Chapter 2- Obligations of the Partners impliedly (as when a particular enterprise or transaction is

undertaken.
 RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP
- Partners to Partners - The expiration of the term or accomplishment of a particular
- Partners with Partnership undertaking will cause dissolution.
- Partnership with 3rd person 1. Rights and duties of partners in a partnership at will
- Partners to 3rd person - Partnership may be extended or renewed by partners by
express agreement (written or oral) or impliedly, by mere
 Art. 1784 A partnership begins from the moment of the continuation of business after the termination of such term
execution of the contract, unless otherwise stipulated without settlement or liquidation. In such case right and duties
of the partners remain the same as they were at such
 COMMENCEMENT OF THE PARTNERSHIP termination but only insofar consistent with partnership at will.
- Is a consensual contract hence, exist from the celebration of the 2. Dissolution/termination of the partnership
contract by the partners - with some continuation, the partnership for a fixed term or
- What is necessary is that essential requisites of the contract of particular undertaking is dissolved and a new one, a partnership
partnership are present even partners have not yet actually at will is created, continued existence of which will depends
given their contributions, conditions or details such as the upon the will of the partners.
participation of profit/losses, nature, as they are part of the - Unless otherwise provided by the partners, partnership at will
accidental and not to the essential parts of the contract. means a partner may terminate whenever he wishes. The
- When a partnership relation results, the law itself fixes the reason is that partnership relationship is a personal one, thus
incidents of this relation, if partners fail to do so. the law will not force anyone to continue as a partner or
 EXECUTORY AGREEMENT OF PARTNERSHIP become a partner.
- The above rule on the commencement of partnership is NOT 3. Power/right of a partner to terminate a partnership
ABSOLUTE. - Anyone of the partners may at his sole pleasure terminate,
1. Future partnership dictate a dissolution of a partnership at will. He must act on
- partners may stipulate some other date of commencement good faith (bad faith cannot prevent dissolution but can result
- Persons who have entered contract to be partners at some incurring liability for damages to other partners)
future time/ or on happening or fulfillment of some condition - Implicit in good faith is the requirement that the dissolution
or future contingency do not become partners until or unless must not be made at an improper or unreasonable time.
the agreed time has arrived or the condition happened. - Partnership for a fixed term may likewise terminated by the
- There can be a future partnership which at the moment has no express will of any partner before the time mentioned.
juridical existence yet. - No such thing as an indissoluble partnership.
2. Agreement to create partnership  Art. 1786 Every partner is a debtor of partnership for whatever
- A distinction must be made between a partnership actually he may promise to contribute.
consummated and an agreement to enter a contract at a future He shall also be bound for warranty in case of evection
time with regard to specific and determinate things which he may
- Agreement remains executory, no partnership exists yet. have contributed to the partnership in the same cases and same
3. Failure to agree on material terms manner as the vendor is bound with respect to the vendee. He
- Failure of the parties to agree on material terms may not shall also be liable for the fruits thereof from the time they
merely be evidence of the intent of the parties to be bound should have been delivered, without the need of any demand.
only in the future, but may prevent any rights or obligations  OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF
from arising for lack of complete contract PROPERTY

This article deals with the obligation of the partners among

 Art. 1785 When a partnership for fixed term or particular
themselves and to the partnership with respect to contribution of
undertaking is continued after termination of such term or
property.
particular undertaking without any express agreement, the
rights and duties remain the same as they were at such 1. To contribute at the beginning of partnership/ stipulated time
termination, so far consistent with a partnership at will. the money, property or industry which he may have promised
- Continuation of the business by the partners or such of them as to contribute
habitually acted therein during the term, without any 2. To answer for eviction in case the partnership is deprived of
settlement or liquidation of partnership affairs, is prima facie the determinate property contributed
evidence of continuation of the partnership 3. To answer for the fruits of the property the contribution of
 CONTINUATION OF PARTNERSHIP BEYOND FIXED TERM which he delayed, from the date they should have been
contributed up to the time of actual delivery
PARTNERSHIP WITH A FIXED TERM – the term of its existence has
4. To preserve the property with the diligence of good father of
been agreed upon expressly (when there is a definite period) or
a family pending delivery to the part.
