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Is the
issuance a contribution of money?
Article 1767 No, unless the check is encashed.
By the contract of partnership, two or 2. Considering the same information
more persons bind themselves to contribute above but with B contributing 10k
money, property or industry to a common fund, in equivalent dollars.
with the intention of dividing the profits among No, the contribution must be
themselves. made using the legal tender, in
Two or more persons may also form a this case, Philippine pesos.
partnership for the exercise of a profession. - Property contributed may be movable,
(1665a). immovable or intangible property.
Ex. Equipment, land, patents, etc.
NOMINATE - If the partnership did not contribute
- There is a name given by the law money or property, then industry was
- Contract of Partnership: contributed.
CONSENSUAL (meaning it is - Note: Contributions may differ for each
perfected by both parties) of the partners.
PERSONS TO A COMMON FUND TO DIVIDE
- Includes not only natural persons but PROFITS AMONGST EACH OTHER
also JURIDICAL persons. A - The primary objective of partnerships
corporation may not be a partner but it is to make profits. Sharing of profits
may engage in JOINT VENTURES. need not equal.
BIND THEMSELVES - Sharing ratios are determined by the
- Must be capable and competent , partner’s agreement, and if there was
meaning, the following may are not no agreement, then the ratios will be
included: based on the ratio of the partner’s
1. Minors contributions.
2. Emancipated minors - Sharing ratio for losses will be the
3. Those under civil interdiction- same as the sharing ratios for profits.
accessory penalty of being - The industrial partner shall not share in
convicted of crimes losses.
4. Insane persons - The industrial partner is exempt only to
5. Incompetent persons (see oblicon the partners but bot to third parties
notes) without prejudice to his right. A1816.
- However, if the person is only a CONSENT (DELECTUS PERSONAE)
suspect, he may still bind himself into a - You can’t join a partnership without
contract since there is no final verdict the consent of ALL partners.
yet. Why?
TO CONTRIBUTE MONEY, Because the partnership will need to
PROPERTY OR INDUSTRY be dissolved before you are admitted
- Makes the contract onerous since this is and a new partnership will be made
Mutual and All must give either one of in this place.
the above.
- Examples: Article 1768
1. A and B create a partnership with a The partnership has a juridical
promise of contributing 10k each personality separate and distinct
in cash. A gave his share while B from that of each of the partners,
even in case of failure to comply with
the requirements of article 1772, first
paragraph. (n) Article 1770
A partnership must have a lawful object
or purpose, and must be established for the
If they bought the land for P1.000.000 each common benefit or interest of the partners. When
to build a house but instead opted to sell it an unlawful partnership is dissolved by a judicial
for P2,500,000 then they have a profit of decree, the profits shall be confiscated in favor of
P500,000 but are they partners? the State, without prejudice to the provisions of
No, because even if there was a profit of P500,000, the Penal Code governing the confiscation of the
this is merely incidental to the sale and not from Instruments and effects of a crime. (1666a)
business operations of A&B.
If the land was instead used to build an • The partnership must have a lawful object or
apartment that is rented out? purpose
Yes, because A&B share profits from RENTING, - Lawful object refers to CAPITAL
this can be considered as ordinary business - Lawful purpose refers to the
operations. BUSINESS itself
• There must be common interest and benefit
Example for (3) • Unlawfulness of the partnership will cause it to be
dissolved and profits shall be confiscated
If a person owns a big tract of land for • Example of unlawful purpose:
planting rice and entered into an agreement GAMBLING
with a farmer that they will divide the A & B are partners where A contributed
harvest, is the farmer partners with the P100,000 in cash and B contributes gambling
owner of the land? paraphernalia. They were raided and the gambling
No because of the following reasons paraphernalia was confiscated. Can the P100.000
(1) The famer had no contribution also be confiscated?
(2) The farmer has no say in the disposition of the No, because the P100.000 was not the reason for
land the crime in anyway. The state is therefore
(3) The farmer has no say in management required to return this amount to A.
