COMPREHENSIVE REVIEWER

COVERAGE
PARTNERSHIP & PARTNERSHIP LAWS
 CHAPTER 1: GENERAL PROVISIONS
Partnership - 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 profits among themselves. (Art. 1767)

Who?
2 or more Persons
What?
Contribute on the same fund using
*Money
*Property
*Industry

Why?
To divide profit among themselves.

Distinction of Partnership, Co-Ownership and Corporation in Terms

of the following
Distinction Partnership Co-Ownership Corporation
Created by a
contract, by
Creation Created by Law Created by Law
mere agreement
of parties
Has a juridical Has a juridical
Personality personality
Juridical separate and separate and
None
Personality Distinct from distinct from
That of each that of each
Partner partner
Common Enjoyment
Realization of Common Enjoyment
Purpose of a right or
Profits of Rights
thing
50 years and
extendible by
Duration/ Term another 50 years
No Limit 10 years Maximum
of Existence depending from
Articles of
Incorporations
Stockholder has
a right to
Transferability Co- Owner may transfer shares
Disposal
of Interest freely do so without prior
consent of other
stockholders
In Absence of
Stipulation to
contrary, a Management is
Co-Owner cannot
Power to Act Partner may bind vested with the
represent the
with 3rd Person partnership Board of
co-ownership
(Each partner is Directors
agent of
Partnership)
Death of co-
Death of partner Death of
owner does not
results in stockholder does
Effect of Death necessarily
Dissolution of not dissolve
dissolve co-
Partnership corporation
ownership
May be dissolved May be dissolved
Can only be
at any time by anytime by the
dissolved with
Dissolution the will of any will of any or
the consent of
or all of the all of the co-
the state
partners owners
No. of Minimum of 2 Minimum of 2 Minimum of 5
Incorporators persons persons incorporators
From date of
From the moment
Commencement of issuance of
of execution of
Juridical None certificate of
contract of
Personality incorporation by
partnership
the SEC
NO PRESUMPTION OF PARTNERSHIP FROM RECEIPT OF PROFITS:

1.    As debt by installment

2.    As wages or rent

3.    As annuity

4.    As interest on loan

5.    As consideration for sale of goodwill of business/other property

by installments

SIMILARITIES BETWEEN A PARTNERSHIP AND A CORPORATION

1.    Both have juridical personality separate and distinct from that of
the individuals composing it

2.    Both can only act through agents

3.    Both organizations are composed of an aggregate of individuals

(except corporation sole)

4.    Both distribute profits to those who contribute capital to the

business

5.    Both can only be organized when there is a law authorizing their
organization

6.    Both are taxable as a corporation

EFFECTS OF UNLAWFUL PARTNERSHIP

1.    The contract is void ab initio and the partnership never existed
in the eyes of the law

2.    The profits shall be confiscated in favor of the government

3.    The instruments or tools and proceeds of the crime shall also be
forfeited in favor of the government.
 
4.    The contributions of the partners shall not be confiscated unless
they fall under no. 3
 

FORM OF PARTNERSHIP CONTRACT  

GENERAL RULE: No special form is required for the validity of the
contract

EXCEPTIONS:

1.     Where immovable property/real rights are contributed

a.    Public instrument is necessary

b.    Inventory of the property contributed must be made, signed by the

parties and attached to the public instrument otherwise it is VOID

2.     Where capital is P3,000 or more, in money or property

a.    Public instrument is necessary

b.    Must be registered with SEC

CLASSIFICATIONS OF PARTNERSHIP  
1.      As to extent of its subject matter

1. UNIVERSAL PARTNERSHIP

i.      UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY - comprises

the following:

a)  Property which belonged to each of the partners at the time of

the constitution of the partnership

b)    Profits which they may acquire from all property contributed

ii.    UNIVERSAL PARTNERSHIP OF PROFITS - comprises all that the

partners may acquire by their industry or work during the
existence of the partnership

