Central Philippine University
COLLEGE OF LAW
Jaro, Iloilo City
REVIEW NOTES FOR MID-TERM EXAMINATION
1. a. What is partnership? Give its requisites.
i. Article 1767 of the Civil Code defines that 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
diving profits among themselves.
ii. The law provides that the requisites of a valid
partnership is that:
1. There should be a valid contract;
2. The parties must have legal capacity to enter
into such contract;
3. There is a contribution of money, property, or
industry to a common fund;
4. The object must be lawful; and
5. The purpose is to divide the profits among
themselves.
b. Why is partnership considered a juridical
person?
Article 44 of the Civil Code grants the
partnership a juridical personality. It is considered a juridical
person because a partnership is a creation of law.
2. Distinguish between general partnership and
limited
partnership:
(1) As to composition.
a. A general partnership as provided by law is
a partnership that is composed of all
general partners while a limited
partnership is a partnership that must
have at least 1 general partner and 1
limited partner.
(2) As to constitution.
a. The law provides that a general
partnership may be created orally.
However, for a limited partnership there
should be a certificate of limited
partnership according to Article 1844 of
the Civil Code.
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(3) As to firm name.
a. As to the firm name the law provides that
the firm name of the general partnership
may or may not include the names of the
general partners. In a limited partnership
however the law provides that the firm
name may include that of the general
partner, but the name of the limited
partner is prohibited by law.
3. Distinguish between general partner and limited
partner:
(1) As to liability.
a. The law provides that a general partner
may be held personally liable. The limited
partner however is only liable up to the
extent of his contribution to the
partnership.
(2) As to contribution.
a. As to contribution the law provides that a
general partner can contribute money,
property, or industry.
(3) As to participation in management.
a. The law provides that a general partner
may be appointed to manage the firm.
However, the limited partner is prohibited
by law to manage the partnership.
(4) As to firm name
a. As to the firm name the law provides that
the name of the general partner may or
may not appear in the firm name of the
partnership. The limited partner however,
is prohibited from appearing in the firm
name if a name of the limited partner
appears he may be held liable as a general
partner.
(5) As to limitation to engage in business.
a. The law provides that a general partner is
generally prohibited to engage in business
or a similar business to that of the
partnership, unless given consent by the
other partners. In the case of the limited
partner, he may engage in other
businesses.
4. Can an industrial partner engage in any
business?
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Why?
No, Article 1789 provides that an industrial
partner cannot engage in any other business for himself
unless the partnership expressly permits him to do so.
5. Can a capitalist partner engage in other
business? Why?
Article 1808 provides that capitalist partners
cannot engage in business of the same kind as the
partnership unless there is a stipulation to the contrary.
6. What are the property rights of a partner? Which
right is
assignable?
Article 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management (n)
The partners interest in the partnership is assignable.
7. A, capitalist partner conveys or transfers his
whole interest in the partnership to X.
a) Will the conveyance or transfer dissolve the
partnership? Why? Explain.
a. No the conveyance does not dissolve the
partnership as provided by Article 1813 of the
Civil Code.
b) Will X become a partner? Why? Explain.
a. No X does not become a partner because
Article 1813 of the Civil Code provides that
the assignee does not become partner.
8. How are profits and losses of a partnership
distributed?
Article 1799. Profits of partnerships are distributed
according to the agreement of partners. If there is no
agreement then it is according to the contribution of
partners. The share of the industrial partner in profits is that
it is just and equitable.
Losses are distributed according to the agreement
of partners. If there is no agreement as to losses then it is
according to the stipulation about profits. The industrial
partner is exempted from losses.
9. Can the industrial partner be held liable for a
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partnership obligation? What is the nature of his
liability?
Yes, Article 1816 provides that all partners even
and industrial partner may be held liable for a partnership
obligation. The nature of the obligation is joint. However, the
industrial partner may demand reimbursement from his
other partners.
