BUSINESS LAWS AND REGULATIONS

Lecture Notes
1.
WEEK 1-4 MATERIALS
PARTNERSHIP rights are contributed
▪ A contract whereby two or more - It must be in a public instrument
persons bind themselves to and an inventory signed by the
contribute money, property or parties must be attached.
industry to a common fund with the Otherwise, the partnership is
intention of dividing the profits INVALID.
among themselves.
EXCEPTION TO THE
ELEMENTS EXCEPTION:
1. Two or more persons bound - SC said if no third party will be
themselves to contribute money, prejudiced, nullity of the partnership
property or industry to a common agreement will not prevent the
fund. court from considering it as an
2. Intention to divide profits ordinary contract.
- The contract of partnership is
CONSENSUAL. Perfected by 2. When the partnership capital is PHP
meeting of minds with respect to 3,000 or more
the object and consideration of the - Must be in public instrument but
contract. failure to comply does not affect the
ENTITY THEORY existence of the juridical entity.
▪ At the time of perfection, the - Partnership with a capital of at least
partnership has personality separate 3,000 must be registered with SEC.
and distinct from the partners. Juridical personality still exists if not
▪ The PARTNERSHIP can acquire registered in SEC.
properties in its own name.
- Any capacitated person can be a
▪ It may conduct business using its
partner.
own name which may or may not
include the names of the partners. DELECTUS PERSONAE
▪ The partnership should be - The partners choose with whom
impleaded in cases involving a they will enter into a partnership
property registered in the name of agreement, who will be accepted in
the partnership. their partnership and whether they
will remain as partners.
REAL PARTY IN INTEREST
- No formality is required. It need not DISQUALIFICATIONS IN
to be in writing. UNIVERSAL PARTNERSHIP
EXCEPT: - Those who are prohibited from
1. When immovable property or real making donations can’t be partners.
1. Persons guilty of adultery or - Can adopt a partnership name
concubinage at the time of the - All general partners may be liable
donation. even up to the extent of their
2. Persons found guilty of same personal properties and may
criminal offense in consideration therefore be sues by third person.
thereof.
3. Made to public officer or his wife, JOINT ACCOUNTS:
defendants, ascendants by reason of his - No juridical personality
office. - No commercial name common to
all participants can be adopted
PARTNERSHIP VS. - The person carrying on the joint
CORPORATION business can be sued and is liable to
PARTNERSHIP: persons transacting with the former.

