Professional Documents
Culture Documents
PARTNERSHIP
PARTNERSHIP
it is a CONTRACT whereby two or more
persons (1) bind themselves to CONTRIBUTE money,
property, or industry to a COMMON FUND (2) with the
intention of dividing the PROFITS among themselves or
in order to EXERCISE a PROFESSION
a STATUS and a FIDUCIARY RELATION
subsisting between persons carrying on a business in
common with a view on profit
CHARACTERISTICS
PARTNERSHIP
OF
THE
CONTRACT
OF
2
2. COMMON FUND obtained from contributions
3. JOINT INTERESTS in the PROFITS
WHAT DO NOT ESTABLISH A PARTNERSHIP
1. mere co-ownership or co-possession
even with profit sharing
2. mere sharing of GROSS returns
even with joint ownership of the properties
involved
RULES TO DETERMINE THE EXISTENCE OF A
PARTNERSHIP
1.
2.
3.
4.
PARTNERSHIP BY ESTOPPEL
IF 2 persons not partners represent
themselves as partners to strangers, a
partnership by estoppel results
WHEN 2 persons, who are partners, in
connivance with a friend who is not a partner
inform a stranger that said friend is their partner,
a partnership by estoppel also result to the end
that the stranger should not be prejudiced
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individual
capacity,
notwithstanding
the
absence of a partnership
2. when two or more individuals, having a common
interests in a business bring a court action, it
should be presumed that they prosecute the
same in their individual capacity as co-owners
and not in behalf of a partnership which does not
exist in legal contemplation
CLASSIFICATION OF PARTNERSHIPS
A) ACCORDING TO MANNER OF CREATION
1. ORALLY constituted
2. constituted in a PRIVATE INSTRUMENT
3. constituted in a PUBLIC INSTRUMENT
4. REGISTERED S.E.C.
B) ACCORDING TO OBJECT
1. UNIVERSAL
2. PARTICULAR
C) ACCORDING TO LIABILITY
1. LIMITED PARTNERSHIP
2. GENERAL PARTNERSHIP
D) ACCORDING TO LEGALITY
1. LAWFUL OR LEGAL
2. UNLAWFUL OR ILLEGAL
E) ACCORDING TO DURATION
1. for a SPECIFIC PEIOD or FIXED PERIOD
2. PARTNERSHIP AT WILL
F) ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP
2. PARTNERSHIP BY ETOPPEL
G) AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1. SECRET PARTNERSHIP
2. NOTORIOUS / OPEN PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
2. PROFESSIONAL / NON-TRADING
GENERAL PARTNERSHIP
one where all the partners are general partners
they are LIABLE even with respect to their individual
properties, after the assets of the partnership has been
exhausted
LIMITED PATNERSHIP
one where at least one partner is a general partner
and the others are limited partners
one whose liability is limited only up to the extent of his
contribution
a partnership where all the partners are limited
partners cannot exist as a limited partnership
REFUSED REGISTRATION
IF it continuous as such, it will be considered as a
general partnership and all the
partners will be
general partners
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KINDS OF UNIVERSAL PARTNERSHIP
1. PARTNERSHIP OF ALL PRESENT PROPERTY
2. PARTNERSHIP OF ALL PROFITS
*UNIVERSAL PARTNERSHIP OF ALL PRESENT
PROPERTY
CONTRIBUTION of
1. ALL the properties actually belonging to the
partners
2. the PROFITS acquired with said property
BECOMES COMMON PROPERTY
EXCEPT all FUTURE PROPERTY
FRUITS of FUTURE PROPERTY INCLUDED IF
STIPULATED UPON
*UNIVERSAL PARTNERSHIP OF PROFITS
comprises all that the partners may acquire by the
INDUSTRY or WORK of the partners become common
property regardless of within said profits were obtained
through the usufruct contributed
EXCEPT PRIZES and GIFTS
RULE:
articles of universal partnership, entered without
specification of its nature, only constitute a universal
partnership of PROFITS
RULE:
persons who are prohibited from giving each other any
donation or advantage cannot enter into universal
partnership
WHO:
1. HUSBAND and WIFE
2. those guilty of ADULTERY or CONCUBINAGE
3. those guilty of the same criminal offense if the
partnership was entered into in consideration of
the same
while spouses cannot enter into a universal
partnership, they can enter into a particular partnership
or be members thereof
a universal partnership is virtually a donation to each
other of the partners properties or at least their usufruct
PARTICULAR PARTNERSHIP
a particular partnership has for its OBJECT:
1. DETERNMINATE THINGS their use or fruits
2. SPECIFIC UNDERTAKING
3. EXERCISE of a PROFESSION or VOCATION
OBLIGATIONS OF THE PARTNERS
RULE:
a PARTNERSHIP BEGINS from the moment of the
EXECUTION of the CONTRACT
* even if contributions have not yet been made the firm
