Article 1787- When the capital or a part thereof which a partner is bound to Failure to comply with the above
mply with the above requirements renders the
contribute consists of goods, their appraisal must be made in the manner
prescribed in the contract of partnership, and in the absence of stipulation, it
shall be made by experts chosen by the partners, and according to current
prices, the subsequent changes thereof being for the account of the
partnership.
Under Article 1787, if goods are contributed, there must be an appraisal of
such goods made:-
1. In accordance with the Partners agreement, or
2. In the absence of such an agreement, by expert appraisers chosen
by the partners who shall base their appraisal on current prices.
Appraisal of goods or property contributed
1. The appraisal of the value of the goods contributed is necessary to
determine how much has been contributed by the partners.
a. In the absence of stipulation, the share of each partner in the
profits and losses is in the proportion to what he may have
contributed.
b. The appraisal is made firstly, in the manner prescribed by the
contract of partnership; secondly, in the absence of
stipulation, by experts chosen by the partners and according
to current prices.
c. After the goods have been contributed, the partnership bears
the risk or gets the benefit of subsequent changes in fair
value.
2. In the case of immovable property, the appraisal is made in the
inventory of said property; otherwise, it may be made as provided
in Article 1787. There is no reason why the rule in Article 1787
should not also aply with respect to other kinds of property.
Article 1772- Every contract of partnership having a capital of P3, 000 or
more, in money or property, shall appear in a public instrument, which must
be recorded in the Office of the SEC.
Failure to comply with the requirements of the preceding
paragraph shall not affect the liability of the partnership and the members
thereof to third persons.
Requirements:
1. Capital must be P3, 000 or more, in money or property;
2. Contract must be in public instrument;
3. Must be duly recorded and registered with the SEC.
The 2nd paragraph of Art. 1772, however, provides that failure of the
partners to comply with the above requirements will make them and the
Partnership liable for contractual liabilities to third parties.
Article 1773- A contract of partnership is void, whenever immovable
property is contributed thereto, if an inventory of said property is not made,
signed by the parties, and attached to the public instrument.
Partnerships with contribution of immovable property
Where immovable property, regardless of its value, is contributed
by any of the partners, the failure to comply with the following requirements
will render the partnership contract void in so far as the contracting parties are
concerned:-*4
1. The contract of Partnership must be in a public instrument;
2. The inventory must be signed by all the partners and attached
to the public instrument;
3. The Articles of Partnership together with the inventory must
be filed and registered with the SEC.
partnership void.
Purpose of inventory: Inventory of the immovable property contributed is
necessary to determine how much is the contribution of each partner worth in
terms of money, so that in the event of dissolution, the return of the partners
contributions can be easily determined and facilitated, based on such
inventory value. This article has the intention to protect third persons. With
regard to them, a de facto partnership or partnership by estoppel may exist.
Dissolution- is change in the relation of the partners caused by any partner
ceasing to be associated in the carrying on as distinguished from the winding
up of the business.
- The partnership is not terminated but continues until the winding
up partnership affairs is completed.
- This is the break-up of a legal relation between or among the
partners.
- This is the point in time when the partners cease to carry on the
business together.
- This represents demise of the partnership.
- At this stage, the partners can no longer enter into new contracts or
close new business that will bind the Partnership.
Exceptions: 1. when the act is necessary for winding up purposes;
2. when the act is necessary to complete and fulfill unfinished
contracts.
Winding up- is the process of settling the business or partnership affairs after
dissolution.
- Involves process of liquidating Partnership business after
dissolution, such as the consolidation of the Partnership assets and
receivables; payments of all Partnership liabilities both to third
party creditors and partners/ creditors; return of their respective
contributions; and the distribution of net assets, if any, among the
partners themselves.
Termination- is that point in time when all partnership affairs are completely
wound up and finally settled. It signifies the end of the partnership life.
- This is the 3rd stage where the Partnership officially ceases
operation and bows out of existence after the completion of the
winding up of Partnership affairs.
Act of Dominion- all the partners, including the managing partner, if any,
must give their consent to all Acts of Dominion or Ownership.
Act of Strict Dominion- for acts which are not apparently for carrying on in
the usual way the business of the partnership, the partnership is not bound,
unless authorized by all the other partners or unless they have abandoned the
business. The instances of acts which are generally outside the implied power
of a partner are enumerated in the third paragraph. They constitute limitations
to the authority granted to the partners to bind the partnership.
Partnership at will- one in which no time is specified and is not formed for a
particular undertaking or venture and which may be terminated anytime by
mutual agreement of the partners, or by the will of any one partner alone, or
one for a fixed term or particular undertaking which is continued by the
