Northern CPAR: Business Laws – Law on Partnership

NORTHERN CPA REVIEW

4th Floor Pelizloy Centrum, Lower Session Road, Baguio City
Contact Numbers: 09294891758; 09272128204
E-mail: ncpar@yahoo.com
ATTY. ANDRIX DOMINGO, CPA

BUSINESS LAWS
The Law on Partnership
Partnership
→ A contract whereby 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.
What are the relations created by a contract of partnership?
1. Relations among the partners themselves;
2. Relations of the partners with the partnership;
3. Relations of the partnership with third persons with whom it contracts; and
4. Relations of the partners with such third persons.
Characteristics of a contract of partnership
1. Consensual
2. Principal
3. Bilateral or multilateral
4. Nominate
5. Preparatory
6. Onerous
7. Commutative
Essential requisite of partnership
1. There must be a valid contract
2. There must be a mutual contribution of money, property or industry to a common fund
3. It must have a lawful object or purpose
4. The partnership must be established for the common benefit or interest of the partners
What is the legal effect of the receipt by a person of a share of the profits of a business.

Such receipt is prima facie evidence that he is a partner in the business. No such inference, however, shall be
drawn if such profits were received in payment:
 As a debt by instalments or otherwise;
 As wages of an employee or rent to a landlord
 As annuity to a widow or a representative of a deceased partner;
 As interest on a loan though the amount of payment may vary with the profits of the business; and
 As the consideration for the sale of goodwill of a business or other property by instalments or otherwise.
Form of a partnership contract
A partnership contract may be constituted in any form except as follows:
1. Where the immovable property or real rights are contributed to the partnership
a. The partnership contract must be in a public instrument; and
b. An inventory of the said property must be made, signed by the parties and attached to the public instrument.
Effect if above requirements are not complied with
a. The partnership contract is void.
b. The partnership will not have any juridical personality.
2. Where the capital of the partnership is P3, 000.00 or more, in money or property.
a. The partnership contract must be in a public instrument, and
b. Registered with the Securities and Exchange Commission
Effect if the above requirements are not complied with
a. The partnership contract is still valid. Accordingly, the partnership still acquires juridical personality.
b. The liability if the partnership and the members thereof to third persons are not affected.
Who may become partners
1. Any natural persons who is capacitated may become a partner
2. A partnership may enter into another partnership with individuals or other partnership as there is no prohibition
thereto.
What are the obligations of the partners among themselves and to the partnership with respect to
contribution of money or property?
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Northern CPAR: Business Laws – Law on Partnership
(1) To contribute at the beginning of the partnership or at the stipulated time the money or property which he
promised to contribute;
(2) To answer for eviction
(3) To answer to the partnership for the fruits of the property the contribution of which he delayed
(4) To preserve the said property
(5) To indemnify the partnership for any damage caused to it by the retention of the same or by the delay in its
contribution.
Kinds of partnership
1. As to object
a. Universal partnership –either be a universal partnership of all present property or a universal partnership of
profits.
1) Universal partnership of all present property
2) Universal partnership of profits
b. Particular partnership
→has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a
profession.
2. As to liability
a. General Partnership
b. Limited partnership
3. As to duration
a. Partnership for a fixed term
b. Partnership for a particular undertaking
c. Partnership at will
4. As to representation to others
a. Ordinary partnership
b. Partnership by estoppel
5. As to legality of its existence:
a. De jure partnership
b. De facto partnership
6. As to publicity
a. Secret partnership
b. Open or notorious –
Kinds of partners
1. As to liability
a. General partner
b. Limited partner
2. As to contribution
a. Capitalist partner
b. Industrial partner
3. Other Classifications
a. Managing partner
b. Liquidating partner
c. Nominal partner
d. Ostensible partner
e. Secret partner
f. Silent partner
g. Dormant partner
h. Real partner
i. Subpartner
Rules on division of profit and loss
1. If all are capitalist partner
a. agreement.
b. If only the sharing of the partners in the profits has been agreed upon, the share of each partner is the losses
shall be in the same proportion as the share of each in the profits.
c. In the absence of both, in proportion to his capital contribution.
2. If aside from the capitalist partners, there is also an industrial partner (or there are industrial partners)
a. Profits
1) agreement.
2) In the absence of any agreement thereon, the industrial partner shall first receive a just and equitable
share of the profits and thereafter, each capitalist partner shall share in the profits in proportion to his
capital contribution.
b. Losses
1) The industrial partner shall not share in the losses.
2) The capitalist partners shall share in the losses as follows.
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a) agreement.
b) In the absence of any agreement thereon, each capitalist partner shall share in the losses in the same
proportion as the share of each in the profits.
c) In the absence of both, capital contribution.
Designation in the share in the profits and losses by a third person or by a partner.
1. If entrusted by the partners to a third person
→The same shall be binding upon the partners
2. If entrusted to one of the partners
→The designation is void
Rules on management
1. When a partner has been appointed manager in the articles of partnership.
• Revocation of appointment of managing partner
1) With just or lawful causes – his appointment can be revoked by the vote of the partners owning the
controlling interest.
2) Without just cause of lawful cause – his appointment can be revoked only with the consent of all the
partners including the managing partner
2. When a partner has been appointed manager after the partnership has been constituted.
• Revocation of his appointment as managing partner
He may be removed with or without just or lawful cause by the vote of the partners owning the controlling
interest.
3. When two or more partners have been appointed as managers
a. When there is a specification of their respective duties
→Each managing partner shall perform only the duties specified in his appointment.
b. When there is no specification of their respective duties or there is no stipulation that one shall not act
without the consent of the others.
→Each one may separately execute all acts of administration.
• Rule in the case of opposition of the other managers
a) The decision of the majority of the managing partners shall prevail.
b) In case of tie, the decision of the managing partners owning the controlling interest shall prevail.
c. When there is a stipulation that none of the managing partners shall act without the consent of the others.
→The concurrence of all of them shall be necessary for the validity of the acts.
4. When the manner of management has not been agreed upon
→All the partners shall be considered managers
Rule in case of opposition of the other partners.
1) The decision of the majority shall prevail.
2) In case of a tie, the decision of the partners owning the controlling interest shall prevail.
What are the obligations of an industrial partner?
→Not to engage in any other business for himself unless the partnership expressly permits him to do so; otherwise
(1) The capitalist partners may exclude him from the firm; or
(2) They may avail themselves of the benefits which the industrial partner may have obtained from other
businesses, with a right to damages in either case.
May a capitalist partner engage in business for himself?
(1) As a rule, he cannot engage, for his own account, in any operation which is of the same kind of business in which
the partnership is engaged; otherwise:
(a) He shall be liable to the partnership for any profits he obtained from his transactions; and
(b) He shall personally bear all his losses.
Requirement to operate under a firm name
A partnership shall operate under a firm name, which may or may not include the name of one or more of the
partners.
Obligations of partners
1) contribution of capital
2) contribution of property.
3) contribution of money.
4) reimburse amount appropriated
5) contribute additional capital
6) obligation of a partner who has received his share of the partnership credit.
7) obligation to pay damages to the partnership.
8) obligation to bear risk for property contributed
9) obligation to render information
10) obligation to account
11) Liability of a newly-admitted partner for obligations of the partnership

