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1784. WHEN A PARTNERSHIP BEGINS
GR: A partnership begins from the moment of the EXECUTION OF THE CONTRACT ER: unless it is otherwise stipulated
1785. DURATION OF A PARTNERSHIP a. for a fixed term b. for a particular undertaking c. continued IF CONTINUED, after the fixed term or undertaking without express agreement Effect: the rights and duties of the partners remain the same as they were at such termination, so far as consistent with a partnership at will. PRIMA FACIE EVIDENCE of continuation: A continuation of the business by the partners or such of them as habitually acted therein during the term, WITHOUT settlement or liquidation of the partnership affairs. 1786. DUTIES OF EVERY PARTNER Every partner is: a. A debtor of the partnership for whatever he may have promised to contribute thereto b. Bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership. (as if vendor is bound to the vendee) c. Liable for the fruits thereof from the time they should have been delivered, without need of any demand. 1787. WHEN CONTRIBUTION CONSISTS OF GOODS When a capital or a part thereof which a partner is bound to contribute CONSISTS OF GOODS their appraisal must be: 1. In a manner stipulated in the contract of partnership 2. In the absence of stipulation, by experts chosen by the partners The appraisal is according to the current prices, the subsequent changes thereof being for the account of partnership. 1788. WHEN A PARTNER FAILS TO CONTRIBUTE AND HIS LIABILITY FOR CONVERSION
A partner is liable for interest and damages if:
- He has undertaken to contribute a sum of money and he fails to do so
- Liability begins from the time when he should have complied with the obligation
- He took any amount from the partnership coffers
- Liability begins from the time he converted the amount to his own use 1789. OBLIGATION OF AN INDUSTRIAL PARTNER GR: An industrial partner CANNOT engage in business for himself ER: partnership EXPRESSLY PERMITS him to do so Effects if he engaged in business for himself The capitalist partners may either:
- Exclude him from the firm, or
- Avail themselves of the benefits which he may have obtained in violation of this provision. Wirh a right to damages in either case. 1790. AMOUNT OF CONTRIBUTION OF PARTNERS GR: They shall contribute in equal shares to the capital of the partnership ER: When there is a stipulation to the contrary 1791. A CAPITALIST PARTNER IS OBLIGED TO SELL HIS INTEREST TO THE OTHER PARTNERS TO SAVE THE VENTURE:
- In case of an imminent loss of the business of the partnership
- That partner refuses to contribute an additional share to the capital Exception:
- Industrial partners
- If there exists an agreement to the contrary 1792. RULE IF MANAGING PARTNER COLLECTS A CREDIT
- If a partner authorized to manage collects a demandable sum
- Such sum is owed to him in his own name
- He collects such sum from a person a. who also owed the partnership another sum b. such sum is also demandable Effect: the sum collected shall be applied to the TWO CREDITS in PROPORTION to their amounts, even though he may have given a receipt for his own credit only.
1796. OBLIGATION OF THE PARTNERSHIP FOR DISBURSED AMOUNTS
The partnership shall be responsible to every partner:
- The amounts he may have disbursed on behalf of the partnership
- Its corresponding interest, from the time the expenses are made
- Obligation he may have contracted a. In good faith b. In the interest of the partnership business
- Risks in consequence of its management. 1797. HOW PROFITS ARE DISTRIBUTED Losses and profits shall be distributed:
- In conformity with the agreement
- If only the share of profit has been agreed, the share of losses shall be in the same proportion.
- If no stipulation: a. The share of each partner for profit or loss shall be in proportion to what he may have contributed b. Industrial partner is not liable for losses Industrial partner’s share:
- He shall receive such share as may be just and equitable.
- If he contributed capital, he shall receive a share in the profit in proportion to his capital.
WHAT IS CONTRIBUTED?
WHO BEARS THE RISK
OF LOSS?
Not fungible or determinate things (usufruct – use & fruits) Borne by the partner who owns them Fungible Things that will deteriorate Borne by the partnership If contributed to be sold The thing is brought and appraised in the inventory (in the absence of stipulation) Borne by the partnership, limited to the value of which they are appraised
1798. DESIGNATION OF THIRD PERSON’S SHARE IN PROFITS AND
LOSSES
Partners may agree to intrust to a third person the designation of the share of each one in the profits and losses. This may be impugned only when it is manifestly inequitable. A partner cannot complain (impugn) such decision if:
- The partner has begun to execute the decision of the third person
- He failed to impugn it within a period of three months from the time he had knowledge thereof. 1799. EXCLUSION OF PARTNER TO ANY SHARE IN PROFIT OR LOSSES Stipulation of which is void. 1800. PARTNERSHIP MANAGER
- He is appointed in the articles of partnership
- He executes all acts of administration despite the opposition of his partners, unless he acted in bad faith.
