Law on Par Cor Study Guide PDF

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STUDY GUIDEI. DEFINITIONS1. Partnership -By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a ...

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STUDY GUIDE I. DEFINITIONS 1. Partnership -By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. 2. Element of delectus personae - a person has the right to select persons with whom he wants to be associated with in partnership. 3.

Particular partnership – a particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.

4.

Secret Partnership - one wherein the existence of certain persons as partners is not avowed or made known to the public by any of the partners.

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Universal Partnership of profits - A universal partnership of profits is one w/c 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 w/c each of the partners may possess at the time of the celebration of the contract.

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Partnership with a fixed term – in one which the term of its existence have been agreed upon expressly or impliedly. The expiration of the term thus fixed or the accomplishment of the particular undertaking specified will cause the automatic dissolution of the partnership.

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Subpartnership - Person for a division of the profits coming to him from the partnership enterprise is termed subpartnership. It is a partnership within a partnership and is distinct and separate from the main or principal partnership.

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Industrial partner - is one who contributes his industry or labor in the partnership

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Eviction – Eviction shall takes place whenever by a final judgment based on a right prior to the sale or an act imputable to the vendor, the vendee (partnership) is deprived of the whole or a part of the thing purchased.

10. Future partnership - Partners may stipulate some other date for the commencement of the partnership; it can be in future time or based on happening of some future contingency; it has no juridical personality at the moment. 11. Partner’s interest in a partnership - consists of his proportional share in the undistributed profits during the life of the partnership and his share in the undistributed surplus after its dissolution

12. Profit - excess of returns over expenditure in a transaction or series of transactions, the net income of the partnership for a given period of time 13. Surplus - assets of the partnership of after partnership debts and liabilities are paid and settled and the rights of the partners among themselves are adjusted; excess of assets over liabilities 14. Partnership capital - PARTNERSHIP CAPITAL IS CONSTANT, and is not affected by fluctuations although it may be increased or diminished by unanimous consent of the partners. Partnership capital represents the AGGREGATE OF THE INDIVIDUAL CONTRIBUTIONS made by the partners. 15. Pro rata liability -equally or jointly (not proportionately) - Basis of pro-rating liability: No. of the members of the firm and NOT the amount of their contributions 16. Subsidiary liability -because they become PERSONALLY LIABLE ONLY after the partnership assets have already been EXHAUSTED 17. Equitable interest or title - One that is not recognized in law but only in EQUITY; one that is IMPERFECT OR UNENFORCEABLE in law but because of equitable principles, may be converted into a legal title or interest 18. Estoppel - Estoppel is a BAR which precludes a person from DENYING OR ASSERTING ANYTHING contrary to that which has been established as the TRUTH by his own deed or representation, either EXPRESS OR IMPLIED 19. Dissolution – is the change in relation of the partners caused by any partner ceasing to be associated in the carrying on the business. It is the point in time when the partners cease to carry on the business together. It represent demise of a partnership 20. Termination – is that point in time when all partnership affairs are completely wound up and finally settled. It signifies the end of the partnership life. 21. Knowledge of a fact –when he has actual knowledge thereof, but also when he has knowledge of such other facts as in the circumstances show bad faith 22. Notice of a fact – when a person claims the benefit of the notice: a) states the fact to such person or b) delivers through the mail or other means of communication, a written statement of the fact to such person or to a proper person at his place of business or residence 23. Assets of the partnership -The assets of the partnership are: a.) the partnership property. b.) the contributions of the partners necessary for the payment of all the liabilities specified in No. 2. 24. Limited partnership -A limited partnership is one formed by two or more persons under the provisions of the following article, having as members one or more general

partners and one or more limited partners. The limited partners as such shall not be bound by the obligations of the partnership. 25. Substituted limited partner - A substitute limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership 26. Presumption of general partnership – a partnership transacting business is, prima facie, a general partnership 27. Contributor -A stranger in limited partnership whose liability is limited to his interest in the firm without any right and power to participate in the management and control of the business 28. Preferred limited partner - Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners as to the return of their contributions, as to their compensation by way of income, or as to any other matter. If such an agreement is made it shall be states in the certificate, and in the absence of such a statement all the limited partners shall stand upon equal footing. II.

DISCUSSIONS 1. Enumerate the five essential features of a partnership contract. Why is a partnership characterized as a preparatory contract? 1. There must be a valid contract 2. The parties must have legal capacity to enter into the contract 3. There must be a mutual contribution of money, property or industry to a common fund 4. The object must be lawful 5. The primary purpose must be to obtain profits and to divide the same among parties preparatory- which means that other contracts will be entered into as the partnership pursues its business. 2. Explain and illustrate: a partnership is a juridical person. 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. Thus, a partnership may be declared insolvent even if the partners are not. It may enter into contracts and may sue and be sued in its firm name or by its duly authorized representative. It is sufficient that service of summons be served on any partner.

