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Civil Law > Partnerships > Flashcards

Partnerships Flashcards

1
Q

What is a partnership?

A

By the contract of partnership, two or more persons bind themselves to contribute money, property and industry to a common fund, with the intention of dividing the profits among themselves.

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2
Q

Does partnership has a juridical personality separate and distinct from that of each partners? What are its implications?

A

Yes. As an independent juridical person, a partnership may enter into contracts, acquire and possess property of all kinds in its name, as well as incur obligations and bring civil or criminal actions in conformity with the laws and regulations of its organizations.
The partners cannot be held liable for the obligations of the partnership unless it is shown that the legal fiction of a different juridical personality is being used for a fraudulent, unfair, or illegal purpose.

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3
Q

What are the characteristics of partnership?

A

P3-C3-BON
Principal- does not depend for its existence

Preparatory- entered as a means to an end

Profit-oriented- purpose is for profit and not just common enjoyment

Commutative- undertaking of each one is considered equal with the others

Consensual- perfected by mere consent

Capable of suit- endowed with legal personality, unless it is an unlawful partnership. It can be sue and be sued.

Bilateral- entered by two or more persons and the rights and obligations arising therefrom are always reciprocal

Onerous- certain contributions have to be made

Nominate- has a special designation in law

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4
Q

What are the salient features of ordinary partnership?

A
  1. Community of interest in profits and losses
  2. Community of interest in the capital employed
  3. Community of power in administration
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5
Q

What are the essential requisites of partnership?

A

C3-O-P2-S2

  1. There must be a valid CONTRACT
    - the relation is fundamentally contractual for it considers the essential elements such as (cause, object and consideration
    - it is fiduciary in character in which the element of delectus personae exists
  2. The parties have legal CAPACITY to enter into the contract.
  3. There must be a mutual CONTRIBUTION of money, property, or industry, or industry to a common fund.
  4. The OBJECT or purpose must be lawful.
  5. The primary PURPOSE must be to obtain profits to divide the same among the parties.
  6. There must be at least one general partner
  7. There must be Affectio Societaties
  8. The articles of partnership must not be kept SECRET among the members
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6
Q

Differentiate Partnership and Corporation

A

1.Parternship
2. Corporation

As to creation
1. Created by mere agreement
2. created by law or by operation of law

As to number of incorporators
1. at least 2 persons
2. there may be only 1 incorporator but not more than 15 in number

As to commencement of Juridical personality
1. from the moment of execution of the contract of partnership
2. from the date of issuance of the certificate of incorporation by the SEC

As to powers
1. may exercise any power authorized by the partners
2. can exercise only the powers expressly granted by law or implied from those granted or incident to its existence

As to management
1. when management is not agreed upon, every partner is an agent of the partnership
2. vested in the board of directors or trustees

As to effect of mismanagement
1. a partner, as such, can sue a co-partner who mismanages
2. The suit against a member of the board of directors or trustees who mismanages must be in the name of the corporation

As to right of succession
1. no such right
2. has such right

As to extent or liability to third persons
1. partners are generally liable for partnership debts to third persons
2. stockholders are liable only to the extent of the shares subscribed by them

As to term of existence
1. may be established for any period of time stipulated by the partners
2. shall have perpetual existence unless its articles of incorporation provide otherwise

As to firm name
1. Limited partnership is required by law to add the word LTD to its name
2. not the same or similar to any registered firm name

As to dissolution
1. may be dissolved at any time by any or all of the partners
2. can only be dissolved with the consent of the State

As to governing law
1. governed by the contract and the civil code
2. governed by the RCC

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7
Q

What are the rules to determine the existence of a partnership?

A

NCR-SHARE
1. GR. Persons who are NOT partners as to each other are not partners as to third persons.
XPN: Partnership by estoppel

  1. CO-OWNERSHIP or co-possession of a property does not of itself establish a partnership, whether such co-owners or co-possessors do or do not share any profits made by the use of the property.
  2. Sharing of gross RETURNS alone does not of itself indicate a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived
  3. Receipt by a person of SHARE in the profits is a prima facie evidence that he is a partner in the business; sharing in the net profits presupposes sharing in the losses.
    XPN:DIWAC
    a. as a DEBT by installments or otherwise
    b. as INTEREST on a loan, though the amount of payment varies with the profits of the business
    c. as WAGES of an employee or rent to a landlord
    d. as an ANNUITY to a widow or representative of a deceased partner
    e. as the CONSIDERATION for the sale of a goodwill of a business or other property by installments or otherwise
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8
Q

What is the object or purpose of partnership?

