1. Which article of the Civil Code defines partnership? 7.

7. What is the document that usually embodies the terms of a partnership?

A. Article 1769 A. Deed of Sale
B. Article 1767 B. Articles of Incorporation
C. Article 1784 C. Articles of Partnership
D. Article 1776 D. Business License
Answer: B. Article 1767 Answer: C. Articles of Partnership

2. What is the primary intention of persons entering into a partnership? 8. According to Article 1769, sharing of gross returns is:
A. To contribute property A. Proof of partnership
B. To exercise a profession B. Prima facie evidence of partnership
C. To divide profits among themselves C. Not in itself proof of partnership
D. To establish co-ownership D. Always unlawful
Answer: C. To divide profits among themselves Answer: C. Not in itself proof of partnership

9. A partnership differs from co-ownership because:

3. A profession may be the subject of partnership when:
A. Partnership has a juridical personality, co-ownership does not
A. It requires academic learning and public service
B. Co-ownership is always created by contract
B. It is mainly for personal interest
C. Co-owners cannot dispose of their share
C. It requires no academic background
D. Partnership has a fixed duration
D. It is solely for livelihood
Answer: A. Partnership has a juridical personality, co-ownership does not
Answer: A. It requires academic learning and public service
10. Which type of partnership involves all present property of the partners?
4. The contract of partnership is “consensual” because:
A. Universal partnership of profits
A. It requires notarization
B. Universal partnership of all present property
B. It is perfected by mere consent
C. Particular partnership
C. It requires property contribution immediately
D. Limited partnership
D. It must always be in writing
Answer: B. Universal partnership of all present property
Answer: B. It is perfected by mere consent
11. In a universal partnership of profits, the partners contribute:
5. A partnership is “onerous” because: A. All property owned at the time of constitution
A. It is always burdensome B. Only profits acquired during partnership
B. Parties aspire to gain benefits through giving something C. Both present property and profits
C. It requires heavy capital investment D. Inheritance and donations automatically
D. Partners cannot withdraw easily Answer: B. Only profits acquired during partnership
Answer: B. Parties aspire to gain benefits through giving something
12. If partners enter into a universal partnership without specifying its nature, it
6. Which of the following is NOT an essential requisite of a partnership? is deemed as:
A. Contribution to a common fund A. Universal partnership of all property
B. Lawful purpose B. Universal partnership of profits
C. At least two industrial partners C. Particular partnership
D. Intention to divide profits D. General partnership
Answer: C. At least two industrial partners Answer: B. Universal partnership of profits
13. A partnership for a specific profession is classified as: 18. Which partnership is one where existence is hidden from the public?
A. Trading partnership A. Open partnership
B. Professional partnership B. Secret partnership
C. Universal partnership C. Dormant partnership
D. Partnership at will D. Professional partnership
Answer: B. Professional partnership Answer: B. Secret partnership

14. Which classification refers to a partnership where all partners are unlimitedly
liable? 19. Which type of partnership is formed mainly to engage in trade or commerce?
A. Limited partnership A. Professional partnership
B. General partnership B. Universal partnership
C. Particular partnership C. Commercial partnership
D. Ostensible partnership D. Particular partnership
Answer: B. General partnership Answer: C. Commercial partnership

15. A partnership at will is one that: 20. A capitalist partner is one who contributes:
A. Has no fixed duration A. Only services
B. Ends only upon the death of a partner B. Only labor
C. Is for a specific undertaking only C. Money or property
D. Exists for exactly 10 years D. Legal expertise
Answer: A. Has no fixed duration Answer: C. Money or property

16. Which type of partnership exists even without meeting all legal 21. An industrial partner contributes:
requirements? A. Cash
A. De jure partnership B. Real estate
B. Ostensible partnership C. Industry or personal service
C. De facto partnership D. Shares of stock
D. Universal partnership Answer: C. Industry or personal service
Answer: C. De facto partnership
22. Which partner manages the affairs of the partnership?
17. A partnership that is recognized only to third persons by conduct or admission A. Silent partner
is called: B. Dormant partner
A. Real partnership C. Managing partner
B. Secret partnership D. Secret partner
C. Ostensible partnership Answer: C. Managing partner
D. Partnership by estoppel
Answer: D. Partnership by estoppel 23. A silent partner is one who:
A. Does not contribute capital
B. Does not actively take part in management
C. Is unknown to the public
D. Only receives salary
Answer: B. Does not actively take part in management
24. A partner who takes charge of winding up after dissolution is called: 30. A retiring partner is also called a:
A. Managing partner A. Withdrawing partner
B. Liquidating partner B. Continuing partner
C. Dormant partner C. Dormant partner
D. Ostensible partner D. Secret partner
Answer: B. Liquidating partner Answer: A. Withdrawing partner

