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PARTNERSHIP
It is a CONTRACT whereby two or more persons (1) bind themselves to
CONTRIBUTE money, property, or industry to a COMMON FUND (2) with the intention
of dividing the PROFITS among themselves or in order to EXERCISE a PROFESSION
a STATUS and a FIDUCIARY RELATION subsisting between persons carrying
on a business in common with a view on profit
CHARACTERISTICS OF THE CONTRACT OF PARTNERSHIP
[C, C, L, I, AS, NP]
1. CONSENSUAL
perfected by mere consent
2. CONTRIBUTION of money, property or industry to a COMMON FUND
3. object must be a LAWFUL one
4. INTENTION of DIVIDING the PROFIT among the PARTNERS
5. AFFECTIO SOCIETATIS
the desire to formulate an ACTIVE UNION, with people among whom there
exist a mutual CONFIDENCE and TRUSTS
6. NEW PERSONALITY
the object must be for profit and not merely for the common enjoyment
otherwise only a co-ownership has been formed. HOWEVER, pecuniary profit
need not be the only aim, it is enough that it is the principal purpose
BUSINESS TRUSTS
when certain persons entrust their property or money to others who will
manage the same for the former
RULES ON CAPACITY TO BECOME A PARTNER
1. a person capacitated to enter into contractual relations may become a partner
2. an UNEMANCIPATED MINOR CANNOT become a partner UNLESS his parent or
guardian consents
3. a MARRIED WOMAN, cannot contribute conjugal funds as her contribution to the
partnership UNLESS she is permitted to do so by her husband OR UNLESS she is
the administrator of the conjugal partnership, in which the COURT must give its
consent authority
4. a PARTNERSHIP being a juridical person by itself can form another partnership
5. a CORPORATION cannot become a partner on grounds of public policy
a partner shares not only in profits but also in the losses of the firm
RULE:
the partnership has a PERSONALITY SEPARATE and DISTINCT from that of
each partner
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EXCEPTION:
PARTNERSHIP BY ESTOPPEL
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RULE:
when an UNLAWFUL PARTNERSHIP is dissolved by a judicial decree, the PROFITS
shall be CONFISCATED in FAVOR of the STATE
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G. R.
a partnership may be constituted in any form
EXCEPTION: PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is contributed
2. REAL RIGHTS are contributed
*
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LIMITATIONS ON ACQUISITION
1. AGRICULTURAL LANDS 1024 HECTARES
2. lease of public lands (GRAZING) 2000 HAS.
RULES
1.
2.
3.
4.
IF
with third
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GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their individual properties, after the assets of
the partnership has been exhausted
LIMITED PATNERSHIP
one where at least one partner is a general partner and the others are limited
partners
one whose liability is limited only up to the extent of his contribution
a partnership where all the partners are limited partners cannot exist as a limited
partnership
REFUSED REGISTRATION
IF it continuous as such, it will be considered as a general partnership and all the
partners will be general partners
KINDS OF UNIVERSAL PARTNERSHIP
1. PARTNERSHIP OF ALL PRESENT PROPERTY
2. PARTNERSHIP OF ALL PROFITS
*UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY
CONTRIBUTION of
1. ALL the properties actually belonging to the partners
2. the PROFITS acquired with said property
BECOMES COMMON PROPERTY
EXCEPT all FUTURE PROPERTY
FRUITS of FUTURE PROPERTY INCLUDED IF STIPULATED UPON
*UNIVERSAL PARTNERSHIP OF PROFITS
comprises all that the partners may acquire by the INDUSTRY or WORK of the
partners become common property regardless of within said profits were obtained
through the usufruct contributed
EXCEPT PRIZES and GIFTS
RULE:
articles of universal partnership, entered without specification of its nature, only
constitute a universal partnership of PROFITS
RULE:
persons who are prohibited from giving each other any donation or advantage cannot
enter into universal partnership
WHO:
1. HUSBAND and WIFE
2. those guilty of ADULTERY or CONCUBINAGE
3. those guilty of the same criminal offense if the partnership was entered into in
consideration of the same
while spouses cannot enter into a universal partnership, they can enter into a
particular partnership or be members thereof
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PARTICULAR PARTNERSHIP
a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS their use or fruits
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION
OBLIGATIONS OF THE PARTNERS
RULE:
a PARTNERSHIP BEGINS from the moment of the EXECUTION of the CONTRACT
* even if contributions have not yet been made the firm already exists, for
partnership is a consensual contract
DURATION OF PARTNERSHIP
UNLIMITED
