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LAW ON PARTNERSHIPS, AGENCY, & TRUSTS

By: ATTY. RAYMIEJELLA R. SUSUSCO-VIAGEDOR

Course Description: The course involves the fundamental concepts and


principles governing the law on Partnership, Agency & Trusts pursuant to
the provisions of the Civil Code of the Philippines and Supreme Court
decisions.

Course Outline

A – LAW ON PARTNERSHIP:
 Concept of partnership, characteristics, elements and essential
features. Art. 1767
 Partnership as a juridical person. Art. 1768
 Rules to determine existence of partnership. Art. 1769
 Partnership distinguished from other forms of organization or
association
 Formalities and object of partnership. Art. 1770-Art.1775
 Classification of partnerships; Kinds of partnerships. Art. 1776-Art.
1783

B – OBLIGATIONS OF THE PARTNERS


 Obligations of the partners among themselves, with respect to
contributions of property. Art. 1784-Art. 1788
 Obligations of Industrial partners, of capitalist partners, of
managing partners who collects debts. Art. 1789-Art.1792
 Obligations of partners who receives share of partnership credits,
of partner to damages. Art. 1793-Art.1796
 Rules in the distribution of profits and losses and designation of
profits and losses by third person. Art. 1797
 Stipulation excluding a partner from any share in the profits and
losses. Art. 1799

C – MANAGEMENT OF THE PARTNERSHIP


 Rights and obligations with respect to management of the
partnership, scope and compensation of the manager. Art. 1800
 Powers of two or more Managing Partners whose respective duties
are unspecified. Art. 1801
 Rules when unanimity is stipulated. Art. 1802
 Rules when management has not been agreed upon. Art. 1803
 Sub-partnership. Art. 1804

D – RIGHTS OF PARTNER TO PARTNERSHIP BOOKS AND ACCOUNTS. Art.


1805-Art. 1809

E – PROPERTY RIGHTS OF A PARTNER


 Extent of property rights. Art. 1810
 Nature of partner’s right in specific partnership property. Art. 1811
 Nature of partner’s interest in the partnership and effect of
Assignment of partner’s interest; Rights of assignee. Art. 1812-Art.
1813
 Remedies of separate creditor, Redemption of interest charged.
Art. 1814

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F – OBLIGATIONS OF PARTNERS TO THIRD PERSONS
 Liability for contractual obligations. Art. 1815-Art. 1816
 Stipulation against liability. Art. 1817
 Conveyance of real property. Art. 1819
 Admission by partner. Art. 1820
 Notice or knowledge by a partner. Art. 1821
 Liability of partner for wrongful acts. Art. 1822-Art. 1824
 Partner by estoppel. Art. 1825
 Liability of incoming partner. Art. 1826
 Preference of partnership creditors in partnership property. Art.
1827

G – DISSOLUTION AND WINDING UP


 Dissolution, Winding and termination. Art. 1828
 Causes, grounds, effects of dissolution. Art. 1829-Art.1832
 Authority of partners to act for partnership. Art. 1833-Art. 1835
 Manner of winding up and persons authorized to wind up. Art. 1836
 Rights of a partner upon dissolution. Art. 1837-1838
 Liquidation and distribution of assets upon dissolution. Art. 1839
 Dissolution by change of ownership; rights of creditors of dissolved
partnership which is continued. Art. 1840
 Rights of retiring or legal representative of deceased partner. Art.
1841
 Partner’s right to account of his interest. Art. 1842

H – LIMITED PARTNERSHIP
 Concept, characteristics, purpose, distinction between general
and limited partnership. Art. 1843
 Requirements in the formation; presumption of general
partnership. Art. 1844
 Partner’s contribution, liability of his surname appearing in the
partnership name, liabilities and rights and powers of general
partners. Art. 1845-1850
 Rights in general of a limited partner. Art. 1851
 Status where there is failure to create limited partnership and status
where one is both a general and limited partner at the same time.
Art. 1852
 Transactions of limited partners, preferred compensation of limited
partners. Art. 1853-1856
 Return of contribution, liability of limited partner. Art. 1857-1858
 Substituted limited partner. Art. 1859
 Effect of retirement, death, of a limited partner. Art 1860
 Right of executor, rights of creditors. Art. 1861-1862
 Priority in the distribution of assets. Art. 1863
 Cancellation of certificate. Art. 1864-1865
 Limited partner, a mere contributor. Art. 1866

II.