31. A surviving partner is one who:

25. A partner who appears to the public as a partner but actually is not is called: A. Withdraws from the firm voluntarily
A. Real partner B. Remains after the death of another partner
B. Nominal partner C. Is newly admitted to the partnership
C. Partner by estoppel D. Is hidden from the public
D. Secret partner Answer: B. Remains after the death of another partner
Answer: C. Partner by estoppel
32. A partnership begins from the moment of:
26. A dormant partner is one who: A. First contribution of capital
A. Is active but not known publicly B. Registration with the SEC
B. Is inactive and not known publicly C. Execution of the contract
C. Only contributes profits D. Commencement of business
D. Retains no rights after withdrawal Answer: C. Execution of the contract
Answer: B. Is inactive and not known publicly
33. The continuation of a partnership beyond its fixed term without settlement
27. Which type of partner is one who is truly part of an existing legal partnership? creates:
A. Real partner A. A new limited partnership
B. Partner by estoppel B. A partnership at will
C. Dormant partner C. A universal partnership
D. Silent partner D. A dormant partnership
Answer: A. Real partner Answer: B. A partnership at will

28. A majority partner is one whose contribution represents: 34. Which requisite is NOT essential for a valid partnership?
A. The smallest share in partnership A. Valid contract
B. The minority capital B. At least one general partner
C. The controlling interest C. Lawful purpose
D. Industrial contribution D. Minimum paid-up capital of ₱500,000
Answer: C. The controlling interest Answer: D. Minimum paid-up capital of ₱500,000

29. An incoming partner is someone who: 35. A co-ownership differs from partnership in that it is:
A. Withdraws from the firm A. Created always by contract
B. Continues business after dissolution B. Created generally by law
C. Is newly admitted into the partnership C. Has juridical personality
D. Is one of the original founders D. Meant for profit-sharing
Answer: C. Is newly admitted into the partnership Answer: B. Created generally by law
36. Which of the following DOES NOT by itself establish a partnership? 42. A partnership with a fixed period automatically dissolves upon:
A. Sharing of profits A. Death of a partner
B. Sharing of gross returns B. Expiration of the term
C. Contribution to common fund C. Decision of the managing partner
D. Existence of Articles of Partnership D. Withdrawal of an industrial partner
Answer: B. Sharing of gross returns Answer: B. Expiration of the term

37. If a person receives profits as rent to a landlord, it means: 43. If a partnership is created for a specific undertaking, it dissolves:
A. He is automatically a partner A. After 10 years
B. He is not considered a partner B. Upon withdrawal of a partner
C. He becomes a secret partner C. Upon completion of the undertaking
D. He is an incoming partner D. Only when profits are divided
Answer: B. He is not considered a partner Answer: C. Upon completion of the undertaking

38. Which classification refers to a partnership created with full legal compliance? 44. Which partner continues the business after dissolution due to admission or
A. De facto partnership retirement of partners?
B. De jure partnership A. Incoming partner
C. Secret partnership B. Continuing partner
D. Ordinary partnership C. Surviving partner
Answer: B. De jure partnership D. Secret partner
Answer: B. Continuing partner
39. A partner who is not publicly known, but actively participates in business, is a:
A. Dormant partner 45. A partner who withdraws from the partnership is called:
B. Secret partner A. Dormant partner
C. Silent partner B. Retiring partner
D. Ostensible partner C. Secret partner
Answer: B. Secret partner D. Nominal partner
Answer: B. Retiring partner
40. A “sleeping partner” is also known as a:
A. Dormant partner 46. Which of the following contributions cannot be included in a universal
B. Liquidating partner partnership of all present property?
C. Silent partner A. Real property owned at constitution
D. Secret partner B. Profits from contributed property
Answer: A. Dormant partner C. Property acquired by inheritance
D. Cash at the time of formation
41. Which type of partnership does not fix its term of existence? Answer: C. Property acquired by inheritance
A. Limited partnership
B. Partnership at will
C. Partnership for a particular undertaking
D. Universal partnership
Answer: B. Partnership at will
47. The partnership contract is considered a contract of: 53. The liability of a limited partner extends to:
A. Sale A. His separate property
B. Agency B. His stipulated capital contribution only
C. Lease C. His share of profits
D. Mortgage D. Future earnings
Answer: B. Agency Answer: B. His stipulated capital contribution only

