Published — April 27, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
After knowing about the obligations of partners, read also: RIGHTS AND OBLIGATIONS OF STOCKHOLDERS
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A partnership begins at the moment of the execution of the contract
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Every partner is a debtor to the partnership
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Every partner is responsible to the partnership for damages suffered by it through his fault
May the partners stipulate as to when their partnership begins?
The law says:
Yes.
A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated. Thus, it is clear that the future partners may still agree on the date as to when their partnership begins. Here, the partners may agree for a specific period or for a specific undertaking.
When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any express agreement, the rights and duties of the partners remain the same as they were at such termination, so far as is consistent with a partnership at will.
What are the obligations of partners among themselves?
The law says:
Every partner is a debtor of the partnership for whatever he may have promised to contribute to the partnership. Every partner shall also be bound for warranty in case of eviction with regard to specific and determinate things which he may have contributed to the partnership, in the same cases and in the same manner as the vendor or seller is bound with respect to the vendee or buyer. He shall also be liable for the fruits or profits of the partnership from the time they should have been delivered, without the need of any demand.
Also, 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. The same rule applies to any amount he may have taken from the partnership coffers, and his liability shall begin from the time he converted the amount to his own use.
As for an industrial partner (a partner who contributes his industry to the partnership), he cannot engage in business for himself, unless the partnership expressly permits him to do so. If he should do so without the permission of the partnership, the capitalist partners (partners who contribute a sum of money to the partnership) may either exclude him from the firm or avail themselves of the benefits which he may have obtained with a right to damages in either case.
Furthermore, if a partner authorized to manage collects a demandable sum which was owed to him in his own name, from a person who owed the partnership another sums also demandable, the sum thus collected shall be applied to the two credits in proportion to their amounts, even though he may have given a receipt for his own credit only; but should he have given it for the account of the partnership credit, the amount shall be fully applied to the latter.
What about if the partnership has suffered damages through the fault of a partner?
The law says:
Every partner is responsible to the partnership for damages suffered by it through his fault, and he cannot compensate them with the profits and benefits which he may have earned for the partnership by his industry. However, the courts may equitably lessen such responsibility if through the partner’s extraordinary efforts in other activities of the partnership, unusual profits have been realized.
How should the losses and profits of the partnership be distributed? A related article will be posted in a few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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