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Rights of partners
a. To associate another person with him in his share of the profits.
b. To have access to and inspect and copy the partnership books at reasonable hours.
c. To have a formal account of partnership affairs
d. Property rights of a partner
What are the property rights of every partner?
1. His rights in specific partnership property.
2. His interest in the partnership
→A partner’s interest in the partnership is his share of the profits and surplus.
3. His right to participate in management.
• State the rules in case a managing partner collects a demandable debt from a person who also owes the
partnership a demandable debt.
(1) The sum collected shall be applied to the two credits in proportion to their amounts;
(2) It shall be fully applied to the partnership credit, if the receipt given in for the account of the same; and
(3) The debtor, however, has the right to have the payment applied to his debt to the partner if it should be more
onerous to him.
Obligations of the partnership to the partners
a. To pay to the partner any amounts he may have disbursed for the partnership with interest from the time the
expenses were made.
b. To pay for the obligations which a partner may have contracted in good faith in the interest of the partnership
business.
c. To answer for risks in consequence of its management.
Obligations of partnership for wrongful act of partner/s
The partnership shall be solidarily liable with all the partners in the following cases:
a. For loss or injury caused to a third person or any penalty is incurred by reason of the wrongful act or omission of
any partner acting in the ordinary course of the business of the partnership or with the authority of his co-
partners.
b. Where one partner acting within the scope of his apparent authority receives money or property of a third person
and misapplies it.
c. Where the partnership in the course of the business receives money or property of a third person and such money
or property is misapplied by any partner while it is in the custody of the partnership.
Liability of partnership to third persons for acts of partners
1. When the partnership is bound
1. If the partner is authorized to act for the partnership, the partnership is bound whether or not the act is for
apparently carrying on in the usual way the business of the partnership.
2. If the partnership is not authorized to act for the partnership the partnership is bound if:
i. The act is apparently carrying on in the usual way of business of the partnership; and
ii. The third person has no knowledge of the partner’s lack of authority.
2. When the partnership is not bound
1) When although the act is for apparently carrying on in the usual way the business of the partnership, the
partner is not authorized to act for the partnership and the third person has knowledge of the partner’s lack
of authority.
2) When the partner is not authorized to act for the partnership and the act is not for apparently carrying on in
the usual way the business of the partnership.
Preference of partnership creditors in partnership assets over private creditor or a partner
In the payment of the liabilities of the partnership and those of the private debts of a partner, preference shall be as
follows:
1) Partnership creditors shall be paid first out of partnership assets.
2) Thereafter, a partner’s separate creditor shall be paid out of the share owing him if there is an excess
3) If the share of the debtor partner in the remaining assets is not enough to settle his private debts, his private
creditor can go after the partner’s separate assets over which he has preference.
DISSOLUTION AND WINDING UP
• Dissolution is the change in the relation or the partners caused by any partner ceasing to be associated in the
carrying on of the business.
• Winding up is the process of settling the business or affairs of the partnership after dissolution.
• Termination refers to the point when all the business or affairs of the partnership are completely wound up.
CAUSES OF DISSOLUTION
1. Without violation of the agreement of the partners.
a. termination of the definite term or particular undertaking
b. By the express will:
i. Of any partner who must act in good faith, when no definite term or particular undertaking is specified.
ii. Of all the partners who have not assigned their interests or suffered them to be charged for their separate
debts, either before or after the termination of any specified term or undertaking.
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c. By the expulsion of any partner from the business bona fide in accordance with such a power conferred by
the agreement between the partners.
2. In contravention of the agreement between the partners
3. When any event makes it unlawful for the business of the partnership to be carried on or for the
members to carry it on in partnership.
4. In the following cases of loss:
a. Loss before or after delivery of property where the partner contributed only its use or enjoyment, he having
reserved the ownership thereof.
b. Loss before delivery of specific thing, which a partner had promised to contribute to the partnership.
5. By the death of any partner.
6. By the insolvency of any partner or of the partnership.
7. By the civil interdiction of any partner.
8. By decree of court in the following cases:
1) On the application by or for a partner to dissolve the partnership whenever:
a. A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind.
b. A partner becomes in any 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.
2) On the application of the purchaser of a partner’s interest.
a. After the termination of the specific term or particular undertaking.
b. At any time when the partnership was a partnership at will when the interest was assigned or the charging
order was issued.
What is the effect of dissolution on the authority of partners to act for the partnership?
(1) General rule - Dissolution terminates all authority of any partner to act for the partnership.
(2) Exceptions:
(a) When necessary to wind up partnership affairs; and
(b) When necessary to complete transactions begun but not then finished
When the act of a partner after dissolution binds the partnership
1. When the act is necessary for winding up of partnership affairs.
2. When the act is necessary to complete transactions begun before dissolution.
3. In the case of a new transaction or business in the following cases:
a. If the other party to the transaction had extended credit to the partnership before dissolution and he had no
knowledge or notice of the dissolution.
b. If the other party to the transaction had not so extended credit but had nevertheless known of the
partnership before dissolution, and the fact of dissolution had not been advertised in a newspaper of general
circulation in the place at which the business is regularly carried on.
Rules on existing liability of a partner upon dissolution
1. The dissolution does not itself discharge the partner’s liability
2. A partner is discharged from any existing liability upon dissolution by the agreement of the following:
a. The partner himself;
b. The partnership creditor; and
c. The person continuing the business
3. The individual property of a deceased partner shall be liable for obligations of the partnership while he was a
partner, but subject to the prior payment of his separate debts.
Who may wind up partnership affairs
1. Extra-Judicially
a. By the partner or partners designated by the agreement.
b. If none was designated:
1. By the partner or partners who have not wrongfully dissolved the partnership.
2. If all the partners are dead, the legal representative of the last surviving partner who was not insolvent.
2. Judicially
Under the direction and control of the court
Rescission of partnership contract
• Grounds for rescission
1. Fraud; or
2. Misrepresentation to enter into the partnership contract.
Liquidation of dissolved partnership
a. Liquidation or winding up
This involves the sale of the assets of the partnership, the payment of its liabilities, and the distribution of the
remaining cash or other property to the partners.

