LAW 2

Created by

Sumayya

Cards (1189)

Partnership is a contract where two or more persons contribute money, property, or industry to a common fund with the intention of dividing profits or exercising a profession
Characteristics of a partnership:
Consensual, bilateral or multilateral, nominate, principal, onerous, preparatory
Principles applicable to partnerships include Affectio Societatis and Delectus Personae
Purpose of a partnership can be to divide profits or exercise a profession, but it must have a lawful object or purpose
Partnership vs. Corporation:
Partnership is created by voluntary agreement, while a corporation is created by the state
Partnership can have two or more organizers, while a corporation has not more than 15
Partnership has no time limit except by agreement, while a corporation has perpetual existence
Partnership has separate juridical personality from its partners, allowing it to acquire property, incur obligations, and bring legal actions
Rules to determine the existence of a partnership:
No partnership between persons not partners to each other, except by estoppel
Presumption: receiving a share of profits implies partnership, unless profits were received as debt, wages, annuity, interest, or for goodwill or property sale
Formal requirements for a partnership:
Generally, a partnership can be constituted in any form
Exception: A partnership contract is void if immovable property is contributed without an inventory attached to a public instrument
Kinds of partnerships:
Universal vs. Particular (based on object)
General vs. Limited (based on liability)
With a fixed term or at will (based on term)
Kinds of partners:
Capitalist, Industrial, Capitalist-Industrial (based on contribution)
General vs. Limited (based on liability)
Silent, Secret, Dormant, Ostensible, Managing, Liquidating, Incoming (based on role)
Obligations of a partner:
To give contribution, additional contribution in case of losses, prohibition to engage in other businesses
Prohibition for industrial partners: they cannot engage in business for themselves unless permitted by capitalist partners
Effects of non-compliance for capitalist partners:
May be excluded from the firm
Capitalist partners can avail themselves of benefits obtained in violation of the prohibition
Exceptions to the prohibition for capitalist partners engaging in businesses in the same industry as the partnership:
Express stipulation allowing engagement
Approval from other partners, whether express or implied
During liquidation and winding up of the partnership
When a general-capitalist partner becomes a limited partner in a competitive enterprise
Effects of non-compliance for capitalist partners:
Must bring all illegally obtained profits to the partnership
Personally liable for all losses
May be ousted for loss of trust and confidence
Managing partner collecting from a common debtor:
If receipt issued in the name of the partnership, payment applied to partnership credit
If receipt issued in managing partner's name, payment applied proportionate to the amounts of the two debts, unless the debt owed by the debtor to the managing partner is more onerous
Obligations of partners to the partnership and other partners:
Not to convert partnership funds/property for personal use
To account for and hold as trustee unauthorized personal profits
Share partnership credit received from an insolvent firm debtor with other partners
Keep partnership books in the principal office and allow access to other partners
Reimburse partnership for damages through fault
Inform other partners on all matters affecting the partnership
Observe diligence of a good father of a family in dealings
Adhere to partnership agreement and decisions of managing partners
Obligations of partners to third parties:
Every partnership must operate under a firm name
Liability after exhaustion of partnership assets: all partners, including industrial ones, liable pro rata with all their property after partnership assets are exhausted
Authority to act for and in behalf of the partnership:
Every partner is an agent of the partnership for its business
Authority may be express, implied, or apparent
Consent of all partners necessary for certain actions
Effects of conveyance of real property:
Different effects based on who conveys the property and in whose name it is conveyed
Solidary liability for torts/quasi-delict:
Partnership liable for loss or injury caused by partner acting in the ordinary course of business or with co-partners' authority
Solidary liability for misappropriation:
Partnership bound to make good loss when partner misapplies money or property received in partnership business
Partner by estoppel:
Liability for representing oneself as a partner of an existing or non-existent partnership
Liability of new (or incoming) partner:
Liable for debts incurred prior to admission up to contribution
Liable for debts incurred after admission up to personal assets
Rights of a partner:
Right to share in profits
Property rights in specific partnership property and interest in the partnership
Rights of the assignee/conveyee:
To get profits the assignor-partner would have obtained
To avail of usual remedies in case of fraud in the management
Receive assignor’s interest in the event of a dissolution
Partner’s Interest may be subject to a charge or attachment by the court:
Only the interest, that is profits and surplus of the partner and not his share in the specific properties of the partnership
Priority is given to creditors of the partnership
Such interest may be redeemed prior to foreclosure with:
The separate property of any one or more of the partners
Partnership property with the consent of ALL the other partners
Rules on Management:
One Managing Partner:
May execute all acts of administration, even with opposition from other partners
Power can be revoked with just or lawful cause and by a vote of partners representing the controlling interest
Multiple Managing Partners:
With stipulation that no Managing Partner may act without the consent of the others
With Specification of Duties – each Managing Partner can perform an act of administration within their respective duties
Without specification of duties:
Each managing partner may separately execute all acts of administration
Disputes resolved by majority vote of managing partners
In case of a tie, the controlling interest of ALL partners prevails
Other Rights of a Partner:
To associate with another person in his share with consent of all partners
To inspect and copy partnership books
To demand a formal account in specific cases
To ask for dissolution of the firm at the proper time and the right to return of capital and advancements
Right to compensation and reimbursement
Dissolution and Winding-Up:
Dissolution is the change in the relation of partners caused by any partner ceasing to be associated in the carrying on of the business
Winding up is the process of settling business affairs after dissolution
Termination is when all partnership affairs have been wound up
Causes of dissolution can be extrajudicial or judicial
Effects of Dissolution:
Mutual agency is terminated
Acts for winding-up of partnership affairs are still binding
Partners may continue the partnership after dissolution, creating a new partnership
Winding Up or Liquidation:
Liquidation is the process of liquidating partnership assets and distributing proceeds to satisfy claims
Distribution of assets is done in a specific order
In the distribution of a Limited Partnership’s assets, priority is given to the share of partners as to the profits over their share as to capital
Partner’s Liability: if the assets of the partnership are insufficient to cover the liabilities, the remaining claims may be satisfied against the separate assets of the partners
Limited Partnership is formed by two or more persons having as members one or more general partners and one or more limited partners
Limited liability in a limited partnership means a limited partner's liability is limited only to their capital contribution
To form a limited partnership, two or more persons must sign and swear to a certificate stating various details including the name of the partnership, character of the business, location of the principal place of business, and the contributions of each partner
A limited partner may demand the return of their contribution after six months' notice in writing to all other members or on the dissolution of the partnership
A Substituted Limited Partner is a person admitted to all the rights of a limited partner who has died or assigned his interest in a partnership, subject to certain conditions
A limited partner cannot be an industrial partner, take part in the management of the partnership, or contribute industry