Partnership Law Fundamentals

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Questions and Answers

What is the general rule regarding the commencement of a partnership?

It commences from the moment of celebration of the contract. (correct)

It starts at the time of registration with the SEC.

It begins when all partners contribute their capital.

It starts only after a profit is realized.

Which duty is not part of the obligations of partners among themselves?

Duty to deliver fruits

Duty to warrant against eviction

Duty to manage partnerships with external entities (correct)

Duty to contribute

In the context of a partnership, what is a 'partnership at will'?

A partnership that can be terminated at any time without reason.

A partnership that ends with the achievement of its purpose.

A partnership with indefinite duration and no time limit. (correct)

A partnership with a fixed duration.

What happens to a partner who fails to make their required contribution?

They will be automatically liable as a debtor of the partnership. Signup and view all the answers

What is the obligation of partners regarding the preservation of property?

Partners must exercise due diligence in preserving the property prior to its contribution. Signup and view all the answers

What does the duty to warrant against eviction entail?

It refers to specific and determinate things already contributed. Signup and view all the answers

What is the default rule regarding the extent of contribution among partners if no specific stipulation is made?

Contributions are in equal shares. Signup and view all the answers

In what case is it permissible for a partner to delay contribution?

If there is a contrary stipulation specifying a different timeline. Signup and view all the answers

What must happen if a partner fails to timely contribute their share to the partnership?

They are liable for interest and damages. Signup and view all the answers

If a partner converts partnership funds for personal use, what is one of their obligations?

To reimburse the partnership for the converted amount. Signup and view all the answers

What must a partner do regarding the fruits of their contribution?

They must deliver fruits from the time they should have been contributed to actual delivery. Signup and view all the answers

According to the rules, who bears the risk of loss before the delivery of a contributed item?

The contributing partner. Signup and view all the answers

In what situation is a capitalist partner obligated to contribute additional capital?

In case of imminent loss of the business. Signup and view all the answers

What method is prescribed for the appraisal of goods contributed to a partnership?

By contract stipulations or experts, if not stipulated. Signup and view all the answers

What happens if a capitalist partner refuses to contribute additional capital to save the business?

They can be forced to sell their interest to the other partners. Signup and view all the answers

What is the consequence of a partner failing to pay their contribution on time?

Obligation to pay agreed or legal interest. Signup and view all the answers

In the absence of a specific profit-sharing agreement, how should losses be allocated among the partners?

In proportion to their capital contributions Signup and view all the answers

What is the liability status of an industrial partner regarding losses in a partnership?

Not liable for losses but liable for debts Signup and view all the answers

Under what condition can the designation by a third party of shares in profits and losses be questioned?

If it is deemed manifestly inequitable Signup and view all the answers

What is required for any important alteration in the immovable property of the partnership?

Unanimous consent of all partners Signup and view all the answers

Which of the following statements is correct regarding a partner associating someone in their share?

The partnership must admit the third person as an associate Signup and view all the answers

What distinguishes an industrial partner from other partners in terms of loss allocation?

The industrial partner is not liable for losses Signup and view all the answers

What is the duty of the managing or active partner regarding the partnership books?

To maintain true and correct books for all partners Signup and view all the answers

What does the general rule regarding exclusion from profits and losses state?

Partnerships must benefit all partners equally Signup and view all the answers

Who has the right to demand information from the partnership?

Any partner, their legal representatives, or a dead partner's representative Signup and view all the answers

What must occur for a third party's designation of shares in profits to stand, despite being manifestly inequitable?

The aggrieved party must execute the decision Signup and view all the answers

Which statement is true regarding partners' rights in the management of a partnership?

Each partner has an equal voice in managing the business Signup and view all the answers

What is the fiduciary duty of a partner regarding secret profits?

To account for any secret profits made from partnership activities Signup and view all the answers

What characterizes the right to inspect partnership books?

Inspection must occur during reasonable hours on business days Signup and view all the answers

How can a partner be appointed as a manager in a partnership?

Through common agreement in the articles of partnership Signup and view all the answers

What is a partner's duty under the principle of good faith regarding information?

To disclose true and full information on demand Signup and view all the answers

Which of the following options is NOT a fiduciary duty of a partner?

Duty to disclose all personal financial information Signup and view all the answers

What does Article 1793 state regarding a partner's duty towards the partnership credit received from an insolvent debtor?

The partner must share the credit with the other partners. Signup and view all the answers

What must a partner do if they caused damages to the partnership?

They must pay for damages out of their own pocket. Signup and view all the answers

In the distribution of partnership profits, what is the primary guideline if no agreement exists?

Profits are allocated based on each partner's capital contribution. Signup and view all the answers

Which duty does the partnership have towards its partners regarding expenses?

Duty to refund amounts disbursed on behalf of the firm. Signup and view all the answers

Why can't general damages be offset by benefits earned by a partner?