A

A partnership must have a lawful object and must be established for the common benefit or interest of the partners

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9
Q

What are the formal requirements of a partnership contract?

A

GR: A partnership may be constituted in any form
XPN:
a. If Real property or real right is contributed
b. if it is covered by the Statute of Frauds
c. A limited partnership cannot be constituted orally

A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.

Form if Personal property is contributed
a. if capital is less than 3K= no special form
b. If capital is 3K or more= it shall appear in public instrument and must be recorded in the office of SEC

Form if Real Property is Contributed
a. must be in writing in a public instrument
b. an inventory of the property contributed, signed by the parties, is attached to the public instrument.

Form if personal

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10
Q

What are the classifications of partnership?

A

As to object
a. Universal Partnership
Of all present property
of profits
b. Particular Partnership- on which has for its object (DFUSE)
DETERMINAE things
their USE or FRUITS
A SPECIFIC undertaking
The EXERCISE of a profession or vocation

As to liability of Partners
a. General Partnership- where all the partners are liable pro rata with all their property after the partnership assets have been exhausted
b. Limited partnership- where the limited partners shall not be bound by the obligations of the partnership in excess of his capital contribution

As to duration
a. Partnership at will- no fixed term or undertaking
b. Partnership with a fixed period
c. Partnership for a particular undertaking- automatically dissolved upon the achievement of the particular undertaking stipulated in the contract of partnership

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11
Q

What do you mean by “universal partnership of all present property”?

A

One wherein the partners contribute all the property which actually belong to them to a common fund, with the intention of diving the same among themselves, as well as the profits which they may acquire therewith.

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12
Q

What do you mean by “universal partnership of profits”?

A

One which comprises all that the partners may acquire by their industry or work during the existence of the partnership and the USUFRUCT of movable or immovable property which each of the partners may possess at the time of the celebration of the contract.

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13
Q

What is the underlying presumption if there is no specification of its nature in the articles of universal partnership?

A

Articles of partnership, entered into without specification of its nature, only constitute a universal partnership of profits.

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14
Q

Differentiate Universal Partnership of all present property and Universal Partnership of profits

A
  1. Universal partnership of all present property
  2. Universal partnership of profits

As to coverage
1. all present property actually belonging to the partners are contributed to the partnership, which become common property of all the partners and the partnership
2. Property, which the partners owned at the time of the celebration of the contract, shall continue to pertain to them. Only the usufruct (use and fruits) shall become common property

As to profits
1. only profits derived from the property contributed become common property but not profits arising from other property of the partners. The latter points, however, may by stipulation be considered as common property for the enjoyment of all
2. All profits acquired through the “industry or work” of the partners become common property

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15
Q

Differentiate universal partnership and particular partnership

A

As to subject matter

Universal partnership encompasses all the present properties of the partners. or to all of the profits

Particular partnership deals with determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation

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16
Q

May a husband and wife form or be partners in a general professional partnership?

A

Yes. It is a particular partnership for the exercise of a common profession or occupation.

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17
Q

What are the different kinds of partners?

A

As to the nature of contribution

Capitalist partner contributes money or property

Industrial partner contributes only his industry or personal service

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18
Q

Differentiate capitalist partner and industrial partner

A

As to prohibition to engage in other business

CP- cannot generally engage in the same or similar enterprise as that of his firm, unless there is a stipulation to the contrary
IP- cannot engage in any business for himself, unless the partnership expressly permits him to do so

As to profits

CP- Shares in the profits according to agreement thereon; if none, pro rata to his contribution
IP- receives a just and equitable share

As to losses

CP
1. First, the stipulation as to losses,
2. If none, the agreement as to profits
3. If none, pro rata to contribution

IP- Exempted as to losses as between partners, but is liable to third persons, without prejudice to reimbursement from the capitalist partners

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19
Q

What are the relations created by the contract of partnership?

A
  1. Relations among the partners themselves
  2. Relations of the partners with the partnership
  3. Relations of the partnership with third persons with whom it contracts
  4. Relations of the partners with such third persons
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20
Q

What are some of the obligations of a partner?