- Created by mere agreement PARTNERSHIP VS. CO-

- Subject only to what the parties OWNERSHIP
have agreed upon
- MUTUAL AGENCY: Each general PARTNERSHIP:
partner may represent and bind the
partnership. - Has juridical personality
- Interests cannot be transferred - Cannot be created by law, only by
without the consent of the partners. agreement
- Death of partner dissolved - Intent to distribute profit
partnership - Valid stipulation not to divide
property for more than 10 years
CORPORATION: - Mutual agency
- Death extinguishes partnership
- Commences only from the issuance
- Assignment does not result to
of the Certificate of Registration
partnership
- More restricted powers because of
- May validly stipulate the division of
limited personality
profit
- Stockholders are not agents of the
corporation CO-OWNERSHIP:
- Can be freely transferred
- No juridical personality
- Death does not dissolve the
- Cannot be created by law, only by
corporation
agreement
- No intent
PARTNERSHIP VS. JOINT
- Invalid stipulation to not divide
ACCOUNTS property for more than 10 years
PARTNERSHIP: - Mutual agency does not apply
- Death does not extinguish co-
- Separate and distinct personality ownership
- Assignment may result to co- partnership. Partners shall retain
ownership ownership their properties but
- Stipulation that it shall be divided usufruct shall pertain to partnership.
not respective in the interest is void
TYPES OF PARTNERSHIP
JOINT VENTURE ACCORDING TO LIABILITY
▪ Association of persons or
GENERAL PARTNERSHIP
companies jointly undertaking some
▪ The partners are all liable for all
commercial enterprise, generally all
partnership obligations even up to
contribute assets and share risks.
the extent of their personal
▪ Form of partnership and should be
properties. There is no limited
governed by law of partnership
partner.
UNIVERSAL PARTNERSHIP
LIMITED PARTNERSHIP
▪ May refer to all the present property
▪ There are limited and general
or all the profits.
Partners
▪ In absence of any statement,
Universal pat is presumed to be one TYPES OF PARTNERSHIP
of PROFITS only. ACCORDING TO DURATION
UNIVERSAL PARTNERSHIP PARTNERSHIP AT WILL
OF ALL PRESENT ▪ Does not fix its term. The birth and
PROPERTIES life of this type is predicated on the
▪ The partners contribute all the mutual desire and consent of the
properties tat actually belong to partners.
them AT THE TIME OF THE
PERFECTION to a common fund or
TYPES OF PARTNERSHIP
shall become part of the partnership ACCORDING TO LEGALITY
property, with the intention of OF EXISTENCE
dividing the same among
themselves, as well as all the profits DE FACTO PARTNERSHIP
which they may acquire therewith. ▪ Partnership if legal formalities are
▪ Property acquired subsequently by not complied with. It cannot exist
INHERITANCE, LEGACY OR because partnership is perfected by
DONATION, cannot be included in mere consent.
stipulation making future properties
DE JURE PARTNERSHIP
EXCEPT fruits thereof.
▪ Merely by consent as to the
UNIVERSAL PARTNERSHIP elements of the contract.
OF PROFITS ▪ If no intent to enter into a
▪ Comprises of ALL that the partners partnership, there can be no
may acquire by their industry or partnership whether de facto
work during the existence of the or de jure.
TYPES OF PARTNERS one with who a partner shares his
ACCORDING TO profits in partnership.
CONTRIBUTION GENERAL RULE:
- A corporation cannot become a
CAPITALIST PARTNER
member of a partnership in absence
▪ One who contributes money or
of express authorization by statute
property.
or charter.
INDUSTRIAL PARTNER - The mutual agency would be
▪ One who contributes industry. He inconsistent with the policy of law
cannot be liable for losses. He that the corporation shall manage
cannot engage in business unless its own affairs separately. Such
expressly provided for in the arrangement would improperly
agreement. allow corporate property to be
subject of risks not contemplated by
TYPES OF PARTNERS the stockholders.
ACCORDING TO SHARE IN EXCEPTION BY SEC: Allowed if
LIABILITY complied with the following conditions:
1. Authority to enter into partnership
GENERAL PARTNER 2. Nature of the business venture of
▪ One who controls and manages the partnership is in line with the
partnership and is liable for business authorized by the charter
partnership obligations. or AOI
3. Partnership must be limited and
LIMITED PARTNERS corporation is a limited partner
▪ He is not personally liable for
partnership obligations but is not - Spouses cannot enter into a
involved in the management. universal partnership. But it may
enter limited partnership with
TYPES OF PARTNERS another spouse.
ACCORDING TO ROLE IN
THE PARTNERSHIP OBLIGATIONS OF
PARTNERS
MANAGING PARTNER - To contribute money or property
▪ One who is designated as the - The partner becomes the debtor
person who will administer the from the time of execution
affairs of partnership. - Liable to pay interest and damages
even if not stipulated and even
LIQUIDATING PARTNER without demand from the time the
▪ Winds up the affairs execution unless different time is
stipulated.
ASSOCIATE/SUBPARTNER
- If property, the partner who fails
He is not a real partner but he is the
bears the risk of loss
- Partner who contributed the - If debt is given in the name of the
property is liable for warranty partner, in proportion of the amount
against hidden defects and eviction of debts.
- It cannot be agreed upon that all ▪ INDUSTRIAL cannot engage in
will only contribute INDUSTRY in a ANY business for himself UNLESS
partnership authorized by the partnership. If he
- If there is no agreement to contrary, engages, he may be excluded and
a capitalist must contribute be required to pay damages.
additional capital to save the ▪ CAPITALIST cannot engage in the
partnership in case of imminent loss SAME LINE OF BUSINESS unless
- IF HE FAILS TO CONTRIBUTE: he expressly permitted. If he violated,
may be obliged to sell his interest to Profits of capitalist partners belong
other partners. to PARTNERSHIP and he shall bear
- Partners have fiduciary duty that the loss.
requires them to act in good faith ▪ Partner must account for the
and with fairness. common benefit all the secret
profits connected with the affairs or
FIDUCIARY DUTIES OF use of property of the partnership.
PARTNER (LODI) ▪ When money or property have been
1. Loyalty received for a specific purpose, and
2. Obedience he misappropriated, HE IS LIABLE
3. Diligence FOR ESTAFA
4. Inform
DUTY OF OBEDIENCE
DUTY OF LOYALTY - Must adhere to the provisions of
- Duty not to act adversely to the partnership agreement and
interest of the partnership. decisions of partners
- If a debtor is indebted in the - A partner is liable to the partnership
partnership and a managing partner for any damage caused by his
and the latter was able to collect negligence
from the said debtor, The partner - Negligent partner cannot
should divide what he has collected compensate the DAMAGE with the
and apply it to both debts in profits and benefits he earned.
proportion to their amount. DUTY TO INFORM
- Application of payment shall only - Notice to the partner is notice to the
be applied if the debt to the partnership unless there is fraud
managing partner is more onerous - A partner who is in charge of the
to the debt to the partnership. books has the duty to allow other
- If the debt is given in the name of partners to inspect books and
the partnership, the entire amount records. And has the duty to render
should be paid to the partnership. accounting in proper cases.
RIGHTS OF PARTNERS TITLE IX
1. Participate in management Partnership
- May execute all acts of administration
unless otherwise agreed. CHAPTER 1
2. Rights to share in the profits. General Provisions
Distribution shall be in accordance
with: ARTICLE 1767
A. Will and stipulation By the contract of partnership two or
B. If no stipulation, capital contributions more persons bind themselves to
C. For industrial, if no stipulation: He is contribute money, property, or industry
NOT LIABLE for the losses. If he to a common fund, with the intention of
contributed dividing the profits among themselves.
a capital, he is also entitled to share in ARTICLE 1768
profits in proportion to his capital. The partnership has a juridical
GR: Partners are not entitled to personality separate and distinct from
compensation unless agreed upon. that of each of the partners, even in
3. Right to reimbursement of case of failure to comply with the
expenditures incurred in behalf of requirements of article 1772, first
partnership paragraph. (n)
4. Right to return advances. ARTICLE 1769
5. Right to return of capital In determining whether a partnership
exists, these rules shall apply:
6. Right to information and right to (1) Except as provided by article 1825,
inspect and copy the partnership’s persons who are not partners as to
books at any reasonable hours and to each other are not partners as to third
demand full information of things persons;
affecting partnership (2) Co-ownership or co-possession does
7. Right to accounting when: not of itself establish a partnership,
A. If he is wrongfully excluded from the whether such co-owners or co-
partnership business possessors do or do not share any
B. If agreed upon profits made by the use of the property;
C. If he derives secret profits (3) The sharing of gross returns does
D. Whether other circumstances render not of itself establish a partnership,
it just or reasonable. whether or not the persons sharing
them have a joint or common right or
interest in any property from
which the returns are derived;
(4) The receipt by a person of a share of
the profits of a business is prima facie
evidence that he is a partner in the
business, but no such inference shall be Failure to comply with the
drawn if such profits were received in requirements of the preceding
payment: paragraph shall not affect the
(a) As a debt by installments or liability of the partnership and the
otherwise; members thereof to third persons. (n)
(b) As wages of an employee or rent to
a landlord; ARTICLE 1773
(c) As an annuity to a widow or A contract of partnership is void,
representative of a deceased partner; whenever immovable property is
(d) As interest on a loan, though the contributed thereto, if an inventory of
amount of payment vary with the said property is not made, signed by
profits of the business; the parties, and attached to the public
(e) As the consideration for the sale of a instrument. (1668a)
goodwill of a business or other property ARTICLE 1774
by installments or otherwise. (n) Any immovable property or an interest
ARTICLE 1770 therein may be acquired in the
A partnership must have a lawful object partnership name. Title so acquired can
or purpose, and must be established for be conveyed only in the partnership
the common benefit or interest of the name. (n)
partners. When an unlawful partnership ARTICLE 1775
is dissolved by a judicial decree, the Associations and societies, whose
profits shall be confiscated in favor of articles are kept secret among the
the State, without prejudice to the members, and wherein any one of the
provisions of the Penal Code governing members may contract in his own
the confiscation of the instruments and name with third persons, shall have no
effects of a crime. (1666a) juridical personality, and shall be
ARTICLE 1771 governed by the provisions relating to
A partnership may be constituted in co-ownership. (1669)
any form, except where immovable ARTICLE 1776
property or real rights are contributed As to its object, a partnership is either
thereto, in which case a public universal or particular. As regards the
instrument shall be necessary. (1667a) liability of the partners, a partnership
ARTICLE 1772 may be general or limited. (1671a)
Every contract of partnership having a ARTICLE 1777
capital of three thousand pesos or A universal partnership may refer to all
more, in money or property, shall the present property or to all the
appear in a public instrument, which profits. (1672)
be recorded in the Office of the
ARTICLE 1778
Securities and Exchange Commission.
A partnership of all present property is ARTICLE 1782
that in which the partners contribute all Persons who are prohibited from giving
the property which actually belongs to each other any donation or advantage
them to a common fund, with the cannot enter into universal partnership.
intention of dividing the same among (1677)
themselves, as well as all the profits
which they may acquire therewith. ARTICLE 1783
(1673) A particular partnership has for its
object determinate things, their use
ARTICLE 1779 or fruits, or a specific undertaking, or
In a universal partnership of all present the exercise of a profession or vocation.
property, the property which belonged (1678)
to each of the partners at the time of
the constitution of the partnership, CHAPTER 2
becomes the common property of all Obligations of the Partners
the partners, as well as all the profits
which they may acquire therewith. SECTION 1
A stipulation for the common Obligations of the Partners
enjoyment of any other profits may also Among Themselves
be made; but the property which the
ARTICLE 1784
partners may acquire subsequently by
A partnership begins from the moment
inheritance, legacy, or donation cannot
of the execution of the contract, unless
be included in such stipulation, except
it is otherwise stipulated. (1679)
the fruits thereof. (1674a)
ARTICLE 1785
ARTICLE 1780
When a partnership for a fixed term or
A universal partnership of profits
particular undertaking is continued
comprises all that the partners may
after the termination of such term or
acquire by their industry or work
particular undertaking without any
during the existence of the partnership.
express agreement, the rights and
Movable or immovable property which
duties of the partners remain the same
each of the partners may possess at the
as they were at such termination, so far
time of the celebration of the contract
as is consistent with a partnership at
shall continue to pertain exclusively to
will.
each, only the usufruct passing to the
partnership. (1675) A continuation of the business by the
partners or such of them as habitually
ARTICLE 1781 acted therein during the term, without
Articles of universal partnership, any settlement or liquidation of the
entered into without specification of its partnership affairs, is prima facie
nature, only constitute a universal evidence of a continuation of the
partnership of profits. (1676) partnership. (n)
 ARTICLE 1786 partnership expressly permits him to do
Every partner is a debtor of the so; and if he should do so, the capitalist
partnership for whatever he may have partners may either exclude him from
promised to contribute thereto. the firm or avail themselves of the
benefits which he may have obtained in
He shall also be bound for warranty in violation of this provision, with a right
case of eviction with regard to specific to damages in either case. (n)
and determinate things which he may
have contributed to the partnership, in ARTICLE 1790
the same case and in the same manner Unless there is a stipulation to the
as the vendor is bound with respect to contrary, the partners shall contribute
the vendee. He shall also be liable for equal shares to the capital of the
the fruits thereof from the time they partnership. (n)
should have been delivered, without
the need of any demand. (1681a) ARTICLE 1791
If there is no agreement to the contrary,
ARTICLE 1787 in case of an imminent loss of the
When the capital or a part thereof business of the partnership, any partner
which a partner is bound to contribute who refuses to contribute an additional
consists of goods, their appraisal must share to the capital, except an industrial
be made in the manner prescribed in partner, to save the venture, shall be
the contract of partnership, and in the obliged to sell his interest to the other
absence of stipulation, it shall be made partners. (n)
by experts chosen by the partners, and
according to current prices, the ARTICLE 1792
subsequent changes thereof being for If a partner authorized to manage
the account of the partnership. (n) collects a demandable sum, which was
owed to him in his own name, from a
ARTICLE 1788 person who owed the partnership
A partner who has undertaken to another sum also demandable, the sum
contribute a sum of money and fails to thus collected shall be applied to the
do so becomes a debtor for the interest two credits in proportion to their
and damages from the time he should amounts, even though he may have
have complied with his obligation. given a receipt for his own credit only;
but should he have given it for the
The same rule applies to any amount
account of the partnership credit, the
he may have taken from the
amount shall be fully applied to the
partnership coffers, and his liability
latter.
shall begin from the time he converted
the amount to his own use. (1682) The provisions of this article are
understood to be without prejudice to
ARTICLE 1789 the right granted to the debtor by
An industrial partner cannot engage in article 1252, but only if the personal
business for himself, unless the
credit of the partner should be more shall be limited to the value at which
onerous to him. (1684) they were appraised. (1687)

