Partnership Outline 2004

Page 1 of 8
PARTNERSHIP
ELEENTS!
1. 2 or more persons bind themselves
2. to contribute money, property or industry
3. to a common fund
4. with the intention of dividing the profts
among themselves
"O#RNS $% &ARAN ET AL%
A partnership constituted in such a manner,
the existence of which was only known to
those who had an interest in the same, there
being no mutual agreements between the
partners, and without a corporate name
indicating to the public in some way that there
were other people besides the one who
ostensibly managed and conducted the
business, in exactly the accidental partnership
of cuentas en participacion.
Those who contract with the person under
whose name the business of such partnership
of cuentas en participacion is conducted, shall
have only a right of action against such person
and not against the other person interested,
and the latter, on the other hand, shall have
no right of action against the third person who
contracted with the manager unless such
manager formally transfers his right to them.
R#'A $% NLR&
To determine whether or not there is an
employer-employee relationship or a
partnership relation, look at the parity of
standing of the parties. n a !oint venture,
each party has an e"ual proprietary interest
and exercises e"ual rights in the conduct of
the business.
NO PRES#PTION O( PARTNERSHIP
(RO RE&EIPT O( PRO(ITS
1. #eceived as debt by installments
2. #eceived as wages or rent
3. #eceived as annuity by widow or
representative of deceased partner
4. #eceived as interest on a loan
5. #eceived as consideration for sale of $% of
business& other property by installments
NA)ARRO $% &A
'o-ownership or co-possession of some items
and&or any sharing of proceeds by way of
advances received by both parties are not
indicative and supportive of the existence of
any partnership between them. (ook at Article
)*+, '' to determine %-. a partnership
exists.
R#LES AS TO (OR
1. $eneral rule/ Any form
2. 0ust appear in a public instrument if
a. immovable property or real rights are
contributed1 void if an inventory of the
immovable property is not made,
signed and attached thereto
b. capital of at least 2 3,4441 fled with
the 56'
SPO#SES TI# PE&* $% &A
t cannot be said that there was a business
partnership between the appellants and the
appellees, absent the re"uired public
instrument constituting the partnership,
immovable properties having been contributed
by the parties 7Article )**), 'ivil 'ode8 and
recording thereof in the 5ecurities and
6xchange 'ommission 7Article )**2, 'ivil
'ode8.
"ASI& &LASSI(I&ATIONS
1. As to ob!ect
a. universal 9 to all present property or all
profts
profts include all that the partners
may ac"uire by their industry or
work during the existence of the
partnership
however, it does no include
property subse"uently ac"uired by
inheritance, legacy or donation
except the fruits thereof
b. particular 9 determinate things, their
use or fruits, a specifc undertaking or
exercise of profession or vocation
2. As to liability
a. general
b. limited
3. As to duration
a. partnership w& a fxed term or for a
particular undertaking
b. partnership at will
*IN+S O( PARTNERS
). capitalist 9 contributes money
or property
2. industrial 9 contributes only his
industry or personal service
3. general 9 liability to 3
rd
persons
extends to separate property, either
capitalist or industrial
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:. limited- liability to 3
rd
persons
limited to his capital contribution1 only in
limited partnerships
;. managing 9 administers a<airs
of partnership
+. li"uidating 9 takes charge of
winding up partnership upon dissolution
*. partner by estoppel 9 not really
a partner
=. continuing 9 continues
business of partnership after it haw been
dissolved
,. surviving partner 9 one who
remains after partnership dissolved by
death of any partner
O"LI'ATIONS O( PARTNERS AON'
THESEL)ES
1. >egins from moment of execution of
contract, unless otherwise stipulated
'ontinuation of partnership for a fxed
term or particular undertaking
a. after the termination of such term
or particular undertaking
w&o any express
agreement
the rights and duties of
the partners remain the same
as they were at such
termination
b. prima facie evidence of a
continuation of the partnership
continuation of the
business by the partners or
such of them as habitually
acted therein during the term
w&o any settlement or
li"uidation of the partnership
a<airs
2. To contribute to partnership whatever was
promised by partner
a. obligations w& respect to
contribution of property 7capital8
every partner is a debtor of
the partnership for whatever
he may have promised to
contribute thereto
bound for warranty in case
of eviction with regard to
specifc and determinate
things
liable for fruits thereof
from the time they should have
been delivered w&o the need of
any demand
b. if capital contributed consists of
goods
must be made in the manner
prescribed in the contract of
partnership
in the absence of stipulation/
it shall be made by experts
chosen by the partners
according to current prices
subse"uent changes thereof
being for account of the
partnership
c. risk of loss of things contributed
risk borne by the partner who
owns them
if things contributed are
not fungible
only their use and fruits
contributed for common
beneft
risk shall be borne by the
partnership if things
contributed are