3. Give the cases when a person who is not a partner has a right to share in the profits of a partnership. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment: a. As a debt by installments or otherwise. b. As wages of an employee or rent to a landlord. c. As an annuity to a widow or representative of a deceased partner. d. As interest on a loan, though the amount of payment vary with the profits of the business. e. As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. 4. What is the importance of giving publicity to the articles of partnership? It is essential that the arts of partnership be given publicity for the protection not only of the members themselves but also 3rd persons from fraud and deceit. A member who transacts business for the secret partnership in his own name becomes personally bound to 3rd persons unaware of the existence of such association. Partnership liability may still result, however, in cases of estoppel. 5. Give the effects where a partnership is formed for an unlawful purpose. (ME) 1. The contract is void and the partnership never existed in the eyes of the law; 2. The profits shall be confiscated in favor of the government; 3. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government; 4. The contributions of the partners shall not be confiscated unless they fall under #3. 6. Illustrate the relations created by a contract of partnership. 1. Relations among the partner themselves; 2. Relations of the partners with the partnership; 3. Relations of the partnership with third persons with whom it contacts; and 4. Relations of the partners with such third persons. 7. State the 5 obligations of a partner with respect to property he promised to contribute. (ME) Obligations of partners to contribute: 1. To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he have promised to contribute; 2. To answer for eviction, in case the partnership is deprived of the determinate property contributed; 3. To answer to the partnership for the fruits of the property the contribution of which he delayed, from the date they should have been contributed up to the time of actual delivery;

4. To preserve said property with the diligence of a good father of a family pending delivery to the partnership; 5. To indemnify the partnership for any damage caused to it by the retention of the same or by the delay in its contribution. 8. Give the requisite before a capitalist partner may be obliged to sell his interest in a partnership to the other partners. 1. There is an imminent loss of the business of the partnership 2. The majority of the capitalist partners are of the opinion that an additional contribution to the common fund would save the business 3. The capitalist partner refuses deliberately to contribute an additional share to the capital 4. There is no agreement that even in case of an imminent loss of the business the partners are not obliged to contribute. 9. Why is appraisal of the value of the goods or property contributed by a partner required? How shall it be made? Appraisal is necessary to determine how much has been contributed by the partnersThe appraisal is made by: a. Stipulation b. If there is no stipulation - experts chosen by the partners and according to current prices 10. State the liability of a partner if he fails or delays his obligations with respect to contribution of property. What is the reason of the rule? No demand is necessary- From the time the partner ought to deliver up to the time of actual delivery From the mere fact that the contribution which a partner ought to deliver does not pass to the common fund on time, the partnership fails to receive the benefits which the said contribution ought to produce thus prejudicing the common purpose of obtaining from them the greatest possible profits through some means of speculation or investment. The injury to the partnership is constant. 11. What are the property rights of a partner in a partnership? (ME) EXTENT OF PROPERTY RIGHTS OF A PARTNER Principal Rights a. His rights in specific partnership property b. His interest in the partnership c. His right to participate in the management

Related Rights a. Right to reimbursement for amounts advanced to the partnership and to indemnification for risks in consequence of management b. Right of access and inspection of partnership books c. Right to true and full information of all things affecting the partnership d. Right to a formal account of partnership affairs under certain circumstances e. Right to have the partnership dissolved under certain circumstances 12. What rights are not acquired by an assignee or transferee of a partner who conveys all his interest in a partnership? The assignment made to the third person does not grant the assignee the right: 1. To interfere in the management 2. To require any information or account 3. To inspect any partnership books 13. What are the only rights acquired by said assignee or transferee? RIGHTS OF THE ASSIGNEE 1. To receive in accordance with his contract the profits accruing to the assigning partner 2. To avail himself of the usual remedies provided by law in the event of fraud in the management 3. To receive the assignor’s interest in case of dissolution 4. To require an account of partnership affairs, but only in case the partnership is dissolved, and such account shall cover the period from the date only of the last account agreed to all by the partners 14. What is considered as the extent of a partner’s interest in a partnership? Nothing is to be considered as the share of a partner but his proportion of the residue or balance after an account has been taken of the debts and credits, including the amount paid by several partners in liquidating firm debts or in making advances to the partnership, and until that occurs, it is impossible to determine the extent of his interest. This interest alone is available for the satisfaction of the separate debts of the partners. 15. May a partnership continue to use in its firms name the name of a partner who has died? Cannot use the name for it will counter 1815 but they can continue the use of name of deceased partners as long as it is indicated that said partner is already deceased

