PARTNERSHIP
> It is a CONTRACT whereby two or more persons (1) bind themselves to CONTRIBUTE
money, property, or industry to a COMMON FUND (2) with the intention of dividing the PROFITS among themselves
or in order to EXERCISE a PROFESSION
> a STATUS and a FIDUCIARY RELATION subsisting between
persons carrying on a business in common with a view on profit
CHARACTERISTICS
OF THE CONTRACT OF PARTNERSHIP
[C, C, L, I, AS, NP]
1. CONSENSUAL
> perfected by mere consent
2. CONTRIBUTION of
money, property or industry to a COMMON FUND
3. object must be a
LAWFUL one
4. INTENTION of DIVIDING the PROFIT among the PARTNERS
5. “AFFECTIO
SOCIETATIS”
> the desire to
formulate an ACTIVE UNION, with people among whom there exist a mutual CONFIDENCE and TRUSTS
6. NEW PERSONALITY
> the object must be
for profit and not merely for the common enjoyment otherwise only a
co-ownership has been formed. HOWEVER, pecuniary profit need not be the only
aim, it is enough that it is the principal purpose
BUSINESS
TRUSTS
> when certain persons entrust their property or money to
others who will manage the same for the former
RULES ON CAPACITY
TO BECOME A PARTNER
- a person capacitated to enter into contractual
relations may become a partner
- an UNEMANCIPATED MINOR CANNOT become a partner
UNLESS his parent or guardian consents
- a MARRIED WOMAN, cannot contribute conjugal funds as
her contribution to the partnership UNLESS she is permitted to do so by
her husband OR UNLESS she is the administrator of the conjugal
partnership, in which the COURT must give its consent authority
- a PARTNERSHIP being a juridical person by itself can
form another partnership
- a CORPORATION cannot become a partner on grounds of
public policy
> a partner shares not
only in profits but also in the losses of the firm
RULE:
> the partnership has a PERSONALITY SEPARATE and DISTINCT
from that of each partner
CONSEQUENCES OF
THE PARTNERSHIP BEING A JURIDICAL ENTITY
- its juridical personality is SEPARATE and DISTINCT
from that of each partner
- the partnership CAN in GENERAL:
A)
acquire and possess property of all kinds
B)
incur obligations
C)
bring civil and criminal actions
D)
can be adjudged insolvent even if the
individual members be each financially solvent
- unless he is generally sued, a partner has no right
to make a separate appearance in court, if the partnership being sued is
already represented
LIMITATIONS ON
ALIEN PARTNERSHIP
1) if 60% capital is
not owned by Filipinos
> the firm cannot
acquire by purchase or otherwise AGRICULTURAL Philippine lands
2) foreign
partnership may “lease” lands provided the period does not exceed 99 years
3) foreign
partnership may be “MORTGAGEES” of land
> period of 5 years, renewable for another 5 years
> they cannot purchase it in a foreclosure sale
RULES IN CASE OF
ASSOCIATIONS NOT LAWFULLY ORGANIZED AS PARTNERSHIP
- it possesses NO LEGAL PERSONALITY
> it cannot sue as
such HOWEVER, the partners in their individual capacity CAN
- one who enters into a contract with a partnership as
such cannot when sued later on for recovery of the debt, allege the lack
of legal personality on the part of the firm, even if indeed it had no
personality
> ESTOPPEL
> whether a partnership has a juridical personality or not
depends on its PERSONAL LAW of the partnership or the law of the place where
the partnership was organized
REQUISITES FOR
EXISTENCE OF PARTNERSHIP [I, CF, JI]
- INTENTION to create a partnership
- COMMON FUND obtained from contributions
- JOINT INTERESTS in the PROFITS
WHAT
DO NOT ESTABLISH A PARTNERSHIP
- mere co-ownership or co-possession
> even with profit
sharing
- mere sharing of GROSS returns
> even with joint
ownership of the properties involved
RULES TO
DETERMINE THE EXISTENCE OF A PARTNERSHIP
1.
persons who are not partners to each other
are not partners as to third persons
EXCEPTION:
>
PARTNERSHIP BY ESTOPPEL
2.
CO-OWNERSHIP of a property does not itself
establish a partnership, even though the co-owners share in the profits derived
from the incident of joint ownership
3.
SHARING OF GROSS RETURNS ALONE does not
indicate a partnership whether or not the persons sharing them have a joint or
common right or interest in any property from which the returns are derived
4.
the receipt of the share in the profits is a
strong presumptive evidence of partnership HOWEVER, no such inference will be
drawn if such profits were received in payment
A)
as a DEBT by installments or otherwise
B)
as WAGES of an employee
C)
as RENT to a landlord
D)
as an ANNUITY to a widow or representative of
a deceased partner
E)
as INTEREST on a LOAN, though the amount of
payment vary with the profits of the business
F)
as the CONSIDERATION for the sale of a GOOD
WILL of a business or other property or otherwise
> creditors are not
partners, for their only interest in the sharing of profits is the receipt or
payment of their credits
> in a partnership, the
partners are supposed to trust and have confidence in all the partners
PARTNERSHIP
BY ESTOPPEL
> IF 2 persons not partners represent themselves as
partners to strangers, a partnership by estoppel results
> WHEN 2 persons, who are partners, in connivance with a friend who is not a partner inform a
stranger that said friend is their partner, a partnership by estoppel also
result to the end that the stranger should not be prejudiced
RULE: LAWFUL OBJECT or
PURPOSE
> a partnership must have LAWFUL OBJECT or PURPOSE, and
must be established for the common benefit or interest of the partners
> it must be within the commence of man, possible and not
contrary to law, morals, good customs, public order or public policy
> IF a partnership has
SEVERAL PURPOSES, one of which is UNLAWFUL, the partnership can still validly
exist so long as the illegal purpose can be separated from the legal purposes
> NO need for JUDICIAL DECREE to dissolve an unlawful
partnership
> VOID AB INITIO
> one of the causes for the dissolution of a partnership
is “any event which makes it unlawful for
the business of the partnership to be carried on”
RULE:
> when an UNLAWFUL PARTNERSHIP is
dissolved by a judicial decree, the PROFITS shall be CONFISCATED in FAVOR of
the STATE
G. R.
> a partnership may be constituted in
any form
EXCEPTION:
PUBLIC INSTRUMENT
1. IMMOVABLE PROPERTY is
contributed
2. REAL RIGHTS are contributed
*
need for INVENTORY of IMMOVABLES
** for EFFECTIVITY of the partnership
contract insofar as innocent third persons are concerned the same must be
REGISTERED if REAL PROPERTIES are INVOLVED
> a partnership contract is
NOT CONVERED by the STATUTE of FRAUDS
> an AGREEMENT TO FORM a
partnership does not itself create a partnership
> when there are conditions
to be fulfilled or when a certain period is to lapse, the partnership is not
created till after the fulfillment of the conditions or the arrival of the term
and this is true even if one of the parties has already advanced his agreed
share of the capital
RULE: if CAPITAL is P3,000 or more
REQUIRED:
1.
