What is Partnership?
Partnership is a contract whereby 2 or more persons bind themselves to contribute money, property or industry to a common fund, with the intention of dividing the profits among themselves or in order to exercise a profession.
Characteristics of a partnership and explain.
- Consensual - perfected by mere consent except if real property is contributed wherein it becomes formal or solemn contract that requires the contract of partnership to be notarized and inventory of real property must be attached to the public instrument.
- Bilaterial / Multilateral - entered by 2 or more persons.
- Nominate - It has specific name and rules.
- Preparatory - means by which other contracts will be entered into as the partnership pursues its business.
- Onerous - The partners contribute money, property or industry to a common fund.
- Principal- It does not depend upon any other contract for its validity or existence.
What are the 2 principles applicable to the partnership?
- Afectio Societatis- there must be an active union with people to whom there exists mutual confidence and trust.
- Delectus Personae (Personal Choice)- The partners have the right to choose who to associate with.
Essential Requisities of Partnership
- Must be a valid partnership contract
- Must have a lawful object or purpose
- Must have a mutual contribution
- Must be established for the common benefit or interest of the partners.
What will happen if the partnership object or purpose is unlawful or contrary to laws, morals, public policy or public order?
The partnership is VOID. All the profits earned will be confiscated in favor of the state.
Partnership has a separate juridical personality and distinct from each of the partners. The partnership can, in general?
- Acquire or possess properties of all kinds.
- Incur obligations
- Bring civil or criminal actions
- Adjudged insolvent even if the individual partners are financially solvent.
Cases that do not establish partnership:
- Partners who are not partners to each other
- Co- ownership or co-possession, whether such co-owners or co-possessors do or do not share any profits made by the use of the property.
- Sharing of gross return, whether or not the persons sharing them have a joint or common right or interest.
General Rule: Receipt by a person of share of the business is a prima facie evidence that he is a partner. What are the exceptions?
- Debt by installment
- Wages of an employee
- Rent to a landlord
- Annuity to a widow or representative of a deceased partner
- Consideration for the sale of goodwill of a business or property by installment.
What are the formal requirements of the partnership?
General Rule: Any form
Exception: Immovable property or real property is contributed, the contract of partnership must be notarized or signed and inventory of the said property must be attached to the notarized public instrument.
If the contributed capital is 3k or more or personal property, the contract must be notarized and registed for SEC and must appear in the public instrument in order to affect the third persons. Non-compliance does not affect the validity of the contract.
What are the formal requirements of the Ltd partnership
A Certificate of a limited co-partnership must be signed by the partners and must be recorded with the SEC, otherwise the partnership will be considered as a general partnership. Non- compliance with the formality will make the limited partners as general partners to partnership creditors, but they will remain to be limited partners to the partners themselves.
Kinds of Partnership
According to Object:
Universal: All Profit, All Present Property.
Particular: Determinate thing, used, fruits. Particular undertaking. Exercise of profession.
According to Liability: General, Limited.
According to Term: Fixed Term or Particular undertaking, At will.
Kinds of Partners
As to Contribution: Capitalist, Industrial, and Capitalist-Industrial.
As to liability: General and Limited
Other partners: Silent, Secret, Ostensible, Dormant, Managing, Liquidating, Incoming
Loss borne by a partner
- The thing contributed is specific and determinate which is NOT FUNGIBLE and only their use and fruits may be for the common benefit, and
- Stipulation
Loss Borne by the Partnership
- Things contributed are
a. fungible
b. cannot be kept without deteriorating
c. contributed to be sold. - was appraisal in the inventory and no stipulation that partner will bear the loss.
Obligation of a partner to the partnership
- to give his contribution
- to give additional contribution in case of imminent losses.
- Prohibition to engage in other businesses.
- Credit to the firm the payment made by a debtor who owes both the partnership and the managing partner.
Rules on Managing partner collecting from a common debtor
a. if the managing partner issued a receipt in the name of the partnership; the payment shall be applied to the partnership credit.
b. if the managing partner issued a receipt in his name, the payment shall be applied proportionate.
XPN:
1. Managing partner’s debt is most onerous and the debtor choose to apply the payment exclusively.
Authority of the partner to act in behalf of the partnership may be:
- Express
- Implied
- Apparent ( 2 REQUISITES: NO KNOWLEDGE OF THE 3RD PARTY, AND NO AUTHORITY)
Effect of non-compliance of an industrial partner when he engaged in other business without the permission of the capitalist.
A Capitalist partner may
1. Exclude him
2. Avail themselves of the benefits which he may have obtained in the violation of the provision.
Effect of non-compliance of a capitalist partner when he engaged in other business in the same industry
- he shall bring all the profit illegally to the partnership
- He is personally liable for all losses.
- He may be ousted for loss of trust and confidence.
General Rule: Capitalist partner is prohibited to engage in other business of the same industry as that of the partnership. What are the Exceptions?
- Expressly stipulated
- Other partners allow him to do so, expressly or impliedly
- period of dissolution and winding up
- becomes a limited partner in that enterprise.
Cases when the consent of all partners is necessary?
- Assign the partnership property in trust for creditors or on the assignee’s promise to pay debts of the partnership.
- dispose of goodwill of the business.
- do any other act which would make it impossible to carry on the ordinary business of the partnership
- enter into a compromise
- confess a judgment
- submit a partnership claim to arbitration
- Renounce a claim of the partnerhsip.
Solidary liability for torts/ quasi-delicts: The partnership is bound to make good the loss in two situations:
- Pertains to partner as receiver: when one partner acting within his apparent authority receives money or property of a third person and misapplies it.
- Pertains to partnership as receiver : where the partnership in the course of its business receives money or property of a third person and the money or property received misapplies by any partner while in the custody of the partnership.
Liability of new partner
- debts incurred prior to admission: liable upto his contribution except if there is stipulation
2 debts incurred after the admission: liable upto the personal assets.
Distribution of profits is in accordance with
- Stipulations
- capital contributions
the industrial partner shall receive just and equitable