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b. Order of payment of partnership liabilities.
a. Those owing to the creditors other than partners.
b. Those owing to partners other than capital and profits.
c. Those owing to partners in respect to capital.
d. Those owing to partners in respect to profits.
Right to accounting
Any partner or the legal representative of a deceased partner has a right to an accounting of his interest against the
following:
1. Winding up partners
2. The surviving partners
3. The person or partnership continuing the business
LIMITED PARTNERSHIP
A partnership which has one or more general partners and one or more limited partners.
Requirements for formation
Two or more persons desiring to form a limited partnership must comply with the following requirements:
1. They must subscribe and swear to a certificate, which shall state:
a. The name of the partnership, adding thereto the word “limited”.
b. The character of the business.
c. The location of the principal place of business.
d. The name and place of residence of each member, general and limited partners being respectively designated.
e. The term for which the partnership is to exist.
f. The amount of cash and a description of and the agreed value of the other property contributed by each
limited partner.
g. Additional contributions, if any to be made by each limited partner and the times at which or events on the
happenings of which they shall be made.
h. The time agreed upon, when the contributions of each limited partner is to be returned.
i. The share of the profits or the compensation by way of income which each limited partner shall receive by
reason of his contribution.
j. The right, if given, of a limited partner to substitute an assignee or contributor to his place and the terms and
conditions of the substitution.
k. The right, if given, of the partners to admit additional limited partner.
l. The right, if given, of one or more of the limited partners to priority over the other limited partners, as to
contributions or as to compensation by way of income and the nature of such priority.
m. The right, if given, of the remaining general partner or partners to continue the business on the death,
retirement, civil interdiction, insanity or insolvency of a general partner.
n. The right, if given, of a limited partner to demand and receive property other than cash in return for his
contribution.
2. They must file for record the certificate with the Securities and Exchange Commission
Obligations of a limited partner
1. Not to allow the inclusion of his surname in the partnership.
Exceptions:
a. It is also the surname of a general partner.
b. The business had been carried on under a name in which his surname appeared prior to his admission as a
limited partner.
2. To be liable as a general partner if he takes part in the control of the business.
3. To be liable to the partnership for the following:
a. For the difference between his actual contribution and that stated in the certificate.
b. For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the
conditions stated in the certificate.
4. To hold as trustee for the partnership in the following:
a. Specific property stated in the certificate as contributed by him, but which was not contributed.
b. Specific property which has been wrongfully returned to him.
c. Money or property wrongfully paid or conveyed to him on account of his contribution.
5. To be liable to the partnership after he has rightfully received the return of his capital contribution, for any sum
not in excess of such return with interest, which is necessary to discharge its liabilities to all creditors who
extended credit or whose claims arose before such return.
6. Not to receive or hold as collateral any partnership property on account of his claims for loan granted to or other
business transaction with the partnership.
7. Not to receive from a general partner or the partnership on account of such claims any payment, conveyance or
release from liability. If at the time the assets of the partnership are not sufficient to discharge partnership
liabilities to persons not claiming as general or limited partners.

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Rights of a limited partner
a. To have the partnership books kept at the principal place of business of the partnership.
b. To inspect and copy the partnership books or any of them at a reasonable hour.
c. To have on demand true and full information of all things affecting the partnership.
d. To have on demand a formal account of partnership affairs whenever circumstances render it just and equitable.
e. To have dissolution and winding up by decree of court.
f. To receive a share in the profits or other compensation by way of income stipulated in the certificates.
g. To receive the return of his contribution provided partnership assets exceed the liabilities.
h. To loan money to the partnership.
i. To transact business with the partnership.
j. To receive, unless he is also a general partner, on account of resulting claims against the partnership, with general
creditors, a pro rata share of the asset.
k. To agree with other limited partners that one or more of them shall have priority over other limited partners as to:
a. Return of their contribution
b. Compensation by way of income
c. Any other matter
Assignment of limited partner’s interest
I. Rule: A limited partner’s interest is assignable.
II. Effect of assignment
a. The assignee does not become a substituted limited partner
1. The assignee is only entitled to receive the following to which the assignor partner would otherwise be entitled:
a. Share of the profits
b. Other compensation by way of income
c. Return of the contribution
2. He has no right to:
1) Require the information or account of partnership transactions.
2) Inspect partnership books
• Substituted limited partner
is a person admitted to all the rights of a limited partner who has died or has assigned his interest in the
partnership.
• Requisites in order that assignee may become a substituted limited partner
a) All the members of the partnership must consent to the assignee becoming a substituted limited
partner, unless the assignor is empowered by the certificate to give the assignee such right.
b) The certificate must be amended to reflect the substitution.
c) The certificate must be registered with the SEC.
• Rights and liabilities of the substituted limited partner
He has all the rights and powers, and is subject to all restrictions and liabilities of the assignor, except
those liabilities of which he is ignorant at the time he became a limited partner and which could not be
ascertained from the certificate.
• Liabilities of the assignor
The substitution of the assignee as a limited partner does not release the assignor from the following
liability:
1) To persons who rely on a false statement in the certificate
2) To creditors who extended credit or whose claims arose before the assignment.
Retirement, death, civil interdiction, insanity, or insolvency of a partner
a) Effect
a) Partner is a general partner – partnership is dissolved.
b) Partner is a limited partner – partnership is not dissolved except if there is no more limited partner because in
such a case, the requirement that there must be at least one limited partner in a limited partnership is no
longer complied with.
b) Continuation of business
→The business may be continued by the remaining general partners if:
1. The right to do so is stated in the certificate; or
2. All members consent.
Order of payment of liabilities
the liabilities of the partnership shall be entitled to payment in the following order:
1. Those to creditors, including limited partners, in the order of priority as provided by law
2. Those to limited partners by way of their share of the profits and other compensation by way of income on their
contributions.
3. Those to limited partners in respect to the capital of their contributions.
4. Those to general partners other than for capital and profits.
5. Those to general partners in respect to profits.
6. Those to general partners in respect to capital.

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State the requirements for the amendment or cancellation of a certificate.
(a) The amendment or cancellation must be in writing;
(b) It must be signed and sworn to by all the members, including the new members, and the assigning limited
partner in case of substitution or addition of a limited or general partner; and
(c) The certificate, as amended, must be filed for record in the Securities and Exchange Commission.
QUIZZER
PART 1

