Business Law and Regulations (PARTNERSHIP) Disqualified in a Universal Partnership:

 Those made between persons who were guilty

of adultery or concubinage at the time of the
PARTNERSHIP - Contract whereby two or more persons donation;
bind themselves to contribute money, property, or
 Those made between persons found guilty of
industry to a common fund, with the intention of
the same criminal offense, in consideration
dividing the profits among themselves.
thereof;
ELEMENTS OF PARTNERSHIP  Those made to a public officer or his wife,
 Two or more persons bind themselves to descendants, and ascendants, by reason of his
contribute money, property or industry to a office.
common fund; and,
 They intend to divide the profits among As to its liability:
themselves. 1. General partnership: the partners are liable for
ENTITY THEORY all partnership obligations even up to the extent
of their personal properties;
 From the perfection of the contract, partnership
possesses juridical personality, separate and 2. Limited partnership: there are partners who are
distinct from the partners. exempted from liability.

FORMALITIES As to its Duration:

 No formality required 1. Partnership at will
2. Partnership with a fixed term: When the
EXCEPT:
partnership reaches its fix term and continued
1. When immovable property or real rights are by the partners without the express agreement,
contributed; or the rights and duties of the partners remain the
2. When the partnership capital is P3,000.00 or same
more

DELECTUS PERSONAE
KINDS OF PARTNERS
 The partners choose with whom they will enter
1. Capitalist Partner
into a partnership agreement. The choice is
- One who contributes money or property
based on the personal characteristics of each
- He has the obligation to contribute
partner.
additional capital to save the partnership
from imminent losses. If he does not, he will
be obliged to sell his interest to other
KINDS OF PARTNERHIP
partners
As to its object: 2. Industrial Partner
- One who contributes industry
1. Universal Partnership - He is liable to third persons for partnership
a. Universal partnership of all present obligations but he has the right to ask for
property: partners contribute all the reimbursement from the capitalist partner.
properties that belong to them at the time - He cannot engage in business unless
of the perfection of the common fund expressly provided in the agreement of the
b. Universal partnership of profits: all that the partners.
partners may acquire by their industry 3. General Partner
during the existence of the partnership - One who controls and manages the
2. Particular partnership: It has for its object partnership and is liable for partnership
determinate things, their use or fruits, or obligations
specific undertaking or the exercise of a
profession or vocation.
 4. Limited Partner 2. Duty of Obedience - Partners must adhere to
- He is not personally liable for partnership the provisions of the partnership agreement
obligations but is not involved in the and the decisions of the partners
management of the partnership 3. Duty of Diligence - Partners are obliged to use
5. Managing Partner the same level of care and skill that a
- One who is designated as the person who reasonable person in the same position would
will administer the affairs of the partnership use in the same circumstances.
6. Liquidating Partner 4. Duty to Inform - A partner owes a duty to
- One who winds-up the affairs of a dissolved inform his or her co-partners of all information
partnership regarding partnership affairs.
 Information on the partnership affairs
 Notice to the partner is notice to the
OBLIGATIONS OF PARTNERS partnership, unless there is fraud.
 Inspection of books and records.
 Obligation to Contribute
1. Money
- The partner becomes the debtor from the
RIGHTS OF PARTNERS
time of execution of the partnership.
- The partner is liable to pay interest and 1. Right to Participate in Management
damages, even not stipulated and without - Each partner may separately execute all
demand, from the time of the execution of acts of administration
the partnership, unless otherwise - Based on MUTUAL AGENCY
stipulated. 2. Right to Share in Profits
2. Property - Stipulations which excludes one or more
- The partner is liable to damages in case of from any share in the profits or losses is
non-delivery. void.
- He who fails to deliver shall bear the risk of - Allocation of profit and losses shall be
loss. based on agreement of the partners, in the
- He is liable to warranty against eviction and absence thereof, in proportion to their
hidden defects capital contributions.
3. Industry - For industrial partner, he shall receive just
and equitable share under circumstances. If
he contributes money or property, he shall
FIDUCIARY DUTIES receive share in proportion to his
contribution
1. Duty of Loyalty - A duty that a partner owes not
3. Right to Compensation
to act adversely to the interests of the
- Partners are not entitled unless agreed
partnership
upon by the parties.
 Capitalist partner competing with the 4. Right to Reimbursement
partnership without permission. Violation, the - Entitled reimbursement for expenses
profits of that partner belongs to the incurred in behalf of the partnership.
partnership while the loss shall beat by the said 5. Right to Return of Advances
partner - Reimbursed for the advances or loans
 Secret profits: Account the profits to the extended to the partnership, however, in
partnerships case of dissolution, outside creditors are
 Misuse of partnership property: Account the given preference.
profits to the partnership with interest and 6. Right to Return of Capital
damages. - It occurs in case of dissolution after
satisfying the claims of the creditors
 7. Right to Information ii. Rights acquired by the assignee are: (1)
- It includes right to inspect and copy of the share in the profits; (2) share in the surplus
partnership’s book and records at any in case of dissolution; (3) limited right to
reasonable hour; and the right to demand accounting upon dissolution – from the
true and full information and things date of last account agreed upon by the
affecting the partnership. partners.
8. Right to Accounting iii. Rights NOT acquired by the assignee are: (1)
- An action for formal accounting when: the right to interfere in the management;
(1) Partner excluded from the partnership (2) right to information or account; (3) the
business or profession of its property by his right to inspect books; or (4) to file a
co-partners; petition for dissolution.
(2) rights exist under the terms of any iv. When the partner assigns his rights to the
agreement; other partners, the latter acquires all the
(3) he derives secret profits pertaining to rights of the former
the partnerships;
(4) whenever other circumstances render it
just and reasonable. MANAGEMENT OF PARTNERSHIP