ARTICLE 1793 ARTICLE 1796

A partner who has received, in whole The partnership shall be responsible to
or in part, his share of a partnership every partner for the amounts he may
credit, when the other partners have have disbursed on behalf of the
not collected theirs, shall be obliged, if partnership and for the corresponding
the debtor should thereafter become interest, from the time the expenses are
insolvent, to bring to the partnership made; it shall also answer to each
capital what he received even though partner for the obligations he may have
he may have given receipt for his share contracted in good faith in the interest
only. (1685a) of the partnership business, and for
risks in consequence of its
ARTICLE 1794 management. (1688a)
Every partner is responsible to the
partnership for damages suffered by it ARTICLE 1797
through his fault, and he cannot The losses and profits shall be
compensate them with the profits and distributed in conformity with the
benefits which he may have earned for agreement. If only the share of each
the partnership by his industry. partner in the profits has been agreed
However, the courts may equitably upon, the share of each in the losses
lessen this responsibility if through the shall be in the same proportion.
partner’s extraordinary efforts in other
In the absence of stipulation, the share
activities of the partnership, unusual
of each partner in the profits and losses
profits have been realized. (1686a)
shall be in proportion to what he may
ARTICLE 1795 have contributed, but the industrial
The risk of specific and determinate partner shall not be liable for the losses.
things, which are not fungible, As for the profits, the industrial partner
contributed to the partnership so that shall receive such share as may be just
only their use and fruits may be for the and equitable under the circumstances.
common benefit, shall be borne by the If besides his services he has
partner who owns them. contributed capital, he shall also
receive a share in the profits in
If the things contribute are fungible, or proportion to his capital. (1689a)
cannot be kept without deteriorating, or
if they were contributed to be sold, the ARTICLE 1798
risk shall be borne by the partnership. If the partners have agreed to intrust to
to a third person the designation of the
In the absence of stipulation, the risk of
share of each one in the profits and
things brought and appraised in the
losses, such designation may be
inventory, shall also be borne by the
impugned only when it is manifestly
partnership, and in such case the claim
inequitable. In no case may a partner shall prevail. In case of a tie, the matter
who has begun to execute the decision shall be decided by the partners owning
of the third person, or who has not the controlling interest. (1693a)
impugned the same within a period of
three months from the time he had ARTICLE 1802
knowledge thereof, complain of such In case it should have been stipulated
decision. that none of the managing partners
shall act without the consent of the
The designation of losses and profits others, the concurrence of all shall be
cannot be intrusted to one of the necessary for the validity of the acts,
partners. (1690) and the absence or disability of any one
of them cannot be alleged, unless there
ARTICLE 1799
is imminent danger of grave or
A stipulation which excludes one or
irreparable injury to the partnership.
more partners from any share in the
(1694)
profits or losses is void. (1691)
ARTICLE 1803
ARTICLE 1800
When the manner of management has
The partner who has been appointed
not been agreed upon, the following
manager in the articles of partnership
rules shall be observed:
may execute all acts of administration
despite the opposition of his partners, (1) All the partners shall be considered
unless he should act in bad faith; and agents and whatever any one of them
his power is irrevocable without just or may do alone shall bind the
lawful cause. The vote of the partners partnership, without prejudice to the
representing the controlling interest provisions of article 1801.
shall be necessary for such revocation
(2) None of the partners may, without
of power.
the consent of the others, make any
A power granted after the partnership important alteration in the immovable
has been constituted may be revoked property of the partnership, even if it
at any time. (1692a) may be useful to the partnership. But if
the refusal of consent by the other
ARTICLE 1801 partners is manifestly prejudicial to the
If two or more partners have been interest of the partnership, the court’s
intrusted with the management of the intervention may be sought. (1695a)
partnership without specification of
their respective duties, or without a ARTICLE 1804
stipulation that one of them shall not Every partner may associate another
act without the consent of all the person with him in his share, but the
others, each one may separately associate shall not be admitted into the
execute all acts of administration, but if partnership without the consent of all
any of them should oppose the acts of the other partners, even if the partner
the others, the decision of the majority
having an associate should be a ARTICLE 1809
manager. (1696) Any partner shall have the right to a
formal account as to partnership affairs:
ARTICLE 1805
The partnership books shall be kept, (1) If he is wrongfully excluded from
subject to any agreement between the the partnership business or possession
partners, at the principal place of of its property by his co-partners;
business of the partnership, and every
(2) If the right exists under the terms of
partner shall at any reasonable hour
any agreement;
have access to and may inspect and
copy any of them. (n) (3) As provided by article 1807;

