Chapter 2

Question 1

Commencement of Partnership

Answer 1

A partnership is a consensual contract (see Art. 1767.); hence, it exists from the moment of the celebration of the contract by the partnership. (see Art. 1315.)
What is necessary is that the essential requisites of a contract of partnership are present even when the partners have not yet actually given their contributions, or even through its conditions or details, such as the participation of the partners in the profits and losses and the nature of the partnership have not yet been fixed, as they pertain to the accidental and not to the essential parts of the contract.

Question 2

ARTICLE 1785.

Answer 2

When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any
express agreement, the rights and duties of the partners remain the same as they were at such termination, so far as is consistent with a partnership at will.
A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership.

Question 3

PARTNERSHIP AT WILL

Answer 3

one in which no time is specified and is not formed for a particular undertaking or venture which may be terminated anytime by mutual agreement
The partnership, however, may be extended or renewed by the partners by express agreement, written or oral, or impliedly, by the mere continuation of the business after the termination of such term or particular undertaking without any settlement or liquidation. In such cases, the rights and duties of the partners remain the same as they were at such termination but only insofar as it is consistent with a partnership at will.

Question 4

Dissolution/Termination of the partnership.

Answer 4

In other words, with such continuation, the partnership for a fixed term or particular undertaking is dissolved and a new one, a partnership at will, is created the continued existence of which will depend upon the will of the partners. Unless otherwise provided by the partnership, a partnership is “at will” (see Art. 1776), meaning that a partner may terminate the partnership whenever he wishes. The reason is that a partnership relationship is a personal one; thus the law will not force anyone to continue as a partner or to become a partner.

Question 5

ARTICLE 1786.

Answer 5

Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.
He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect to the vendee. He shall also be liable for the fruits thereof from the time they should have been delivered, without the need of any demand.

Question 6

ARTICLE 1787.

Answer 6

When the capital or a part thereof which a partner is bound to contribute consists of goods, their appraisal must be made in the manner prescribed in the contract of partnership, and in the absence of stipulation, it shall be made by experts chosen by the partners, and according to current prices, the subsequent changes thereof being for the account of the partnership. (n)

Question 7

ARTICLE 1788.

Answer 7

A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation.
The same rule applies to any amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the amount to his own use. (1682)

Question 8

ARTICLE 1789.

Answer 8

An industrial partner cannot engage in business for himself unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages in either case. (n)

Question 9

A partnership with a fixed term

Answer 9

A partnership with a fixed term is one in which the term of its existence has been agreed upon expressly or impliedly. The expiration of the term thus fixed or the accomplishment of the particular undertaking specified will cause the automatic dissolution of the partnership

Question 10

Obligations with respect to the contribution of property

Answer 10

The above article deals with the obligation of the partners among themselves and to the partnership with respect to the contribution of property. They are as follows:

1. To contribute at the beginning of the partnership or at the stipulated time the money, property or industry to which he may have promised to contribute
2. To answer for eviction in case the partnership is deprived of the determined property contributed
3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery.

Question 11

Effect of failure to contribute property promised

Answer 11

1. Liability as a Debtor to the Partnership - The mutual contribution to a common fund is of the essence of the contract of partnership, for without the contributions, the partnership is useless. It is logical that the failure to contribute is to make the partner automatically a debtor of the partnership even in the absence of any demand.
2. Remedy of other partners - Under this article, the remedy of the other partners or the partnership is nlt rescission or cancellation of the contract of a partnership but an action for specific performance with damages and interest from the defaulting partner who is made a debtor of the partnership for what he has promised to contribute to the partnership, from the time that he should have complied with his obligation.

Question 12

Article 1810

Answer 12

The property rights of a partner are:
1. His rights in specific partnership property
2. His interest in the partnership
3. His right to participate in the management

Question 13

Article 1813

Answer 13

A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership, or, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. However, in case of fraud in the management of the partnership, the assignee may avail himself of the usual remedies.
In case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners. (n)

Question 14

Article 1814

Answer 14

Without prejudice to the preferred rights of partnership creditors under Article 1827, on due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts, and inquiries which the debtor partner might have made, or which the circumstances of the case may require.
The interest charged may be redeemed at any time before foreclosure, or in case of a sale being directed by the court may be purchased without thereby causing a dissolution:
(1) With separate property, by any one or more of the partners; or
(2) With partnership property, by any one or more of the partners with the consent of all the partners whose interests are not so charged or sold.
Nothing in this Title shall be held to deprive a partner of his right, if any, under the
exemption laws, as regards his interest in the partnership. (n)

Question 15

Article 1816

Answer 15

All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. (n)

Question 16

Article 1823

Answer 16

The partnership is bound to make good the loss:
(1) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. (n)

Question 17

Article 1824

Answer 17

All partners are liable solidarily with the partnership for everything chargeable to the partnership under articles 1822 and 1823. (n)

Question 18

Article 1825

Answer 18

When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to anyone, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such persons to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made:
(1) When a partnership liability results, he is liable as though he were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise
separately.
When a person has been thus represented to be a partner in an existing partnership, or with one or more persons, not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation. When all the members of the existing partnership consent to the representation, a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the persons consenting to the representation. (n)

Question 19

Article 1828

Answer 19

The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. (n)

Question 20

Article 1831

Answer 20

On application by or for a partner, the court shall decree a dissolution whenever:
(1) A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind;
(2) A partner becomes in any other way incapable of performing his part of the partnership contract;
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business;
(4) A partner wilfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;
(5) The business of the partnership can only be carried on at a loss;
(6) Other circumstances render a dissolution equitable.
Examples of circumstances which render a dissolution equitable are abandonment of the business, fraud in the management of the business, refusal without justifiable cause to render accounting of the partnership affairs.
On the application of the purchaser of a partner’s interest under Article 1813 or 1814:
(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 order was issued. (n)

Question 21

Article 1839 Section 2

Answer 21

(2) The liabilities of the partnership shall rank in order of payment, as follows:
(a) Those owing to creditors other than partners,
(b) Those owing to partners other than for capital and profits,
(c) Those owing to partners in respect of capital,
(d) Those owing to partners in respect of profits.