Note: Persons who are prohibited from giving donations or

advantage to each other cannot enter into a universal partnership
 
 1. PARTICULAR PARTNERSHIP - has for its objects:
i.      Determinate things

ii.     Their use or fruits

iii.    Specific undertaking

iv.   Exercise of profession or vocation

2.As to liability of partners

1. GENERAL PARTNERSHIP - consists of general partners who are liable

pro rata and subsidiarity and sometimes solidarity with their
separate property for partnership debts

1. LIMITED PARTNERSHIP - one formed by 2 or more persons having as

members one or more general partners and one or more limited
partners, the latter not being personally liable for the
obligations of the partnership

3.    As to duration

1. PARTNERSHIP AT WILL - one in which no time is specified and is

not formed for a particular undertaking or venture which may be
terminated anytime by mutual agreement

1. PARTNERSHIP WITH A FIXED TERM - the term for which the

partnership is to exist is fixed or agreed upon or one formed for
a particular undertaking

4.      As to legality of existence

1. DE JURE PARTNERSHIP - one which has complied with all the legal
requirements for its establishment
 1. DE FACTO - one which has failed to comply with all the legal
requirements for its establishment

5.    As to representation to others

1. ORDINARY OR REAL PARTNERSHIP - one which actually exists among

the partners and also as to 3rd person.

1. OSTENSIBLE OR PARTNERSHIP BY ESTOPPEL - one which in reality is

not a partnership but is considered a partnership only in
relation to those who, by their conduct or omission, are
precluded to deny or disprove its existence

6.    As to publicity

1. SECRET PARTNERSHIP - one wherein the existence of certain persons

as partners is not avowed or made known to the public by any of
the partners

1. OPEN OF NOTORIOUS PARTNERSHIP - one whose existence is avowed or

made known to the public by the members of the firm

7. As to purpose

1. COMMERCIAL OR TRADING PARTNERSHIP - one formed for the

transaction of business

1. PROFESSIONAL OR NON-TRADING PARTNERSHIP - one formed for the

exercise of a profession
CHARACTERISTICS:
1. Consensual
- Perfected by MERE CONSESNT
- Upon the express or IMPLIED AGREEMENT
- Not necessarily in Writing
2. Nominate
- Has a special name
- i.e. Contract of Sale
3. Bilateral
- Entered into by 2 or more person
- RIGHTS and OBLIGATIONS are ALWAYS RECIPROCAL
4. Onerous
- Benefit Through giving of something
- MUST HAVE A CONTRIBUTION
5. Commutative
- Undertaking of each partner is considered equivalent of
others
- ALL EQUAL
6. Principal
- It does not depend for its existence upon some other
contract
- Meaning it is an independent contract
7. Preparatory
- Entered into as a means to an end
- Perfect example is REALIZATION OF PROFITS

FIDUCIARY IN NATURE
- Partnership is a form of voluntary association entered into
by the associates
- It is a personal relation In which the element of Delectus
Personaae exists (TRUST and CONFIDENCE)
1. Right to choose co partners
- No one can become a member of the partnership without the
consent of all
2. Power to dissolve partnership
- Mutual agency arises and the doctrine of delectus personane
allows them to have the power to dissolve; MUST ACT IN GOOD
FAITH
ESSENTIAL FEATURES OF PARTNERSHIP
Essential Features:
1. There must be a valid contract.
- Creation and proof of existence – may be informally created,
existence provided by the conduct or acts or parties.