- His power: GR: Is irrevocable without just or lawful cause ER : can be revoked if: a. Made by the vote of the partners representing the controlling interest. b. Power is granted after the partnership has been constituted. 1801. RULE WHEN THERE ARE TWO OR MORE MANAGERS Two or more partners may SEPARATELY EXECUTE all acts of ADMINISTRATION if there is no stipulation :
- Of their respective duties
- That one of them shall not act without the consent of all the others (unanimity)
- if someone opposes: decision of the majority shall prevail
- if there is a tie: the matter shall be decided by the partners owning the controlling interest. 1802. STIPULATION OF UNANIMITY FOR THE ACTS OF MANAGING PARTNERS
- If it is stipulated
- That the managing partners shall act with the consent of the others (there must be unanimity)
- The concurrence of all shall be necessary for the validity of the act
a. from any transaction connected with the formation, conduct, or liquidation of the partnership b. from any use by him of its property
1808. BUSINESS PROHIBITION ON CAPITALIST PARTNERS Capitalist partner 1. cannot engage for their own account in any operation which is of the kind of business in which the partnership is engaged ER: if there is a stipulation to the contrary 2. A partner who violates this prohibition: a. shall bring to the common funds any profits accruing to him from his transactions b. shall personally bear all the losses. 1809. RIGHT TO DEMAND FORMAL ACCOUNT Any partner shall have the right to a formal account as to partnership affairs: 1. if he is wrongfully excluded from the partnership business or possession of its property by his co-partners; 2. if the right exists under the terms of any agreement; 3. as provided by Article 1807; 4. Whenever other circumstances render it just and reasonable. 1810. PROPERTY RIGHTS OF A PARTNER: 1. Right in a specific partnership property; 2. Interest in the partnership 3. Right to participate in the management 1811. CO-OWNERSHIP IN SPECIFIC PARTNERSHIP PROPERTY Partners are co-owners, its incidents are such that: 1. A partner has an equal right with his partners to possess specific partnership properties for partnership purposes, ER: he has no right to possess such property for any other purpose without the consent of his partners; 2. His right in the partnership property is not assignable ER: except in connection with the assignment of rights of all the partners in the same property 1814. CHARGING ORDER. Any judgment creditor of a partner, on due application to a competent court which entered the judgment or any other court may:
- CHARGE the interest of the debtor partner with payment of the unsatisfied
amount of such judgment debt with interest thereon.
- May then later on APPOINT A RECEIVER of his share of the profits, and of any other money due or to fall due to him in respect of the partnership - he is entitled to any relief to conserve partnership assets for partnership purposes, thus, he may nullify efforts to assign specific partnership property
- Make ALL ORDERS, DIRECTIONS, ACCOUNTS AND INQUIRIES which the debtor partner might have or which the circumstances of the case may acquire. This is without prejudice to the preferred rights of partnership creditors under art. 1827 REDEMPTION. May be redeemed at any time before foreclosure, or in case of a sale being directed by the court, may be purchased without thereby causing dissolution. Redemption means EXTINGUISHMENT of the charge. IF AFTER FORECLOSURE:
- With SEPARATE PROPERTY by any one or more of the partners; or
- with PARTNERSHIP PROPERTY, by any one or kore of the partners with the CONSENT OF ALL THE PARTNERS whose interests re not so charged or sold INTEREST in the partnership may be charged or levied upon, but his INTEREST IN A SPECIFIC PARTNERSHIP PROPERTY cannot be attached PREFERENTIAL RIGHTS OF PARTNERSHIP CREDITORS Partnership creditors (as distinguished from separate creditors of each partner) are entitled to PRIORITY over partnership assets. On the other hand, individual SEPARATE CREDITORS have preference over separate or individual properties. Art. 1827 is preference of credits of partnership creditors. Section 3 1815. FIRM NAME Every partnership shall operate under a firm name.
- May or may not include the name of one or more of the partners
- Those who, not being, members of partnership, include their names in the firm name shall be SUBJECT TO THE LIABILITY OF A PARTNER. Liable because of estoppel, but not subject to the rights of partners.
The discharge by a plaintiff of one of the partners dis not mean he is no longer a partner. They must not be held liable for the discharged partner. A stipulation that all the industrial partners and some of the capitalist partners are exempted from liability in so far as third persons are concerned is NULL AND VOID
1817. STIPULATION TO EXEMPT LIABILITY IS VOID. This includes an industrial partner exempting himself to be liable to third parties. Exception: they can stipulate an exemption on the liability as against each other. Conflict with article 1799, harmonized. No stipulation as to exemption from sharing of profit and losses. In 1817. They can stipulate an exemption from liability as against themselves, the liability is IN EXCESS OF THE ORIGINAL CAPITAL CONTRIBUTED. THUS, he cannot recover his capital. LIABILITY - responsibility to third persons LOSSES - responsibility among partners. 1818. WHEN A PARTNER CAN BIND OR CANNOT BIND THE PARTNERSHIP
- Every partner is an agent of the partnership: (BINDS THE PARTNERSHIP) a) For the purpose of its business b) Whose acts, including the execution of an instrument for apparently carrying on in the usual business of the partnership. He acts in behalf and in the name of the partnership DOES NOT BIND THE PARTNERSHIP:
- If the partner so acting HAS NO AUTHORITY TO ACT for the partnership in the PARTICULAR MATTER.