ARTICLE 1806 (4) Whenever other circumstances

Partners shall render on demand true render it just and reasonable. (n)
and full information of all things
affecting the partnership to any partner SECTION 2
or the legal representative of any Property Rights of a Partner
deceased partner or of any partner
under legal disability. (n) ARTICLE 1810
The property rights of a partner are:
ARTICLE 1807
Every partner must account to the (1) His rights in specific partnership
partnership for any benefit, and hold as property;
trustee for it any profits derived by him (2) His interest in the partnership; and
without the consent of the other
partners from any transaction (3) His right to participate in the
connected with the formation, conduct, management. (n)
or liquidation of the partnership or from ARTICLE 1811
any use by him of its property. (n)
A partner is co-owner with his partners
ARTICLE 1808 of specific partnership property. The
The capitalist partners cannot engage incidents of this co-ownership are such
for their own account in any operation that:
which is of the kind of business in (1) A partner, subject to the provisions
which the partnership is engaged, of this Title and to any agreement
unless there is a stipulation to the between the partners, has an equal
contrary. right with his partners to possess
Any capitalist partner violating this specific partnership property for
prohibition shall bring to the common partnership purposes; but he has no
funds any profits accruing to him from right to possess such property for any
his transactions, and shall personally other purpose without the consent of
bear all the losses. (n) his partners;
(2) A partner’s right in specific partnership, the assignee may avail
partnership property is not assignable himself of the usual remedies.
except in connection with the
In case of a dissolution of the
assignment of rights of all the partners
partnership, the assignee is entitled to
in the same property;
receive his assignor’s interest and may
(3) A partner’s right in specific require an account from the date only
partnership property is not subject to of the last account agreed to by all the
attachment or execution, except on a partners. (n)
claim against the partnership. When
partnership property is attached for a ARTICLE 1814
partnership debt the partners, or any of Without prejudice to the preferred
them, or the representatives of a rights of partnership creditors under
deceased partner, cannot claim any Article 1827, on due application to a
right under the homestead or competent court by any judgment
exemption laws; creditor of a partner, the court which
entered the judgment, or any other
(4) A partner’s right in specific court, may charge the interest of the
partnership property is not subject to debtor partner with payment of the
legal support under article 291. (n) unsatisfied amount of such judgment
debt with interest thereon; and may
ARTICLE 1812
then or later appoint a receiver of his
A partner’s interest in the partnership is
share of the profits, and of any other
his share of the profits and surplus. (n)
money due or to fall due to him in
ARTICLE 1813 respect of the partnership, and make all
A conveyance by a partner of his whole other orders, directions, accounts and
interest in the partnership does not of inquiries which the debtor partner
itself dissolve the partnership, or, as might have made, or which the
against the other partners in the circumstances of the case may require.
absence of agreement, entitle the The interest charged may be redeemed
assignee, during the continuance of the at any time before foreclosure, or in
partnership, to interfere in the case of a sale being directed by the
management or administration of the court, may be purchased without
partnership business or affairs, or to thereby causing a dissolution:
require any information or account of (1) With separate property, by any one
partnership transactions, or to inspect or more of the partners; or
the partnership books; but it merely
entitles the assignee to receive in (2) With partnership property, by any
accordance with his contract the profits one or more of the partners with the
to which the assigning partner would consent of all the partners whose
otherwise be entitled. However, in case interests are not so charged or sold.
of fraud in the management of the Nothing in this Title shall be held to
deprive a partner of his right, if any,
under the exemption laws, as regards he is a member binds the partnership,
his interest in the partnership. (n) unless the partner so acting has in fact
no authority to act for the partnership
SECTION 3 in the particular matter, and the person
Obligations of the Partners with whom he is dealing has knowledge
with Regard to Third of the fact that he has no such
Persons authority.
An act of a partner which is not
ARTICLE 1815
apparently for the carrying on of
Every partnership shall operate under a
business of the partnership in the usual
firm name, which may or may not
way does not bind the partnership
include the name of one or more of the
unless authorized by the other partners.
partners. Those who, not being
Except when authorized by the other
members of the partnership, include
partners or unless they have
their names in the firm name, shall be
abandoned the business, one or more
subject to the liability of a partner. (n)
but less than all the partners have no
ARTICLE 1816 authority to:
All partners, including industrial ones, (1) Assign the partnership property in
shall be liable pro rata with all their trust for creditors or on the assignee’s
property and after all the partnership promise to pay the debts of the
assets have been exhausted, for the partnership;
contracts which may be entered into in
the name and for the account of the (2) Dispose of the good-will of the
partnership, under its signature and by business;
a person authorized to act for the
(3) Do any other act which would make
partnership. However, any partner may
it impossible to carry on the ordinary
enter into a separate obligation to
business of a partnership;
perform a partnership contract. (n)
(4) Confess a judgment;
ARTICLE 1817
Any stipulation against the liability laid (5) Enter into a compromise concerning
down in the preceding article shall be a partnership claim or liability; meiriw
void, except as among the partners. (n) (6) Submit a partnership claim or
ARTICLE 1818 liability to arbitration;
Every partner is an agent of the (7) Renounce a claim of the
partnership for the purpose of its partnership.
business, and the act of every partner,
No act of a partner in contravention of
including the execution in the
a restriction on authority shall bind the
partnership name of any instrument, for
partnership to persons having
apparently carrying on in the usual way
knowledge of the restriction. (n)
the business of the partnership of which
 ARTICLE 1819 ▪ Where the title to real property is in
▪ Where title to real property is in the the name of one or more or all the
partnership name, any partner may partners, or in a third person in trust
convey title to such property by a for the partnership, a conveyance
conveyance executed in the executed by a partner in the
partnership name; but the partnership name, or in his own
partnership may recover such name, passes the equitable interest
property unless the partner’s act of the partnership, provided the act
binds the partnership under the is one within the authority of the
provisions of the first paragraph of partner under the provisions of the
article 1818, or unless such property first paragraph of article 1818.
has been conveyed by the grantee ▪ Where the title to real property is in
or a person claiming through such the names of all the partners a
grantee to a holder for value conveyance executed by all the
without knowledge that the partner, partners passes all their rights in
in making the conveyance, has such property. (n)
exceeded his authority.
ARTICLE 1820
▪ Where title to real property is in the
An admission or representation made
name of the partnership, a
by any partner concerning partnership
conveyance executed by a partner,
affairs within the scope of his authority
in his own name, passes the
in accordance with this Title is
equitable interest of the partnership,
evidence against the partnership. (n)
provided the act is one within the
authority of the partner under the ARTICLE 1821
provisions of the first paragraph of Notice to any partner of any matter
article 1818. relating to partnership affairs, and the
▪ Where title to real property is in the knowledge of the partner acting in the
name of one or more but not all the particular matter, acquired while a
partners, and the record does not partner or then present to his mind, and
disclose the right of the partnership, the knowledge of any other partner
the partners in whose name the title who reasonably could and should have
stands may convey title to such communicated it to the acting partner,
property, but the partnership may operate as notice to or knowledge of
recover such property if the the partnership, except in the case of a
partners’ act does not bind the fraud on the partnership, committed by
partnership under the provisions of or with the consent of that partner. (n)
the first paragraph of article 1818, ARTICLE 1822
unless the purchaser or his Where, by any wrongful act or omission
assignee, is a holder for value, of any partner acting in the ordinary
without knowledge. course of the business of the
partnership or with the authority of his or consented to its being made in a
co-partners, loss or injury is caused to public manner he is liable to such
any person, not being a partner in the person, whether the representation
partnership, or any penalty is incurred, has or has not been made or
the partnership is liable therefor to the communicated to such person so
same extent as the partner so acting or giving credit by or with the
omitting to act. (n) knowledge of the apparent partner
making the representation or
ARTICLE 1823 consenting to its being made:
The partnership is bound to make good
the loss: (1) When a partnership liability results,
he is liable as though he were an actual
(1) Where one partner acting within the member of the partnership;
scope of his apparent authority receives
money or property of a third person (2) When no partnership liability
and misapplies it; and results, he is liable pro rata with the
other persons, if any, so consenting to
(2) Where the partnership in the course the contract or representation as to
of its business receives money or incur liability, otherwise separately.
property of a third person and the
money or property so received is ▪ When a person has been thus
misapplied by any partner while it is in represented to be a partner in an
the custody of the partnership. (n) existing partnership, or with one or
more persons not actual partners,
ARTICLE 1824 he is an agent of the persons
All partners are liable solidarily with the consenting to such representation
partnership for everything chargeable to bind them to the same extent and
to the partnership under articles 1822 in the same manner as though he
and 1823. (n) were a partner in fact, with respect
to persons who rely upon the
ARTICLE 1825
representation. When all the
▪ When a person, by words spoken or
members of the existing partnership
written or by conduct, represents
consent to the representation, a
himself, or consents to another
partnership act or obligation results;
representing him to anyone, as a
but in all other cases it is the joint
partner in an existing partnership or
act or obligation of the person
with one or more persons not actual
acting and the persons consenting
partners, he is liable to any such
to the representation. (n)
persons to whom such
representation has been made, who ARTICLE 1826
has, on the faith of such A person admitted as a partner into an
representation, given credit to the existing partnership is liable for all the
actual or apparent partnership, and obligations of the partnership arising
if he has made such representation before his admission as though he had
been a partner when such obligations (b) By the express will of any partner,
were incurred, except that this liability who must act in good faith, when no
shall be satisfied only out of partnership definite term or particular undertaking
property, unless there is a stipulation to is specified;
the contrary. (n)
(c) By the express will of all the
ARTICLE 1827 partners who have not assigned their
The creditors of the partnership shall interests or suffered them to be
be preferred to those of each partner as charged for their separate debts, either
regards the partnership property. before or after the termination of any
Without prejudice to this right, the specified term or particular
private creditors of each partner may undertaking;
ask the attachment and public sale of (d) By the expulsion of any partner
the share of the latterin the partnership from the business bona fide in
assets. (n) accordance with such a power
conferred by the agreement between
CHAPTER 3 the partners;
Dissolution and Winding Up
(2) In contravention of the agreement
ARTICLE 1828 between the partners, where the
The dissolution of a partnership is the circumstances do not permit a
change in the relation of the partners dissolution under any other provision of
caused by any partner ceasing to be this article, by the express will of any
associated in the carrying on as partner at any time;
distinguished from the winding up of (3) By any event which makes it
the business. (n) unlawful for the business of the
ARTICLE 1829 partnership to be carried on or for the
On dissolution the partnership is not members to carry it on in partnership;
terminated, but continues until the (4) When a specific thing, which a
winding up of partnership affairs is partner had promised to contribute to
completed. (n) the partnership, perishes before the
delivery; in any case by the loss of the
ARTICLE 1830
thing, when the partner who
Dissolution is caused:
contributed it having reserved the
(1) Without violation of the agreement ownership thereof, has only transferred
between the partners: to the partnership the use or enjoyment
of the same; but the partnership shall
(a) By the termination of the definite
not be dissolved by the loss of the thing
term or particular undertaking specified
when it occurs after the partnership has
in the agreement;
acquired the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or (2) At any time if the partnership was a
of the partnership; partnership at will when the interest
was assigned or when the charging
(7) By the civil interdiction of any
order was issued. (n)
partner;
(8) By decree of court under the ARTICLE 1832
following article. (1700a and 1701a) Except so far as may be necessary to
wind up partnership affairs or to
ARTICLE 1831 complete transactions begun but not
On application by or for a partner the then finished, dissolution terminates all
court shall decree a dissolution authority of any partner to act for the
whenever: partnership:

