LESSON 1 – MONDAY (January 30, 2023) PART 1 - PARTNERSHIP V. CORPORATION Civil Code ARTICLE 1767. 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 dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (1665a) Revised Corporation Code SEC. 2. Corporation Defined. – A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. Distinctions: Partnership Partners can choose to be involved in the partnership up to the extent of how much the intent to. Each partner is an agent of the partnership Corporation Only certain members are allowed to be involved in decision making, specifically members with significant amount of investment, 20% above, and the appointed directors and the directors elected after the incorporation. All actions by the company are bound to the authority of the BOD. Created by Agreement(Contract) Has a separate juridical personality Realization of Profits(Earning of Profit) Created by operation of law Has a separate juridical personality Can be any, as long as stipulated in the AOI, that is not contrary to law, public policy, public order etc. No limit, as presented in the revised corporation code Real and Juridical persons can be a partner Stocks can be transferred/sold to another person without the consent of any other stockholders Liability is limited only to the extent of the debt of the corporation to its creditors Can only be dissolved and liquidated with the consent of the state. No limit, as long as the partners are alive Real person can only be the partner Interest cannot be transferred/sold to another individual without the consent of other partners Liability can extend personally especially general partners in limited partnership Can be dissolved when any of the partners intend, or liquidate if all partners want to end the partnership All types of partnership require atleast two partners to contract Juridical personality exists, as well as the partnership, upon the execution of the contract One type of Corporation, namely OPC that allows one person to form a corporation, no stipulation of minimum members within the RCC. Juridical personality only commences on the issuance of certificate of incorporation by SEC The existence of the partnership does not require the business to immediately conduct their operations The existence of the corporation does not require the business to immediately conduct their operations What is a Juridical Personality? A Juridical Personality is a corporation, a partnership, or other legal entity that is recognized by law which grants a juridical personality separate and distinct from that of a shareholder, partner or member. Understanding: it is a collection of natural or artificial persons, forming a personality separate and distinguished from the creators. This personality has the capacity to contract and create obligations and rights from those contracts. LESSON 2 – WEDNESDAY (February 1, 2023) PART 2 - ELEMENTS & KINDS OF PARTNERSHIP Essential Elements: (1) There must be a valid contract – Oral or Written (2) The parties must have a legal capacity to enter into the contract (3) There must be a mutual contribution of money, property, or industry to a common fund (4) The object must be lawful (5) The purpose or primary purpose must be to obtain profits and divide the same among themselves Kinds of Partnership as to Object: (1) Universal Partnership A partnership that can achieve its objective of obtaining and dividing profits from any types of business as long as it is not contrary to the law, morals, good customs, public order and public policy. Two types: Universal Partnership of All present properties – the partners contribute the properties and all the fruits derived from it thorough the agreement. The partners co own the properties contributed. Implication: The profit is divided in proportion to the value of their interest, that is their property Universal Partnership of All profits – the partners contribute only the fruits obtained from the contributed property. No transfer of ownership to the partnership. Implication: The profit is divided in proportion to their interest; therefore, the division becomes equal as the number of partners become the basis of distribution of profit. NOTE: Distribution of profits and sharing of losses can be agreed upon by the parties. (2) Particular Partnership A partnership that has a determinate object as contribution, has a specific purpose or is made to exercise a practice of profession. It has only one intends to achieve a goal through one specific business activity or one profession. E.g., Professional Firms, Business enterprises with only one specific type of business Kinds of Partnership as to Liability:(Not Taught) (1) General Partnership All the partners are personally liable for the debts and obligations of the partnership. Amount of contribution does not affect the decision-making power of any partner. The decision making is made by the partners, including the managing partner. (2) Limited Partnership Limited partnership has two types of partners: General Partners – Are personally liable for the debts and obligations of the partnership. Limited Partners – No personally liable and only liable