* MAY BE AGREED UPON
1. EXPRESSLY definite period
2. IMPLIEDLY upon achievement of its purpose
PARTNERSHIP AT WILL
a partnership wherein its continued existence really depends upon the will of the
partners or even on the will of any of them
2 KINDS:
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3. IF the partner is in BAD FAITH, he is liable not only for the fruits actually
produced, BUT also for those that could have been produced
4. IF MONEY HAS BEEN PROMISED, INTEREST and DAMAGES from the time he
should have complied with his obligation should be given
5. NO DEMAND is needed to put the partner in default
6. it is DELIVERY, actual or constructive that TRANSFERS OWNERSHIP
RULES ON THE DUTY TO WARRANT
1. the warranty in case of eviction refers to specific and determinate things already
contributed
2. there is EVICTION whenever by a final judgment based on a right prior to the
sale or an act imputable to the partner, the partnership is deprived of the whole
or a part of the thing purchased
RULE WHEN CONTRIBUTION CONSISTS OF GOODS
APPRAISAL of VALUE is needed to determine how much was contributed
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CONDITIONS:
1. 2 or more partners are managers
2. there is no specification of respective duties
3. there is no stipulation requiring UNANIMITY
SPECIFIC RULES:
1. each may separately execute all acts of administration
UNLIMITED POWER to ADMINISTER
2. IF any of the managers OPPOSE
MAJORITY RULE
IN CASE OF A TIE
- persons owning controlling interest prevail provided they are also managers
* right to oppose is not given to NON-MANAGERS
* OPPOSITION should be done BEFORE the acts produce legal effects insofar as third
persons are concerned
RULE WHEN UNANIMITY is REQUIRED
1. the CONCURRENCE of all shall be necessary for the validity of the acts
2. the ABSENCE or DISABILITY of ANYONE of them CANNOT BE ALLEGED UNLESS
there is imminent danger of grave or irreparable injury to the partnership
RULE ON DUTY of THIRD PERSONS
third persons are not required to inquire as to whether or not a partner with whom he
transacts has the consent of all the managers
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in
the
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dissolution)
1. with separate property, by any one or more of the partners
OR
2. with partnership property, by any one or more partners with the consent of all the
partners whose interests are not so charged or sold
* consent of the delinquent partner not needed
RULE:
every partnership shall operate under a FIRM NAME
* the firm name may or may not include the name of one or more of the partners
** STRANGERS who include their names in the firm are liable as partners because of
ESTOPPEL, BUT do NOT have the RIGHTS of partners
** IF a LIMITED PARTNER includes his name in the firm name, he has obligations BUT
not the rights of a general partner
RULE on LIABILITY for CONTRACTUAL OBLIGATIONS
* all partners, including industrial ones, shall be liable pro-rata with all their property
and after all the partnership assets have been exhausted
* NOT APPLICABLE for TORTS or CRIMES ----- LOSS
----- INJURY
----- MISAPPROPRIATION
** while an INDUSTRIAL PARTNER is exempted by law from LOSSES as between the
partners, he is NOT EXEMPTED from liability insofar as third persons are concerned
he may recover what he has paid from the CAPITALIST partners
* under the law the liability of the partners is subsidiary and joint NOT principal and
solidary
*RULE on LIABILITY of a PARTNER who has WITHDRAWN
1. a partner who withdraws is not liable for liabilities contracted after he has
withdrawn
2. if his interest has not yet been paid him
his right to the same is that of a mere creditor
** a stipulation exempting liability to third persons is VOID
* any partner may enter into a separate obligation to perform a partnership contract
RULE:
* every partner is an agent of the partnership for the purpose of its business
G.R.- the act of every partner for apparently carrying on in the USUAL WAY the
business of the partnership of which he is member binds the partnership
EXCEPT:
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1. if he has NO AUTHORITY
and
2. the person with whom he was dealing with HAS KNOWLEDGE of the fact that he has
no such authority
RULE:
an act of a partner which is not apparently for the carrying on of business of the
partnership in the usual way does not bind the partnership UNLESS authorized by the
other partners
* a partnership is a CONTARCT of MUTUAL AGENCY, each partner acting as a principal
on his own behalf and as an agent for his co-partners or the firm
REQUISITES on WHEN can a partner BIND the partnership
1. expressly or impliedly AUTHORIZED
2. when he acts in BEHALF AND IN THE NAME of the partnership
INSTANCES of IMPLIED AUTHORIZATION