a. Articles of Partnership – embody with the terms of

association in a written document.
b. Element of contract – CONSENT, OBJECT, CAUSE
c. Other forms of Association EXCLUDED – EXCLUDES FROM ITS
CONCEPT all other associations which do not have their
origin in contract
2. Must have Legal capacity to enter into a contract
I. GENERAL RULE: Parties have the necessary legal
capacity to enter into a contract
II. CANNOT GIVE THEIR CONSENT:
1. Emancipated Minors
2. Insane/demented Persons
3. Deaf mutes who do not know how to write
4. Person who are suffering from Civil Interdiction
5. Incompetents who are under guardianship
III. EXCEPTION: Persons who are prohibited from giving
each other any donation cannot enter into a
universal partnership
IV. No prohibitions against a partnership being a
partner in another partnership. A corporation is
without capacity to enter into a contract of
partnership.
3. There must be a mutual contribution of money, property, or
industry to a common fund
I. NO MUTUAL CONTRIBUTION NO PARTNERSHIP
II. Legal Tender – Medium of payment recognized by the
law to use extinguish private or public debt
III. PROPERTY: Capable of being appropriated
1. Real (Immovable) – land
2. Personal (Movable)
IV. TANGBILE/Touchable
V. INTANGIBLE – ex. Intellectual property (Patent,
Trademark, Copyright and Goodwill)
4. Object must be LAWFUL
I. EFFECT OF ILLEGALITY – The object unlawful when it
is contrary to law, morals, good customs, public
order or public policy
Business Partnership not permitted to engage in:
Kay not engage in an enterprise for which the law
requires a specific form of business,
5. The primary purpose should be to obtain profit and divide among
themselves.
Sufficient if obtaining profit principal purpose:
Profit need not be the exclusive aim, sufficient that is it the
principal purpose

SHARING OF PROFITS
NOT NECESSARILY IN EQUAL SHARES: Necessary that there be an
intention of dividing profits among the members, not necessarily
in equal shares; there must be a join interest in the profits

NOT CONCLUSIVE EVIDENCE OF PARTNERSHIP: Merely presumptive and

not conclusive

SHARING OF LOSSES: Necessary corollary of sharing in profits: the

right to share in the profits carries with the obligation to
share also in the losses.

AGREEMENT NOT NECESSARY: Not necessary for the parties to agree

upon a system of sharing.

ARTICLE 1768
- Partnership has a Juridical Personality separate and
distinct from partners
SEPARATE JURIDICAL PERSONALITY

- Recognized as a legal person

- May Acquire and Possess property of all kinds and INCUR
OBLIGATIONS.
ARTICLE 1769

- DETERMINING WHETHER A PARTNERSHIP EXISTS,

- These rules shall apply:
I. Person who are not partners as to each other are
not partners as to third person (ESTOPPEL)
 Admission and misrepresentation
rendered conclusive
 Misled third persons or parties into
believing that the former are partners
in a non-existing partnership
 Cannot take it back
II. Co-ownership or Co-possession does not of itself
establish a partnership
 Can be surrendered
III. Sharing of Gross returns does not of itself
establish a partnership.
 It does not indicate a partnership, it
should be the profits
 Net returns creates an interference
that there is a partnership (Sharing
of profit and loss)
IV. Receipt by a person of a share of the profit is
prima facie evidence but no such interference shall
be drawn if profits were received as payment
A. Debt by installment
B. Wages of an Employee
C. Annuity to a widow
D. Interest on a loan
E. Sales of Goodwill
 SHARING OF PROFITS IS NOT A PRIMA
FACIE EVIDENCE THAT HE IS A PARTNER IN
THE BUSINESS (under subparagraph A, B,
C, D, E, F above)
- PRIMA FACIE: FIRST IMPRESSION IS WHAT YOU SEEM TO BE THE
TRUTH
Co-ownership
The ownership of an undivided thing or
right belongs to different persons
As to: Partnership Co Ownership
Always with May exist without
Creation
contract contract
Juridical
Yes None
personality
Purpose Profit Common enjoyment
Not more than 10
Duration No limitation
years
Disposal of
May not dispose Can dispose
interest
Power to
act with May bind the
Cannot represent co-owner
third partnership
person
Effect of Not necessarily
Dissolve
death dissolve

Conjugal Partnership of Gains

Partnership formed by the marriage of husband
and wife by virtue of which they place in a
common fund the fruits and income from their
separate properties and those acquired through
their efforts or chance
CONJUGAL PARTNERSHIP OF
AS TO: PARTNERSHIPP
GAINS
Parties Any gender Man and woman
Stipulation
Laws which govern of the Governed by law
parties
Juridical
Yes None
personality
Execution of
Commencement Marriage
contract
Purpose Profit Regulate property
Distribution of According to
Divided equally
profits agreement
Husband decision
Management Equally
prevails
Disposition of May be Cannot be
shares disposed disposed
Voluntary Association
Organized for social purposes (social clubs,
committee, fraternal societies)
AS TO: PARTNERSHIP ASSOCIATION
Juridical
Yes None
personality
Objective
Pecuniary
Purpose is
profit
lacking
Contribution
of Capital Fees
members
Liability of Liable for
Depends
members debts