- the person with whom he is dealing HAS KNOWLEDGE of the fact that he has NO SUCH AUTHORITY For APPARENTLY carrying the business of the partnership. There must be authority
and third person mist be in good faith to bind the partnership NOT APPARENTLY
- ACTS not apparently for the usual business of the partnership (acts which must be authorized, express or implied, by the other partners. Authority must be UNANIMOUS): a) Assign the partnership property in trust for the creditors or on the assignee's promise to pay the debts of the partnership; an assignment is made on the condition that the assignee would pay the debt of the partnership. b) Dispose the goodwill of the business c) Do any other act which would make it impossible to carry on the business of a partnership d) Confess a judgment e) Enter into a compromise concerning a partnership claim or liability f) Sub,it a partnership claim or liability to arbitration g) Renounce a claim of the partnership These are 7 acts of dominion or ownership There is MUTUAL AGENCY in partnership: each partner acts as principal on his behalf, and as agents for his co-partners for the firm. Implied authorization:
- Other partners do not object although they have knowledge of the act.
- He acts for apparently carrying on in the usual way of business 1819. CONVEYANCES OF REAL PROPERTY IN EXCESS OF AUTHORITY
- The title of the property is in the partnership name. Conveyance in the partnership name EFFECT: partnership can recover this. EXCEPT: (absolutely binding, cannot be recovered by the partnership) a) the partner's acts bind the partnership under 1818 b) the property has been conveyed by the grantee or the person claiming from such
of a partnership there is HFV One or more partners All partners Person in trust for the partnership Partnership name or in his own name Passes equitable title All partners All partners Passes all the rights in such property
1820. ADMISSION OR REPRESENTATION OF A PARTNER is an evidence against the partnership, under the conditions: 1. Admission or representation 2. Made by any partner 3. Within the scope of his authority 4 in accordance with his title ① When admission is made BEFORE dissolution - binding when the partner has authority to act on PARTICULAR MATTER ② AFTERR DISSOLUTION - binding only if admission were necessary to wind up the business ----- insert 1821 from office pc ----- 1822. WRONGFUL ACT OR OMISSION OF A PARTNER The partnership is liable to the same extent as the partner so acting or omission to act:
- By an wrongful act or omission of any partner a) Acting in the ordinary course of the business of partnership OR b) With the authority of his co-partners
- Loss or injury is caused to any person, not a partner
- Or penalty is incurred.
- Innocent partners are also civilly personally liable subject to their right to recover from the guilty partner.
- this article also covers an injury caused to the employee because the law speaks of " any person, not being a partner " EXCEPTION TO THE RULE:
- The act or omission is not done within the scope of his authority
- The act or omission is NOT WRONGFUL
- Wrongful act or omission did not produce any liability
- It was committed AFTER the firm has DISSOLVED, provided that it is not in connection with winding up. 1823. LIABILITY OF PARTNERS FOR MISAPPROPRIATION Partnership is bound to make good the loss:
- Partner a) acting WITHIN THE SCOPE OF HIS APPARENT AUTHORITY b) receives money or property of a third person c) and misapplies it.
- Partnership a) in the course of its business b) receives money or property of a third person c) and the money or property so received is MISAPPLIED BY A PARTNER while it is in the custody of the partnership. The third person can sue either the partner alone, who misappropriated the money, or all the partners, or the partnership. Because the liability is solidary under 1824.
EFFECT:
a) he is an agent of the persons consenting to such representation b) Which will bind them to the same extent and in the same manner as though he were a partner in fact, with respect to persons who rely upon the representation.
- When all the members of the existing partnership consent to the representation EFFECT: a partnership act or obligation results; but in all other cases it is the joint act or obligation of the person acting and the person consenting to the representation. Partner by estoppel is committed by one person only Partnership by estoppel is committed when representation involves several persons pretending to be a firm the admission or representation must be PLAIN AND CLEAR ESTOPPEL DOES NOT APPLY IF: There is misrepresentation and third party IS NOT DECEIVED REQUISITES TO MAKE A PERSON A PARTNER BY ESTOPPEL:
- Person must represent himself as a partner when in fact he is NOT A PARTNER, or consents to another representing him to anyone as a partner in an existing partnership or with one or more persons not actual partners.
