BUSINESS ORGANI-
ZATIONS
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PARTNERSHIP
EXISTENCE OF TWO DEBTS (Art. 1792)
• If the managing partner collects a sum from a common debtor who owes money both to
said partner and to the partnership, subject to the rules under Art. 1252 (Application of
Payment), below are the rules:
1. If the managing partner issued a receipt in the name of the partnership: the payment shall
be applied to the partnership credit;
2. If the managing partner issued a receipt in his name: the payment shall be applied propor -
tionate to the amounts of the two debts. EXCEPT: When the debt owed by the debtor to
the managing partner is more onerous, the debtor may choose to apply the payment ex -
clusively to such.
PARTNERSHIP
EXISTENCE OF TWO DEBTS (Art. 1793)
• This article applies:
1. When there is only to one debt,
2. This applies to any partner not only a managing partner;
3. The debtor eventually became insolvent.
PARTNERSHIP
Distribution of Profits and Losses (Art. 1797)
I. Rules on distribution of Profits
In accordance with the agreement;
If there is no agreement, in proportion to contribution; the industrial partner shall re-
ceive such hare as may be just and equitable.
If the industrial partner contributed capital, he shall also receive a share in the profits
in proportion to his capital
PARTNERSHIP
Distribution of Profits and Losses
II. Rules on distribution of Losses
In accordance with the agreement;
If there is a stipulation as to profits only, sharing of losses shall be based on the same
proportion
No stipulation or agreement, based on capital contribution
Industrial partner shall not be liable for losses unless he also contributed capital
PARTNERSHIP
Distribution of Profits and Losses
What if the agreement is not valid?
- As if NO agreement or stipulation. The apply the rule when there is no
agreement
PARTNERSHIP
Distribution of Profits and Losses
Designation of losses and profits CANNOT be entrusted to one of the partners
A stipulation which excludes one or more partners from any share in the profits or losses
is void. (in relation to Art. 1799)
PARTNERSHIP
Sharing of losses and liabilities
I. Liabilities of a Partner
A new partner is liable for the obligations already contracted before his admission but
only to the extent of this contribution unless there is a stipulation to the contrary.
A new partner is liable to the extent of his personal property (if general partner) for
subsequent obligations like an original partner.
PARTNERSHIP
APPOINTMENT OF MANAGING PARTNER
MANAGING PARTNER IN THE ARTICLES OF PARTNERSHIP
1. May execute all acts of administration, in good faith, even with opposition from the other part-
ners;
2. The power to execute all acts of administration can only be revoked if (a)with just or lawful cause;
and (2) by a vote of the partner representing the controlling interest.
PARTNERSHIP
APPOINTMENT OF MANAGING PARTNER
MANAGING PARTNER AFTER PARTNERSHIP HAS BEEN CONSTITUTED:
1. May execute all acts of administration, in good faith, even with opposition from the other part-
ners;
2. The power as manager may be revoked by a vote of the partners representing the controlling in-
terest EVEN WITHOUT just or lawful cause
PARTNERSHIP
APPOINTMENT OF MULTIPLE MANAGING PARTNER
1. Each partner may separately execute all acts of administration;
2. Should one of the managing partners oppose the act of another, the matter shall be decided by a
majority of the managing partners per head count; (Any of the partners may oppose the acts of
administration)
3. Should there be a tie in the votes of the managing partners, the controlling interest of ALL the
partners shall prevail.
PARTNERSHIP
MANNER OF MANAGEMENT HAS NOT BEEN AGREED UPON:
1. All the partners shall be considered agents and whatever any one of them may do alone
shall bind the partnership, without prejudice to the provisions of Article 1801. – controlling in-
terest (supplied)
2. None of the partners may, without the consent of the others, make any important alteration in
the immovable property of the partnership, even if it may be useful to the partnership. But if
the refusal of consent by the other partners is manifestly prejudicial to the interest of the partner-
ship, the court's intervention may be sought.