1. Partner who contributes money and / or property, except

a. General b. Capitalist c. Industrial d. Managing
2. Partner who contributes industry or labor
a. General b. Capitalist c. Industrial d. Managing
3. Partner who contributes both capital and industry
a. General b. limited c. Managing d. Capitalist-industrial
4. Partner who is liable beyond the extent of his contribution
a. General b. Capitalist c. Industrial d. Silent
5. Partner who is liable only to the extent of his contribution
a. Limited b. General c. Industrial d. Managing
6. Partner who manage actively the firm’s affairs
a. Silent b. Liquidating c. Managing d. Dormant
7. Partner who does not participate in the management though he shares in the profits or losses
a. Liquidating b. Nominal c. Ostensible d. Silent
8. Partner who winds up the affairs of the firm after it has been dissolved
a. Liquidating b. Managing c. Industrial d. Capitalist
9. Partner whose connection with the firm is known to the public
a. Ostensible b. Secret c. Silent d. Nominal
10. Partner whose connection with the firm is concealed or kept a secret
a. Ostensible b. Secret c. Silent d. Nominal
11. Partner who is both a secret and silent partner
a. Nominal b. Ostensible c. Limited d. Dormant
12. Partner who is not really a partner but who may become liable as such insofar as third persons are concerned
a. Nominal b. Ostensible c. Silent d. Secret
13. May contributed money, property or industry to the common fund
a. Limited partner c. Both limited and general partner
b. General partner d. Dormant partner
14. May be required to make additional contribution in case of imminent loss:
a. Capitalist partner c. Industrial partner
b. Limited partner d. Dormant partner
15. A. F was a bookkeeper in a partnership named “GH”, with a yearly salary amounting to 5% of the net profits for
the year. F, however had no vote at all in the management of the business. He is a partner in GH.
B. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the
partnership.
a. both statement are true c. only the first is true
b. both statement are false d. only the second is true
16. A. Co-ownership or co-possession does not in itself establish a partnership, except when such co-owners or co-
possession share in the profits made by the use of the property.
B. The sharing gross returns does not of itself established a partnership, except when the persons sharing them
have a joint or common right or interest in any property from which the returns are derived.
a. both statement are true c. only the first is true
b. both statement are false d. only the second is true

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17. A. The receipt by a person of a share of the profits of a business is conclusive evidence that he is a partner in the
business
B. A partnership of all present property is where the partner contribute all the property which actually belong to
them to a common fund, with the intention of dividing the same among themselves, as well as all the profits
which they may acquire therewith.
a. both statement are true c. only the first is true
b. both statement are false d. only the second is true
18. A. In a universal partnership of all present property, the property which belong to each of the partners at the
time of constitution of the partnership becomes a common fund of all partners and all profits which they may
acquired therewith. A stipulation for the common enjoyment of any profits may also be made. But properties
which they may acquired through inheritance, legacy, or donation cannot be included in such stipulation,
except the fruits thereof.
B. The universal partnership of profits comprises all that the partners may acquire by industry or work during
the existence of the partnership. Movable or immovable property which each may possess at the time of the
celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the
partnership.
a. both statement are true c. only the first is true
b. both statement are false d. only the second is true
19. A. Every partner may associate another person with him in his share, but the associated shall not be admitted in
the partnership without the consent of all the other partners, even if the partner having an associate should be
a manager.
B. Articles of universal partnership, entered into without specification of its nature, only constitute universal
partnership of profits.
a. both statement are true c. only the first is true
b. both statement are false d. only the second is true

PART II.

1. Which of the following is not correct?

a. A- cash (Ltd.); B – cash (Gen.); C – service (Gen)
b. A- property (Ltd.); B – cash (Gen.); C – service (Gen)
c. A- service (Ltd.); B – cash (Gen.); C – service (Gen)
d. A- cash (Ltd.); B – property (Gen.); C – service (Gen)

2. A and B orally agreed to form a partnership two years from today, each one to
contribute P10, 000.00. At the arrival of the said date, if one refuses to go ahead with
the agreement, can the other enforce the agreement?
a. Yes, since the agreement is to be enforced after one year from the making thereof,
the same should be in writing to be enforceable.
b. Yes, because the prior agreement was voluntarily made.
c. Yes, because the contract of partnership is not governed by the Statute of Frauds.
d. No, because the agreement was merely oral.

3. If a partner is insolvent, the first in the order of preference in the distribution of his
assets is:
a. Partnership creditors
b. Partner’s contribution to the partnership
c. Separate creditors of the debtor
d. Pro-rata between the separate creditors and the partnership creditors.

4. The following except one, are common characteristics of partnership and corporation.
Which is the exception?
a. The individuals composing both organizations have little voice in the conduct of
the business.
b. Both can only act through agents.
c. Both are business organizations composed of a number of individuals.
d. Both have juridical personalities separate and distinct from that of the members
composing it.

5. Which of the following is not a requisite prescribed by law in order that the partnership
may be held liable to a third party for the acts of one of the partners.
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
a. The partners bind the partnership by acquiescence for obligations he may have
contracted in good faith.
b. The partner must have the authority to bind the partnership.
c. The contract must be in the name of the partnership or for its own account.
d. The partner must act on behalf of the partnership.

6. X, Y and Z are partners in Ace & Co. W represented himself as a partner in the said
partnership to A, who on the faith of such representation, granted P1M loan to the
partnership. Assuming only X and Y consented to such representation, who shall be
liable to A?
a. Since the partnership benefited from the credit extended by A, all partners X, Y and
Z are liable.
b. Only X, Y and W are partners by estoppel and are liable pro rata.
c. Since the loan was extended to the partnership, all the partners and W are liable.
d. Only W who made the representation shall be liable.

7. A, B, and C are general partners in the merchandising firm. Having contributed equal
amounts to the capital, they also agreed on equal distribution of whatever profit is
realized per fiscal period. After two years of operation however, C conveys her whole
interest in the partnership to D, without knowledge and consent of A and B. Is the
partnership dissolved?
a. The partnership is not dissolved because the conveyance of a partner’s interest in
the partnership does not of itself dissolve the partnership.
b. The partnership is not dissolved because the assignment made by C of his whole
interest was without the knowledge and consent of A and B.
c. The partnership was dissolved because the assignee, D automatically becomes a
new partner and strictly speaking, there is a new entity.
d. It is dissolved because C has ceased to be a partner because of the assignment of
his whole interest to D.

8. Based on the preceding facts:

a. D can participate in the management of the partnership.
b. D cannot inspect the books nor copy them for any information on the
partnership affairs as a partner can.
c. C has ceased to have the rights to use the partnership property.
d. C cannot take part in the control of the business anymore.

9. Still based on the same facts:

a. If A and B want to dissolve the partnership, C as a partner need not consent
thereto because he had assigned his interest to D.
b. D may ask the court for its dissolution being the assignee of C’s interest in the
partnership.
c. A, B and D may dissolve the partnership even without the consent of C.
d. A, B and C cannot dissolve the partnership without the consent of D.

10. Spouses A and B formed a limited partnership to engage in real estate business
and A contributed P1M only. Is the partnership between the spouses valid?
a. The partnership is not valid because the spouses cannot enter into a limited
partnership.
b. The partnership is valid because spouses can enter into a partnership, limited
or general, universal or particular.
c. The partnership is not valid because spouses cannot enter into any kind of
partnership for business except conjugal partnership.
d. The partnership is valid because spouses are prohibited to enter into a
universal partnership only.

