Law on Partnership Reviewer | Article 1784 to 1799
I.
LAW ON PARTNERSHIP REVIEWER | ART.
1784-1799 (NCC)
a.
COMMENCEMENT OF PARTNERSHIP
¾ A partnership
begins from the moment of the execution of the contract, unless it is otherwise
stipulated.
¾ Consensual
contract
¾ The
birth and life of a partnership is predicated on the mutual desire and consent
of the parties.
¾ The
partners may stipulate some other date for the commencement of the partnership
¾ partnership
remains inchoate or unperformed = NOT consummated.
b.
CONTINUATION OF A PARTNERSHIP BEYOND ITS
TERMS
¾ may be
extended or renewed by the partners by express agreement, written or oral, or impliedly,
by the mere continuation of the business after the termination of such term or
particular undertaking without any settlement or liquidation.
¾ The
partnership for a fixed term or particular undertaking is dissolved and a new one,
a partnership at will, is created by implied agreement the continued existence
of which will depend upon the mutual desire and consent of the partners.
c.
PARTNERS AS DEBTORS OF THE PARTNERSHIP
d.
OBLIGATION WITH RESPECT TO THE PARTNERSHIP
CAPITAL
(1) To contribute on the date due the amount he
has undertaken to contribute to the partnership;
(2) To reimburse any amount he may have taken
from the partnership coffers and converted to his own use;
(3) To pay the agreed or legal interest, if he
fails to pay his contribution on time or in case he takes any amount from the common
fund and converts it to his own use; and
(4) To indemnify the partnership for the damages
caused to it by the delay in the contribution or the conversion of any sum for
his personal benefit.
e.
LIABILITY TO PAY INTEREST; CRIMINAL
LIABILITY
¾ GR: Partner is liable for interest
and damages from the time he should have
complied with his obligation or from
the time he converted the amount to his own use, as the case may be.
ETR: Unless
there is a stipulation fixing a different time. It arises from the commencement of the partnership or upon perfection of the contract.
¾ Estafa (Art. 315, RPC)
- if he misappropriates partnership money or
property received by him for a specific purpose of the partnership.
- mere failure on the part of the industrial partner
to liquidate partnership affairs and to account to persons interested the
amounts respectively due them.
f.
RESTRICTIONS IMPOSED ON INDUSTRIAL PARTNER
¾ GR: An industrial partner cannot
engage in business for himself
ETR: unless
the partnership expressly permits him to do so.
¾ Reason:
to prevent any conflict of interest between the industrial partner and the
partnership and to insure faithful compliance by said partner with his
prestation.
¾ Mere toleration
by the partnership will not exempt the industrial partner from liability.
g.
REMEDIES AGAINST ERRING INDUSTRIAL PARTNER
¾ The
capitalist partners have the right either to exclude him from the firm; or
¾ To
avail themselves of the benefits which he may have obtained.
¾ With right
to damages
h.
RESTRICTIONS IMPOSED ON CAPITALIST PARTNER
(1808)
¾ GR: Capitalist cannot engage for their
own account in any operation which is of the kind of business in which the
partnership is engaged
ETR: by
stipulation may permit the capitalist partner to engage in the same kind of
business.
¾ Reason:
prevents a partner from availing himself personally of information obtained by
him in the course of the transaction of the partnership business or by reason of
his connection with the firm regarding the business secrets and clientele of
the firm to its prejudice.
i.
REMEDIES AGAINST ERRING CAPITALIST PARTNER
¾ To bring
to the common fund any profits derived by him from his transactions; and,
¾ in case
of losses, he shall bear them alone
j.
RULES ON SHARING IN AND DISTRIBUTION OF
PROFITS AND LOSSES
¾ DISTRIBUTION OF PROFITS:
(a) The partners share the profits according to
their agreement subject to Article 1799.
(b) If there is no such agreement:
1) The
share of each capitalist partner shall be in proportion to his capital
contribution. This rule is based on the presumed will of the partners.
