II.B. Partners Obligations Inter Se

Question 1

What are the partnerships obligation inter se?

Answer 1

The partnership obligations inter se are:

1. To bring to collation – Art. 1793
2. To share in the profits/losses – Arts. 1797, 1798, 1799
3. To render true and full information – Art. 1806, 1821
4. Not to engage in another business – Art. 1789, 1808

Question 2

When does a partnership begin?

Answer 2

Art. 1784. A partnership begins from the moment of the execution of the contract unless it is otherwise stipulated.

Question 3

Does a partnership have a time limit for its lifespan?

Answer 3

No. The birth and life of a partnership is predicated on the mutual desire and consent of the parties (see Ortega vs. Court of Appeals)

Question 4

Art. 1785. par. 1. When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any […], the rights and duties of the partners […], so far as is consistent with a partnership at will.

Answer 4

Art. 1785. par. 1. When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any express agreement, the rights and duties of the partners remain the same as they were at such termination, so far as is consistent with a partnership at will.

Question 5

Art. 1785. par. 2. A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is […].

Answer 5

Art. 1785. par. 2. A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership.

Question 6

When is a partner considered a debtor to the partnership?

Answer 6

Art. 1786. par. 1. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.

Question 7

Is a partner bound to warrant the thing contributed?

Answer 7

Yes. Art. 1786. par. 2. He shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership, in the same cases and in the same manner as the vendor is bound with respect to the vendee.

Question 8

Is the partner liable for the fruits of the thing contributed?

Answer 8

Yes, in case of delay. Art. 1786. par. 3. He shall also be liable for the fruits thereof from the time they should have been delivered, without the need of any demand.

Question 9

When the capital or a part of what is contributed by a partner consists of goods, how shall the goods be appraised?

Answer 9

1. In the manner prescribed in the contract of partnership;
2. In the absence of stipulation, by experts chosen by the partners and according to current prices
   
   1. Subsequent changes thereof being for the account of the partnership. [see. Art. 1787]

Question 10

What is the repercussion upon the partner who has undertaken to contribute a sum of money but fails to do so?

Answer 10

Art. 1788. par. 1. A partner who has undertaken to contribute a sum of money and fails to do so becomes a debtor for the interest and damages from the time he should have complied with his obligation.

Question 11

What is the repercussion on the partner if he has taken amount from the partnership coffers?

Answer 11

The partner also becomes a debtor for the interest and damages from the time he converted the money for his own use. (Art. 1788 par. 2)

Question 12

May an industrial partner engage in business for himself?

Answer 12

Generally, No. Art. 1789. An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained in violation of this provision with a right to damages in either case.

Question 13

What is the general rule as to the amount of contribution of the partners in the partnership?

Answer 13

Art. 1790. Unless there is a stipulation to the contrary, the partners shall contribute equal shares to the capital of the partnership.

Question 14

What shall be the obligations of the partners in case of an imminent loss of the business of the partnership?

Answer 14

Contribute additional share to the capital (except if industrial partner)

Art. 1791. If there is no agreement to the contrary, in case of an imminent loss of the business of the partnership, any partner who refuses to contribute an additional share to the capital, except an industrial partner, to save the venture shall be obliged to sell his interest to the other partners.

Question 15

What is the obligation of the managing partner to the partnership in case he collects a demandable sum?

Answer 15

If the debtor has a debt to him and the partnership, the managing partner must apply the payment pro rata with the partnership.

Art. 1792. If a partner authorized to manage collects a demandable sum, which was owed to him in his own name, from a person who owed the partnership another sum also demandable, the sum thus collected shall be applied to the two credits in proportion to their amounts, even though he may have given a receipt for his own credit only; but should he have given it for the account of the partnership credit, the amount shall be fully applied to the latter.

The provisions of this article are understood to be without prejudice to the right granted to the debtor by Art. 1252, but only if the personal credit of the partner should be more onerous to him.

Question 16

What is the obligation of the partner to bring to collation?

Answer 16

Art. 1793. A partner who has received, in whole or in part, his share of a partnership credit, when the other partners have not collected theirs, shall be obliged, if the debtor should thereafter become insolvent, to bring to the partnership capital what he received even though he may have given receipt for his share only.

Question 17

What is the extent of the partner’s liability when it comes to damages the partnership suffered due to the former’s fault?

Answer 17

Art. 1794. Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. However, the courts may equitably lessen this responsibility if through the partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.

Question 18

Who bears the risk for the risk of specific and determinate things, which are not fungible, contributed to the partnership so that only their use and fruits may be for the common benefit?

Answer 18

The risk shall be borne by the partner who owns them.

Art. 1795. par. 1. The risk of specific and determinate things, which are not fungible, contributed to the partnership so that only their use and fruits may be for the common benefit, shall be borne by the partner who owns them.

Question 19

Who shall bear the risk for the things contributed which are fungible, or cannot be kept without deteriorating, or that they were contributed to be sold?

Answer 19

Art. 1795. par. 2. If the things contributed are fungible, or cannot be kept without deteriorating, or if they were contributed to be sold, the risk shall be borne by the partnership.

Question 20

Who shall bear the risk of things brought and appraised in the inventory in the partnership?

Answer 20

Art. 1795. par. 2. […] In the absence of a stipulation, the risk of things brought and appraised in the inventory, shall also be borne by the partnership, and in such case the claim shall be limited to the value at which they were appraised.

