BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference

ADBC BSA3A

Chapter 1 - Articles of partnership must not be kept secret

among members (secrecy not directed to 3 rd
PARTNESHIP (1767) part, but to partners), otherwise
- A contract wherein two or more persons bind o No legal personality
themselves to contribute money, property, or o Governed as co-ownership
industry to a common fund, with the intention
ESSENTIAL CHARACTERISTICS
of dividing the profits among themselves.
(BUSINESS PARTNERSHIP) 1. Consensual
- Can also be formed to exercise a profession - Perfected by mere consent
(PROFESSIONAL PARTNERSHIP) - 2 or more parties agree to form
- Geared towards: PROFIT GENERATION - Exceptions:
i. When real property is contributed:
SEPARATE JURIDICAL PERSONALITY (1768)
 Agreement shall be executed
- Entity theory in public instrument (Statute
- A partnership is separate and distinct from of Fraud – public instrument to
each partner be enforceable)
- It may:  Inventory of the property or
o Acquire and possess property of all lease attached to the
kinds agreement (Required under
o Incur obligations Statue of Fraud; registry of
o Bring civil and criminal actions (in deeds annotation)
conformity with laws and regulations of PUBLIC INVENTORY EFFECT OF ABSENCE OF
organization) INSTRUMEN
REQUIREMENTS
T

ELEMENTS X X VOID
/ X VOID
1. Meeting of minds (perfected by mere consent) VALID (either party may compel
2. Form a common fund execution of public instrument
so it may be registered in the
3. Intention the profits and losses will be divided X /
registry of property,
among partners nonetheless, partnership
agreement may be enforced)
ESSENTIAL FEATURES
/ / VALID
1. Valid contract ii. Statute of fraud so require to be
2. Mutual contribution of money, property, or complied
industry to a common fund - Principle stating that there
3. Lawful object, purpose and parties must have are agreements that should
legal capacity to enter the contract (1670) be in writing, otherwise
4. Primary purpose: obtain profits and divide unenforceable
among partners iii. Capital contribution is P3000 or
more:
 Should be registered with SEC
 Should be in writing
Additional info:
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

2. Commutative MUTUAL AGENCY

- There is a burden
- Without contractual stipulation, partners are
- Contribution of 1 is almost equivalent
to the contribution of another (ex. considered as agents and whatever anyone of
them may do alone shall bind the partnership
Partner A = 1000, Partner B = car, Car =
1000) (1803, 1818)
- Partners can dispose of partnership property
3. Principal
- No more need for an anteceded even in partnership name (1819)
- Admission of one, admission of all (1820)
(existing) contract for life of partnership
to ensue - Notice to one is notice of all (1821)
- Fault of one is fault of all (1822)
- Contract in itself
4. Bilateral - Unlimited liability (esp capitalist partners)
- Multiplicity of parties involved  Liable pro-rate with properties and
5. Onerous liabilities, after partnership’s assets are
- Something is expected in return exhausted (1816)
- Opposite of Gratuitous (nothing is  Industrial partners are liable to 3 rd party but
expected) can seek reimbursement from capitalist
- If one party contributes, the others - Stipulation against personal liability of
should too partners for partnership debts is void except
6. Nominate among them exhausted (1817)
- Has name of its own “Contract of - All partners are liable solidarily w/
partnership) partnership for everything chargeable to it
- Govern by rules of civil code when caused by the wrongful act or omission
7. Preparatory of any partner acting in the ordinary course of
- Preparatory to operation and to earn business or with authority from the other
profit partner and for partner's act or
misapplication of properties (1824)
CONCEPTS - Newly admitted partner is also liable for
obligations arising before his admission but
1. Contractual in nature (1767, 1784)
out of property share (1826)
2. Entity Theory – separate juridical personality
- Partnership creditors are those of each
(1768)
partner as regards the partnership property
3. Delectus Personae – not forced to associate
(1827)
with someone you don’t like
- Upon dissolution, partners shall contribute
- Assignment of partner of his share does
amounts to satisfy partnership’s liabilities
not make assignee a partner
(1839)
(SUBPARTNER; not a partner and not
entitled to any rights) (1804, 1813)
- Existence of partnership is closely tied-up
to contractual relationship of partners
4. Mutual Agency – every partner Is an agent of
partnership (1803)
 BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