(4) In case of loss, the owner shall carry the entire
burden and the farmer need not pay anything Legal effects of a Judicial Dissolution
- Partnership is considered void from the
Example for (4) beginning
- Profit and instrument of the crime is
A partnership borrowed P50,000 and confiscated
instead of giving the creditor a specific - The only returnable items are those
amount to be repaid, they agreed that the that were never related to or connected
creditor will receive 1% of the partnership's with the crime committed.
annual gross profit. Is the creditor a
partner? Article 1771
No because the receipt of share in net income A partnership may be constituted in any
happens to be because of an existing debt. form, except where Immovable property or real
rights are contributed thereto, in which case, a
To determine whether a person is a partner; public instrument shall be necessary (1667a).
(1) Required contribution
(2) Say in management Can a partnership be created orally?
(3) Share in losses Yes. A partnership may be constituted in any
form as stated in Article 1771).
- Partnerships are not covered by the How do we reconcile this with Article 1358 and
Statute of Fraud since these are not 1357?
necessarily required to be in writing Article 1358 is for purposes of convenience and
(contract of partnership can be in any not for validity or enforceability of the law.
form). Article 1357 states that contracting parties have
- If immovable property and/or real the right to compel each other to place the
rights are contributed to the contract into writing.
partnership, then the contract must be
in a public instrument (notarized Purpose of Registration:
documents). (1) Condition for obtaining a license to engage in
- In order to bind 3RD persons, the business and in trade
transfer of OWNERSHIP of (2) 3rd persons want proof that the partnership is
immovable property MUST BE existent, who the partners are and what the
REGISTERED with the REGISTRY capitalization is before they enter into
OF PROPERTY in the province or city contracts/engage in business.
where the property is located (3) The government requires this so that tax liabilities
- The article shows that partnerships can may not be avoided (BIR)
be perfected by MERE CONSENT.
Failure to comply with the Article's
Article 1772 requirements will not prevent the formation
Every contract of partnership having a of the partnership.
capital of P3.000.00 or more, in money or The Statute of Fraud will only apply if there
property, shall appear in a public instrument, was an agreement made by the contracting
which must be recorded in the office of the parties.
Securities and Exchange Commission. Failure to
comply with the requirements of the preceding Examples
paragraph shall not affect the liability of the A and B promise to contribute to their partnership
partnership and the members thereof to third money worth P10,000.00 each within one year from
persons. (n). their agreement. A contributes early but when the
time comes for B to contribute his share, he refuses to
If the partnership's capital is P3,000.00 or do so. Can A compel B to give his contribution?
more in any form), it must be in a public No. A cannot compel B to pay his contribution to
instrument, recorded with the SEC and note the partnership
that property referred to here is MOVABLE Why?
since immovable property is covered by Because the contract/agreement between the two
Article 1771. parties was purely ORAL and never really written,
Failure to comply with the requirements of and it has already been one year since they agreed
Article 1772 will not affect the ability of the to their contract terms.
partnership to 3rd persons.
Article 1773
Isn't this inconsistent with Article 1358? A contract of partnership is void,
No, remember that in Article 1358, the contract whenever immovable property is contributed
terms exceed P500.00 then the contract must be in thereto, if an inventory of said property is not
writing. This is merely for purposes of made, signed by the parties and attached to the
convenience and not validity or enforceability of public instrument. (1668a).
the law. Also note that according to Article 1768, Refers specifically where one or both of the
the partnership will still be valid and have a parties contribute immovable property. The
juridical entity. requirements are:
(1) The contract must be in a public instrument Article 1775
(2) An inventory of the immovable property must be Associations and societies whose articles
made, signed by BOTH parties and attached to the are kept secret among members, and wherein
public instrument, otherwise the partnership is anyone of the members may contract in his own
VOIDED. name with third persons, shall have no juridical
Actual Case in Applying Article 1773: personality and shall be governed by the
provisions relating to co-ownership. (1669)
A and B agree to form a partnership engaging in a
fish pond business where both partners will There is no juridical entity since the
contribute cash, the cash is later used to buy land members can contract with 3 persons in their
that is converted into a fish pond. C comes along and own name without binding others.
points out that the partnership is void because no In a partnership:
inventory of the land was made. Is the partnership (1) The partners are merely agents who cannot act
really void? alone.