A
  1. to give his contribution
  2. not to convert firm money or property to his own use
  3. not to engage in unfair competition with his own firm
  4. to account for and hold as trustee, unauthorized personal profits
  5. pay damages caused by his fault
  6. duty to credit to the firm, payment made by a debtor who owes him and the firm
  7. to share with the other partners the share of the partnership credit which he has received from an insolvent firm debtor
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21
Q

What are the obligations of partners among themselves?

A
  1. Obligation with respect to CONTRIBUTION of Property
  2. Obligations with respect to CONTRIBUTION of Money and Money Converted to personal use
  3. Obligation not to engage in other business for himself
  4. Obligation to contribute capital and additional capital
  5. Obligation of Managing partner who collects debt
  6. Obligation of partner who receives share in partnership credit
  7. Obligation of partner for damages to partnership
  8. duty to render information
  9. obligation to account for any benefit and hold as trustee unauthorized personal profits
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22
Q

What are the implications of the obligation to contribute property among partners?

A

CoW-DADI
1. to CONTRIBUTE what had been promised

  1. to WARRANT specific and determinate property contributed to the partnership in case of eviction
  2. to DELIVER the fruits of the property from the time they should have been delivered, without the need of any demand
  3. when contribution is in goods, the amount thereof must be determined by proper APPRAISAL of the value thereof at the time of contribution
  4. to preserve the property with the DILIGENCE of a good father of a family pending delivery to the partnership
  5. to INDEMNIFY for any interest and damages caused by the retention of the property or by delay in its obligation to contribute a sum of money
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23
Q

What is the rule with regards to the amount, time and delay in the giving of contribution by the partners?

A

As to the amount, unless there is stipulation to the contrary, the partners shall contribute equal shares to the capital of the partnership

As to when, the contribution must be provided upon perfection of the contract, except if the partners stipulate otherwise

As to the issue of delay, he becomes a debtor for the interest and damages from the time he should have complied with his obligation

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24
Q

What are the prohibitions between the partners?

A

Industrial partner cannot engage in any 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 of avail themselves of the benefits which he may have obtained in violation of this provision, with a right to damages.

Capitalist partner is prohibited only to any operation which is of the same or similar kind of business in which the partnership is engaged, unless there is a stipulation to the contrary.
XPN to CP’s prohibition:
1. Expressly stated that he can engage
2. Other partners allowed him to do so
3. during period of liquidation and winding up, the partnership is already non-existent
4. the general-capitalist partner becomes a limited partner in a competitive enterprise