11. ••A corporation cannot enter into a partnership contract with natural person but
with a juridical person it can.
••A general partner is always the capitalist in a limited partnership.
a. Both statements are false
b. First is true, second is false
c. Both are true
d. First is false, second is true

12. 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 P.5 M and Z
10
Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
contributed P.2 M to the common fund. By a vote of the partners, W and X were
appointed managing partners, without specification of their duties and powers. A
applied as secretary and B applied as accountant of the partnership. The hiring of
A was decided upon by W and X but was opposed by Y and Z. Whose decision
shall prevail?
a. The decision of W and X shall prevail because the hiring is an act of
management and as managers they can do so.
b. That of Y and Z shall prevail because they are the capitalist partners.
c. The decision of Y and Z because they have the controlling interest.
d. The decision of W and X because it is an act of ownership.

13. In the same problem as aforementioned, suppose the hiring of B was decided
upon by W and Z, but was opposed by X and Y, whose decision shall prevail?
a. The decision of W and Z because W is the managing partner and the hiring is
an act of administration.
b. The decision of X and Y because in case of tie in the decision of managing
partners, that of the controlling interest shall prevail.
c. That of W and Z because Z is also a capitalist partner.
d. None of the decision because of the statement of equal rights.

14. If a partner is insolvent, the first in the order of preference is:

a. Partnership creditors
b. Partner’s contribution to the partnership.
c. Separate creditors of the partner.
d. Pro rata between the separate creditors and the partnership creditors.

15. A, B and C are partners in partnership “DA KING RAYMOND” to engage in

buy and sell of carabao milk. A and B contributed P10, 000.00 each while C
contributed his service. After payment of the partnership liabilities to creditors,
only P6, 000.00 remains. In the absence of stipulation to the contrary the share of
C shall be:
a. Equal to the share of A
b. Equal to the share of B
c. P2, 000.00
d. Nothing

16. X, Y and Z are partners who contributed equally to the capital of the partnership.
A owes the partnership P9, 000.00. Z collected from A P3, 000.00 before X and Y
could receive anything from A, who later became insolvent and therefore, they
could not collect their shares.
a. Partner Z shall share the P3, 000.00 with his co-partners X and Y.
b. Z cannot be required to share what he already received from A.
c. X and Y should first exhaust all remedies to collect from A.
d. X and Y can automatically deduct from the capital contribution of Z in the
partnership their respective shares in the p3, 000.00.

17. A and B are partners in a real estate business. The partnership owns a parcel of
land which C desires to buy. C contacted A and informed him of his intention to
buy the said land. A did not tell B such intention of C. A bought B out of the
partnership and afterwards sold the land to C at a profit.
a. The partnership was dissolved when A became the sole owner.
b. The sale is void because it was without the knowledge of B.
c. A is not liable to B for his share of the profits.
d. A is liable to B for his share in the profits.

18. A, B and C are partners in “RAY MOON” Company to engage in the sale of beer
under the full moon on summer days even in cases of conflagration and very very
hot coffee on rainy days even in case of inundation. D represented himself as a
partner in the partnership to E who, on the belief of such representation, extended
credit of P50, 000.00 to the partnership. Assuming only B and C consented to
such representation, who shall be liable to E?
a. All of A, B, C, and D are liable because of partnership liability for the credit
extended to the partnership by E.
b. B, C and D are partners by estoppels and thus, are liable to E.
c. Partners A, B and C are liable to E for the benefit extended to them.
d. Only D who made the representation is liable to E.
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
 Northern CPAR: Business Laws – Law on Partnership

19. May contribute money, property or industry to a common fund.

a. Limited partner
b. General partner
c. Both limited and general partner
d. Both limited and industrial partner

THe following are

disquahidi%g to
form a univerral
partnership, excert
one:
21. THe following are
disquahidi%g to
form a univerral
partnership, excert
one:
a. Brotheò ane
sister Husb!nd
`and
sife Those
euiltù oæ
adeltery or
concub)nage
b. Husb!nd`and
sife Those
euiltù oæ
adeltery or
concub)nage
c. Those euiltù oæ
adeltery or
concub)nage
d. Those guilty of
the same
offense, if the
partnership is
entered ioto
consmderati•n
of the same

22. A is a capitalist paRtner and B the ineustricl o~e. A engaged personelly in

the same kinf of bõsiness as vhat of the pavtnership:
a. If there are losses, the partnerslip will bear the losses
b. I& there$are profits, they will be shared by`A and the partnership.
c. If there are profits, A shall give them to the partndrsxip.
d. A may$be excluded from the partnersh)p with liability for dqeages.

23. SuppmsE in vhe {amd factq aó aforementioned, B engagås in business on hió

own áccount `ut diffezent from that of the pastnership.
a. If there are profits, and the partnership shall sharu equally.
b. Iæ thEre are losses, B and the paRtnårslip shall eq5ally shaze.
c. B eay(be %xcluted from the partnership but without damages.
d. B may bd excluded from the pa2tnership0with damages.

24. and B are capipalist partners while C is an industriaL"partner. Bkth A and B

equallx contributEd P05, 004.00 to e!ãh to thg capital. A contractual liability in
favOr of`X was incurred en the a-ount of!P42, 000.00. After the exhausting
partnership asseps there is a balance rec/verable from:
a. A and B only
b. A, C anD C
c. A, B afd C and C can get reimbursument¢&rom A and B. A, b and B without
reiíbur3ement froí A and B in C–s fatour.
d. A, b and B without reiíbur3ement froí A and B in C–s fatour.

25. In the aforementioned æactq, suppose A, B and C agreed t`at one of them shahl
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
nkt be li`ble to the credhtors, iS txe agr%ement valid?
a. he stitulation that one of them shal, not be liarle to the crediTors is voidable
at the instance of the creditors.
b. It shall be vohd agrfement even among the p`rtners b%cause part~ership is
for common benefkt and knterest.
c. It shall be void"insofar as the creditor{ are concerned.
d. It shall0be voi`Able amnfg 4hm partners thmoselves.

26. A B`and C qve paztners in e partnerrhip engaget in retail with each contributing
P20, 000.10 each. D is admitped as a new partner with a cOnTribution of
P8,"000.00. At the vime of his qdmission, the partnership has a pze-existi~g
obligation to E in the aMount of P80,"000.00.
a. D is not liable0To E for this ïbligation éncurred when"he was not 9et a
partner.
b. D is liable to E up to hys Personal assets wh)ci were fot contriruted.
c. D is liable uP ug his capital contributinn.
d. T iS liable ur t• his capital contribution in fcvor of cpeditors bõt with right of
reimbursgment from A, B and C.