 5. To indemnify the partnership for any damage caused by the c. After the goods have been contributed, the partnership
retention of the same or by the delay in its contribution bears the risk or gets the benefit of subsequent changes in
their value.
The money or property contributed by the partner becomes the 2. Property subject to appraisal- in case of immovable
property of the partnership. It cannot be withdrawn or disposed by property, the appraisal is made in the inventory of said
the contributing partner without the consent by the partnership or property
other partners.  ART. 1788 A partner who has undertaken to contribute a sum
of money and fails to do so becomes a debtor for the interest
 EFFECTS OF FAILURE TO CONTRIBUTE PROPERTY PROMISED and damages from the time he should have complied with his
1. Liability as debtor to partnership- mutual contribution to a obligation
common fund is of the essence of the contract of partnership. The same rule applies to any amount he may have taken from
Without contributions, partnership is useless. Failure to the partnership coffers, and his liability shall begin at the time
contribute makes a partner automatically a debtor of the he converted the amount to his own use.
partnership even the absence of demand  OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF MONEY
2. Remedy of the partners- the remedy of other partners is not AND MONEY CONVERTED TO PERSONAL USE
recission or cancellation of contract of part. But an action for - Contemplates 2 distinct cases
specific performance (collect what is owing) with damages and - Money promised but not given on time
interest from the defaulting partner who is made a debtor for - The partnership money converted to personal use of a partner
1. to contribute on the date due the amount he has
what he has promised to contribute to the partnership from the
undertaken to contribute to the part.
time he should have complied his obligation.
2. To reimburse anu amount he may have taken from the
Art. 1838, however allows recission or annulment of
part. And converted to his own use
partnership contract on the ground of fraud or 3. To pay the agreed or legal interest, if he fails to pay his
misrepresentation committed by one of the parties. contribution on time, or if he takes anu amount from the
 LIABILITY OF A PARTNER IN CASE OF EVICTION common fund and converts it to his own use
- Partner is bound in the same case and manner as the vendor is 4. To indemnify the partnership for the damages caused to it
bound with respect to the vendee. (Governed by law on sales) by the delay in the contribution or the conversion for his
- Under law on sales, Eviction shall take place whenever by a final personal benefit
judgement based on a right prior to the sale or an act  LIABILITY OF GUILTY PARTNER FOR INTEREST AND DAMAGES
imputable to the vendor, the vendee is deprived to the whole 1. Accrual of liability- guilty partner is liable for both interest
part or a part of the thing purchased. and damages not from the time judicial (filing of
- This obligation of warranty in case of eviction is consequence of action/complaint in court) or extrajudicial demand is
the character of the contract of partnership (onerous contract) made. But from the time he should have complied with his
obligations or from the time he converted the amount for
 LIABILTY OF PARTNER FOR FRUITS OF PROPERTY IN CASE OF
his own use.
DELAY
2. Justification for double responsibility- double responsibility
- No demand is necessary to put the partner in default
of the partner is an exception to the general rule in
- Mere fact that the contribution which a partner ought to
damaged that in obligations consisting the payment of a
deliver does not pass to the common fund on time, the sum pf money, indemnify for damages shall be only the
partnership fails to receive the benefits ought to produce thus payment of interest agreed upon or, in absence of
prejudicing the common purpose of obtaining profits from the stipulation, the legal interest 6% or now 12% .
greatest possible. - Same principle with 1794 every partner is responsible to the
 Art. 1787 When the capital or a part thereof which a partner is partnership for damages suffered through his fault and justified
bound to contribute consists of goods, their appraisal must be by the contract of partnership.
made in the manner prescribed in the contract of part, and in  ART. 1789 An industrial partner cannot engage in business for
the absence of stipulation, it shall be made by the experts himself, unless the partnership expressly permits, and if he
chosen by the partners, according to the current prices, the should do, the capitalist partner may either exclude him from
subsequent changes thereof being for the account of the the firm or avail themselves of the benefit which he may have
partnership. obtained in violation of this provision, with a right of damages
in either case.