- The designated manager can perform all

acts of administration, his decision is
PROPERTY RIGHTS OF PARTNERS
irrevocable even objected by other partners
1. Specific Partnership Property unless he acted in bad faith.
- A partner is a co-owner of other partners in  2 or More Managing Partner:
the properties of the partnership subject to - Specific duties may be designated in which
the following limitations: case one can perform such duties without
i. The partner can possess the the consent of the others.
properties not for his own purposes - Unanimity may be agreed upon in which
unless with consent of the other case all must consent to actions, except
partners. there is grave or irreparable injury
ii. The partner who has the possession - When no specific duties are designated and
of the properties cannot exclude unanimity is not agreed upon, each
other partners in doing so. managing partner may separately perform
iii. Properties cannot be assigned acts of administration. In case of conflict,
except when all partners are the majority prevails. In case of tie, the
consented thereto. partners owning controlling interest shall
iv. Properties cannot be attached and decide.
execute except on a claim against  No Managing Partner Designated
the partnership. - all partners are considered agent of the
v. Not subject to legal support partnership and whatever any one of them
2. Interest in the Partnership Itself do alone shall bind the partnership.
- A partner’s interest in the partnership is his - Alienation of immovable property is not
share in the profits and surplus. allowed, even it is useful to the partnership,
without the consent of other partners. If
Assignments of Rights:
the refusal of the consent of the partners is
A partner may assign his rights. prejudicial to the partnership, the court’s
intervention may be sought
i. His interest can be assigned without
dissolution of the partnership. The assignee
does not acquire all the right of the
LIABILITY OF PARTNERS TO THIRD PARTIES
partners.
Liability - He is liable to the antecedent partnership
debts up to the extent of his personal
- All partners are pro rata liable to the
contributions. After becoming a partner, he
liability of the partnership based on
is now personally liable to for debts and
contract to the third person even up to the
obligations incurred by the partnership.
extent of their personal assets. Any
stipulation to the contrary is VOID. ￭
Exception: limited partners. Liability of the Outgoing Partner
- The partnership is liable to the acts of the
- If the partnership is dissolved and
partner if it is performed in the exercise of
continued by other partners, the retiring
the partner’s authority (express, implied
partner still be liable to third person who
and apparent authority). ￭ Third person is
had no notice that he is no longer part of
not duty bound to inquire or investigate the
the partnership.
limits of the apparent authority of the
partner

Unanimous Approval is Required: DISSOLUTION, WINDING UP AND TERMIINATION OF

PARTNERSHIP
- Assign the partnership property in trust for
creditors or on the assignee’s promise to Dissolution
pay the debts of the partnership
- Dispose of the goodwill of the business - Change in the relation of the partners
- Do any other act which would make it caused by any partner ceasing to be
impossible to carry on the ordinary business associated in the carrying on of the
of the partnership business; partnership is not terminated but
- Confess a judgment continues until the winding up of
- Enter into a compromise concerning a partnership affairs is completed.
partnership claim or liability Winding Up
- Submit a partnership claim or liability to
arbitration - Process of settling the business or
- Renounce a claim of the partnership partnership affairs after dissolution