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25
What are the provisions regarding the contribution of capital and additional capital?
CONTRIBUTION TO PARTNERSHIP CAPITAL GR: the partners shall contribute capital shares XPN: a. when there is stipulation to the contrary b. industrial partner XPN to XPN: Unless besides his services, he has contributed capital pursuant to an agreement to that effect. CONTRIBUTION OF ADDITIONAL CAPITAL GR: A partner is not bound to contribute additional capital. XPN: a. when there is an agreement to the contrary b. in case of imminent loss of the business, and there is no agreement to the contrary, capitalist partners are under the obligation to contribute an additional share to save the venture. If he refuses to contribute, he shall be obliged to sell his interest in the partnership to other partners.
26
What are the provisions regarding the collection of debts by the managing partner?
GR: Where a person is separately indebted to the partnership and to the managing partner at the same time, any sum received by the latter, 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. XPN: a. where he received entirely for the account of the partnership, in which case the whole sum shall be applied to the partnership credit only b. if the collecting partner is not a managing partner. There is no basis for the suspicion that the partner is in bad faith.
27
What are the rules for the distribution of profits?
a. if there is an agreement The profits shall be distributed in conformity with the agreement. however, they cannot stipulate that one or more partners shall be excluded from the profits and losses. b. if there is no agreement i. share of capitalist partner shall be in proportion to his capital contribution ii. industrial partner shall receive such share, which must be satisfied first before the capitalist partners shall divide the profits, as may be just and equitable under the circumstances c. if the industrial partner also contributed money or property, he is considered a double contributor or a capitalist industrial partner. As far as his contribution of capital is concerned, he shall, in addition, also receive share in the profits in proportion to the amount of the capital he had contributed to the firm.
28
What are the rules regarding distribution of losses?
a. The losses shall be distributed in conformity with the agreement subject to Art. 1799 b. 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; c. in the absence of stipulation as to the share of each partner in the profits, in proportion to what he may have contributed. Note: If there is no profit sharing ration stipulated, then the losses shall be divided in proportion ito ther capital contributions.
29
What stipulation regarding sharing of profits and losses is considered void?
A stipulation excluding a partner from any share in the profits or losses is void. Reason: The partnership must exist for the common benefit and interests of partners.
30
What are the implications if the manner of management has been provided for in the partnership agreement?
WHEN A PARTNER HAS BEEN APPOINTED MANAGER IN THE ARTICLES OF PARTNERSHIP Extent of power: He may execute all acts of administration despite the opposition of his partners, unless he should act in bad faith. The power of the managing partner appointed in the Articles of Partnership is generally irrevocable. It can be revoked only: i. Upon showing of just and lawful cause ii. upon the vote of the partners representing the controlling interest WHEN A PARTNER HAS BEEN APPOINTED AS MANAGER after THE CONSTITUTION OF THE PARTNERSHIP Power to act may be revoked at any time for any cause whatsoever. Reason: such appointment is a mere delegation of power. Extent of power: As long as he remains manager, he can perform all acts of administration, but if others oppose and he persists, he can be removed.
31
What are the rules when 2 or more partners have been entrusted with the management?
WITHOUT SPECIFICATION OF THEIR RESPECTIVE DUTIES AND WITHOUT STIPULATION THAT ONE OF THEM SHALL NOT ACT WITHOUT THE CONSENT OF ALL THE OTHERS GR: Each one may execute all acts of administration XPN: if any such partner should oppose, i. Decision of the majority of the managing partners shall prevail; or ii. In case of a tie, decision of the partners having the controlling interest shall prevail, provided that they are also managers WHEN STIPULATION REQUIRING UNANIMITY OF ACTION In case it should have been stipulated that none of the managing partners shall act without the consent of the others. GR: The concurrence of ALL shall be necessary for the validity of the acts and absence or disability of any managing partner cannot be alleged. XPN: When there is an imminent danger of grave or irreparable injury to the partnership.
32
What are the rules when the manner of management has not been agreed upon?
All partners shall be considered agents and whatever any one of them may do alone binds the partnership (without prejudice to the provisions of Art 1801) XPN: 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. XPN to XPN: 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.
33
What are the Rights of a partner?
PRA3ID 1. Property rights of a partner 2. Right to reimbursement for amounts advanced to the partnership and to indemnification for risks in consequence of management 3. Right to ASSOCIATE with another person in his share 4. Right of ACCESS and inspection of partnership books 5. Right to a formal ACCOUNT of partnership affairs under certain circumstances 6. Right to demand true and full information of all things affecting the partnership. 7. Right to demand true and full information of all things affecting the partnership 8. Right to compensation 9. Right to reimbursement
34
What are the property rights of a partner?
SIM 1. SPECIFIC partnership property 2. INTEREST in the Partnership 3. MANAGEMENT participation
35
What are the circumstances for a partner to assert its right to a formal account of partnership affairs?
WAPO 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. If a partner has derived PROFITS from any transaction connected with the formation, conduct or liquidation of the partnership or from any use by him of its property 4. Whenever OTHER circumstances render it just and reasonable
36
What is the rule regarding the right to specific partnership property?
a. Contemplates tangible property b. The specific partnership property belongs to the partnership. The partners have no actual interest in it until after dissolution c. The right over a specific partnership property is not subject to attachment or execution except if it is based on a claim against the partnership itself