PARTNERSHIP
ASSOCIATION AND ASSIGNMENT OF PARTNER’S INTEREST
I. ASSOCIATION OF OTHERS TO PARTNER’S INTEREST:
Can be done without the consent of other partners
Associate shall not be admitted to the Partnership without the consent of ALL the
partners
PARTNERSHIP
ASSOCIATION AND ASSIGNMENT OF PARTNER’S INTEREST
II. ASSIGNMENT OF PARTNER’S INTEREST :
Can be done without the consent of the other partners
Does not dissolve the partnership, unless there is an agreement.
Does not entitle the assignee to interfere in the management and administration of the
partnership affairs.
PARTNERSHIP
ASSOCIATION AND ASSIGNMENT OF PARTNER’S INTEREST
II. ASSIGNMENT OF PARTNER’S INTEREST :
Assignee merely receives his share in profits in accordance with what the assigning
partner would have received.
IN CASE OF FRAUD, assignee may ask for the dissolution of the partnership through
a court decree.
PARTNERSHIP
ASSOCIATION AND ASSIGNMENT OF PARTNER’S INTEREST
III. ASSIGNMENT OF INTEREST BY COURT DECREE:
Must be made by a JUDGMENT creditor upon due application to a competent court.
Court may charge the interest of the debtor partner with payment of unsatisfied
amount of such judgment debt with interest thereon.
Court may appoint a receiver of the debtor partner’s share in profit for the benefit of
the judgment creditor
PARTNERSHIP
PROPERTY RIGHTS OF A PARTNER
What are the Property Rights of a Partner?
a. His rights in specific partnership property;
b. His interest in the partnership; and
c. His right to participate in the management
PARTNERSHIP
PROPERTY RIGHTS OF A PARTNER
I. Rights in a Specific Partnership.
- Partner is considered as a co-owner with his partners of specific partnership property
- A partner cannot assign his interest over a specific partnership property unless all the
partners will assign theirs.
- A partner can possess the property for partnership purpose.
PARTNERSHIP
PROPERTY RIGHTS OF A PARTNER
I. Rights in a Specific Partnership.
- A partner cannot possess the partnership property for any other purpose other than
partnership purpose without the consent of ALL the partners
- Not subject to attachment or execution except on a claim against the partnership.
PARTNERSHIP
PROPERTY RIGHTS OF A PARTNER
II. Partner’s Interest in the Partnership.
- Share in Profits and surplus
- Partnership Surplus is equivalent to Partnership Assets – Partnership Liabilities.
PARTNERSHIP
Obligations of the Partners with regard to Third Persons
• All partners, including industrial ones, are liable equally with all their property and af-
ter all the partnership assets have been exhausted, for the contracts which may be
entered into in the name and for the account of the partnership, under its signature
and by a person authorized to act for the partnership.
• The partnership is liable for the acts of a partner who acts within the scope of his au-
thority
PARTNERSHIP
Obligations of the Partners with regard to Third Persons
• All partners are liable solidarily with the partnership for everything chargeable to
the partnership as a result of the following:
Liability incurred due to any wrongful act or omission of any partner acting in
the ordinary course of the business of the partnership or with the authority of hi
s co-partners
Liability incurred where one partner acting within the scope of his apparent
authority receives money or property of a third person and misapplies it;
PARTNERSHIP
Obligations of the Partners with regard to Third Persons
• All partners are liable solidarily with the partnership for everything chargeable to
the partnership as a result of the following:
• Liability incurred where the partnership in the course of its business receives money
or property of a third person and the money or property so received is misapplied by
any partner while it is in the custody of the partnership.
PARTNERSHIP
Obligations of the Partners with regard to Third Persons
• Article 1824 vs. Article 1816:
1. Art. 1824 pertains to wrongful act or omission (1822) or misappropriation (1823), Art.
1816 pertains to liability to third persons after exhaustion of partnership assets;
2. In Art. 1824, partners are solidarily liable, in Art. 1816, they are liable pro rata
(equally).