Professional Documents
Culture Documents
Partnership: Characteristics of The Contract of Partnership (C, C, L, I, AS, NP)
Partnership: Characteristics of The Contract of Partnership (C, C, L, I, AS, NP)
persons who are not partners to each other are not partners as to third persons
EXCEPTION:
PARTNERSHIP BY ESTOPPEL
PARTNERSHIP BY ESTOPPEL
IF 2 persons not partners represent themselves as partners to strangers, a
partnership by estoppel results
WHEN 2 persons, who are partners, in connivance with a friend who is not a
partner inform a stranger that said friend is their partner, a partnership by estoppel also
result to the end that the stranger should not be prejudiced
RULE: LAWFUL OBJECT or PURPOSE
a partnership must have LAWFUL OBJECT or PURPOSE, and must be
established for the common benefit or interest of the partners
it must be within the commence of man, possible and not contrary to law,
morals, good customs, public order or public policy
IF a partnership has SEVERAL PURPOSES, one of which is UNLAWFUL, the
partnership can still validly exist so long as the illegal purpose can be separated from
the legal purposes
NO need for JUDICIAL DECREE to dissolve an unlawful partnership
VOID AB INITIO
one of the causes for the dissolution of a partnership is any event which
makes it unlawful for the business of the partnership to be carried on
RULE:
when an UNLAWFUL PARTNERSHIP is dissolved by a judicial decree, the PROFITS
shall be CONFISCATED in FAVOR of the STATE
G. R.
a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
IF the partnership has ALIENS, it CANNOT OWN LANDS, whether public or private or
whether agricultural or commercial EXCEPT through HEREDITARY SUCCESSION
LIMITATIONS ON ACQUISITION
1 AGRICULTURAL LANDS 1024 HECTARES
2 lease of public lands (GRAZING) 2000 HAS.
RULES
1
2
3
4
5
IF
1 ORDINARY PARTNERSHIP
2 PARTNERSHIP BY ETOPPEL
G) AS TO LEGALITY OF EXISTENCE
1 DE JURE PARTNERSHIP
2 DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1 SECRET PARTNERSHIP
2 NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1 COMMERCIAL / TRADING
2 PROFESSIONAL / NON-TRADING
GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their individual properties, after the assets of the
partnership has been exhausted
LIMITED PATNERSHIP
one where at least one partner is a general partner and the others are limited partners
one whose liability is limited only up to the extent of his contribution
a partnership where all the partners are limited partners cannot exist as a limited
partnership
REFUSED REGISTRATION
IF it continuous as such, it will be considered as a general partnership and all the
partners will be general partners
KINDS OF UNIVERSAL PARTNERSHIP
1 PARTNERSHIP OF ALL PRESENT PROPERTY
2 PARTNERSHIP OF ALL PROFITS
PARTICULAR PARTNERSHIP
a particular partnership has for its OBJECT:
1 DETERNMINATE THINGS their use or fruits
2 SPECIFIC UNDERTAKING
3 EXERCISE of a PROFESSION or VOCATION
OBLIGATIONS OF THE PARTNERS
RULE:
a PARTNERSHIP BEGINS from the moment of the EXECUTION of the CONTRACT
* even if contributions have not yet been made the firm already exists, for partnership
is a consensual contract
DURATION OF PARTNERSHIP
UNLIMITED
* MAY BE AGREED UPON
1 EXPRESSLY definite period
2 IMPLIEDLY upon achievement of its purpose
PARTNERSHIP AT WILL
a partnership wherein its continued existence really depends upon the will of the
partners or even on the will of any of them
2 KINDS:
*** an industrial partner can only be a general partner, never a limited partner
MANAGING PARTNER
one who manages actively the firms affairs
SILENT PARTNER
one who does not participate in the management, though he shares in the PROFITS
or LOSSES
LIQUIDATING PARTNER
one who winds up or liquidates the affairs of the firm after it has been dissolved
OSTENSIBLE PARTNER
one whose connection with the firm is public and open
SECRET PARTNER
one whose connection with the firm is concealed or kept secret
DORMANT PARTNER
one who is both a secret (hidden) and silent (not managing) partner
NOMINAL PARTNER
one who is not really a partner BUT who may become liable as such insofar as third
persons are concerned
RULE:
partners shall CONTRIBUTE EQUAL SHARES to the capital of the partnership
* it is permissible to contribute UNEQUAL SHARES IF there is a stipulation to this
effect
* in the absence of proof, the shares are presumed to be equal