PUBLIC INSTRUMENT
2.
RECORDED – S.E.C.
*
>
FAILURE TO COMPLY – shall not effect the liability of the partnership and its
members to third persons
**
>
IF REAL PROPERTIES have been contributed, REGARDLESS of the VALUE, a public
instrument is needed for the attainment of legal personality
REQUIREMENTS
WHERE IMMOVABLE / REAL PROPERTY IS CONTRIBUTED
1.
PUBLIC
INSTRUMENT
2.
INVENTORY
– signed and attached to the P.I.
* > applies regardless of the
value of the real property
*
>
applies even if only real rights over the real property are
contributed
*
>
applies if aside from real property, cash or personal property is
contributed
> TRANSFER of land to the partnership
must be duly “recorded” in the ROD to make the transfer effective insofar as
third persons are concerned
RULE:
> any immovable property or an interest
therein maybe acquired in the partnership
name
> title so acquired can be conveyed
only in the partnership name
>IF the partnership has ALIENS, it
CANNOT OWN LANDS, whether public or private or whether agricultural or
commercial EXCEPT through HEREDITARY SUCCESSION
LIMITATIONS
ON ACQUISITION
1. AGRICULTURAL LANDS – 1024
HECTARES
2. lease of public lands
(GRAZING) – 2000 HAS.
RULES IF
A) articles are kept secret among
the members
B) any one of
the members may contract in his “own” name
with third persons
1. NOT a partnership – NOT a
LEGAL PERSON
2. it may be sued by third
person under the common name it uses
3. it cannot sue as such and
cannot be ordinarily be a party to a civil action
4. insofar as innocent third
parties are concerned
> the parities can be
considered as members of a partnership
5. as between themselves or
insofar as third persons are prejudiced
> only the rules of
co-ownership must apply
EFFECT
OF CERTAIN TRANSACTIONS
1. contracts entered into by a
“partner” in his own name may be sued upon still by him in his individual
capacity, not withstanding the absence of a partnership
2. when two or more
individuals, having a common interests in a business bring a court action, it should be presumed
that they prosecute the same in their individual capacity as co-owners and not
in behalf of a partnership which does not exist in legal contemplation
CLASSIFICATION
OF PARTNERSHIPS
A)
ACCORDING TO MANNER OF CREATION
1. ORALLY constituted
2. constituted in a PRIVATE
INSTRUMENT
3. constituted in a PUBLIC
INSTRUMENT
4. REGISTERED – S.E.C.
B)
ACCORDING TO OBJECT
1. UNIVERSAL
2. PARTICULAR
C)
ACCORDING TO LIABILITY
1. LIMITED PARTNERSHIP
2. GENERAL PARTNERSHIP
D)
ACCORDING TO LEGALITY
1. LAWFUL OR LEGAL
2. UNLAWFUL OR ILLEGAL
E)
ACCORDING TO DURATION
1. for a SPECIFIC PEIOD or
FIXED PERIOD
2. PARTNERSHIP AT WILL
F)
ACCORDING TO REPRESENTATION TO OTHERS
1. ORDINARY PARTNERSHIP
2. PARTNERSHIP BY ETOPPEL
G)
AS TO LEGALITY OF EXISTENCE
1. DE JURE PARTNERSHIP
2. DE FACTO PARTNERSHIP
H) AS TO PUBLICITY
1. SECRET PARTNERSHIP
2. NOTORIOUS / OPEN
PARTNERSHIP
I) AS TO PURPSE
1. COMMERCIAL / TRADING
2. PROFESSIONAL / NON-TRADING
GENERAL PARTNERSHIP
> one where all the partners are
general partners
> they are LIABLE even with respect to
their individual properties, after the assets of the partnership has been
exhausted
LIMITED PATNERSHIP
> one where at least one partner is a
general partner and the others are limited partners
> one whose liability is limited only
up to the extent of his contribution
> a
partnership where all the partners are limited partners cannot exist as a
limited partnership
> REFUSED REGISTRATION
> IF it continuous as such,
it will be considered as a general partnership and all the partners will be general partners
KINDS
OF UNIVERSAL PARTNERSHIP
1. PARTNERSHIP OF ALL PRESENT
PROPERTY
2. PARTNERSHIP OF ALL PROFITS
*UNIVERSAL
PARTNERSHIP OF ALL PRESENT PROPERTY
> CONTRIBUTION of
1. ALL the properties actually
belonging to the partners
2. the PROFITS acquired with
said property
> BECOMES COMMON PROPERTY
> EXCEPT all FUTURE PROPERTY
> FRUITS of FUTURE PROPERTY
– INCLUDED IF STIPULATED UPON
*UNIVERSAL
PARTNERSHIP OF PROFITS
> comprises all that the partners may
acquire by the INDUSTRY or WORK of the partners become common property
regardless of within said profits were obtained through the usufruct
contributed
> EXCEPT
PRIZES and GIFTS
RULE:
> articles of universal partnership,
entered without specification of its nature, only constitute a universal
partnership of PROFITS
RULE:
> persons who are prohibited from
giving each other any donation or advantage cannot enter into universal
partnership
WHO:
1.
HUSBAND
and WIFE
2.
those
guilty of ADULTERY or CONCUBINAGE
3.
those
guilty of the same criminal offense if the partnership was entered into in
consideration of the same
> while spouses cannot enter into a
universal partnership, they can enter into a particular partnership or be
members thereof
> a universal partnership is virtually
a donation to each other of the partners properties or at least their usufruct
PARTICULAR PARTNERSHIP
>
a particular partnership has for its OBJECT:
1.
DETERNMINATE
THINGS – their use or fruits
2.
SPECIFIC
UNDERTAKING
3.
