1. What is partnership?

 Partnership is a contract of 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.
2. What are the essential features of partnership?
 The following are the essential features of a partnership contract:
(1) There must be a valid contract;
(2) The parties (two or more persons) must have 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; and
(5) The primary purpose must be to obtain profits and to divide the same among the parties.
3. What is the purpose of people entering into partnership?
 The primary purpose must be to obtain profits and to divide the same among the parties. People
enter into a partnership to combine their resources, skills, and efforts for a common business
goal, and to share in the profits and losses of the business.
4. What is delectus personae in a contract of partnership?
 Partnership is a relation in which delectus personae is an important element. No one may be
introduced into the firm as a partner without the unanimous consent of the other partners.
 Delectus personae refers to the right of partners to choose their co-partners. It emphasizes the
personal qualifications and characteristics of the individuals involved in the partnership.
5. A and B entered into an agreement to form a partnership. Because A’s refusal to comply with the
agreement, B brought an action to compel the execution of a partnership contract. May A be
compelled against his will to carry out the agreement or execute the partnership papers?
 No. Under Article 1167, A has an obligation to do, not to give. The law recognizes the
individual’s freedom or liberty to do an act as he has promised to do, or not to do it, as he
pleases. It falls within what Spanish commentators call a very personal act (acto personalismo),
of which courts may not compel compliance, as it is considered an act of violence to do so.
(Woodhouse vs. Halili, 83 Phil. 526 [1953].)