CONDITIONS before a capitalist partner is obliged to sell his shares / interest to
the other partners [IL, RC, NA]
1 if there is IMMINENT LOSS of the BUSINESS of the partnership
2 he REFUSES to CONTRIBUTE an ADDITIONAL SHARE to the CAPITAL
3 there is no agreement to the contrary
* INDUSTRIAL PARTNER IS EXEMPTED
REQUISITES:
1 existence of at least 2 debts ---- PARTNERSHIP
---- PARTNER
2 both sums are demandable
3 the collecting partner is the managing partner
* the sum thus collected shall be applied to the two credits in
proportion to their amounts
RULE:
* where a partner receives his share in the partnership credit
CONDITIONS:
1 a partner has received his share in the partnership credit in whole or in part
2 the other partners have not collected their part of the credit
3 the debtor subsequently becomes INSOLVENT
RULE: - the partner shall be obliged to bring to the partnership
capital what he received even though he may have given receipt for
his share only
* DOES NOT APPLY when debt was collected after dissolution of the partnership
RULE:
* every partner is responsible to the partnership for damages suffered by it through his
fault
* he cannot compensate them with the profits and benefits, which he may have
earned for the partnership by his industry
* the courts may equitably lessen his responsibility
FUNGIBLE or DETERIORABLE
FIRM bears the loss for it is evident ownership was transferred
FIRM bears the loss for evidently the firm was intended to be the owner
4
2 the aggrieved partner has not IMPUGNED the distribution within 3 months he
had knowledge
*RULE IF APPOINTMENT OTHER THAN in the ARTICLES of PARTNERSHIP
1 power to act may be REVOKED at ANY TIME with or without just cause
REMOVAL should be done by the controlling interest
2 EXTENT of POWER
as long as he remains manager, he can perform all acts of administration
BUT if others oppose and he persists, he can be removed
*RULE WHEN there are 2 or MORE MANAGERS
CONDITIONS:
1 2 or more partners are managers
2 there is no specification of respective duties
3 there is no stipulation requiring UNANIMITY
SPECIFIC RULES:
1 each may separately execute all acts of administration
UNLIMITED POWER to ADMINISTER
2 IF any of the managers OPPOSE
MAJORITY RULE
IN CASE OF A TIE
- persons owning controlling interest prevail provided they are also managers
* right to oppose is not given to NON-MANAGERS
* OPPOSITION should be done BEFORE the acts produce legal effects insofar as
third persons are concerned
RULE WHEN UNANIMITY is REQUIRED
1 the CONCURRENCE of all shall be necessary for the validity of the acts
2 the ABSENCE or DISABILITY of ANYONE of them CANNOT BE ALLEGED
UNLESS there is imminent danger of grave or irreparable injury to the
partnership
RULE ON DUTY of THIRD PERSONS
third persons are not required to inquire as to whether or not a partner with whom he
transacts has the consent of all the managers
*RULES to be observed when the manner of management has not been agreed
upon:
1 all the partners are considered AGENTS
whatever any one of them may do alone shall not 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 organization or through some other means
5 ALTERATIONS REQUIRE UNANIMITY
- IMMOVABLE partnership property
- BUT if the refusal to consent by the others is prejudicial to the interest of the
partnership
- COURTS INTERVENTION may be sought
RULES on ASSOCIATE of PARTNER
1 every partner may associate another person with him in his share
2 for a partner to have an associate in his share
consent of all the other partners is NOT REQUIRED
3 for the associate to become a partner
ALL MUST CONSENT
RULE:
* a PARTNERS INTEREST in the partnership is his SHARE of the PROFITS and
SURPLUS
IT CAN BE: [A, A, LS]
1 ASSIGNED
2 ATTACHED
3 be subject to LEGAL SUPPORT
*EFFECTS of CONVEYANCE by PARTNER of his INTEREST in the PARTNERSHIP
1 IF he conveys his WHOLE INTEREST
A partnership may still remain
B partnership may be dissolved
* mere conveyance does not dissolve the partnership
2 the ASSIGNEE does not necessarily become a partner
the ASSIGNOR is still the partner, with a right to demand accounting and
settlement
3 the ASSIGNEE CANNOT interfere in the MANAGEMENT or ADMINISTRATION
of the firm
the ASSIGNEE CANNOT also DEMAND [I, A, I]
A INFORMATION
B ACCOUNTING
C INSPECTION of partnership books
*** while a partners INTEREST in the firm may be CHARGED or LEVIED upon, his
INTEREST in a specific firm PROPERTY CANNOT be attached.
