Section I – obligations of partners a.

Distinction between
consummated partnership and
among themselves future partnership
b. Executory = no partnership
4 Juridical Relationships 3. Failure to agree on material terms
a. No intent to be bound in the
1. Among partners themselves future
2. Partners with the partnership b. Prevent any rights or
3. Partnership with third persons obligations from arising
whom it contracts c. LACK OF COMPLETE CONTRACT
4. Partners with the third persons
Guide Questions
ARTICLE 1784 a. What relations are created by a
partnership contract? Partners among
ARTICLE 1784. A partnership begins from themselves
the moment of the execution of the b. When does a partnership begin? 1784
contract, unless it is otherwise stipulated. from execution of contract, except
(1679) otherwise stipulated
a. What if a partner has not yet
Commencement of Partnership given his contribution, does the
partnership life commence
- Partnership is a consensual contract already?
- Exists from the moment of the b. Can you stipulate that
celebration of the contract partnership will commence on a
- AS LONG AS REQUISTES OF A VALID later date?
CONTRACT EXISTS
o Does not require contributions
ARTICLE 1785
to be given already
o Does not require profits and
ARTICLE 1785. When a partnership for a
losses and the nature of
fixed term or particular undertaking is
partnership to be fixed
continued after the termination of such
Executory agreement of partnership term or particular undertaking without any
1. Future partnership express agreement, the rights and duties of
a. Stipulation of some other date the partners remain the same as they were
for commencement of at such termination, so far as is consistent
partnership
with a partnership at will.
b. There will be future a
partnership & no juridical A continuation of the business by the
existence as of the moment
partners or such of them as habitually acted
2. Agreement to create partnership
therein during the term, without any
settlement or liquidation of the partnership
affairs, is prima facie evidence of a c. Even a partnership for a fixed
continuation of the partnership. (n) term CAN BE terminated
before the time mentioned