already exists, for partnership is a consensual contract
DURATION OF PARTNERSHIP
UNLIMITED
* MAY BE AGREED UPON
1. EXPRESSLY definite period
2. IMPLIEDLY upon achievement of its
purpose
PARTNERSHIP AT WILL
a partnership wherein its continued existence really
depends upon the will of the partners or even on the will
of any of them
2 KINDS:
1. when there is no term, express or implied
2. when it is continued by the habitual managers
although the period has ended or the purpose
has been accomplished
3 IMPORTANT DUTIES OF EVERY PARTNER [C, D-F,
W]
1. duty to CONTRIBUTE what had been promised
2. duty to DELIVER the FRUITS of what should
have been delivered
3. duty to WARRANT
RIULES ON THE DUTY TO CONTRIBUTE
1. the contribution must be made at the time the
partnership is entered into UNLESS a different
period is stipulated
2. no demand is needed to put the partner in
default
3. the partner must exercise due diligence in
preserving the property to be contributed before
he actually contributes the same
4. a partner who promises to contribute to the
partnership becomes a promissory debtor of the
partnership
RULES ON THE DUTY TO DELIVER THE FRUITS
1. IF property has been promised, the fruits thereof
should also be given
2. the fruits referred to are those arising from the
time they should have been delivered, without a
need of any demand
3. IF the partner is in BAD FAITH, he is liable not
only for the fruits actually produced, BUT also for
those that could have been produced
4. IF MONEY HAS BEEN PROMISED, INTEREST
and DAMAGES from the time he should have
complied with his obligation should be given
5. NO DEMAND is needed to put the partner in
default
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6. it is DELIVERY, actual or constructive that
TRANSFERS OWNERSHIP
RULES ON THE DUTY TO WARRANT
1. the warranty in case of eviction refers to specific
and determinate things already contributed
2.
2) According to Liability:
c) GENERAL PARTNER
one who is liable beyond the extent of his
contribution
d) LIMITED PARTNER
one who is liable only to the extent of his
contribution
***an industrial partner can only be a general partner,
never a limited partner
3) According to participation/activity:
e) MANAGING PARTNER
one who manages actively the firms affairs
f) SILENT PARTNER
one who does not participate in the management,
though he shares in the PROFITS or LOSSES
g) LIQUIDATING PARTNER
one who winds up or liquidates the affairs of the
firm after it has been dissolved
h) OSTENSIBLE PARTNER
one whose connection with the firm is public and
open
i) SECRET PARTNER
one whose connection with the firm is concealed or
kept secret
j) DORMANT PARTNER
one who is both a secret (hidden) and silent (not
managing) partner
k) NOMINAL PARTNER
one who is not really a partner BUT who may
become liable as such insofar as third persons are
concerned
RULE:
partners shall CONTRIBUTE EQUAL SHARES to the
capital of the partnership
*it is permissible to contribute UNEQUAL SHARES
IF there is a stipulation to this effect
*in the absence of proof, the shares are presumed
to be equal
CONDITIONS before a capitalist partner is obliged to
sell his shares / interest to the other partners[IL, RC,
NA]
1. if there is IMMINENT LOSS of the BUSINESS of
the partnership
2. he REFUSES to
CONTRIBUTE
ADDITIONAL SHARE to the CAPITAL
3. there is no agreement to the contrary
* INDUSTRIAL PARTNER IS EXEMPTED
an
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*RULE if
CREDIT
MANAGING
PARTNER
COLLECTS
REQUISITES:
1. existence of at least 2 debts
---- PARTNERSHIP ---- PARTNER
2. both sums are demandable
3. the collecting partner is the managing partner
*the sum thus collected shall be applied to the two
credits in
proportion to their amounts
RULE:
*where a partner receives his share in the partnership
credit
CONDITIONS:
1. a partner has received his share in the
partnership credit in whole or in part
2. the other partners have not collected their part
of the credit
3. the debtor subsequently becomes INSOLVENT
RULE: - the partner shall be obliged to bring to the
partnership
capital what he received even though he may have given
receipt for
his share only
* DOES NOT APPLY when debt was collected after
dissolution of the partnership
RULE:
*every partner is responsible to the partnership for
damages suffered by it through his fault
*he cannot compensate them with the profits and
benefits, which he may have earned for the partnership
by his industry
*the courts may equitably lessen his responsibility
RES PERIT DOMINO
*RULES ON WHO BEARS THE RISK OF LOSS
1.
