I. C. Kinds of Partners

Question 1

What are the kinds of partners?

Answer 1

Industrial Partners

Capitalist Partners

Managing Partners

Partners by estoppel

Question 2

Who is an industrial partner?

Answer 2

An industrial partner is one who contributes only his industry or personal service.

Question 3

What are the rules governing an industrial partner?

Answer 3

• An industrial partner cannot engage in a business for himself, unless the partnership expressly permits him to do so [Art. 1789];
• If the industrial partner engages in business for himself, the capitalist partners may either: (1) exclude him from the firm; or (2) avail themselves of the benefits which he may have obtained in violation of Art. 1789 with a right to damages [Art. 1789];
• An industrial partner shall not be obliged to contribute additional share to the capital in case of imminent loss of the business. [Art. 1790]
• The industrial partner shall not be liable for the losses of a partnership, in the absence of a stipulation [Art. 1797].
• The industrial partner shall receive a just and equitable share of the profits under the circumstances [Art. 1797].
• If, other than his labor, the industrial partner contributes capital, the industrial partner shall also receive a share in the profits in proportion to his capital [Art. 1797].
• Under Art. 1767, work is considered as an asset which may contributed to a common fund in the formation of a contract of partnership.

Question 4

Who is a capitalist partner?

Answer 4

A capitalist partner is one who contributes money or property to the common fund (see Arts. 1789, 1790, 1797, 1808, 1767).

Question 5

What are the rules concerning the capitalist partner?

Answer 5

• Capitalist partners have the right to exclude an industrial partner from the firm, with a right to damages, in case the latter engages in a business for himself (see Art. 1789);
• Capitalist partners may also avail themselves of the benefits, with a right to damages, which they may have obtained by the industrial partner’s violation of the prohibition from engaging in business for himself (see Art. 1789);
• Absent any stipulation to the contrary, the capitalist partners shall contribute equal shares to the capital of the partnership. (see Art. 1790);
• A capitalist partner shall be obliged to contribute an additional share to the capital in case there is an imminent loss of the business of the partnership, except when there is an agreement to the contrary. (see Art. 1791);
• If the capitalist partner refuses to to contribute additional share to the capital in case there is an imminent loss or danger to the business of the partnership, he or she shall be obliged to sell his or her interest to the other partners. (see Art. 1791);
• Capitalist partners shall be liable for the losses incurred by the partnership in proportion to what he or she may have contributed, in the absence of an agreement providing for the proportion of distribution of shares and profits. [see Art. 1797];
• The capitalist partners cannot engage for their own account in any operation which is of the kind of business in which the partnership is engaged, unless there is a stipulation to the contrary. [Art. 1808 par. 1];
• Any capitalist partner violating this prohibition shall bring to the common funds any profits accruing to him from his transactions, and shall personally bear all the losses. [Art. 1808 par. 2];
• Money and property are among the assets that may be contributed to a common fund in a contract of partnership. [Art. 1767]

Question 6

Who is a managing partner?

Answer 6

A managing partner is one who manages the affairs or business of the partnership; he may be appointed either in the articles of partnership or after the constitution of the partnership. He is also known as a general or real partners. (see Art.s 1792, 1800, 1801, 1802).

Question 7

What are the rules regarding a managing partner?

Answer 7

• WHEN THE MANAGING PARTNER COLLECTS A DEBT FOR HIMSELF: When a managing partner collects a debt from a debtor who also the partnership money, the money collected shall be applied as payment to the managing partner and the partnership, in proportion to their amounts. This applies even if the receipt given by the managing partner is for his name only. However, if the managing partner issues a receipt in the name of the partnership, then the payment shall be made fully to the partnership alone. [see Art. 1792].
• POWER OF THE MANAGING PARTNER APPOINTED BY VIRTUE OF THE ARTICLES OF PARTNERSHIP: When a partner is appointed as a manager by virtue of the articles of partnership, then the managing partner has the power to execute all acts of administration despite the opposition of his partners, and this power is irrevocable without any just or lawful cause. To revoke such powers, it will be necessary to have a vote of majority of the partners representing the controlling interest. The exception to this rule is if the managing partner performs his acts in bad faith. [see Art. 1800 par. 1]
• POWER OF THE MANAGING PARTNER APPOINTED AFTER CONSTITUTION OF PARTNERSHIP: However, when a managing partner is appointed after the partnership has been constituted, then the power he or she bears may be revoked at any time. [see Art. 1800 par. 2];
• RULE IN CASE THERE ARE TWO OR MORE PARTNERS: If there are two or more partners intrusted with the management of the partnership, then the applicable rule depends on whether a specification of their respective duties, or a stipulation that one of the shall not act without the consent of the other has been made in the agreement.
• If there is a stipulation that none of the managing partners shall act without the consent of the others, then Art. 1802 shall apply. Art. 1802 provides that in such case, the concurrence of all (partners) shall be necessary for the validity of the acts of the managing partner, and the absence or disability of any of the partners cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership [see Art. 1802].
• However, if there is no stipulation, then each of the managing partners may execute all acts of administration, but if any of them should oppose the acts of the others, the decision of the majority shall prevail. In case of a tie, the matter shall be decided by the partners owning the controlling interest. [see Art. 1801].

Question 8

Who is a partner by estoppel?

Answer 8

A partner by estoppel is one who is not really a partner, not being a party to the partnership agreement, but is liable as a partner for the protection of innocent third persons. He is one who is represented as being in fact a partner, but who is not so as between the partners themselves. He is also known as partner by implication or nominal partner. sometimes a.k.a. “quasi-partner” [De Leon, 75]