No, the partnership is not void because according (2) Articles of Partnership are known to ALL
to the Supreme Court, article 1773 need not apply partners AND to the GENERAL PUBLIC.
since the land was BOUGHT from the CASH
CONTRIBUTION. Article 1776
As to its object, a partnership is either
Suppose a partnership contributes immovable universal on particular.
property but does not conduct an inventory and As regards to the liability of the partners,
enters into a contract with A. The partnership does a partnership may be general or limited. (1671a)
not fulfill its obligation to A and A sues the
partnership. Was A right in suing the partnership? Classifications of Partnerships:
No, since the partnership was void from the (1) As to the Object:
beginning. A should instead file against the (a) Universal Partnership of All Present Property -
“partners” themselves. They will be sued under defined in Article 1778.
the legal basis of them being partners by (b) Universal Partnership of All Profits - defined in
estoppels, as stated in Article 1825. Article 1780.
(c) Particular Partnerships - defined in Article 1783.
If A wishes to be in a partnership with and promises (2) As to the Liability:
to contribute land but subsequently sells the same (a) General - general partners are liable PRO-RATA
plot to C. Who immediately registers the transfer, und subsidiarily, sometimes solidarily, with their own
who owns the land? property/assets if the partnership is insolvent may
C owns the land because A never registered the include industrial partners).
transfer. (b) Limited - limited partners are liable only up to the
Estafa: when the owner of a property sells extent of their contribution
the same to two or more different persons. (3) As to Duration:
(a) At will - no particular undertaking can be
Article 1774 dissolved at any time.
Any immovable property or an interest (b) With a Fixed Term -- may only be dissolved upon
therein may be acquired in the partnership name. the end of its term unless continued by the partners
Title so acquired can be conveyed only in the (4) As to Legality of Existence:
partnership name. (n) (a) De Jure - complied with ALL requirements
(b) De Facto-failed to comply with ALL
Being a juridical entity, a partnership can requirements
acquire property and subsequently become (5) As to Representation to Others:
its owner. (a) Ordinary/Real-actually exists
(b) Ostensible/ by Estoppel-exists only to partners
(6) As to Publicity: A stipulation for the common enjoyment
(a) Secret - some partners are not known to the public of any other profits may also be made; but the
(b) Open/Notorious - all partners are known to the property which the partners may acquire
public. subsequently by inheritance, legacy or donation
(7) As to Purpose: cannot be included in such stipulation, except the
(a) Commercial/Trading -business transactions fruits thereof. (1674a)
(D) Professional/Non-Trading -exercise of Why is the universal partnership of all
professions. present property not popular in the
Kinds of Partners: Philippines?
(1) Under the Civil Code: Property owned at the time of contribution
(a) Capitalist- contributes money property will become common property of the
(b) Industrial - contributes industry partnership eventually because only the
(c) General - liability extends to personal assets profits acquired through the contribution
(d) Limited -liability up to contribution only will become common property, unless there
(e) Managing - manages the partnership was a stipulation that says otherwise.
(f) Liquidating-responsible during dissolution Example:
(g) By Estoppel- not really a partner A and B form a Universal Partnership of All
(h) Continuing - continues business after dissolution Present Property and stipulate that property and
0) Surviving-remains after partner's death profits that are acquired during business operations
0) Sub-partner - contracts with parties, Article 1804 will become common property even if these were not
Other Classifications: due to their contributions and that if anyone inherits
(a) Ostensible - active, known to the public property, it will become common property as well. A
(b) Secret - active, unknown to the public acquires land as part of his compensation package
(c) Silent - inactive, known to the public from Ayala Land and inherits and from his parents
(d) Dormant-inactive, unknown to the public whose property will become common property?
