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Partnership Reviewer: University of The Philippines
Partnership Reviewer: University of The Philippines
PARTNERSHIP REVIEWER
University of The Philippines
PARTNERSHIP
it is a CONTRACT whereby two or more persons (1) bind themselves to
CONTRIBUTE money, property, or industry to a COMMON FUND (2) with the intention
of dividing the PROFITS among themselves or in order to EXERCISE a PROFESSION
BUSINESS TRUSTS
when certain persons entrust their property or money to others who will
manage the same for the former
a partner shares not only in profits but also in the losses of the firm
RULE:
the partnership has a PERSONALITY SEPARATE and DISTINCT from that of
each partner
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1. persons who are not partners to each other are not partners as to third persons
EXCEPTION:
PARTNERSHIP BY ESTOPPEL
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PARTNERSHIP BY ESTOPPEL
IF 2 persons not partners represent themselves as partners to strangers, a
partnership by estoppel results
WHEN 2 persons, who are partners, in connivance with a friend who is not a
partner inform a stranger that said friend is their partner, a partnership by estoppel
also result to the end that the stranger should not be prejudiced
it must be within the commence of man, possible and not contrary to law,
morals, good customs, public order or public policy
one of the causes for the dissolution of a partnership is any event which
makes it unlawful for the business of the partnership to be carried on
RULE:
when an UNLAWFUL PARTNERSHIP is dissolved by a judicial decree, the PROFITS
shall be CONFISCATED in FAVOR of the STATE
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G. R.
a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is contributed
2. REAL RIGHTS are contributed
* FAILURE TO COMPLY shall not effect the liability of the partnership and its
members to third persons
TRANSFER of land to the partnership must be duly recorded in the ROD to make
the transfer effective insofar as third persons are concerned
RULE:
any immovable property or an interest therein maybe acquired in the partnership
name
title so acquired can be conveyed only in the partnership name
IF the partnership has ALIENS, it CANNOT OWN LANDS, whether public or private or
whether agricultural or commercial EXCEPT through HEREDITARY SUCCESSION
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LIMITATIONS ON ACQUISITION
1. AGRICULTURAL LANDS 1024 HECTARES
2. lease of public lands (GRAZING) 2000 HAS.
CLASSIFICATION OF PARTNERSHIPS
A) ACCORDING TO MANNER OF CREATION
1. ORALLY constituted
2. constituted in a PRIVATE INSTRUMENT
3. constituted in a PUBLIC INSTRUMENT
4. REGISTERED S.E.C.
B) ACCORDING TO OBJECT
1. UNIVERSAL
2. PARTICULAR
C) ACCORDING TO LIABILITY
1. LIMITED PARTNERSHIP
2. GENERAL PARTNERSHIP
D) ACCORDING TO LEGALITY
1. LAWFUL OR LEGAL
2. UNLAWFUL OR ILLEGAL
E) ACCORDING TO DURATION
1. for a SPECIFIC PEIOD or FIXED PERIOD
2. PARTNERSHIP AT WILL
F) ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP
2. PARTNERSHIP BY ETOPPEL
G) AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1. SECRET PARTNERSHIP
2. NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
2. PROFESSIONAL / NON-TRADING
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GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their individual properties, after the assets of the
partnership has been exhausted
LIMITED PATNERSHIP
one where at least one partner is a general partner and the others are limited partners
one whose liability is limited only up to the extent of his contribution
a partnership where all the partners are limited partners cannot exist as a limited
partnership
REFUSED REGISTRATION
IF it continuous as such, it will be considered as a general partnership and all the
partners will be general partners
RULE:
articles of universal partnership, entered without specification of its nature, only
constitute a universal partnership of PROFITS
RULE:
persons who are prohibited from giving each other any donation or advantage cannot
enter into universal partnership
WHO:
1. HUSBAND and WIFE
2. those guilty of ADULTERY or CONCUBINAGE
3. those guilty of the same criminal offense if the partnership was entered into in
consideration of the same
while spouses cannot enter into a universal partnership, they can enter into a
particular partnership or be members thereof
PARTICULAR PARTNERSHIP
a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS their use or fruits
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION
* even if contributions have not yet been made the firm already exists, for partnership
is a consensual contract
DURATION OF PARTNERSHIP
UNLIMITED
* MAY BE AGREED UPON
1. EXPRESSLY definite period
2. IMPLIEDLY upon achievement of its purpose
PARTNERSHIP AT WILL
a partnership wherein its continued existence really depends upon the will of the
partners or even on the will of any of them
2 KINDS:
1. when there is no term, express or implied
2. when it is continued by the habitual managers although the period has ended or
the purpose has been accomplished