48. An ostensible partner is also called: 54. Which partner is BOTH silent and secret?
A. Partner by estoppel A. Managing partner
B. Silent partner B. Dormant partner
C. Secret partner C. Real partner
D. Nominal partner D. Majority partner
Answer: A. Partner by estoppel Answer: B. Dormant partner

49. The duration of a co-ownership agreement to keep a property undivided 55. If profits are received as wages of an employee, this indicates:
cannot exceed: A. Partnership exists
A. 5 years B. No partnership exists
B. 10 years C. De facto partnership exists
C. 15 years D. Co-ownership exists
D. 20 years Answer: B. No partnership exists
Answer: B. 10 years
56. Which type of partnership is avowed and made known to the public?
50. If a person receives profits as payment of a debt, he is considered:
A. Secret partnership
A. A partner by estoppel
B. Open partnership
B. Not a partner
C. Dormant partnership
C. An industrial partner
D. De facto partnership
D. A dormant partner
Answer: B. Open partnership
Answer: B. Not a partner
57. A nominal partner is one who:
51. Which type of partnership is also called “ordinary or real partnership”?
A. Has no real interest, but is liable to third parties
A. Universal partnership
B. Has controlling interest in the firm
B. De facto partnership
C. Is both silent and secret
C. Actual partnership among partners and third persons
D. Manages the partnership
D. Limited partnership
Answer: A. Has no real interest, but is liable to third parties
Answer: C. Actual partnership among partners and third persons
58. Which is the main purpose of partnership?
52. The liability of a general partner extends to:
A. Enjoyment of property
A. Only his contribution
B. Profit realization and division
B. Profits received
C. Providing public service only
C. His separate property
D. Creation of co-ownership
D. None of the above
Answer: B. Profit realization and division
Answer: C. His separate property
59. Which of the following is true of co-ownership but NOT partnership? 65. The dissolution of a partnership by death creates a need for:
A. Has juridical personality A. A continuing partner
B. Created by law generally B. Liquidation
C. Can bind each other in contracts with third parties C. Automatic renewal
D. Always entered by at least two people D. Co-ownership
Answer: B. Created by law generally Answer: B. Liquidation
60. The partnership law in the Philippines is primarily found in: 66. Which partner cannot be held liable for obligations after withdrawal without
A. Corporation Code notice?
B. Civil Code A. Dormant partner
C. Constitution B. Managing partner
D. Securities Regulation Code C. Industrial partner
Answer: B. Civil Code D. Majority partner
Answer: A. Dormant partner
61. A partner who contributes both money and services is classified as:
A. Industrial partner 67. A contract of partnership is considered:
B. Capitalist partner A. Accessory
C. Nominal partner B. Principal
D. Dormant partner C. Conditional
Answer: B. Capitalist partner D. Gratuitous
Answer: B. Principal
62. A partnership that fails to comply with legal requirements but operates as
such is called: 68. A partnership where only profits are pooled but not ownership of property is:
A. De jure partnership A. Particular partnership
B. De facto partnership B. Universal partnership of profits
C. Universal partnership C. Universal partnership of property
D. Limited partnership D. Limited partnership
Answer: B. De facto partnership Answer: B. Universal partnership of profits