16. In what cases are partners’ solidarily liable with the partnership to third persons? SOLIDARY liability of the partners and the partnership for the WRONGUL ACT OR OMISSION (tort) or BREACH OF TRUST by any partner ACTING within the SCOPE OF THE PARTNERSHIP BUSINESS OR WITH AUTHORITY FROM THE OTHER PARTNERS All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822and 1823. 17. Can W who is not a partner in a partnership be held liable as a partner? Explain. Persons who are not partners to each other are not partners as to 3 rd persons. Hence, one may not be liable or claim any right as a partner UNLESS he consent to his being a partner A person, not otherwise a partner may be held liable as a partner by estoppel and thus may be held liable to 3rd persons relying on such representation when: 1. He DIRECTLY REPRESENTS himself as a PARTNER of an EXISTING PARTNERSHIP or of a NON-EXISTINGPARTNERSHIP (with one or more person who are not actual partners) 2. He INDIRECTLY REPRESENTS himself by consenting to another representing him as a partner in an existing partnership or in a non-existing partnership 18. Give the rule governing the liability of a partner for partnership contract. After all the partnership assets have been exhausted, all the partners, including the industrial ones, shall be liable for all the contracts which may have been entered into in the name, for the account of the partnership and under its signature and by a person authorized to act for the partnership However, any partner MAY ENTER INTO A SEPARATE OBLIGATION to perform a partnership contract 19. Give the effect if the specific property to be contributed by a partner is lost: (a) before delivery – the partnership is dissolved because there is no contribution inasmuch as the thing to be contributed cannot be substituted with another. There is a failure of a partner to fulfill his part of the obligation. (b) after delivery – the partnership is not dissolved, but it assumes the loss of the thing having acquired ownership thereof. The partners may contribute additional capital to save the venture.

20. Enumerate the rights of a partner who has not causes the dissolution of a partnership wrongfully when such dissolution is in violation of partnership agreement. 1. To have partnership property applied for the payment of its liabilities and to receive in cash his share of the surplus 2. To be indemnified for damages caused by the partner guilty of wrongful dissolution 3. To continue the business in the same name during the agreed term of the partnership, by themselves or jointly with others 4. To possess partnership property should they decide to continue the business 21. Who are authorized to wind-up the affairs of a dissolved partnership? 1. Partner designated in the agreement. 2. In absence of agreement, the part that did no wrongfully dissolved the partnership. 3. If all partners died, the legal representative of the last surviving partner provided that the partner is not insolvent. 22. Give the rights of an injured partner when a partnership is rescinded or annulled on the ground of fraud or misrepresentation committed against him. 1. Right of a lien on, or retention of, the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by him for the purchase of an interest in the partnership and for any capital or advances contributed by him. 2. Right to subrogation in place of partnership creditors after payment of partnership liabilities 3. Right of indemnification by the guilty partner against all debts and liabilities of the partnership. 23. Give at least 4 grounds for the judicial dissolution of a partnership. 1. A partner has been declared insane in any judicial proceeding or is shown to be of unsound mind. 2. A partner becomes in any other way incapable of performing his part of the partnership contract. 3. A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business. 4. A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him. 5. The business of the partnership can only be carried on at a loss. 6. Other circumstances render a dissolution equitable.

24. What are the characteristics of a limited partnership? Characteristics of limited partnership 1. Must be formed by compliance with the statutory requirements 2. There must be one or more general partners who control the business and personally liable to creditors. 3. There must be one or more limited partners contributing to the capital and share in the profits but do not participate in the management of the business and are not personally liable for partnership obligations beyond their capital contributions. 4. The limited partners may ask for the return of their capital contributions under the conditions prescribed by law. 5. The partnership debts are paid out of the common fund and the individual properties of the general partners. 25. Give the cases when a limited partner is liable as a general partner. The contributions of a limited partner may be cash or property, but not services. Otherwise, he shall be considered an industrial and general partner, which in case, he shall not be expected from personal liability. The surname of a limited partner shall not appear in the partnership name unless: 1. It is also the surname of a general partner. 2. Prior to the time when the limited partner became such, the business has been carried on under a name in which his surname appeared. A limited partner whose surname appears in a partnership name contrary to the provisions of the first paragraph is liable as a general partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner. 1. Prompt renunciation of interest and/ or income upon ascertaining the mistake. 2. Non-inclusion of limited partner’s name in the firm name. 3. Non-participation in the management of the business. 26. Give at least 4 differences between a general partner and a limited partner. General partner Personally liable for partnership obligations Have equal right in management of partnership May contribute money, property or industry Proper party to proceedings Interest cannot be assigned to make new partner His name may ...