- Third person relied on the said misrepresentation
- Third person has given credit to the actual or apparent partnership
- Alleged partner cannot disallow liability by claiming he is not actually a partner. NOTE: a partnership wanting of legal formalities may be CONSIDERED AS PARTNERSHIP BY ESTOPPEL with regard to their contractual obligations. 1826. ENTRY OF A NEW PARTNER INTO AN EXISTING PARTNERSHIP
- A person admitted as a partner into an existing partnership
- is liable for all the obligations of the partnership a) arising before his admission
- as though he had been a partner when such obligations were incurred,
- EXCEPT that this liability shall be SATISFIED only out of PARTNERSHIP PROPERTY
- unless there is a stipulation to the contrary. An original partner is liable insofar as his share in the firm is concerned, and with his own individual property. The newly admitted partner becomes an ORDINARY ORIGINAL PARTNER for the obligation incurred AFTER his admission Although the partnership is dissolved because of the admission of the new partner, partnership assets are also available even to the old creditors including that of the contribution of the new partner. All creditors, irrespective of the times when they become creditors of the partnership, SHOULD HAVE EQUAL RIGHTS IN SUCH PROPERTY. 182 7. PREFERENCE OF PARTNERSHIP CREDITORS
- The creditors of the partnership shall be preferred to those of each partner as regards the partnership property.
- Without prejudice to this right, the private creditors of each partner may ask the attachment and public sale of the share of the latter in the partnership assets. Partnership property of the partners cannot be taken as payment for partnership debts until the partnership property of the firm has been exhausted. CONFLICT: 1811 provides that specific partnership property is not subject to attachment or execution. To reconcile this the phrase " share in the latter of the partnership assets " should not be interpreted as specific partnership property but merely as SHARE IN THE PROFITS AND LOSSES.
TERMINATION is the point in time after all the partnership affairs have been wound up. An action for accounting and payment of money allegedly due a partner, a receiver must be appointed to wind up the dissolved partnership. A dissolved partnership cannot evade previous obligations entered into by the partnership
1830. CAUSES OF DISSOLUTION
- Without violation of the agreement between the partners: a) By the termination of the definite term or particular undertaking specified in the agreement; if the partnership continues after this period PARTNERSHIP AT WILL. b) By the express will of any partner , who must act in good faith, when no definite term or particular undertaking is specified; if in BAD FAITH, partnership dissolves but liable for damages. Because of the mutual agency that arises in the partnership. The doctrine of DELECTUS PERSONAE allows the partners to have the power, although not necessarily the right to dissolve the partnership. c) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking; d) By the expulsion of any partner from the business bona fide in accordance with such power conferred by the agreement between the partners; because the number of partners decrease. Expulsion in bad faith may effectuate dissolution because there would be apparent lack of confidence. Without prejudice to liability
- In contravention of the agreement if they agree for a definite term or particular undertaking between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of any partner at any time; with or without justifiable cause.
- By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership; if the law or ordinance declares the transaction o object thereof to be unlawful; if unlawful from the beginning, there is no juridical personality. All its acts are void
- Note: this article does not apply to GENERIC THINGS, because genus does not
perish a) When a specific thing, which a partner had promised to contribute to the partnership, perishes before the delivery; b) In any case by the loss of the thing, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; naked owner reserves the ownership, the loss is borne by him, as if he had not contributed anything. Since the thing itself is lost, the usufruct is also lost c) but the partnership SHALL NOT BE DISSOLVED by the loss of the thing when it occurs after the partnership has acquired the ownership thereof - firm bears the loss because after all he had NOT given his contribution;
- By the death of any partner; because in the reduction in number a) PARTIAL - surviving partners continue the business among themselves b) TOTAL - proceeds to the liquidation (status: partnership in liquidation ) No profit gained after the dissolution could be collected by heir. He is only entitled to the profits already obtained at the time of the death of the partner.
- By the insolvency of any partner or of the partnership; need not be judicially declared, what is enough is that the assets must be less than the liabilities
- By the civil interdiction of any partner; incapacity to dispose of his property, inter vivos
- By the decree of court under the following article. It must be a final judgment The partners cannot agree that the causes for automatic dissolution is limited or restricted Disposition of all real property of a partnership engaged in a real estate brokerage will not dissolve the partnership After dissolution partners become CO-OWNERS. hence, the right to demand accounting can be transferred. The right to dissolve is incidental to partnership and wrongful dissolution would be a cause for damages. 1831. COURT DECREE OF DISSOLUTION
- A partner is the one who can file a complaint in court. a) A partner has been judicially declared insane in any judicial proceeding or b) is shown to be of unsound mind. Ratio: partner will be incapacitated to