63. A partnership formed for the exercise of law or medicine is a: 69. If a person is represented as a partner but is not actually one, he is
A. Professional partnership considered:
B. Commercial partnership A. Real partner
C. Secret partnership B. Partner by estoppel
D. Ostensible partnership C. Silent partner
Answer: A. Professional partnership D. Dormant partner
Answer: B. Partner by estoppel
64. A partner who has withdrawn from the firm is called:
A. Retiring partner 70. A co-owner can dispose of his share:
B. Silent partner A. Only with unanimous consent
C. Secret partner B. Without the consent of others
D. Dormant partner C. Only after 10 years
Answer: A. Retiring partner D. Only when dissolved
Answer: B. Without the consent of others
 76. Which partner is in charge of winding up partnership affairs upon dissolution?
71. The partnership contract is perfected by: A. Managing partner
A. Registration with the government B. Liquidating partner
B. Contribution of property C. Dormant partner
C. Consent of the parties D. Secret partner
D. Actual division of profits Answer: B. Liquidating partner
Answer: C. Consent of the parties
77. The contribution of a limited partner is:
72. A partnership is classified as “bilateral” because: A. Only industry
A. It has two parties only B. Only profits
B. Rights and obligations are reciprocal C. Limited to stipulated capital
C. It requires two types of contribution D. Unlimited with liability to personal assets
D. It needs both cash and property Answer: C. Limited to stipulated capital
Answer: B. Rights and obligations are reciprocal
78. A partnership that does not disclose certain partners to the public is a:
73. When profits are given as annuity to a widow of a deceased partner, this A. Secret partnership
means: B. Open partnership
A. A new partnership exists C. Dormant partnership
B. No partnership exists D. Professional partnership
C. Co-ownership is created Answer: A. Secret partnership
D. A secret partnership is implied
Answer: B. No partnership exists 79. Which characteristic makes partnership a means to an end?
A. Bilateral
74. The undertaking of each partner is considered equivalent to that of others, B. Onerous
making the contract: C. Preparatory
A. Onerous D. Consensual
B. Commutative Answer: C. Preparatory
C. Consensual
D. Nominate 80. If partners continue the business after the expiration of a fixed term, this
Answer: B. Commutative creates:
A. A partnership by estoppel
75. A partnership which is entered to engage in trade is called: B. A universal partnership
A. Professional partnership C. A partnership at will
B. Commercial partnership D. A dormant partnership
C. De facto partnership Answer: C. A partnership at will
D. Nominal partnership
Answer: B. Commercial partnership 81. A nominal partner is also known as:
A. Partner by estoppel
B. Quasi-partner
C. Incoming partner
D. Dormant partner
Answer: B. Quasi-partner
82. A partnership agreement to be created in the future is called: 88. Which is TRUE about co-ownership?
A. Executed partnership A. Death of a co-owner dissolves the arrangement
B. Executory agreement of partnership B. It has separate juridical personality
C. Partnership at will C. Co-owner can dispose of his share independently
D. Co-ownership D. It is always for profit
Answer: B. Executory agreement of partnership Answer: C. Co-owner can dispose of his share independently

83. A universal partnership of all present property does NOT include: 89. A professional partnership refers to one formed for:
A. Property owned at the time of formation A. Business trade
B. Profits from contributed property B. Exercise of a calling like law or medicine
C. Property acquired later through donation C. Industrial contribution
D. Cash already owned at formation D. Co-ownership of property
Answer: C. Property acquired later through donation Answer: B. Exercise of a calling like law or medicine

84. A real partner is one who: 90. A partnership formed by mistake or without clear contract but recognized is:
A. Is only represented as partner A. De jure partnership
B. Is truly a contributing member B. De facto partnership
C. Does not participate in business C. Secret partnership
D. Is secret from the public D. Ostensible partnership
Answer: B. Is truly a contributing member Answer: B. De facto partnership

85. An open partnership is also called: 91. A contract of partnership is classified as:
A. Secret partnership A. Gratuitous
B. Ostensible partnership B. Onerous
C. Notorious partnership C. Conditional
D. Particular partnership D. Rescissible
Answer: C. Notorious partnership Answer: B. Onerous

86. A person who contributes only services to the partnership is a: 92. Which of the following is NOT included in essential requisites of partnership?
A. Capitalist partner A. Legal capacity of parties
B. Industrial partner B. Contribution to common fund
C. Managing partner C. Lawful object
D. Dormant partner D. SEC registration
Answer: B. Industrial partner Answer: D. SEC registration