 APPRAISAL OF GOODS OR PROPERTY CONTRIBUTED
 OBLIGATIONS OF INDUSTRIAL PARTNER
1. Need for appraisal- appraisal of the value is necessary to
- The one who contributes his industry, labor or services.
determine how much has been contributed by the
- Owner of his services, which are his contribution to the
partners.
common fund
a. In the absence of stipulation, share of every partner in P/L - Unless the contrary is stipulated, he becomes a debtor of the
is in proportion to what they may have contributed. (1797) partnership for his work or services from the moment of the
b. The appraisal is made firstly, manner prescribed by the commencement of the part.
contract, secondly, in the absence of stipulation, expert - The partnership acquires an exclusive right to avail itself of his
chosen by the partners and according to current prices. industry.
- If he engages in business for himself, such act is prejudicial to 3. Capitalist refuses (deliberately not because of his financial
the interest of the other partners. inability to do so)
 PROHIBITION AGAINST ENGAGING IN BUSINESS 4. There is no agreement that even in case of imminent loss the
1. As regard an industrial partner- prohibition is absolute and partners are not obliged to contribute
applies whether the industrial partner is to engage in the same
business in which the partnership is engaged or in any kind of Note: Industrial partner is exempted from the requirement to
business. contribute additional share. Having contributed his entire industry,
- Prevent conflict of interest between the industrial partner and he can do nothing further.
the partnership and to ensure faithful compliance with his  REASON FOR THE SANCTION
obligation - Refusal of the partner to contribute additional share reflects
2. As regard to the capitalist partners- prohibitions extends only lacks of interest in continuance of the part.
to any operation which of the same kind of business in which - Unjust for him to remain and reap the benefits of the efforts of
the partnership is engaged unless there is a stipulation to the others while he refuses to help.
contrary. - Remedy by both parties, since partner who refuses is paid the
 REMEDIES WHERE INDUSTRIAL PARTNER ENGAGES IN value of his interest, while other partners is relived from the
BUSINESS burden of continuing their association with him
- If the industrial partner engages in business for himself, without  ART. 1792 If a partner authorized to manage collects a
express permission of the partnership, the capitalist partners demandable sum, which was owed to him in his own name,
have the right either to exclude him from the firm or to avail from a person who owed the partnership another sums also
themselves of the benefits which he may have obtained. demandable, the sum thus collected shall be applied to the two
1. In either case, the capitalist partner has a right to damages. The credits in proportion to their amounts, even though he may
permission must be expressly given to exempt him from have given a receipt for his own credit only, but should he have
liability. given it for the account of the partnership credit, the amount
2. Though law mentions only capitalist partners, it is believed that shall be fully applied to the latter.
industrial partners are also entitled to the remedy granted since The provisions of this article are understood to be without
they are equally prejudice by the act of their co-partner prejudice to the right granted to the debtor by article 1252, but
engaging for himself. only if the personal credit of the partner should be more
 ART. 1790 Unless there is a stipulation to the contrary, the onerous to him.
partners shall contribute equal shares to the capital of the  OBLIGATION OF MANAGING PARTNER WHO COLLECTS DEBTS
partnership - A person may be indebted to the partnership and the managing
 EXTENT OF CONTRIBUTION TO THE CAPITAL partner at the same time.
- the partners can stipulate the contribution of unequal shares to - Any sum received by the managing partner shall be applied to
common funs, but in the absence of stipulation, the two credits proportion to their amounts
presumption is that contribution shall be in equal shares. - Exception is where managing partner received the sum for the
- Partners are deemed to have equal rights and obligations account of the partnership, in this case the whole sum shall be
(1770) applied to the partnership credit only.