ART 1770
A partnership, must have a lawful object and must be established for
the common benefit of the partners
EFFECTS OF UNLAWFUL PARTNERSHIP
1. Contract is VOID
2. Profits shall be CONFISCATED in favor of the
government
3. The instruments or tools and proceeds of the
crime shall be FORFEITED
4. CONTRIBUTIONS OF THE PARTNERS shall NOT BE
CONFISCATED unless part of the crime.

ART 1771

- A partnership may be constituted in any form EXPECT where

IMMOVABLE property or real rights are contributed in which a
public instrument SHALL be necessary.
ART.1772

- Capital of 3000 or more must be registered in SEC

- NOT AN ABSOLUTE RULE
- ONLY A GENERAL RULE
- EXCEPT
- IMMOVABLE PROPERTY CONTRIBUTED
- 3000php or MORE CAPITAL

ART. 1773

- Partnership is void if not inventory must be signed and

attached to the public instrument (ISAP)
PUBLIC INSTRUMENT

- Written Contract
- Authorized by the public office (NOTARIZED)
INVENTORY meaning in Partnership

- List of items of immovable property contributed

- Signed by the partners attached to the public instrument
- REGISTERED IN SEC
Exceed 3k, no registration

- Not prevent the formation of partnership

- No Effect on as to third person
- The reason why is it there? * to ENABLE OTHERS TO REGISTER
ART. 1774

- Acquired in partnership name, conveyed only in partnership

name
ART. 1775

- Associations and societies, whose articles are kept secret

among the members, and wherein, anyone of the members may
contract in his own name with third persons, shall have no
SJP
- Articles of partnership kept secret is NOT CONSIDERED AS A
PARTNERSHIP
ART. 1776

- Classification of partnership EXTEND OF ITS SUBJECT MATTER

1. OF ALL PRESENT PROPERTY
 CONTRIBUTE ALL OF THEIR PROPERTY
 PROFITS THEY ACCRUED
2. For Profit
 SUBJECT OF CONTRIBUTION; profit
 TRANSFER: right of the property, to
use it.
LIABILITIES OF PARTNERS
GENERAL PARTNER

- NEED ATLEAST 1 GENERAL PARTNER TO PARTNERSHIP

- LIAB extends to PERSONAL PROPERTY
LIMITED PARTNER

- Partner in a limited partnership

- LIAB only extends to its CONTRIBUTION ONLY
DURATION
De Jure- Complied with all legal documents.
De facto- Failed to comply

REPRESENTATION
Ordinary/real – existing among partners
Ostensible – Estoppel
PUBLICITY
Secret – Not known to public, active
Open – made known to public
PURPOSE
Commercial (Trading) - Business i.e (Merchandising, Suppliers
and such)
Professional (Non – Trading) – Profession i.e (Lawyers, Doctors
and etc)
KINDS OF PARTNERS
CAPITALIST PARTNER – Contributes money
INDUSTRIAL PARTNER – Contributes Industry
GENERAL PARTNER – Liabilities extends to capital contribution
LIMITED PARTNER – Liability limited only to extend of capital
contribution
MANAGING PARTNER - Manages the affairs of the partnership
SILENT PARTNER- Not active, known as a partner
SECRET PARTNER – Active, not known
DORMANT PARTNER – Not active, Not known
ART. 1777

- UNIVERSAL PARTNERSHIP – To all present property or to all

the profits
ART, 1778

- ALL PRESENT PROPERTY

- Contributes property
- DIVIDE PROFITS
ART. 1779

- All present property becomes the common property of all the

partners as well as profits
- FUTURE PROPERTIES CANNOT BE CONTRIBUTED
- Inheritance, legacy and donation
- Or Any guarantee that property will go to you or be in your
possession
ART. 1780