2. the fruits referred to are those arising from the time they should have been
delivered, without a need of any demand
3. IF the partner is in BAD FAITH, he is liable not only for the fruits actually
produced, BUT also for those that could have been produced
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4. IF MONEY HAS BEEN PROMISED, INTEREST and DAMAGES from the time he
should have complied with his obligation should be given
RULE:
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
CAPITALIST PARTNER
one who FURNISHES CAPITAL
* NOT EXEMPTED from LOSSES
* he can engage in other business PROVIDED there is no competition between
the partnership and his business
* share in the profits according to agreements
INDUSTRIAL PARTNER
one who FURNISHES INDUSTRY or LABOR
* he is EXEMPTED from LOSSES as between the partner BUT liable to strangers
without prejudice to reimbursement from the capitalist partner
* he CANNOT engage in any other BUSINESS WITHOUT the express CONSENT
of the other partners, OTHERWISE
1. he can be EXCLUDED from the firm
- plus damages OR
2. the BENEFITS he obtains from the other businesses CAN BE AVAILED of by the
other partners
- plus damages
whether or not there is COMPETITION
* in computing always look for ----- NET PROFITS
----- NET LOSSES
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GENERAL PARTNER
one who is liable beyond the extent of his contribution
LIMITED PARTNER
one who is liable only to the extent of his contribution
*** an industrial partner can only be a general partner, never a limited partner
MANAGING PARTNER
one who manages actively the firms affairs
SILENT PARTNER
one who does not participate in the management, though he shares in the PROFITS or
LOSSES
LIQUIDATING PARTNER
one who winds up or liquidates the affairs of the firm after it has been dissolved
OSTENSIBLE PARTNER
one whose connection with the firm is public and open
SECRET PARTNER
one whose connection with the firm is concealed or kept secret
DORMANT PARTNER
one who is both a secret (hidden) and silent (not managing) partner
NOMINAL PARTNER
one who is not really a partner BUT who may become liable as such insofar as third
persons are concerned
RULE:
partners shall CONTRIBUTE EQUAL SHARES to the capital of the partnership
REQUISITES:
1. existence of at least 2 debts ---- PARTNERSHIP
---- PARTNER
2. both sums are demandable
3. the collecting partner is the managing partner
RULE:
* where a partner receives his share in the partnership credit
CONDITIONS:
1. a partner has received his share in the partnership credit in whole or in part
2. the other partners have not collected their part of the credit
3. the debtor subsequently becomes INSOLVENT
* DOES NOT APPLY when debt was collected after dissolution of the partnership
RULE:
* every partner is responsible to the partnership for damages suffered by it through his
fault
* he cannot compensate them with the profits and benefits, which he may have
earned for the partnership by his industry
2. FUNGIBLE or DETERIORABLE
FIRM bears the loss for it is evident ownership was transferred
1. to REFUND amounts disbursed on behalf of the firm plus legal interest from the
time expenses where made
2. to ANSWER to each partner for OBLIGATIONS he may have entered into in good
faith in the interest of the partnership, as well as the risks in consequence of its
management
* REFUND must be made even in case of failure of the enterprise entered into,
provided the partner is not at fault
* AMOUNT DISBURSED does not refer to the ORIGINAL CAPITAL
* an INDUSTRIAL PARTNER shall receive a JUST and EQUITABLE share in the profits
2. EXTENT of POWER
as long as he remains manager, he can perform all acts of administration
BUT if others oppose and he persists, he can be removed
SPECIFIC RULES:
1. each may separately execute all acts of administration
UNLIMITED POWER to ADMINISTER
*RULES to be observed when the manner of management has not been agreed
upon:
1. all the partners are considered AGENTS
whatever any one of them may do alone shall not bind the partnership
2. IF the acts of one are opposed by the rest, the majority shall prevail
3. when a partner acts in his OWN NAME, he does not bind the partnership
4. authority to bind the firm does not apply if somebody else has been given
authority to manage in the articles of organization or through some other means
2. at any reasonable hour, every partner shall have access to and may inspect and
copy any of them
RULE:
* a partner is CO-OWNER with his partners of SPECIFIC PARTNERSHIP PROPERTY
1. he has equal rights with his partners to POSSESS the property BUT only for
PARTNERSHIP PURPOSES
he may possess such property for other purposes PROVIDED the other
partners expressly or impliedly gives their CONSENT
2. he CANNOT ASSIGN his right to the property EXCEPT if all the other partners
assign their rights in the same property
RULE:
* a PARTNERS INTEREST in the partnership is his SHARE of the PROFITS and
SURPLUS
IT CAN BE: [A, A, LS]
1. ASSIGNED
2. ATTACHED
3. be subject to LEGAL SUPPORT
*** while a partners INTEREST in the firm may be CHARGED or LEVIED upon, his
INTEREST in a specific firm PROPERTY CANNOT be attached.