partners after the termination of such term or particular undertaking without
express agreement.
Partnership with a fixed term- one which the term for which the
partnership is to exist is fixed or agreed upon or one formed for a particular
undertaking, and upon the expiration of the term or completion of the
particular enterprise, the partnership is dissolved, unless continued by the
partners.
Article 1825- Partner by estoppel; Partnership by estoppel
1. Meaning and effect of estoppel. Estoppel is a bar which
precludes a person from denying or asserting anything contrary to
that, which has been established as the truth by his own deed or
representation, either express or implied. Through estoppel, an
admission or representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the person
relying thereon.
2. When person a partner by estoppel. A person not a partner may
become a partner by estoppel, and thus be held liable to third
persons as if he were a partner, when by words or by conduct he:
a. Directly represents himself to anyone as a partner in an
existing partnership or in a non- existing partnership (with
one or more persons not actual partners);
b. Indirectly represents himself by consenting to another
representing him as partner in an existing partnership or in a
non- existing partnership.
The third person with whom the partner contracted must show that
the purported partner represented himself or permitted others to
represent him as partner, and furthermore, that he dealt with the
partnership to his injury in justifiable reliance on such
representation.
3. When partnership liability results. If all the actual partners
consented to the representation, then the liability of the person who
represented himself to be a partner or who consented to such
representation and the actual partners is considered a partnership
liability. This is a case of agent of the partnership and his act or
obligation that of the partnership.
4. When liability pro rata. When there is no existing partnership
and all those represented as partners consented to the
representation, or not all of the partners of an existing partnership
contracted to the representation, then the liability of the person
who represented himself to be a partner or who consented to his
being represented as partner, and all those who made and
consented to such representation, is joint or pro rata.
5. When liability separate. When there is no existing partnership
and not all but only some of those represented as partners in an
existing partnership consented to such representation, then the
liability will be separate that of the person who represented
himself as a partner or who consented to his being represented as a
partner, and those who made and consented to the representation,
or that only of the person who represented himself as partner.
6. Estoppel does not create partnership.
Kinds of Partners
1. Under the Civil Code
a. Capitalist partner- one who contributes money or property to
the common fund.
b. Industrial partner- one who contributes only his industry or
personal service.
c. General partner- one whose liability to third person extends
to his separate property; he may either be a capitalist or
industrial partner.
d. Limited partner- one whose liability to third persons is
limited to his capital contribution. He is also known as
special partner. Unlike the general partner, he does not
participate in the management of the business.
e. Managing partner- one who manages the affairs or business
of the partnership; he may be appointed either in the articles
of partnership or after the constitution of the partnership. He
is also known as a general or real partner.
f. Liquidating partner- one who takes charge of the winding up
of partnership affairs upon dissolution.
g. Partner by estoppel- one who is not really a partner, not
being a party to a partnership agreement, but is liable as a
partner for the protection of innocent third persons. He is one
who is represented as being, in fact, a partner, but who is not
so as between the partner themselves. He is also known as
partner by implication or nominal partner. The term quasi-
partner is sometimes used. He is liable for the debts of the
firm to those who in good faith believed him to be a partner
h. Continuing partner- one who continues the business of a
partnership after it has been dissolved by reason of the
admission of a new partner, or the retirement, death, or
expulsion of one or more partners.
i. Surviving partner- one who remains after a partnership has
been dissolved by the death of any partner.
j. Subpartner- one who, not being a member of the partnership,
contracts with a partner with reference to the latters hare in
the partnership.
2. Other classifications
a. Ostensible partner- one who takes active part and known to
the public as a partner in the business, whether or not he has
an actual interest in the firm. If he is not actually a partner, he
is subject to liability by the doctrine of estoppel.
b. Secret partner- one who takes active part in the business but
is not known to be a partner by outside parties nor held out as
a partner by the other partners, although he participates in the
profits and losses of the partnership.
c. Silent partner- one who does not take any active part in the
business although he may be known to be a partner. Thus, he
need not be a secret partner. If he withdraws from the
partnership, he must give notice to those persons who do
business with the firm to escape liability in the future.
d. Dormant partner- one who does not take active part in the
business and is not known or held out as partner. He would
be both a silent and a secret partner. The term is used as
synonymous with sleeping partner. He may retire from the
partnership without giving notice and cannot be held liable
for the obligations of the firm subsequent to his withdrawal.
His only interest in joining the partnership would be the
sharing of the profits earned.