EXERCISE
of a PROFESSION or VOCATION
OBLIGATIONS
OF THE PARTNERS
RULE:
> a PARTNERSHIP BEGINS from the moment
of the EXECUTION of the CONTRACT
*
>
even if contributions have not yet been made the firm already exists, for
partnership is a consensual contract
DURATION OF PARTNERSHIP
> UNLIMITED
*
>
MAY BE AGREED UPON
1. EXPRESSLY – definite period
2. IMPLIEDLY – upon
achievement of its purpose
PARTNERSHIP AT WILL
>
a partnership wherein its continued existence really depends upon the
will of the partners or even on the will of any of them
2 KINDS:
1. when there is no term,
express or implied
2. when it is continued by the
habitual managers although the period has ended or the purpose has been accomplished
3
IMPORTANT DUTIES OF EVERY PARTNER [C, D-F, W]
1. duty to CONTRIBUTE what had
been promised
2. duty to DELIVER the FRUITS
of what should have been delivered
3. duty to WARRANT
RIULES
ON THE DUTY TO CONTRIBUTE
1. the contribution must be
made at the time the partnership is entered into UNLESS a different period is
stipulated
2. no demand is needed to put
the partner in default
3. the partner must exercise
due diligence in preserving the property to be contributed before he actually
contributes the same
4. a partner who promises to
contribute to the partnership becomes a promissory debtor of the partnership
RULES
ON THE DUTY TO DELIVER THE FRUITS
1. IF property has been
promised, the fruits thereof should also be given
2. the fruits referred to are
those arising from the time they should have been delivered, without a need of
any demand
3. IF the partner is in BAD
FAITH, he is liable not only for the fruits actually produced, BUT also for
those that could have been produced
4. IF MONEY HAS BEEN PROMISED,
INTEREST and DAMAGES from the time he should have complied with his obligation
should be given
5. NO DEMAND is needed to put
the partner in default
6. it is DELIVERY, actual or
constructive that TRANSFERS OWNERSHIP
RULES
ON THE DUTY TO WARRANT
1.
the
warranty in case of eviction refers to specific and determinate things already
contributed
2.
there
is EVICTION whenever by a final judgment based on a right prior to the sale or
an act imputable to the partner, the partnership is deprived of the whole or a
part of the thing purchased
RULE WHEN CONTRIBUTION CONSISTS OF
GOODS
> APPRAISAL of VALUE is
needed to determine how much was contributed
HOW APPRAISAL
MADE
1.
as
PRESCRIBED in the CONTRACT
2.
in
default, by EXPERTS chosen by the partners, and at CURRENT PRICES
*> necessity of the INVENTORY –
APPRAISAL
RULE on RISK of LOSS
> after goods have been
contributed, the partnership bears the risk of subsequent changes in the value
RULE:
> a partner who has
undertaken to contribute a sum of money and fails to do so becomes a debtor for
the interest and damages from the time he should have complied with his
obligation
CAPITALIST PARTNER
> one who FURNISHES CAPITAL
*> NOT EXEMPTED from LOSSES
*> he can engage in other business
PROVIDED there is no competition between
the partnership and his business
*> share in the profits according to
agreements
INDUSTRIAL PARTNER
> one who FURNISHES INDUSTRY
or LABOR
*> he is EXEMPTED from LOSSES as between
the partner BUT liable to strangers without prejudice to reimbursement from the
capitalist partner
*> he CANNOT engage in any other
BUSINESS WITHOUT the express CONSENT of the other partners, OTHERWISE
1. he can be EXCLUDED from the
firm
- plus damages OR
2. the BENEFITS he obtains
from the other businesses CAN BE AVAILED of by the other partners
-
plus
damages
> whether or not there is
COMPETITION
*> in computing always look
for -----> NET PROFITS
-----> NET LOSSES
CAPITALIST
– INDUSTRIALIST PARTNER
> one who contributes BOTH CAPITAL and
INDUSTRY
GENERAL
PARTNER
> one who is liable “beyond” the extent
of his contribution
LIMITED
PARTNER
> one who is liable “only” to the
extent of his contribution
***> an industrial partner can only be a
general partner, never a limited partner
MANAGING
PARTNER
> one who manages actively the firms
affairs
SILENT
PARTNER
> one who does not participate in the
management, though he shares in the PROFITS or LOSSES
LIQUIDATING
PARTNER
> one who winds up or liquidates the
affairs of the firm after it has been dissolved
OSTENSIBLE
PARTNER
> one whose connection with the firm is
public and open
SECRET
PARTNER
> one whose connection with the firm is
concealed or kept secret
DORMANT
PARTNER
> one who is both a secret (hidden) and
silent (not managing) partner
NOMINAL
PARTNER
> one who is not really a partner BUT
who may become liable as such insofar as third persons are concerned
RULE:
> partners shall CONTRIBUTE EQUAL
SHARES to the capital of the partnership
*> it is permissible to
contribute UNEQUAL SHARES IF there is a stipulation to this effect
*> in the absence of proof,
the shares are presumed to be equal
CONDITIONS
before a capitalist partner is obliged to
sell his shares / interest to the other partners [IL, RC, NA]
1. if there is IMMINENT LOSS
of the BUSINESS of the partnership
2. he REFUSES to CONTRIBUTE an ADDITIONAL SHARE to the CAPITAL
3. there is no agreement to
the contrary
*> INDUSTRIAL PARTNER IS
EXEMPTED
*RULE
if MANAGING PARTNER COLLECTS A CREDIT
REQUISITES:
1. existence of at least 2
debts ----> PARTNERSHIP
----> PARTNER
2. both sums are demandable
3. the collecting partner is
the managing partner
*> the sum thus collected
shall be applied to the two credits in
proportion to their amounts
RULE:
*> where a partner receives his share in the partnership credit
CONDITIONS:
1.
a
partner has received his share in the partnership credit – in whole or in part
2.
the
other partners have not collected their part of the credit
3.
the
debtor subsequently becomes INSOLVENT
RULE: - the partner shall be
obliged to bring to the partnership
capital what he received even though
he may have given receipt for
his share only
*> DOES NOT APPLY when debt
was collected after dissolution of the partnership
RULE:
*> every partner is
responsible to the partnership for damages suffered by it through his fault
*> he cannot compensate them
with the profits and benefits, which he may have earned for the partnership by
his industry
*> the courts may equitably
lessen his responsibility
“RES
PERIT DOMINO”
*RULES ON WHO BEARS THE RISK OF LOSS
1.
if
SPECIFIC and DETERMINATE THINGS NOT FUNGIBLE whose USUFRUCT is enjoyed by a
firm
> the PARTNER who OWNS it bears the
loss for ownership was never transferred
to the firm
2.