* when the CHARGING ORDER is applied for and granted, the court may appoint a
receiver of the partners share in the profits
the receiver appointed is entitled to any relief necessary to conserve the
partnership assets for partnership purposes
* interest charged may be redeemed at any time before foreclosure
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2. with partnership property, by any one or more partners with the consent of all the
partners whose interests are not so charged or sold
* consent of the delinquent partner not needed
RULE:
every partnership shall operate under a FIRM NAME
* the firm name may or may not include the name of one or more of the partners
** STRANGERS who include their names in the firm are liable as partners because of
ESTOPPEL, BUT do NOT have the RIGHTS of partners
** IF a LIMITED PARTNER includes his name in the firm name, he has obligations BUT
not the rights of a general partner
* under the law the liability of the partners is subsidiary and joint NOT principal and
solidary
* any partner may enter into a separate obligation to perform a partnership contract
RULE:
* every partner is an agent of the partnership for the purpose of its business
G.R.- the act of every partner for apparently carrying on in the USUAL WAY the
business of the partnership of which he is member binds the partnership
EXCEPT:
1. if he has NO AUTHORITY and
2. the person with whom he was dealing with HAS KNOWLEDGE of the fact that he has
no such authority
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RULE:
an act of a partner which is not apparently for the carrying on of business of the
partnership in the usual way does not bind the partnership UNLESS authorized by the
other partners
2. where title is in the name of the partnership and partner sold in his OWN NAME
3. where title is in the name of one or more BUT not all the partners
partners in whose name the title is named MAY CONVEY BUT the
PARTNERSHIP may RECOVER such property IF done not in its USUAL BUSINESS
EXCEPT if he had transferred it to a Holder for value
EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED OWNERSHIP
2. admissions made AFTER DISSOLUTION are binding only if the admissions were
necessary to WIND UP the business
3. an admission made by a former partner made after he has RETIRED from the
partnership is not evidence against the firm
* SERVICE of PLEADINGS on the partner in a law firm is also service on the whole
firm and the other partners
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LOSS OR INJURY
RULE on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY LIABILITY)
* the partnership is solidarily liable with the partner if the wrongful act or omission
1. the partner is acting in the ordinary course of business of the partnership
OR
2. with authority of his co-partners
3. if the act or omission, although wrongful did not make the partner concern
liable
- DAMNUN ABSQUE INSURIA
4. if the wrongful act or omission was committed after the firm had been dissolved
and the same was not in connection with the process of winding up.
PARTNER BY ESTOPPEL
a person who represents himself or consents to another / others representing him to
anyone as a partner either in an existing partnership or in one that is fictitious or
apparent
PARTNERSHIP BY ESTOPPEL
when all the members of the existing partnership consent to such representation of a
partner by estoppel
* when although there is misrepresentation, if the third party is not deceived, the
doctrine of estoppel does not apply
BURDEN of PROOF
the creditor or whoever alleges the existence of a partner or partnership by estoppel
has the burden of proving the existence of the MISREPRESENTATION AND INNOCENT
RELIANCE on it
**IF a partner sells his share to a third party, BUT the firm itself still remains
SOLVENT, partnership creditors CANNOT assail the validity of the sale by alleging that
it is made in fraud of them, since they have not really been prejudiced
WINDING UP
the process settling business affairs after dissolution
TERMINATION
the point in time after all the partnership affairs have been wound up
RULE ON DISSOLUTION
* on dissolution the partnership is not terminated BUT continues until the winding
up of partnership affairs is completed
*EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this does not necessarily mean that a
partner can evade previous obligations entered into by the partnership
2. dissolution saves the former partners from new obligations to which they have
not expressly or impliedly consented UNLESS the same be essential for winding
up
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*CAUSES OF DISSOLUTION
1. without VIOLATION of the AGREEMENT between the partners
A) TERMINATION of the DEFINITE TERM or PARTICULAR UNDERTAKING
B) EXPRESS WILL or ANY PARTY in GOOD FAITH (PARTNERSHIP by WILL)
C) EXPRESS WILL of ALL of the PARTNERS except those who have
(interests) ASSIGNED or whose interests have been (separate debts)
CHARGED
D) EXPULSION in good faith of a member
2. in CONTRAVENTION of the agreement between the partners
by the EXPRESS WILL of ANY PARTNER at any time
3. UNLAWFULNESS of the BUSINESS
4. LOSS thing promised
A) SPECIFIC THING PERISHES before delivery
B) USUFRUCT is lost EXCEPT if ownership had been transferred to the
partnership
5. DEATH of ANY partner
6. INSOLVENCY of any partner or of the partnership
7. CIVIL INTERDICTION of any partner
8. DECREE of COURT
*** if the cause is not justified or no cause was given, the withdrawing partner is
liable for DAMAGES BUT in no case can he be compelled to remain in the firm