RIGHTS of the ASSIGNEE
1 to get whatever profits the assignor-partner would have obtained
2 to avail himself of the usual remedies in case of fraud in the management
3 to ask for ANNULMENT of the contract of assignment IF:
A) he was induced to enter into it through any of the vices of consent
B) he himself was incapacitated to give consent
OR
RULE:
every partnership shall operate under a FIRM NAME
* the firm name may or may not include the name of one or more of the partners
** STRANGERS who include their names in the firm are liable as partners because of
ESTOPPEL, BUT do NOT have the RIGHTS of partners
** IF a LIMITED PARTNER includes his name in the firm name, he has obligations
BUT not the rights of a general partner
RULE on LIABILITY for CONTRACTUAL OBLIGATIONS
* all partners, including industrial ones, shall be liable pro-rata with all their property
and after all the partnership assets have been exhausted
* NOT APPLICABLE for TORTS or CRIMES ----- LOSS
----- INJURY
----- MISAPPROPRIATION
** while an INDUSTRIAL PARTNER is exempted by law from LOSSES as between the
partners, he is NOT EXEMPTED from liability insofar as third persons are concerned
he may recover what he has paid from the CAPITALIST partners
* under the law the liability of the partners is subsidiary and joint NOT principal and
solidary
*RULE on LIABILITY of a PARTNER who has WITHDRAWN
1 a partner who withdraws is not liable for liabilities contracted after he has
withdrawn
2 if his interest has not yet been paid him
his right to the same is that of a mere creditor
** a stipulation exempting liability to third persons is VOID
* any partner may enter into a separate obligation to perform a partnership contract
RULE:
* every partner is an agent of the partnership for the purpose of its business
G.R.- the act of every partner for apparently carrying on in the USUAL WAY the
business of the partnership of which he is member binds the partnership
EXCEPT:
1. if he has NO AUTHORITY
and
2. the person with whom he was dealing with HAS KNOWLEDGE of the fact that he has
no such authority
RULE:
an act of a partner which is not apparently for the carrying on of business of the
partnership in the usual way does not bind the partnership UNLESS authorized by the
other partners
* a partnership is a CONTARCT of MUTUAL AGENCY, each partner acting as a
principal on his own behalf and as an agent for his co-partners or the firm
REQUISITES on WHEN can a partner BIND the partnership
1 expressly or impliedly AUTHORIZED
2 when he acts in BEHALF AND IN THE NAME of the partnership
INSTANCES of IMPLIED AUTHORIZATION
1 when the other partners DO NOT OBJECT, although they have knowledge of the
act
2 when the act is for apparently carrying on in the usual way the business of the
partnership
* this is binding on the firm even if the partner was not really authorized
PROVIDED that the third party is in GOOD FAITH
RULE on UNUSUAL ACTS
one or more but less than all the partners HAVE NO AUTHORITY TO:
[AP, DG, AI, CJ, EC, SA, RC]
1 ASSIGN the PARTNERS PROPERTY
2 DISPOSE of GOODWILL
3 do any other act which would make it impossible to carry on the ordinary
business of the partnership
4 CONFESS a judgment
5 ENTER into a COMPROMISE
6 SUBMIT to ARBITRATION
7 RENOUNCE to CLAIM
*RULES on CONVEYANCE of REAL PROPERTY
1 where title to real property is in the partnership name
any partner may convey title to such property by a conveyance executed in the
partnership name
* PARTNERSHIP MAY RECOVER SUCH PROPERTY
EXCEPT:
1 if the firm is engaged in the buying and selling of land (USUAL
BUSINESS)
2 if property was conveyed to a HOLDER for VALUE and who had NO
KNOWLEDGE of the partners LACK of AUTHORITY
2. where title is in the name of the partnership and partner sold in his OWN NAME
3. where title is in the name of one or more BUT not all the partners
partners in whose name the title is named MAY CONVEY BUT the
PARTNERSHIP may RECOVER such property IF done not in its USUAL BUSINESS
EXCEPT if he had transferred it to a Holder for value
4. when property held in trust by partner
a sale only conveys EQUITABLE INTEREST
5 when title is in the name of all partners
conveyance executed by all partners possess all rights of such property
EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED OWNERSHIP
*RULE on ADMISSION or REPRESENTATION MADE by a PARTNER
an admission by a partner is an admission against the partnersip,under the following
conditions:
1 the admissions must concern partnership affairs
2 must be within the scope of his authority
RESTRICTIONS ON THE RULE:
1 admissions made BEFORE DISSOLUTION are binding only when the partner
has authority to act on the particular matter
2 admissions made AFTER DISSOLUTION are binding only if the admissions were
necessary to WIND UP the business