6. How is partnership formed?

 Article 1767 of the Civil Code recognizes the creation of a contract of partnership when ‘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.’ Its requisites are: ‘(1) mutual
contribution to a common stock, and (2) a joint interest in the profits.’ In other words, a
partnership is formed when persons contract ‘to devote to a common purpose either money,
property, or labor with the intention of dividing the profits between themselves.’
 Partnership is typically formed by an agreement, either written or oral, between individuals who
intend to carry on a business together for profit.
7. How will you prove the existence of a partnership if there is no written agreement or contract
executed by the “supposed partners”?
 In case there is no written agreement between the parties, the existence or non-existence of a
partnership must be determined from the conduct of the parties, any documentary evidence
bearing thereon, and the testimony of the parties.
 The existence of a partnership can be proven through the conduct, contributions, and intentions
of the parties involved in the absence of a written agreement.
8. Who may become a partner?
 Any person capable of entering into a contract may become a partner, subject to certain legal
restrictions or qualifications.
9. May a corporation be a partner?
 Yes, a corporation may be a partner in a partnership, and this is known as a "limited partnership"
where the corporation is typically a limited partner.
10. What may be contributed to the common fund of a partnership?
 Partners may contribute money, property, skills, or other resources to the common fund of a
partnership.
11. Does failure to register the partnerships with the Securities and Exchange divest the partnership’s
juridical personality?
 Failure to register a partnership does not necessarily divest the partnership of its juridical
personality, but registration may have legal implications and benefits.
12. Looking forward to an upward valuation of real properties in Biday, San Fernando City, La
Union, A and B bought a hectare of agricultural land at said barangay for the purpose of selling it
at a profit. They agreed to proportionately divide the profit of re-sale. Is there a partnership
formed in this case?
 The buying of the land for resale with an agreement to divide profits suggests the existence of a
partnership, but the specific circumstances may determine the legal status.
13. Explain the legal consequence/s of partnership possessing a juridical personality.
 A partnership duly formed under the law is a juridical person to which the law grants a juridical
personality separate and distinct from that of each of the partners. (Art. 44, par. 3.) As an
independent juridical person, a partnership may enter into contracts, acquire and possess property
of all kinds in its name, as well as incur obligations and bring civil or criminal actions in
conformity with the laws and regulations of its organizations.
 A partnership with juridical personality is treated as a legal entity separate from its partners. It
can enter into contracts, sue and be sued, and hold property in its name.
14. A and B formed partnership M Company. Z sued M Company for collection for sum of money
with damages. Pending final determination of the case, A died. Arguing that A’s death dissolved M
Company, hence, there is no “M Company” to speak of; thus, the pending case against M
Company should be dismissed. Is B’s argument correct?
 A partner's death generally does not dissolve a partnership unless the partnership agreement
states otherwise. The partnership would continue with the remaining partner(s).
15. Who is a:
  a. General partner: General partner or one whose liability to third persons extends to his
separate property; he may be either a capitalist or industrial partner. (see Arts. 1843, 1816.) He is
also known as real partner;
 b. Limited partner: Limited partner or one whose liability to third persons is limited to his
capital contribution. (see Art. 1843.) He is also known as special partner.
 c. Capitalist partner: Capitalist partner or one who contributes money or property to the
common fund (see Art. 1767.);
 d. Industrial partner: Industrial partner or one who contributes only his industry or personal
service (Arts. 1789, 1767.);
 e. Managing partner: Managing partner or one who manages the affairs or business of the
partnership; he may be appointed either in the articles of partnership or after the constitution of
the partnership. (see Art. 1800.) He is also known as general or real partner;
 f. Liquidating partner: Liquidating partner or one who takes charge of the winding up of
partnership affairs upon dissolution (see Art. 1836.);
 g. Ostensible partner: Ostensible partner or one who takes active part and known to the public
as a partner in the business (see Art. 1834, par. 2.), whether or not he has an actual interest in the
firm. Thus, he may be an actual partner or a nominal partner. If he is not actually a partner, he is
subject to liability by the doctrine of estoppel (Art. 1825.);
 h. Nominal partner: A partner in name only, without a real interest in the business.
 i. Dormant partner: Dormant partner or one who does not take active part in the business and is
not known or held out as partner. (see Art. 1834, par. 2.) He would be both a silent and a secret
partner. He may retire from the partnership without giving notice and cannot be held liable for
obligations of the firm subsequent to his withdrawal. His only interest in joining the partnership
would be the sharing of the profits earned.
 j. Partner by estoppel: Partner by estoppel or one who is not really a partner, not being a party
to a partnership agreement, but is liable as a partner for the protection of innocent third persons.
(see Art. 1825.) He is one who is represented as being in fact a partner, but who is not so as
between the partners themselves. He is also known as partner by implication or nominal partner.
16. X and Y agreed to establish a hauling business. X promised to give two from his five existing
trailer trucks, while Y promised his land as truck depot, office and warehouse. Before delivering
the trucks into the partnership, X’s trucks were gutted by fire. What is the effect of the loss of the
trucks to the existence of the partnership?
 The loss of the trucks may affect the partnership's ability to fulfill its objectives, but the
partnership may continue if the partners decide to do so.
17. If only four of the trucks were lost, is the establishment of partnership still possible?
 The establishment of the partnership is still possible, but the loss of assets may need to be
addressed among the partners.
18. X, Y and Z agreed to establish a hauling business. X promised to give two trailer trucks, Y
promised his land as truck depot, office and warehouse, and Z will be responsible in getting clients
for the partnership. X delivered only one trailer truck. What is the obligation of X to the
partnership? If X refuses to comply with his promise in the partnership, what remedy or remedies
do the partners have against X?
  X is obligated to contribute the promised assets (trailer trucks) to the partnership. Failure to do so
may result in legal consequences.
19. State the rule on prohibition against engaging in competitive business and the consequence/s of its
violation.
 ART. 1808. The capitalist partners cannot engage for their own account in any operation which is
of the kind of business in which the partnership is engaged, unless there is a stipulation to the
contrary.
Any capitalist partner violating this prohibition shall bring to the common funds any profits
accruing to him from his transactions, and shall personally bear all the losses.
 Partners are generally prohibited from engaging in a business that competes with the partnership
without the consent of the other partners. Violation may lead to legal consequences, including
damages or dissolution.