27. ••The partlers are liable to third persons jointly or %qually for torts!or!quasi-
delicô commhtted bx any(qartner in the conduct od thE busyness or with
authority of the pártnerc.
••For conpsacteal1l)ability, their liability Shall¢be solidary and alì par|ners are
|iable.-Both ape faLse qtatements
a. Both ape faLse qtatements
b. Both are trug
c. First is false, second is true
d. First is true, second is false

28. ••The partnership shall bg bmund I. ôh! contract entered into by thm pcrtnår
wèo has no aut`ority provided t`e third peòson is in good faith although the act of
the partner is not In wsual way of bõsiless.
••The partner’s acts alvhough not in the usual way of conducting the business shall
b)nv the partnership provided he was authoriz%d by his co-xartners.
a. Both statements `re true
b. Both are false
c. First"is tRue, secont is faìse
d. First is false, second is true

29. A and B are partîess with A as ôhm managang partNer. C owes A P10l
008.000and$the partnership P30, 000.22 whic( are now both due. A issued
a"receipt"for the payment of C in the amount of P10,"000.0p in his ow.`name.
The paylent shall Be applied to:
a. This partnårship credkt totally.
b. The credit Of A only since the rdbeipt és in his nimd.
c. The0payment shall be applied equa\ly in both crediôs.
d. The raymen4s shaln be applied!xroportionately to roth cbeditr.

30. A, B and C are pardners who contrIbuted equally ôo the capital. D Uitjout the
knowledge of the death of C contracted with A who also was unaware of the
death of C. The liability of A is P90, 000.00. How much can D collect after
exhausting partnership assets in the amount of P60, 000.00.
a. P30, 000.00 from any one of A, B and C.
b. P15, 000.00 each from A and B.
c. P10, 000.00 from each of A and B and P10, 000.00 from C’s estate.
d. The partners are not liable beyond their capital contribution because the
partnership was already dissolved at the time of liability.

31. This is the order of priority in general partnership liabilities:

a. Outside creditors, creditor partner, partner’s capital, partner’s profit.
b. Outside creditors, creditor partner, partner’s profit, partner’s capital.
c. Creditor partner, Outside creditor, partner’s profit, partner’s capital.
d. Creditor partner, Outside creditor, partner’s capital, partner’s profit.

32. C and P are capitalist partners while I is industrial partner, who in addition to his
services also contributed capital to the partnership. There is no agreement as to
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
the profits and losses. The partnership realized profit in the amount of P21,
000.00. The share of I in the profits shall be:
a. C and P will determine I’s share in the profits.
b. I’s share shall be P7, 000.00.
c. Pro rata to his contributed capital.
d. Just and equitable under the circumstances.

33. In the preceding number, suppose I is only an industrial partner, his share in the
profits shall be:
a. Just and equitable under the circumstances.
b. In proportion to the capital contribution of his co-partners.
c. Equal to the least share in the profit of a capitalist partner.
d. The average share of all the capitalist partners.

34. Suppose instead of profit, the partnership suffered loss in the same amount of
P21, 000.00 the share of the capitalist partners in the loss shall be:
a. In accordance to their profit sharing agreement.
b. In accordance with their loss sharing agreement.
c. In proportion to their capital contribution.
d. Equally among them.

35. With still the same facts, as industrial partner, the share of I in the loss shall be:
a. Just and equitable under the circumstances.
b. As agreed upon by the partners before the loss was realized.
c. None, he being an industrial partner.
d. In proportion to his capital contribution.

36. ••After dissolution, the partners can still enter into new business transactions in
the name of the dissolved partnership although not for the purpose of winding up
partnership affairs.
••Insanity of either general or limited partner in a limited partnership shall dissolve
the partnership.
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false

37. A and B orally entered into a partnership with each of them contributing P3,
000.00 each and some personal properties in the amount of P1, 000.00 each. The
partnership contract is:
a. Unenforceable because the amount involved exceeds P500.00.
b. Void because it is not in public instrument.
c. Valid
d. Void, because it is not registered with the SEC.

38. A partnership which must be in public instrument to be valid is:

a. Contribution immovables or real rights therein regardless of the value thereof.
b. Contribution is P3, 000.00 or more or personal property.
c. General partnership
d. Particular partnership

39. ••A universal partnership entered into without designation is considered one of
profits.
••A limited partner’s surname cannot appear in the partnership name if it is also
the surname of a general partner to prevent misrepresentation to third persons.
a. Both statements are false
b. First is true, second is false
c. Both are true
d. First is false, second is true

40. Which of the following statements is not correct?

a. A partnership contract is not covered by the Statute of Frauds
b. A limited partner shall not be bound by the obligations of the partnership.
c. A limited partner who takes part in the control of the business shall be liable
as a general partner.

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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
d. A stipulation which excludes a partner from sharing in the profits or loss is
void.

41. Which of the following is incorrect?

a. An industrial partner who engages in business for himself may be excluded
from the firm.
b. An industrial partner may not engage in business for himself unless there is a
contrary stipulation.
c. A capitalist partner may engage in the same line of business as that of the
partnership.
d. An offending capitalist partner may not be excluded from the firm.

42. ••A partner’s interest in the partnership is not assignable unless the other partners
consent.
••An act of strict dominion may be performed by a partner without the consent of
his co-partners if it is advantageous to the partnership.
a. Both statements are false
b. Both are true
c. First is true, second is false
d. First is false, second is true

43. ••The death, insanity, retirement, insolvency or civil interdiction of a limited

partner does not dissolve the partnership.
••In a general partnership, the fact that the business can only be carried on at a
loss does not result in the dissolution of the partnership.
a. First statement is false, second is true
b. First is true, second is false
c. Both are true
d. Both are false

44. ••A partnership contract begins from the moment of the execution of the contract
unless it is otherwise stipulated
••Even if a third person is in good faith, the partnership is not bound in the
contract entered into by a partner after the dissolution of the partnership if the
business of the partnership has become unlawful.
a. First statement is false, second is true
b. First is true, second is false
c. Both are false
d. Both are true

45. ••A universal partnership of present property shall include the profits which the
partners may acquire therewith such as properties to be acquired through legacy,
donation or inheritance.
••After dissolution, the partners may still enter into contracts in the name of the
dissolved partnership if it is for the purposes of winding up.
a. First statement is false, second is true
b. First is true, second is false
c. Both statements are false
d. Both are true

46. Three of the following are property rights of a partner. Which is not?
a. Right to specific partnership property.
b. Right to participate in the management.
c. Right to demand formal accounting of partnership affairs.
d. Interest of the partner in the partnership

47. ••If a person receives a share in the profits of a business, he is a prima facie
presumed to be a partner in business.
••In partnership there is agency, co-ownership and co-possession of partnership
property.
a. Both statements are true
b. Both are false
c. First is false, second is true
d. First is true, second is false

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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
48. ••If a person shares in the gross returns by the use of a property he is deemed to
be a partner.
••If co-owners shared in the profits derived from the use of the property owned
in common, there is partnership.
a. Both are true
b. First is false, second is true
c. First is true, second is false
d. Both are false

49. ••A person who represents himself as a partner, when in fact he is not, shall be
liable as a partner by estoppel even if third person has knowledge that he is not.
••A partnership is always created by agreement of the parties
a. Both statements are false
b. Both are true
c. Firs is true, second is false
d. First is false, second is true

50. ••A general partnership is dissolved by the insanity of a partner.