amount
of
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1. power to act may be REVOKED at ANY TIME
with or without just cause
REMOVAL should be done by the controlling
interest
2. 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
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2. INTERESTS in the PARTNERSHIP
3. right to PARTICIPATE in the MANAGEMENT
RULE:
*a partner is CO-OWNER with his partners of
SPECIFIC PARTNERSHIP PROPERTY
* RIGHTS of a PARTNER
PARTNERSHIP PROPERTY
in
SPECIFIC
PREFERENTIAL
RIGHTS
of
PARTNERSHIP
CREDITORS
*partnership creditors are entitled to PRIORITY over
partnership assets, including the partners interest in the
profits
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** IF a LIMITED PARTNER includes his name in the
firm name, he has obligations BUT not the rights of a
general partner
RULE
on
LIABILITY
for
CONTRACTUAL
OBLIGATIONS
*all partners, including industrial ones, shall be liable
pro-rata with all their property and after all the
partnership assets have been exhausted
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3. where title is in the name of one or more BUT not all
the partners
partners in whose name the title is named MAY
CONVEY BUT the PARTNERSHIP may RECOVER such
property IF done not in its USUAL BUSINESS EXCEPT
if he had transferred it to a Holder for value
4. when property held in trust by partner
a sale only conveys EQUITABLE INTEREST
5. when title is in the name of all partners
conveyance executed by all partners possess all rights
of such property
EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED
OWNERSHIP
*RULE on ADMISSION or REPRESENTATION MADE
by a PARTNER
an admission by a partner is an admission against the
partnersip,under the following conditions:
1. the admissions must concern partnership affairs
2. must be within the scope of his authority
RESTRICTIONS ON THE RULE:
1. admissions made BEFORE DISSOLUTION are
binding only when the partner has authority to
act on the particular matter
2. admissions made AFTER DISSOLUTION are
binding only if the admissions were necessary to
WIND UP the business
3. an admission made by a former partner made
after he has RETIRED from the partnership is
not evidence against the firm
EFFECT of NOTICE to a PARTNER
notice to a partner is notice to the partnership
*notice to a partner, given while already a partner is a
notice to the partnership PROVIDED it relates to
partnership affairs
EFFECT of KNOWLEDGE ALTHOUGH NO NOTICE
WAS GIVEN:
*knowledge of the partner is also knowledge of the
firm PROVIDED THAT:
1. the knowledge was acquired by a partner who is
acting in the particular matter involved; and
2. the partner having knowledge, had reason to
believe that the fact related to a matter which
had some possibility of being the subject of the
partnership business AND he was so situated
of
PARTNER BY ESTOPPEL
a person who represents himself or consents to
another / others representing him to anyone as a partner
either in an existing partnership or in one that is fictitious
or apparent
PARTNERSHIP BY ESTOPPEL
when all the members of the existing partnership
consent to such representation of a partner by estoppel
RULES AND SITUATIONS:
1. if a third person is misled and acts because of
such misrepresentation
the deceiver is a partner by estoppel
2. if the partnership
misrepresentation
partnership liability results
consented
to
such
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3. if the firm had not consented
no partnership liability results BUT the deceiver is
considered still as a partner by estoppel with all the
obligations but not the rights of a partner
4. when a person represents himself as a partner
of a NON-EXISTENT partnership
NO partnership liability results BUT the deceiver and
all persons who may have aided him in the
misrepresentation are still liable
liability would be JOINT or PRO-RATA
*when although there is misrepresentation, if the third
party is not deceived, the doctrine of estoppel does not
apply
BURDEN of PROOF
the creditor or whoever alleges the existence of a
partner or partnership by estoppel has the burden of
proving the existence of the MISREPRESENTATION
AND INNOCENT RELIANCE on it
ENTRY OF A NEW PARTNER into an EXISTING
PARTNERSHIP
RULE:
*he shall be liable for all the obligations of the
partnership BUT his liability will extend only to his share
in the partnership property
*his own individual property shall be excluded
*same liability of a limited partner
PREFERENCE of PARTNERSHIP CREDITORS
RULE:
*the creditors of the partnership shall be preferred to
those of such partner as regards the partnership
property
Without prejudice to this right
the private creditors of each partner may ask the
