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Chapter 2 - Obligations of Partners

Chapter 2 - Obligations of Partners

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Categories:Types, Business/Law
Published by: Unica Amor Mananquil on Mar 06, 2011
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12/10/2014

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Prelims Reviewer
Abad, Bagang & MananquilCHAPTER 2:OBLIGATIONS OF THE PARTNERSSECTION 1: Obligations of the Partners among Themselves
RELATIONS CREATED BY A CONTRACT OF PARTNERSHIP1.
 
Among the partners themselves2.
 
The partners with the partnership3.
 
The partnership with third persons4.
 
The partners with third persons*The partnership relationship is essentially on of mutual trust and confidence, the law imposes upon the partners highest standardsof integrity and good faith in their dealings with each other.*A partner is both principal and an agent in relation to his co-partners. In a limited partnership, it does not involve the element of trust and confidence, as in the case of general partnership
Art. 1784.A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated
.COMMENCEMENT AND TERM OF PARTNERSHIP-
 
Consensual contract-
 
Its registration in the SEC is not essential to give it juridical personality-
 
The birth and life is predicated on the mutual desire and consent of the partiesFUTURE PARTNERSHIP-
 
Partners may stipulate some other date for the commencement of the partnership-
 
It can be in future time or based on happening of some future contingency-
 
It has no juridical personality at the momentAGREEMENT TO CREATE PARTNERSHIP-
 
This is different from a partnership actually consummated-
 
This is still inchoate
Art. 1785.When a partnership for a fixed term or particular undertaking is continued after the termination of such term orparticular undertaking without any express agreement, the rights and duties of the partners remain the same as they were atsuch termination, so far as is consistent with a partnership at will.
 
A continuation of the business by the partners or such of them as habitually acted therein during the term, without anysettlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership. (n)
 PARTNERSHIP WITH A FIXED TERM-
 
One which the term of its existence has been agreed upon expressly or impliedly.-
 
The expiration of the term fixed or completion of the undertaking will automatically dissolve the partnershipDISSOLUTION OF PARTNERSHIP-
 
One of the partners may dictate a dissolution at will but he must act in good faith-
 
A partnership with fixed term may be terminated prior to the expiration of the termPARTNERSHIP FOR A TERM IMPLIEDLY FIXED-
 
An agreement of the parties may evidence an understanding that the relation should continueuntil the accomplishment of a particular undertaking or certain things have been done or havetaken place
 
 
Prelims Reviewer
Abad, Bagang & MananquilArt. 1786.Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may havecontributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect to the vendee. Heshall also be liable for the fruits thereof from the time they should have been delivered, without the need of any demand. (1681a)
OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF PROPERTY1.
 
To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which hepromised2.
 
To answer for eviction in case the partnership is deprived of the determinate property contributed3.
 
To answer to the partnership for the fruits of the property the contribution of which he delayed4.
 
To preserve the property with diligence of a good father of a family pending delivery5.
 
To indemnify the partnership for any damage caused to it by the retention of the property or by delay in its contributionEFFECT OF FAILURE TO CONTRIBUTE PROPERTY PROMISED-
 
It will make the partner ipso jure a debtor of the partnership even in the absence of any demand-
 
The remedy is not rescission but an action for specific performance with damages and interest from the defaulting partnerLIABILITY OF PARTNER IN CASE OF EVICTION-
 
Eviction shall takes place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor,the vendee (partnership) is deprived of the whole or a part of the thing purchased-
 
Governed by the law on sales (Art. 1547)LIABILITY OF PARTNER FOR FRUITS OF PROPERTY IN CASE OF DELAY-
 
No demand is necessary-
 
From the time the partner ought to deliver up to the time of actual deliveryLIABILITY OF PARTNER FOR FAILURE TO PERFORM SERVICE STIPULATED-
 
Partners are not entitled to charge each other except when there is a stipulation providing otherwise-
 
If a partner neglects or refuses to render service without justifiable cause, which caused loss to the partnership, he may beheld liable
Art. 1787.When the capital or a part thereof which a partner is bound to contribute consists of goods, their appraisal must bemade in the manner prescribed in the contract of partnership, and in the absence of stipulation, it shall be made by expertschosen by the partners, and according to current prices, the subsequent changes thereof being for account of the partnership. (n)
APPRAISAL OF GOODS OR PROPERTY CONTRIBUTED-
 
Appraisal is necessary to determine how much has been contributed by the partners-
 
The appraisal is made by:1.
 
