Chapter 2: Obligations of the Partners Among Themselves

Question 1

When does a partnership begins?

Answer 1

A partnership begins from the moment of the execution of the contract.

Question 2

What will happen if a partnership with a fixed term or particular undertaking continues?

Answer 2

It will turn into a partnership at will.

Question 3

Who will be liable if a property is evicted due to legal reasons?

Answer 3

The partner who contributed the property.

Question 4

Is demand necessary when it comes to contributions?

Answer 4

Demand is NOT necessary, the partner is already in default.

Question 5

What is the remedy in case of failure to deliver the promised contribution?

Answer 5

Specific performance with interest and damages

Question 6

How should goods be appraised?

Answer 6

Based on the method indicated in the articles of the partnership

Question 7

How should goods be appraised if the contract doesn’t specify how to appraise it?

Answer 7

Experts chosen by the partners must do it. The value will be determined based on the current market price.

Question 8

When does the obligation to pay the interest and damages if a partner fails to deliver his promised contribution arises?

Answer 8

From the moment a partner fails to deliver his contribution on the agreed date.

Question 9

Remedy of the capitalist partners if an industrial partner engages in any other business for themselves.

Answer 9

• Exclude the indutrial partner from the partnership.
• May avail themselves the benefits which the industrial partner may have obtained plus damages.

Question 10

What will happen if a capitalist partner refuses to contribute additional capital when facing an imminent loss?

Answer 10

The capitalist partner shall be obliged to sell their interest to the other capitalist partner who are willing to contribute additional capital.

Question 10

Are capitalist partner bound to contribute additional capital?

Answer 10

GENERAL RULE: Capitalist Partners are NOT bound to contribute additional capital.

Question 11

What happens when a partner, authorized to manage the partnership, collects a payment from someone who owes both the partner and the partnership?

Answer 11

The amount shall be proportionally applied to both debts.

Question 12

If a partner pays only his personal debt to another partner, how should the collected sum be applied?

Answer 12

The amount must still be divided proportionally to both personal partner and the partnership.

Question 13

In the case where a partner pays off a debt that is owed only to the partnership, where does the entire payment go?

Answer 13

The entire amount belongs to the partnership.

Question 14

What are the conditions that must exist for a managing partner to collect debts?

Answer 14

• Existence of at least 2 debts
• Both sums are demandable

Question 15

What should happen if a partner collects their share of a partnership credit while other partners have not yet received theirs, and the debtor later becomes insolvent?

Answer 15

The partner must bring the amount back to the partnership funds

Question 16

If a partner causes damage to the partnership due to their fault or misconduct, how should this be handled?

Answer 16

The partner is responsible for the full amount of the damages.

Question 17

Under what circumstances might a court reduce a partner’s liability for damages caused to the partnership?

Answer 17

If the partner’s extraordinary efforts lead to unusual profits for the partnership.

Question 18

Items that can be changed with others of the same kind and quality.

Answer 18

Fungible Things

Question 19

Who bears the risk of loss for specific and determinate things that are not fungible and contributed only the usufruct of the item to the partnership?

Answer 19

The partner who owns them

Question 20

If a partner contributes fungible items that deteriorate or are intended to be sold, who bears the risk of loss?

Answer 20

The partnership will bear the risk of loss as there was a transfer of ownership

Question 21

Who will bear the risk of loss for items brought into the partnership and appraised as part of an inventory?

Answer 21

The partnership bears the risk.

Question 22

If a partnership item that was appraised in the inventory is lost or damaged, what is the limit for compensation claims?

Answer 22

The appraised value recorded in the inventory

Question 23

What is the obligation of the partnership to every partner for every expenses and obligations they incure while managing the partnership’s affairs?

Answer 23

• To refund the amounts disbursed by the partner plus interest from the time the expenses were made
• To answer to each partner for obligations, he may have contracted into in good faith in the interest of the partnership, and for the risks in consequence of its management

Question 24

How should profits be distributed among partners?

