PARTNERSHIP1

[Follow the Outline]

Part ONE
Modified True or False. Consider the statement true only when it is absolutely true.
Explain ALL your answers.

1. A person who is not a partner cannot be held liable as though he were a partner.

2. Every partner is a debtor of the partnership for whatever he may have promised to contribute
thereto.

3. A partnership may be constituted in any form.

4. A partner is co-owner with his partners of specific partnership property.

5. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business.

6. Every partnership shall operate under a firm name, which may or may not include the name of
one or more of the partners.

7. Persons who are prohibited from giving each other any donation or advantage cannot enter into a
particular partnership.

8. The contributions of a limited partner may be cash or other property, but not services.

9. A partnership begins from the moment of the execution of the contract.

10. A person may be a general partner and a limited partner in the same partnership at the same time.

Part TWO
Multiple Choice. Choose the best answer.

11. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a
partner in the business, but no such inference shall be drawn if such profits were received in
payment:
a. of a debt by installments .
 b. as wages of an employee
c. as rent to a landlord
d. all of the above
e. none of the above

12. This partnership comprises all that the partners may acquire by their industry or work during the
existence of the partnership:
a. universal partnership of present property
b. universal partnership of profits
c. particular partnership
d. limited partnership
e. none of the above

13. Articles of universal partnership, entered into without specification of its nature, shall be deemed
:
a. a universal partnership of present property
b. a universal partnership of profits
c. either a universal partnership of present property or a universal partnership
of profits
d. neither a universal partnership of present property or a universal
partnership of profits
e. void

14. Persons who are prohibited from giving each other any donation or advantage cannot enter into a:

a. universal partnership of present property

b. universal partnership of profits
c. any kind of universal partnership
d. particular partnership
e. limited partnership

15. This partnership has for its object determinate things, their use or fruits, or a specific
undertaking, or the exercise of a profession or vocation:
a. universal partnership of present property
b. universal partnership of profits
c. particular partnership
d. limited partnership
e. none of the above

16. This partner cannot engage in business for himself, unless the partnership expressly permits him
to do so:
a. capitalist
b. industrial
c. limited
d. general partner
e. incoming

17. The risk of specific and determinate things contributed to the partnership so that only their use
and fruits may be for the common benefit shall, in the absence of a contrary stipulation, be borne
by the partnership except if the things:
a. are not fungible
 b. cannot be kept without deteriorating
c. were contributed to be sold
d. were appraised in the inventory
e. all of the above
f. none of the above

18. This partner cannot engage for his own account in any operation which is of the kind of business
in which the partnership is engaged, unless there is a stipulation to the contrary:
a. capitalist
b. industrial
c. limited
d. general partner
e. managing

19. In this property right, a partner is co-owner with his partners of specific partnership property:
a. a partner’s rights in specific partnership property
b. a partner’s interest in the partnership
c. a partner’s right to participate in the management
d. all of the above
e. none of the above

20. Except when authorized by the other partners or unless they have abandoned the business, one
or more but less than all the partners have no authority to:
a. assign the partnership property in trust for creditors
b. dispose of the good-will of the business
c. do any other act which would make it impossible to carry on the ordinary
business of a partnership
d. all of the above
e. none of the above

Part THREE
Give direct and concise but complete answers.
Cite authorities, if any.

1. “X” used his saving from his salaries amounting to a little more than P2,000 as capital in
establishing a restaurant. “Y” gave the amount of P4,000 to “X” as “financial assistance” with
the understanding that “Y” would be entitled to 22% of the annual profits derived from the
operation of the restaurant. After the lapse of 22 years, “Y” filed a case demanding his share in
the said profits. “X” denied that there was a partnership and raised the issue of prescription as
“Y” did not assert his rights anytime within ten (10) years from the start of the operation of the
restaurant. Is “Y” a partner of “X” in the business? Why? What is the nature of the right to
demand one’s share in the profits of a partnership? Does this right prescribe?
2. X and Y are partners in a shop offering portrait painting. Y provided the capital and the
marketing while X was the portrait artist. They accepted the ₱50,000.00 payment of Kyla to do
her portrait but X passed away without being able to do it. Can Kyla demand that Y deliver the
portrait she had paid for because she was dealing with the business establishment and not with the
artist personally? Why or why not?

3. Distinguish co-ownership from partnership.

4. Can a husband and wife form a limited partnership to engage in real estate business, with the wife
being a limited partner?