Tort Liability Termination

- In the ordinary course of business - The point when all partnership affairs are
- With authority completely wound up and finally settled. It
- For misappropriation of funds received signifies the end of the partnership life.
- For misapplication of money in partnership CAUSES OF DISSOLUTION
custody
Extrajudicial Dissolution
Partners by Estoppel
1. Without contravention of the agreement
- A person who is not a partner but who - By the termination of the definite term or
represent himself as a partner (or who particular undertaking specified in the
consented to such representation being agreement.
made public) is liable to third persons who - By the express will of any partner, who
relied on his representation. One can be a must act in good faith, with no definite
partner by estoppel even if there is no term or particular undertaking.
partnership. - By the express will of all the partners who
Liability of the Incoming Partner have not assigned their interests or suffered
them to be charged for their separate
debts, either before or after the
 termination of any specified tern or 2. Discharge of liability
particular undertaking. 3. Settlement of accounts between partners
- By the expulsion of any partner from the a. Partnership creditors
business bona fide in accordance with such b. Partners as creditors
a power conferred by the agreement c. Partners as investors
between the partners.

2. With contravention of the agreement

- Dissolution is allowed despite of the WINDING UP AND DISTRIBUTION OF ASSETS
violation in lieu of the principle of
involuntary servitude Partnership assets are distributed in the following
order:
Dissolution by Operation of Law
1. Those owing to creditors other than partners
- Illegality of the partnership business 2. Those owing to partners other than for capital
- Specific thing promised to be contributed and profits.
by the partner perishes before the delivery. 3. Those owing to partners in respect of capital.
- Death of any partner 4. Those owing to partners in respect of profit.
- Insolvency of any partner or the
partnership. Where a partner has become insolvent or his estate is
- Civil interdiction of any partner. insolvent, the claims against his separate property shall
rank in the following order:
Judicial Dissolution
1. Those owing to separate creditors.
- A partner has been declared insane in any 2. Those owing to partnership creditors.
judicial proceeding or is shown to be of 3. Those owing to partners by way of contribution.
unsound mind.
- A partner in any other way incapable of
performing his part of the partnership LIMITED PARTNERSHIP
contract
- A partner has been guilty of such conduct as - One or more general partners control the
tends to affect prejudicially the carrying on business
the business. - One or more general partners contribute to
- A partner willfully or persistently commits a the capital and share in the profits but do
breach of the partnership agreement, or not participate in the management of the
otherwise so conducts himself in matters business and are not personally liable for
relating to the partnerships business that it partnership obligations beyond their capital
is not reasonably practicable to carry on the contributions
business in partnership with him.
Rules on the Limited Partnership Name
- The business of the partnership can only be
carried on at a loss.  The surname of the limited partner shall not
- Other circumstances render a dissolution appear in the partnership name unless:
equitable. - It is also the surname of the general
partner;
- Prior to the time when the limited partner
EFFECT OF DISSOLUTION ON AUTHORITY became such, the business has been carried
on under the name in which his surname
1. Authority of partners to bind the partnership is appeared.
terminated
  If the surname of the limited partner appears, except when continued by the remaining
he will be liable as general partner to the general partners under a right to do so in
creditor who extended debts to the partnership the certificate and with the consent of all
not knowing that he is not a general partner members.
- A partnership may be dissolved at the
When Return Can Be Demanded:
instance of LIMITED PARTNER when:
- On the dissolution of a partnership; or : He rightfully but unsuccessfully demands
- When the date specified in the certificate the return of his contribution; or
for its return has arrived; or : The other liabilities of the partnership
- After he has six months’ notice in writing to have not been paid, or the partnership
all other members, if no time is specified in property is insufficient for the payment of
the certificate, either for the return of the his demanded contribution.
contribution or for the dissolution of the
Preference of Credits
partnership
1. Those to creditors other than partners on
Conditions for Return of Contribution
account of their contributions and general
- All liabilities of the partnership, except partners;
liabilities to general partners and to limited 2. Those to limited partners in respect to their
partners on account of their contributions, share of the profits and other compensation by
have been paid or there remains property way of income on their contributions;
of the partnership sufficient to pay. 3. Those to limited partners in respect to the
- The consent of all members is had, unless capital of their contributions;
the return of the contribution may be 4. Those to general partners other than for capital
rightfully demanded under the provisions of and profits; ◇
the second paragraph; and 5. Those to general partners in respect to profits;
- The certificate is cancelled or so amended 6. Those to general partners in respect to capital
as to set forth the withdrawal or reduction.

When Consent or Ratification of Limited Partner

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. Possess partnership property, or assign their
rights in specific partnership property, for other
than a partnership purpose;
4. Admit a person as a general partner;
5. Admit a person as a limited partner, unless the
right so to do is given certificate.
6. Continue the business with partnership
property on the death, retirement, insanity, civil
interdiction or insolvency of a general partner,
unless the right to do is given in the certificate

Dissolution

The partnership is dissolved when:

- Retirement, death, insolvency, insanity, or

civil interdiction of a GENERAL PARTNER