FUNGIBLE
or DETERIORABLE
> FIRM bears the loss for it is evident
ownership was transferred
3.
THINGS
CONTRIBUTED to be SOLD
>FIRM bears the loss for evidently the
firm was intended to be the owner
4.
CONTRIBUTED
under APPRAISAL
> FIRM bears the loss because this has
the effect of an implied sale
RULE
on RESPONSIBILITY of the FIRM
1. to REFUND amounts disbursed
on behalf of the firm plus legal interest from the time expenses where made
2. to ANSWER to each partner
for OBLIGATIONS he may have entered into in good faith in the interest of the
partnership, as well as the risks in consequence of its management
*> REFUND must be made even
in case of failure of the enterprise entered into, provided the partner is not
at fault
*> AMOUNT DISBURSED – does
not refer to the ORIGINAL CAPITAL
*HOW
PROFITS ARE DISTRIBUTED
1. according to AGREEMENT
2. IF NONE, according to
amount of CONTRIBUTION
*HOW
LOSSES are DISTRIBUTED
1. according to AGREEMENT as
to losses
2. IF NONE, according to
agreement as to PROFITS
3. IF NONE, according to
amount of CONTRIBUTION
*> an INDUSTRIAL PARTNER
shall receive a JUST and EQUITABLE share in the profits
*RULE
on INDUSTRIAL PARTNERS’ LIABILITIES
-
may be held liable by third persons BUT he may recover what he has paid from
the other capitalist partners
*RULE
on DESIGNATION by THIRD PERSON of SHARES in PROFITS and LOSSES
*> third person is NOT a PARTNER --> appointed to only
distribute shares
*> the designation of shares
by third persons may be IMPUGNED, IF it is MANIFESTLY INEQUITABLE
*> the designation of shares
by third persons CANNOT be IMPUGNED EVEN IF MANIFESTLY INEQUITABLE IF:
1. the aggrieved partner has
already BEGUN to EXECUTE the decision
2. the aggrieved partner has
not IMPUGNED the distribution within 3 months he had knowledge
*RULE
IF APPOINTMENT OTHER THAN in the ARTICLES of PARTNERSHIP
1. power to act may be REVOKED
at ANY TIME with or without just cause
> REMOVAL should be done by
the controlling interest
2. EXTENT of POWER
> as long as he remains
manager, he can perform all acts of administration
BUT – if others oppose and he
persists, he can be removed
*RULE WHEN there are 2 or MORE
MANAGERS
CONDITIONS:
1. 2 or more partners are
managers
2. there is no specification
of respective duties
3. there is no stipulation
requiring UNANIMITY
SPECIFIC RULES:
1. each may separately execute
all acts of administration
> UNLIMITED POWER to ADMINISTER
2. IF any of the managers
OPPOSE
> MAJORITY RULE
> IN CASE OF A TIE
- persons owning controlling interest
prevail provided they are also managers
*> right to oppose is not
given to NON-MANAGERS
*> OPPOSITION should be done
BEFORE the acts produce legal effects insofar as third persons are concerned
RULE WHEN UNANIMITY is REQUIRED
1. the CONCURRENCE of all
shall be necessary for the validity of the acts
2. the ABSENCE or DISABILITY
of ANYONE of them CANNOT BE ALLEGED UNLESS there is imminent danger of grave or
irreparable injury to the partnership
RULE ON DUTY of THIRD PERSONS
> third persons are not required to
inquire as to whether or not a partner with whom he transacts has the consent
of all the managers
*RULES
to be observed when the manner of management has not been agreed upon:
1. all the partners are
considered AGENTS
> whatever any one of them may do alone
shall not bind the partnership
2. IF the acts of one are opposed
by the rest, the majority shall prevail
3. when a partner acts in his
OWN NAME, he does not bind the partnership
4. authority to bind the firm
does not apply if somebody else has been given authority to manage in the
articles of organization or through some other means
5. ALTERATIONS REQUIRE
UNANIMITY
- IMMOVABLE partnership property
- BUT if the refusal to consent by the
others is prejudicial to the interest of the partnership
- COURTS INTERVENTION may be sought
RULES on ASSOCIATE of PARTNER
1. every partner may associate
another person with him in his share
2. for a partner to have an
associate in his share
> consent of all the other
partners is NOT REQUIRED
3. for the associate to become
a partner
> ALL MUST CONSENT
RULES on PARTNERSHIP BOOKS
1. kept at the principal place
of business of the partnership
2. at any reasonable hour,
every partner shall have access to and may inspect and copy any of them
DUTY of PARTNERS TO GIVE INFORMATION
> good faith not only requires that a
partner should not make any FALSE CONCEALMENT, BUT he should abstain from all
concealment
DUTY
to ACCOUNT [B, P, U-P]
> every
partner must account to the partnership
1. any benefit acquired
2. any profits received
3. any use of partnership
property
RIGHT
TO DEMAND a FORMAL ACCOUNT
> any
partner shall have the right to a formal
account as to partnership affairs
1. if wrongfully excluded from
partnership BUSINESS
2. if wrongfully excluded from
partnership PROPERTY by his co-partners
3. if the right exists under
the terms of agreement
4. if the other partner receives
other benefits, profits or uses partnership property
5. whenever other
circumstances render it just and reasonable
*> the right to demand an
accounting exists as long as the partnership exists
*> prescription begins to run
only upon the dissolution of the partnership when the final accounting is done
PROPERTY
RIGHTS OF PARTNERS [P, I, M]
1. rights in specific
PARTNERSHIP PROPERTIES
2. INTERESTS in the
PARTNERSHIP
3. right to PARTICIPATE in the
MANAGEMENT
RULE:
*> a partner is CO-OWNER with
his partners of SPECIFIC PARTNERSHIP PROPERTY
*> RIGHTS of a PARTNER in
SPECIFIC PARTNERSHIP PROPERTY
1. he has equal rights with
his partners to POSSESS the property BUT only for PARTNERSHIP PURPOSES
> he may possess such
property for other purposes PROVIDED the other partners expressly or impliedly
gives their CONSENT
2. he CANNOT ASSIGN his right
to the property EXCEPT if all the other
partners assign their rights in the same property
3. his right to the property
is NOT SUBJECT to ATTACHMENT or EXECUTION, EXCEPT on a claim against
partnership
4. his right to the property
is NOT SUBJECT to LEGAL SUPPORT
*> if there is PARTNERSHIP
DEBT, the specific property can be attached
RULE:
*> a PARTNERS INTEREST in the
partnership is his SHARE of the PROFITS and SURPLUS
IT CAN BE: [A, A, LS]
1. ASSIGNED
2. ATTACHED
3. be subject to LEGAL SUPPORT
*EFFECTS
of CONVEYANCE by PARTNER of his INTEREST in the PARTNERSHIP
1. IF he conveys his WHOLE
INTEREST
A) partnership may still
remain
B) partnership may be
dissolved
*> mere conveyance does not dissolve the
partnership
2. the ASSIGNEE does not
necessarily become a partner
> the ASSIGNOR is still the
partner, with a right to demand accounting and settlement
3. the ASSIGNEE CANNOT
interfere in the MANAGEMENT or ADMINISTRATION of the firm
> the ASSIGNEE CANNOT also
DEMAND [I,
A, I]
A) INFORMATION
B) ACCOUNTING
C) INSPECTION of partnership
books
***> while a partners INTEREST
in the firm may be CHARGED or LEVIED upon, his INTEREST in a specific firm
PROPERTY CANNOT be attached.