fungible
cannot be kept w&o
deteriorating
or contributed to be sold
brought and appraised in
the inventory 7in absence
of stipulation, claim limited
to value of at w&c they
were appraised8
3. (iable for warranty in case of eviction and
for fruits of thing delivered
4. (iable for interest and damages in case
money was to be contributed
5. ndustrial partners cannot engage in
business for himself, unless expressly
allowed by the partnership
a. if he should do so against the
prohibition of the capitalist
partner, they may either
exclude him from the frm
or avail themselves of the
benefts which he may have
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obtained in violation of this
provision
w& a right to damages in either
case
6. To contribute e"ual shares to capital
7. To contribute additional capital in case of
imminent loss
a. exceptions/
industrial partner
if there is an agreement to the
contrary
b. e<ect of failure to contribute/ any
partner 7except the industrial partner8
who refuses to contribute additional
share to the capital to save the
venture shall be obliged to sell his
interest to the other partners
8. To apply demandable sum proportionately
to partnership?s and managing partner?s
credits1 if receipt given in partnership?s
name, to apply amount fully to such
9. To bring to capital share of partnership
credit received in advance when debtor
becomes insolvent and other partners
have not received their shares
10. #esponsible for damages su<ered by
the partnership through partner?s fault
11. #esponsible for amounts disbursed on
partnership?s behalf and for interest 7the
partnership is liable in this case8
12. #esponsible for obligations contracted
in good faith and for risks in conse"uence
of its management 7the partnership is
liable in this case8
13. 5hare in profts and losses by
agreement
a. .o loss-sharing agreement 9 use proft-
sharing proportion
b. .o agreement at all 9 use capital
contribution, with industrial partner
not sharing in losses and receiving
share in profts as may be !ust @
e"uitable
c. An agreement excluding a partner
from sharing in profts or losses is void
the industrial partner is not
liable for losses 7Art. )*,* ''8
however, with respect to 3
rd
persons, the industrial partner
is liable prorata, sub!ect to
reimbursement from the other
partners
d. 0ay entrust designation of shares to a
third person, not to a partner
14. 0anner of management
a. f appointed in articles of partnership,
managing partner may execute all acts
of adm?n despite opposition, unless in
bad faith1 power is irrevocable without
!ust or lawful cause1 controlling
interest is necessary in order to revoke
appointment
b. f power granted after constitution,
revocable any time
c. f two or more entrusted w&o
specifcation of duties or concurrence
re"uirement, each may separately
execute all acts of adm?n1 decision of
ma!ority prevails in case of opposition
against managing partners. n case of
a tie, the matter shall be decided by
the partners owning controlling
interest
d. f with concurrence re"uirement, such
re"?t must be met for validity of acts
e. f there is no agreement as to
management, all partners considered
agents and can bind partnership,
sub!ect to rules on opposition1
concurrence re"?t for important
alterations to immovable property.
5ubpartnership
6very partner may associate another
person with him in his share
>ut the associate shall not be admitted
into the partnership
%&o consent of all the other
partners
6ven if the partner having an
associate should be a manager
15. To keep partnership books at principal
place of business and open for inspection
at reasonable hours
16. To render on demand true and full
information of all things a<ecting the
partnership to/
a. any partner
b. partner under legal disability
c. legal representative or deceased
partner
17. To account for any beneft, and hold as
trustee any profts obtained from
partnership transactions or use of
partnership property. w&o others? consent
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18. 'apitalist partners are prohibited from
engaging in a competing business for their
own account unless otherwise stipulated.
a. 6<ect of violation/
0ust contribute to common funds
any profts
5hall personally bear the losses
19. #ight to a formal account as to
partnership a<airs/
a. f wrongfully excluded from business&
possession of property
b. #ight exists by agreement
c. As provided by A)=4* 7see )* above8
d. %henever !ust @ reasonable
PROPERT- RI'HTS O( A PARTNER
1. #ights in specifc partnership property
2. nterest in the partnership/ share of profts
and surplus
3. #ight to participate in management
NAT#RE O( PARTNER.S RI'HT TO
SPE&I(I& PARTNERSHIP PROPERT-
). 'o-owner w& his partners
2. has an e"ual right with his partners to
possess specifc partnership property
for partnership
purposes
w&o the consent
of his partners, no right to possess
such property for any other
purpose
PARTNER.S RI'HT IN SPE&I(I&
PARTNERSHIP PROPERT-
). not assignable,
except in connection with the
assignment of rights of all the partners
in the same property
2. not sub!ect to
attachment or execution except on a
claim against the partnership
3. not sub!ect to
legal support under A2,)
A PARTNER.S INTEREST IN THE
PARTNERSHIP IS HIS SHARE O( THE
PRO(ITS AN+ S#RPL#S
The right to demand one?s share in the
profts of a partnership is
imprescriptable unless repudiated.