to the extent of their contribution. They do not have decision making power, and therefor not liable for any mistakes of the business enterprise. PART 3 - REQUIRED FORMALITIES (PARTNERSHIP) General Rule: No Formalities Required unless: Case 1: The value of total contribution exceeds 3,000. Formalities: Public Instrument – notarized written contract. Other Requirements: SEC Registration and Certification – to be able to have a license to operate and therefor contract with third persons. It also serves as credibility. Case 2: The contribution consists of an Immovable property. Formalities: Public Instrument – notarized written contract. Inventory – discloses the cost, for the benefit of the partners as co-owners of the contributed property LESSON 1 – (February 3, 2023) Distribution of Profit and Losses in the partnership Rights of a partner arising from the contract of Partnership: 1. Share in Interest 2. Participate in Management PART 4 – DISTRIBUTION OF PROFIT AND LOSSES Share in Interest Generally, when no stipulation of share in Profit or Loss, the amount of contribution is the basis for profit distribution, while loss distribution is based on the profit distribution. Exception: There is an agreed distribution of profit. This is to be followed unless there is a Pactum Leonina, and profit distribution is the basis of loss distribution. There is an separate agreement on distribution of profit and loss. This is to be followed unless there is a Pactum Leonina, the loss distribution follows the stipulation. Notes: Industrial partner should have a share equitable to his performance. He is exempted from share in loss. A Managing partner who also is the industrial partner will have a share in profit or loss. All partners, capitalist or industrial, are personally liable to third persons. Liability is different from loss. Third persons are allowed to decide on the distribution of P/L, unless Pactum Leonina is present or i Pactum Leonina – Stipulation that excludes a partner or partners from share in profit and losses. It is not allowed in the Philippine court. 3 months after gaining knowledge on the decision of the third person. LESSON 4 – (February 6, 2023) Rights of a partner arising from the contract of Partnership: 1. Share in Profit(DONE) 2. Participation in Management PART 5 – OBLIGATIONS OF PARTNERS AMONG THEMSELVES (1784-1808) Inter Se – themselves, each other. A partnership begins at the moment there is an agreement between the parties. It therefore formulates after Partnership at Will and Partnership at a Fixed Term (1785) Partnership at Will – a partnership that has no definite duration to which it will end. Partnership for a fixed term/particular undertaking – a partnership specifying a term or a completion of a specific undertaking the partnership shall dissolve. Case 1: When the parties continue the partnership after the undertaking/term, then it is implied that they intend to continue as if it were a partnership at will and the partners’ rights and duties shall remain. It is also implied that the partnership was dissolved and new one is created. o When the partnership does not settle all its obligations or does not liquidate, it is prima facie evidence of the intention to continue the partnership. Case 2: When the parties explicitly intend to continue the partnership, he may create a new contract and stipulate a new agreement, dissolving the old partnership for a new one. General Obligations of a Partner to each other: Cannot be waived. 1. Obligation to observe good faith(Fiduciary Duties) - Utmost good faith, trust and confidence Obligations of a Partner: can be expressly waived. 1. 2. 3. 4. 5. 6. 7. 8. 9. With respect to contribution of property With respect to contribution of money and money converted into personal use Not to engage in other business for himself(1789) To Contribute capital and when necessary, extra capital Managing partner – as to collecting debt Receives his share on the partnership credit. For damages to the partnership - duty of diligence Render information Account for any benefit and hold as trustee(the same) in favor of partnership. Pneumonic- Willy Wonka Need To Make Roast For Randy Asi Obligation 1 - With respect to contribution of property (1786) The parties obligate themselves to contribute a property. It does not imply that the property must be immediately surrendered to the partnership. A term of conveyance can be agreed by the parties and whenever there is agreement, the partner becomes a debtor to the partnership. 1. 2. 3. 4. 