1. when the other partners DO NOT OBJECT, although they have knowledge of the
act
2. when the act is for apparently carrying on in the usual way the business of the
partnership
* this is binding on the firm even if the partner was not really authorized
PROVIDED that the third party is in GOOD FAITH
RULE on UNUSUAL ACTS
one or more but less than all the partners HAVE NO AUTHORITY TO:
[AP, DG, AI, CJ, EC, SA, RC]
1. ASSIGN the PARTNERS PROPERTY
2. DISPOSE of GOODWILL
3. do any other act which would make it impossible to carry on the ordinary
business of the partnership
4. CONFESS a judgment
5. ENTER into a COMPROMISE
6. SUBMIT to ARBITRATION
7. RENOUNCE to CLAIM
*RULES on CONVEYANCE of REAL PROPERTY
any partner may convey title to such property by a conveyance executed in the
partnership name
1. if the firm is engaged in the buying and selling of land (USUAL BUSINESS)
2. if property was conveyed to a HOLDER for VALUE and who had NO
KNOWLEDGE of the partners LACK of AUTHORITY
2. where title is in the name of the partnership and partner sold in his OWN NAME
IF DONE IN USUAL BUSINESS
buyer does not become owner BUT ACQUIRES EQUITABLE INTEREST
IF NOT DONE IN USUAL BUSINESS
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buyer does not become owner and is not even entitled to equitable interest
3. where title is in the name of one or more BUT not all the partners
partners in whose name the title is named MAY CONVEY BUT the
PARTNERSHIP may RECOVER such property IF done not in its USUAL BUSINESS
EXCEPT if he had transferred it to a Holder for value
4. when property held in trust by partner
a sale only conveys EQUITABLE INTEREST
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LOSS OR INJURY
RULE on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY
LIABILITY)
* the partnership is solidarily liable with the partner if the wrongful act or omission
1. the partner is acting in the ordinary course of business of the partnership
OR
2. with authority of his co-partners
* innocent partners have right to recover from the guilty partner
(SOLIDARY
PARTNER BY ESTOPPEL
a person who represents himself or consents to another / others representing him to
anyone as a partner either in an existing partnership or in one that is fictitious or
apparent
PARTNERSHIP BY ESTOPPEL
when all the members of the existing partnership consent to such representation of a
partner by estoppel
RULES AND SITUATIONS:
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NO partnership liability results BUT the deceiver and all persons who may
have aided him in the misrepresentation are still liable
liability would be JOINT or PRO-RATA
* when although there is misrepresentation, if the third party is not deceived, the
doctrine of estoppel does not apply
BURDEN of PROOF
the creditor or whoever alleges the existence of a partner or partnership by estoppel
has the burden of proving the existence of the MISREPRESENTATION AND INNOCENT
RELIANCE on it
ENTRY OF A NEW PARTNER into an EXISTING PARTNERSHIP
RULE:
* he shall be liable for all the obligations of the partnership BUT his liability will
extend only to his share in the partnership property
* his own individual property shall be excluded
* same liability of a limited partner
PREFERENCE of PARTNERSHIP CREDITORS
RULE:
* the creditors of the partnership shall be preferred to those of such partner as
regards the partnership property
the private creditors of each partner may ask the attachment and public sale of the
share of the latter in the partnership assets
**IF a partner sells his share to a third party, BUT the firm itself still remains
SOLVENT, partnership creditors CANNOT assail the validity of the sale by alleging that it
is made in fraud of them, since they have not really been prejudiced
DISSOLUTION AND WINDING UP
the change in the relation of the partners caused by any partner causing to be
associated in the carrying on of the business
it is the point of time the partners cease to carry on the business together
WINDING UP
the process settling business affairs after dissolution
TERMINATION
the point in time after all the partnership affairs have been wound up
RULE ON DISSOLUTION
* on dissolution the partnership is not terminated BUT continues until the winding up
of partnership affairs is completed
*EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this does not necessarily mean that a
partner can evade previous obligations entered into by the partnership
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2. dissolution saves the former partners from new obligations to which they have
not expressly or impliedly consented UNLESS the same be essential for winding
up
*CAUSES OF DISSOLUTION
1. without VIOLATION of the AGREEMENT between the partners
A) TERMINATION of the DEFINITE TERM or PARTICULAR UNDERTAKING
B) EXPRESS WILL or ANY PARTY in GOOD FAITH (PARTNERSHIP by WILL)