&ON)E-AN&E O( PARTNER O( HIS /HOLE
INTEREST IN THE PARTNERSHIP
). does not in itself dissolve the
partnership
2. nor entitle the assignee the right
to
interfere in management
to re"uire
information or account of
partnership transactions
to inspect
RI'HTS O( ASSI'NEE
). receive the
profts to w&c the assigning partner
would otherwise be entitled
2. however, in case
of fraud in the management of the
partnership, the assignee may avail
himself of the usual remedies
3. in case of
dissolution, receive his assignor?s
interest, and may re"uire an account
from date only of last account agreed to
by all partners
O"LI'ATIONS /ITH RE'AR+ TO THIR+
PERSONS
). -perate under a frm name1 non-partners
whose names appear in the frm are liable
as partners
). (iable pro rata w& all their property and
after partnership assets have been
exhausted for partnership contracts 7also
includes industrial partners8
a. Any stipulation which exempts a
partner from liability shall be void
with regard to third persons
except as among the partners.
2. (iable for acts of partner for apparently
carrying on in the usual way the
partnership business, unless actually not
authoriAed A.B third person aware of lack
of authority
a. 2#.'2(6 -C 0DTDA( A$6.'E/ 6very
partner is an agent of the partnership
for the purpose of its business, and the
act of every partner for apparently
carrying on the usual way of the
business of the partnership of which he
is a member binds the partnership
b. 6xception/ if the part so acting has in
fact no authority, and the 3
rd
person
with whom he is dealing is aware of
such a fact
3. (iable for acts .-T for carrying on the
business >DT authoriAed by other partners
:. 5olidarily liable for any loss or in!ury
caused to any person by the wrongful
act&omission of any partner in the
ordinary course of business or authoriAed
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Partnership Outline 2004
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by co-partners to the same extent as the
guilty partner
;. 5olidarily liable for breach of trust when/
a. partner acting w&in scope of apparent
authority receives money and
misapplies it
b. partnership receives money in the
ordinary course of business and any
partner misapplies it
7. n cases of estoppel 7A)=2;8
2artner by estoppel
a. when a person
by words spoken or written
or by conduct
b. 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
c. 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
d. if representation or consent made in
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
e. extent of liability
when partnership liability results/
liable as though actual
membership of partnership
when no partnership liability
results/ liable pro rata with other
persons so consenting to the
contract or representation as to
incur liability
LITTON $% HILL 1 &ERON2 ET AL%
The contract entered into be one of the
partners is binding on the partnership. t was
neither published in the newspapers nor
stated in the commercial registry that the
partnership Fill @ 'eron had been dissolved.
3
rd
persons are not bound in entering into a
contract with any of the two partners, to
ascertain %-. he has the consent of the other
partner. There is a general presumption that
each individual partner is an authoriAed agent
for the frm and that he has authority to bind
the frm in carrying on the partnership
transactions.
'O3#IOLA- $% S-&IP2 ET AL%
The wife of the deceased limited partner
manifested her intent to be bound as a general
partner and acted as such. The other general
partner, by allowing her control of the
partnership property from ),:2 to ),:,, is
estopped from denying her the capacity to
alienate partnership property. An heir
ordinarily becomes a limited partner only in
order to protect him or her from liability
greater than that of the estate left by the
deceased but this statutory limitation may be
disregarded by the heir.
A&TS /HI&H A PARTNER A- NOT +O
/4O A#THORIT- 5 A+A&& SR 6
1. Assign partnership property in trust for
creditors or on assignee?s promise to pay
debts of partnership
2. +ispose of goodwill of business
3. Act which would make impossible
continuation of partnership business
4. &onfess !udgment
5. &ompromise partnership claim or liability
6. Submit claim or liability to arbitration
7. Renounce a partnership claim
TRANSA&TIONS IN)OL)IN' REAL
PROPERT-
). Title in partnership name1 'onveyance in
partnership name by a partner
'onveys title
#ecovery allowed unless/
conveyance was in usual course
and binds partnership 7Art. )=)=
''8
or grantee& holder for value has
conveyed property w&o knowledge
of partner?s lack of authority
2. Title in partnership name1 'onveyance by
partner in own name
2asses e"uitable interest, provided
partner is authoriAed under
A)=)=.)