Continutaion of partnership beyond fizxed

term
Guide Questions
- Partnership with a fixed term
a. What if partnership for fixed term or
o There is a definite period
particular undertaking is continued
o Expiration of
even after the termination?
term/accomplishment of
Partnership at will, prima facie
undertaking = dissolution
continuation
1. Rights and duties of partners in a
partnership at will ARTICLE 1786
a. May be extended through
expressed agreement, ARTICLE 1786. Every partner is a debtor of
written or oral, or implied the partnership for whatever he may have
b. WITHOUT settlement or promised to contribute thereto.
liquidation He shall also be bound for warranty in case
c. Rights and duties remain the of eviction with regard to specific and
same determinate things which he may have
2. Dissolution/termination of the contributed to the partnership, in the same
partnership cases and in the same manner as the
a. Partnership for a fixed term vendor is bound with respect to the vendee.
is dissolved after the He shall also be liable for the fruits thereof
undertaking is accomplished from the time they should have been
delivered, without the need of any demand.
b. Partnership relationship is a
(1681a)
personal one, thus, the law
will not force anyone to Obligations with respect to the contribution of
continue as a partner or to property
become a partner 1. Contribute at the beginning of the
3. Power/right of a partner to partnership or at the stipulated time
terminate partnership 2. Answer eviction in case the partnership
a. Any one of the partners may is deprived of the property contributed
3. To answer the partnership fruits of the
dictate the dissolution
property the contribution of which he
b. Must be in good faith – if delayed
not, will incur liability for a. Partnership fails to receive
damages benefits
 b. Hinders partnership to receive e. What if it was lost before
the greatest possible profits delivery? Specific, terminate; if
c. DEMAND IS NOT NECESSARY not
4. Preserve property with the diligence of f. What if a partner takes money
a good father of a family from partnership coffers?
5. To compensate partnership for any Liable+int/damages 1788
damage caused by the retention of the
same contribution
- Contribution becomes property of ARTICLE 1787
partnership – cannot be withdraw or
disposed without approval or ARTICLE 1787. When the capital or a part
partnership or partners thereof which a partner is bound to
contribute consists of goods, their appraisal
Effect of failure to contribute property
must be made in the manner prescribed in
promised
the contract of partnership, and in the
1. Liability as debtor to partnership absence of stipulation, it shall be made by
a. Without contribution = useless experts chosen by the partners, and
partnership according to current prices, the subsequent
b. Automatically debtor of the
changes thereof being for the account of
partnership (even WITHOUT
the partnership. (n)
DEMAND)
2. Remedy of other partners 1. Need for appraisal
a. Not recission or cancellation a. To determine how much has
b. AN ACTION TO COLLECT with been contributed
DAMAGES and INTEREST b. In absence of stipulation ,
profits and losses is in
Guide Questions
proportion to how much has
a. How does the partnership treat been contributed
a partner with regard to what c. Done in the manner prescribed
he promised to contribute? by the contract of partnership
1786 – Debtor or by experts
b. What happens if partner 2. Property subject to appraisal
contributes office space and a. Immovable property – made in
later on partnership was the inventory of said property
evicted? Liable for warranty (1773, 1795)
c. What if the partner promised to b. Other than immovable – 1787
contribute P1M today but only will be followed
delivers it a year later? Liable
Guide Questions
for it plus fruits and/or interest.
d. What if there was no demand a. Who determines value of goods
to give the contribution, would contributed in a partnership? 1787
the partner still be liable for experts in manner prescribed in Articles
fruits and interests? Yes. No of Partnership.
need for demand. b. Why do you need appraisal?
 ARTICLE 1788 prejudicial to the interest of the
partnership
ARTICLE 1788. A partner who has
Prohibition against engaging in business
undertaken to contribute a sum of money
and fails to do so becomes a debtor for the 1. Industrial
interest and damages from the time he a. Prohibition is applied whether
should have complied with his obligation. the business is in the same
The same rule applies to any amount he industry or not
b. Reason: prevent conflict of
may have taken from the partnership
interest between the industrial
coffers, and his liability shall begin from the
and partnership and to ensure
time he converted the amount to his own faithful compliance with
use. (1682) obligations
Obligations with respect to capital 2. Capitalist
a. Prohibition is applicable to
1. Contribute the amount he has business in the same industry
undertaken on the due date UNLESS there is stipulation
2. Reimburse amount that he has
taken/converted to personal use from Remedies if industrial engages
the partnership fund 1. Capitalists have the right to damages
3. Pay agreed/legal interest from delayed a. In case that the capitalists
contributions or partnership fund that permitted him, exemption from
he took liability should be expressed
4. To indemnify partnership from the 2. Industrial partners are also entitled to
damages damages
Accrual liability – liable for interest and damage Guide Questions
from the time he should have complied or from
the time he took the funds a. What is an industrial partner?
Can he engage in business for
ARTICLE 1789 himself? 1789
b. What happens if he does?
ARTICLE 1789. An industrial partner cannot Capitalist may exclude him or
engage in business for himself, unless the avail of benefits themselves +
partnership expressly permits him to do so; damages
and if he should do so, the capitalist c. What if he engages in a
partners may either exclude him from the business of a different nature as
that of the partnership’s?
firm or avail themselves of the benefits
Regardless; absolute
which he may have obtained in violation of
prohibition
this provision, with a right to damages in
d. What’s the remedy of the
either case. (n) capitalist partners? 1789
- If the industrial partner engages in e. What is a capitalist partner?
business himself, it is considered Can he engage in business for
himself? Yes. Read 1808
 f. What happens if he does 4. There is no agreement that even
engage in business for himself? though there is loss, capitalists are not
He shall be obliged to bring required to contribute additional share
profits to common fund but
NOTE!! Industrial partner is exempted – since
liable solely for losses.
he contributed his entire industry, he can do
nothing further
ARTICLE 1790
Reasons:
ARTICLE 1790. Unless there is a stipulation
to the contrary, the partners shall - refusal means lack of interest in the
contribute equal shares to the capital of the continuance of the partnership
- unjust for him to remain and reap the
partnership. (n)
efforts of others
- Amount contributed can be stipulated
- BUT if none, it is presumed to be equal
- Not applicable to industrial unless they Guide Questions
will contribute capital too
a. There are 4 partners, 2 are of the
ARTICLE 1791 opinion that additional capital is needed
for the business, while the other 2 don’t
ARTICLE 1791. If there is no agreement to agree with them. Will they be required
the contrary, in case of an imminent loss of to sell out? 1801
the business of the partnership, any partner b. Can you require Industrial partner to
contribute capital?
who refuses to contribute an additional
c. Why do we have this Article?
share to the capital, except an industrial
partner, to save the venture, shall be ARTICLE 1792
obliged to sell his interest to the other
partners. (n) ARTICLE 1792. If a partner authorized to
manage collects a demandable sum, which
- Capitalists are not required to was owed to him in his own name, from a
contribute shares more than he initially person who owed the partnership another
contributed
sum also demandable, the sum thus
- BUT in case of loss, and there is no
collected shall be applied to the two credits
agreement to the contrary, he is
OBLIGED to contribute additional share in proportion to their amounts, even
- IF NOT, his interest will be sold to other though he may have given a receipt for his
partners own credit only; but should he have given it
for the account of the partnership credit,
Requisites for application of rule:
the amount shall be fully applied to the
1. There is imminent loss latter.
2. Majority of capitalists agree that an
additional contribution would save The provisions of this article are understood
business to be without prejudice to the right granted
3. The capitalist refuses (except if it’s bc of to the debtor by article 1252, but only if the
financial incapacity)
personal credit of the partner should be kay partner (15% interest to partner, 10% to
more onerous to him. (1684) partnership)]
Obligation of managing partner who Guide Questions
collects debt
a. Suppose a Limited partner collects,
- Limited partners NOT allowed how will credit be applied?
- If person is indebted to partnership b. What if one loan is due today and
and managing partner the other one due next week?
o Sum is applied to both c. Why do you have this rule?
credits in proportion to their
amounts
ARTICLE 1793
- BUT if sum is for the partnership ARTICLE 1793. A partner who has received,
credit, sum should be accounted for in whole or in part, his share of a
the partnership partnership credit, when the other partners
have not collected theirs, shall be obliged, if
the debtor should thereafter become
Requisites insolvent, to bring to the partnership capital
what he received even though he may have
1. There are at least 2 debts – one for
given receipt for his share only. (1685a)
the collecting partner & one for the
partnership - Only ONE present credit
2. Both debts are demandable - Applies even if the partner is
3. The partner who collects is authorized to manage or not
authorized to manage and actually
manages the partnership Requisites

