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Business Laws and Regulation Management

(Partnership Law)
Final Examinations 2021

Name: Antao, Nur Jihad

Course & Year: BSA II
Schedule: MW 6:30-8:00 pm

Instructions: Use and edit this file to answer the second part of your final examination; submit the
same file (only this file –MS Word) once finished not later than June 30, 2021, 9AM.

Start here! By
1. Nature of partnership

 By the contract of partnership two or more persons bind themselves to

contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves. Two or more persons
may also form a partnership for the exercise of a profession.

Partnership firm involves two or more people, who join together to earn
profits. Accounting for partnership firms involves preparing and
maintaining the full set of accounts for the firm where all income,
expenses, partners contribution, drawings etc are recorded.

Two or more persons may also form a partnership for the exercises of a
profession. (Art. 1767) It is both:

A contract and

A business organization

It is a judicial entity which has a personality separate and distinct from that
of each of the partners. It begins the moment of the execution of contracts,
unless it is otherwise stipulated.

2. Distinguish corporation from a partnership

 A partnership is different from a corporation in many ways. First, there is
no time limit for the existence of the partnership as this depends on the
agreement of the parties. On the other hand, a corporation can exist for a
period not exceeding fifty (50) years. Second, as to the beginning of
juridical personality, a partnership becomes a juridical person from the
time the contract begins while in a corporation, it only becomes a juridical
person upon registration with the Securities & Exchange Commission
(SEC). Third, although a partner may transfer his interest in a partnership
to another, the transferee does not automatically become a partner unless
all the other partners give their consent. However, in corporations, when
the shares of stock are transferred to another, the transferee becomes a
stockholder of the corporation. Fourth, as to liability to third
persons, partners may be held liable with their private and personal
property while in corporations, the stockholders are generally liable only to
the extent of their subscribed capital stock. Lastly, a partnership may be
dissolved due to the insolvency, civil interdiction, death, insanity or
retirement of any of the partners while such grounds do not dissolve a
corporation.
Business Laws and Regulation Management
(Partnership Law)
Final Examinations 2021
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3. Characteristics of a partnership
The contract of partnership is:
 Consensual - because it is perfected by mere consent, that is, upon the
express or implied agreement of two or more persons;
 Nominate - because it has a special name or designation in our law;
 Bilateral - because it is entered into by two or more persons and the rights
and obligations arising there from are always reciprocal;
 Onerous - because each of the parties aspires to procure for himself a
benefit through the giving of something;
 Commutative - because the undertaking of each of the partners is
considered as the equivalent of that of the others;
 Principal - because it does not depend for its existence or validity upon
some other contracts; and
 Preparatory - because it is entered into as a means to an end, i.e. to
engage in business or specific venture for the realization of profits with the
view of dividing them among the contracting parties.

4. Essential requisites of a partnership

 Essential requisites of a partnership
The essential requisites of a partnership contract are:
a. There must be a valid contract;
b. The parties must have legal capacity to enter into the contract;
c. There must be a mutual contribution of money, property, or industry to a
common fund;
d. The object must be lawful; and
e. The primary purpose must be to obtain profits and to divide the same
among the parties.

5. How is the contract of partnership formed?

 The relation is evidenced by the terms of the contract which may be oral
or written, express or implied from the acts and declarations of the parties,
subject to the provisions of Articles 1771 to 1773 and to the Statute of
Frauds.

6. Who may become partners?

 Before there can be a valid contract of partnership, it is essential that the
contracting parties have the necessary legal capacity to enter into the
contract. As a general rule, any person may be a partner who is capable
of entering into contractual relations. Consequently, any person who
cannot give consent to a contract cannot be a partner. Hence, the
following cannot give their consent to a contract of partnership:
 Unemancipated minors;
 Insane or demented persons;
 Deaf-mutes who do not know how to write;
 Persons who are suffering from civil interdiction; and
 Incompetents who are under guardianship.

7. Kinds of partnership
1. General partnership A general partnership is the most basic form of
partnership. It does not require forming a business entity with the state. 

Business Laws and Regulation Management

(Partnership Law)
Final Examinations 2021
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2. Limited partnership Limited partnerships (LPs) are formal business entities

authorized by the state. They have at least one general partner who is fully
responsible for the business and one or more limited partners who provide
money but do not actively manage the business.
3. Limited liability partnership A limited liability partnership (LLP) operates like a
general partnership, with all partners actively managing the business, but it
limits their liability for one another's actions.
4. Limited liability limited partnership A limited liability limited partnership (LLLP)
is a newer type of partnership available in some states. It operates like an LP,
with at least one general partner who manages the business, but the LLLP
limits the general partner's liability so all partners have liability protection.

8. Explain exhaustively the rules on division of profit and loss in partnership

 Profits or losses, made by a firm should be divided among its partners in
accordance with the provision of their Partnership Deed. However, if there
is no written or oral agreement among the partners, the Law prescribes
that profits and losses should be shared equally by the partners.

9. Causes of partnership dissolution

1. Without violating the agreement:

     a. Termination of the definite term or specific undertaking
     b. Express will of any partner in good faith, when there is no definite term and
no specified undertaking
     c. Express will of all partners (except those who have assigned their interests
or suffered them to be charged for their separate debts) either before or after the
termination of any specified term or particular undertaking
d. Expulsion of any partner in good faith of a member
2. Violation of the agreement
3. Unlawfulness of the business
4. Loss
a. Specific thing promised as contribution is lost or perished before delivery
    b. Loss of a specific thing contributed before or after delivery, if only the use of
such is contributed
5. Death of any of the partners
6. Insolvency of any partner or of the partnership
7. Civil interdiction of any partner 8. By decree of court under Art. 1831, NCC
a. a partner has been declared insane or of unsound mind

  b. a partner becomes in any other way incapable of performing his part of the
partnership contract

     c. a partner has been guilty of such conduct as tends to affect prejudicially the
carrying on of the business
     d. a partner wilfully or persistently commits a breach of the partnership agreement
     e. the business of the partnership can only be carried on at a loss
     f. other circumstances render a dissolution equitable

10. Grounds for the rescission of partnership contract

Business Laws and Regulation Management
(Partnership Law)
Final Examinations 2021
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 Grounds for the rescission of partnership contract

Ground for rescission
Fraud or Misinterpretation to enter into the partnership contract

Rights of partners who was induced by fraud or misinterpretation.

Right of lien o, or retention of, the surplus of the partnership property, after
the satisfaction of partnership liabilities for any sum of money paid by him
to the partnership by way of capital or advances.
Right of subrogation in place of partnership creditors for any payment
made by him for partnership liabilities.
Right of indemnification from the person guilty of fraud or misinterpretation
against all debts of the partnership.

11. Define limited partnership

A limited partnership (LP) is where two or more people own a business, but there
are two classes of partners: general partners (who own and operate the
business), and limited partners (who invest their money or property in the
business, do not have the right to make decisions regarding the operation of the
business, and do not have personal liability for business debts). The limited
partnership was designed to allow limited partners to invest in the business, but
not have the drawback of personal liability.

12. Kinds of partners

There are many types of partners, the common types of which are.
1.General partner
2. Industrial partner (one who furnishes labor or industry)
3. Capitalist partner (one who give capital)
4. Limited partner (one who is liable only to the extent of his contribution )

13. True or False. An industrial partner can engage in business for himself unless the partnership
expressly prohibits him to do so. TRUE
14. True or False. A capitalist partner cannot engage in business for himself unless the partnership
expressly permits him to do so. TRUE
***NOTHING FOLLOWS***

Business Laws and Regulation Management

(Partnership Law)
Final Examinations 2021