20. State the rules in the management and conduct of the partnership business.
 ART. 1796. The partnership shall be responsible to every partner for the amounts he may have
disbursed on behalf of the partnership and for the corresponding interest, from the time the
expenses are made; it shall also answer to each partner for the obligations he may have
contracted in good faith in the interest of the partnership business, and for risks in consequence
of its management.
(1) refund amounts disbursed by the partner in behalf of the partnership plus the corresponding
interest from the time the expenses are made (not from the date of demand);
(2) answer for the obligations the partner may have contracted in good faith in the interest of the
partnership business; and
(3) answer for risks in consequence of its management.
 The rules are typically outlined in the partnership agreement, covering matters such as decision-
making, profit sharing, and other aspects of business management.
21. What is “good will” of a business that is prohibited to be disposed by a partner?
 The goodwill of a business may be defined to be the advantage which it has from its
establishment or from the patronage of its customers, over and above the mere value of its
property and capital. The goodwill of a partnership rests in the probability that its old customers
will continue their custom and will commend the partnership to others, making the latter new
customers. It may also include the advantages which may be derived from the partners holding
themselves out as carrying on the business identified with the name of a particular firm.
 Goodwill refers to the favorable reputation a business has acquired. It is typically considered an
asset of the partnership, and its disposal without consent may be restricted.
22. Discuss the liability of partnership for wrongful acts or omissions by any of the partners.
 Partnerships are generally liable for the wrongful acts or omissions of their partners committed
within the scope of the partnership business.
23. M sued XYZ Company for Damages arising from a breach of contract. Subsequently, Q was
included as a new partner in XYZ Company. The suit of M against the partnership exposed the
partnership to bankruptcy. Partnership asset lacks exactly P1,200,000.00. How much do partners
X, Y, Z and Q has to contribute in paying their partnership’s obligation?
  Each partner is typically liable for their share of the partnership's obligations. The contribution
may be based on the agreed profit-sharing ratio or other terms in the partnership agreement.
24. Enumerate the causes of dissolution of a partnership.
 (1) Without violation of the agreement between the partners:
(a) By the termination of the definite term or particular undertaking specified in the
agreement;
(b) By the express will of any partner, who must act in good faith, when no definite term
or particular undertaking is specified;
(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 fi de in accordance with such
a power conferred by the agreement between the partners;
(2) In contravention of the agreement 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;
(3) 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;
(4) When a specific thing, a partner had promised to contribute to the partnership, perishes before
the delivery; 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; but the partnership shall not be dissolved by the loss of the thing when it occurs after
the partnership has acquired the ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;
(8) By decree of court under the following article. (1700a and 1701a)

25. Who may apply for judicial decree of dissolution?

 Any partner may apply for a judicial decree of dissolution under specific circumstances outlined
in the law or partnership agreement.
26. What are the grounds for judicial decree of dissolution?
 Dissolution of a partnership may be decreed judicially on application, either
(1) On application by a partner:
(a) Insanity.
(b) Incapacity;
(c) Misconduct and persistent breach of partnership agreement;
(d) Business can be carried on only at a loss;
 (e) ) Other circumstances. — Examples of circumstances which render a dissolution
equitable are abandonment of the business, fraud in the management of the business,
refusal without justifiable cause to render accounting of partnership affairs, etc.
(2) by the purchaser or assignee of a partner’s interest.
 Grounds for judicial decree of dissolution may include fraud, willful or persistent breach of the
partnership agreement, incapacity of a partner, or other circumstances specified in the law.
27. Distinguish general partners from limited partners.
 a. General partner: General partner or one whose liability to third persons extends to his
separate property; he may be either a capitalist or industrial partner. (see Arts. 1843, 1816.) He is
also known as real partner;
 b. Limited partner: Limited partner or one whose liability to third persons is limited to his
capital contribution. (see Art. 1843.) He is also known as special partner. The terms “general
partner” and “limited partner” have relevance only in a limited partnership;

 General partners actively participate in the management of the business and have unlimited
liability. Limited partners contribute capital but have limited involvement in management and
liability is restricted to their investment.