RFBT - PARTNERSHIP Flashcards
What is a partnership?
A partnership is a contract of two or more persons who 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. It is both a CONTRACT and a BUSINESS ORGANIZATION. It is a JURIDICAL ENTITY which has a personality DISTINCT FROM THAT OF EACH OF THE PARTNERS. It BEGINS FROM THE MOMENT OF THE EXECUTION OF THE CONTRACT, unless otherwise stipulated.
What are the essential requisites of a partnership?
- ) There must be a valid contract - there must be voluntary agreement among the partners.
- ) There must be a mutual contribution of money property, or industry to a common fund.
- ) It must have a lawful object or purpose.
- ) The partnership must be established for the common benefit or interest of the partners which is to obtain profits and to divide the profits among the partners. However, if a partnership is formed for the PRACTICE OF A PROFESSION, ITS PRIMARY PURPOSE IS TO RENDER SERVICE TO THE PUBLIC.
What are the required form of a partnership contract?
A partnership contract may be constituted in any form, except as follows:
1.) Where IMMOVABLE PROPERTIES are contributed:
a.) The partnership contract must be IN A PUBLIC
INSTRUMENT
b.) An inventory of the said property must be made,
SIGNED BY THE PARTIES AND ATTACHED TO THE
PUBLIC INSTRUMENT.
If a and b above are not complied with, the
partnership is VOID AND HAS NO JURIDICAL
PERSONALITY.
- ) Where the capital of partnership is P3,000.00 or more.
a. ) The partnership must be in a public instrument
b. ) Registered with SEC
If a and b are not complied with, it is still VALID and
has JURIDICAL PERSONALITY and the liability to 3rd
persons are not affected.
3.) If LIMITED PARTNERSHIP
a.) Certificate signed under oath by parties concerned
and recorded with SEC is required. Noncompliance
will render it a general partnership?
Are corporations are allowed to enter into partnership agreements?
Yes, but corporations can only enter into partnerships in the form of joint venture agreements.
What is a universal partnership of all present property?
It is a partnership in which all the partners contribute all the property which actually belonged to them to the common fund, with the intention of dividing the same among themselves, as well as the profits which they acquire therewith.
EVERYTHING IS INCLUDED except:
1.) Property acquired by each partner AFTER THE PARTNERSHIP FORMATION UNLESS STIPULATED.
2.) Property received by INHERITANCE, LEGACY, OR DONATION after partnership formation.
What is a universal partnership of profits?
It comprises all that the partners may acquire by their work or industry during the existence of the partnership. It comprises:
a. ) Profits obtained by partners by their work or industry during the existence of the partnership, EXCLUDING those profits w/o exertion of efforts such as those acquired by chance/lucrative title.
b. ) USUFRUCT of property belonging to each partner at the time of the constitution of the partnership. Ownership of the property shall continue to pertain exclusively to each partner.
c. ) The profits and fruits of A and B.
d. ) Profits and fruits IF STIPULATED from property acquired AFTER partnership formation.
What is the rule in case universal partnership is without any specification?
It will only constitute a UNIVERSAL PARTNERSHIP OF PROFITS because it transmits less rights and interests.
Who are prohibited from entering into a universal partnership?
- ) Spouses during marriage.
- ) Persons guilty of concubinage
- ) Those guilty of the same criminal offense in consideration thereof.
- ) Public officers and his spouse, descendants or ascendants by reason of his office.
What is a particular partnership?
A partnership which has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession.
What is a general partnership?
Comprised of all general partners who are all liable to the extent of their separate property after the partnership assets have been exhausted.
What is a Limited Partnership?
Partnership where there is at least one general partner and one or more limited partners.
What is a partnership for a fixed term?
One whose duration is fixed by the partners.
What is a partnership for a particular undertaking?
One which is organized for a certain undertaking, which when attained, causes the termination of the partnership.
What is a partnership at will?
One where no period is fixed by the parties, hence, may be terminated at will by the partners.
What happens when a partnership for a fixed term continues after the expiration of said term?
The partnership becomes a partnership at will, with the following effects:
a. ) 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.
b. ) The absence of settlement or liquidation of partnership affairs is prima facie evidence of the continuation of partnership.
What is an ordinary partnership?
One which actually exists among the partners as well as to 3rd persons.
What is a partnership by estoppel?
One which in reality is not a partnership but is considered one with respect to those, who by reason of their conduct or admission, are precluded from denying its existence.
What happens if ALL the partners consent to a misrepresentation?
A partnership by estoppel is created between the actual partners and the person who made the representation. A partnership liability results and the partners and the person who made the representation are liable with their separate properties.