- UNIVERSAL PROPERTY OF PROFITS – comprises all that the

partners may acquire their industry
- Or work during the existence of the partnership
- OWNERSHIP of present and future property
- Partners retains their ownership
- Profits acquired by chance: lotter is not included and it
must be from work
ART. 1781

- Not specified which universal

- Profit
- WHY?: less obligations
ARTI. 1782

- Person who are prohibited from giving each other any

donation cannot enter into a universal partnership
- EXAMPLE
 PARTNERSHIP
 HUSBAND LAWYER
 WIFE ENGINEER
- Not allowed: they have different undertakings or ethical
considerations involved that could make some trouble
- Husband and wife – particular partnership
- Donation shall be void if guilt of adultery, guilty of same
crime or a public officer (virtue: position in office)
ART. 1783

- Particular partnership determinate thing, profession

CHAPTER 2 OBLIGATIONS OF PARTNERS

ART. 1784

- Partnership BEGINS from the MOMENT OF THE EXECUTION OF

CONTRACT, unless otherwise stipulated.
- COMMENCEMENT OF PARTNERSHIP
- Consensual contract
- Necessary and ESSENTIAL REQUISITES
- EXECUTORY AGREEMENT OF APRTNERSHIP
 Future partnership – may stipulate
some other date
 Agreement to create partnership –
agreement remains executory, no
partnership still exists
 Failure to agree on material items –
may prevent any rights/obligations
ART. 1785

- FIX TERM/ PARTICULAR UNDERTAKING – continued after the

termination without express agreement
- Rights and duties of partners stay the same

Continuation of the business by the partners without the

settlement/liquidation is prima evidence of continuation

EXPIRATION OF THE TERM – INDICATES AUTOMATIC DISSOLUTION

FIXED TERM/ PARTICULAR UNDERTAKING is automatically

DISSOLVED and turns into a partnership at will
ART. 1786

- EVERY PARTNER IS A DEBTOR OF THE PARTNERSHIP for whatever he

may HAVE PROMISED to contribute.
- He shall be bound for warrant in case of eviction of
specific things
- Promise to contribute 1 Million todays and was Contributed 2
years from today NO DEMAND WAS NECESSARY
- demand triggers delay (dito hindi)
the moment demand is not needed, delay begins,
liable for damages.
 Effect of failure to contribute property
promised
1. Liability as debtor to partnership –
mutual contribution to a common
fund is the essence of the contract
of partnership
ART.1787

- Bound to contribute goods

- Appraisal must be made in the manner prescribed in the
contract of partnership
- In absence of stipulation, it shall be made by experts
- Appraisal of the value of the good contributed is necessary
to determine how much has been contributed by the partners

Immovable property – appraisal is made in the inventory

ART. 1788

- 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.
- Same rule applies when he may have taken from the
partnership

2 distinct cases:
Money promised but not given
Personal use (Use for himself)

Guilty partner is liable for both interest and damages from the time
he should have complied with this obligation
Indemnity for damages shall only be the payment
Without stipulation, legal interest of 6%
ART.1789

- Industrial partner (Contributes industry/service) cannot

engage in business for himself
- Unless the partnership expressly permits to Capitalist
partners may exclude him from the firm or avail benefits
Industrial partner
- Cannot engage in the same business in which the partnership is
engaged or in any kind of business
Capitalist partner
- Cannot engage to any operation which of the same kind of business
If industrial partner engages
- Capitalist partner have the right to exclude him from the business
- Avail themselves of the benefits
- Capitalist have a right to damages

ART.1790

- Unless there is a stipulation, partners shall contribute

equal shares
- Partners can stipulate of unequal shares
ART.1791

- If no agreement, in case on imminent loss,

- any partner who refuses shall be obliged to sell his
interest to the other partners.
- Because it reflects the lack of interest to continue the
partnership.
ART. 1792

- Partner authorized to manage collects a demandable sum

- Owed to him in his name
- From a person who owed the partnership another sum
- The sum collected shall be applied to the two credits in
proportion of the amounts
- If given to the partnership, amount shall be fully applied
to the latter
ART. 1793

