Cayabyab, Rishia Glodoviza, Sophia

Deapera, Sarah Medrano, Lovely Ann

Dalmacion, Kate BSA 2

Obligation of the Partners Among Themselves

Art. 1784. A partnership begins from the moment of the execution of the contract, unless
otherwise stipulated. (Acquisition by a partnership of juridical personality)

Partnership
 Commences upon execution of the
consensual contract
 May stipulate for a different date even
if the partnership is registered with
SEC
Corporation
 Commences to exist on the date stated
in the certificate of incorporation from
SEC

Kinds of Partner as to Duration. (Art. 1785)

a. For a fixed term- duration is fixed by the partners and is dissolved upon the expiration
date.

b. For a particular undertaking- organized for a certain undertaking, thus it is dissolved

upon attainment of undertaking.

c. At will- may be terminated at any time by one or more partners when partners happen
to not agree on a specific undertaking/definite term or when the partnership was formed for a
fixed term/specific undertaking and the term expired or undertaking is attained but the business
is continued by the partners.

Obligation of a partner

 Contribution of specific things (Art. 1786)

A. To deliver to the partnership at the time it was constituted or stipulated he has
promised to contribute the property.
B. To take care of the property before its delivery with diligence of a good father.
C. To be liable for damages in case of default.
D. To answer for eviction in case the partnership is deprived of the property he has
contributed.
 E. To be liable for the fruits of the thing without the need of demand.

 Contribution of money and amount appropriated (Art. 1788)

A. To deliver to the partnership at the time it was constituted or stipulated he has
promised to contribute the money.
B. To pay interest on the amount he had promised to contribute from the time he
should have complied with his obligation.
C. To pay damages suffered by the partnership due to his default.
D. To reimburse any amount he may have taken for his own use.
E. To pay interest on the amount he had converted for his own use.
F. To indemnify the partnership for damages

 Contribution of equal shares (Art. 1790)

A. Partner can stipulate the contribution of unequal shares to the common fund.
B. Absence of stipulation, there is a presumption that the contribution is in equal
shares.

 To contribute additional shares (Art. 1791)

Capitalist partner is not bound to contribute more than what he agreed to
contribute.
In case of imminent loss of the partnership:
Each partner is obliged to contribute additional shares but provision does not
apply to industrial partners and capitalist partners (not required to give additional
contribution upon stipulation)

 To render information (Art 1806)

The partners shall render on demand and on true information of all things
affecting the partnership to any partner, or the legal representative of a deceased partner
or of a partner under legal disability.

 Respect to benefits or profits (Art 1807)

A. Every partner must account to the partnership for any benefit.
B. And hold as trustee for the partnership any profits derived by him in any
transaction connected with the formation, conduct or liquidation of the partnership or from any
use by him of his property without the consent of others partners.
 Rights of Different Kinds of Partner
(Art.1789, 1804, 1805, 1808, 1809)
Art.1789
INDUSTRIAL PARTNER
The one who contributes his industry, labor, or services to the partnership. He
becomes the debtor of the partnership for his work or services. The partnership acquires
an exclusive right to avail itself of his industry. Action for specific performance is not
available as a remedy because it will amount to involuntary servitude
PROHIBITION AGAINST ENGAGING IN BUSINESS1.
1. Industrial Partner
 Absolute prohibition
 Applies whether he would engage in the same business or not
 To prevent any conflict of interest
2. Capitalist Partner
Prohibition only extends to any operation which is of the same kind of business in which
the partnership is engaged.
REMEDIES WHERE INDUSTRIAL PARTNER ENGAGES IN BUSINESS
 Exclude him from the firm or avail themselves of the benefits which he may obtained
 Right to damages
 Mere toleration by the partnership will not exempt the industrial partner from liability

Art. 1804
Every partner may associate another person with him in his share, but the associate shall
not be admitted into the partnership without the consent of all the other partners, even if
the partner having an associate should be a manager.
That every partner may associate with another person, known as the SUBPARTNER, as
re his share (partner’s hare) even without the consent of the other partner
SUBPARTNERSHIP
The manner by which the profits are to be divided between the members of the
subpartnership or that one of the members shall receive the entire profits is immaterial as
re the formation of the subparntership. It is a distinct and separate partnership from that
of the mainpartnership. A subpartnership agreement does not in any wise affect the
composition, existence and operations of the firm. But thesubpartners are partners inter se
(among or between themselves) but the subpartner does not become a member of the firm
without the mutual assent of all the partners even if they know of the existence of the
subpartnership agreement. He does not acquire the rights of the partners and neither does
he become indebted for the partnership’s debts.