PARTNERSHI CO- CORPORATI by SEC heirs

of Tan Eng
P OWNERSHIP ON Kee v.
Created by a CA, G.R. No.
contract, by 126881,
mere Created by law
Creation October
agreement of
3, 2000
the
parties
Has a juridical Has a juridical
personality personality
Juridical separate and separate and
None
personality distinct from distinct from PARTNERSHIP JOINT VENTURE
that of each that of each Informal partnership, no
partner stockholder Separate juridical
firm name and no legal
Common personality
personality
enjoyment of a
thing or right 50 years Participating merchants
Depends on AOI maximum, can transact business
extendible to Mutual Agency
Duration/ Term of under own name
Realization of not more than
Purpose
profits
existence= No 50 years in any (individually liable)
limitation 10 years one instance Continuing business of Usually limited to single
maximum Disposal (Now various transactions of transaction
Does not indefinite)
presuppose
certain kind
operation of profit Under PH law, form of
Partner may Stockholder partnership which has for
not dispose of has a right to its object specific
Transferab his individual
Co-owner may
transfer shares undertaking
ility of interest unless without Corporation cannot enter Corporation can engage in
freely do so
interest agreed prior consent
such such
upon by all of other
partners stockholders
Mutual
Agency every Management WEAKNESSES OF PARTNERSHIP
In absence of is vested with
Power to partner may
stipulation to the right 1. Partners are co-owners of partnership’s properties
act with bind
contrary, a Co- of
3rd partnership Representatio and enjoy personal possession (1811)
owner cannot
Persons (each partner represent n 2. Partners can dispose real property under
is agent of (BOD & BOT)
partnership partnership name (1819)
Death of 3. Causes of Dissolution
partner Death does not
Effect of
necessarily
a. Change in relationship of partners, such as
results in
death when one chooses to stop being a part (1828,
dissolution of dissolve such
partnership 1830)
Can only be
dissolved
b. Expulsion of partner dissolves partnership
May be dissolved at any time by the (1830)
with the
will of any or all the
Dissolution consent of c. Loss of thing promised to be contributed
partners or co-owners
the state or
(1830)
of
incorporators d. Death, insolvency, or civil interdiction of
Commenc From date of partner (1830)
e ment of From issuance of
juridical execution of None certification
personali contract of
ty incorporation
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

Exception: Articles of partnership stipulate for - If dissolved by a judicial decree, profits shall be
the continuance upon death of any partners confiscated in favor of State, without prejudice
(SEC Opinion, April 28, 1994) to the provisions of Penal Code governing
- There is continuity of personality of confiscation of the instruments and effects of
partnership as there exists a “partnership crime
at will” - EFFECTS:
e. Petition by partner that a partner is/has (1831)  Contract is void an initio (from the
i. Declared insane beginning) and partnership never existed
ii. Become incapable of performing his part in the eyes of the law (1409)
iii. Guilty of conduct affecting prejudicially  Profits shall be confiscated in favor of govt
the partnership business (1770)
iv. Willfully committed breach of partnership  Instruments or tools and proceeds of crime
agreement shall also be forfeited in favor of govt
f. Petition by partner that the partnership (1770)
business can only be carried at a loss; or other  Contributions of partners shall not be
equitable reasons confiscated unless they fall under no. 3
(1411, 1412)
PARTNERSHIP GENERAL RULE
- Judicial decree is not necessary to dissolve
- Persons who are not partners as between unlawful partnership
themselves, cannot be partners are to third
EFFECT OF PARTIAL ILLEGALITY
persons (1769)
 Except: Partnership by Estoppel (1825) 1. Part legal and part illegal; an account of that
which is legal may be had
OTHER RULES TO DETERMINE PARTNERSHIP’S
2. Without the knowledge or participation of
EXISTENCE (1769)
partners, firm’s profits in lawful business have
1. Co- ownership or co-possession cannot be been increased by wrongful acts, the innocent
established as partnership partners are not precluded as against the guilty
2. Sharing of gross returns does not establish a partners from recovering their share of profit
partnership
CLASSIFICATION OF PARTNERSHIP
3. Receipt by a person of a share of profit of business
is prima facie (first impression) evidence that he is SUBJECT MATTER
a partner, unless such payments were for: Universal Partnership Particular Partnership
- Debt by installments Of all present property: Has for its objects
- Wages or rent - Property which - Determinate things
belonged to each of - Use and fruits
- Annuity
partners at the time of - Specific undertaking
- Interest on loan
constitution of - Exercise of profession
- Consideration for sale of goodwill by partnership or vocation
installments - Profits which they may
acquire from property