- - A partner who has received his share in partnership credit

when others have not yet collected, is obliged to bring to
the partnership capital when the debtor
becomes insolvent
- receive from debtor of partnership, 90k, 3 partners
including you, instead of bring money to partnership you
took 30k (U Bad men)
- allowed to do: no
- General Provision: everything that you receive on behalf of
the partnership, you must return to the partnership (art
1807) because it belongs to the partnership.
WRONGFUL ACT OR OMISSION OF A PARTNER
The partnership is solidarily liable with the partner if the
wrongful act or omission was done.
– The partner is acting in the ordinary course of business of the
partnership,
– With authority of his co-partners
WHEN THE FIRM AND OTHER PARTNERS NOT LIABLE
1. If the wrongful act or omission is DONE
– Outside the scope of partnership business
– Without 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
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 TO 3RD PERSON
1. Partnership is liable even if partner acted within the scope of
his authority to 3rd person who suffered losses thru:
– Misappropriation by a partner of the money or property received
from a 3rd person
– Misappropriation by a partner of the money or property of a 3rd
person under the custody of the partnership.
All partners are solidarily liable with the partnership to 3rd
persons for any wrongful act or omission, or breach of trust
committed by a partner acting within the scope of his apparent
authority, or with the authority of his co-partners.
ESTOPPEL
Estoppel is a bar which precludes a person from denying or
asserting anything contrary to what has been established as the
truth by his own deed or representation.
WHEN A PERSON IS A PARTNER IN ESTOPPEL
A person may become a partner by estoppel and thus be held liable
to 3rd persons as if he were a partner, when by words or conduct he:
a) Directly represents himself to anyone as a partner in an
existing partnership or in a non-existing partnership or
b) Indirectly represents himself by consenting to another
representing him as a partner in an existing partnership or in a non-
existing partnership.

PREFERENCE OF PARTNERSHIP CREDITORS Rule: (Art 1827)

1. The creditors of the partnership shall be preferred as
regards the partnership property.
2. The creditors of individual partners may ask for attachment and
public sale of the partner’s share in the partnership
3. The purchaser at the public sale does not become partner

DISSOLUTION, WINDING UP, TERMINATION

Dissolution – change in the relation of the partners caused by any

partner ceasing to be associated in the carrying on of the business;
partnership is not terminated but continues until the winding up
of partnership affairs is completed
Winding Up – process of settling the business or partnership affairs
after dissolution
Termination – that point when all partnership affairs are completely
wound up and finally settled. It signifies the end of the partnership
life

CAUSES OF DISSOLUTION
1. Without violation of the agreement between the partners
a. By termination of the definite term/ particular undertaking
specified in the agreement
b. By the express will of any partner, who must act in good
faith, when no definite term or particular undertaking is
specified.
c. By the express will of all the partners who have not assigned
their interest/ charged them for their separate debts, either
before or after the termination of any specified term or
particular undertaking
d. By the bona fide expulsion of any partner from the business
in accordance with power conferred by the agreement
2. In contravention of the agreement between the partners, where
the circumstances do not permit a dissolution under any other
provision of this article, by the express will of any partner at
any time
3. By any event which makes it unlawful for business to be carried
on/for the members to carry it on for the partnership
4. Loss of specific thing promised by partner before its delivery
5. Death of any partner
6. Insolvency of a partner/partnership
7. Civil interdiction of any partner
8. Decree of court under art 1831
GROUNDS FOR DISSOLUTION BY DECREE OF COURT (Art 1831)
1. Partner declared insane in any judicial proceeding or shown to
be of unsound mind
2. Incapacity of partner to perform his part of the partnership
contract
3. Partner guilty of conduct prejudicial to business of partnership
4. Willful or persistent breach of partnership agreement or conduct
which makes it reasonably impracticable to carry on partnership
with him
5. Business can only be carried on at a loss
6. Other circumstances which render dissolution equitable
IN CASE OF PURCHASER OF PARTNER’S INTEREST The Purchaser may
ask for dissolution:
o After the termination of the specified term or particular
undertaking
o AT ANY TIME, if the partnership was a “partnership at will” when
the interest was assigned or when the charging ordered was issued