5. An oral partnership is valid?

6. A, B and C formed a partnership for the purpose of contracting with the Government in the
construction of one of its bridges. On June 30, 1992, after completion of the project, the bridge
was turned over by the partners to the Government. On August 30, 1992, D, a supplier of
materials used in the project sued A for collection of the indebtedness to him. A moved to
dismiss the complaint against him on the ground that it was the ABC partnership that is liable for
the debt. D replied that ABC partnership was dissolved upon completion of the project for which
purpose the partnership was formed.

Will you dismiss the complaint against A if you were the judge?

7. Joe and Rudy formed a partnership to operate a car repair shop in Quezon City. Joe provided the
capital while Rudy contributed his labor and industry. On one side of their shop, Jose opened and
operated a coffee shop, while on the other side, Rudy put up a car accessories store. May they
engage in such separate businesses? Why?

8. M and O are partners of M & O Partnership, Ltd. O is the managing partner. N owes M
P10,000.00 and M & O Partnership, Ltd. P30,000.00. The obligations of N are both due. M
collected from N the debt of N to M in the amount of P10,000.00 and issued a receipt in the
name of M.

To which obligation will the P10,000.00 be applied?

9. In 2005, L, M, N, 0 and P formed a partnership. L, M and N were capitalist partners who contributed
P500,000 each, while 0, a limited partner, contributed P1 ,000,000. P joined as an industrial partner,
contributing only his services. The Articles of Partnership, registered with the Securities and
 Exchange Commission, designated L and 0 as managing partners; L was liable only to the extent of
his capital contribution; and P
was not liable for losses.

In 2006, the partnership earned a net profit of P800,000. In the same year, P engaged in a different
business with the consent of all the partners. However, in 2007, the partnership incurred a net loss of
P500,000. In 2008, the partners dissolved the partnership. The proceeds of the sale of partnership
assets were insufficient to settle its obligation. After liquidation, the partnership had an unpaid
liability ofP300,000.

Assuming that the just and equitable share of the industrial partner, P, in the profit in 2006 amounted
to P1 00,000, how much is the share of 0, a limited partner, in the P800,000 net profit?

10. W, X, Y and Z organized a general partnership with W and X as industrial partners and Y and Z as
capitalist partners. Y contributed P50,000.00 and Z contributed P20,000.00 to the common fund. By
a unanimous vote of the partners, W and X were appointed managing partners, without any
specification of their respective powers and duties.

A applied for the position of Secretary and B applied for the position of Accountant of the
partnership.

The hiring of A was decided upon by W and X, but was opposed by Y and Z.

The hiring of B was decided upon by W and Z, but was opposed by X and Y.

Who of the applicants should be hired by the partnership? Explain and give your reasons.

11. In 2005, L, M, N, 0 and P formed a partnership. L, M and N were capitalist partners who
contributed P500,000 each, while 0, a limited partner, contributed P1 ,000,000. P joined as an
industrial partner, contributing only his services. The Articles of Partnership, registered with the
Securities and Exchange Commission, designated L and 0 as managing partners; L was liable
only to the extent of his capital contribution; and P
was not liable for losses.

In 2006, the partnership earned a net profit of P800,000. In the same year, P engaged in a different
business with the consent of all the partners. However, in 2007, the partnership incurred a net loss of
P500,000. In 2008, the partners dissolved the partnership. The proceeds of the sale of partnership
assets were insufficient to settle its obligation. After liquidation, the partnership had an unpaid
liability ofP300,000.

In 2007, how much is the share of 0, a limited partner, in the net loss of P500,000?

12. Stating briefly the thesis to support your answer to each of the following cases, will the death of a
partner terminate the partnership?
13. Pauline, Patricia and Priscilla formed a business partnership for the purpose of engaging in neon
advertising for a term of five (5) years. Pauline subsequently assigned to Philip her interest in the
partnership. When Patricia and Priscilla learned of the assignment, they decided to dissolve the
partnership before the expiration of its term as they had an unproductive business relationship
with Philip in the past. On the other hand, unaware of the move of Patricia and Priscilla but
sensing their negative reaction to his acquisition of Pauline’s interest, Philip simultaneously
petitioned for the dissolution of the partnership.

1. Is the dissolution done by Patricia and Priscilla without the consent of Pauline or Philip
valid? Explain.

2. Does Philip have any right to petition for the dissolution of the partnership before the
expiration of its specified term? Explain.

14. A partner cannot demand the return of his share (contribution) during the existence of a
partnership. Do you agree? Explain your answer.