Question 21

Who shall be responsible for the amounts a partner may have disbursed on behalf of the partnership? Does this include the interest, and when shall this be reckoned?

Answer 21

The partnership. Yes it includes interest. It shall be reckoned from the time the expenses are made.

Art. 1796. The partnership shall be responsible to every partner for the amounts he may have disbursed on behalf of the partnership and for the corresponding interest, form the time the expenses are made; it shall also answer to each partner for the obligation he may have contracted in good faith in the interest of the partnership business, and for risks in consequence of its management.

Question 22

How shall the share for the profits and losses in a partnership be distributed?

Answer 22

1. In conformity with the agreement.
2. If share of profits is only agreed upon, such proportion.
3. If no agreement, proportion to what he contributed.
   
   1. note industrial partner will get just and equitable share of profits. but if he contributed capital also, he shall receive a share in the profits in proportion to his capital. [i think this also applies to the losses]

Art. 1797. The losses and profits shall be distributed in conformity with the agreement. If only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the same proportion.

In the absence of stipulation, the share of each partner in the profits and losses shall be in proportion to what he may have contributed, but the industrial partner shall not be liable for the losses. As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. If, besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital.

Question 23

May the parties intrust to a third person the designation of the share of each one in the profits and losses? May this impugned?

Answer 23

Yes, and it may only be impugned when it is manifestly inequitable.

Art. 1798. If the partners have agreed to intrust to a third person the designation of the share of each one in the profits and losses, such designation may be impugned only when it is manifestly inequitable. IN no case may a partner who has begun to execute the decision of the third person, or who has not impugned the same within a period of three months from the time he had knowledge thereof, complain of such decision.

The designation of losses and profits cannot be intrusted to one of the partners.

Question 24

May a partner be excluded from any share in the profits or losses?

Answer 24

No, such stipulation will be void.

Art. 1799. A stipulation which excludes one or more partners from any share in the profits or losses is void.

Question 25

What shall be the scope of the authority of the managing partner?

Answer 25

Under Art. 1800 par. 1, “The partner who has been appointed manager in the articles of partnership may execute all acts of administration despite the opposition of his partners, unless he should act in bad faith; and his power is irrevocable without just or lawful cause.”

Question 26

What is needed in order to revoke the power of the managing partner?

Answer 26

Under Art. 1800 par. 1, “The vote of the partners representing the controlling interest shall be necessary for such revocation of power.”

Art. 1800 par. 2. A power granted after the partnership has been constituted may be revoked at any time.

Question 27

What is the scope of the authority of the managing partners in case two or more persons have been given such responsibility? What will be the remedy in case one of the managing partners oppose the act(s) of the other managing partner(s)?

Answer 27

WITHOUT STIPULATION OR SPECIFICATION: Under Art. 1801, “If two or more partners have been intrusted with the management of the partnership without specification of their respective duties, or without stipulation that one of them shall not act without the consent of all the others, each one may separately execute all acts of administration.”

However, if there is an opposition by one of the managing partners, Art. 1801 also provides, “[I]f 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.”

WITH STIPULATION: Art. 1802. In case it should have been stipulated that none of the managing partners shall act without the consent of the others, the concurrence of all shall be necessary for the validity of the acts, and the absence or disability of any one of them cannot be alleged, unless there is imminent danger of grave or irreparable injury to the partnership.

Question 28

What rules shall be observed in case the manner of the management of the partnership has not been agreed upon?

Answer 28

Art. 1803. When the manner of management has not been agreed upon, the following rules shall be observed.

(1) All the partners shall be considered agents and whatever any one of them may do alone shall bind the partnership, without prejudice to the provisions of Article 1801.
(2) None of the partners may, without the consent of the others, make any important alteration in the immovable property of the partnership, even if it may be useful to the partnership. But if the refusal of consent by the other partners is manifestly prejudicial to the interest of the partnership, the court’s intervention may be sought.

Question 29

Do partners have the right to associate another person with him in his share?

Answer 29

Yes, such is called a contract of subpartnership. Art. 1804. Every partner may associate another person with him in his share, but the associate shall not be admitted into the partnership without the consent of all the other partners, even if the partner having an associate should be a manager.

Question 30

Where will the partnership books be kept? And who has access to them?

Answer 30

Principal place of business; every partner shall have access.

Art. 1805. The partnership books shall be kept subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at any reasonable hour have access to and may inspect and copy any of them.

Question 31

What is the partner’s obligation to render true and full information?

Answer 31

Art. 1806. Partners shall render on demand true and full information of all things affecting the partnership to any partner or the legal representative of any deceased partner or of any partner under legal disability.

Question 32

What is the obligation of the partner to account and hold as trustee the profits?

Answer 32

Art. 1807. Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.

Question 33

What is the prohibition upon the capitalist partner?

Answer 33

Art. 1808. 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 thee is a stipulation to the contrary.

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.

Question 34

When will a partner have the right to a formal account as to partnership affairs?

Answer 34

Art. 1809. Any partner shall have the right to a formal account as to partnership affairs:

(1) If he is wrongfully excluded from the partnership business or possession of its property by his co-partners;
(2) If the right exists under the terms of any agreement;
(3) As provided by Article 1807;
(4) Whenever other circumstances render it just and reasonable. (n)