e. Original partner- one who is a member of the partnership
from the time of its organization.
f. Incoming partner- a person, lately, or about to be, taken into
a partnership as a member.
g. Retiring partner- one withdrawn from the partnership; a
withdrawing partner
Universal Partnership of All Present Property- is that in which the partners
contribute all the property which actually belongs to them to a common fund,
with the intention of dividing the same among themselves, as well as all the
profits which they may acquire therewith. The property which belonged to
each of the partners at the time of the constitution of the partnership becomes
the common property of all the partners, as well as all the profits which they
may acquire therewith.
Universal Partnerships of Profits- comprises all that the partners may
acquire by their industry or work during the existence of the partnership and
the usufruct of movable or immovable property which each of the partners
may possess at the time of the celebration of the contract.
Preference of partnership creditors in partnership property:
The rule is based upon the theory that the partnership, treated as a
legal entity distinct and separate from the members composing it, should
apply its property to the payment of its debts in preference to the claim of any
partner or his creditors.
Article 1822-24 The above three articles provide for the solidarily liability
of all the partners and the partnership to third persons for the partners
wrongful act or omission or breach of trust acting within the scope of firms
business or with the authority of his co-partners. This is true even though the
other partners did not participate in or ratify, or had no knowledge of the act
or omission, without prejudice to their right to recover from the guilty partners
in other words, whether innocent or guilty, all the partners are solidarily liable
with the partnership itself.
Requisites for liability:
1. The partner must be guilty of a wrongful act or omission.
2. He must be acting in the ordinary course of business or with the
authority of his co-partners even if the act is connected with the
business.
Nature of partners interest in the partnership:
1. Share of the profits and surplus the partners interest in the
partnership consists of his proportionate share in the profits during
the life of the partnership as a going concern and his share in the
surplus after its dissolution. This interest is assignable by the
partner in the absence of any agreement to the contrary, being
personal property:
a) Profit means the excess of returns over expenditure in a
transaction or series of transactions; or the net income of the
partnership for a given period of time.
b) Surplus- Refers to the assets of the partnership after
partnership debts and liabilities are paid and settled and the
rights of the partners among themselves are adjusted. It is the
excess of assets over liabilities; if the liabilities are more than
the assets the difference represents the extent of the loss.
a.) By the termination of the definite term or 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 interests or suffered them to be charged for their
separate debts, either before or after the termination of any
specified term or particular undertaking.
d.) By the expulsion of any partner from the business bona fide
in accordance with such a power conferred by the agreement
between the partners.
2. In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any provision of
this article, by the express will of any partner at any time;
3. By any event which makes it unlawful for the business of the
partnership to be carried on or for the members to carry it on in
partnership;
4. When a specific thing, which a partner had promise to contribute to
the partnership, perishes before the delivery; in any case by the
loss of the thing, when the partner who contributed it having
reserved the ownership thereof, has only transferred to the
partnership the use or enjoyment of the same; but the partnership
shall not be dissolve by the loss of the thing when it occurs after
the partnership has acquired the ownership thereof.
5. By the death of any partner.
6. By the insolvency of any partner of the partnership.
7. By the civil interdiction of any partner.
8. By decree of court under the following article.

The profits are shared in conformity with the agreement;

otherwise, in proportion to the capital contributions but the
industrial partner shall receive such share as may be just and
equitable under the circumstances.

2. Extent of the partners interest- Nothing is to be considered as the

share of a partner but his proportion of the residue or balance after
an account has been taken of the debts and credits, including the
amount paid by the several partners in liquidating firm debts or in
making advances to the partnership, and until that occurs, it Is
impossible to determine the extent of his interest. This interest in
the surplus alone is available for the satisfaction of the separate
debts of the partners.

Rights of assignee of partners interest:

1. To receive in accordance with his contract the profits accruing to

the assigning partner.
2. To avail himself of the usual remedies provided by law in the event
of fraud in the management.
3. To receive the assignors interest in case of dissolution; and
4. To require an account of partnership affairs, but only in case the
partnership is dissolved, and such account shall cover the period
from the date only of the last account agreed to by all the partners.

Persons authorized to wind up:

1. The partners designated by the agreement.

2. In the absence of such agreement, all the partners who have not
wrongfully dissolved the partnership.
3. The legal representative of the last surviving partner ( when all the
partners are already dead), not insolvent.

Article 1830 Dissolution is caused: Voluntary (1&2)

1. Without violation of the agreement between the partners: