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PARTNERSHIP
- 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.
Essential Characteristics:
a. Consensual e. Principal
b. Bilateral f. Nominate
c. Onerous g. Preparatory
d. Commutative
Essential requisites:
a. There must be a valid contract
b. The parties must have legal capacity to enter into the contract
Persons incapacitated to enter into a contract of universal partnership:
1. spouses during the existence of the marriage
2. between persons who are guilty of adultery or concubinage
3. between persons guilty of the commission of the same offense in consideration thereof
4. between public officer or his wife or some other person by reason of the public office.
c. There must be mutual contribution to the common fund
Contribution to a common fund:
1. Property real, personal, tangible or intangible
2. Money cash, and legal tender except if there is a stipulation
3. Industry mental or physical
IMPORTANT: limited partners can only contribute money of property.
d. The object must be lawful
Effects of unlawful partnership:
1. Void ab initio
2. Profits shall be confiscated in favor of the government
3. Instruments or tools and proceeds of the crime shall be forfeited in favor of the government
4. Capital contributions will be returned to the partners unless the contributions were used as
instruments or tools in the commission of the crime
e. The purpose or primary purpose must be to obtain profits and to divide the same among the
partners OR to exercise profession
f. The Articles of Partnership must not be secret to among its members
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Statute of Frauds in a Partnership:
a. Sale of personal property when the price is not les than Php500, unless there is delivery of payment
b. Sale of real property or any interest thereon
c. Promise to answer for the debt, default or miscarriage of another person
d. Agreement to form a partnership shall be performed after 1 year
e. Lease of partnership property for more than 1 year
2. Co-ownership of a property does not itself establish a partnership, even though the co- owners share
in the profits derived from the incident of joint ownership.
3. Sharing of gross returns alone does not indicate a partnership, whether or not the persons sharing
them have a joint or common right or interest in any property.
4. Sharing of net profit (or simply profit) shall give rise to a disputable presumption of the existence of a
partnership, except when such profits were received in payment:
a. as a debt by installments or otherwise
b. as wages of an employee or rent to a landlord;
c. as an annuity to a widow or representative of a deceased partner;
d. as interest on a loan, though the amount of payment vary with the profits of the business;
e. as the consideration for the sale of a goodwill of a business or other property by
installments or otherwise.
Classification of Partnership:
1. as to object. 5. as to publicity
a. universal partnership a. secret partnership
1. of all present property b. notorious/open partnership
2. of profits
b. particular partnership
Classes of partners:
1. As to contributions 4. Other classifications
a. capitalist a. liquidating
b. industrial b. real
c. dormant
2. As to liability d. ostensible
a. general e. secret
b. limited
5. Other related terms
3. As to management a. sub-partner, associate, assignee
a. managing b. nominal/partner by estoppel
b. silent
Contract of Sub-partnership
- one formed between a member of a partnership and a third person for a division of profits coming to
him from the partnership enterprise.
- it is a partnership within a partnership distinct and separate from the main or principal partnership.
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AGENCY
PARTNERSHIP
1. has juridical personality separate and 1. no juridical personality
distinct from the partners
2. partners are agents for the partnership 2. agent is not a principal himself
and for other partners
3. partner is part co-owner with his co- 3. agent is not a co-owner of the
partners with respect to partnerships principal
property
4. power of attorney if not required for a 4. power of attorney is ordinarily
partner to act, provided the act is within the required before an agent can act in
scope of partnership behalf of the principal
CORPORATION
PARTNERSHIP
1. created by mere agreement of the 1. created by operation of law
parties
2. may be organized by only two 2. requires at least 5 incorporators
persons
3. juridical personality commences 3. juridical personality commences
from the moment of execution of the from the moment of issuance of the
contract of partnership Certificate of Incorporation by the SEC
4. may exercise any power 4. can exercise such powers expressly
authorized by the partners as long as granted by law or incident to its
it s not contrary to law, morals, etc. existence
5. if no agreement as to 5. power to do business is vested in
management every partner is an the board of directors/trustees
agent of the partnership
6. a partner as such may sue a co- 6. suit against the board of director
partner who mismanages who mismanages must be brought in
the corporations name
7. has no right of succession 7. has right of succession
8.the partners are liable personally 8. the stockholders are liable to the
and subsidiarily for partnership debts extent of the shares subscribed by
them
9. based on delectus personam 9.not based on delectus personam
10. may be established for any 10. may not be formed for a period