(1) A partner has been declared insane (1) With respect to the partners,
in any judicial proceeding or is shown
(a) When the dissolution is not by the
to be of unsound mind;
act, insolvency or death of a partner; or
(2) A partner becomes in any other way
(b) When the dissolution is by such act,
incapable of performing his part of the
insolvency or death of a partner, in
partnership contract;
cases where article 1833 so requires;
(3) A partner has been guilty of such
(2) With respect to persons not
conduct as tends to affect prejudicially
partners, as declared in article 1834. (n)
the carrying on of the business;
(4) A partner wilfully or persistently
ARTICLE 1833
commits a breach of the partnership Where the dissolution is caused by the
agreement, or otherwise so conducts act, death or insolvency of a partner,
himself in matters relating to the each partner is liable to his co-partners
partnership business that it is not for his share of any liability created by
reasonably practicable to carry on the any partner acting for the partnership
business in partnership with him; as if the partnership had not been
dissolved unless:
(5) The business of the partnership can
only be carried on at a loss; (1) The dissolution being by act of any
partner, the partner acting for the
(6) Other circumstances render a partnership had knowledge of the
dissolution equitable. dissolution; or
On the application of the purchaser of a (2) The dissolution being by the death
partner’s interest under article 1813 or or insolvency of a partner, the partner
1814: acting for the partnership had
(1) After the termination of the knowledge or notice of the death or
specified term or particular insolvency.
undertaking;
 ARTICLE 1834 (1) Where the partnership is dissolved
After dissolution, a partner can bind the because it is unlawful to carry on the
partnership, except as provided in the business, unless the act is appropriate
third paragraph of this article: for winding up partnership affairs; or