87. A partnership is “nominate” because: 93. A partnership that exists both among partners and as to third persons is a:
A. It is accessory to another contract A. Ordinary partnership
B. It has a special designation in law B. Ostensible partnership
C. It is a preparatory contract C. Secret partnership
D. It is perfected by consent D. Nominal partnership
Answer: B. It has a special designation in law Answer: A. Ordinary partnership
94. An agreement to keep property undivided beyond 10 years creates: 100. The essential purpose of partnership is:
A. A partnership A. Preservation of property
B. Invalid co-ownership B. Public service only
C. Limited partnership C. Realization and division of profits
D. Universal partnership D. Formation of a corporation
Answer: B. Invalid co-ownership Answer: C. Realization and division of profits

95. The doctrine of partnership by estoppel protects:

A. Government agencies
ESSAY:
B. Innocent third persons
C. Retiring partners only
D. Majority partners only 1. Concept of Partnership (Article 1767)
Answer: B. Innocent third persons
Problem:
96. The contribution of an industrial partner consists of: Alex and Ben agreed that Ben will contribute ₱50,000 while Alex will contribute his
A. Money skill in running a coffee shop. They agreed to divide the profits. Is this a valid
B. Property partnership?
C. Industry or labor
D. Profits ALAC:
Answer: C. Industry or labor
Answer: Yes.
97. A continuing partner is one who:
A. Retires from the firm Law: Article 1767 provides that a partnership exists when two or more persons
B. Is admitted as new partner contribute money, property, or industry to a common fund with the intention of
C. Carries on the business after changes in membership dividing profits.
D. Is unknown to the public
Answer: C. Carries on the business after changes in membership Application: Alex contributed his industry, and Ben contributed money. They both
intended to share profits.
98. Partnership at will may be terminated by any partner, provided:
A. Done in good faith Conclusion: A valid partnership exists between Alex and Ben.
B. SEC approval is secured
C. Profits are already divided
D. There is a majority vote
Answer: A. Done in good faith

99. Partnership is distinguished from co-ownership mainly because:

A. Both aim at profit-making
B. Partnership has separate juridical personality
C. Co-ownership always requires registration
D. Co-ownership always involves contracts
Answer: B. Partnership has separate juridical personality
2. Partnership for Exercise of a Profession 4. Articles of Partnership (Formalities)

Problem: Problem:
Three licensed doctors decided to form a medical partnership to run a clinic. Emma and Faith agreed to form a partnership and contribute a parcel of land. They
However, one member suggested that they register as a corporation instead. Is this only had a verbal agreement. Is the partnership valid?
allowed?
ALAC:
ALAC:
Answer: No, the partnership is void.
Answer: No.
Law: Under Article 1771 and 1773, when immovable property is contributed, the
Law: Article 1767 states that persons may form a partnership for the exercise of a partnership contract must be in a public instrument and registered with the SEC.
profession. Certain professions cannot be organized as corporations under the law.
Application: Since land is involved, writing and registration are mandatory.
Application: Since they are doctors, they may form a professional partnership but
not a corporation. Conclusion: The verbal agreement is invalid.

Conclusion: The doctors may form a partnership but not a corporation. 5. Existence – Gross Returns

Problem:
3. Characteristics – Consensual Contract George and Henry shared the gross sales of a sari-sari store equally. Henry insists
they are partners. Is he correct?
Problem:
Carlo and Dino orally agreed to start a tailoring shop. No formal document was ALAC:
signed. Dino later argued there was no partnership because nothing was in writing.
Is Dino correct? Answer: No.

ALAC: Law: Article 1769(3) states that sharing of gross returns does not of itself establish
a partnership.
Answer: No.
Application: They shared gross sales, not profits, so partnership does not exist.
Law: A partnership is consensual, perfected by mere consent (Article 1767).
Conclusion: Henry is not correct.
Application: Even without a written agreement, their oral consent and intent to
share profits are sufficient.

Conclusion: A valid partnership exists.