Stipulation2.
 
If there is no stipulation  experts chosen by the partners and according to current prices
Art. 1788.A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest anddamages from the time he should have complied with his obligation.The same rule applies to any amount he may have taken from the partnership coffers, and hisliability shall begin from the time he converted the amount to his own use. (1682)
OBLIGATIONS WITH RESPECT TO CONTRIBUTION OF MONEY (PAR. 1) AND MONEY CONVERTED TOPERSONAL USE (PAR. 2)1.
 
To contribute on the date due2.
 
To reimburse any amount he may have taken for his own use3.
 
To pay the agreed or legal interest, if he fails to pay on time4.
 
To indemnify the partnership for the damages
 
 
Prelims Reviewer
Abad, Bagang & Mananquil
LIABILITY OF GUILTY PARTNER FOR INTEREST AND DAMAGES-
 
It will start from the time when the partner should have made the contribution or the time he converted the money to hisown use and not to the time of the judicial or extra-judicial demandLIABILITY OF PARTNER FOR FAILURE TO RETURN PARTNERSHIP MONEY RECEIVED-
 
Estafa (Art 315 of the RPC)  if he misappropriate partnership money or property received by him for a specific purpose-
 
Mere failure to return is not an act under estafa
Art. 1789.An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he mayhave obtained in violation of this provision, with a right to damages in either case. (n)
INDUSTRIAL PARTNER-
 
The one who contributes his industry, labor, or services to the partnership-
 
He becomes the debtor of the partnership for his work or services-
 
The partnership acquires an exclusive right to avail itself of his industry-
 
Action for specific performance is not available as a remedy because it will amount to involuntary servitudePROHIBITION AGAINST ENGAGING IN BUSINESS1.
 
Industrial Partner
o
 
Absolute prohibition
o
 
Applies whether he would engage in the same business or not
o
 
To prevent any conflict of interest2.
 
Capitalist Partner
o
 
Prohibition only extends to any operation which is of the same kind of business in which the partnership isengagedREMEDIES WHERE INDUSTRIAL PARTNER ENGAGES IN BUSINESS-
 
Exclude him from the firm or avail themselves of the benefits which he may obtained-
 
Right to damages-
 
Mere toleration by the partnership will not exempt the industrial partner from liability
Art. 1790. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the partnership.(n)
EXTENT OF CONTRIBUTION TO PARTNERSHIP CAPITAL-
 
Partner can stipulate the contribution of unequal shares to the common fund-
 
Absence of stipulation, there is a presumption that the contribution is in equal shares
Art. 1791.If there is no agreement to the contrary, in case of an imminent loss of the business of the partnership, any partner whorefuses to contribute an additional share to the capital, except an industrial partner, to save the venture, shall he obliged to sellhis interest to the other partners. (n)
OBLIGATION OF CAPITALIST PARTNER TO CONTRIBUTE ADDITIONAL CAPITALGR: capitalist partner is not bound to contribute more than what he agreed to contributeEXPN: imminent loss of the business-
 
He is under obligation to contribute an additional share to save the venture-
 
If he refuses, he shall be obliged to sell his interest to the other partnersRequisites for application of rule1.
 
Imminent loss of the business2.
 
Majority of the capitalist partners are of the opinion that an additional contribution to thecommon fund would save the business3.
 
The partner refuses deliberately

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