3 an admission made by a former partner made after he has RETIRED from the
partnership is not evidence against the firm
EFFECT of NOTICE to a PARTNER
notice to a partner is notice to the partnership
*notice to a partner, given while already a partner is a notice to the partnership
PROVIDED it relates to partnership affairs
LOSS OR INJURY
RULE on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY LIABILITY)
* the partnership is solidarily liable with the partner if the wrongful act or omission
1 the partner is acting in the ordinary course of business of the partnership
OR
2 with authority of his co-partners
* innocent partners have right to recover from the guilty partner
* When the firm and other partners not liable:
1 if the wrongful act or omission was NOT DONE
A within scope of partnership business
B with authority of the other co-partners
2 if the act or omission is NOT WRONGFUL
3 if the act or omission, although wrongful did not make the partner concern liable
- DAMNUN ABSQUE INSURIA
4 if the wrongful act or omission was committed after the firm had been dissolved
and the same was not in connection with the process of winding up.
LIABILITY of PARTNERSHIP for MISAPPROPRIATION (SOLIDARY LIABILITY)
1 RECEIVING PARTY MISAPPROPRIATES
2 ANY PARTNER MISAPPPROPRIATES
- money or property in custody of partnership
PARTNER BY ESTOPPEL
5
6
7
8
*** if the cause is not justified or no cause was given, the withdrawing partner is liable
for DAMAGES BUT in no case can he be compelled to remain in the firm
* the insolvency need not be judicially declared, it is enough that the assets be less
than the liabilities
DISSOLUTION by JUDICIAL DECREE WHEN ALOWED:
(I, UM, I-PP, C, PB, BL, OC)
1 partner declared insane in any judicial proceeding or is shown to be of
UNSOUND MIND
2 partner becomes INCAPABLE of performing his part of the partnership contract
3 partner has been guilty of such CONDUCT as tends to affect prejudicially the
business
4 partners PERSISTENT BREACH of agreement
5 the business of the partnership can only be denied on at a loss
6 other circumstances which render dissolution equitable
IN CASE OF PURCHASER of PARTNERS INTEREST
1 after the termination of the specified term or particular undertaking
2 AT ANY TIME, if the partnership was a partnership at will when the interest was
assigned or when the charging ordered was issued
* proof as to the existence of the firm must first be given
* even if a partner has not yet been previously declared insane by the court,
dissolution may be asked, as long as the insanity is duly proved in court
* in a suit for dissolution, the court may appoint a RECEIVER at its discretion
EFFECTS OF DISSOLUTION
RULE:
* when the firm is dissolved, a partner can no longer bind the partnership
* a dissolved partnership still has the personality for the winding up of its affairs
the firm is still allowed to collect previously acquired credits
the firm is still bound to pay of its debts
DISSOLUTION CAUSED by A-I-D
RULE: (STILL BOUND) as to each partners
RULE:
* the INDIVIDUAL PROPERTY of a DECEASED PARTNER shall be liable for all
obligations of the partnership incurred while he was a partner BUT subject to prior
payments of his separate debts
* IF there be a NOVATION of the OLD PARTNERSHIP DEBTS and such novation is
done after one of the partners has retired and without the consent of such partner
said partner cannot be held liable by creditors who made the novation with
knowledge of the firms dissolution
EXTRAJUDUCIAL AND JUDICIAL WINDING-UP
EXTRAJUDICIAL:
1 by the partners who have not wrongfully dissolved the partnership
2 by the legal representative of the last surviving partners
JUDICIAL:
under the control and direction of the court, upon proper cause that is shown to the
court
* profits that will actually enter the firm after dissolution as a consequence of
transactions already made before dissolution are included because they are considered
as profits existing at the time of dissolution
* any other income earned after the time, like interest or dividends on stock owned by
the partners or partnership at the time of dissolution should not be distributed as profits
BUT as merely additional income to the capital
BETTER RIGHTS of INNOCENT PARTNERS
innocent partners have better rights than guilty partners and that the guilty partners
are required to indemnify for the damages caused
2 a partner retires and assigns his rights IF the business is continued without
liquidation of the partnership affairs
3 all but one partner retire without liquidation
4 when all partner assign their right to a person who will assume their debt
5 after wrongful dissolution, remaining partners continue the business without
liquidation
6 when partner expelled and remaining partners continue the business without
liquidation