Answer 24

In accordance with the agreement

Question 25

How should profits be distributed among partners if there is no agreement?

Answer 25

Capitalist partner - In proportion to his contribution Industrial partner - Just and equitable - Equivalent to the share of the capitalist partner with the lowest share

Question 26

What is the status of an industrial partner concerning losses?

Answer 26

Not liable for losses

Question 27

How should losses be distributed among partners?

Answer 27

- Based on the agreement. - In case of the absence of agreement: 1.) Based on the profit sharing ratio 2.) Based on the capital contribution of the partners

Question 28

What is the general rule regarding the validity of a third person designating the shares of partners in profits and losses?

Answer 28

Valid

Question 29

Under what condition can the designation by a third person be questioned?

Answer 29

If it is manifestly inequitable

Question 30

What happens if a partner begins to execute the decision of the third person regarding profit and loss designation?

Answer 30

The decision may not be questioned

Question 31

What is the time limit for a partner to question the decision made by a third person once they become aware of it?

Answer 31

3 months

Question 32

What are the two exceptions that prevent a partner from questioning the decision made by a third person?

Answer 32

- A partner began to execute the decision of the third person - A partner has not questioned the decision within three months from the time they had knowledge of it

Question 33

What is the status of a stipulation that excludes one or more partners from sharing in the profits or losses?

Answer 33

The stipulation is void but not the contract of partnership

Question 34

How shall profits and losses be distributed if a stipulation excluding partners is void?

Answer 34

Profits and losses shall be distributed as if there was no agreement, based on the partners' capital contributions

Question 35

Can a manager's power be taken away without a lawful reason?

Answer 35

No, the manager's power is generally irrevocable unless there is a lawful reason.

Question 36

Under what condition can the power of a managing partner be revoked?

Answer 36

The power is irrevocable without just or lawful cause, but can be revoked with the vote of partners representing the controlling interest (Majority)

Question 37

What is the procedure to remove a managing partner without just cause?

Answer 37

Unanimity is required, including the vote of the managing partner themselves

Question 38

What happens if a partner is given managerial power after the partnership is formed?

Answer 38

This power can be revoked at any time, with or without just cause

Question 39

What is the presumption regarding the actions of a managing partner?

Answer 39

The law presumes that the manager is acting in good faith unless proven otherwise.

Question 40

If there is no agreement on management, who manages the partnership?

Answer 40

Management is vested in all partners

Question 41

How does the appointment of a manager in the articles of partnership differ from a manager appointed in other instruments?

Answer 41

The appointment in the articles provides stronger protection and is more difficult to revoke, while an appointment in another instrument is more flexible and easier to revoke.

Question 42

What happens when two or more partners are entrusted with the management of the partnership without specified duties?

Answer 42

Each partner may separately execute all acts of administration

Question 42

In the event of a disagreement among managing partners, whose decision prevails?

Answer 42

The decision of the majority shall prevail

Question 43

What occurs in the case of a tie among partners when making a decision?

Answer 43

The matter shall be decided by the partners owning the controlling interest

Question 44

Can the absence or disability of any managing partner be used to bypass the requirement for unanimous consent?

Answer 44

No, the absence or disability of any partner cannot be alleged to bypass this requirement

Question 45

What is the exception to the requirement for unanimous consent among managing partners?

Answer 45

In cases of imminent danger of grave or irreparable injury to the partnership, a managing partner may act without the others' consent

Question 46

Does Article 1802’s requirement for unanimous consent affect third parties contracting with the partnership?

Answer 46

No, the requirement applies only to the partners themselves and does not impose any obligations on third parties

Question 47

What presumption do third parties have when dealing with a managing partner regarding authority?

Answer 47

Third parties are entitled to presume that the managing partner they are dealing with has the necessary authority and has followed the internal rules of the partnership.