(e) Original-member at time of organization Only A's land will become common property
(f) Incoming -about to become a member because it was essentially PAYMENT while B's
(g) Retiring - about to withdraw was inherited. The article prohibits donations to
become common property, only fruits of such can
Article 1777 become common property.
A universal partnership may refer to all In a partnership contributions must be
the present property or to all the profits. (1672) determinate/certain and partners are akin to
donors. Donations cannot comprehend
Article 1778 future property but profits can be stipulated.
A partnership of all present property is
that in which the partners contribute all the Article 1780
property which actually belongs to them to a A universal partnership of profits
common fund, with the intention of dividing the comprises all that the partners may acquire by
same among themselves, as well as the profits their industry or work during the existence of the
which they may acquire therewith. (1673) partnership. Movable or immovable property
which each of the partners may possess at the time
Article 1779 of the celebration of the contract shall continue to
In a universal partnership of all present pertain exclusively to each, only the usufruct
property, the property which belongs to each of passing to the partnership (1675).
the partners at the time of the constitution of the
partnership becomes the common property of all Example:
the partners, as well as all the profits which they Suppose A and B form a Universal
may acquire therewith. Partnership of All Profits and A wins in the lotto,
P100, 000.00. B tries to share in 50% citing the They are not allowed to donate to each other
existence of their partnership and that A used the and a universal partnership essentially
partnership's money to purchase the lottery ticket. requires that the partners donate to each
Can B really share in the lotto winnings? other.
No. В cannot since it came from CHANCE, not They can join a particular partnership
WORK. instead.
If the P100, 000.00 instead came from A's A partnership formed in violation of this
work in DLSU, can B share in the profits of A? article shall be null and void. It shall not
Yes, because it came from WORK. have any legal personality either.
As long as it is PROFIT, the profit becomes
common property to the partners UNLESS Illustrative Case:
there was a stipulation in their agreement A B and C for a partnership to engage in the
If A and B form a Universal Partnership of importation, marketing and operation of automatic
All Profits for a Taxi-Cab business and both phonographs, radios, Television sets amusement
contribute vehicles that will serve as the machines and their parts accessories, with B and C
taxi, what they were actually contributing is as limited partners. Subsequently, A and B got
the USE or the RIGHT TO USE their married and thereafter, C sold his share to A and B
vehicles. Upon dissolution, the vehicles will for a nominal amount. Was the partnership dissolved
be returned to them since there was never a after the marriage of A and B and C's sale to them of
transfer of ownership. his share in the partnership?
Unique feature of the Universal Partnership No, the firm was not a universal partnership but a
of All Profits particular one.
- The partners retain the title of ownership
Pertinent Legal Provisions
Article 1781 (1) Article 87: Every donation or grant of gratuitous
Articles of Universal Partnership, entered advantage, direct or indirect between spouses during
into without specification of its nature, only their marriage, valid or not shall be void except
constitute a universal partnership of profits moderate gifts which the spouses may give each
(1676). other on the occasion of any family rejoicing.
(2) Article 739. The following donations shall be
If the articles of universal partnership are void:
doubtful or unclear then the presumption is (a) Those made between persons who were guilty of
that it is a universal partnership of all adultery or concubinage at the time of the donation
profits. (b) Those made between persons found guilty of the
- Because a universal partnership of all same criminal offense in consideration thereof
profits require less obligations and is (c) Those made to a public officer or his wife,
less onerous since the partners get to descendants and ascendants by reason of his office.
retain ownership over the property that
they contribute. Article 1783
A particular partnership has for its object
Article 1782 determinate things, their use or fruits, or a
Persons who are prohibited from giving specific undertaking, or the exercise of a
each other any donation or advantage cannot profession or vocation (1678)
enter into a universal partnership. (1677)
Defines what a particular partnership is:
A husband and wife cannot join a universal Particular partnerships are those that are:
partnership.
- Neither a universal partnership for all NO. Because they cannot enforce the contract
present property nor a universal since it was perfected 1.5 years ago and the
partnership for all profits. contract was only oral. Since the contract was for
- Example: Those that are formed for the 1.5 years, it was greater than 1 year and should
acquisition and Sale of property. have been written instead.