A – LAW ON AGENCY

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 Concept, characteristics, essential elements, nature and basis,
parties, capacity of parties, acts that may be delegated to
agents. Art. 1868
 Kinds, form of acceptance, revocation of agency. Art. 1869-1873
 Sale of land through agent. Art. 1874
 Presumption as to compensation. Art. 1875
 General and special agency. Art. 1876
 Agency couched in general terms, acts of administration. Art. 1877
 When special powers required. Art. 1878
 Scope of authority to sell and to mortgage, special power to
compromise and submit to arbitration. Art. 1879-1880
 Authority of agent, kinds. Art. 1881-1882
 Kinds of principal. Art. 1883

B – OBLIGATIONS OF THE AGENT


 Specific obligations of agents; obligations of person who declines
an agency, advance necessary funds. Art. 1884 – 1886
 Instructions and authority distinguished. Art. 1887
 Obligations not to carry out agency, or prefer his own interest; not
to loan to himself; to render accounts. Art. 1888 – 1891
 Subagent, concept, definition, appointment. Art. 1892 – 1893
 Liability of two or more agents. Art. 1894
 Liability for interest; person liability. Art. 1895 – 1897
 Effect where third person aware of the limits of agent’s powers;
effects of ignorance of agents; scope of authority; lack of authority
not available as defense. Art. 1898 – 1901
 Presentations of power of attorney and instructions. Art. 1902
 Factor or Commission agent; liability; obligations. Art. 1903 – 1906
 Meaning of guarantee commission; obligation; liability of agent for
fraud or negligence. Art. 1907

C. OBLIGATIONS OF THE PRINCIPAL


 Specific obligation of the principal; representation essence of
agency; ratification by the principal. Art. 1910
 Agency by estoppels; apparent authority.
 Distinguished from authority by estoppels; Implied agency
distinguished by agency by estoppels. Art.1911
 Obligation to advance funds; obligation to reimburse agent for
funds advance by latter. Art. 1912
 Obligation to indemnify agent. Art. 1913
 Right of agent to retain object of agency in pledge. Art. 1914
 When principals solidarity liable to agency. Art. 1915
 Rule where two persons contract separately with agent and
principal. Art. 1916
 Liability to third person of agent or principal who contracts
separately. Art. 1917
 When principal not liable for expenses. Art. 1918

D. MODES OF EXTINGUISHMENT OF AGENCY


 Modes of extinguishing an agency; continuance and capacity of
principal and agent. Art. 1919

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 Agency generally revocable at will by principal; liability of
principal for damage caused by revocation; kinds of revocation.
Art. 2020
 Effect of revocation in relation to third persons. Art. 1921 – 1922
 Revocation by appointment of new agent; revocation by direct
management of business by principal himself; revocation by one
of two or more principals. Art. 1923 – 1925
 Partial revocation of general power. Art. 1926
 When agency irrevocable; agency couple with an interest. Art.
1927
 Right of agency to withdraw. Art. 1928
 Obligation of agent to continue to act after withdrawal. Art. 1929
 When death of principal does not terminate agency; validity of
acts of agents after death of principal; duty agent’s heirs. Art. 1930
– 1932

III. TRUST

A. INTRODUCTORY COMMENT
 Trust defined. Characteristics of a Trust. Trust distinguished from
Guardianship or Executorships Trust distinguished from a stipulation
Pour Autrui. Co-ownership as Trust; Parties to a Trust. Elements of
a trust. Art. 1440
 Classification of Trust. Art. 1441
 Suppletory Effect of the General Law of Trust. Comment of the
Code Commission. Art. 1442

B. EXPRESS TRUSTS
 Formalities Re Express Trusts. Distinguished from the Formalities of an
Implied Trust. Art. 1443
 How an Express trust is created. Clear intent, capacity,
administration of the trust. Art. 1444
 Effect if Trustee Declines. Art. 1445
 Necessity of acceptance by the beneficiary. When acceptance
is presumed. How Express Trusts are ended. Art. 1446

C. IMPLIED TRUSTS
 Enumeration of instances of Implied Trust. Art. 1447
 Purchase of property where title is not given to payer but to
another; rule if document expresses a different intent. Art. 1448
 When donee does not get full ownership of benefit. Art. 1449
 Conveyance of property so that it may serve as security; trust
receipt. Art. 1450
 When title to inherited land is not in the owner’s name; Rule in Co-
ownership; paraphernal properties registered under the husband’s
name; Title in the name of the surviving husband. Art. 1451
 When property is in the name of only one of the co buyers;
Presumptions that share are equal. Art. 1452
 When a person declares his intent to hold property for someone
else. Art. 1453
 Absolute conveyance made for security purpose. Art. 1454
 Use of Trust Funds; Applicability of Article, example. Reasons for the
rule, cases. Art. 1455

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 Property acquired thru mistake or fraud, nature of the mistake or
fraud, against whom the right must be exercised, when the article
does not apply, query and how to prove trust. Ar. 1456
 Proof of Implied Trust, Oral Evidence for Trust Must be trustworthy.

References:
 De Leon, Hector, THE LAW ON PARTNERSHIPS AND PRIVATE
CORPORATIONS, Latest Edition, Rex Printing Co.
 Paras, Edgardo, CIVIL CODE OF THE PHILIPPINES ANNIOTATED, Book
V, Latest Edition, Rex Printing, Co.
 Villanueva, Cesar L. and Villanueva-Tiansay, Teresa S., AGENCY &
TRUSTS, PARTNERSHIPS & JOINT VENTURES, 2018 Edition, Rex
Bookstore.