University of San Carlos

School of Business and Economics

Department of Accountancy

Regulatory Framework for Business Transactions November 7, 2020

Law on Partnership J.M.DENILA

I. Multiple Choice
1. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear
in a public instrument, which must be recorded in the Office of the SEC. Failure to comply with this requirement
a. renders the contract of partnership void.
b. renders the contract of partnership unenforceable.
c. affects the liability of the partnership to third persons and the partnership has no legal personality.
d. does not affect the liability of the partnership to third persons and the partnership still has a legal personality.

2. In case of losses, the industrial partner shall,

a. Share in the losses in any event.
b. Shall share in the losses only if there is a stipulation.
c. Shall not share in the losses even if he contributes capital.
d. Shall not share in the losses except if he contributes capital also.

3. A and B are partners in A & B Partnership. A owns two parcels of land which he contributed to the partnership. B
owns six trucks which he contributed to the partnership. The profits of the land and the trucks were also included as
contributions. The properties contributed are all what A and B own. The partnership is:
a. Universal
b. Universal partnership of all present property
c. Universal partnership of all profits
d. Particular partnership

4. R, S and T decided to form a universal partnership of all present property. The contract of
partnership was executed on October 10, 2018 but they commenced business on October 18, 2019. One of the
following is not correct?
a. If the partnership is for 15 years, but one of the partners withdraws from the partnership on the 12 th year, the
firm is dissolved.
b. The partnership began its existence on October 10, 2018.
c. If after the expiration of the its term, the partners continue to transact business, the partnership is converted to
a partnership at will.
d. In the absence of any partnership agreement specifically covering the division of losses among the partners, they
will be deemed to share the losses in accordance with their capital contributions.

5. A, B and C formed a Universal Partnership of Profits. The partners contributed the following: A – 20 sewing
machines; B – 14 Furniture and Fixtures; C – 4 storey building. The parties agreed that only the use of the fruits of
the objects contributed shall pertain to the partnership. Which of the following statements is true?
a. The partnership upon delivery shall be the owner of the objects contributed.
b. Upon dissolution, the objects shall be converted into cash and the proceeds shall be divided equally among the
partners including the fruits.
c. During the term of the partnership, the contributing partner remains to be the naked owner of the object
contributed but upon dissolution all objects are to be converted into cash and proceeds shall be divided equally
among the three partners.
d. During the term of the partnership, the loss of the objects contributed shall be borne by the partners concerned.

6. April, May and Jun formed a partnership with a capital of P100,000 and the partners contributing 50%, 30% and
20%, respectively. Mars has a claim of P160,000 against the partnership. If Mars files a suit to collect her claim,
which of the following is not correct?
a. All the partners are liable to the extent of their separate property.
b. All the partners shall be liable pro-rata with all their property only after the partnership assets have been
exhausted.
c. The personal liability of the partners is merely joint and not solidary.
d. After exhaustion of the partnership assets, April, May and Jun shall be liable 50%, 30% and 20% respectively to
Mars for unpaid claim.

7. On April 1, 2018, A and B entered into a contract of partnership for the purpose of buying and selling textbooks,
with the former as capitalist partner and the latter as industrial partner. It was agreed that A shall contribute
P100,000 to the common fund on May 2, 2018. Upon the arrival of the designated date, A failed to deliver the
contribution he promised. As a result
a. B should make a demand upon A for the delivery of his contribution to render A in default.
b. The contract of partnership becomes void because A failed to give his contribution to the common fund.
c. B can compel A to deliver his contribution with interest and damages without the necessity of demand.
d. The contract of partnership was never perfected because there was no delivery of contributions by the partners.

8. Three of the following are rights of a partner, which one is not? Right to
a. Associate another person to his share.
b. Admit another partner.
c. Inspect and copy partnership books.
d. Ask dissolution of the firm at the proper time.

Law on Partnership (1)

9. A partnership begins from:
a. The moment of the execution of the contract;
b. The moment of the notarization of the document of partnership;
c. The registration with the SEC;
d. The moment all contributions are paid.