Reasons: 1. A partner has received (whole or

part) his partnership credit
- Law safeguards the partnership 2. The other partners have not
incase the collector partner collected their shares
prioritizes his own interest 3. Partnership debtor became
- Good faith assumes that the insolvent
managing partner attends to the
interest of the partnership more Reasons
than his own - Based on the community interest
NOTE: if there is no specific managing among the partners
partner, all partners are considered - If the credit of the debtor become
managing partner bad debts, it would be unjust for A
not to share loss with B and C
NOTE: debtor is given the right to prefer
payment to the partner if it should be more ARTICLE 1795
onerous to him [if mas mataas pala interest
ARTICLE 1795. The risk of specific and of the partnership and for the
determinate things, which are not fungible, corresponding interest, from the time the
contributed to the partnership so that only expenses are made; it shall also answer to
their use and fruits may be for the common each partner for the obligations he may
benefit, shall be borne by the partner who have contracted in good faith in the interest
owns them. of the partnership business, and for risks in
consequence of its management. (1688a)
If the things contribute are fungible, or
cannot be kept without deteriorating, or if - If a partner has advanced funds, he
they were contributed to be sold, the risk is entitled to recover WITH interest
shall be borne by the partnership. In the
absence of stipulation, the risk of things ARTICLE 1797
brought and appraised in the inventory, ARTICLE 1797. The losses and profits shall be
shall also be borne by the partnership, and distributed in conformity with the agreement. If
in such case the claim shall be limited to the only the share of each partner in the profits has
value at which they were appraised. (1687) been agreed upon, the share of each in the
losses shall be in the same proportion. In the
absence of stipulation, the share of each
Risk of loss of things contributed partner in the profits and losses shall be in
proportion to what he may have contributed,
1. Specific and determinate things but the industrial partner shall not be liable for
which are not fungible the losses. As for the profits, the industrial
a. Shall be borne by the partner partner shall receive such share as may be just
as the ownership is not and equitable under the circumstances. If
transferred to the besides his services he has contributed capital,
he shall also receive a share in the profits in
partnership
proportion to his capital. (1689a
2. Specific and determine things which
is transferred to the partnership - Profits sharing
a. Risk is on the partnership o According to stipulation
3. Things fungible or perishable o If none, according to capital
a. Risk is on the partnership contribution
4. Things contributed to be sold o Industrial partner shall
a. Risk is on the partnership receive a share that is just
5. Things brough and appraised in and equitable
inventory  Must be satisfied first
a. Risk is on the partnership before capitalist
partners divide
ARTICLE 1796
- Loss sharing
ARTICLE 1796. The partnership shall be o According to stipulation
responsible to every partner for the o If none, same as profit
amounts he may have disbursed on behalf sharing
 o If no profit sharing, according
to capital contribution
o INDUSTRIAL PARTNERS ARE
EXEMPTED

ARTICLE 1798
ARTICLE 1798. If the partners have agreed to
in trust to a third person the designation of the
share of each one in the profits and losses, such
designation may be impugned only when it is
manifestly inequitable. In no case may a partner
who has begun to execute the decision of the
third person, or who has not impugned the
same within a period of three months from the
time he had knowledge thereof, complain of
such decision. The designation of losses and
profits cannot be intrusted to one of the
partners. (1690)

- Designation of profit-sharing can be

done by a third party with consent
- Decision of 3rd party is binding unless
it is inequitable
o In such case, a partner can
complain within 3 months of
knowledge
 In order not to
disrupt business
operations