* liability of third person becoming a partner in the partnership continuing the business
to the creditors of the dissolved partnership shall be satisfied out of the partnership
property ONLY
G.R. when a partner retires, he is entitled what is due him after liquidation BUT no
liquidation is needed if there is already a settlement at the date of dissolution
JURISPRUDENCE
BASTIDA vs. MENZI
* articles of association by which 2 or more persons obligate themselves to place in a
common fund any property, industry, or any of these things, in order to obtain profit,
shall be COMMERCIAL
BORJA vs. ADDISON
* a surviving husband may form a partnership with the heirs of the deceased wife for
the management and control of the community property
BUT in the absence of the formalities prescribed by the Civil Code, knowledge of the
existence of the new partnership or community of property must at least be brought
home to third persons dealing with the surviving husband in regard to the community
real property in order to bind them by the community agreement
KIEL vs. SABERT
* the declarations of one partner, not made in the presence of his co-partner, are not
competent to prove the existence of a partnership between them as against such
partner
* the existence of a partnership cannot be established by general reputation, rumor or
hearsay
EVENGELISTA vs. C.I.R.
* By the contract of partnership 2 or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits
among themselves
ESSENTIAL ELEMENTS of a PARTNERSHIP
1
2
* when our internal Revenue Code includes partnerships among the entities subject
to the tax on corporations, said code which are not necessarily partnerships in the
technical sense of the term
* PARTNERSHIPS includes a SYNDICATE, GROUP, POOL, JOINT VENTURE, or
other unincorporated organization, through or by the means of which any business,
financial operation, or venture is carried on
* a joint venture need not be undertaken in any of the standard forms,
or in conformity with the usual requirements of the law on partnerships, in order that one
could be deemed constituted for purposes of the TAX on corporations
PASCUAL vs. C.I.R.
* co-ownership or co-possession does not itself establish a partnership, whether such
co-owners or co-possessors do or do not share any profits made by the use of the
property
* the sharing of gross returns does not itself establish a partnership, within the
persons sharing them have a joint or common right or interest in any property from
which the returns are derived
* aside from the circumstances of profit, the presence of other elements constituting
partnership is necessary, such as:
1 the clear intent to form a partnership
2 the existence of a juridical personality different from that of the individual partners
AND
3 the freedom to transfer or assign any interest in the property by one with the
consent of the others
* an isolated transaction whereby 2 or more persons contribute funds to buy certain
real estate for profit in the absence of other circumstances showing a contrary intention
cannot be considered a partnership
* persons who contribute property or funds for a common enterprise and agree to
share the gross returns of that enterprise in proportion to their contribution, BUT who
severally retain the title to their respective contribution, are not thereby rendered
partners
they have no common stock or capital and no community of interest as principal
proprietors in the business itself which the proceeds derived
* the subsequent marriage of the partners could not operate to dissolve the
partnership because it is not one of the causes provided for dissolution by law with
regards to limited partnerships
* partnership has distinct and separate personality from that of its partners
* a husband and wife may not enter into a contract of general co-partnership/
UNIVERSAL partnership
ACOAD vs. MABATO
* a partnership may be constituted in any form EXCEPT where immovable property or
real rights are contributed thereto, in which case a public instrument shall be necessary
* A CONTRACT of PARTNERSHIP is VOID
whenever immovable property is contributed thereto, if inventory of said
property is not made, signed by the parties and attached to the public instrument
EVANGELISTA vs. ABAD SANTOS
* an INDUSTRIAL PARTNER cannot engage in BUSINESS FOR HIMSELF, UNLESS
the partnership expressly permits him to do so
IF HE SHOULD DO SO, the capitalist partners may either:
1 EXCLUDE him from the firm
OR
2 AVAIL themselves of the benefits which he may have obtained in violation of this
provision
with a right to DAMAGES in either case
* the prohibition against an industrial partner engaging in business for himself seeks
to prevent any conflict of interest between the industrial partner and the partnership and
to ensure faithful compliance by said partner with his prostation