What happens if NOT ALL the partners consented to misrepresentaion?
No partnership liability results. A partnership by estoppel is created only between the consenting partners and the person who made the misrepresentation. They shall be liable JOINTLY with their separate properties.
What happens when persons misrepresent themselves as partners in a non-existing partnership?
Those who consented to the misrepresentation shall be liable jointly.
What is a general partner?
One who is liable for partnership debts to the extend of his separate property after all assets of the partnership have been exhausted.
What is a limited partner?
One who is liable for partnership debts only to the extent of his capital contribution only.
What is a general-limited partner?
One who has all the rights and powers and is subject to the restrictions of a general partner, except that, in respect to his contribution, he shall have the rights against the other members which he would have had if he were not also a general partner.
What is a capitalist partner?
One who contributes money or property to the common fund.
What is an industrial partner?
One who contributes services to the common fund.
What is a capitalist industrial partner?
One who contributes money or property and services to the common fund.
What is a managing partner?
One who manages the affairs of the partnership.
What is a liquidating partner?
One who takes charge of the winding up affairs of the partnership after it is dissolved.
What is a nominal partner?
One who is actually NOT A PARTNER but who may be liable as such to 3rd persons. (Partner by estoppel)
What is an ostensible partner?
One who is active and known to the public as a partner.
What is a secret partner?
One whose connection to the partnership is kept from the public.
What is a silent partner?
One who has no voice in the management of the business though he shares in the profits and losses. He does not take active part in the business but may be known as partner by 3rd persons.
What is a dormant partner?
One who does not participate in the management of the partnership and is not known to the public as a partner.
What is the rule on profit/loss division if all partners are capitalist partner?
- ) P/L shall be divided according to their agreement.
- ) If only the sharing of profits has been agreed on, the losses will also be divided in the same manner.
- ) If no P/L agreement in place, it will be according to their contributed capital.
What is the rule on profit/loss division if there is an industrial partner?
- ) P/L shall be divided according to their agreement.
- ) In the absence of any agreement thereon, the industrial partner shall receive first a just and equitable share of the profits, thereafter the capitalist partners shall receive a share in proportion to their capital contribution. (IN THE OLD LAW, THE INDUSTRIAL PARTNER RECEIVED A SHARE EQUIVALENT TO THAT OF THE PARTNER WITH THE LEAST CAPITAL CONTRIBUTION.)
If it is a LOSS:
1.) The industrial partner does not share in the losses.
- ) The capital partners shall share in the losses as follows:
a. ) Losses shall be divided according to their agreement.
b.) If only the sharing of profits has been agreed on,
the losses will also be divided in the same manner.
c.) If no P/L agreement in place, it will be according to
their contributed capital.
What is the rule on profit/loss division if there is also a capitalist-industrial partner?
As to profits:
1.) Profits shall be divided according to their agreement.
- ) In the absence of any agreement thereon, profits shall be divided as follows:
a. ) The capitalist-industrialist shall receive first a just and equitable share in his capacity as an industrialist partner.
b.) Thereafter, the capitalists and capitalist-industrial partner shall divide the profits in proportion to their contributed capital.
As to Losses,
a.) Losses are divided according to their agreement
b.) In the absence of an agreement, losses are divided in proportion to their capital contribution.
c.) In a and b above, capitalist-industrial partner shall
not share in the losses in his capacity as an industrial
partner.
What happens when the profits and losses distribution is designated to a 3rd person?
It shall be binding upon the partners and MAY BE IMPUGNED ONLY WHEN IT IS MANIFESTLY INEQUITABLE. However, even if it is manifestly inequitable, it can NO LONGER BE IMPUGNED:
a. ) By a partner who has begun to execute it OR
b. ) By any partner if THREE MONTHS had already lapsed from the time he OBTAINED KNOWLEDGE thereof.
What happens when the profits and losses distribution is entrusted to one of the partners?
The designation is VOID because it cannot be entrusted to one of the partners.
What are the rules of management when a partner has been appointed in the ARTICLES OF PARTNERSHIP?
1.) Scope of authority - managing partner may execute all acts of administration despite the opposition of his partners UNLESS HE ACTS IN BAD FAITH.
- ) Revocation of appointment of managing partner
a. ) W/ lawful cause - appointment can be revoked by the vote of the partners owning the controlling interest.
b.) W/o lawful cause - appointment can be revoked ONLY WITH THE CONSENT OF ALL PARTNERS INCLUDING THE MANAGING PARTNER because such revocation would be a novation to the terms thereof.