Of profits:
UNLAWFUL PARTNERSHIP - All partners may acquire
by their industry or work
during existence of
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

partnership

Note: Persons prohibited

from giving donations or
advantage to each other
cannot enter in such
(1782)
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

LIABILITY OF PARTNERS
General Partnership Limited Partnership
- General partners are - 1 or more general
liable pro rate partner
- Subsidiarily and - 1 or more limited
sometimes solidarily partners, not being
with their separate personally liable for
property for obligations of
partnership debts partnership

DURATION
Partnership with a Fixed
YEHEY
Partnership at Will
Term
- No time is specified
- Not formed for
- Term is fixed or agreed
upon
NAHUMAN NA
particular undertaking - Formed for a particular
or venture which may
be terminated anytime
by mutual agreement
undertaking
NIMO ANG
LEGALITY OF EXISTENCE
CHAPTER 1!
De Jure Partnership De Facto Partnership
- Complied with all legal - Failed to comply all
requirements for legal requirements MAGCHAPTER 2
establishment

PURPOSE
NAKA HAWDA
Commercial or Trading Professional or Non-
Partnership
- Transaction of
business
trading Partnership
- Exercise of a profession OY og oo wala jud niy pulos na part HAHAHA pero gibasa

nimo gibasa man gani sad nimo ni?

BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

Chapter 2 public as a partner

Takes active part but is not known
WHO MAY BE PARTNERS? Secret
to be a partner
Does not take active part but is
- Any person capacitated to contract, except: Silent
known to be a partner
 Persons prohibited from giving donation and Does not take active part and is not
Dormant
advantage to each other cannot enter universal known
partnership (1782)
 Persons suffering from civil interdiction
GENERAL RIGHTS AND OBLIGATIONS OF
 Persons who cannot give consent to contract
PARTNERS (summary)
i. Minors
1. Faithfully give contribution
ii. Insane persons
2. Industrial partner can’t engage in
iii. Deaf-mutes who don’t know how to write
another business
3. Capitalist partner cannot engage any
endeavor that will compete against the
KINDS OF partnership
PARTNERS 4. As far as 3rd person is concerned, every
Contributes money or property
partner is liable (wala siyay pake sa
Capitalist Issue: when to deliver his promised
contribution types sa partner)
Contributes only industry or 5. Mutual agency, everyone can manage
personal service but if managing partner is appointed,
Industrial
Issue: does he have to be full time? he will manage the affairs of
Contribute 100% of effort? partnership
Liability to 3rd persons extends to
General
his separate property OBLIGATIONS OF PARTNERS TO ONE ANOTHER
Liability to 3rd persons limited to his
Limited
capital contribution 1. Promised Contribution
Managing Manages the affairs or business - Obligation with respect to contribution of
Takes charge of winding up property
Liquidating
partnership affairs upon dissolution  To contribute at the beginning of
Not really a partner by liable as a
Partners by partnership or at stipulated time the
partner for the protection of
Estoppel money, property, or industry which he
innocent 3rd persons
Continues the business after it has may have promised to contribute (1786)
been dissolved by reason of:  To answer for eviction, in case of the
- Admission of new partnership is deprived of determinate
Continuing
- Death property contributed (1786)
Partner
- Retirement  To answer the fruits of the property
- Expulsion
contributed of which he delayed, from
date they should have been contributed up
Remains after partnership has been
Surviving Partner to time of actual delivery (1786)
dissolved by death of any partner
Not a member of partnership who
In case of delay during delivery,
contracts with a partner with
Subpartner partner is liable to partnership and required
reference to latter’s share in
partnership to deliver fruits, accessions, additions.
Ostensible Takes active part and known to
BUSINESS LAW (ACFR 3145) lecture video
ADBC BSA3A
No demand, there is no delay
(Demand is unnecessary in partnership)
Unless 1 law states so, 2 time is of
essence, 3 demand is necessary
 To preserve said property with diligence of
a good father of a family (1163)
 To indemnify partnership for any damage
caused by retention
- Delivery of a thing as contribution
automatically makes the partners as debtors
and the partnership as the creditor which has
the right to collect
EFFECT OF FAILURE TO CONTRIBUTE PROPERTY
PROMISED
Partner becomes ipso jure (by the law itself)
a debtor of partnership even w/o any
demand (1169)
Remedy of other partner is not rescission but
specific performance with damages from defaulting
partner (1788)
OBLIGATION W/ RESPECT TO CONTRIBUTION OF
MONEY AND MONEY CONVERTED TO PERSONAL USE:
a. Contribute on the date fixed the amount he
has undertaken to contribute to the
partnership
b. Reimburse any amount he may have taken
from the partnership
c. Pay for the agreed or legal interest if he fails
to pay on time or in case he takes any
amount from common fund and converts to
personal use
d. Indemnify the partnership for the damages
caused to it by delayed contribution or
conversion to personal benefits (1788)
Warranty against hidden defect
Warranty against eviction
video conference ART # or reference
- Warranties attributable to contributor of
property (ex. sale – seller is contributor)
- When partner contributes, he warrants that
aside from contribution, the property belongs to him, so
the property is avoided from eviction or hidden defects
2. Fiduciary Duty
- One entered into and to be maintained on the
basis of trust and confidence
- Partner must observe the utmost good faith,
fairness, and integrity in his dealings with the
others
 Cannot use partnership assets for own
benefit
 Cannot carry on business for his private
advantage
 Cannot take any profit clandestinely
 Cannot obtain for himself that he should
have obtained for the partnership (ex.
Business opportunity)
 Cannot carry on another business in
competition
 Cannot avail knowledge or properly
regarded as the property of partnership
- INDUSTRIAL PARTNER
- cannot engage in business for himself
unless partnership permits him to do so
- Consequences:
 capitalist partners may exclude
him from the firm
 capitalist partners avail
themselves the benefits which
the former obtained in violation
 capitalist partners have right to
file an action for damages
- CAPITALIST PARTNER
- Cannot engage any operation which is
of the same kind of business the
partnership is engaged, unless there is
stipulation to contrary
- Consequences:
BUSINESS LAW (ACFR 3145)
ADBC BSA3A
 He may be required to bring
profits derived from the other
business to the common fund
and personally bear the losses
 He may be ousted from
partnership
OBLIGATION WITH RESPECT TO CONTRIBUTION TO