RIGHTS
of the ASSIGNEE
1. to get whatever profits the
assignor-partner would have obtained
2. to avail himself of the
usual remedies in case of fraud in the management
3. to ask for ANNULMENT of the
contract of assignment IF:
A) he was induced to enter into it
through any of the vices of consent
OR
B)
he himself was incapacitated to give consent
4. to demand an accounting BUT
only if the partnership is dissolved
PREFERENTIAL
RIGHTS of PARTNERSHIP CREDITORS
*> partnership creditors are
entitled to PRIORITY over partnership assets, including the partners interest
in the profits
**> SEPARATE or INDIVIDUAL
creditors have PREFERENCE in separate or individual properties
*> when the CHARGING ORDER is
applied for and granted, the court may appoint a receiver of the partners share
in the profits
> the receiver appointed is
entitled to any relief necessary to conserve the partnership assets for
partnership purposes
*> interest charged may be
redeemed at any time before foreclosure
*> AFTER FORECLOSURE the interest may still be redeemed by (without
causing dissolution)
1.
with separate property, by any one or
more of the partners OR
2.
with partnership property, by any one
or more partners with the consent of all the partners whose interests are not
so charged or sold
*> consent of the delinquent
partner not needed
RULE:
> every partnership shall operate under
a FIRM NAME
*> the firm name may or may
not include the name of one or more of the partners
**> STRANGERS who include
their names in the firm are liable as partners because of ESTOPPEL, BUT do NOT
have the RIGHTS of partners
**> IF a LIMITED PARTNER
includes his name in the firm name, he has obligations BUT not the rights of a
general partner
RULE
on LIABILITY for CONTRACTUAL OBLIGATIONS
*> all partners, including
industrial ones, shall be liable pro-rata with all their property and after all
the partnership assets have been exhausted
*> NOT APPLICABLE for TORTS
or CRIMES -----> LOSS
-----> INJURY
-----> MISAPPROPRIATION
**> while an INDUSTRIAL
PARTNER is exempted by law from LOSSES as between the partners, he is NOT
EXEMPTED from liability insofar as third persons are concerned
> he may recover what he has
paid from the CAPITALIST partners
*> under the law the
liability of the partners is subsidiary and joint NOT principal and solidary
*RULE
on LIABILITY of a PARTNER who has WITHDRAWN
1. a partner who withdraws is
not liable for liabilities contracted after he has withdrawn
2. if his interest has not yet
been paid him
> his right to the same is that of a
mere creditor
**> a stipulation exempting
liability to third persons is VOID
*> any partner may enter into
a separate obligation to perform a partnership contract
RULE:
*> every partner is an
“agent” of the partnership for the purpose of its business
G.R.- the act of every partner for
apparently carrying on in the USUAL WAY the business of the partnership of
which he is member binds the partnership
EXCEPT:
1.
if he has NO AUTHORITY and
2.
the person with whom he was dealing with HAS KNOWLEDGE of the fact that he has
no such authority
RULE:
> an act of a partner which is not
apparently for the carrying on of business of the partnership in the usual way
does not bind the partnership UNLESS authorized by the other partners
*> a partnership is a
CONTARCT of MUTUAL AGENCY, each partner acting as a principal on his own behalf
and as an agent for his co-partners or the firm
REQUISITES
on WHEN can a partner BIND the partnership
1. expressly or impliedly
AUTHORIZED
2. when he acts in BEHALF AND
IN THE NAME of the partnership
INSTANCES
of IMPLIED AUTHORIZATION
1.
when
the other partners DO NOT OBJECT, although they have knowledge of the act
2.
when
the act is for “apparently carrying on in the usual way the business of the
partnership
*> this is binding on the firm even if
the partner was not really authorized PROVIDED that the third party is in GOOD
FAITH
RULE
on UNUSUAL ACTS
> one
or more but less than all the partners HAVE NO AUTHORITY TO:
[AP, DG, AI, CJ, EC, SA, RC]
1. ASSIGN the PARTNERS
PROPERTY
2. DISPOSE of GOODWILL
3. do any other act which
would make it impossible to carry on the ordinary business of the partnership
4. CONFESS a judgment
5. ENTER into a COMPROMISE
6. SUBMIT to ARBITRATION
7. RENOUNCE to CLAIM
*RULES
on CONVEYANCE of REAL PROPERTY
1.
where title to real
property is in the partnership name
> any partner may convey
title to such property by a conveyance executed in the partnership name
*>
PARTNERSHIP MAY RECOVER SUCH PROPERTY
EXCEPT:
1. if the firm is engaged in
the buying and selling of land (USUAL BUSINESS)
2. if property was conveyed to
a HOLDER for VALUE and who had NO KNOWLEDGE of the partners LACK of AUTHORITY
2.
where title is in the name of the
partnership and partner sold in his OWN NAME
> IF DONE IN USUAL BUSINESS
> buyer does not become
owner BUT ACQUIRES EQUITABLE INTEREST
> IF NOT DONE IN USUAL BUSINESS
> buyer does not become
owner and is not even entitled to equitable interest
3.