Accounting Firms Law Firms. Etc.
Popular because it is easy to join The Statute of Fraud does not usually apply
but to some particular cases such as the
Chapter 2 - Obligations of the Partners example above, it will.
If the contribution is immovable property,
Section 1 - Obligations of the Partners among comply with Article 1773 otherwise the
Themselves partnership will be void.
Suppose A, B and Care partners. A promises What will happen if C fails to comply with his
to contribute a RED CAR, B promises to contribute obligation?
GOODS WORTH P50,000.00 and C promises to C will be liable for his contribution plus
contribute P50,000.00 IN CASH on October 2011. interest and damages from the date he was
On October 2011, none of them comply. What supposed to contribute. The same rule will apply if
happens? the partners take money from the partnership's
A Band C thus become debtors to the partnership. funds without everyone's consent. He will
however, not be charged for theft or estafa and his
Suppose B and C contribute their parts but obligation will only be to return the money he took
A does not Can Band C ask for the rescission or plus interest and damages from the time he took
annulment of the contract? the money.
When will a partner be held criminally liable? Article 1790
Suppose the partners set aside P10.000.00 Unless there is a stipulation to the
for payment to one of their creditors. A takes this contrary, the partners shall contribute equal
amount from the fund and is subsequently shares to the capital of the partnership. (n)
discovered to have done so.
- Then A can be charged for estafa since he The partners shall contribute to the capital of
misappropriated the money ALREADY SET the partnership as per their agreement,
ASIDE. except if there was no agreement in the first
place, in which case, they shall contribute
Article 1789 equally.
An industrial partner cannot engage in Example:
business for himself, unless the partnership A and B decide to form a partnership and
expressly permits him to do so; and if he should agree to contribute to the capital in the ratio of
do so, the capitalist partners may either exclude 60:40, how much should the partners contribute to
him from the firm or avail themselves of the the partnership?
benefits which he may have obtained in violation The partners shall contribute in the ratio of 60:40,
of this provision, with a right to damages in either meaning if their partnership capital is a combined
case. (n) total of P10,000.00 then A contributed P6, 000.00
and B contributed P4,000.00
An industrial partner contributes his industry
- Partnership has the EXCLUSIVE RIGHT A and B decide to form a partnership but did
to his industry. not say how much the other should contribute, how
- Prohibited from the engaging in business much should each partner contribute to the
of ANY kind unless the partnership has partnership?
expressly permitted him to do so. Since the partners did not give any sort of
agreement as to the ratio of their capital
Example: contribution, we shall assume that they will
Suppose that a partnership is engaged in a contribute in equal proportions, meaning if the
automobile repair shop. A is the industrial partner partnership capital is a combined total of
(chief mechanic) and works only up to 5PM every P10,000.00, then each partner contributed
working day. Can he go home and work on the P5,000.00.
partnership's customers' autos, even if he says it to
the capitalist partners EVERY DAY before he leaves? Article 1791
The law says that there must be If there is no agreement to the contrary,
EXPRESSED permission, in this situation, all A has in case of imminent loss of the business of the
is IMPLIED permission. The capitalist partners' partnership, any partner who refuses to
remedy is therefore to either; only one contribute an additional share to the capital,
(1) Avail of the benefits from A's business except an industrial partner to save the venture,
(2) Exclude A from the partnership and demand for shall be obliged to sell his interest to the other
damages partners. (n)
Capitalist partners are prohibited from
engaging in SIMILAR businesses only If there is an imminent loss in the
Industrial partners have the same remedies partnership, the partner who refuses to
as capitalist partners contribute additional funds, IF HE IS
CAPABLE TO DO SO, shall sell his share
TO THE PARTNERS, unless he is an
industrial partner.