attachment and public sale of the share of the latter in
the partnership assets
**IF a partner sells his share to a third party, BUT the
firm itself still remains SOLVENT, partnership creditors
CANNOT assail the validity of the sale by alleging that it
is made in fraud of them, since they have not really been
prejudiced
TERMINATION
the point in time after all the partnership affairs have
been wound up
RULE ON DISSOLUTION
*on dissolution the partnership is not terminated BUT
continues until the winding up of partnership affairs is
completed
*EFFECT on OBLIGATIONS
1. just because a partnership is dissolved this does
not necessarily mean that a partner can evade
previous obligations entered into by the
partnership
2. dissolution saves the former partners from new
obligations to which they have not expressly or
impliedly consented UNLESS the same be
essential for winding up
*CAUSES OF DISSOLUTION
1. without VIOLATION of the AGREEMENT
between the partners
A) TERMINATION of the DEFINITE TERM
or PARTICULAR UNDERTAKING
B) EXPRESS WILL or ANY PARTY in
GOOD FAITH (PARTNERSHIP by
WILL)
C) EXPRESS WILL of ALL of the
PARTNERS except those who have
(interests)
ASSIGNED
or
whose
interests have been (separate debts)
CHARGED
D) EXPULSION in good faith of a member
2. in CONTRAVENTION of the agreement between
the partners
by the EXPRESS WILL of ANY PARTNER at any time
3. UNLAWFULNESS of the BUSINESS
4. LOSS thing promised
A) SPECIFIC THING PERISHES before
delivery
B) USUFRUCT is lost EXCEPT if
ownership had been transferred to the
partnership
5. DEATH of ANY partner
6. INSOLVENCY of any partner or of the
partnership
7. CIVIL INTERDICTION of any partner
8. DECREE of COURT
WINDING UP
the process settling business affairs after dissolution
DISSOLUTION
ALOWED:
JUDICIAL
DECREE
WHEN
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(I, UM, I-PP, C, PB, BL, OC)
1. partner declared insane in any judicial
proceeding or is shown to be of UNSOUND
MIND
2. partner becomes INCAPABLE of performing his
part of the partnership contract
3. partner has been guilty of such CONDUCT as
tends to affect prejudicially the business
4. partners PERSISTENT BREACH of agreement
5. the business of the partnership can only be
denied on at a loss
6. other circumstances which render dissolution
equitable
IN CASE OF PURCHASER of PARTNERS INTEREST
1. after the termination of the specified term or
particular undertaking
2. AT ANY TIME, if the partnership was a
partnership at will when the interest was
assigned or when the charging ordered was
issued
*proof as to the existence of the firm must first be
given
*even if a partner has not yet been previously declared
insane by the court, dissolution may be asked, as long
as the insanity is duly proved in court
*in a suit for dissolution, the court may appoint a
RECEIVER at its discretion
EFFECTS OF DISSOLUTION
RULE:
*when the firm is dissolved, a partner can no longer
bind the partnership
*a dissolved partnership still has the personality for
the winding up of its affairs
the firm is still allowed to collect previously acquired
credits
the firm is still bound to pay of its debts
DISSOLUTION CAUSED by A-I-D
RULE: (STILL BOUND) as to each partners
G.R. where the dissolution is caused by the ACT,
INSOLVENCY or DEATH of a partner, each partner is
liable to his co-partners for his share of any liability
created by any partner acting for the partnership
EXCEPTION: - individual liabilities
1. if dissolution by ACT
the partner acting for the partnership HAD
KNOWLEDGE of the dissolution
OR
2. if dissolution by DEATH or INSOLVENCY
the partner acting for the partnership HAD knowledge
or notice of the death or insolvency
*only the partner acting assumes liability
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EXTRAJUDICIAL:
1. by the partners who have not wrongfully
dissolved the partnership
2. by the legal representative of the last surviving
partners
JUDICIAL:
under the control and direction of the court, upon
proper cause that is shown to the court
* profits that will actually enter the firm after dissolution
as a consequence of transactions already made before
dissolution are included because they are considered as
profits existing at the time of dissolution
* any other income earned after the time, like interest
or dividends on stock owned by the partners or
partnership at the time of dissolution should not be
distributed as profits BUT as merely additional income to
the capital
BETTER RIGHTS of INNOCENT PARTNERS
innocent partners have better rights than guilty
partners and that the guilty partners are required to
indemnify for the damages caused
* RIGHT of INOCENT PARTNERS TO CONTINUE the
BUSINESS
in essence this is a new partnership
can use the same firm name