••A limited partnership is dissolved by the insanity of a limited partner
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false

51. A limited partner shall be liable as general partner unless:

a. He takes part in the control of the business.
b. His surname appears in the partnership name.
c. His contribution is service.
d. He renounces his share in the profits after knowledge of the error that he was
made a general partner.

52. A partnership is dissolved, except:

a. Death of a partner
b. Insolvency of a partner or of the partnership
c. Partnership business can only be carried on at a loss.
d. Partnership business has become unlawful.

53. A, B and C are partners contributed the following: A - P6, 000.00; B – P4, 000.00;
and C – service. They agreed that the profits and losses shall be distributed as
follows to wit: A – 35%; B- 25% and C – 40%. How shall the loss of P10, 000.00
be distributed?
a. A – P6, 000.00; B – P4, 000.00; C – none
b. A – P3, 333.33; B – P3, 333.33; C – P3, 333.33
c. A – P3, 500.00; B – P2, 500.00; C – P4, 000.00
d. A – P5, 000.00; B – P2, 500.00; C – none

54. In the same facts in the preceding number, suppose it is a profit of P10, 000.00,
how shall it be distributed?
a. A – P5, 000.00; B – P5, 000.00; C – none
b. A – P3, 333.33; B – P3, 333.33; C – P3, 333.33
c. A – P6, 000.00; B – P4, 000.00; C – none
d. A – P3, 500.00; B – P2, 500.00; C – P4, 000.00

55. Still with the same facts except that there is no agreement as to the sharing of
profits and losses, how shall the profits of P10, 000.00 be distributed?
a. A – P3, 500.00; B – P2, 500.00; C – P4, 000.00
b. A – P6, 000.00; B – P4, 0000.00; C – just
c. A – P5, 000.00; B – P5, 000.00; C – none
d. A – P3, 333.33; B – P3, 333.33; C – 3, 333.33

56. With the same facts in the immediately preceding number, if it was a loss of P10,
000.00, how shall it be distributed?
a. A – P3, 500.00; B – P2, 500.00; C – P4, 000.00
b. A – P6, 000.00; B – P4, 000.00; C – none
c. A – P3, 333.33; B – P3, 333.33; C – P3, 333.33

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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
d. A – P5, 000.00; B – P5, 000.00; C – none

Part III

1. Partnership assets and liabilities are as follows:

December 31, 2008 December 31, 2007
Assets P 200, 000 P 50, 000
Liabilities 100, 000 200, 000
Capital
A – P50, 000; B – P50, 000 100, 000 150, 000

A and B, general partners, have fully paid their capital contributions. What is the remedy of creditor C?
a. Collect partnership liability from the partnership.
b. Collect partnership liability from B only
c. Collect partnership liability from A only
d. Collect partnership liability from A and B capital contributions (including personal assets)

2. A and B are partners engaging in the humble business of merchandising. On January 15, 2010
when the total obligation of the partnership totals P80, 000, Raymond was admitted as new smiling
face partner with or without reason who secretly promised to himself that the partnership will
maximize profit up to nine digits. At the time of C’s admission, the partnership creditors were M
for P50, 0000 and N for P30, 000. After January 15, 2010, the partnership borrowed from O, P20,
000 and P40, 000 from P. On June 15, 2010, the partnership becomes terribly insolvent despite the
presence of the promising new partner whose promises were made to be broken leaving an
obligation totalling to P140, 000 and the partnership assets amounting to P30, 000. The creditors
are going after the separate properties of the partners to satisfy their remaining claims. How are the
creditors’ claims satisfied?
Answer 1 – M and N can go after the separate properties of A and B but Raymond’s separate
properties are not answerable to their claims.
Answer 2 – O and P can go after the separate properties of A, B and Raymond.
a. Both answers are wrong.
b. Both answers are correct.
c. Answer 1 is wrong but answer 2 is correct.
d. Answer 1 is correct but answer 2 is wrong.

3. A is the managing partner of A and B company. X is indebted to A for P20, 000 and the
partnership for P60, 000. When both debts mature, X pays A P20, 000 and the latter issues a
receipt for his personal credit. The payment for P20, 000 shall be applied:
a. To the whole debt owing to A.
b. ¼ in favor of A and ¾ in favor of partnership.
c. Debt owing to the partnership.
d. ½ in favour of A and ½ in favour of the partnership.

4. XYZ partnership composed of three (3) capitalist partners and one industrial partner suffered
business losses. Its remaining assets amounting to P100, 000. The partnership is indebted to its
supplier C in the amount of P160, 000. How can C recover the 160, 000?
a. C can recover from the partnership P100, 000 and the balance of P60, 000 from the other
capitalist partners.
b. C can recover from the partnership P100, 000 and the balance of P60, 000 from any of the
partners solidarily.
c. C can recover from the partnership P100, 000 and the balance of P60, 000 from the four (4)
partners jointly including the industrial partner.
d. C can recover from the partnership P100, 000 only and suffer as his list in the balance of P60,
000.

5. A, B and C formed the partnership with A as general partner, B as limited partner and C as
industrial partner. A and B contributed P50, 000 each. The partnership failed and after disposing all
its assets to pay partnership debts there still remains a note payable in the sum of P 30, 000.00
a. A legal representative of a limited partner.
b. A and B are liable to pay P15, 000.
c. Only A is liable to pay P30, 000 indebtedness.
d. C is liable to pay P15, 000.

6. Which of the following persons are not disqualified to form a universal partnership?
a. Those guilty of adultery and concubinage
b. Husband and wife
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
c. Brother and sister
d. Those guilty of the same criminal offense, if the partnership is entered into in consideration of
the same.

7. A limited partnership formed in 2004 by Raymondo as general partner and Zeus and Sharryl as
limited partners. In 2005, Raymondo and Sharryl got married. Did the marriage dissolve or change
the form of the partnership?
1st answer – yes, partnership is dissolved by the marriage because there is a change in equity and status
among the partners.
2nd answer – no, because spouses can enter into a universal partnership.

a. Both answers are correct.

b. 1st answer is wrong, 2nd answer is correct
c. Both answers are wrong
d. 1st answer is correct, 2nd answer is wrong

8. Which of the following incidents may be a cause for involuntary dissolution of a partnership?
a. Expulsion of any partner
b. Insolvency of any partner
c. Express will of any partner
d. Termination of term of the partnership.

9. Which of the following liabilities of the partnership shall rank 1 st in the order of payment?
a. Those owing to creditors other than partners.
b. Those owing to partners in respect to profits.
c. Those owing to partners in respect to capital.
d. Those owing to partners other than for capital or profit.

