DURATION OF PARTNERSHIP
• No limitation
• Can be fixed by agreement of the partners
CONTINUATION OF PARTNERSHIP
There is prima facie (disputable presumption) evidence of continuation
of the business after the termination of the term or particular
undertaking, if there is no settlement or liquidation of the partnership
affairs after the arrival of such term or period of liquidation.
CONTINUATION OF PARTNERSHIP BEYOND FIXED
TERM
1. If there is no express agreement, the rights and duties of the
partners remain the same.
2. The partnership with a fixed term is dissolved and a partnership
at will is created.
OBLIGATIONS OF PARTNERS TO CONTRIBUTE
1. To contribute at the start of partnership or at the stipulated time,
the money, property, or industry which the partner has promised;
OBLIGATIONS OF PARTNERS ON CONTRIBUTION OF
PROPERTY
1. To answer for eviction in case partnership is deprived of the
property contributed.
2. To answer for the fruits of the property contributed from the time
of delay up to the time of actual delivery.
3. To preserve the property with the diligence of a good father of a
family pending delivery to the partnership.
4. To indemnify the partnership for any damage caused to it by the
retention of the same or by the delay in its contribution.
EFFECT OF FAILURE TO CONTRIBUTE THE PROPERTY
PROMISED
1. The partner automatically becomes a debtor of the partnership.
2. Other partners may file for an action for specific performance (to
collect) with damages and interest from the defaulting partner.
APPRAISAL OF GOODS OR PROPERTY CONTRIBUTED
1. Appraisal is necessary to determine how much has been
contributed by the partners
a. In the absence of stipulation, the share of each partner in
the profits and losses is in proportion to what he may
contributed.
b. Appraisal is made:
i. In the manner prescribed by the contract of
partnership
ii. If not stipulated, by expert chosen by the
partners and according to current prices.
c. After the goods have been contributed, the partnership
bears the risk or gets the benefit of subsequent changes in
their value.
2. In case of immovable, appraisal shall be made in the inventory of
said property
OBLIGATIONS OF PARTNERS WITH RESPECT TO
PARTNERSHIP CAPITAL
1. To contribute on the date due the amount promised to put in to
the Partnership.
2. To reimburse any amount taken from the Partnership coffers and
converted to personal use.
3. To pay the agreed or legal interest in case of failure to make the
contribution on time or if any amount is taken for personal use.
4. To indemnify the partnership for the damages caused.
OBLIGATIONS OF INDUSTRIAL PARTNER
1. He is a debtor of the partnership for his work or services.
2. The partnership acquires exclusive right to avail of his services.
PROHIBITION TO ENGAGE IN BUSINESS
Industrial Partner – Absolute prohibition whether in the same business
as the partnership or any other kind of business, unless expressly
permits by the partnership.
Capitalist Partner – Extend only to any operation which is of the same
kind of business as the partnership, unless there is a stipulation to the
contrary.
REMEDIES AGAINST INDUSTRIAL PARTNER
1. The Capitalist Partners have the right to exclude him from the
partnership; or
2. To avail themselves of the benefits which he may have obtained;
3. Right to damages in either case.
EXTENT OF CAPITAL CONTRIBUTION
o In case of imminent lost, and there is no agreement to the contrary,
a Capitalist Partner is obliged to contribute an additional share to
save the venture. If he refuses to contribute, he shall be obliged to
sell his interest to the other partners.
REQUISITES BEFORE CAPITALIST PARTNER MAYBE
OBLIGED TO SELL HIS INTEREST
1. There is an imminent loss of the business of the partnership.
2. Majority of the capitalist partners believe that additional
contribution would save the business.
3. The capitalist partner refuses to contribute an additional share to
the capital.
4. There is no agreement that even in case of an imminent loss of the
business the partners are not obliged to contribute.
OBLIGATION OF MANAGING PARTNERS WHO COLLECT
DEBT
o To apply the amount collected to the partnership’s credit.
o Should there be two credits – to apply the payment to the two
credits in proportion to their amounts
Application of Article 1972
1. There are atleast two debts from same debtor, one where the
partner is the creditor and one where the partnership is the
creditor.
2. Both debts are demandable.
3. The partner, who is authorized to collect, actually collected money
from the debtor.
4. Amounts collected should be applied to the two credits in
proportion to their amounts.
OBLIGATION OF PARTNER WHO RECEIVES SHARE OF
PARTNERSHIP CREDIT
o Partnership credit is distributed among partners.
o The partner who received his share shall be obliged to bring to the
partnership capital what he had received.