C) EXPRESS WILL of ALL of the PARTNERS except those who have (interests)
ASSIGNED or whose interests have been (separate debts) CHARGED
D) EXPULSION in good faith of a member
2. in CONTRAVENTION of the agreement between the partners
by the EXPRESS WILL of ANY PARTNER at any time
3. UNLAWFULNESS of the BUSINESS
4. LOSS thing promised
A) SPECIFIC THING PERISHES before delivery
B) USUFRUCT is lost EXCEPT if ownership had been transferred to the
partnership
5. DEATH of ANY partner
6. INSOLVENCY of any partner or of the partnership
7. CIVIL INTERDICTION of any partner
8. DECREE of COURT
*** if the cause is not justified or no cause was given, the withdrawing partner is
liable for DAMAGES BUT in no case can he be compelled to remain in the firm
* the insolvency need not be judicially declared, it is enough that the assets be less
than the liabilities
DISSOLUTION by JUDICIAL DECREE WHEN ALOWED:
(I, UM, I-PP, C, PB, BL, OC)
1. partner declared insane in any judicial proceeding or is shown to be of
UNSOUND MIND
2. partner becomes INCAPABLE of performing his part of the partnership contract
3. partner has been guilty of such CONDUCT as tends to affect prejudicially the
business
4. partners PERSISTENT BREACH of agreement
5. the business of the partnership can only be denied on at a loss
6. other circumstances which render dissolution equitable
IN CASE OF PURCHASER of PARTNERS INTEREST
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 ordered was issued
* proof as to the existence of the firm must first be given
* even if a partner has not yet been previously declared insane by the court,
dissolution may be asked, as long as the insanity is duly proved in court
* in a suit for dissolution, the court may appoint a RECEIVER at its discretion
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EFFECTS OF DISSOLUTION
RULE:
* when the firm is dissolved, a partner can no longer bind the partnership
* a dissolved partnership still has the personality for the winding up of its affairs
the firm is still allowed to collect previously acquired credits
the firm is still bound to pay of its debts
DISSOLUTION CAUSED by A-I-D
RULE: (STILL BOUND) as to each partners
G.R. where the dissolution is caused by the ACT, INSOLVENCY or DEATH of a
partner, each partner is liable to his co-partners for his share of any liability created by
any partner acting for the partnership
EXCEPTION: - individual liabilities
1. if dissolution by ACT
the partner acting for the partnership HAD KNOWLEDGE of the dissolution
OR
2. if dissolution by DEATH or INSOLVENCY
the partner acting for the partnership HAD knowledge or notice of the death or
insolvency
* only the partner acting assumes liability
*AFTER DISSOLUTION, a partner can still bind the PARTNERSHIP
(WU, UT, TB)
1. By any ACT appropriate for WINDING UP partnership affairs
2. By COMPLETING transactions UNFINISHED at dissolution
3. By any TRANSACTION which could bind the partnership IF dissolution had not
taken place PROVIDED the other party is:
A) PREVIOUS CREDITOR and had NO KNOWLEDGE or NOTICE of the
dissolution
OR
B) NOT a PREVIOUS CREDITOR, had NO KNOWLEDGE or NOTICE and
dissolution was NOT PUBLISHED
* if there was publication of the dissolution it is presumed he already knows,
regardless of actual knowledge on non knowledge
WHEN is the PARTNERSHIP NOT BOUND
1. new business with third parties who are in bad faith
2. firm dissolved because UNLAWFUL except for acts of winding up
3. partner who acted became INSOLVENT
4. partner not authorized to wind up EXCEPT if customer in good faith
* if after dissolution, if a stranger will represent himself as a partner although he is
not one he will be a partner by estoppel
RULE:
* the dissolution of the partnership does not itself discharge the existing liability of
any partner
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3. creditors
RULE:
* the INDIVIDUAL PROPERTY of a DECEASED PARTNER shall be liable for all
obligations of the partnership incurred while he was a partner BUT subject to prior
payments of his separate debts
* IF there be a NOVATION of the OLD PARTNERSHIP DEBTS and such novation is
done after one of the partners has retired and without the consent of such partner
said partner cannot be held liable by creditors who made the novation with
knowledge of the firms dissolution
EXTRAJUDUCIAL AND JUDICIAL WINDING-UP
EXTRAJUDICIAL:
1. by the partners who have not wrongfully dissolved the partnership
2. by the legal representative of the last surviving partners
JUDICIAL:
under the control and direction of the court, upon proper cause that is shown to the
court
* profits that will actually enter the firm after dissolution as a consequence of
transactions already made before dissolution are included because they are considered
as profits existing at the time of dissolution