where title is in the name of one or more BUT not all the partners
> partners in whose name the title is
named MAY CONVEY BUT the PARTNERSHIP may RECOVER such property IF done not in
its USUAL BUSINESS EXCEPT if he had
transferred it to a Holder for value
4. when
property “held in trust” by partner
> a sale only conveys
EQUITABLE INTEREST
5.
when title is in the name
of all partners
> conveyance executed by all partners
possess all rights of such property
EQUITABLE INTEREST
-BENEFICIAL INTEREST, BUT NOT NAKED
OWNERSHIP
*RULE
on ADMISSION or REPRESENTATION MADE by a PARTNER
> an
admission by a partner is an admission against the partnersip,under the following
conditions:
1. the admissions must concern
partnership affairs
2. must be within the scope of
his authority
RESTRICTIONS
ON THE RULE:
1. admissions made BEFORE
DISSOLUTION are binding only when the partner has authority to act on the
particular matter
2. admissions made AFTER
DISSOLUTION are binding only if the admissions were necessary to WIND UP the
business
3. an admission made by a
former partner made after he has RETIRED from the partnership is not evidence
against the firm
EFFECT
of NOTICE to a PARTNER
® notice to a partner is notice to the
partnership
*®notice to a partner, given
while already a partner is a notice to the partnership PROVIDED it relates to
partnership affairs
EFFECT
of KNOWLEDGE ALTHOUGH NO NOTICE WAS GIVEN:
*® knowledge of the partner is also knowledge of the firm PROVIDED THAT:
1.
the
knowledge was acquired by a partner who is acting in the particular matter
involved;and
2.
the
partner having knowledge, had reason to believe that the fact related to a
matter which had some possibility of being the subject of the partnership
business AND he was so situated that he could communicate it to the partner
acting on that particular matter
*® SERVICE of PLEADINGS on
the partner in a law firm is also service on the whole firm and the other partners
LOSS OR INJURY
RULE
on WRONGFUL ACT or OMISSION of a PARTNER (SOLIDARY LIABILITY)
*® the partnership is
solidarily liable with the partner if the wrongful act or omission
1.
the
partner is acting in the ordinary course of business of the partnership OR
2.
with
authority of his co-partners
*® innocent partners have right to recover from the guilty partner
*
When the firm and other partners not liable:
1. if the wrongful act or
omission was NOT DONE
A) within scope of partnership
business
B) with authority of the other
co-partners
2. if the act or omission is
NOT WRONGFUL
3. if the act or omission,
although wrongful did not make the partner concern liable
- DAMNUN ABSQUE INSURIA
4. if the wrongful act or
omission was committed after the firm had been dissolved and the same was not
in connection with the process of winding up.
LIABILITY
of PARTNERSHIP for MISAPPROPRIATION – (SOLIDARY LIABILITY)
1. RECEIVING PARTY
MISAPPROPRIATES
2. ANY PARTNER
MISAPPPROPRIATES
-
money
or property in custody of partnership
PARTNER
BY ESTOPPEL
® a person who represents himself or
consents to another / others representing him to anyone as a partner either in
an existing partnership or in one that is fictitious or apparent
PARTNERSHIP
BY ESTOPPEL
® when all the members of the existing
partnership consent to such representation of a partner by estoppel
RULES
AND SITUATIONS:
1.
if a third person is misled
and acts because of such misrepresentation
® the deceiver is a partner
by estoppel
2.
if the partnership
consented to such misrepresentation
® partnership liability
results
3.
if the firm had not
consented
® no partnership liability
results BUT the deceiver is considered still as a “partner by estoppel” with
all the obligations but not the rights of a partner
4.
when a person represents
himself as a partner of a NON-EXISTENT partnership
® NO partnership liability
results BUT the deceiver and all persons who may have aided him in the
misrepresentation are still liable
® liability would be JOINT
or PRO-RATA
*® when although there is
misrepresentation, if the third party is not deceived, the doctrine of estoppel
does not apply
BURDEN
of PROOF
® the creditor or whoever alleges the
existence of a partner or partnership by estoppel has the burden of proving the
existence of the MISREPRESENTATION AND INNOCENT RELIANCE on it
ENTRY
OF A NEW PARTNER into an EXISTING PARTNERSHIP
RULE:
*® he shall be liable for all
the obligations of the partnership BUT his liability will extend only to his
share in the partnership property
*® his own individual property
shall be excluded
*® same liability of a
limited partner
PREFERENCE
of PARTNERSHIP CREDITORS
RULE:
*® the creditors of the
partnership shall be preferred to those of such 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
**®IF a partner sells his
share to a third party, BUT the firm itself still remains SOLVENT, partnership
creditors CANNOT assail the validity of the sale by alleging that it is made in
fraud of them, since they have not really been prejudiced
DISSOLUTION
AND WINDING UP
® the change in the relation of the
partners caused by any partner causing to be associated in the carrying on of
the business
® it is the point of time the partners
cease to carry on the business together
WINDING
UP
® the process settling business affairs
after dissolution
TERMINATION
® the point in time after all the
partnership affairs have been wound up
RULE
ON DISSOLUTION
*® on dissolution the
partnership is not terminated BUT continues until the winding up of partnership
affairs is completed
*EFFECT
on OBLIGATIONS
1. just because a partnership
is dissolved this does not necessarily mean that a partner can evade previous
obligations entered into by the partnership
2. dissolution saves the
former partners from new obligations to which they have not expressly or
impliedly consented UNLESS the same be essential for winding up
*CAUSES
OF DISSOLUTION
1. without VIOLATION of the
AGREEMENT between the partners
A) TERMINATION of the DEFINITE
TERM or PARTICULAR UNDERTAKING
B) EXPRESS WILL or ANY PARTY
in GOOD FAITH (PARTNERSHIP by WILL)
C) EXPRESS WILL of ALL of the
PARTNERS except those who have (interests) ASSIGNED or whose interests have
been (separate debts) CHARGED
D) EXPULSION in good faith of
a member
2. in CONTRAVENTION of the
agreement between the partners
® by the EXPRESS WILL of ANY
PARTNER at any time
3. UNLAWFULNESS of the
BUSINESS
4. LOSS – thing promised
A) SPECIFIC THING – PERISHES
before delivery
B) USUFRUCT is lost EXCEPT if
ownership had been transferred to the partnership
5. DEATH of ANY partner
6. INSOLVENCY of any partner
or of the partnership
7. CIVIL INTERDICTION of any
partner
8. DECREE of COURT
***® if the cause is not
justified or no cause was given, the withdrawing partner is liable for DAMAGES
BUT in no case can he be compelled to remain in the firm
*® the insolvency need not be
judicially declared, it is enough that the assets be less than the liabilities
DISSOLUTION
by JUDICIAL DECREE WHEN ALOWED:
(I,