3. Title in name of one or more but not all
partners, and record does not disclose
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partnership right1 'onveyance by partner
with title
'onveys title
#ecovery allowed if act does not
bind partnership under A)=)=.),
unless purchaser& assignee is a
holder for value w&o knowledge
:. Title in name of one or more or all
partners, or in a third person in trust1
'onveyance in partnership name or in
partner?s own name
2asses e"uitable title, provided
partner is authoriAed under
A)=)=.)
;. Title in name of all partners1 'onveyance
executed by all
2asses all rights in such property
+ISSOL#TION
). the change in relation of the partners
caused by any partner ceasing to be
associated in the carrying on of the
business
2. di<erent from the winding up of the
business, simply put/ change in the
membership of the partnership
ORTE'A2 +EL &ASTILLO2 8R% an9 "A&ORRO
$% &A
The birth and life of a partnership at will is
predicated on the mutual desire and consent
of the partners. The right to choose with whom
a person wishes to associate himself is the
very foundation and essence of that
partnership.
n passing, neither would the presence of a
period for its specifc duration or the
statement of a particular purpose for its
creation prevent the dissolution of any
partnership by an act or will of a partner.
Among partners, mutual agency arises and
the doctrine of delectus personae allows them
to have the power, although not necessarily
the right, to dissolve the partnership. An
un!ustifed dissolution by the partner can
sub!ect him to a possible action for damages.
E((E&TS O( +ISSOL#TION
). partnership is not terminated
2. but continues until the winding up of
partnership a<airs is completed
3. partners have limited authority to bind
the partnership after dissolution
&A#SES O( +ISSOL#TION
1. %ithout violation of agreement
a. >y termination of defnite term or
particular undertaking specifed
.ote/ dissolution, however, does not
extinguish obligations which must be fulflled
during the winding up of the partnership
a<airs
b. >y express will of a partner in $C
c. >y express will of all partners who
have not assigned their interests
d. >y expulsion of a partner bona fde
2. %ith violation, by express will of a partner
3. 6vent which renders continuance unlawful
4. (oss of specifc thing promised by partner/
before its delivery
or when only the use or en!oyment had
been transferred to the partnership
and ownership had been reserved by
the contributing partner
5. Beath of any partner
6. nsolvency of a partner or the partnership
7. 'ivil interdiction of a partner
8. Becree of court dissolving partnership
.ote/ Assignment to a 3
rd
person of all of a
partner?s interest does not dissolve the
partnership in the absence of stipulation to the
contrary
+ISSOL#TION "- &O#RT
G Dpon application by or for a partner
). nsanity of partner
2. nability of partner to perform his part of
the partnership contract
3. 2artner guilty of conduct pre!udicial to
business
:. %illful or persistent breach of partnership
agreement
;. 2artnership can only be carried on at a loss
+. %hen e"uitable under circumstances
G Dpon application by purchaser of partner?s
interest/
). After termination of specifed term or
undertaking
2. At any time if partnership at will
RO8AS $% A'LANA
Dnder Article )=34, par. 2 of the 'ivil 'ode,
even if there is a specifed term, one partner
can cause its dissolution by expressly
withdrawing even before the expiration of the
period, with or without !ustifable cause. -f
Excellence.
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Partnership Outline 2004
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course, if the cause is not !ustifed or no cause
was given, the withdrawing partner is liable for
damages but in no case can he be compelled
to remain in the frm. %ith his withdrawal, the
number of members is decreased, hence, the
dissolution.
R#LES IN SETTLIN' A&&O#NTS "ET/EEN
PARTNERS A(TER +ISSOL#TION
ASSETS
). the partnership property
2. the contributions of the partners
necessary for the payment of all the
liabilities 9 assets shall be applied in
the order of their declaration to the
satisfaction of the liabilities
+AN (#E LE#N' $% IA& an9 LE#N' -I#
#egarding the prescriptive period within which
the private respondent may demand an
accounting, Articles )=4+, )=4*, and )=4,
show that the right to demand an accounting
exists as long as the partnership exists.
2rescription begins to run only upon the
dissolution of the partnership when the fnal
accounting is done.
