist 1791 is not applicable.
partners and not industrial partners, unless he is 4. There is no agreement that even in case
also a capitalist partner at the same time. of an imminent loss of the business the
a. It is possible to have a capitalist- partners are not obliged to contribute.
industrial partner, wherein, he can a. Only refers to the capitalist
contribute money or property, partner
and his industry. b. Industrial partner is exempted
from the requirement to
1791. If there is no agreement to the contrary, in contribute an additional share.
case of an imminent loss of the business of the Having contributed his entire
partnership, any partner who refuses to industry, he can do nothing
contribute an additional share to the capital, further.
except an industrial partner, to save the venture,
shall be obliged to sell his interest to the other Reason behind the provision
partners. The refusal of the partner to contribute
his additional share reflects his lack of
GN: A capitalist partner is not bound to interest in the continuance of the
contribute to the partnership more than what he partnership.
agreed to contribute. It would be unjust for him to remain and
reap the benefits of the efforts of the
Except when (according to article 1791) others while he himself refuses to help.
There is an imminent loss of the business, a. Hence, the law provides a remedy
and there is no agreement to the contrary which, incidentally, is just to both
(as to who would make an additional parties since the partner who
capital), he is under obligation to refuses to contribute is paid the
contribute an additional share to save the value of his interest while the
venture. other partners are thereby
relieved from the burden of
LAW002- OBLIGATIONS OF THE PARTNERS
Bachelor of Science in Accountancy
continuing their association with
him in the business.