can ask new members to join
BUT shall: for protection of guilty partners
1. give a BOND approved by the court
2. to PAY guilty partners his interests at the time of
dissolution MINUS DAMAGES
*a guilty partner who is EXCLUDED will be
indemnified against all present or future partnership
liabilities
RIGHT TO GET CASH
in case on non-continuance of the business, the
interest of the partner should if he desires be given in
cash
assets may be sold
a guilty partner, in ascertaining the value of his interest
is not entitled to a proportional share of the value of
GOOD WIL
RIGHTS OF INNOCENT PARTNERS IN CASE of
RESCISSION
based
on
FRAUD
AND
MISREPRESENTATION
1. Right to LIEN or RETENTION SURPLUS
CAPITAL
ADVANCES
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* articles of association by which 2 or more persons
obligate themselves to place in a common fund any
property, industry, or any of these things, in order to
obtain profit, shall be COMMERCIAL
15
3. the freedom of each party to transfer or assign
the whole property
DUTERTE vs. RALLOS
* an agreement between 2 persons to operate a
cockpit, by which one is to contribute his services and
the other to provide the capital, the profits to be divided
between them, constitutes a partnership
DELUAO vs. CASTEEL
* a contract of partnership to exploit a fishpond
pending its award to any qualified party or applicant is
VALID BUT a contract of partnership to divide the
fishpond after such award is ILLEGAL
*one of the causes of dissolution is any event which
make it unlawful for the business of the partnership to be
carried on or for the members to carry it on in
partnership
C.I.R. vs. SUTER
*a UNIVERSAL PARTNERSHIP requires either that
the object of the association be:
1. all the present property of the partners as
contributed by them to the common fund
OR
2. all that the partners may acquire by their
industry or work during the existence of the
partnership
* the subsequent marriage of the partners could not
operate to dissolve the partnership because it is not one
of the causes provided for dissolution by law with
regards to limited partnerships
*partnership has distinct and separate personality from
that of its partners
*a husband and wife may not enter into a contract of
general co-partnership/ UNIVERSAL partnership
1. 8. Voting Shares
1. a. Founders Shares given rights and
privileges not enjoyed by owners of
other stocks; right to vote/be voted in the
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election of directors shall not exceed 5
years
Non-Voting Shares
1. a. Preferred Shares issued only with par value;
given preference in distribution of assets in
liquidation and in payment of dividends and
other preferences stated in the articles of
incorporation
2. b. Redeemable Shares expressly provided in
articles; have to be purchased/taken up upon
expiration of period of said shares purchased
whether or not there is unrestricted retained
earnings
3. c. Treasury Stocks stocks previously issued
and fully paid for and reacquired by the
corporation through lawful means (purchase,
donation, etc.)
1. 9. Exceptions where holders of non-voting
shares may vote:
1. a. amendments of articles of
incorporation
2. b. adoption/amendment of by-laws
3. c. increase/decrease of bonded
indebtedness
4. d. increase/decrease of capital stock
5. e. sale/disposition of all/substantially all
corporate property
6. f. merger/consolidation of corporation
8. h. corporate dissolution
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1. 19. Grounds for Rejection of Registration
1. a. a direct participation in
management where his vote is
needed to approve certain corporate
actions
3. c. proprietary rights
4. d. remedial rights
1. 29. Voting Trust Agreement an agreement
between a group of stockholders and trustee for
a term not exceeding 5 years in which control
over the stocks is lodged in the trustee. The
purpose is for controlling the voting.
3. c. election of officers
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1. 35. Representative Suit brought by the
stockholder in his own behalf and in behalf of
other stockholders similarly situated, having
common cause against the corporation
1. 36. Derivative Suit brought by a stockholder
for and in behalf of the corporation to
protect/vindicate corporate rights after he has
exhausted intra-corporate remedies
Requisites:
1. a. cause of action in favor of the corporation
2. b. refusal of corporation to sue
3. c. injury to the corporation
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2. Publication of notice in a newspaper of general
circulation once a week for three consecutive
weeks.
3. One year period within which any contest may
be presented to the corporation.