CHAPTER 2: Obligations of the Partners

• Article 178: A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated.
• Article 1785: When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without express agreement, the rights and duties of the partners remain the same as they were at such termination, so far as is consistent with a partnership at will.

  
  

  A continution of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is a prima facie evidence of a continuation of the partnership.
• Article 1786: Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.

  
  

  He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof from the time they should have been delivered, without the need of any demand.
• Article 1787: When a capital or a part thereof which is partner is bound to contribute consists of goods, their appraisal shall be made in the manner prescribed in the contract of partnership, and in the absence of stipulation, it shall be made by experts chosen by the partners, and according to current prices, the subsequent changes thereof being for account of the partnership.
• Article 1788: A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation.

  
  

  The same rule applies to any amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the amount to his own use.
• Article 1789: An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he may do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefit which he may have obtained in violation of this provision, with a right to damages in either case.
• Article 1790: Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the partnership.
• Article 1791: If there is no agreement to the contrary, in case of an imminent loss of the business of the partnership, any partner who refuses to contribute an additional share to the capital, except an industrial partner, to save the venture, shall be obliged to sell his interest to the other partners.
• Article 1792: If a partner authorized to manage collects a demandable sum which was owed to him in his own name, from a person who owed the partnership another sum also demandable, the sum thus collected shall be applied to the two credits in proportion to their amounts, even though he may have given a receipt for his own credit only; but should he have given it for the account of the partnership credit, the amount shall be fully applied to the latter.
• Article 1793: A partner who received, in whole or in part, his share of a partnership credit, when the other partners have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only.
• Article 1794: Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits he may have earned for the partnership by his industry.

  
  

  However, the courts may equitably lessen this responsibility if through the partner's extraordinary efforts in other activities of the partnership, unusual profits have been realized.
• Article 1795: The risk of specific and determinate things, which are not fungible, contributed to the partnership so that only their use and fruits may be for the common benefit, shall be borne by the partner who owns them.
• If the things contributed are fungible, or cannot be kept without deteriorating, or if they were contributed to be sold, the risk shall be borne by the partnership. In the absence of stipulation, the risk of the things brought and appraised in the inventory, shall also be borne by the partnership, and in such case the claim shall be limited to the value at which they were appraised.
• Article 1796: The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest, from the time the expenses are made; it shall also answer to each partner for the obligations he may have contracted in good faith in the interest of the partnership business, and for risks in consequence of its management.
• Article 1797: The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.
• In the absence of stipulation, the share of each partner in the profits and lossess shall be in proportion to what he may have contributed, but the industrial partner shall not be liable for losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. If besides his services he has contributed capital, he shall also received a share in the profits in proportion to his capital.
• Article 1798: If the partners have agreed to intrust to a third person the designation of the share of each one in the profits and losses, such designation may be impugned only when it is manifestly equitable. In no case may a partner who has begun to execute the decision of the third person, or who has not impugned the same within a period of three months from the time he had knowledge thereof, complain of such decision.

  
  

  The designation of losses and profits cannot be intrusted to one of the partners.
• Article 1799: A stipulation which excludes one or more partners from any share in the profits or losses is void.
• Article 1800: The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable without just or lawful cause. The vote of the partners representing the controlling interest shall be necessary for such revocation of power.

  A power granted after the partnership has been constituted may be revoked at any time.
• Article 1801: If two or more partners have been intrusted with the management of the partnership without specification of their respective duties, or without stipulation that one of them shall not act without the consent ofall the others, each may separately execute all acts of administration, but if any of them should oppose the acts of the others, the decision of the majority shall prevail. In case of a tie, the matter shall be decided by the partners owning the controlling interest.
• Article 1802: In cae it should have been stipulated that none of the managing partners shall act without the consent of the others, the concurrence of all shall be necessary for the validity of the acts, and the absence or disability of any one of them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership.
• Article 1803: When the manner of management has not been agreed upon, the following rules shall be observed:

  (1) All the partners shall be considered agents and whatever any

  one of them may do alone shall bind the partnership, without

  prejudicie to the provisions of Article 1801.
• (2) None of the partners may, without the consent of the others,

  make any important alteration in the immovable property of the

  partnership, even if it may be useful to the partnership. But if the

  refusal of consent by the other partners is manifestly prejudicial

  to the interest of the partnership, the court's intervention may be

  sought.
• Article 1804: Every partner may associate another person with him in his share, but the associate shall not be admitted into the partenrship without the consent of all the other partners, even if the partner having an associate should be a manager.
• Article 1805: The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every parter shall at any reasonable hour have access to and may inspect and copy any of them.
• Article 1806: Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability.
• Article 1807: Every partner must account and hold to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transactionn connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.
• Article 1808: The capitalist partner cannot engage for their own account in any operation which is of the kind of business which the partnership is engaged, unless there is a stipulation to the contrary.

  
  

  Any capitalist partner violating this provision shall bring to the common funds any profits accruing to him from his trasactions, and shall personally bear all the losses.
• Article 1809: Any partner shall have the right to a formal account as to partnership affairs:

  (1) If he is wrongfully excluded from the partnership business or

  possession of its property by his co-partners;

  (2) If the right exists under the terms of any agreement;

  (3) As provided in Article 1807; and

  (4) Whenever circumstances render it just and reasonable.
• Article 1810: The property rights of a partner are:

  (1) His right in specific partnership property;

  (2) His interest in the partnership; and

  (3) His right to participate in the management.
• Article 1811: A partner is co-owner with his partners of specific partnership property.

  
  

  The incidents in this co-ownership are such that:

  (1) A partner, subject to the provisions of this Title and to any

  agreement between the partners, has an equal right with his

  partners to possess specific partnership property for partnership

  purposes; but he has no right to posses such property for any

  other purposes without the consent of his partners;
• (2)A partner's right in specific partnership property is not assignable

  except in connection with the assignment of rights of all the

  partners in the same property;

  (3) A partner's right in specific partnership property is not subject to

  attachment or execution, except on a claim against the

  partnership. When partnership property is attached for

  partnership debt the partners, or any of them, or the

  representatives of a deceased partner, cannot claim any right

  under the homestead or exemption laws;
• (4) A partner's right in specific partnership property is not subject to

  legal support under Article 291.
• Article 1812: A partner's interest in the partnership is his share of the profits and surplus.
• Article 1813: A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled.
• However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.

  In case of a dissolution of the partnership, the assignee is entitled to received his assignor's interest and may require an account from the date only of the last account agreed to by all the partners.
• Article 1814: Without prejudice to the preferred rights of the partnership creditors under Article 1827, on due application to a competent court by any judgement creditor of any partner, the court which entered the judgement, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgement debt with interest thereon;
• and may then or later appoint a receiver of his share of profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require.
• The interest charged may be redeemed at any time before foreclosure, or in case of a sale being directed by the court, may be purchased without thereby causing a dissolution:

  (1) With separate property, by any one or more of the partners; or

  (2) With partnership property, by any one or more of the partners

  with the consent of all the partners whose interests are not so

  charged or sold.

  
  

  Nothing in this Title shall be held to deprive a partner of his right, if any, under the exemption laws, as regards his interest in the partnership.
• PSA 2010