6. Existence – Profits Received as Debt 8. Classification – Universal Partnership of Profits

Problem: Problem:
Isabel lent money to Jessa, who agreed to give Isabel 20% of business profits until Mia and Niko agreed that all profits from their work as architects will belong to the
the loan is paid. Isabel claims she is now a partner. Is she correct? partnership. Their personal properties remain separate. What kind of partnership is
this?
ALAC:
ALAC:
Answer: No.
Answer: Universal partnership of profits.
Law: Article 1769(4)(a) states that receipt of profits in payment of a debt does not
make one a partner. Law: Article 1780 defines a universal partnership of profits as one comprising all
that partners may acquire by their work during the partnership.
Application: The sharing of profits was only repayment of a loan.
Application: Only profits are pooled, not property ownership.
Conclusion: Isabel is only a creditor, not a partner.
Conclusion: Mia and Niko formed a universal partnership of profits.
7. Distinction – Partnership vs. Co-ownership
9. Classification – Limited Partnership
Problem:
Kevin and Leo bought a car together and agreed to use it alternately. Kevin claims Problem:
they are partners. Is this correct? Olivia contributed ₱1M as capital but declared herself a limited partner. The firm
incurred debts exceeding ₱5M. Creditors want to reach Olivia’s personal property.
ALAC: Is she liable?

Answer: No. ALAC:

Law: Article 1769(2) states that co-ownership does not by itself establish a Answer: No.
partnership.
Law: In a limited partnership (Article 1843), limited partners are liable only to the
Application: They co-own a car but there is no profit-sharing or business intention. extent of their contributions.

Conclusion: They are co-owners, not partners. Application: Olivia’s liability stops at ₱1M.

Conclusion: Creditors cannot pursue her personal property.

10. Duration – Partnership at Will 12. Kind – Dormant Partner

Problem: Problem:
Paolo and Quentin agreed to form a partnership without fixing its term. Later, Sam invested in a company but did not participate in management and was also
Paolo withdrew. Quentin claimed this was illegal. Is he correct? unknown to the public as a partner. Later, he withdrew without notice. Is he still
liable for future debts?
ALAC:
ALAC:
Answer: No.
Answer: No.
Law: Article 1784 states a partnership at will may be dissolved anytime by any
partner in good faith. Law: A dormant partner (silent + secret) may retire without public notice and is not
liable for future debts.
Application: Since no term was fixed, Paolo may withdraw.
Application: Since Sam was not known publicly, creditors cannot rely on his
Conclusion: Quentin’s claim is not valid. presence.

11. Kind – Industrial Partner Conclusion: Sam is not liable for future debts after withdrawal.

Problem:
Rosa joined a partnership only by contributing her skills in painting. Later, the 13. Commencement of Partnership
capitalist partners wanted to expel her for not contributing money. Is this valid?
Problem:
ALAC: Tony and Ulysses signed a contract of partnership to begin in January 2026. In
November 2025, Tony already entered into contracts with suppliers in the name of
Answer: No. the partnership. Are these binding?

Law: An industrial partner contributes industry, not capital (Article 1789). ALAC:

Application: Rosa is a valid partner despite not contributing money. Answer: No, they are not binding.

Conclusion: The expulsion has no legal basis. Law: Article 1784 states that a partnership begins from the moment of execution
unless stipulated otherwise. A future partnership has no juridical existence until the
agreed date.

Application: Since the partners agreed to commence only in January 2026,

contracts made before that date are premature and cannot bind the partnership.

Conclusion: Tony’s contracts are not binding on the partnership.

14. Executory Agreement of Partnership 16. Dissolution by Death of Partner

Problem: Problem:
Victor and Wilma agreed that they will form a partnership once Wilma passes the Zara and Allan were partners in a tailoring shop. Allan died. Zara continued the
CPA board exam. Before the exam, creditors sued them as partners. Are they liable business alone, using the firm’s name. Is the old partnership still valid?
as such?
ALAC:
ALAC:
Answer: No, the old partnership is dissolved.
Answer: No.
Law: Article 1830 states that the death of a partner causes dissolution.
Law: Under the doctrine of executory agreements, no partnership exists until the
agreed condition is fulfilled. Application: The continuation of the business by Zara creates a new partnership,
not a continuation of the old one.
Application: Since Wilma had not yet passed the CPA exam, the condition had not
occurred. Thus, no partnership existed. Conclusion: The old partnership dissolved upon Allan’s death.

Conclusion: Victor and Wilma cannot be considered liable as partners. 17. Rights in Partnership at Will

15. Continuation Beyond Fixed Term Problem:

Ben withdrew from a partnership at will without giving notice to his partners. They
Problem: sued him for damages. Are they correct?
Xavier and Yana agreed to form a partnership for 3 years. After expiration, they
continued the business without liquidation. What kind of partnership exists now? ALAC:

ALAC: Answer: Yes, if withdrawal was done in bad faith.