37
What is the nature of the partner's right in specific partnership property?
A partner is a co-owner with his partners of specific partnership property.
38
What are the incidents of co-ownership?
RAEL 1. Equal RIGHT with other partners to possess specific partnership property for partnership purposes 2. Not ASSIGNABLE, except in connection with the assignment of rights of all partners in the same property 3. Not subject to attachment or EXECUTION, except on a claim against the partnership 4. Not subject to LEGAL support
39
What are the "interests in the partnership"?
1. A partner's interest in the partnership is his share of the profits and surplus 2. The interest of a partner in a going partnership business where there has been no settlement of his account is not a debt due from partnership and therefore, not subject to attachment or execution on a judgment recovered against the individual partner
40
Define Profit, Surplus and Loss
Profit- excess of returns over expenditures in a transaction or series of transaction Surplus- assets of the partners after partnership liabilities are paid and the rights of the partners among themselves are adjusted Loss- the difference between the liabilities of the partnership are more than the assets
41
What is the general rule regarding a partner's interest in specific partnership property and partner's interest in the partnership?
A partner's interest in specific partnership property cannot be assigned and attached, and is not subject to legal support A partner's interest in the partnership can in general be assigned, attached, and be subject to legal support.
42
What is the effect of assignment of partner's whole interest in the partnership?
A conveyance by a partner of his whole interest in the partnership does not of itself dissolve the partnership.
43
What are the prohibitions of the assignee against the other partners?
In the absence of agreement, the assignee cannot, as against the other partners: IRI 1. INTERFERE in the management or administration of the partnership, business or affairs 2. REQUIRE information or account of partnership transactions 3. INSPECT the partnership books
44
What is the rule regarding the right to participate in the management?
In the absence of an agreement to the contrary, all partners have equal rights in the management and conduct of partnership business.
45
What are the remedies of separate judgment creditor of a partner?
1. Application for a charging order after securing judgment on his credit 2. Preferential rights of partnership creditors 3. Appointment of receiver 4. Redemption of interest charged 5. Exemption laws
46
What is the rule regarding the selection of the firm name?
Every partnership shall operate under a firm name, which may or may not include the name of one or more of the partners. The following are allowed: 1. The name of the individual partner 2. Surnames of all partners 3. Surname of one or more of members with the addition "and Company" 4. A name purely fanciful or fictitious Note: if a limited parter will be in the firm name. he is considered as a general partner.
47
What are the obligations of partners to third persons?
1. Liability for contractual obligations 2. Liability of partnership for acts of partners
48
What is the rule regarding liability for contractual obligations?
In the case of a partnership obligation arising from contracts, all general partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted; in other words, the liability of the partners is joint and subsidiary.
49
Is an industrial partner not exempted from liability?
No. An industrial partner is exempted from losses. However, neither on principle nor on authority can the industrial partner be relieved from liability to third persons for the debts of the partnership. Losses concern partners; liabilities concern third persons.
50
What are the liabilities of partnership for acts of partners?
a. Acts for apparently carrying on in the usual way the business of the partnership GR: Every partner is an agent of the partnership. The act of every partner binds the partnership. b. acts of strict dominion or ownership GR: The act does not bind the partnership XPN: Partnership is bound if: i. Act is authorized by ALL the partners ii. They have abandoned the business c. Acts in contravention of a restriction on authority - No act of a partner in contravention of a restriction or authority shall bind the partnership to persons having knowledge of the restriction.
51
What are the acts authorized of a partner wherein the consent of all partners are necessary?
DAD-CARE 1. DO any other act which would make it impossible to carry on the ordinary business of a partnership 2. ASSIGN the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership 3. DISPOSE of the goodwill of the business 4. CONFESS a judgment 5. submit a partnership claim or liability to ARBITRATION 6. RENOUNCE a claim of the partnership 7. ENTER into a compromise concerning a partnership claim or liability.
52
What is the rule if the Title: in partnership name Conveyance: in partnership name?
The conveyance passes title to the property but the partnership can recover the property unless: a. The conveyance was in the usual way of business and the buyer had no knowledge of the fact that the partner with whom he is dealing has no authority; or b. Unless such property has been conveyed by the grantee or a person claiming through such grantee to a holder for value without knowledge that the partner in making the conveyance, has exceeded his authority.
53
What is the rule if title: in partnership name conveyance: in partner's name?
Buyer gets only the equitable interest of the partnership provided the act is one within the authority of the partner and is in the usual way of business of the partnership
54
What is the rule if title: in name of one or more partners but not all conveyance: in name of partner or partners in whose name title stands and the record does not disclose the right of the partnership?
Passes title to the property but the partnership may recover. The effect is same in paragraph 1.
55
What is the rule if title: in the name of one or more or all partners, or in a third person in trust of the partnership conveyance: in partnership name or in a partner's name?
Passes the equitable interest provided the act is one with authority of the partner and is in the usual way of business of the partnership.
56
What is the rule if title: in name of all partners conveyance: in name of all partners?
Passes title to the property
57
What is the rule regarding admission by a partner?
