Food Shock!

, a partnership created by three partners, Caren Commendador, Marienne Mayhew, and

John Mark Verar, has requested a review for their articles of partnership. To start with, the partnership
was known to be a universal partnership of all present property. In their articles, under Article VII, it was
stated that the common property of the partners in the partnership business are those property which
belonged to them at the time of the constitution and those acquired subsequently, as well as those
profits acquired from the property contributed and acquired subsequently. This stipulation is in
accordance with Article 1778 and 1779 in the New Civil Code of the Philippines. As such, the name used
in the partnership was in connection with their primary purpose of establishing the business. As such,
the name used was not identical with those who were already registered and protected by law. The
articles of partnership has followed what was stated in SEC Memorandum Circular No. 13 Series 2019
which states the amended guidelines and procedures for the use of corporate and partnership names.

Article V of their articles of partnership states their designation as a partner which would be appropriate
to know what their classifications are as a partner. With regards to their profit and/or loss sharing ratios,
it was expressly stipulated in their articles of partnership, under Article VIII. What was stipulated was in
accordance with Article 1797 and 1799 of the New Civil Code. Caren Jay, as the only pure industrial
partner, does not violate the contents of Article 1799, which states that a stipulation made to exclude
one or more partners from the sharing of profits or losses is void, because in Article 1797, an industrial
partner is exempted from the sharing of losses of the partnership, while John Mark Verar and Marienne
Mayhew, being both capitalist, even if one is an industrial partner, is still liable for the losses in
proportion of their capital contributions. It would violate the contents of Article 1799 if John Mark Verar,
both a capitalist and industrial partner, will be excluded from the sharing of losses since he contributed
money, aside from services rendered.

With regards to Article IX of their article, it clearly follows what was stated in Article 1789 that an
industrial partner cannoot engage in any business for himself, UNLESS the partnership expressly permits
him to do so. In their article, it was expressly stated that the industrial partners can engage in a business
for himself/herself with the following conditions as stated in the articles of partnership.

Meanwhile, the management of the partnership, which was stated in Article XI of their articles, followed
what was stated in Article 1802 that none of the managing partners should act without the consent of
the other existing partners, unless there is an imminent danger or irreparable injury of the partnership,
of which consent is not needed. This is in accordance with the law, even if they have specific duties as
stated in their articles, but the decision must be with consent to the other existing partners. This is a
emphasizing fairness in participating in the management and decision making of the firm as it would
require every partners' opinion to create an overall decision for the partnership as it was created with a
mutual intention of dividing profits among themselves, so every other partner is important in creating
decisions for the partnership.

The articles of partnership definitely put some safeguards and protections among the partners especially
in Article IX, which states that should an industrial partner engage in a business other than the
partnership, then the profits will go to the partnership in a 50:50 basis as well as that the partnership will
not be held liable to any losses and liabilities acquired by the said business engaged by the industrial
partner. It was also stated in Article XIV of their articles that in case of withdrawal or retirement of the
partnership, their should be five days prior written notice, which would let the other partners know of
his withdrawal or retirement of the partnership and thus, shall be obligated to sell his/her interest in the
partnership which is in fact justifiable and reasonable as that partner has no longer interests in the said
partnership business.

The stipulations created in the articles of partnership were practical and specific. Although in the short-
term, the partnership would be booming with the industry that they are engaging in, it will not be
advantageous in the long-term basis due to the following reasons:

1.) The industrial partner might strain himself should he decide to engage in the same kind of business.
Although the partnership is benefited from such endeavor, but the fact that an industrial partner will be
able to engage in the same business might create a conflict of interest in the long-term

2.) The properties that was acquired subsequently after the partnership will be considered a
partnership property and all of the fruits and profits acquired thereof which might be one of the reasons
why the partners would withdraw or retire from the partnership business. Certainly, this would still
depend upon the management of the partners and the path that the partnership would venture into.