10. Is the industrial partner exempted from losses?
Why?
Yes, the industrial partner is exempted from losses
as provided under Article 1797. The industrial partner is
exempted from losses since he cannot withdraw any labor or
industry that he may have contributed to the common fund,
and in a sense if the partnership shows no profit then he has
labored in vain.
11. Who shall manage the partnership?
Article 1800. The partner who is appointed by
the articles of partnership shall be the one to
manage the partnership.
The management of the partnership may be
vested on one, some, or all, or third persons.
12. Can a partner appointed by partners as manager
after the constitution of partnership be removed
without just cause? Explain.
Yes, the managing partner appointed by the
partners may be removed without just cause if there is
unanimity including his own vote.
13. Define dissolution, winding up and termination.
Article 1828 defines dissolution as the change in
the relation of the partners caused by any partner
ceasing to be associated in the carrying on as
distinguished from the winding up of the business.
Winding up is defined as the process of settling
business affairs after dissolution. Termination is the
point in time after all the partnership affairs have been
wound up.
14. Give the causes of dissolution.
Article 1830 gives the causes of dissolution.
15. X and Y formed a partnership orally. X
contributed P50,000.00 to the common fund
while Y contributed his Toyota Hi-Lux. Is the
partnership valid? Explain.
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Yes
16. Bruce and Ann formed a partnership orally. Bruce
contributed his house and lot to the common
fund. Ann contributed P2M and her industry. Is
the partnership valid? Explain.
No,
17. Alex, Ben, Charlie formed a general partnership
with the following contribution: Alex, P2,000;
Ben, P4,000; Charlie, P6,000. After five years of
operations, the assets of the partnership
dwindled and was valued at P3,000 only, so the
partners decided to stop their business. There
was no agreement as to distribution of profits
and losses. The partnership was indebted to
Dexter for a loan of P12,000. Under the
circumstances, from whom Dexter can demand
satisfaction of his credit, and to what extent?
Explain.
a) Dexter can demand satisfaction from all the
partners.
18. Roger and Charity are husband and wife. They
entered into a contract of partnership. Is the
partnership valid? Explain.
No, Article 1782 bars husband and wives from
entering in to a contract of partnership.
19. X, Y and Z formed a partnership under the
following terms and conditions:
a. Participation: X, 40%; Y 40%; and Z, 20%.
b. Z would contribute his management expertise and
be manager for 5 years without compensation.
c. Z shall not be liable for losses.
The partnership suffered from unexpected economic
reverses and became bankrupt.
(1) Could X alone, opposed by Y and Z, have Z
removed as manager? Explain.
No, X alone cannot remove Z as manager.
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Article 1800 provides that the vote of
partners representing controlling interest shall be
necessary for such revocation of power.
In the case given, X’s interest alone does not
represent the controlling interest.
Thus, X cannot remove Z as a manager.
(2) Could Z be personally held liable for debts of the
partnership not satisfied with the assets of the
partnership? Explain.
a. No, Z cannot be held liable personally.
Under the law, a managing partner has the
powers of a general agent, as well as all
the incidental powers needed to carry out
the objectives of the partnership.
b. In the case given, Z is considered as the
managing partner because he contributed
his management expertise.
c. Thus, Z cannot be personally held liable
for the debts of the partnership.
19. a. What is a partnership by estoppel?
a) According to the law a partnership by estoppel
happens when a person represents himself as
partner in a partnership that does not exist, and a
third person believes that such partnership exists.
b. What is meant by a partner by estoppel?
i. The law defines a partner by estoppel as
a person that is not a partner includes
his name in the firm name then he can
be held liable as a partner.( just not in
formality)
21. Melchor and Gaspar are partners in Golden Star
Partnership. Melchor being the managing partner.
Herod owes Gaspar P5,000 and the Golden Star
Partnership P10,000. Both credits are demandable.