10. What does the sharing of gross returns in a business undertaking mean?
a. Conclusive evidence of partnership;
b. Prima facie evidence of partnership;
c. Does not establish a partnership.
d. Disputable presumption of partnership.

11. When may a partner who was appointed as manager in the articles of partnership be removed?
a. May be removed at anytime;
b. May be removed with just or lawful cause by majority of the partners;
c. May be removed for just and lawful cause by a vote of partners representing controlling interest;
d. May be removed by order of the court.

12. In connection with the rule of mutual agency of the partners in a partnership which of the following is not correct?
a. Partnership is liable to every partner for amounts disbursed on behalf of the partnership, plus interest, from the
time the expenses are made;
b. Unless otherwise agreed upon, all partners shall be considered agents and whatever any one of them may do
alone binds the partnership;
c. Anyone of the partners may make important alterations on the immovable property of the partnership;
d. Admission or representation made by a partner concerning partnership affairs is evidence against the partnership.

13. A and B orally entered into a partnership with each of them contributing P3,000 each and some personal
properties in the amount of P1,000 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

14. 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.

15. A and B entered into a universal partnership of profits. Subsequently A became a professor in a university. Will
A’s salary belong to the partnership?
a. Yes, because the salary was acquired through A’s industry or work.
b. No, unless it is stipulated that his salary shall be deemed contributed.
c. No, because it is not considered a profit acquired from a property.
d. Yes, if stipulated by the partners.

16. A and B are partners in buying and selling cars. A, by the partner’s agreement, was authorized to buy only in
cash. One day, A bought on credit a car from X, a client, who did not know of A’s lack of authority. A’s purchase was
made in the name of the partnership. Is the partnership bound in the sale?
a. The partnership is not bound because the contract is unenforceable, A exceeded his authority.
b. It is not bound because the contract with X is not in the ordinary course of business.
c. It is bound because X was in good faith and the act of A was apparently in the conduct of business.
d. It is bound if it ratifies the contract of sale by acceptance of benefits.

17. A and B entered into a universal partnership of profits. Later, A purchased a parcel of land. Will the fruits of the
said land belong to the partnership?
a. No, because the partnership of profits refer only to present fruits.
b. No, because the fruits of property refer only to property possessed by partners at the time of celebration of
contract.
c. Yes, because the fruits are from the property of A.
d. Yes, because the fruits under the law shall cover after-acquired property also.

18. A and B agreed on a profit sharing ratio in their partnership. A, being the industrial partner and B as capitalist
partner. It was also stipulated that A shall also share in the same ratio as to the losses. Is A liable for losses?
a. No, because the law exempts the industrial partner from losses.
b. No, because the partners cannot stipulate the industrial partner shall be liable for losses.
c. Yes, even in the absence of stipulation.
d. Yes, because it was so stipulated.

19. 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, because the prior agreement was voluntarily made.
b. Yes, because the contract is not governed by the Statute of Frauds.
c. Yes, since the contract was enforceable.
d. No, because the agreement was merely oral.

Law on Partnership (2)

20. W, X, Y and Z organized a partnership with W and X as industrial partners and Y and Z as capitalist partners. Y
contributed P.5M and Z contributed P.2M to the common fund. By a unanimous 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. That of W and X because it is an act of management and as managers they can do so.
b. That of Y and Z 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.

21. Refer to #20, suppose the hiring of B was decided upon by W and Z, but was opposed by X and Y, whose decision
shall prevail?
a. That of W and Z because W is the managing partner and the hiring is an act of administration.
b. That of X and Y because the controlling interest shall prevail in this case.
c. The decision of W and Z because Z is also a capitalist partner.
d. None because of the statement of equal rights.

22. X, Y and Z are partners who contributed equally to the partnership. A owes the partnership P9,000. Z collected
from A P3,000 before X and Y could receive anything from A, who later became insolvent and therefore they could
not collect their shares.
a. Z shall share P2,000 with his co-partners X and Y.
b. Z shall share the P3,000 with his co-partners X and Y.
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 their share of P2,000.

23. A is a capitalist partner and B the industrial one. A engaged personally in the same kind of business as that of
the partnership:
a. If there are losses, the partnership will bear the losses.
b. If there are profits, A and the partnership will share it.
c. If there are profits, A shall give them to the partnership.
d. A may be excluded from the partnership with liability for damages.