5. Deliver the property. Warrant the property. Deliver the fruits of the property. Preserve the property with ordinary diligence(1163) Indemnify for any damages for the retention of or delay in delivery of the property. Remedy upon failure to deliver the contribution is Specific Performance with Damages. Upon reaching delay, demand is no longer required, and damages is already due including the property. If it is in a form of Inventory, then it must be appraised at the time of donation so that the value of contribution can be determined. Manner of appraisal can be agreed upon or can be tasked to experts. If it is immovable, then attached inventory is the basis of the value of contribution. Who bears the loss of the thing: Case 1: Thing is specific and determinate but non-fungible. Answer: The risk of loss is on the partner. The object cannot be transferred. Case 2: Thing is specific and determinate but fungible. Answer: The risk of loss is on the partnership. The object is transferable (This can extinguish the partnership) Case 3: the object is a mere usufruct(use of property) and the thing is lost. Answer: The risk of loss is on the partner. There is no transfer of ownership. Case 4: the object is a fungible(replaceable, consumable) and the thing is lost. Answer: The risk of loss is on the partnership. It is impossible to use the property without being consumed or impaired. Case 5: the object is for the selling purposes, and the thing is lost. Answer: The risk of loss is on the partnership. The intention of transferring the ownership is present. Case 6: the object is appraised in the inventory and the thing is lost. Answer: The risk of loss is on the partnership. Since there is an implied sale, the partner intends to transfer the price of the property to the partnership. Res perit Domino – the owner bears the loss. Obligation 2 - With respect to contribution of money and money converted into personal use. (1788) It is the duty of the partner to contribute, on the due date, the amount which he promises to deliver. It arises from the commencement of the partnership(can be agreed upon).The profit is no included. 1. 2. 3. 4. Deliver the amount on the due date. Pay for damages in case of delay. Pay agreed or legal rate of interest. Indemnify for any damages caused by the delay on the delivery of payment. Duty to reimburse any amount taken from the partnership for personal use. The liability begins from the time he converted the amount to his own use. The amount plus interest and damages can already be included. No demand is required, the operation of law automatically makes it legal delay. Obligation 3 - Not to engage in other business for himself(1789) Capitalist – Cannot engage in businesses of similar nature to the one undertaken by the partnership. Industrial Partner – Cannot engage in any types of business(can be agreed upon). - If the industrial partner persist, damaged partners can acquire as remedy the profits of the other business. This can also be a “Just Cause.” Obligation 4 - To contribute capital and when necessary, extra capital. (1808) The amount depends on the agreement of the capitalist partners, if no agreement, all amounts given is presumed to be equal in value. - All parties MUST contribute to the partnership. Industrial partner is not required to contribute unless it is agreed upon. The partnership is always the priority especially for the managing partner. Capitalist partners are also required to contribute extra capital when: 1. 2. 3. 4. The partnership is in imminent loss. Contribution of extra capital is certain to save the partnership. Agreed by the majority. Valid Cause If the partners do not contribute, then he is obliged to sell his interest to the other partners. - If the partner deliberately refuses to give, it is a “Just Cause.” He must not be in a financial difficulty. There must be no agreement that prevents the delivery of extra capital. Industrial partner is not required to contribute unless it is agreed upon. His industry is sufficient. Obligation 5 - Managing partner – as to collecting debt. (1792) Case 1: A person is indebted to both partnership and personally to a managing partner. - Any sum received should be applied to both obligations, even though the receipt present payment to only the managing partner. He may also receive it entirely for the partnership and not for himself. The amount automatically becomes a property of the partnership, and the non-delivery therefore causes legal delay resulting to interest and possibly damages. The debtor can choose to pay the partner only if his debt is more onerous than his debt to the partnership. Case 2: A person is indebted to the partnership. - The managing partner is entitled to receive the money as trustee of the partnership, obligated to bring the amount to the treasury, if such exist. It only applies to the managing partner. A managing partner is a partner that is assigned by the partners, and also that he is acting as one. Obligation 6 - Receives his share on the partnership credit. (1793) A partner should be obliged to bring to the partnership capital what he has received, even though he may only make a personal receipt. It only applies when the partnership capital still exists, or that the properties have not yet been returned due to dissolution/liquidation. The community of interest no longer exist after the liquidation. There is still only one credit in this case because of the Juridical Personality Obligation 7 - For damages to the partnership; duty of diligence. (1794) Any partner is responsible for the damages suffered by it through his fault. Amounts that cannot be used as compensation: 1. Industry and profits earned from his industry. 