PARTNERSHIP CAPITAL:
a. Contribute equal shares unless there is
stipulation
b. Capitalist must contribute additional capital in
case of imminent loss, otherwise, refusal to do
so shall create an obligation on his part to sell his
interest to other partners
- Requisites:
 Imminent loss
 Majority of capitalist partners believe
that additional contribution would save
the business
 Capitalist partner refuses to contribute
(not due to financial inability)
 No agreement to contrary
OBLIGATION OF MANAGING PARTNERS WHO COLLECTS
DEBT FROM PERSON WHO ALSO OWED THE
PARTNERSHIP (1792)
a. Apply sum collected to 2 credits in proportion
to their amounts
b. If he received it for the account of partnership,
the whole sum shall be applied to partnership
credit
- Requisites
 At least 2 debts, one where the
collecting partner is creditor and the
other, where partnership is creditor
 Both debts are demandable
 Partner who collects is authorized to
manage
OBLIGATION OF PARTNER WHO RECEIVES SHARE OF
PARTNERSHIP CREDIT
lecture video video conference ART # or reference
a. Obliged to bring partnership capital what he has
received even though he may have given
receipt for his share only (1793)
- Requisites
 Partner has received in whole or in part,
his share of partnership credit
 Other partners have not collected their
shares
 Partnership debtor has become
insolvent
BEARING THE RISK OF LOSS OF THINGS CONTRIBUTED
THINGS RISK IS BORNE BY:
Specific and Not fungible and only the PARTNER
determinate use is contributed
things Ownership is transferred PARTNER
Fungible things (consumable) PARTNERSHIP
Things contributed to be sold PARTNERSHIP
Things brought and appraised in inventory PARTNERSHIP
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES
a. With agreement
i. Share of capitalist partner is in proportion
to his capital contribution
ii. Share of industrial is not fixed- as may be
just and equitable under the circumstances
b. Without agreement
i. If sharing of profits is stipulated – apply to
sharing of losses
ii. If no profit sharing is stipulated – losses
shall be borne according to capital
contribution
iii. Purely industrial partner is not liable for
losses (1799)
A stipulation which excludes one or more partners from
any share in the profits and losses is void.
- Stipulation exempting a partner from losses
should be allowed
- As far as third persons are concerned, any
stipulation may be properly declared void.
BUSINESS LAW (ACFR 3145) lecture video
ADBC BSA3A
RIGHTS AND OBLIGATIONS WITH RESPECT TO
MANAGEMENT
1. Partner is appointed manager in the articles of
partnership = Power of managing partner is
irrevocable without just or lawful cause; except:
- When in bad faith
- Vote of partners representing
controlling interest necessary to revoke
power
2. Partner is appointed manager after constitution
of partnership = Power is revocable any time for
any cause.
3. 2 or more persons entrusted with the
management without specification of duties or
stipulation that each shall not act w/o other’s
consent.
- Each may execute all acts of
administration
- In case of opposition, decision of
majority shall prevail
- In case of tie, decision of partners
owning controlling interest shall prevail
4. Manner of management is not agreed upon
a. All partners are agents
b. Unanimous consent is required for
alteration of immovable property
c. If refusal of partner is manifestly
prejudicial to interest of partnership,
court’s intervention may be sought
OTHER RIGHTS AND OBLIGATIONS OF PARTNERS
1. Sub partnership
2. Inspect and copy partnership books anytime
3. Formal account as to partnership affairs
i. If he is wrongfully excluded from business
or possession of its property by co-
partners
ii. If right exists under terms of agreement
iii. As provided under Art 1807
iv. Whenever other circumstances render it
just and reasonable
video conference ART # or reference
4. Render on demand true and full information
affecting partnership
5. Account to the partnership as fiduciary
PROPERTY RIGHTS OF A PARTNER
a. His rights in specific partnership property
1. Partner has equal right to possession
which is not assignable and such right is
limited to the share of what remains
after debts are paid
b. His interest in the partnership
c. His rights to participate in management (1810)
OBLIGATION OF PARTNERS W/ REGARD TO 3RD PERSONS
1. Every partnership shall operate under firm name
 Names included are liable as partners
2. All partners shall be liable for contractual
obligations of partnership’s property after assets
have been exhausted: a. Pro rata b. Subsidiary
3. Admission or representation made by any partner
is evidence against partnership
4. Notice to one, notice to all. Except in case of fraud:
 Knowledge of partner acting in the particular
matter, acquired while a partner
 Knowledge of partner acting in the particular
matter then present to his mind
 Knowledge of any other partner who
reasonably could and should have
communicated it to acting partner
5. Partners and the partnership are solidary liable to
3rd persons for partner’s breach of trust
6. Liability of incoming partner is limited to:
(1) his share in property for existing obligations,
(2) his separate property for subsequent
obligations
7. Creditors of partnership preferred in partnership
property and may attach partner’s share in
partnership assets
8. Every partner is an agent of partnership
POWER OF PARTNER AS AGENT OF PARTNERSHIP
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