- Above rule is not applicable to the industrial partner, unless  REQUISITES FOR APPLICATION OF RULE
besides his services, he has contributed to the capital pursuant - 2 debts exist, (1) where the collecting partner is a creditor (2)
to an agreement. partnership is the creditor
 ART. 1791 If there is no agreement to the contrary, in case of an - Both debts are demandable
imminent loss of the business, any partner who refuses to - Partner who collects is authorized to manage and actually
contribute an additional share to the capital except an manages the partnership
industrial partner, to save the venture, shall be obliged to sell  REASON FOR APPLYING PAYMENT TO PARTNERSHIP CREDIT
his interest to other partners
- the law safeguards the interest of the partnership by
 OBLIGATIONS OF CAPITALIST PARTNER TO CONTRIBUTE preventing the possibility of their being subordinated by the
ADDITIONAL CAPITAL managing partner to his own interest
- General rule, a capitalist partner is not bound to contribute to - he should not intentionally fail to effect the collections of the
the part. More than what he agreed to contribute. credit of the partnership in order to effect the collections of his
- However, if there is an imminent loss, and no agreement to the own
contrary, he is under obligation to contribute an additional - the article does not apply where the partner who collects for
share to save the venture. his own credit is not authorized to manage (no ground for
- If he refuses to contribute, he shall be obliged to sell his suspicion)
interest to other partners. - Manner of management is not agreed and all partners
 REQUISITES FOR APPLICATION OF RULE participate in the management of the partnership (every
Before a capitalist may be obliged to sell his interest to others; partner is considered managing partner)
 RIGHT OF DEBTOR TO APPLICATION OF PAYMENT
1. There is imminent loss - 2nd paragraph, the debtor is given the right to prefer payment
2. Majority of the partners are of the opinion that additional of the credit if it should be more onerous (burdensome) to him
contribution to common fund would save the business in accordance with his right to application of payment.
 ART. 1793 A partner who has received, in whole or in part, his the risk shall be borne by the partnership. In the absence of
share of partnership credit, when other partners have not stipulation, the risk of things brought and appraised in the
collected theirs, shall be obliged, if the debtor become insolvent, inventory, shall be borne by the partnership, and in such case
to bring to the partnership capital what he received even the claim shall be limited to the value at which they were
though he may have given receipt for his share only appraised

 OBLIGATIONS OF PARTNER WHO RECEIVES SHARE OF  RISK OF LOSS OF THINGS CONTRIBUTED

PARTNERSHIP CREDIT (diff. form ART 17922, 2 credits) - Determination of the risk of the things contributed to the part.
- In this article there is only one credit- credit in favor of the 1. Specific and determinate things which are not fungible where
partnership only the use is contributed- the risk is borne by the partner
- This article applied whether the partner who received his share since he remains the owner of the thing (car)
of the partnership credit is authorized to manage or not. 2. Specific and determinate things ownership of which is
 REQUISITES FOR APPLICATION OF RULE transferred to the partnership- the risk is on the partnership,
- A partner received whole or in part his share of the partnership being the owner
credit 3. Fungible things or things which cannot be kept without
- Other partners have not collected their shares deteriorating even if they are contributed only for the use of the
- Partnership debtor becomes insolvent partnership- risk of loss is borne by the partnership for the
ownership is transferred since the use is impossible without
Reason for imposing obligation to return being consummated or impaired.
- Fungible things of which any unit is, from its nature or by
- Based on the community of interest among partners, one mercantile usage, treated as the equivalent of any other unit
principle of the contract of partnership (oil, wine, rice)
 ART. 1794 Every partner is responsible to the partnership for 4. Things contributed to be sold- partnership bears risk of loss, for
damages suffered by it through his fault, and he cannot the partnership is the intended owner, otherwise the
compensate them with profits and benefits which he may have partnership could not affect the sale
earned for the partnership for his industry. However, the courts 5. Things brought and appraised in the inventory- partnership
may equitably lessen this responsibility if through the partner’s bears the risk of loss. Because the intention of the parties was
extraordinary efforts in other activities of the partnership, to contribute to the partnership the price of the things
unusual profits have been realized contributed with an appraisal in the inventory. Implied sale
 OBLIGATION OF PARTNER FOR DAMAGES TO PARTNERSHIP making the partnership the owner of said things.
- This rule applicable to all contract, that any person guilty of - The above presuppose that the things contributed have been
negligence or fault in fulfillment of his obligations shall be liable delivered actually or constructively to the partnership. Before
for damages delivery, risk of loss is borne by the partner.