2. Other profits and benefits to be received from the partnership. It can be mitigated by the court if through his effort, unusual profits were received. Number of damages to be paid will only be known during/after liquidation. Obligation 8 - Render information(1806) Any partners is obliged to give information that affects or benefits the partnership. It may be given to each partner or to the legal representatives or officer assigned to deliver such information. Obligation 9 - Account for any benefit and hold as trustee(the same) in favor of partnership. (1807) Account and hold any profits or benefit any profits derived by him without the consent of other partners from any transaction connected with the formation, conduct or liquidation of the partnership. If the partner receives anything related to the business, or properly pertains to the partnership(payment of credit, payment of sales or credit payments from insolvent third persons), this shall be held by the partner as a trustee with the obligation to give it to the partnership capital. - Fiduciary duty prohibits him to acquire title that is unfavorable to the partnership or to his co-partners. Judicial Dissolutions – Action against breach of duty account for benefits as trustee. (1831) Notes: THE PARTNERS MUST ACT PRIORITIZING THE PARTNERSHIP The duty of the partnership is terminated after the completion of winding up of the partnership. PART 5 - RULES ON MANAGEMENT (PARTNERSHIP) (1800 – 1803) Participation in Management Every partner is an agent of the partnership, any act to carry out the usual way of business binds the partnership( acts in good faith) Rule 1: when no stipulation of designation of managerial task or management partner, all partners are considered agent of the partnership. Exception: Agreement in management; There is a stipulation appointing a managing partner/s: General: Managing partner can act without express permission by the partners, unless in bad faith Case 1: Managing partner was designated in the AOP/during the execution of contract. - The partner is irrevocably unassigned without a just cause. In case of no just cause, one can be removed as long as it is unanimously decided by the partners. Unanimous decisions represent a change in the will of the partnership. Case 2: Managing partner was designated after the perfection/creation of the contract. - The partner or any person assigned as managing partner/managing person can be revoked without any requirement for just cause, as long as it is voted for by majority. Managing partners have designated tasks: If Each act in extent of their given tasks; No problem in management. But if one overextends his acts or goes to encompass task of other partner; Fault is on the overextending party. Managing partners have express designation: The managing partners are free to act upon themselves any transaction relating to the partnership. In case there is overlapping of decision: (1) Managing partner(if any) vote for majority decision. If non then all partners vote for majority decision (2) In case of tie, the partner/s owning controlling interest shall decide. (3) In case of tie, the partner’s who voted against the contract(action undertaken) will decide. Note that the cases above only apply to contracts and does not include day to day tasks such as trading etc. Other Information: Stipulation requiring partner’s acts be agreed upon by all other partners need to be expressly written and agreed upon by the parties. No voting for decision shall be valid without the presence of all the partners, unless there is a impending danger to the existence of partnership or that is irreparable. PART 7 – OBLIGATIONS OF PARTNERS TO THE PARTNERSHIP (1784-1808) PART 9 – RIGHTS OF A PARTNER (1809-1827) 1. Property rights. 2. Specific partnership property. 3. Equity rights. 4. Participate in management. 5. Reimbursement and Indemnification. 6. Sub-partnership. 7. Access and Inspection 8. True and Full information. 9. Formal Account of partnership affairs. 10. Dissolve the partnership. 11. Use partnership name. PART 8 – OBLIGATIONS OF PARTNERS AND PARTNERSHIP TO THIRD PERSONS (1815-1827) 1818 Every partner is an agent of the partnership for the purpose of its business. The acts of every partner bind the partnership is such act: Carrying on in the usual way of the business Must act in the name of partnership. Authorized or tasked by the partners(majority) to perform such act. Except: 1. The person acting has no authority to act. 2. The third person knows that the other has no authority. Case 1: Act is carrying out on the usual way of the business, the partner acts beyond authority and the third person HAS NO knowledge of the restriction of the authority. Result: Binding to Partnership Case 1: Act is carrying out on the usual way of the business, the partner acts beyond authority and the third person HAS knowledge of the restriction of the authority. Result: Binding Specific Partner and Third Person You know something may cause harm, yet you still did it = implied consent = estoppel Action requiring the CONSENT of all partners: 1. Assignment of partnership property in trust, for creditors or in the assignees promise to pay the debt of the partnership – The assignment will surely cause the dissolution of partnership. 