Imminent Loss sum thus collected shall be applied to the two
There is a need for the capitalist partners to credits in proportion to their amounts, even
contribute additional funds to save the though he may have given a receipt for his own
partnership credit only; but should he have given it for the
The industrial partner need not do so account of the partnership credit, the amount
because he has already given 100% of his shall be fully applied to the latter.
efforts The provisions of this article are
If the capitalist partner is WILLING but understood to be without prejudice to the right
NOT FINANCIALLY CAPABLE, the granted to the debtor by Article 1252, but only if
article will NOT apply to him because he is the personal credit of that partner should be more
already insolvent. onerous to him. (1684)
Selling of interest
Refusal to contribute additional funds to .A and B are in a partnership where A is the
save the partnership means that the partner managing partner. C owes A a sum of P5,000.00 and
no longer has any interest in the partnership the partnership a sum of P10,000.00. The credit to A
He should not be allowed to reap the is due on September 1 while the partnership's is due
benefits that the other partners have worked on September 15, both debts are due and
hard for because he had not done anything to demandable. A collects from C a total of P3,000.00
help anyway only and A subsequently issues a receipt in his name.
He cannot complain of being removed from Is the partnership entitled to share in the P3,000.00?
the partnership because he will be paid what Yes but in proportion to their respective debts so
is due to him for this share in the interest of A gets P1,000.00 and the partnership gets
the partnership P2,000.00
Agreement that the partner need not
contribute additional funds in cases of loss Supposing there was no mention as to who
the managing partner is, will the requisites of Article
The capitalist partner will not be required
1792 still be present?
since it was in their agreement in the first
place. Yes, in the absence of information relating to the
identity of the managing partner, the assumption
Note that more contribution to the
shall be that ALL partners are managing partners
partnership capital would mean you share
more in the profits but this should be
If A issues a receipt on the name of the
voluntary
partnership instead, to whose credit will the
P3,000.00 be put?
Things to consider
The entire P3,000.00 will go to the partnership.
(1) There must be an IMMINENT LOSS
(2) The partner who is unwilling to contribute must
Supposing the credit of A carries 18% while
be SOLVENT FINANCIALLY CAPABLE
that of the partnership carries only 10%. C pays A
(3) There was no agreement that the partners will not
and says that the P3,000.00 shall be applied to A's
have to contribute additional funds in cases of loss.
credit. Is the partnership entitled to share in the
If the purpose of additional contribution is
P3,000.00 still?
simply to raise capital, then this article will
No, the debtor is given the right to apply payment
not apply.
to whichever debt is more onerous.
Article 1792
Things to remember
If a partner authorized to manage collects
The two conditions should be both present in order
a demandable sum, which was owed to him in his
for the Article to apply, otherwise, the entire amount
own name, from a person who owed the
will go to whoever collects payment from the debtor
partnership another sum also demandable, the
(1) 2 debts and both are due and demandable
(2) The one collecting should be the managing here is only DEBTOR for damages and he cannot
partner compensate using his profits and benefits earned
for the partnership because it IS HIS DUTY to do
Article 1793 so in the first place.
A partner who was received, in whole or
in part, his share of a partnership credit, when the Responsibility may be equitably mitigated
other partners have not collected theirs, shall be by the courts through extraordinary efforts
obliged, if the debtor should thereafter become of the partner, unusual profits are
insolvent, to bring to the partnership capital what recognized/realized.
he received even though he may have given receipt
for his share only. (1685a) Example
A partnership between A and B is engaged
In this case, there is only ONE debt but 2 or in an auto shop business. A customer brought his car
more debtors, both of which are partners. in to be painted YELLOW but A bought RED paint
Example: instead and the car is painted RED. Damages are
A and B are partners and C owes the suffered by the partnership for P30,000.00 due to the
partnership a sum of P10,000.00 B is the managing repainting. Can A compensate this loss using the
partner but A collects his share in the P10,000.00 profits he earned for the partnership?
and C pays A P5,000.00 to which A issues a receipt A cannot compensate it with the profits he earned
in his name. When B's turn to collect comes, C is because it is his obligation to bring profits in the
already insolvent. What should A do? first place. The responsibility of the P30, 000.00,
A shall return his P5,000.00 to the partnership however, may be mitigated by the court if by
and split it with B because C has already become other activities. A is able to bring about unusual
insolvent. or extraordinary profits meaning, he may be
allowed by the courts to pay back just P15,000.00
Take not that whoever collects doesn't instead.