* the insolvency need not be judicially declared, it is enough that the assets be less
than the liabilities
* even if a partner has not yet been previously declared insane by the court,
dissolution may be asked, as long as the insanity is duly proved in court
* in a suit for dissolution, the court may appoint a RECEIVER at its discretion
EFFECTS OF DISSOLUTION
RULE:
* when the firm is dissolved, a partner can no longer bind the partnership
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* a dissolved partnership still has the personality for the winding up of its affairs
the firm is still allowed to collect previously acquired credits
the firm is still bound to pay of its debts
3. By any TRANSACTION which could bind the partnership IF dissolution had not
taken place PROVIDED the other party is:
A) PREVIOUS CREDITOR and had NO KNOWLEDGE or NOTICE of the
dissolution OR
B) NOT a PREVIOUS CREDITOR, had NO KNOWLEDGE or NOTICE and
dissolution was NOT PUBLISHED
* if there was publication of the dissolution it is presumed he already knows,
regardless of actual knowledge on non knowledge
RULE:
* the dissolution of the partnership does not itself discharge the existing liability of
any partner
NEED for an AGREEMENT BETWEEN
1. partner concerned
2. other partners
3. creditors
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RULE:
* the INDIVIDUAL PROPERTY of a DECEASED PARTNER shall be liable for all
obligations of the partnership incurred while he was a partner BUT subject to prior
payments of his separate debts
EXTRAJUDICIAL:
1. by the partners who have not wrongfully dissolved the partnership
2. by the legal representative of the last surviving partners
JUDICIAL:
under the control and direction of the court, upon proper cause that is shown to the
court
* profits that will actually enter the firm after dissolution as a consequence of
transactions already made before dissolution are included because they are considered
as profits existing at the time of dissolution
* any other income earned after the time, like interest or dividends on stock owned by
the partners or partnership at the time of dissolution should not be distributed as
profits BUT as merely additional income to the capital
* a guilty partner who is EXCLUDED will be indemnified against all present or future
partnership liabilities
* IF the partnership assets are insufficient, the other partners must contribute more
money or property
ORDER OF PREFERENCE:
1. INDIVIDUAL or SEPARATE CREDITORS
2. PARTNERSHIP CREDITORS
3. those owing to other partners by way of contribution
G.R. when a partner retires, he is entitled what is due him after liquidation BUT no
liquidation is needed if there is already a settlement at the date of dissolution
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JURISPRUDENCE
* when our internal Revenue Code includes partnerships among the entities subject
to the tax on corporations, said code which are not necessarily partnerships in the
technical sense of the term
* the sharing of gross returns does not itself establish a partnership, within the
persons sharing them have a joint or common right or interest in any property from
which the returns are derived
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* aside from the circumstances of profit, the presence of other elements constituting
partnership is necessary, such as:
1. the clear intent to form a partnership
2. the existence of a juridical personality different from that of the individual
partners AND
3. the freedom to transfer or assign any interest in the property by one with the
consent of the others
* persons who contribute property or funds for a common enterprise and agree to
share the gross returns of that enterprise in proportion to their contribution, BUT who
severally retain the title to their respective contribution, are not thereby rendered
partners
they have no common stock or capital and no community of interest as principal
proprietors in the business itself which the proceeds derived
* the common ownership of property does not itself create a partnership between the
owners, though they may use it for the purpose of making gains AND they may without
becoming partners, agree among themselves as to the management and use of such
property and the application of the proceeds therefrom
* the sharing of returns does not in itself establish a partnership within the persons
sharing therein have a joint or common right or interest in the property
there must be:
1. clear intent to form a partnership
2. the existence of a juridical personality different from the individual partners
AND
3. the freedom of each party to transfer or assign the whole property
* one of the causes of dissolution is any event which make it unlawful for the
business of the partnership to be carried on or for the members to carry it on in
partnership
* the subsequent marriage of the partners could not operate to dissolve the
partnership because it is not one of the causes provided for dissolution by law with
regards to limited partnerships
* partnership has distinct and separate personality from that of its partners
* a husband and wife may not enter into a contract of general co-partnership/
UNIVERSAL partnership
* the prohibition against an industrial partner engaging in business for himself seeks
to prevent any conflict of interest between the industrial partner and the partnership
and to ensure faithful compliance by said partner with his prostation
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