EFFECT OF DISSOLUTION Rule: (Art 1832)

o When the firm is dissolved, a partner can no longer bind the
partnership
o 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 its debts

DISSOLUTION CAUSED BY ACT, DEATH, OR INSOLVENCY

General Rule:
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
o if dissolution by ACT
– the partner acting for the partnership HAD KNOWLEDGE of the
dissolution OR
o 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
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 as 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
WHEN IS THE PARTNERSHIP NOT BOUND
1. When the firm is dissolved because it has become UNLAWFUL except
for acts of winding up
2. When partner who acted became INSOLVENT

EFFECT OF DISSOLUTION ON PARTNER’S EXISTING

LIABILITY Rule:
The dissolution of the partnership does not itself discharge the
“existing liability” of any partner
Except if there is an Agreement Between
= partner concerned = other partners = creditors
LIABILITY OF ESTATE OF DECEASED PARTNER 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 firm’s dissolution
MANNER OF WINDING UP
1. Judicially – under the control and direction of the proper court
upon cause shown by any partner, his legal representative, or his
assignee
2. Extra judicially – by the partners themselves without the
intervention of the court
PERSONS AUTHORIZED TO WINE UP THE AFFAIRS OF
PARTNERSHIP
1. The partners designated by the agreement
2. If no agreement, by all partners who have not wrongfully dissolved
the partnership, or
3. Legal representative of the last surviving partner who is not
insolvent
RIGHTS WHERE DISSOLUTION IS NOT IN CONTRAVENTION OF AGREEMENT
1. To have the partnership property applied to discharge the
partnership liabilities
2. To have the surplus, if any distributed to partner

RIGHTS WHERE DISSOLUTION IS IN CONTRAVENTION OF

AGREEMENT
1. Rights of Innocent Partners
a. To have partnership property applied for the payment of
partnership’s liability
b. To receive in cash his share in the surplus
c. To be indemnified for the damages caused by the guilty partner
d. To continue the business in the same name during the agreed term
of the partnership, by themselves or with others
e. To possess the partnership property should they agree to continue
2. Rights of Guilty Partner
a. To have partnership property applied for the payment of
partnership’s liability
b. To receive in cash his share in the surplus less damages caused by
his
wrongful dissolution
c. If the business is continued, to the save the value of his interest
at the
time of dissolution ascertained and paid in cash, or secured by a bond
approved by court
d. To be released from all existing and future obligation of the
partnership
RIGHT OF PARTNER TO RESCIND CONTRACT OF
PARTNERSHIP
When a Partner is induced to enter into a Contract of Partnership
– By fraud or misrepresentation
– The contract is voidable or annullable
– Partner is entitled to restitution
RIGHTS OF INJURED PARTNER WHERE PARTNERSHIP
CONTRACT IS RESCINDED
1. Right to LIEN or RETENTION
– SURPLUS
– CAPITAL
– ADVANCES
2. Right of SUBROGATION – as creditor
3. Right of INDEMNIFICATION from guilty partner
ORDER OF PAYMENT IN WINDING UP PARTNERSHIP
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
PREFERENCE WITH RESPECT TO THE ASSETS
o regarding partnership property
–partnership creditors have preference
o regarding individual properties of partners
–individual creditors are preferred
RULE IF PARTNERS IS INSOLVENT
Order of Preference:
1. Individual or separate creditors
2. Partnership creditors
3. Those owing to other partners by way of contribution
INSTANCES WHEN CREDITORS OF THE DISSOLVED
PARTNERSHIP ARE ALSO CREDITORS OF THE PARTNERSHIP
CONTINUING BUSINESS
1. When a 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 retires without liquidation
4. When all partners 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