matter as it doesn't make a difference
If you get your share early and the other Follows that if the partner is guilty of fraud
parties cannot get theirs because the debtor or damages, he shall be liable for that.
has become insolvent, then you must retum
YOUR share to the partnership so that no
one gets more than he should have. Article 1795
The risk of specific and determinate
Article 1794 things which are not fungible, contributed to the
Every partner is responsible to the partnership so that only their use and fruits may
partnership for damages suffered by it through be for the cornmon benefit, shall be borne by the
his fault, and he cannot compensate them with the partner who owns them.
profits and benefits which he may have earned for The things contributed are fungible, or
the partnership by his industry. However, the cannot be kept without deteriorating, or if they
courts may equitably lessen this responsibility if were contributed to be sold, the risk shall be
through the partner's extraordinary efforts in borne by the partnership. In the absence of
other activities of the partnership, unusual profits stipulation, the risk of things brought and
have been realized. (1686a) appraised in the inventory, shall also be borne by
the partnership, and in such case the claim shall
Why Compensation will not apply be limited to the value at which they were
Compensation will not apply because in appraised. (1687)
compensation, you should be both a debtor and a
creditor at the same time. However, the partner Refers to rules as to who bears the risks
made by contributions.
If the contribution is determinate and non- A partnership needs office supplies so B
fungible but only the use is contributed, contracts for P10,000.00 worth of supplies. Who will
when it is lost, then the one who contributes pay for the contract price of P10.000.00?
it is liable for it. The partnership shall be the one to shoulder the
If fungible things are contnbuted, the cost as it was made in good faith and did not
partnership shall be the one to shoulder the overstep his authority.
risks.
The partnership shall also be the one to bear If it was stated that the partners cannot
the risk for items brought for sale in contract for more than P5,000.00 worth of supplies
inventory for appraisal for the value at and B still contracts for P10.000.00. How much will
which they were appraised. the partnership pay?
The partnership will only pay what was allowed,
Article 1796 that is, P5,000.00 and B will pay the remaining
The partnership shall be responsible to balance since B overstepped his authority.
every partner for the amounts he may have
disbursed on behalf of the partnership and for the (3) To answer for risks in management
corresponding interest from the time the expenses Example:
are made; it shall also answer to each partner for A partnership is engaged in selling goods
the obligations he may have contracted in good and a customer keeps asking for discounts and an
faith in the interest of the partnership business, argument ensues between the customer, C and the
and for the risks in consequence of its partner A. A gets injured and is brought to the
management (1688a) hospital. Who shall shoulder the hospital bills?
The partnership shall shoulder the hospital bills as
Refers to the obligation of the partnership to it was during A's time in managing the business
the partners. that he was injured.
The partners are merely agents so they are
not personally liable except if they are at Article 1797
fault or if they exceeded their expressed The losses and profits shall be distributed
authority. in conformity with the agreement. If only the
share of each partner in the profits has been
Obligations of the Partnership agreed upon, the share of each in the losses shall
(1) To reimburse any amount disbursed by the be in the same proportion.
partners in behalf of the partnership In the absence of stipulation, the share of
Example: each partner in the profits and losses shall be in
A partnership borrows from the bank a proportion to what he may have contributed, but
sum of P10,000.00 for additional funds but cannot the industrial partner shall not be liable for the
pay it back when it is due to be paid back. A pays losses. As for the profits, the industrial partner
back the P10,000.00 using his personal funds. shall receive such share as may be just and
Should he be reimbursed by the partnership? equitable under the circumstances. If besides his
Yes, the partnership should reimburse A for the services, he has contributed capital, he shall also
sum of P10,000.00 PLUS legal interest starting receive a share in the profits in proportion to his
from the date A disbursed the P10.000.00. capital (1689a)