24. A and B are partners with A as the managing partner. C owes A P10,000 and the partnership P30,000 which are
now both due. A issued a receipt for the payment of C in the amount of P10,000 in his own name. The payment shall
be applied to:
a. This partnership credit totally.
b. The credit of A only since the receipt is in his name.
c. The payment shall be applied equally to both credits.
d. The payment shall be applied proportionately to both credits.

25. A partner is a co-owner with his partners of specific partnership property. Such co-ownership:
a. allows a partner to assign his right in such property
b. allows a partner to use such property for partnership purposes
c. entitles the heirs of a partner to claim support from such property
d. gives the private creditors a right to attach such property

26. Which of the following statements concerning the name of a partnership is false?
a. The firm name may include the name of only one of the partners.
b. The firm name may include the names of two or more of the partners.
c. The firm name may include the names of all the partners.
d. The partnership cannot adopt a name which does not include the name of at least one of the partners.

27. R, Z and T want to form a partnership with R contributing P500,000; Z, office equipment; and T, his services. As
a result, which is false?
a. Any of the three may be appointed as manager.
b. All of them may be appointed as managers.
c. Only T may be appointed as manager because he only contributes his services.
d. Any two of them may be appointed as managers.

28. Ms. K owes P3,000 to RZT Company, a partnership composed of R, Z and T, with R as the manager who is
authorized to collect all credits of the firm. She also owes T the amount of P6,000. Both debts are already due. Ms.
K gives P3,000 to T in payment of her debt to the latter. T thus issues his own receipt.
a. Payment will be applied proportionately at P2,000 for T’s credit and P1,000 for RZT’s credit.
b. Payment will be applied equally to the two credits.
c. Payment will be applied to T’s credit only.
d. Payment will be applied to RZT’s credit only.

29. RZT, the owner of a vacant lot, leased the same to KGF under an agreement that the rental shall be paid by KGF
at the rate of 10% of the annual net income of the flower business that he would put up on the lot. A private
agreement was signed by the parties. In the first year of operations, RZT received from KGF the amount of P20,000
representing 10% of net income of the flower shop business.
a. RZT is a partner of KGF of the flower business of KGF.
b. The relationship between RZT and KGF is only that of a lessor and a lessee.
c. RZT and KGF have a dual contract: partnership and lease.
d. No relationship at all between RZT and KGF.

Law on Partnership (3)

30. The partnership will bear the risk of loss of three of the following things. Which is the exception?
a. Things contributed to be sold.
b. Fungible things.
c. Things contributed so that only their use and fruits will be for the common benefit.
d. Things brought and appraised in the inventory.

II. TRUE or FALSE

1. A partner’s interest in the partnership is not assignable unless the other partners consent.
2. 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.
3. If a person receives a share in the profits of a business, he is prima facie presumed to be a partner in the business.
4. In partnership there is agency, co-ownership and co-possession of partnership property.
5. If co-owners share in the profits derived from the use of the property owned in common, there is partnership.
6. A person who represents himself as a partner when in fact he is not shall be liable as a partner by estoppels even
if the third person has knowledge that he is not.
7. A partnership is always created by agreement of the parties.
8. In the absence of stipulation, the share of the industrial partner in the profits shall be equal to the share of a
capitalist partner with the smallest share.
9. The industrial partner shall not share in the losses unless stipulated.
10. A sub-partner is a mere assignee of a partner’s interest and shall become a partner only with the consent of all
the managing partners.
11. A corporation cannot enter into a partnership contract with a natural person but with a juridical person it can.
12. A property acquired by a partner using partnership funds after dissolution but before the winding up of
partnership affairs is owned by the partnership.
13. The law allows a retiring partner to assign his rights in partnership property to the partners continuing the
business.
14. The purchaser of a partner’s interest may apply to the court for the dissolution of the partnership.
15. A partner’s conveyance of his interest in the partnership operates as a dissolution when it is clear that the parties
contemplated and intended the entire withdrawal from the partnership of such partner.

- End of Exam -

Law on Partnership (4)