OR+ER O( PA-ENT O( THE LIA"ILITIES
O( THE PARTNERSHIP
). '#6BT-#5 other than partners 73
rd
person creditors8
2. 2A#T.6#5 -TF6# than for capital and
profts
3. 2A#T.6#5 in respect of 'A2TA(
:. 2A#T.6#5 in respect of 2#-CT5
-# $% NLR& an9 8A+E O#NTAIN
PRO+#&TS
Dnder Article )=:4 above, creditors of the old
Hade 0ountain are also creditors of the new
Hade 0ountain which continued the business of
the old one without li"uidation of the
partnership a<airs. ndeed, a creditor of the
old Hade 0ountain, like petitioner >en!amin Eu
in respect of his claim for unpaid wages, is
entitled to priority vis-a-vis any claim of any
retired or previous partner insofar as such
retired partnerIs interest in the dissolved
partnership is concerned.
LIITE+ PARTNERSHIP
). one formed by 2 or more persons
2. having members
) or more general partners
and one or more limited
partners
.otes/
). limited partners shall not be bound by the
obligations of the partnership
2. a person may be a general and limited
partner in the same partnership at the
same time, provided that this fact is stated
in the certifcate
3. a limited partner?s interest is assignable
:. the contributions of a limited partner may
be cash or property but not services
;. liability of limited partner only to capital
contribution unless, he takes part in the
control of the business
RE3#IREENTS (OR THE (ORATION
). sign and swear to a certifcate
2. fle for record the certifcate in the
oJce of the 56'
RI'HTS AN+ PO/ERS O( A 'ENERAL
PARTNER
). have all the rights and powers of
administration
2. however, the following acts re"uire
the written consent or ratifcation of
all the limited partners
any act in contravention of the
certifcate
any act which would make it
impossible to carry on the
ordinary business of the
partnership
confession of a !udgment
against the partnership
possession of partnership
property or assignment of
their rights in specifc
partnership property, for other
than a partnership purpose
admission a person as a
general partner
admission a person as a
limited partner, unless the
right so to do is given in the
certifcate
continuation of the business
with the partnership property
on the death, retirement,
insanity, civil interdiction or
insolvency of a general
partner, unless the right so to
do is given in the certifcate
RI'HTS O( A LIITE+ PARTNER
). to have the partnership books kept at
the principal place of business of the
partnership and at a reasonable hour
to inspect and copy any of them
Excellence.
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Partnership Outline 2004
Page 8 of 8
2. to have on demand true and full
information of all the things a<ecting
the partnership and a formal account
of the partnership a<airs whenever
circumstances render it !ust and
reasonable
3. to have dissolution and winding up by
decree of court
:. to receive
a share of the profts
or other compensation by way of
income
and to the return of his
contribution
LIITE+ PARTNER A- TRANSA&T
"#SINESS /ITH LIITE+ PARTNERSHIP
). limited partner
may loan money to
and transact other business w& the
partnership
and 7unless he is also a general
partner8 receive a pro rata share of
the assets on account of resulting
claims against the partnership w&
general creditors
2. but no limited partner shall in respect
to any such claim
receive or hold as collateral
security any partnership property
or
receive from a general partner or
the partnership
any payment, conveyance or
release from liability
if at the time the assets of the
partnership are not suJcient
to discharge partnership
liabilities to 3
rd
persons not
claiming as general or limited
partners
.ote/ such acts constitute fraud on the
creditors of the partnership
PRIORIT- O( PA-ENT O( PARTNERSHIP
LIA"ILITIES
). creditors 7other than limited @ general
partners8
2. limited partners/ share of profts and other
compensation
3. limited partners/ capital
:. general partners/ other than for capital
profts
;. general partners/ profts
+. general partners/ capital
/HEN A LIITE+ PARTNER &AN
RI'HT(#LL- +EAN+ THE RET#RN O(
HIS &ONTRI"#TION
). upon dissolution
2. when the date specifed in the certifcate
for its return has arrived
3. after he has given + mos. notice in writing
to all the other members, if no time is
specifed in the certifcate, either for the
return of the contribution, or for the
dissolution of the partnership
/HEN &AN A LIITE+ PARTNER HA)E THE
PARTNERSHIP +ISSOL)E+ AN+ ITS
A((AIRS /O#N+ #P
). he rightfully but unsuccessfully demands
the return of his contribution
2. the other liabilities of the partnership have
not been paid, or the partnership property
is insuJcient for their payment as re"uired
be Art. )=;* 7'',8 and the limited partner
would otherwise be entitled to the return
of his contribution
Excellence.
#P "arOps 2004
Not just a tradition. Its a commitment.