Since both duties are obligatory, compensation cannot occur. Signup and view all the answers

Which of the following is NOT a duty of the partnership towards the partners?

Duty to manage personal affairs of partners. Signup and view all the answers

Under what condition can damages caused by a partner be mitigated?

If the partner acted with extraordinary efforts resulting in unusual profits. Signup and view all the answers

In the distribution of losses according to Article 1797, what is the basis if there is no agreement?

Losses may be distributed in consideration of partner contributions. Signup and view all the answers

Study Notes

Partnership

Creation: A partnership comes into existence upon the signing of the contract.
Exception: A partnership can be formed at a later date if stipulated in the contract.
Duration: Partnerships can exist indefinitely (partnership at will) or for a specified period (partnership at fixed term).

Obligations of Partners

Duty to Contribute: Partners must contribute their agreed-upon share at the time of partnership formation, unless a different date is specified. Failure to contribute makes the partner liable to the partnership.
Duty to Warrant Against Eviction: Partners must guarantee the ownership of specific and determinate things contributed to the partnership.
Duty to Deliver Fruits: Partners must deliver the fruits of their contributions from the time they should have been contributed until actual delivery.
Duty to Preserve Property: Partners are responsible for maintaining contributed property before delivery, otherwise they are liable for losses.
Duty to Indemnify for Damages: Partners are liable for damages caused by delayed or unjustifiable retention of contributions.

Rules Regarding Contribution

Extent of Contribution: Contributions are presumed to be equal in the absence of a stipulation to the contrary.
Appraisal of Goods: The value of contributions is critical to determine the share of each partner in profits and losses.
- Methods: Appraisal is done according to the partnership contract or, if not specified, by independent experts.
Duty to Indemnify for Interest and Damages: Partners who fail to contribute or who take money from the partnership are liable for interest and damages.

Duty to Contribute Additional Capital

Imminent Loss: Capitalist partners may be required to contribute additional capital to prevent business loss, unless a contrary agreement exists.
Refusal: Refusal to contribute may result in the partner selling their interest to other partners.

Duty to Bear Risk of Loss

Specific and Determinate Things (Non-Fungible): The partner bears the risk of loss before delivering the thing to the partnership.

Insolvent Debtor: Partners must share with one another any payment received from an insolvent debtor, regardless of the amount received.

Duty to Pay for Damages

Partner's Fault: Each partner is liable for damages caused to the partnership by their fault, regardless of profits earned from the partnership.
Mitigating Circumstances: Courts may reduce liability if a partner can demonstrate extraordinary efforts leading to unusual profits.

Duties of the Partnership to the Partners

Duty to Refund: The partnership must reimburse partners for expenses incurred on behalf of the partnership, plus legal interest.
Duty to Answer for Obligations: The partnership must recognize and fulfil contracts entered into by a partner in good faith for the benefit of the partnership and with lawful authority.
Duty to Answer for Risks: The partnership is responsible for risks arising from its management.

Profits and Losses

Distribution of Profits: Profit sharing is determined by agreement, with an industrial partner receiving a just and equitable share.
Distribution of Losses: Loss sharing is also determined by agreement, with an industrial partner not being liable for losses.
Designation by a Third Person: The division of profits and losses can be designated by a third party with the consent of all partners. This designation can be challenged if considered inequitable.
Exclusion from Profits and Losses: A partner cannot be excluded from profits and losses unless they are an industrial partner, in which case they are not liable for losses.

Management of a Partnership

Equal Voice: Each partner has an equal right to participate in partnership business decisions, regardless of the amount of their capital contribution.
Appointment of Manager: A partner can be appointed as manager through the contract or by unanimous consent of all partners.
Unanimous Consent: All partners must unanimously agree to any major changes to the partnership's immovable property.

Associate

Admission of Associate: A partner can associate another person with their share in the partnership, but the associate does not become a partner and is not liable for partnership debts.
Duty to Admit Associate: The partnership must admit the third person as an associate.

Partnership Books

Right to Inspect: Partners have the right to inspect and copy partnership books during reasonable hours.
Duty to Keep: Managing partners are primarily responsible for maintaining accurate partnership books.

Information

Duty to Give Information: Partners must provide true and full information to other partners regarding matters affecting partnership interests.
Who Can Demand Information: Partners, legal representatives of deceased partners, and legal representatives of partners under legal disability can demand partnership information.

Fiduciary Duties

Duty to Act for Common Benefit: Partners are bound to act in the best interests of all partners in partnership transactions.
Duty to Account for Secret Profits: Partners who make secret profits or receive commissions from third parties must disclose these gains to other partners.

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Description

This quiz covers the essential concepts of partnership law, including the creation, obligations, and duration of partnerships. Test your understanding of partners' duties and legal responsibilities within a partnership framework.