- Partner’s fault must be determined in accordance with the - If the loss is due to the fault of any of the partners, he shall be
nature of the obligation and the circumstances of the person, liable for damages to the partnership. (Art 1794)
time, and place.  ART. 1796 The partnership shall be responsible to every partner
 COMPENSATION FOR DAMAGES WITH PROFITS EARNED FOR for the amounts he may have disbursed on behalf of the
PARTNERSHIP BY GUILTY PARTNER partnership and for the corresponding interest, from the time
1. Damages not generally subject to set-off- damaged caused by a the expenses are made; it shall also answer to each partner for
partner cannot be compensated or offset by the profits or the obligations he may have contracted in good faith in the
benefits which he may have earned by his industry in the part. interest of the partnership business, and for risks in
a. The partner has the obligations to secure the benefit of consequence of its management.
the partnership.  RESPONSIBILITY OF PARTNERSHIPS TO PARTNERS
b. Obligation to exercise diligence in the performance of his - In the absence of stipulation, every partner is an agent of the
obligation. Debtor to the partnership for his industry, and part. Hence, the obligations of the partnership to every partner
is obliged to repair injury through his fault cannot be 1. To refund amounts disbursed by him in behalf of the
solved in compensation partnership (advances for partnership debts due and payables)
c. Compensation requires that the negligent partner be both plus the corresponding interest from the time the expenses are
creditor and debtor of the partnership made (not from date of demand) Law refers to the loan or
2. Exception- if unusual profits are realized through extraordinary advances made by a partner to the partnership other than
efforts of the partner at fault, the court are authorized to capital contributed by him
equitably mitigate or lessen his liability. (Even in this case 2. To answer for the obligation (purchase price of supplies needed
partner at fault is not allowed to compensate damages suffered by the partnership)
by the profits earned) 3. To answer for risks (loss of his property, accidents) in
 ART. 1795 The risk of specific and determinate things, which are consequence of its management
not fungible, contributed to the partnership so only their use
and fruits may be for common benefit, shall be borne by the Being a mere agent, the partner is not personally liable, however he
partner who owns them. is free from all fault and he acted within the scope of his authority

If the things contributed are fungible, or cannot be kept  ART 1797 The losses and profits shall be distributed in
without deteriorating, or if they were contributed to be sold, conformity with the agreement. If only the share of each
 partner in the profits has been agreed, the share of each in  ART. 1799 a stipulation which exclude one or more partners
losses shall be in same proportion. from any share in the P/L is void.
In the absence of stipulation, the share od each partner in  STIPULATION EXCLUDING A PARTNER FROM ANY SHARE IN
profits and losses shall be in proportion to what they have P/L
contributed, but the industrial partner shall not be liable for the 1. Stipulation generally void, but partnership subsists- law does
losses. As for the profits, the industrial partner shall receive not allow a stipulation excluding a partner from any share in
such share as may be just and equitable. If, besides his services the P/L
he has contributed capital, he shall also receive a share in the - The partnership must exist from the common benefit of the
profits in proportion to his capital. partners, hence such agreement contravene the very purpose
of a partnership contract. (Profit sharing among partners)
 RULES FOR DISTRIBUTION OF PROFITS AND LOSSES - Though the stipulation is void, the partnership is valid, subsists
- This article and the 2 succeeding ones regulate the distribution and the P/L shall be apportioned as if there were no stipulation.
of profit and loss among partners 2. Stipulation, a factor to show no partnership exists- parties
1. Distribution of profits: expressly stipulates that there shall be no liability for losses, or
a. The partners share the profits according to their agreement from the nature of the contract, it is clear that a party did not
subject to Art. 1799 intend to share in the losses, such fact may be a factor in
b. If there is no such agreement: determining that no partnership exists.