Application of Article 1973
1. A partner has received in whole or in part his share in the
partnership credit.
2. The other partners have not collected their share;
3. And the partnership debtor has become insolvent.
4. The partner who received his share shall be obliged to bring to the
partnership capital what he had received.
OBLIGATION OF PARTNER FOR DAMAGES TO
PARTNERSHIP
Rule:
1. Every partner is responsible to the partnership for the damages it
suffered thru his fault.
2. Damages suffered cannot be off-set with the profits and benefits a
partner earned for the partnership thru his industry.
3. The court may lessen the partner’s responsibility if unusual profits
are realized thru the partners extraordinary efforts
RISK OF LOSS OF THINGS CONTRIBUTED
1. Where only the use of a specific and determinate thing is
contributed – borne by the partner since he remains to be the
owner of the property.
2. Where ownership of a specific and determinate thing is transferred
to the partnership – borne by partnership.
3. Where fungible thing is contributed – borne by the partnership.
4. Where thing contributed is intended for sale – borne by the
partnership.
5. Things brought and appraised in the inventory – borne by the
partnership.
RESPONSIBILITY OF PARTNERSHIP TO THE PARTNERS
1. To refund amount disbursed by a partner in behalf of the
partnership
2. To answer for the obligation contracted in good faith for the
interest of the partnership business.
3. To answer for risks (e.g. loss for accident) in consequences of its
management.
RULES FOR DISTRIBUTION OF PROFITS
1. Partners share the profits in accordance with their agreement.
2. If there is no agreement –
a. Capitalist Partner – share shall be in proportion to his capital
contribution.
b. Industrial Partner – share as maybe just and equitable under the
circumstances.
RULES FOR DISTRIBUTION OF LOSSES
1. Partners share in the accordance to their agreement.
2. If there is no agreement but the contract of provides for the share
of partners in the profits – share in losses shall be the same.
3. If there is no stipulation as to profits – share in the losses shall be
in accordance to capital contribution.
4. Industrial Partners shall not share in the losses.
DESIGNATION OF SHARE BY 3RD PERSON
Rule: (Article 1798)
1. The designation of the share in the profits and losses maybe
delegated to a 3rd person with consent by all partners.
2. The designation by the 3rd person is binding unless manifestly
inequitable.
3. A partner may impugn such designation within 3 months from
knowledge thereof.
4. A partner who has begun to execute the designation of 3rd person
may no longer complain if he did not impugn the same within the
allowed period.
OBLIGATIONS WITH RESPECT TO MANAGEMENT
Rule:
1. Appointment as Manager in the Art. of Partnership
– may execute all acts of administration
– acts are valid unless done in bad faith
– power is revocable only upon just and lawful cause, and vote of
partners representing the controlling interest,
2. Appointment as manager after the constitution of the partnership
– maybe revoked at anytime for whatever cause
SCOPE OF POWER OF MANAGING PARTNER
General Rule:
A managing partner has all necessary and incidental power to carry out
the business (e.g. issue receipt, to make purchases on credit, dismiss an
employee, etc.)
Exception:
Such power as expressly or specifically withheld.
COMPENSATION FOR SERVICES
General Rule:
Partners are generally not entitled to compensation
Exception:
1. Such compensation is agreed or consented to by all partners
2. Services rendered was beyond the partnership's normal function.
TWO OR MORE MANAGING PARTNER
Requisites of Art. 1801
1. Two or more partner have been appointed as managers;
2. There is no specification of their respective duties;
3. No stipulation that an act should be with consent of all other
managing partners;
POWERS OF 2 OR MORE MANAGING PARTNER
Rule for Applicability of Art. 1801
1. Each partner may separately execute all acts of administration.
2. In case of dispute, the decision of majority shall prevail.
3. In case of tie, it shall be decided by the partner owning the
controlling interest.
UNANIMOUS CONSENT OF PARTNERS
Rule: (Art. 1802)
In case there is a stipulation that an act should be with consent of
others, the consent of all managing partner is necessary for the validity
of their acts.
Exception:
In case of imminent danger or irreparable injury to the partnership, a
partner may act without the consent of a partner who is absent or under
disability.
RULES TO BE OBSERVED WHEN THE MANNER OF
MANAGEMENT HAS NOT BEEN AGREED UPON:
1. All the partner are considered AGENTS
– whatever any one of them may do alone shall 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 partnership or
through some other means.