(1) By any act appropriate for winding (2) Where the partner has become
up partnership affairs or completing insolvent; or ewIisi
transactions unfinished at dissolution; (3) Where the partner has no authority
(2) By any transaction which would to wind up partnership affairs; except
bind the partnership if dissolution had by a transaction with one who —
not taken place, provided the other (a) Had extended credit to the
party to the transaction: partnership prior to dissolution and had
(a) Had extended credit to the no knowledge or notice of his want of
partnership prior to dissolution and had authority; or
no knowledge or notice of the (b) Had not extended credit to the
dissolution; or partnership prior to dissolution, and
(b) Though he had not so extended having no knowledge or notice of his
credit, had nevertheless known of the want of authority, the fact of his want of
partnership prior to dissolution, and authority has not been advertised in the
having no knowledge or notice of manner provided for advertising the
dissolution, the fact of dissolution had fact of dissolution in the first paragraph,
not been advertised in a newspaper of No. 2 (b).
general circulation in the place (or in Nothing in this article shall affect the
each place if more than one) at which liability under article 1825 of any
the partnership business was regularly person who after dissolution represents
carried on. himself or consents to another
The liability of a partner under the first representing him as a partner in a
paragraph, No. 2, shall be satisfied out partnership engaged in carrying on
of partnership assets alone when such business. (n)
partner had been prior to dissolution:
ARTICLE 1835
(1) Unknown as a partner to the person ▪ The dissolution of the partnership
with whom the contract is made; and does not of itself discharge the
existing liability of any partner.
(2) So far unknown and inactive in
partnership affairs that the business ▪ A partner is discharged from any
reputation of the partnership could not existing liability upon dissolution of
be said to have been in any degree due the partnership by an agreement to
to his connection with it. that effect between himself, the
partnership creditor and the person
The partnership is in no case bound by
or partnership continuing the
any act of a partner after dissolution:
 business; and such agreement may payment or agreement under the
be inferred from the course of second paragraph of article 1835, he
dealing between the creditor having shall receive in cash only the net
knowledge of the dissolution and amount due him from the partnership.
the person or partnership
When dissolution is caused in
continuing the business.
contravention of the partnership
▪ The individual property of a agreement the rights of the partners
deceased partner shall be liable for shall be as follows:
all obligations of the partnership
(1) Each partner who has not caused
incurred while he was a partner, but
dissolution wrongfully shall have:
subject to the prior payment of his
separate debts. (n) (a) All the rights specified in the first
paragraph of this article, and
ARTICLE 1836
Unless otherwise agreed, the partners (b) The right, as against each partner
who have not wrongfully dissolved the who has caused the dissolution
partnership or the legal representative wrongfully, to damages for breach of
of the last surviving partner, not the agreement.
insolvent, has the right to wind up the
(2) The partners who have not caused
partnership affairs, provided, however,
the dissolution wrongfully, if they all
that any partner, his legal
desire to continue the business in the
representative or his assignee, upon
same name either by themselves or
cause shown, may obtain winding up
jointly with others, may do so, during
by the court. (n)
the agreed term for the partnership and
ARTICLE 1837 for that purpose may possess the
When dissolution is caused in any way, partnership property, provided they
except in contravention of the secure the payment by bond approved
partnership agreement, each partner, as by the court, or pay any partner who
against his co-partners and all persons has caused the dissolution wrongfully,
claiming through them in respect of the value of his interest in the
their interests in the partnership, unless partnership at the dissolution, less any
otherwise agreed, may have the damages recoverable under the second
partnership property applied to paragraph, No. 1 (b) of this article, and
discharge its liabilities, and the surplus in like manner indemnify him against
applied to pay in cash the net amount all present or future partnership
owing to the respective partners. But if liabilities.
dissolution is caused by expulsion of a (3) A partner who has caused the
partner, bona fide under the dissolution wrongfully shall have:
partnership agreement and if the
expelled partner is discharged from all (a) If the business is not continued
partnership liabilities, either by under the provisions of the second
paragraph, No. 2, all the rights of a respect of the partnership liabilities;
partner under the first paragraph, and
subject to liability for damages in the
(3) To be indemnified by the person
second paragraph, No. 1 (b), of this
guilty of the fraud or making the
article.
representation against all debts and
(b) If the business is continued under liabilities of the partnership. (n)
the second paragraph, No. 2, of this
article, the right as against his co- ARTICLE 1839
partners and all claiming through them In settling accounts between the
in respect of their interests in the partners after dissolution, the following
partnership, to have the value of his rules shall be observed, subject to any
interest in the partnership, less any agreement to the contrary:
damage caused to his co-partners by (1) The assets of the partnership are:
the dissolution, ascertained and paid to
him in cash, or the payment secured by (a) The partnership property,
a bond approved by the court, and to (b) The contributions of the partners
be released from all existing liabilities necessary for the payment of all the
of the partnership; but in ascertaining liabilities specified in No. 2.
the value of the partner’s interest the
value of the good-will of the business (2) The liabilities of the partnership
shall not be considered. (n) shall rank in order of payment, as
follows:
ARTICLE 1838
(a) Those owing to creditors other than
Where a partnership contract is
partners,
rescinded on the ground of the fraud or
misrepresentation of one of the parties (b) Those owing to partners other than
thereto, the party entitled to rescind is, for capital and profits,
without prejudice to any other right,
(c) Those owing to partners in respect
entitled:
of capital,
(1) To a lien on, or right of retention of,
(d) Those owing to partners in respect
the surplus of the partnership property
of profits.
after satisfying the partnership liabilities
to third persons for any sum of money (3) The assets shall be applied in the
paid by him for the purchase of an order of their declaration in No. 1 of
interest in the partnership and for any this article to the satisfaction of the
capital or advances contributed by him; liabilities.
(2) To stand, after all liabilities to third (4) The partners shall contribute, as
persons have been satisfied, in the provided by article 1797, the amount
place of the creditors of the partnership necessary to satisfy the liabilities.
for any payments made by him in
(5) An assignee for the benefit of any partner retires and assigns (or the
creditors or any person appointed by representative of the deceased partner
the court shall have the right to enforce assigns) his rights in partnership
the contributions specified in the property to two or more of the
preceding number. partners, or to one or more of the
partners and one or more third persons,
(6) Any partner or his legal
if the business is continued without
representative shall have the right to
liquidation of the partnership affairs;
enforce the contributions specified in
No. 4, to the extent of the amount (2) When all but one partner retire and
which he has paid in excess of his share assign (or the representative of a
of the liability. deceased partner assigns) their rights in
partnership property to the remaining
(7) The individual property of a
partner, who continues the business
deceased partner shall be liable for the
without liquidation of partnership
contributions specified in No. 4.
affairs, either alone or with others;
(8) When partnership property and the
(3) When any partner retires or dies
individual properties of the partners are
and the business of the dissolved
in possession of a court for distribution,
partnership is continued as set forth in
partnership creditors shall have priority
Nos. 1 and 2 of this article, with the
on partnership property and separate
consent of the retired partners or the
creditors on individual property, saving
representative of the deceased partner,
the rights of lien or secured creditors.
but without any assignment of his right
(9) Where a partner has become in partnership property;
insolvent or his estate is insolvent, the
(4) When all the partners or their
claims against his separate property
representatives assign their rights in
shall rank in the following order:
partnership property to one or more
(a) Those owing to separate creditors; third persons who promise to pay the
debts and who continue the business of
(b) Those owing to partnership
the dissolved partnership;
creditors;
(5) When any partner wrongfully causes
(c) Those owing to partners by way of
a dissolution and the remaining
contribution. (n)
partners continue the business under
ARTICLE 1840 the provisions of article 1837, second
In the following cases creditors of the paragraph, No. 2, either alone or with
dissolved partnership are also creditors others, and without liquidation of the
of the person or partnership continuing partnership affairs;
the business: (6) When a partner is expelled and the
(1) When any new partner is admitted remaining partners continue the
into an existing partnership, or when business either alone or with others
without liquidation of the partnership ARTICLE 1841
affairs. When any partner retires or dies, and
▪ The liability of a third person the business is continued under any of
becoming a partner in the the conditions set forth in the
partnership continuing the business, preceding article, or in article 1837,
under this article, to the creditors of second paragraph, No. 2, without any
the dissolved partnership shall be settlement of accounts as between him
satisfied out of the partnership or his estate and the person or
property only, unless there is a partnership continuing the business,
stipulation to the contrary. unless otherwise agreed, he or his legal
representative as against such person
▪ When the business of a partnership or partnership may have the value of
after dissolution is continued under his interest at the date of dissolution
any conditions set forth in this ascertained, and shall receive as an
article the creditors of the dissolved ordinary creditor an amount equal to
partnership, as against the separate the value of his interest in the dissolved
creditors of the retiring or deceased partnership with interest, or, at his
partner or the representative of the option or at the option of his legal
deceased partner, have a prior right representative, in lieu of interest, the
to any claim of the retired partner profits attributable to the use of his
or the representative of the right in the property of the dissolved
deceased partner against the person partnership; provided that the creditors
or partnership continuing the of the dissolved partnership as against
business, on account of the retired the separate creditors, or the
or deceased partner’s interest in the representative of the retired or
dissolved partnership or on account deceased partner, shall have priority on
of any consideration promised for any claim arising under this article, as
such interest or for his right in provided by article 1840, third
partnership property. paragraph. (n)
▪ Nothing in this article shall be held ARTICLE 1842
to modify any right of creditors to The right to an account of his interest
set aside any assignment on the shall accrue to any partner, or his legal
ground of fraud. The use by the representative as against the winding
person or partnership continuing up partners or the surviving partners or
the business of the partnership the person or partnership continuing
name, or the name of a deceased the business, at the date of dissolution,
partner as part thereof, shall not of in the absence of any agreement to the
itself make the individual property contrary. (n)
of the deceased partner liable for
any debts contracted by such
person or partnership. (n)
CHAPTER 4 (h) The time, if agreed upon, when the
contribution of each limited partner is
Limited Partnership
to be returned;
ARTICLE 1843 (i) The share of the profits or the other
A limited partnership is one formed by compensation by way of income which
two or more persons under the each limited partner shall receive by
provisions of the following article, reason of his contribution;
having as members one or more
general partners and one or more (j) The right, if given, of a limited
limited partners. The limited partners partner to substitute an assignee as
as such shall not be bound by the contributor in his place, and the terms
obligations of the partnership. and conditions of the substitution;