Answer: A partnership at will. Law: In a partnership at will, any partner may dissolve the partnership anytime, but
withdrawal must be in good faith (Ortega v. CA).
Law: Article 1785 provides that continuation after the expiration of the fixed term
converts it into a partnership at will. Application: If Ben acted to prejudice his partners, he may be liable for damages.

Application: Xavier and Yana allowed the business to continue, thus creating a Conclusion: The partners’ claim depends on proving bad faith.
partnership at will.

Conclusion: The partnership now exists at will.

18. Secret Partner Liability 20. Managing Partner’s Authority

Problem: Problem:
Claire secretly joined a firm as a partner. The firm incurred debts, and creditors Ferdinand was designated as managing partner. Without consent, he sold the
discovered her participation. Can she be held liable? partnership’s delivery van. Other partners contested. Is the sale valid?

ALAC: ALAC:

Answer: Yes. Answer: Yes, if within his authority as managing partner.

Law: Article 1824 provides that all partners, including secret ones, are liable with Law: A managing partner has authority to manage partnership affairs (Article
their separate property for partnership obligations. 1800). However, acts outside ordinary business require consent.

Application: Claire’s concealment does not exempt her from liability. Application: If the sale of the van was necessary for business operations, the act is
binding. If not, it requires approval of all partners.
Conclusion: Claire is liable for the firm’s debts.
Conclusion: The validity depends on whether the sale was in the ordinary course of
19. Ostensible Partner / Partnership by Estoppel business.

Problem: 21. Liability of Industrial Partner

Dennis publicly represented Ethan as his partner in business, even though Ethan
never consented. Creditors extended goods based on this. Is Ethan liable? Problem:
Gabriel was an industrial partner in a law firm partnership. Without consent, he
ALAC: engaged in a side consultancy. The capitalist partners objected. Is Gabriel allowed
to do this?
Answer: Yes, under estoppel.
ALAC:
Law: Article 1825 states that a person represented as a partner is liable to third
parties who relied in good faith. Answer: No.

Application: Ethan is bound by Dennis’ representation even if he did not consent. Law: Article 1789 prohibits an industrial partner from engaging in any business for
himself, unless expressly permitted.
Conclusion: Ethan is liable as a partner by estoppel.
Application: Gabriel violated his duty of exclusivity.

Conclusion: His side consultancy is prohibited.

22. Nominal Partner Liability 24. Continuation by Incoming Partner

Problem: Problem:
Henry allowed his name to be used in a firm’s business card as a partner, even Karen was admitted as a new partner after the retirement of others. Is the new
though he contributed nothing. A creditor extended credit to the firm. Is Henry partnership the same as the old one?
liable?
ALAC:
ALAC:
Answer: No, it is a new partnership.
Answer: Yes.
Law: Partnership is based on mutual consent. Admission of new partners or
Law: A nominal partner or partner by estoppel is liable to protect third persons withdrawal of old ones dissolves the old partnership and forms a new one.
who relied in good faith.
Application: Karen’s admission created a new juridical entity.
Application: By allowing his name to be used, Henry assumed liability.
Conclusion: A new partnership exists.
Conclusion: Henry is liable for the firm’s debts.
25. Dissolution vs. Termination
23. Surviving Partner’s Authority
Problem:
Problem: Liam claims that once dissolution occurs, the partnership immediately terminates.
After Iggy’s death, Jake, the surviving partner, continued winding up the Is he correct?
partnership affairs. Can Jake bind the firm for new contracts?
ALAC:
ALAC:
Answer: No.
Answer: No.
Law: Dissolution is distinct from termination. Dissolution is the change in relation
Law: After dissolution, a liquidating partner can only finish outstanding business, caused by a partner ceasing, but termination occurs only after winding up.
not create new ones.
Application: The partnership still exists for purposes of liquidation after dissolution.
Application: Jake may settle obligations and collect receivables, but cannot enter
new contracts binding the firm. Conclusion: Liam is incorrect; dissolution is not the same as termination.

Conclusion: Jake’s authority is limited to liquidation.