- Statute
- Philippine Civil Code
- Article
- Art. 1797
- Topic
- Obligations of the Partners
- Status
- In force
- Book
- BOOK IV Obligations and Contracts
- Title
- TITLE IX PARTNERSHIP
- Chapter
- CHAPTER 2 Obligations of the Partners
- Formerly
- Art. 1689a of the old Civil Code
- Year
- 1949
- Cited by
- Multiple Supreme Court decisions
The provision
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 losses shall be in proportion to what he may have contributed, but the industrial partner shall not be liable for the 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 receive a share in the profits in proportion to his capital. (1689a)
Intellegal Wiki · In plain terms
Profits and losses are shared as the partners agreed. If they fixed only the profit shares, the same proportions apply to losses. Absent any stipulation, each partner shares in proportion to what he contributed — except the industrial partner, who is not liable for losses at all, and whose profit share is whatever is just and equitable in the circumstances; if he contributed capital as well as services, he takes a further profit share proportionate to that capital. Two limits sit alongside this article: Article 1799 voids any stipulation excluding a partner from all share in the profits or losses, and Article 1798 lets the partners entrust the apportionment to a third person but never to one of themselves. Note that the industrial partner's exemption is internal only — under Article 1816 all partners, industrial ones included, answer pro rata to outside creditors.
An editorially maintained plain-language explanation of this provision — not legal advice.
Cases applying this article
- Antonia Torres Assisted By Her Husband v. Court of Appeals G.R. No. 134559
- Marsman Drysdale Land v. Philippine Geoanalytics G.R. No. 183374