ARTICLE 1844 (k) The right, if given, of the partners to

Two or more persons desiring to form a admit additional limited partners;
limited partnership shall: (l) The right, if given, of one or more of
(1) Sign and swear to a certificate, the limited partners to priority over
which shall state — other limited partners, as to
contributions or as to compensation by
(a) The name of the partnership, adding way of income, and the nature of such
thereto the word “Limited”; priority;
(b) The character of the business; (m) The right, if given, of the remaining
general partner or partners to continue
(c) The location of the principal place of
the business on the death, retirement,
business;
civil interdiction, insanity or insolvency
(d) The name and place of residence of of a general partner; and
each member, general and limited
(n) The right, if given, of a limited
partners being respectively designated;
partner to demand and receive
(e) The term for which the partnership property other than cash in return for
is to exist; his contribution.
(f) The amount of cash and a (2) File for record the certificate in the
description of and the agreed value of Office of the Securities and Exchange
the other property contributed by each Commission.
limited partner;
A limited partnership is formed if there
(g) The additional contributions, if any, has been substantial compliance in
to be made by each limited partner and good faith with the foregoing
the times at which or events on the requirements.
happening of which they shall be made;
ARTICLE 1845
The contributions of a limited partner
may be cash or property, but not and powers as a limited partner, he
services. takes part in the control of the business.

ARTICLE 1846 ARTICLE 1849

The surname of a limited partner shall After the formation of a limited
not appear in the partnership name partnership, additional limited partners
unless: may be admitted upon filing an
amendment to the original certificate in
(1) It is also the surname of a general
accordance with the requirements of
partner, or
article 1865.
(2) Prior to the time when the limited
partner became such, the business had
ARTICLE 1850
been carried on under a name in which A general partner shall have all the
his surname appeared. rights and powers and be subject to all
the restrictions and liabilities of a
A limited partner whose surname partner in a partnership without limited
appears in a partnership name contrary partners. However, without the written
to the provisions of the first paragraph consent or ratification of the specific
is liable as a general partner to act by all the limited partners, a general
partnership creditors who extend credit partner or all of the general partners
to the partnership without actual have no authority to:
knowledge that he is not a general
partner. (1) Do any act in contravention of the
certificate;
ARTICLE 1847
(2) Do any act which would make it
If the certificate contains a false
impossible to carry on the ordinary
statement, one who suffers loss by
business of the partnership;
reliance on such statement may hold
liable any party to the certificate who (3) Confess a judgment against the
knew the statement to be false: partnership;
(1) At the time he signed the certificate (4) Possess partnership property, or
assign their rights in specific
(2) Subsequently, but within a sufficient
partnership property, for other than a
time before the statement was relied
partnership purpose;
upon to enable him to cancel or amend
the certificate, or to file a petition for its (5) Admit a person as a general partner;
cancellation or amendment as provided
(6) Admit a person as a limited partner,
in article 1865.
unless the right so to do is given in the
ARTICLE 1848 certificate;
A limited partner shall not become (7) Continue the business with
liable as a general partner unless, in partnership property on the death,
addition to the exercise of his rights retirement, insanity, civil interdiction or
insolvency of a general partner, unless renounces his interest in the profits of
the right so to do is given in the the business, or other compensation by
certificate. way of income.