1) The share of each capitalist partner shall be in proportion 3. Partner excluded is industrial partner- law itself excludes him
to his capital contribution. (Presumed will of the partners from the losses. A stipulation exempting him from the losses is
2) The industrial partner shall receive such share, which must valid.
be satisfied first before the capitalist partners shall divide 4. Stipulation provides for unequal shares- the limitation does not
the profits, as may be just and equitable. The share of an mean that the partners cannot stipulate for unequal shares in
industrial partner in profits is not fixed since its difficult to the P/L even if their respective contributions are equal, unless
ascertain the value of the services of a person the equality is so gross that it may be simulated form or
2. Distribution of losses: attempt to exclude a partner from any share in P/L. Stipulation
a. The losses shall be distributed according to their agreement is VOID
b. If there is no agreement, but the contract provides share in  REASON FOR EXEMPTION OF INDUSTRIAL PARTNER FROM
the profits, the share in the losses shall be in accordance with LOSSES
the profit-sharing ratio, but industrial partner shall not be - Because he cannot withdraw the work or labor already done,
liable to losses. (P/L cannot be determined by taking into one unlike the capitalist partner who can withdraw their capital.
particular but of all transactions had) - If the partnership fails to realize any profit then he has labored
c. If there is no profit-sharing stipulated, losses shall be borne in vain and he has already contributed his share in the loss.
by the partners in proportion to their capital contributions,  ART. 1800 The partner who has been appointed manager in the
but the purely industrial partner shall not be liable for losses. articles of partnership may execute all acts of administration
 ART. 1798 If the partners have agreed to in trust to a third despite the opposition of his partners, unless acted in bad faith.
person the designation of the share of each one in the profits His power is irrevocable without just or lawful cause. The vote
and losses, such designation may be impugned only when it is of the partners representing the controlling interest shall be
manifestly inequitable. In no case may a partner who has begun necessary for such revocation of power
to execute the decision of the third person, or who has not A power granted after the partnership has been
impugned the same within a period of three months from the constituted may be revoked at any time.
time he had knowledge thereof, complain of such decision.  RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT
the designation of losses and profits cannot be in trusted to one - Unless the partnership agreement provides otherwise, each
of the partners. partner in a general partnership has a right to an equal voice to
 DESIGNATION OF SHARE IN PROFITS AND LOSSES BY A THIRD conduct and management.
PERSON - Right is not dependent on the amount of a partner’s capital
- The designation of the share in the P/L may be delegated to a contribution or services in partnership. The partners may also
third person by common consent select managing partner or make such allocation of functions
- This speaks of a third person, not a partner. Fulfillment of a
contract cannot be left to the will of one of the contracting Art. 1800 speaks of 2 cases of appointments
parties alone 1. Appointment as manager in the articles of partnership
- Prohibition in 2nd parag. Is necessary for utmost impartiality in - The partner appointed by common agreement in the Articles of
distribution. partnership may execute all acts of administration,
 BINDING FORCE OF DESIGNATION BY THIRD PERSON - notwithstanding the opposition of other partners unless acted
- The designation of 3rd person is binding unless manifestly in bad faith
inequitable - his power is revocable only upon just and lawful case and upon
- The partner who has begun to execute the decision of the third the vote of the partners representing the controlling interest
person or who fails to impugn the same within 3 months from - reason is that the revocation represents a change in the terms
the time he had knowledge, can no longer complain. of contract
- In such case the partner is deemed guilty of estoppel or to have - such appointment should not be revoked without the consent
given his consent or ratification of the designation. of all partners including the partner appointed.
2. Appointment as manager after constitution of the partnership 2. Respective duties specified- the decision of the partner
- Constituted independently of the articles of the partnership concerned shall prevail subject only to the limitation that he
may be revoke anytime for any cause. should act in good faith
- Reason is that the revocation is not founded on a change of will  REQUISITES FOR APPLICATION OF RULE
on the partners, the appointment not being a condition of the 1. 2 or more partners have been appointed as managers
contract 2. No specification of their respective duties
- Merely a simple contract of agency, which may be revoked at 3. No stipulation that one of them shall not act without the
any time. consent of all the others
- Vote for revocation must also represent controlling interest  ART. 1802 In case it should have been stipulated that none of
- As a rule an appointed partner is not entitled to compensation the managing partners shall act without the consent of the
of his service other than his share in profits. others, the concurrence of all shall be necessary for the validity
 SCOPE OF THE POWER OF A MANAGING PARTNER of the acts, and the absence or disability of any one of them
1. Appointed partner has all necessary and incidental powers to cannot be alleged, unless there is imminent danger of grave or
carry out the object of partnership irreparable injury to the partnership.