2. To dispose of Goodwill – It is very valuable. 3. To do any other act that makes it possible to carry on the ordinary business of the partnership 4. Confess of judgement – If done before case is filed – void. If done after case is filled – could cause jeopardy. 5. To enter into a compromise, concerning a partnership claim or liability – it can cause alienation/transfer of 6. To submit claim or liability of arbitration – act of ownership of a partnership property(void) 7. To renounce a claim of partnership – what belongs to the partnership is owned by it. Confession of Judgement – An admission by the person to a liability for a debt without having a trial, it is stipulated on the contract itself. Jeopardy – A person cannot be repeatedly filled on a case of the same crime previously convicted to. Knowledge of the Agent is Knowledge of the Principal(Principal’s right to know his agent’s actions) Knowledge of the partner is considered a knowledge of the partnership in cases: 1. Knowledge or notice of a person acting in a particular matter which was acquired while he was a partner. 2. Knowledge of a partner acting on a particular matter and present in his mind.(One who acted) 3. Knowledge of any partner who reasonably could and should have communicated that knowledge to the partner. In case one or more partner act in fraud in consent of that partner upon the partnership, then that act is not automatically a knowledge of partnership. All partners are liable for all contracts entered by the partnership (1816) Partners can enter into a contract in his name, for the partnership(Subsidiary) Contractual Liability of partners and the partnership: Jointly liable – all partners equally share the liability as a partnership. Subsidiary liable – liability only begins after the failure to perform certain acts. Personal Liability of Partners: Pro rata – proportionate based on the number of partners, not on the contribution. Subsidiary liable – personal liability only begins after the exhaustion of the partnership property. Case 1: The partnership has a liability as well as one or more partners. (1827) Answer: The partnership is preferred over the partner in terms of payment of creditor. As remedy, he can file for a Charging order. Case 2: A partner has a liability to a creditor. Answer: The partnership is not liable, but the partner is. As remedy, he can also file a Charging order. Private creditors can ask for the attachment and public sale of the interest of the debtor partner. Charging order - Judgement creditor charge the interest of debtor partner in the partnership, with the payment of unsatisfied judgement debt with interest. Judgement Creditor – creditor by virtue of a judgment The property can be repurchased by any of the partner, 1. Separate property of a partner 2. Partnership property of the partner/s with the consent of the partners who are not charged. Ownership is not transferred to the partner who bought the property of the debtor partner, he only becomes a trustee holding the property in trust. Obligation 2 - Ownership of real property(Public Instrument) – All contributed properties are owned by the partnership. It does not matter whom it was registered. It can be registered to: 1. 2. 3. 4. Partnership One or more partners Third person in trust for the partnership Any other person permitting its disposal. In some cases, partnership owns a property, but the transaction is under different name. Title is under the Partnership name. Case 1: Under the name of Partnership, conveyed by the partnership: The act is valid, and the partnership can also reacquire the property transferred, unless: 1. The conveyance was an act of carrying out of the usual business. 2. The third person had no knowledge that the partner may have exceeded the authority given to him. Case 2: Under the name of Partnership, conveyed by through the name of a partner: The act is valid, but the buyer only gets the equitable interest of the partnership. Provided: 1. The conveyance was an act of carrying out of the usual business. 2. The act was authorized by the partners. 3. The third person had no knowledge that the partner may have exceeded the authority given to him. Title is under the name of one or more partners. Case 1: Under the one or more partners , conveyed by the one or more partners: The act is valid, and the partnership can also reacquire the property transferred, unless: 1. The conveyance was an act of carrying out of the usual business. 2. The third person had no knowledge that the partner may have exceeded the authority given to him. Title is under the name of a third person in trust for the partnership. Case 1: Under the one or more partners , conveyed by the one or more partners or in partnership’s name: The act is valid, but the buyer only gets the equitable interest of the partnership, unless: 1. The conveyance was an act of carrying out of the usual business. 