Question 48

What is required for the validity of acts when it has been stipulated that none of the managing partners can act without the consent of the others?

Answer 48

The concurrence of all partners is necessary for the validity of the acts

Question 49

What happens when the partnership agreement does not specify how management should be conducted?

Answer 49

All partners are treated as agents of the partnership, meaning any partner can act on behalf of the partnership, and their actions will bind the partnership

Question 50

What is required before making significant changes to the partnership’s immovable property?

Answer 50

Consent from all partners is needed for major changes

Question 51

Can partners make significant changes to immovable property even if they believe those changes would be beneficial?

Answer 51

No, they still require the agreement from all partners before making such changes

Question 52

What can affected partners do if one partner refuses to consent to changes that are harmful to the partnership's interests?

Answer 52

Affected partners can seek intervention from the court

Question 53

Under what condition is court intervention available to the affected partners?

Answer 53

Court intervention is available if it can be shown that the refusal to consent is detrimental to the partnership's well-being

Question 54

Can a partner bring in another person to share in their share of the partnership’s profits and losses?

Answer 54

Yes, every partner may associate another person with them in their share but that person can't become an official partner without the consent of all the other partners

Question 55

What must happen for the associate to be admitted as a partner into the partnership?

Answer 55

The consent of all the other partners is required for the associate to be admitted.

Question 56

An arrangement where an existing partner in a partnership brings in another person (an "associate" or "sub-partner") to share in their own share of the partnership’s profits and losses.

Answer 56

Contract of Sub-Partnership

Question 57

Does an associate in a sub-partnership have the same rights as a full partner in the original partnership?

Answer 57

No, the associate does not have the right to make decisions or manage the partnership. They only share in the sub-partner's portion of profits and losses.

Question 58

Where should the partnership books be kept?

Answer 58

At the principal place of business of the partnership

Question 59

Can the location of the partnership books be changed?

Answer 59

Yes, the location can be adjusted if the partners agree otherwise

Question 60

What rights do partners have concerning the partnership books?

Answer 60

Every partner has the right to access, inspect, and copy the partnership books

Question 61

A time during regular business hours or an agreed-upon time that does not interfere with the normal functioning of the partnership.

Answer 61

Reasonable Hour

Question 62

The act of deliberately hiding or withholding important information about the partnership that is required to be shared with other partners or their legal representatives.

Answer 62

Concealment

Question 63

Who can request information about the partnership?

Answer 63

Any partner, the legal representative of any deceased partner, or the legal representative of any partner under legal disability can request information

Question 64

Refers to a partner who must manage and safeguard any profits or benefits they receive from partnership-related transactions, ensuring these are held for the benefit of the partnership rather than for personal gain.

Answer 64

Trustee

Question 65

What must partners do if they receive profits without the consent of the other partners?

Answer 65

They must hold those profits as a trustee for the partnership and manage them for the benefit of the partnership

Question 66

What happens if a partner uses partnership assets for personal gain?

Answer 66

Any profits derived from the use of partnership assets must be accounted for and managed for the partnership’s benefit

Question 67

What kind of business is a capitalist partners prohibited from partaking?

Answer 67

Similar line of business as the partnership

Question 68

Effects if a capitalist partner engage in a similar line of business as the partnership.

Answer 68

- Capitalist partner must bring any profits to the partnership - Must personally bear all the losses

Question 69

What is the rationale behind prohibiting capitalist partners from engaging in similar businesses?

Answer 69

It is considered unfair for a capitalist partner to engage in a similar business since they have already acquired knowledge of the partnership's business secrets

Question 70

What can a partner do if they are wrongfully excluded from the partnership business?

Answer 70

A partner can demand a formal account if they are wrongfully excluded from the partnership business or denied possession of its property by their co-partners

Question 71

What is the general rule regarding formal accounting in a partnership?

Answer 71

GENERAL RULE: No formal accounting is demandable until after the dissolution of the partnership.