Every partner is an agent and may execute acts with knowledge of lack of
authority
binding effect even if he has no authority 1 or more or Equitable interest
all names of
Except: when 3rd person has knowledge of lack of partners Partnership
DOES
Or 3rd person name
authority in trust for
partnership
WALAY SUMPAY SA
1. Act w/c is not apparently for the carrying of business Name of all Name of all NOTES NI SIR
DOES
in the usual way partners partners HUHUHU FOR
FURTHER RESEARCH

2. Acts of strict dominion or ownership:

3. Assign partnership property in trust for creditors PARTNER BY ESTOPPEL— by words or conduct, he does
any of the ff:
4. Dispose of good-will of business
1. Directly represents himself to anyone as a
5. Do an act w/c would make it impossible to carry on partner in an existing partnership or in a non-
ordinary business of partnership existing partnership
2. Indirectly represents himself by consenting to
6. Confess a judgement
another representing him as a partner in an
7. Enter into compromise concerning a partnership existing partnership or in a non-existing
claim or liability partnership

8. Submit partnership claim or liability to arbitration ELEMENTS TO ESTABLISH LIABILITY AS A PARTNER ON

GROUND OF ESTOPPEL:
9. Renounce claim of partnership
1. Defendant represented himself as
partner/represented by others as such and not
EFFECTS OF CONVEYANCE OF REAL PROPERTY denied/refuted by defendant
BELONGING TO PARTNERSHIP 2. Plaintiff relied on such representation
3. Statement of defendant not refuted
TITLE CONVEYANCE CONVEYANCE EFFECT
PASSES TITLE
partnership can LIABILITIES IN ESTOPPEL (WALA KO KASABOT SA NOTES
recover if:
1. Conveyance was NI SIR ANI SO AKO RA GICOPY PASTE HEKHEK)
not in the usual
Partnership Partnership
Name Name
DOES way of business, or  All partners consented to representation
2. Buyer had
knowledge of lack Partnership is liable
of authority
 No existing partnership & all those represented
only equitable consented;
interest, unless:
1. Conveyance was  Not all partners of existing partnership consents
not in the usual way to representation Person who represented
Partnership
Partner’s name DOES NOT of business, or
Name
2. Buyer had himself & all those who made representation
knowledge of lack of
authority
liable pro-rata/jointly
 No existing partnership & not all represented
Name of 1 or Name of 1 or DOES partnership can
more partners more partners in recover if: consented; None of partners in existing
title 1. Conveyance was partnership consented Person who represented
not in the usual way
of business, or
2. Buyer had
BUSINESS LAW (ACFR 3145) lecture video video conference ART # or reference
ADBC BSA3A

himself liable & those who made/consented to

representation separately liable

ASSIGNMENT OF INTEREST IN PARTNERSHIP

Assignment is subject to three (3) conditions:

 made in good faith

 for fair consideration
 after a fair and complete disclosure of all
important information as to its value

RIGHTS OF AN ASSIGNEE:

1. Get whatever assignor-partner would have

obtained
2. Avail usual remedies in case of fraud in the
management
3. Ask for annulment of contract of assignment if
he was induced to join through any of the vices
of consent
4. Demand an accounting (only in case of
dissolution)