2. The third person had no knowledge that the partner may have exceeded the authority given to him. What is equitable interest of partnership? The person acquiring equitable interest or ownership over the property is entitled to the performance of certain duties and the exercise of certain powers by the partnership, as may be necessary. Title is under the name of all partners. Case 1: Under all partners, conveyed under the name of all partners: The act is valid, all the rights are transferred to the buyer, and it may be ratified implicitly or explicitly. E.g., All partners are present during the conveyance, or the partners benefitted knowingly. 1. The conveyance was an act of carrying out of the usual business. Obligation 3 – Admissions/Representation with regard to partnership affairs (1820) Generally: A person is not bound by the act of a person of which he had no knowledge, or that he has not given consent except by virtue of particular relation between them. Any admission and representation are valid as long as: 1. It concerns the partnership affairs. 2. It is acted within the scope of the authority given. Obligation 4 – Liability arising from delict and quasi delict. Delicts are acts or omissions punishable by law. Quasi delicts act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Criminal Liability (1824) Solidary – Only specific partners, including the partnership, is liable. Subsidiary – liability only begins after the performance of or the failure to perform certain acts. In order for the liability to arise, there must be: Guilty of wrongful act He must be acting in the ordinary business or with authority. Loss or injury is suffered by the person resulted from the acts of a partner The injured third person is not a partner If Quasi delict, there must be no preexisting contractual relation, or if there were, then it is grossly violated. Liability causing loss to third person: (1823) 1. A person given an authority misapplies the property given to him. 2. A person acting within the ordinary business misapplies the property given to him and within the custody of the partnership. Partnership by Estoppel (1825) A person who is not a partner may become a partner if he and be liable to third persons when by conduct: Directly represents himself to anyone as part of a existing or non-existing partnership Indirectly represent himself, by consenting from a person directly representing as part of an existing or non-existing partnership In order for the liability to arise, there must be: 1. The representation was consented by all the partners. 2. The third person delt with the partnership with his injury(he has suffered damage) Case 1: The partnership exists. Sub-Case 1: One or more, but not all, consented to the partnership by estoppel. Answer: The persons who consented and the person who became a partner by estoppel are liable Sub-Case 2: All consented to the partnership by estoppel. Answer: The partnership, the partners and the partner by estoppel are liable Case 2: The partnership does NOT exist. Sub-Case 1: None consented on the partnership. Answer: The partner/s by estoppel is/are liable NOTE: The Partnership in Estoppel is not a valid partnership, only that it is a partnership that protect the third persons Liability of an Incoming Partner (1826) The Incoming partner is liable as if he was a partner before the obligation is incurred, Except: The liability is bound to be satisfied by partnership property (contribution). (Can be stipulated against) The incoming partner becomes a partner after his admission and therefore share the liability jointly and subsidiarily. 1. Property Right Right over specific property PART 10 – DISSOLUTION AND WINDING UP (1828-1842) Dissolution vs Winding Up vs Termination. Dissolution – cease of a partner to be part of the partnership. It is existing, including juridical personality Winding up – settling of partnership affairs(liquidation) Termination – end of the partnership life Causes of Dissolution: 1. Extra Judicial – Right already exist by operation of law. 2. Judicial – Right to dissolve still needs to be though application to court. Extra Judicial Dissolution: (1830) (1) Voluntary; Without violation of AOP(Articles of Partnership) CEEE - For partners only 1. 2. 3. 4. Completion of Term or Undertaking Express will of a partner in good faith Express will of all partners Expulsion of a partner (2) With violation of AOP(Articles of Partnership) VUP DIC - For partners only (3) Event makes it Unlawful (4) Thing Perishes before delivery (5) Death of a partner (6) Insolvency of a partner (7) Partner is in a Civil Interdiction Judicial Dissolution: (1831) UIG BILE – For partners only (1) (2) (3) (4) Unsound mind or Insane partner Incapable to perform. Guilty of conduct in prejudice to the partnership Willfully breaches the agreement or doing normal acts but is impracticable to the business. (5) Partnership can only be carried out at a loss. (6) Circumstance rendering dissolution equitable (Abandonment of duty, Refusal to render full account for partnership transactions, fraud in management) Judicial Dissolution for purchaser of partners interest (1831) - For purchaser of interest only (7) After the termination of term or undertaking (8) At any time if it is a partnership at will when the interest was assigned (9) Issuance charging order. Authority to act: General Rule: Dissolution terminates all authority. Except: (10)Those necessary to wind up partnership(sell or liquidate properties) (11)Those necessary to complete unfinished transaction. What is terminated? Case 1: With respect to partners - The authority between the partnership is extinguished Case 2: When not caused by AID(Act, Insolvency, Death) General Rule: Partnership is terminated and cannot continue. Case 3: When caused by AID(Act, Insolvency, Death) on certain cases: General Rule: Each partner is liable to each other his share in liability. The partnership is bind if the third person was not informed/ has no knowledge of dissolution. Except: 1. 