What are the rules of management when a partner has been appointed AFTER PARTNERSHIP FORMATION?
- ) Scope of authority - he may execute all acts of administration but in case of OPPOSITION BY OTHER PARTNERS, the PARTNERS OWNING CONTROLLING INTEREST may resort to voting for his removal as manager.
- ) Revocation of his appointment as managing partner - he may be removed with or without just cause by the vote of the partners owning controlling interest.
What are the rules of management when two or more partners have been appointed as managers?
A.) When there is a specification of their duties - Each managing partner shall perform only the duties specified in his appointment.
B.) When there is no specification of their duties -
a.) Scope of authority - each one may separately execute all acts of administration.
b.) Rules in case of opposition of other managers -
1.) Decision of majority of managing partners shall
prevail
2.) In case of tie among managers, 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 - CONCURRENCE OF ALL of them shall be necessary for the validity of the acts.
In case of absence or disability of one of the managing partners, the disability/absence cannot be alleged, thus the other managing partners are NOT AUTHORIZED UNLESS THERE IS IMMINENT DANGER/ IRREPARABLE INJURY TO THE PARTNERSHIP.
What are the rules of management when none has been agreed upon?
- ) All partners shall be considered agents of the partnership
- ) Whatever any one of them may do alone shall bind the partnership
- ) Rule in case of opposition of other partners
a. ) Majority shall prevail
b. ) In case of tie, controlling interest shall prevail
May an industrial partner engage in business for himself? What are the effects if he does?
No, unless it has been expressly permitted by the partnership.
If he has engaged in business without being permitted, the capitalist partners may EITHER:
a. ) exclude him from partnership with right to damages
b. ) avail themselves of the benefits obtained from the business he engaged in with right to damages.
What kinds of business may a capitalist partner engage in?
- ) Businesses different from the partnership business
- ) Businesses the same with the partnership business, provided there is a STIPULATION allowing him to engage in that business.
What is the effect if a capitalist partner engages in the same business as the partnership without stipulation allowing him?
- ) He shall bring to the common fund any profits accruing to him from his transaction AND
- ) He shall personally BEAR ALL THE LOSSES.
What are the rules of partnership liabilities to third person?
Pro-rata among general partners
What are the rules on sharing of partnership liabilities to third persons when there is a stipulation exempting a general partner from pro-rata and subsidiary liability after the exhaustion of partnership assets?
- ) Stipulation is void as to 3rd persons
- ) Stipulation is valid among the partners
Liabilities in this case shall be paid as follows:
- ) Assets of partnership shall be used first to pay liabilities
- ) If partnership assets are not sufficient, liability shall be paid equally from the separate assets of the general partners.
- ) Partners NOT exempted from pro-rata and subsidiary liability shall reimburse those who are exempted according to their P/L ratio or capital contribution, whichever is applicable.
What happens when a person not a partner in a partnership includes his/her name in the partnership?
He shall be subject to liability of a partner.
What are the obligations of the partners?
- ) Contribution of capital
- ) Obligations with respect to contribution of property
a.) Deliver the property to the partnership at the time
stipulated
b.) To take care of the property before its deliver to
the partnership with the diligence of a good father of
a family.
c.) To be liable for damages in case of default
d.) To answer for eviction in case the partnership is
deprived of the thing he has contributed.
e.) To be liable for the fruits of the thing from the time
they should have been delivered WITHOUT THE
NEED OF ANY DEMAND.
3.) Obligations with respect to contribution of money
a.) To deliver the partnership money he has promised
to contribute on the date stipulated.
b.) To pay interest on the amount promised he had
promised to contribute from the time he should have
complied with his obligation
c. ) To pay damages if he defaults
4. ) Obligations with respect to amount appropriated
a. ) To reimburse partnership amounts that he may have taken from partnership coffers.
b.) To pay interest on the amount he had converted
for his own use from the time of conversion
c.) To pay damages suffered by the partnership by
reason of the conversion
Others elaborated further in other questions.
What is the obligation of a partner who has received his share of partnership credit?
To bring to the partnership capital his share of partnership credit he received in whole or in part even if has already given his receipt when:
- ) The other partners have not collected their shares
- ) The debtor becomes insolvent after the partner has received the payment.
When is a partner obliged to contribute additional capital?
a. ) To contribute additional share to the capital in case of an IMMINENT LOSS of the business of the partnership EXCEPT:
1. ) IF HE IS AN INDUSTRIAL PARTNER OR
2. ) IF THERE IS AN AGREEMENT TO THE CONTRARY
b.) To sell his interest to the other partners if he refuses to contribute additional capital.