PARTNER’S RIGHT TO ACCOUNT OF HIS INTEREST Accrual of Right

– right to demand an accounting of the value of his interest
accruing after dissolution in the absence of stipulation to the
contrary
Person Liable to Render an Account
o The winding up partner
o The surviving partner
o The person or partnership continuing the business
LIMITED PARTNERSHIP
One formed by two or persons having as members one or more general
partners and one or more limited partners
Characteristics of Limited Partnership
1. A limited partnership is formed by compliance with statutory
requirements
2. One or more general partners control the business and are
personally liable to creditors
3. Limited partners contribute to the capital, share in the
profits, not participate in the management and not liable
beyond capital contributions
4. The limited partners may ask for the return of their capital
contributions under the conditions prescribed by law
5. The partnership debts are paid out of the common fund and
the individual properties of the general partners
6. There is no prohibition against limited partner to engage in
business for himself
Purpose for Formation of Limited Partnership
1. To secure capital from others but still retain control of the
business
2. Share in profits of a business without risk of personal liability
GENERAL VS. LIMITED PARTNER
GENERAL LIMITED
As to liability Personally liable Liability extends
for only to capital
As to In the absence Do not share in
management of agreement, the management
all GPs have
equal rights in
As to May May contribute
contribution contribute money or property
only
As to money,
May not property,
be Freely assignable
assignment of assigned
As to firm name May appear in the May not appear in
firm name the firm name
As to Prohibited No such prohibition
prohibition from engaging in
the same
business
As to death, Dissolves the Does not dissolves
insolvency or patnership the partnership
insanity
As to creation Maybe constituted Needs compliance
in any form with requirements
of the law
As to General partners One or more
composition only general partners
and one or more
Firm name Any name Must have
“Limited” or “Ltd.”

REQUIREMENTS FOR FORMATION OF LIMITED

1. Signed and sworn certificate of
articles of limited partnership

2. Such certificate must be filed in the office of SEC

LIMITED PARTNER’S CONTRIBUTION
1. Money or property
2. If services are also contributed, partner will be considered
general and limited partner
3. Money contributed must be in cash or manager’s check
4. Must make the contribution prior to formation of the limited
partnership
5. Additional contribution maybe made after the formation of the
partnership
FIRM NAME OF LIMITED PARTNERSHIP
General Rule:
Surname of limited partner may not appear in the partnership name
Exception:
o If surname is also the surname of a general partner, or
o Such name is already being used prior to the admission of the
limited partner
LIABILITY FOR FALSE STATEMENT IN THE CERTIFICATE
In case of false statement in the certificate of partnership, any
partners who signed the certificate shall be liable subject to certain
requirements
Requirements:
o Partner knew the statement to be false at the time he signed the
certificates
o Having knowledge subsequently but failed to cancel or amend the same
within sufficient time
o 3rd person relies on such false statement in transacting with the
partnership
o Such 3rd person suffered loss as a result of reliance upon the false
statement
 PARTICIPATION OF LIMITED PARTNER IN THE
MANAGEMENT OF PARTNERSHIP
1. Limited partner shall be liable as general partner if he becomes
involved
in the management of the business
2. Limited partner shall not be liable as general partner if he takes
part in the settlement of the partnership’s affairs after its
dissolution
ADMISSION OF ADDITIONAL LIMITED PARTNER
Additional limited partner may be admitted after the formation of a
limited partnership by filing an amendment to the original certificate
in the office of SEC
RIGHTS, POWER, AND LIABILITIES OF GENERAL PARTNER IN
LIMITED PARTNERSHIP
General Rule:
o Control over the partnership business, in the absence of any
agreement to the contrary
o Bind the partnership in any act of administration
Exception:
o Act in violation of the certificate of agreement
o Acts prejudicial to the interest of the limited partners
o Admit a general or limited partner unless authorized in the
certificate
o Continue the partnership in case of death, retirement, insolvency,
insanity or civil interdiction of any general partners, unless
authorized
RIGHTS OF LIMITED PARTNERS
1. To require that the partnership books be kept at the principal
office of the partnership
2. To inspect and copy the partnership books at reasonable hours
3. To demand true and full information of all things affecting the
partnership
4. To demand a formal account of partnership affairs whenever
circumstances render it just and reasonable
5. To ask for dissolution and winding up by decree of court
6. To receive a share of the profits or other compensation by way of
income
7. To receive the return of his contribution provided the partnership
assets are in excess of all its liabilities.