UM, I-PP, C, PB, BL, OC)
1. partner declared “insane”
in any judicial proceeding or is shown to be of UNSOUND MIND
2. partner becomes INCAPABLE
of performing his part of the partnership contract
3. partner has been guilty of
such CONDUCT as tends to affect prejudicially the business
4. partners PERSISTENT BREACH
of agreement
5. the business of the
partnership can only be denied on at a loss
6. other circumstances which
render dissolution equitable
IN
CASE OF PURCHASER of PARTNERS INTEREST
1. after the termination of
the specified term or particular undertaking
2. AT ANY TIME, if the
partnership was a “partnership at will” when the interest was assigned or when
the charging ordered was issued
*® proof as to the existence
of the firm must first be given
*® even if a partner has not
yet been previously declared insane by the court, dissolution may be asked, as
long as the insanity is duly proved in court
*® in a suit for dissolution,
the court may appoint a RECEIVER at its discretion
EFFECTS
OF DISSOLUTION
RULE:
*® when the firm is
dissolved, a partner can no longer bind the partnership
*® a dissolved partnership still has the personality for the winding up of
its affairs
® the firm is still allowed
to collect previously acquired credits
® the firm is still bound to
pay of its debts
DISSOLUTION
CAUSED by A-I-D
RULE:
(STILL
BOUND) – as to each partners
G.R.®
where the dissolution is caused by the ACT, INSOLVENCY or DEATH of a partner,
each partner is liable to his co-partners for his share of any liability
created by any partner acting for the partnership
EXCEPTION: - individual liabilities
1. if dissolution by ACT
® the partner acting for the
partnership HAD KNOWLEDGE of the dissolution OR
2. if dissolution by DEATH or
INSOLVENCY
® the partner acting for the
partnership HAD “knowledge or notice” of the death or insolvency
*® only the partner acting
assumes liability
*AFTER
DISSOLUTION, a partner can still “bind” the PARTNERSHIP
(WU,
UT, TB)
1. By any ACT appropriate for
WINDING UP partnership affairs
2. By COMPLETING transactions
UNFINISHED at dissolution
3. By any TRANSACTION which
could bind the partnership IF dissolution had not taken place PROVIDED the
other party is:
A) PREVIOUS CREDITOR and had
NO KNOWLEDGE or NOTICE of the dissolution
OR
B) NOT a PREVIOUS CREDITOR,
had NO KNOWLEDGE or NOTICE and dissolution was NOT PUBLISHED
*® if there was publication
of the dissolution it is presumed he already knows, regardless of actual
knowledge on non knowledge
WHEN
is the PARTNERSHIP NOT BOUND
1. new business with third
parties who are in bad faith
2. firm dissolved because
UNLAWFUL except for acts of winding up
3. partner who acted became
INSOLVENT
4. partner not authorized to
wind up EXCEPT if customer in good faith
*® if after dissolution, if a
stranger will represent himself as a partner although he is not one he will be
a partner by estoppel
RULE:
*® the dissolution of the
partnership does not itself discharge the “existing liability” of any partner
®
NEED for an AGREEMENT BETWEEN
1. partner concerned
2. other partners
3. creditors
RULE:
*® the INDIVIDUAL PROPERTY of
a DECEASED PARTNER shall be liable for all obligations of the partnership
incurred while he was a partner BUT subject to prior payments of his separate
debts
*® IF there be a NOVATION of
the OLD PARTNERSHIP DEBTS and such novation is done after one of the partners
has “retired” and without the consent of such partner
® said partner cannot be
held liable by creditors who made the novation with knowledge of the firms
dissolution
EXTRAJUDUCIAL
AND JUDICIAL WINDING-UP
EXTRAJUDICIAL:
1. by the partners who have
not wrongfully dissolved the partnership
2. by the legal representative
of the last surviving partners
JUDICIAL:
® under the control and direction of
the court, upon proper cause that is shown to the court
*® profits that will actually
enter the firm after dissolution as a consequence of transactions already made
before dissolution are included because they are considered as profits existing
at the time of dissolution
*® any other income earned
after the time, like interest or dividends on stock owned by the partners or
partnership at the time of dissolution should not be distributed as profits BUT
as merely additional income to the capital
BETTER
RIGHTS of INNOCENT PARTNERS
® innocent partners have better rights
than guilty partners and that the guilty partners are required to indemnify for
the damages caused
*
RIGHT of INOCENT PARTNERS TO CONTINUE the BUSINESS
® in essence this is a new partnership
® can use the same firm name
® can ask new members to join
BUT shall: for protection of guilty
partners
1. give a BOND approved by the
court
2. to PAY guilty partners his
interests at the time of dissolution MINUS DAMAGES
*® a guilty partner who is
EXCLUDED will be indemnified against all present or future partnership
liabilities
RIGHT
TO GET CASH
® in case on non-continuance of the
business, the interest of the partner should if he desires be given in cash
® assets may be sold
® a guilty partner, in ascertaining the
value of his interest is not entitled to a proportional share of the value of
GOOD WIL
RIGHTS
OF INNOCENT PARTNERS IN CASE of RESCISSION based on FRAUD AND MISREPRESENTATION
1.
Right to LIEN or RETENTION ® SURPLUS
® CAPITAL
® ADVANCES
2.
Right of SUBROGATION – as creditor
3.
Right of INDEMNIFICATION
*ORDER
of PAYMENT in WINDING-UP of PARTNERSHIP LIABILITIES
GENERAL
PARTNERSHIP: [C, R, C, P]
1. those owing to “creditors”
other than partners
2. those owing to “partners”
other than for capital or profits – REIMBURSEMENTS
3. those owing to partners in
respect to CAPITAL
4. those owing to partners in
respect to PROFITS
*® IF the partnership assets
are insufficient, the other partners must contribute more money or property
PREFERENCE
with RESPECT to the ASSETS
1.
regarding partnership
property
® partnership creditors have
preference
2.
regarding individual
properties of partners
® individual creditors are
preferred
RULE
if PARTNER is INSOLVENT
-
How INDIVIDUAL PROPERTY is DISTRIBUTED
ORDER
OF PREFERENCE:
1. INDIVIDUAL or SEPARATE
CREDITORS
2. PARTNERSHIP CREDITORS
3. those owing to other
partners by way of contribution
*When
creditors of the dissolved partnership are also creditors of the partnership
continuing business:
1. new partner is admitted
without liquidation
2. a partner retires and
assigns his rights IF the business is continued without liquidation of the
partnership affairs
3. all but one partner retire
without liquidation
4. when all partner assign
their right to a person who will assume their debt
5. after wrongful dissolution,
remaining partners continue the business without liquidation
6. when partner expelled and
remaining partners continue the business without liquidation
*® liability of third person
becoming a partner in the partnership continuing the business to the creditors
of the dissolved partnership shall be satisfied out of the partnership property
ONLY
G.R.