ARTICLE 1851 ARTICLE 1853

A limited partner shall have the same ▪ A person may be a general partner
rights as a general partner to: and a limited partner in the same
partnership at the same time,
(1) Have the partnership books kept at
provided that this fact shall be
the principal place of business of the
stated in the certificate provided for
partnership, and at a reasonable hour to
in article 1844.
inspect and copy any of them;
▪ A person who is a general, and also
(2) Have on demand true and full
at the same time a limited partner,
information of all things affecting the
shall have all the rights and powers
partnership, and a formal account of
and be subject to all the restrictions
partnership affairs whenever
of a general partner; except that, in
circumstances render it just and
respect to his contribution, he shall
reasonable; and
have the rights against the other
(3) Have dissolution and winding up by members which he would have had
decree of court. if he were not also a general
partner.
A limited partner shall have the right to
receive a share of the profits or ARTICLE 1854
otherccompensation by way of income, A limited partner also may loan money
and to the return of his contribution as to and transact other business with the
provided in Articles 1856 and 1857. partnership, and, unless he is also a
general partner, receive on account of
ARTICLE 1852
resulting claims against the partnership,
Without prejudice to the provisions of
with general creditors, a pro rata share
article 1848, a person who has
of the assets. No limited partner shall in
contributed to the capital of a business
respect to any such claim:
conducted by a person or partnership
erroneously believing that he has (1) Receive or hold as collateral
become a limited partner in a limited security any partnership property, or
partnership, is not, by reason of his
(2) Receive from a general partner or
exercise of the rights of a limited
the partnership any payment,
partner, a general partner with the
conveyance, or release from liability, if
person or in the partnership carrying on
at the time the assets of the partnership
the business, or bound by the
are not sufficient to discharge
obligations of such person or
partnership liabilities to persons not
partnership; provided that on
claiming as general or limited partners.
ascertaining the mistake he promptly
The receiving of collateral security, or their contributions, have been paid or
payment, conveyance, or release in there remains property of the
violation of the foregoing provisions is partnership sufficient to pay them;
a fraud on the creditors of the
(2) The consent of all members is had,
partnership.
unless the return of the contribution
ARTICLE 1855 may be rightfully demanded under the
Where there are several limited provisions of the second paragraph;
partners the members may agree that and
one or more of the limited partners (3) The certificate is cancelled or so
shall have a priority over other limited amended as to set forth the withdrawal
partners as to the return of their or reduction.
contributions, as to their compensation
by way of income, or as to any other Subject to the provisions of the first
matter. If such an agreement is made it paragraph, a limited partner may
shall be stated in the certificate, and in rightfully demand the return of his
the absence of such a statement all the contribution:
limited partners shall stand upon equal (1) On the dissolution of a partnership,
footing. or
ARTICLE 1856 (2) When the date specified in the
A limited partner may receive from the certificate for its return has arrived, or
partnership the share of the profits or
the compensation by way of income (3) After he has given six months’
stipulated for in the certificate; notice in writing to all other members,
provided, that after such payment is if no time is specified in the certificate,
made, whether from the property of the either for the return of the contribution
partnership or that of a general partner, or for the dissolution of the partnership.
the partnership assets are in excess of In the absence of any statement in the
all liabilities of the partnership except certificate to the contrary or the
liabilities to limited partners on account consent of all the members, a limited
of their contributions and to general partner, irrespective of the nature of his
partners. contribution, has only the right to
demand and receive cash in return for
ARTICLE 1857
his contribution.
A limited partner shall not receive from
a general partner or out of partnership A limited partner may have the
property any part of his contributions partnership dissolved and its affairs
until: wound up when:
(1) All liabilities of the partnership, (1) He rightfully but unsuccessfully
except liabilities to general partners demands the return of his contribution,
and to limited partners on account of or
(2) The other liabilities of the When a contributor has rightfully
partnership have not been paid, or the received the return in whole or in part
partnership property is insufficient for of the capital of his contribution, he is
their payment as required by the first nevertheless liable to the partnership
paragraph, No. 1, and the limited for any sum, not in excess of such
partner would otherwise be entitled to return with interest, necessary to
the return of his contribution. discharge its liabilities to all creditors
who extended credit or whose claims
ARTICLE 1858 arose before such return.
A limited partner is liable to the
partnership: ARTICLE 1859
▪ A limited partner’s interest is
(1) For the difference between his
assignable.
contribution as actually made and that
▪ A substituted limited partner is a
stated in the certificate as having been
person admitted to all the rights of a
made, and
limited partner who has died or has
(2) For any unpaid contribution which assigned his interest in a
he agreed in the certificate to make in partnership.
the future at the time and on the ▪ An assignee, who does not become
conditions stated in the certificate. a substituted limited partner, has no
A limited partner holds as trustee for right to require any information or
the partnership: account of the partnership
transactions or to inspect the
(1) Specific property stated in the partnership books; he is only
certificate as contributed by him, but entitled to receive the share of the
which was not contributed or which has profits or other compensation by
been wrongfully returned, and way of income, or the return of his
contribution, to which his assignor
(2) Money or other property wrongfully
would otherwise be entitled.
paid or conveyed to him on account of
his contribution. ▪ An assignee shall have the right to
become a substituted limited
The liabilities of a limited partner as set partner if all the members consent
forth in this article can be waived or thereto or if the assignor, being
compromised only by the consent of all thereunto empowered by the
members; but a waiver or compromise certificate, gives the assignee that
shall not affect the right of a creditor of right.
a partnership who extended credit or ▪ An assignee becomes a substituted
whose claim arose after the filing and limited partner when the certificate
before a cancellation or amendment of is appropriately amended in
the certificate, to enforce such accordance with article 1865.
liabilities.
▪ The substituted limited partner has of such claim, and may appoint a
all the rights and powers, and is receiver, and make all other orders,
subject to all the restrictions and directions, and inquiries which the
liabilities of his assignor, except circumstances of the case may
those liabilities of which he was require.
ignorant at the time he became a
▪ The interest may be redeemed with
limited partner and which could not
the separate property of any general
be ascertained from the certificate.
partner, but may not be redeemed
▪ The substitution of the assignee as a with partnership property. The
limited partner does not release the remedies conferred by the first
assignor from liability to the paragraph shall not be deemed
partnership under articles 1847 and exclusive of others which may exist.
1858.
▪ Nothing in this Chapter shall be
ARTICLE 1860 held to deprive a limited partner of
The retirement, death, insolvency, his statutory exemption.
insanity or civil interdiction of a general
partner dissolves the partnership, ARTICLE 1863
unless the business is continued by the In settling accounts after dissolution the
remaining general partners: liabilities of the partnership shall be
entitled to payment in the following
(1) Under a right so to do stated in the order:
certificate, or
(1) Those to creditors, in the order of
(2) With the consent of all members. priority as provided by law, except
ARTICLE 1861 those to limited partners on account of
On the death of a limited partner his their contributions, and to general
executor or administrator shall have all partners;
the rights of a limited partner for the (2) Those to limited partners in respect
purpose of settling his estate, and such to their share of the profits and other
power as the deceased had to compensation by way of income on
constitute his assignee a substituted their contributions;
limited partner. The estate of a
deceased limited partner shall be liable (3) Those to limited partners in respect
for all his liabilities as a limited partner. to the capital of their contributions;
(4) Those to general partners other than
ARTICLE 1862
for capital and profits;
▪ On due application to a court of
competent jurisdiction by any (5) Those to general partners in respect
creditor of a limited partner, the to profits;
court may charge the interest of the
(6) Those to general partners in respect
indebted limited partner with
to capital.
payment of the unsatisfied amount
Subject to any statement in the dissolution of the partnership or for the
certificate or to subsequent agreement, return of a contribution;
limited partners share in the
(9) A time is fixed for the dissolution of
partnership assets in respect to their
the partnership, or the return of a
claims for capital, and in respect to
contribution, no time having been
their claims for profits or for
specified in the certificate, or
compensation by way of income on
their contribution respectively, in (10) The members desire to make a
proportion to the respective amounts of change in any other statement in the
such claims. certificate in order that it shall
accurately represent the agreement
ARTICLE 1864 among them.
The certificate shall be cancelled when
the partnership is dissolved or all ARTICLE 1865
limited partners cease to be such. A The writing to amend a certificate shall:
certificate shall be amended when:
(1) Conform to the requirements of
(1) There is a change in the name of the article 1844 as far as necessary to set
partnership or in the amount or forth clearly the change in the
character of the contribution of any certificate which it is desired to make;
limited partner; and
(2) A person is substituted as a limited (2) Be signed and sworn to by all
partner; members, and an amendment
substituting a limited partner or adding
(3) An additional limited partner is
a limited or general partner shall be
admitted;
signed also by the member to be
(4) A person is admitted as a general substituted or added, and when a
partner; limited partner is to be substituted, the
amendment shall also be signed by the
(5) A general partner retires, dies,
assigning limited partner.
becomes insolvent or insane, or is
sentenced to civil interdiction and the The writing to cancel a certificate shall
business is continued under article be signed by all members.
1860;
A person desiring the cancellation or
(6) There is a change in the character of amendment of a certificate, if any
the business of the partnership; person designated in the first and
second paragraphs as a person who
(7) There is a false or erroneous
must execute the writing refuses to do
statement in the certificate;
so, may petition the court to order a
(8) There is a change in the time as cancellation or amendment thereof. If
stated in the certificate for the the court finds that the petitioner has a
right to have the writing executed by a
person who refuses to do so, it shall the provisions of article 1844, provided
order the Office of the Securities and the certificate sets forth:
Exchange Commission where the
(1) The amount of the original
certificate is recorded to record the
contribution of each limited partner,
cancellation or amendment of the
and the time when the contribution was
certificate; and when the certificate is
made; and
to be amended, the court shall also
cause to be filed for record in said (2) That the property of the partnership
office a certified copy of its decree exceeds the amount sufficient to
setting forth the amendment. discharge its liabilities to persons not
claiming as general or limited partners
A certificate is amended or cancelled
by an amount greater than the sum of
when there is filed for record in the
the contributions of its limited partners.
Office of the Securities and Exchange
Commission, where the certificate is A limited partnership formed under the
recorded: law prior to the effectivity of this Code,
until or unless it becomes a limited
(1) A writing in accordance with the
partnership under this Chapter, shall
provisions of the first or second
continue to be governed by the
paragraph, or
provisions of the old law.
(2) A certified copy of the order of court
in accordance with the provisions of
the fourth paragraph;
(3) After the certificate is duly amended
in accordance with this article, the
amended certificate shall thereafter be
for all purposes the certificate provided
for in this Chapter.

ARTICLE 1866
A contributor, unless he is a general
partner, is not a proper party to
proceedings by or against a
partnership, except where the object is
to enforce a limited partner’s right
against or liability to the partnership.

ARTICLE 1867
A limited partnership formed under the
law prior to the effectivity of this Code,
may become a limited partnership
under this Chapter by complying with