2. 3. 4. Partner had knowledge of the act that can cause dissolution. Partner had knowledge or notice of the death of a partner. Partner had knowledge or notice of insolvency. Partner had knowledge of the dissolution. Case 4: With respect to non-partners General Rule: A partner can bind the partnership in cases such as: 1. Related to winding up 2. Related to completion of unfinished transactions. 3. New transactions as if there were no dissolution. - Extension of credit by previous creditor who had no knowledge. - Partnership failed to inform the public(advertisement, newspaper, internet, television) Except: 1. 2. 3. 4. Partner had knowledge of the act that can cause dissolution. Partner had knowledge or notice of the death of a partner. Partner had knowledge or notice of insolvency. Partner had knowledge of the dissolution. A partner cannot bound the partnership anymore when dissolution is due to: (1) Unlawful to carry on the business. (2) Insolvency of the partner (3) Unauthorized to wind-up Except: A partner extended credit prior to dissolution without knowledge or notice of want of authority. A partner transacted without knowledge of dissolution. No advertisement of facts about the partnership dissolution (4) Act is not appropriate for winding up or for completion of unfinished transactions. (5) Act was of ordinary course of business, had it not been from the bad faith of one or more partners. Dormant Partner: (1816) General: Liable incurred after dissolution is paid only by partnership properties(no personal liability) Deceased Partner: (1835) General: liable to credits the partnership acquired when he was alive Note: separate creditors are preferred over partnership credits Retiring Partners: (1835) General: Is not discharged from existing liabilities. Except: Agreed by the partner concerned, other partners, and creditors; or Prior notice by the partner to continuing partners and creditors. Continuing Partners: (1835) General: All old obligations are continued PART 11 – LIMITED PARTNERSHIP (1843-1867) Summary: 1. Contribution of Money, Property or Goods MONEY: General: Bring before due Consequence: 1. Interest 2. Damages PROPERTY: General: Bring before due Consequence: 1. Fruits 2. Warranty 3. Damages Requisites: 1. Inventory GOODS: General: Bring before due 1. Exclusion or 2. Avail Benefits 3. Damages for both CAPITALIST: General: Prohibited to engage similar kind Except: - Stipulated Consequence: 1. Profit shared. 2. Loss is personal. 3. Damages for both 3. Contribute extra capital. General: Not required Except: - Refusal - Imminent loss - Majority opinion - Agreement Consequence: Consequence(Refusal): 1. Warranty 2. Damages Requisites: 1. Appraisal(Expert or Agreement) 2. Not to engage in other business for himself. INDUSTRIAL: General: Prohibited to engage in all Except: - Expressly permitted. - Invest Only Consequence: 4. Sell interest to partner. 4. Collection of Debt. General: Apply to both credit Except: - Apply to partnership only. - Debtor decision(Onerous) Requisites: 1. Managing partner 2. Credit to managing partner. 3. Credit to partnership 5. Receive share in partnership credit. General: Bring to partnership capital Except: - Apply to partnership only. - Debtor decision(Onerous) 7. Render information. General: All partners are Consequence: 3. Damages(after dissolution) 4. Profits/benefits cannot offset. Requisites: 4. Partner receives his share. 5. Other partners did not collect. 6. Debtor becomes insolvent. Except: - 6. Damages caused to partnership. General: Partner is responsible Consequence: 1. Damages(after dissolution) 2. Profits/benefits cannot offset. Mitigation: - When Extra ordinary effort and Unusual profits are realized. Responsibility is lessened.(Court) Requisites: 1. Partner’s fault 2. Causes Damage to partnership. No related to partnership Requisites: 3. Partner’s fault 8. Account for any benefit and hold as trustee. General: Partner is responsible Consequence: 5. Damages(after dissolution) 6. Profits/benefits cannot offset. Except: - No related to partnership Requisites: 4. Partner’s fault References: https://subaylawco23.weebly.com/partnership.html https://ndvlaw.com/how-to-form-a-partnership-in-the-philippines/ https://www.youtube.com/watch?v=_MYFKq0TYC8&list=PLBnOkbjrg7Eh1MS4cXjd5gHIOgqLXv1c&index=6 https://dtinegosyocenter.online/what-type-business-entity-rightme#:~:text=The%20partnership%20has%20a%20juridical,of%20each%20of%20the%20partners.&text =A%20Corporation%20is%20comprised%20of,the%20corporation%20as%20a%20whole.