– when a partner retires, he is entitled what is due him after liquidation BUT
no liquidation is needed if there is already a settlement at the date of dissolution
JURISPRUDENCE
BASTIDA vs. MENZI
*® articles of association by
which 2 or more persons obligate themselves to place in a common fund any
property, industry, or any of these things, in order to obtain profit, shall be
COMMERCIAL
BORJA vs. ADDISON
*® a surviving husband may
form a partnership with the heirs of the deceased wife for the management and
control of the community property
® BUT in the absence of the formalities
prescribed by the Civil Code, knowledge of the existence of the new partnership
or community of property must at least be brought home to third persons dealing
with the surviving husband in regard to the community real property in order to
bind them by the community agreement
KIEL vs. SABERT
*® the declarations of one
partner, not made in the presence of his co-partner, are not competent to prove
the existence of a partnership between them as against such partner
*® the existence of a
partnership cannot be established by general reputation, rumor or hearsay
EVENGELISTA vs. C.I.R.
*® By the contract of
partnership 2 or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among
themselves
ESSENTIAL
ELEMENTS of a PARTNERSHIP
1.
an
agreement to CONTRIBUTE money, property, or industry to a COMMON FUND
2.
intent
to divide the profits among the contracting parties
*® when our internal Revenue
Code includes “partnerships” among the entities subject to the tax on
“corporations”, said code which are not necessarily “partnerships” in the
technical sense of the term
*® PARTNERSHIPS – includes
a SYNDICATE, GROUP, POOL, JOINT VENTURE, or other unincorporated organization,
through or by the means of which any business, financial operation, or venture
is carried on
*® a joint venture need not
be undertaken in any of the standard forms,
or
in conformity with the usual requirements of the law on partnerships, in order
that one could be deemed constituted for purposes of the TAX on corporations
PASCUAL vs. C.I.R.
*® co-ownership or
co-possession does not itself establish a partnership, whether such co-owners
or co-possessors do or do not share any profits made by the use of the property
*® the sharing of gross
returns does not itself establish a partnership, within the persons sharing
them have a joint or common right or interest in any property from which the
returns are derived
*® aside from the circumstances of profit, the presence of other elements
constituting partnership is necessary, such as:
1. the clear intent to form a
partnership
2. the existence of a
juridical personality different from that of the individual partners AND
3. the freedom to transfer or
assign any interest in the property by one with the consent of the others
*® an isolated transaction
whereby 2 or more persons contribute funds to buy certain real estate for
profit in the absence of other circumstances showing a contrary intention
cannot be considered a partnership
*® persons who contribute
property or funds for a common enterprise and agree to share the gross returns
of that enterprise in proportion to their contribution, BUT who severally
retain the title to their respective contribution, are not thereby rendered
partners
® they have no common stock
or capital and no community of interest as principal proprietors in the
business itself which the proceeds derived
*® a joint purchase of land,
by two does not constitute a co-partnership in respect thereto, NOR does an
agreement to share the profits and losses on the sale of land create a partnership
*® in order to constitute
a PARTNERSHIP INTER SESE there must be:
A) an intent to form the same
B) generally participating in
both profits and losses AND
C) such a community of
interest, as far as third persons are concerned as enables each party to make a
contract, manage the business, and dispose of the whole property
*® the common ownership of
property does not itself create a partnership between the owners, though they
may use it for the purpose of making gains AND they may without becoming
partners, agree among themselves as to the management and use of such property
and the application of the proceeds therefrom
*® the sharing of returns
does not in itself establish a partnership within the persons sharing therein
have a joint or common right or interest in the property
® there must be:
1. clear intent to form a
partnership
2. the existence of a
juridical personality different from the individual partners AND
3. the freedom of each party
to transfer or assign the whole property
DUTERTE vs. RALLOS
*® an agreement between 2
persons to operate a cockpit, by which one is to contribute his services and
the other to provide the capital, the profits to be divided between them,
constitutes a partnership
DELUAO vs. CASTEEL
*® a contract of partnership
to exploit a fishpond pending its award to any qualified party or applicant is
VALID BUT a contract of partnership to divide the fishpond after such award is
ILLEGAL
*® one of the causes of
dissolution is – any event which make it unlawful for the business of the
partnership to be carried on or for the members to carry it on in partnership
C.I.R. vs. SUTER
*® a UNIVERSAL PARTNERSHIP
requires either that the object of the association be:
1. all the present property of
the partners as contributed by them to the common fund OR
2. all that the partners may
acquire by their industry or work during the existence of the partnership
*® the subsequent marriage of
the partners could not operate to dissolve the partnership because it is not
one of the causes provided for dissolution by law with regards to limited
partnerships
*® partnership has distinct
and separate personality from that of its partners
*® a husband and wife may not
enter into a contract of general co-partnership/ UNIVERSAL partnership
ACOAD vs. MABATO
*® a partnership may be
constituted in any form EXCEPT where immovable property or real rights are
contributed thereto, in which case a public instrument shall be necessary
*® A CONTRACT of
PARTNERSHIP is VOID
® whenever immovable
property is contributed thereto, if “inventory” of said property is not made,
signed by the parties and attached to the public instrument
EVANGELISTA vs. ABAD SANTOS
*® an INDUSTRIAL PARTNER
cannot engage in BUSINESS FOR HIMSELF, UNLESS the partnership expressly permits
him to do so
® IF HE SHOULD DO SO, the capitalist
partners may either:
1. EXCLUDE him from the
firm OR
2. AVAIL themselves of the
benefits which he may have obtained in violation of this provision
® with a right to DAMAGES in
either case
*® the prohibition against an
industrial partner engaging in business for himself seeks to prevent any
conflict of interest between the industrial partner and the partnership and to
ensure faithful compliance by said partner with his prostation