An admission of partner or representation made by any partner concerning partnerships affairs within the scope of his authority is evidence against the partnership. Admission is binding against partnership: (CWD) 1. It is connected with partnership affairs 2. Within the scope of authority 3. During the existence of the firm
58
What is the effect of the notice to a partner?
Notice to a partner while already a partner is notice to the partnership if the matter is connected to partnership affairs. Notice to one partner is considered a sufficient and effective notice to the firm.
59
What is rule regarding liability of partners?
With regard to partnerships, ordinarily, the liability of the partners is not solidary. Only in exceptional circumstances shall the partners' liability be solidary in nature.
60
What is a partner by estoppel?
A person not a partner may become a partner by estoppel and thus liable to third persons as if he was a partner when by his words or conduct, he: 1. directly represents himself to anyone as a partner in an existing partnership or in a non-existing partnership 2. Indirectly represents himself by consenting to another representing him as a partnership in an existing partnership or in a non-existing partnership.
61
What is a partnership by estoppel?
when all the members of the existing partnership consented to the representation, a partnership act or obligation arises. This is a case of partnership by estoppel composed of the alleged partner and the partnership itself.
62
What are the elements to establish liability as a partner on the ground of estoppel?
PARLa 1. PROOF by plaintiff that he was individually AWARE of the defendant's representations or that such representations were made by others and not denied or refuted by defendant; 2. RELIANCE on such representations by the plaintiff; and 3. LACK of any denial or refutation of the statements by the defendant.
63
What is the liability of incoming partner for partnership obligations?
A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising BEFORE his admission as though he had been a partner when such obligations were incurred, except that this liability shall be satisfied only out of partnership property, unless there is a stipulation to the contrary. As regards obligation of the partnership incurred AFTER his admission, he is liable as an ordinary original partner.
64
What is the liability of the outgoing partner for partnership obligations?
Where a partner gives notice of his retirement or withdrawal from the partnership, he is freed from any liability on contracts entered into thereafter, but his liability on existing incomplete contracts continues.
65
Who is preferred in the partnership property?
The creditors of the partnership shall be preferred to those of each partner as regards the partnership property.
66
What are the three different stages when partnership has come to its end? Define Each
Dissolution- change in the relation of the partners caused by any partner ceasing to be associated in carrying on the business. Winding up or liquidation- actual process of settling the partnership business affairs after dissolution. Here, both the partnership and the business enterprise come to an end. It involves: 1. Collection and distribution of assets 2. Payment of debts 3. Determination of the value of each partner's interest in the partnership 4. Defending claims against the firm Termination- point in time when all partnership affairs are wound up or completed and it signifies the end of the partnership life.
67
Who is the liquidator?
a. a party who has not wrongfully caused the dissolution b. legal representative of the lost surviving partner c. the court, upon cause shown by a partner, his legal representative or assignee
68
What is the effect of dissolution?
the partnership is not yet terminated; it will continue to function until the winding up is completed.
69
What are the types of dissolution?
Extrajudicial dissolution Judicial dissolution
70
What are the causes of extra-judicial dissolution?
a. without violation of the agreement between the partners b. in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time; c. by any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership d. in any case by the loss of the thing: i. when a specific thing which a partner had promised to contribute to the partnership, perishes before the delivery; or ii. when the partner has only contributed the usufruct of the property e. by the death of any partner f. by the civil interdiction of any partner g. by the insolvency of any partner or of the partnership h. by degree of court under Art. 1831
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What are the instances of extrajudicial dissolution without violation of the agreement between the partners?
TE3 a. By the termination of the definite term or particular undertaking specified in the agreement b. By the Express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified c. By the Express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking d. by the Expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners.
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What is the effect if a partner withdraws from the partnership before the expiration of term?
Even if there is a specified term, one partner can cause its dissolution by expressly withdrawing even before the expiration of the period, with or without justifiable cause. If there is no cause or the cause is not justified, the withdrawing partner is liable for damages but in no case can he be compelled to remain in the firm. It is a power and not necessarily a right to dissolve a partnership.
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What are the implications of judicial dissolution?
Judicial dissolution is resorted since there are questions of fact that must be established in hearing. In a suit for dissolution, the court may appoint a receiver at its discretion.
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What are the grounds for Judicial Dissolution?
M-I2-L-O a. Any partner commits MISCONDUCT or persistent breach of partnership agreement b. a partner has been declared INSANE in any judicial proceeding or is shown to be of unsound mind c. A partner becomes in any other way INCAPABLE of performing his part of the partnership contract d. The business of the partnership can only be carried on at a LOSS e. OTHER circumstances that render dissolution equitable
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What are the effects of Dissolution?
1. As to Partner's Authority to Act for the partnership GR: Dissolution terminates ALL authority of any partner to act for the partnership XPN: a. Acts necessary to wind up partnership affairs; or b. Acts necessary to complete transactions begun but not then finished 2. As to partner's existing liability GR: Dissolution does not automatically discharge the existing liability of any partner