Unless expressly withheld:
a. A minor power to issue receipts (general power) business WHERE THE UNANIMITY OF ACTION STIPULATED
dealings  ART. 1803 When the manner of management has not been
b. The manager engaged in buying and selling is clothed with agreed upon, the following rules shall be observed:
sufficient authority even without the approval of other 1. All of the partners shall be considered agents and whatever any
partners to purchase on credit (since usual and customary) one of them may do alone shall bind the partnership, without
c. Has the authority to dismiss an employee with justifiable prejudice to the provisions of Article 1801
cause, after complying with the requirements prescribed by 2. None of the partners may, without consent of the others, make
law for terminating employment any important alteration in the immovable property of the
2. Exceptions- when the power is specifically restricted or partnership, even if it may be useful to the partnership. But if
expressly withheld. A managing partner cannot exercise powers the refusal of consent by the other partners is manifestly
which are neither necessary or incidental to carry out the prejudicial to the interest of the partnership, the court’s
object intervention may be sought.
- a managing partner may not bind the partnership by a contact
wholly foreign to its business. He has no authority to execute a RULES WHEN MANNER OF MANAGEMENT HAS NOT BEEN AGREED
mortgage on the firm’s property, for the firm is not liable. UPON
 COMPENSATION FOR SERVICES RENDERED
1. Partners generally not entitled to compensation- In the absence  ART. 1804 Every partner may associate another person with
of agreement, no partner is entitled to compensation of his him in his share, but the associate shall not be admitted into the
services without the consent of all partners partnership without the consent of all other partners, even if
- Helping managing the partnership affairs is taking care of his the partner having an associate should be a manager.
own interest CONTRACT OF SUB-PARTNERSHIP
2. Exception: it can be implied from the circumstances that the
partners intended a partner to receive an additional  ART. 1805 The partnership books shall be kept, subject to any
compensation for beyond normal functions or in capacity other agreement between the partners, at the principal place of
than of a partner business of the partnership, and every partner shall at any
 ART. 1801 If two or more partners have been in trusted with the reasonable hour have access to and may inspect and copy any
management of the partnership without specification of their of them.
respective duties, or without stipulation that one of them shall
not act without the consent of all others, each one may DUTY TO KEEP THE PARTNERSHIP BOOKS
separately execute all acts of administration, but if any of them  ART. 1806 Partners shall render on demand true and full
should oppose the acts of the others, the decision of the information of all things affecting the partnership to any
majority shall prevail. In case of a tie, the matter shall be partner or the legal representative of any deceased partner or
decided by the partners owning the controlling interest of any partner under legal disability.
 POWERS OF 2 OR MORE MANAGING PARTNERS
1. Respective duties are unspecified- each of one may separately DUTY TO RENDER INFORMATION
perform acts of administration
a. If one or more of the managing partners shall oppose the acts  ART. 1807 Every partner must account to the partnership for
of the others, then the decision of majority shall prevail. any benefit, and hold as trustee for it any profits derived by him
- Note: the right to oppose can be exercise only by those without the consent of the other partners from any transaction
entrusted with the management and not by any partner connected with the formation, conduct, or liquidation of the
b. In case of tie, the matter shall have to be decided by the vote of partnership or from any use by him of its property.
the partners owning the controlling interest, that is more than PARTNER ACCOUNTABLE AS FIDUCIARY
50% of capital investments
 ART. 1808 The capitalist partner cannot engage for their own
account in any operation which is of the kind of business in
 which the partnership is engaged, unless there is a stipulation
to the contrary
Any capitalist partner violating this prohibition shall bring
to the common fund any profits accruing to him from his
transactions, and shall personally bear all the losses.

RIGHTS OF CAPITALIST PARTNER TO ENGAGE IN BUSINESS

 ART. 1809 Any partner shall have the right to a formal account
as to partnership affairs:
1. If he is wrongfully excluded from the partnership business
or possession of its property by his co-partners
2. If the right exists under the terms of any agreement
3. As approved by Art 1807
4. Whenever other circumstances render it just and
reasonable

RIGHT OF PARTNER TO FORMAL ACOCUNT