* any other income earned after the time, like interest or dividends on stock owned
by the partners or partnership at the time of dissolution should not be distributed as
profits BUT as merely additional income to the capital
BETTER RIGHTS of INNOCENT PARTNERS
innocent partners have better rights than guilty partners and that the guilty partners
are required to indemnify for the damages caused
* RIGHT of INOCENT PARTNERS TO CONTINUE the BUSINESS
in essence this is a new partnership
can use the same firm name
can ask new members to join
* a guilty partner who is EXCLUDED will be indemnified against all present or future
partnership liabilities
RIGHT TO GET CASH
in case on non-continuance of the business, the interest of the partner should if he
desires be given in cash
assets may be sold
a guilty partner, in ascertaining the value of his interest is not entitled to a
proportional share of the value of GOOD WIL
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JURISPRUDENCE
* a surviving husband may form a partnership with the heirs of the deceased wife for
the management and control of the community property
BUT in the absence of the formalities prescribed by the Civil Code, knowledge of the
existence of the new partnership or community of property must at least be brought
home to third persons dealing with the surviving husband in regard to the community
real property in order to bind them by the community agreement
* the declarations of one partner, not made in the presence of his co-partner, are not
competent to prove the existence of a partnership between them as against such
partner
* the existence of a partnership cannot be established by general reputation, rumor
or hearsay
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* the sharing of gross returns does not itself establish a partnership, within the
persons sharing them have a joint or common right or interest in any property from
which the returns are derived
* aside from the circumstances of profit, the presence of other elements constituting
partnership is necessary, such as:
1. the clear intent to form a partnership
2. the existence of a juridical personality different from that of the individual
partners
AND
3. the freedom to transfer or assign any interest in the property by one with the
consent of the others
* an isolated transaction whereby 2 or more persons contribute funds to buy certain
real estate for profit in the absence of other circumstances showing a contrary intention
cannot be considered a partnership
* persons who contribute property or funds for a common enterprise and agree to
share the gross returns of that enterprise in proportion to their contribution, BUT who
severally retain the title to their respective contribution, are not thereby rendered
partners
they have no common stock or capital and no community of interest as principal
proprietors in the business itself which the proceeds derived
* a joint purchase of land, by two does not constitute a co-partnership in respect
thereto, NOR does an agreement to share the profits and losses on the sale of land
create a partnership
* in order to constitute a PARTNERSHIP INTER SESE there must be:
A) an intent to form the same
B) generally participating in both profits and losses
AND
C) such a community of interest, as far as third persons are concerned as
enables each party to make a contract, manage the business, and dispose
of the whole property
* the common ownership of property does not itself create a partnership between the
owners, though they may use it for the purpose of making gains AND they may without
becoming partners, agree among themselves as to the management and use of such
property and the application of the proceeds therefrom
* the sharing of returns does not in itself establish a partnership within the persons
sharing therein have a joint or common right or interest in the property
there must be:
1. clear intent to form a partnership
2. the existence of a juridical personality different from the individual partners
AND
3. the freedom of each party to transfer or assign the whole property
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* a UNIVERSAL PARTNERSHIP requires either that the object of the association be:
1. all the present property of the partners as contributed by them to the common
fund
OR
2. all that the partners may acquire by their industry or work during the existence
of the partnership
* the subsequent marriage of the partners could not operate to dissolve the
partnership because it is not one of the causes provided for dissolution by law with
regards to limited partnerships
* partnership has distinct and separate personality from that of its partners
* a husband and wife may not enter into a contract of general co-partnership/
UNIVERSAL partnership
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