2) The
industrial partner shall receive such share, which must be satisfied first
before the capitalist partners shall divide the profits, as may be just and
equitable under the circumstances.
¾ DISTRIBUTION OF LOSSES
(a) The losses shall be distributed according to
their agreement subject to Article 1799.
(b) If there is no such agreement, but the
contract provides for the share of the partners in the profits, the share of
each in the losses shall be in
accordance with the profit-sharing ratio, but the industrial partner shall not be liable for losses.
(c) If there is also no profit-sharing stipulated in the contract, then losses shall be borne by the partners in proportion to
their capital contributions, but the purely industrial partner shall not be liable for the losses.
k.
DUTY OF THE MANAGING PARTNER TO HOLD AND
APPLY SUMS COLLECTED (FOR CREDITS OWING TO HIM AND TO THE PARTNERSHIP (IN PROPORTION TO BOTH
OBLIGATIONS.
¾ GR: the managing partner shall be
applied to the two credits in proportion to their amounts.
ETR: where
he received it for the account of the partnership, in which case the whole sum
shall be applied to the partnership credit only.
¾ REQUISITES:
(a) There exist at least two debts, one where
the collecting partner is creditor, and the other, where the partnership is the
creditor;
(b) Both debts are demandable; and
(c) The partner who collects is authorized to
manage and actually manages the partnership.
¾ The debtor is given the right to prefer
payment of the credit of the partner if it should be more onerous to
him in accordance with his right to application of payment.
l.
PARTNER’S LIABILITY IN CASE OF DAMAGE
CAUSED TO THE PARTNERSHIP, DUE TO HIS FAULT; HOW EQUITABLY REDUCED
¾ GR: the
damages caused by a partner to the partnership cannot be offset by the profits
or benefits which he may have earned for the partnership by his industry.
- The partner has the obligation to secure
benefits for the partnership.
- The obligation to exercise diligence in the performance
of his obligation as a partner.
ETR: If
unusual profits are realized through the extraordinary efforts of the partner
at fault, the courts may equitably mitigate or lessen his liability for damages
¾ Applicable
to all contracts that any person guilty of negligence or fault in the
fulfilment of his obligation shall be liable for damages.
¾ partner’s
fault = must be determined in accordance with the nature of the obligation and
the circumstances of the person, the time, and the place.
¾ the
partner at fault is not allowed to compensate such damages with the profits
earned
m.
RISK OF LOSS OF THINGS CONTRIBUTED
¾ FIVE CASES:
(1) SPECIFIC
AND DETERMINATE THINGS WHICH ARE NOT FUNGIBLE WHERE ONLY THE USE IS
CONTRIBUTED.
— The risk of loss is borne by the partner because
he remains the owner of the things;
(2) SPECIFIC
AND DETERMINATE THINGS THE OWNERSHIP OF WHICH IS TRANSFERRED TO THE PARTNERSHIP.
— The risk of loss is for the account of the
partnership, being the owner;
(3) FUNGIBLE
THINGS OR THINGS WHICH CANNOT BE KEPT WITHOUT DETERIORATING EVEN IF THEY ARE CONTRIBUTED
ONLY FOR THE USE OF THE PARTNERSHIP.
— The risk of loss is borne by the partnership
for evidently the ownership was being transferred since use is impossible
without the things being consumed or impaired;
(4) THINGS
CONTRIBUTED TO BE SOLD.
— The partnership bears risk of loss for there
cannot be any doubt that the partnership was intended to be the owner;
otherwise, the partnership could not effect the sale; and
(5) THINGS
BROUGHT AND APPRAISED IN THE INVENTORY.
— The partnership bears the risk of loss because
the intention of the parties was to contribute to the partnership the price of
the things contributed with an appraisal in the inventory.
Presuppose that the things contributed have been delivered
actually or constructively to the partnership. Before delivery, the risk of
loss is borne by the partner since he remains their owner.
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