period of time stipulated by the exceeding 50 years, but subject to
partners extension
11. may be dissolved at anytime by 11. may be dissolved only with the
the will of any or all partners consent of the State
12. death of a general partner 12. death of a shareholder does not
dissolves the partnership dissolve a corporation
13. governed by the Civil Code 13. governed by the Corporation Code
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Obligations of the partners with respect to contribution of money or property:
1. Contribute at the beginning of the partnership or at the time stipulated
2. Answer for eviction
3. Answer for the fruits of the property contributed in case of delay in the delivery
4. Exercise diligence over the property pending delivery
5. Indemnify the partnership for any damage or interest in case of money, caused by the retention
of the same or delay in the delivery
Capitalist partner:
- CANNOT engage in any operation or business similar to the business of the partnership, otherwise:
a. Shall be liable to the partnership for any profit obtained from his transactions
b. Shall personally bear all his losses
EXCEPTION:
-when the business is not the same or similar to that of the partnership
- if there is a stipulation to the contrary
RULE: If a partner authorized to manage collects a demandable sum which was owed to him in his own
name, from a person who owed the partnership another sum also demandable, the sum thus
collected shall be applied to the two credits in proportion to their amounts, even though he may
have given a receipt for his own credit only; but should he have given it for the account of the
partnership credit, the amount shall be fully applied to the credit of the partnership.
Rights of a partner:
1. Receive his share of profits of the partnership
2. Participate in the management of the firm
3. Associate another person in his share of the profits
4. Inspect the partnership books at any reasonable hour
5. Demand formal accounting even before dissolution:
a. If the partner is wrongfully excluded from the partnership business or profession of its
property by his co-partners
b. If the right exists under the terms of any agreement
c. If a partner has derived profits from any transaction connected with the formation, conduct, or
liquidation of the partnership or from any use by him of its property
d. Whenever other circumstances render it just and reasonable
6. Ask for dissolution of the firm by court decree
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Obligations of a newly admitted partner:
1. Obligations already existing before admission
- liability is up to the extent of contribution, unless otherwise agree.
2. Obligations incurred after admission
- liability is up to the extent of separate property, unless admitted as a limited partner
DISSOLUTION
- the change in the relation of the partners caused by any partner ceasing to be associated in carrying
on the business.
EFFECT on the right of the partners to act as agents -- all authority of any partner to act for the
partnership will be terminated.
EXCEPT: 1. Contracts necessary to wind up partnership affairs
2. Contracts already perfected and begun but not then finished
3. The dissolution being by act of any partner, the partner acting for the partnership had
no knowledge of the dissolution; or
4. The dissolution being by the death or insolvency of a partner, the partner acting for
the partnership had no knowledge or notice of the death or insolvency.
Judicially a way of winding up a dissolved partnership under the control and direction of the proper
court upon cause shown by any partner, his legal representative of his assignee
Extra-judicially way of winding up by the partners themselves without the intervention of the court.
Partnership assets:
1. Partnership property including goodwill
2. Contributions of the partners necessary for the payment of all liabilities
Termination
- the point in time when all partnership affairs are wound up or completed and is the end of the
partnership life.
Limited Partnership - formed by two or more persons having as members one or more general partners
and one or more limited partners.
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RULES:
- the limited partners shall not be bound by the obligations of the partnership
- the limited partners do not participate in the control or management of the business of the
partnership
- partnership debts shall be paid out of the common fund and the separate properties of the general
partners
- a limited partner can only contribute money or property
- a limited partners name cannot appear in the partnership name, otherwise he will be liable as a
general partner, except:
1. the surname of the limited partner is the same as the surname of a general partner
2. before the limited partner became as such, the business had been carried on under a name
in which his surname appeared
3. third persons extended credit to the partnership with the knowledge that he is limited partner
General-Limited partner - has all the rights and powers and is subject to all liabilities of a general
partner, but still a limited partner as to liability to contribute capital
Substitute Limited partner - a person admitted to all the rights of a limited partner who has died or has
assigned his interest in a partnership
Preferred Limited partner - given priority over all limited partners in the return of investment,
compensation and other matters provided the agreement will appear in the
certificate of limited partnership
/mrs