Art. 1805
The partnership books shall be kept:
1. In the place agreed upon by the partners
2. In the absence of agreement, at the principal place of business of the partnership
Every partner shall have at a reasonable hour access to and may inspect and copy any of them. The
managing or the active partner has the obligation to keep a true and correct books of accounts and such
books shall at all times be open for inspection by the other partners.
Accordingly:
1) The partners have knowledge of the contents of the books
2) The books state accurately the state of accounts of the partnership
The Partners can:
1. Access
2. Inspect
3. Copy any of them
Rights:
1. Each partner has a right to a true and full information of the partnership accounts and activities
2. Each partner is a co-owner of the partnership properties, including the partnership books, and they also have
equal rights in the management of the partnership affairs so that the books should not be kept under the sole
control and custody of just one partner.
3. The books should not be transferred without the consent of the other partners

Art. 1808
The capitalist partners cannot engage for their own account in any operation which is of the kind of
business in which the partnership is engaged, unless there is a stipulation to the contrary.Any capitalist
partner violating this prohibition shall bring to the common funds any profits accruing to him from his
transactions, and shall personally bear all the losses. (n)
When is capitalist partner PROHIBITED from engaging in other business?
When he is engaged in any business which is the same or similar to the business in which the partnership
is engaged

What is the obligation of the partner that violates this prohibition?

1. Bring to the common fund any profits he derived from his transactions.
2. If there are losses, the partner should bear it alone

Art. 1809
During the existence of the partnership, a partner is NOT entitled to a formal account of
partnership affairs

Reason:
 1. This right is already protected by Art. 1805 and Art. 18062.
2. This may cause much inconvenience and unnecessary waste of time.
3. He is wrongfully excluded from the partnership
4. If it exist under any agreement3.
5. Provided under Art. 18074.
6. Whenever circumstances render it just and reasonable

Division of Profits and Losses

(Art 1797, 3rd person 1798, 1799)

Art. 1797
The losses and profits shall be distributed in conformity with the agreement.

1. Rules on division of profit and losses

a. If all the partners are capitalist partners
1. profit and losses shall be divided according to their agreement
2. If only the sharing of the partners in the profits has been agreed upon, the share of
each partner in the losses shall be in same proportion as the share of each in the profits
3. In the absence of both, the share of each partner in the profit and losses shall be in
proportion to his capital contribution
2. Losses
a. The industrial partner shall share in the losses
b. The capitalist partners shall share in the losses as follows:
1. According to their agreement
2. In the absence of any agreement, shall share in the losses in the same proportion as the
share of each profits
3. In the absence of both, shall share in the losses in proportion to his capital contribution
c. Capitalist-Industrial partners
1. Profits
a. The profits shall be divided according to their agreement
b. In the absence of agreement thereon, the profits shall be divided as follows:
1. Shall first receive a just and equitable share of the profits in his capital as
industrial partner
2. Thereafter, each capitalist partner including the capitalist-industrial partner in his
capacity as capitalist partner shall share in the profits in proportion to his capital
contribution
2. Losses
a. Losses shall be divided among the partners, including capitalist-industrial partner in
his capacity as a capitalist partner, according to their agreement
b. In the absence of any agreement thereon, losses shall be divided among the partners
including capitalist-industrial partner in his capacity as capitalist partner,
according to the ratio of their capital contribution
c. In both of the above cases of loss, the capitalist-industrial partner shall not share in
the losses in his capacity as industrial partner
Art. 1798
If the partners have agreed to entrust to a third person the designation of the share of each
one in the profits and losses

1. Designation of share in the profits and losses by a third person

The same shall be binding upon the partners and may be impugned only when it is
manifestly inequitable. Even if such designation is manifestly inequitable, it can no longer be
impugned:
a. By a partner who has begun to execute it; or
b. By a partner of three months had already lapsed from the time he obtained knowledge
thereof.
2. Designation of share in the profits and losses entrusted to one of the partners
The designation of sharing in the profits and losses entrusted to one of the partners is void.

Accordingly, the profits and losses shall be divided among the partners as if there was no
stipulation thereon; hence, according to the ratio of their capital contribution.

Art. 1799
A stipulation which excludes one or more partners from any share in the profits or losses is
void
1. Exclusion of one or more partners from sharing in the profits and losses

A partnership is established for the common benefit or interest of the partners. Hence,
the partners must share in the benefits and losses in some proportion. The exception is in
the case of an industrial partner who may be validly excluded from losses by stipulation
of the capitalist partners since the law itself provides that he shall not be liable for losses.
(Art. 1797)