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What are the instances when partnership is bound to third persons after dissolution?
1. Acts appropriate for winding up partnership affairs 2. Acts for completing unfinished transactions 3. Any transaction which would bind the partnership if dissolution had not taken place provided the parties are in good faith
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What are the instances when the partnership is not bound to third persons after dissolution?
1. Where partnership was dissolved because it was UNLawful to carry on the business, except when the act is for winding up 2. Where the acting partner in the transaction has become INSolvent 3. Where the partner is UNauthorized to wind up, except if the transaction is with third persons in good faith 4. Where act is inappropriate for winding up or for completing unfinished transactions 5. Completely new transaction which would bind the partnership if dissolution had not taken place with third persons in bad faith
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What is the effect of dissolution in case of the death of a partner?
The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner, subject to prior payment of his separate debts.
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Who are the persons authorized to wind up?
1. Partners designated by the agreement 2. In the absence of such agreement, all partners who have not wrongfully dissolved the partnership; or 3. Legal representative of last surviving partner not insolvent
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What are the Rules in settling the accounts between partners after dissolution?
ALC 1. Determine the ASSets of the partnership which are as follows: a. partnership property b. contributions of the partners necessary for the payment of all liabilities enumerated in Art. 1839 par 2 2. Payment of LIAbilities in Winding up in the following order: a. Those owing to creditors other than partners b. Those owing to partners other than for capital or profits c. Those owing to partners in respect of capital d. Those owing to partners in respect of profits 3. The partners shall CONtribute, as provided by Art. 1797, the amount necessary to satisfy the liabilities
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Who shall have priority on partnership property?
Partnership creditors shall have priority on partnership property and the separate creditors on individual property, saving the rights of lien or secured creditors.
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What happens when assets are not sufficient to satisfy the firm's liabilities?
When the firm's assets are not enough to settle the liabilities, the partners are required to contribute to fully satisfy its liabilities. The amounts of contribution will depend upon the partner's contributed capital, that is, pro rata.
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What is the rule when there are claims over partnership assets and claims over individual properties of partners, which are both in custody of the court for distribution?
1. Partnership creditors are preferred with regard to partnership property; and 2. Individual creditors are preferred with respect to individual properties of partners
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What is the rule when a parter or his estate becomes insolven?
Claims against his separate property shall rank in the ff order: 1. Those owing to separate creditors 2. Those owing to partnership creditors 3. Anything left to the partners by way of contribution
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What is limited partnership?
One formed by two or more persons having as members one or more general partners and one or more limited persons, the latter not being personally liable for partnership debts
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What is the rule in the name of a limited partner?
GR: A surname of limited partner shall not appear in the partnership name. XPN: 1. If it is also the name of a general partner 2. Prior to the time when the limited partner became such, the business had been carried on under a name in which his surname appeared
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What is the rule with regard to the liability of a limited partner?
GR: Limited partner is not liable as a general partner. His liability is limited to the extent of his contribution to the partnership.
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What is the instance wherein the consent or ratification of limited partner is necessary?
GR: General partner shall have the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. XPN: A general partner in a limited partnership has no authority, without consent or ratification of all limited partners. 1. Do any act in contravention of the certificate 2. Do any act which would make it impossible to carry on the ordinary business of the partnership 3. Confess a judgement against the partnership 4. Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose. 5. Admit a person as a general partner 6. Admit a person as a limited partner, unless the right to do is given in the certificate 7. Continue the business with the partnership property on the death, retirement, insanity, civil interdiction or insolvency of a general partner, unless the right to do so is given in the certificate.
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What are the rights of a limited partner?
1. To have the partnership Books kept at the principal place of business of the partnership 2. To Inspect, at a reasonable hour, partnership books and copy any of them 3. To demand true and Full termination of the things affecting the partnership 4. To demand a Formal account of the partnership affairs whenever circumstances render it just and reasonable 5. To ask for dissolution and winding up by decree of court 6. To receive a share in the profits or other compensation by way of income provided that the partnership assets are in excess of partnership liabilities after such payment 7. To receive the return of his contribution provided that: a. All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contribution, have been paid or the partnership assets are sufficient to pay partnership liabilities. b. The consent of all the members has been obtained; and c. The certificate is cancelled or so amended as to set forth the withdrawal or reduction
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Civil Law (6 decks)

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