10. A, B and C are partners in a joint venture engaged in real estate and land development. A without
the knowledge of B and C offered to sell to D all the remaining unsold lots at a price very much
higher than the prevailing market prices. Later, A bought out B and C from the partnership and
thereafter finally sold the lots at a very high profit.
1st conclusion – When A bought out B and C from the partnership, the partnership was dissolved so B
and C have no more share in the profit of the sale.
2nd conclusion – The sale of the lots between A and D is void because it was without the knowledge
and consent of B and C.
a. Both conclusions are correct
b. Both conclusions are wrong
c. 1st conclusion is correct, 2nd conclusion is wrong
d. 1st conclusion is wrong, 2nd conclusion is correct

11. A and B are capitalist partners with C as industrial partner. A and B contributed P20, 000 each to
the capital of the partnership. A contractual liability of P50, 000 was incurred by the partnership in
favour of REX. The assets of the partnership has been exhausted still leaving an unpaid liability of
P12, 000. What are the rights and obligation of the partner if any?
a. A and B only
b. C only
c. A, B and C are liable to REX and C after giving his share may ask reimbursement from A and
B, unless otherwise stipulated.
d. C has no right for reimbursement from A and B unless stipulated

12. The common property of a universal partnership shall be

a. All the properties that shall belong to each of the partners after the constitution of the
partnership.
b. All the properties which belongs to each of the partners at the time of the constitution of the
partnership as well as the profits which they may accrue.
c. All the properties which belong to each of the partners at the time of the constitution of the
partnership.
d. All the properties which belong to each of the partners at the time of the constitution of the
partnership as well as properties which may acquire therewith
.
13. X, Y and Z are partners and contributed to the partnership P40, 000. P30, 000and services,
respectively. The partnership was later liquidated and after payment of the partnership
indebtedness, only P20, 000 worth of assets remained. How much is the share of Z?
a. Zero
b. Equal to the share of X
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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
c. Equal to the share of Y
d. P6, 000

14. The following are instances, except one, when a partnership is unlawful. Which is the exception?
a. A partnership formed to furnish apartment houses to be used as venue for illegal gambling.
b. A partnership formed to create cartel of monopolies.
c. A partnership formed for smuggling of contrabands.
d. A partnership formed for the purpose of buying lands.

15. A partner in a partnership who is not really a partner not being a party to the partnership
agreement but is made liable as a partner for the protection of innocent third persons is known as:
a. Dormant partner
b. Secret partner
c. Partnership by estoppels
d. Partner by estoppel

16. A, B and C are partners engaged in retail business. Their contribution is P20, 000 each. D is
admitted as new partner with a contribution of P8, 000. At the time of his admission, the
partnership has an outstanding obligation to E in the amount of P80, 000. In this case:
a. D is liable to E for this obligation so that after the assets of the partnership amounting to P68,
000 will be exhausted leaving a balance of P12, 000, only A, B and C shall be liable jointly or
pro rata, out of their separate property.
b. D is not liable to E for this obligation.
c. D is liable to E for this obligation so that the assets of the partnership will be exhausted,
leaving a balance of P12, 000, all the partners shall be liable jointly or pro rata, out of their
separate property.
d. Answer not given.

17. A, B and Raymundu are equal partners in X partnership. On April 29, 2010, After incurring
unexpected heavy losses like several mountains that fall on the little and tiny partnership, partner
Raymundu died after walking and crying not only a river but an ocean on the lonely road of broken
dreams. Not knowing that Raymundu died, on May 1, 2010 A feeling alone contracted a liability to
D who also does not know of the death of Raymundu, the liability is P90, 000. After D exhausted
the net assets of X partnership in the amount of P60, 000, he can collect:
a. P10, 000 from estate of Raymundu; P10, 000 from A; P10, 000 from B
b. P15, 000 from A and P15, 000 from B
c. P20, 000 from A and P10, 0000 from B
d. P30, 000 from A

18. A and B are partners of X partnership. A is the managing partner. E owes A P10, 000 and X
partnership P30, 000. The obligations of E are both due. A collected from E the debt of E to A in
the amount of P10, 000 and issued a receipt in the name of A.
a. The whole of the P10, 000 will be applied to debt of E to A.
b. P10, 000 will be applied to debt of E to the partnership,
c. P2, 500 to debt of E to A and P7, 500 to debt of E to the partnership.
d. P 50, 000 each to debt of E to A and to the partnership.

19. A, B and C are general partners in ABC partnership. G is debtor to the partnership in the amount
of P15, 000. A received from the debtor G the sum of P5, 000 and issued a receipt identifying the
amount collected as P5, 000.
a. A can be compelled to share B and C their P5, 000.
b. B and C should automatically sue G to collect the P10, 000.
c. B and C can charge the capital of A with their share of the p5, 000.
d. A cannot be compelled to share the P5, 000 with B and C.

20. This is the order of preference in the liquidation of a general partnership.

a. Outside creditors; partner’s creditors; partner’s capital; partner’s profit
b. Outside creditors; partner’s creditors; partner’s profits; partner’s capital
c. Partner’s creditors; outside creditors; partner’s capital; partner’s profits
d. Partner’s capital; outside creditors; partner’s creditors; partner’s profits

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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06
Northern CPAR: Business Laws – Law on Partnership
21. F, G, H and I are partners. They contributed capital as follows: F – P5, 000; G – P30, 000; H –
P20, 000; and I as the industrial partner, his services. The partnership obligation to outsiders
exceeds the total net assets by P18, 000.Who and by how much will the partners be liable for the
payment of the P18,000?
a. F – P9, 000; G – P 5,4 00; H – P3, 600; I – nothing
b. F – P6, 000; G – P 6, 000; H – P6, 000; I – nothing
c. F – P4, 500; G – P 2, 700; H – P1, 800 I – nothing
d. F – P4,500; G – P 4,500; H – P4, 500; I P4, 500

22. B and Y orally agreed to form a partnership. Each contributed cash and properties worth P10, 000
to common fund. But they did not register the partnership with the Securities and Exchange
Commission.
a. The partnership is void
b. The partnership is voidable
c. The partnership is still valid
d. The partnership is unenforceable

23. A partnership which comprises all that the partners may acquire by their work or industry during
the existence of the partnership is:
a. Particular partnership
b. General partnership
c. Universal partnership of all present property
d. Universal partnership of profits

----End of Handouts----

“You are capable of whatever you wish. No matter how far down you may be, no matter what has happened
in your past, you are capable of molding the future in the direction of your dreams.”

“Success and accomplishment are not limited to those who are lucky. They are available to anyone who
chooses to have great attitude, and be disciplined, focused, persistent, committed, positive, and
enthusiastic.”

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Driven for real excellence! BL by Atty. Andrix Domingo, CPA BL – 6th Batch – HQ06