Herod pays Melchor P3,000 and the latter issues a
receipt in his name. Should Melchor collect the entire
amount? Would the result be the same if the receipt is
the name of the partnership? Explain.
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Suppose that Herod pays to Gaspar. How do you apply
the payment of Herod? Explain.
22. Tom and Jerry formed a partnership to operate a car
repair shop in Jaro, Iloilo City. Tom provided the capital
while Jerry contributed his industry as a mechanic.
Across the street, Tom opened and operated a coffee
shop, and on one side of their shop Jerry put up a car
accessories store. May they engage in business?
23. Tito, Vic, Joey and Alma organized a general
partnership. Tito and Vic are industrial partners.
Joey contributed P60,000 and Alma contributed
P30,000 to the common fund as capitalist
partners. Tito and Vic were both appointed
managing partners without any specification of
their respective duties. When the firm
commenced business operations, Vic and Joey
appointed Jess as accountant of the partnership.
Two years after, Tito decided to dismiss Jess, but
this was opposed by Vic. Resolve the conflict.
a) Since Vic opposed the decision of Tito then the law
provides that if two or more partners are entrusted
with the management of the partnership without
specification of their respective duties then if any of
them oppose the acts of the others, then the matter
should be decided by a vote of the majority. In the
case at bar, the decision to dismiss Jess should be
voted upon by the majority. If there is a tie then the
partner with the controlling interest would be the
one to settle the matter.
24. Can the partners be held liable for a partnership
obligation? If so, what is the nature of their
obligation?
a) Yes, the partners can be held liable for a partnership
obligation and according to the law the nature of the
liability from a partnership obligation is joint.
25. A, B, C, and D formed a general partnership. A, B, and C
contributed P30,000 each while D contributed his labor
and industry. During the first 3 years, the firm was
gaining profits, however, in the fifth year of its business
operation, it suffered from severe business losses due
to government restrictions of movements and travels in
the country. The partners decided to dissolve their
partnership with only P30,000 left as capital. The firm is
indebted to Z P90,000 which is due and demandable.
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From whom can Z demand satisfaction of his credit?
Explain.
25. Suppose that a partner assigns his whole interest
in the partnership to a third person, shall such
assignment result in the latter becoming a
substitute partner?
a) A partner may assign his whole interest in the
partnership. The assignment of the partner of his
whole interest to a third person will not make the
latter a substitute partner. The assignor is still the
partner.
However, in case of fraud in the management of
the partnership, the assignee may avail himself of the
usual remedies.
26. May a partner form a sub-partnerhip with a third
person with respect to his interest in the
partnership?
a) Yes, the law provides that when a partner assigns his
interest in the partnership to a third person then
together they for ma sub-partnership with respect
only to his interest in the partnership.
28. What are the formalities required by law for the
constitution or organization of partnership?
a) The law defines that the formalities required for the
constitution and the organization of a partnership
are:
i. That it may be made orally but when the
contribution of money or property consists of
P3000 or more, it must be in a public instrument
and registered with the Securities and Exchange
Commission, however failure to register will still
make the partnership valid.
ii. If there is immovable property it must be signed in
the inventory and attached to the public
instrument, failure to comply will make the
partnership void.
iii. For a limited partnership there should be a
certificate of limited partnership signed under
oath and registered with the Securities and
Exchange Commission according to Article 1844
of the Civil Code.
29. Distinguish equitable interest from ownership.
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a) The law defines that equitable interest as the partner’s
interest in the partnership and this is his share of the
profits and the surplus, in general this can be
assigned, attached, or be subject to legal support.
Ownership is defined by law as the right of the
person to enjoy fully his property and all the fruits
thereof.
30. When does partnership begin, and for how long will it
exist?
a) According to the law the partnership begins from the
moment of the execution of the contract and it its
existence is unlimited unless otherwise stipulated by
the parties.
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ATTY. ZACARIAS D. BEDONA, JR., LL.B., M.M., LL.M.
Professorial Lecturer