Agency/Partnership/Trusts

1.There is partnership when two or more persons bind themselves to contribute money, property,
reputation or industry in a common fund, with the intention of dividing the profits among
themselves.

FALSE- there is partnership when two or more persons contribute money, property, or industry to a
common find, with the intention of dividing profit among themseleves; repuation is NOT contemplated.
(Art 1767, NCC)

2. A contract of partnership may be commenced in any form, except when a parcel of land is
contributed in which case the contract must be in a private or public instrument.

FALSE- when a parcel of land (or an immovable) is contributed, the agreement must be in a PUBLIC
instrument and an inventory signed by the parties must be attached to the instrument, otherwise the
partnership is invalid (Art. 1771, 1773, NCC)

3. A capitalist partner may be excluded form the partnership if he engages himself in a business of
the same line as the business of the partnership without the consent of the other partners.

False. 2nd paragraph art 1808.

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.

4. A married woman may enter into a contract of partnership even without the husband's consent.

True. A married woman may enter into a contract of partnership even without her husband’s consent, but
the latter may object under certain conditions.

5. A partnership may be a partner in another partnership.

TRUE. A partnership being a juridical person by itself can form another partnership.

6. A corporation may be a limited partner in a partnership.

FALSE. A corporation cannot become a partner on grounds of public policy. The court held in Aurbach
vs. Sanitary Wares Manufacturing Corporation that although a corporation cannot enter into a partnership
contract, it may however engage in a joint venture with others.

7. A partner may contribute US Dollars in a contract of partnership

TRUE. Although the requirement according to De Leon for a contribution of money to be effected, such
money must be in legal tender, the same USD contribution may be held as property contribution.

8. Good will may be contributed to a partnership's common fund.

TRUE. The property contributed may be real or personal, corporeal or incorporeal. Hence, credit such as
promissory note or other evidence of obligation or even a mere goodwill may be contributed, as they are
considered property. (see City of Manila vs. Cumbe, 13 Phil. 677 [1909].)
Agency/Partnership/Trusts

9. A and B entered into a contract to contribute money to a common fund to be used in assisting the
victims of Yolanda. They used 95% of the fund to buy and sell used Bar Review mate rials and the
profits are given to the Diocese of Tacloban for the flood victims. A and B are partners .

Ans: FALSE. A & B are not partners because in partnership, there must be an intention to divide the
profits among themselves.

10. The sharing of gros s returns results to a prima facie presumption of partnership.

Ans: FALSE. The sharing of gross returns does not of itself establish 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 [Article 1769 (3)]

11. A partnership is always created by express agreement.

False. The law presumes that Persons who are acting as partners have entered into a contract of
partnership. The question of whether or not a partnership exists is not always dependent upon the personal
arrangement or understanding of the parties. Rule: legal intention is the crux of partnership. (De leon
pages 45-46)

12. Land purchased from the common fund of partnership must be inventoried otherwise the
contract of partnership will be voided.
True. Article 1773 provides that a contract of partnership is void, whenever immovable property is
contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument.

13. If the operation of the partnership's business becomes illegal because of a law passed by
Congress, the partnership contract is void and the partnership will be considered as not to have
exicted in contemplation of law.
FALSE. Art. 1784 provides that a partnership begins from the moment of the execution of the contract,
unless it is otherwise stipulated. Juridical personality is created from the perfection of the partnership.
Thus, it shall be considered valid until it is considered illegal by operation of law.

14. An industrial partner is necessarily a limited partner because he is exempted from sharing in
the losses of partnership.
FALSE. An industrial partner cannot be considered as a limited partner because the former only
contributes his services while the contributions of a limited partner may be cash or property but not
services. (Art. 1845)

15. A partner by estoppel is a general partne r in an existing partnership which he was

misrepresented to be a partner

False. Article 1825 does not create a partnership as between the alleged partners. The actual partnership is
one thing and liability as partners, another and different thing. It is to be noted that liability is created only
in favor of persons who, on the faith of the representation, gave credit to the actual or apparent
partnership.

16. A silent partner is a secret partner

False. A silent partner is one who does not take any active part in the business although he may be known
to be a partner. Thus, he need not be a secret partner.
Agency/Partnership/Trusts

17. An ostensible partner may be a dormant partner.

False. They are two mutually exclusive kinds of partners. An ostensible partner is one who is publicly
known as such. A dormant partner is one whose connection with the partnership is not known. A dormant
partner is also called a secret partner. (Jurado reviewer pp. 1044)

18. The partners may stipulate on a date for the commencement of the partnership different from
the date of agreement.
True. 1784.

19. In case of an imminent loss of the partnership, a partner who cannot put an additional
contribution should sell his interest to the other partners .
TRUE Art. 1791. If there is no agreement to the contrary, in case of an imminent loss of the business of
the partnership, any partner who refuses to contribute an additional share to the capital, except an
industrial partner, to save the venture, shall be obliged to sell his interest to the other partners.

20. Husband and wife may enter into a partnership for the exercise of a profession.
TRUE. Art. 1783. A particular partnership has for its object determinate things, their use or fruits, or speci
c undertaking, or the exercise of a profession or vocation. A husband and his wife may enter into a
particular partnership.

21. The sharing of net returns may indicate the existence of partnership.

FALSE - It is the sharing of gross returns that may indicate the existence of partnership.

22. A person, not being a partner in fact, allows his name to be included in the firm name may
subject himself to the liabilities of a limited partner.

23. Appraisal of goods contributed to the partnership must be based on the value at the time of the
perfection of the contract if different from delivery.
FALSE. art 1787. When the capital or a part thereof which a partner is bound to contribute consists of
goods, their appraisal must be made in the manner prescribed in the contract of partnership and in the
absence of stipulation, it shall be made by experts chosen by the partners and according to current prices,
the subsequent chanhes thereof being for the account of the partnership.

24. An industrial partner may engage himself in any other business with the authority of the other
partners.
TRUE. art 1789 An industrial partner cannot engage in business for himself unless the partnership
expressly permits hin to do so.

25. When there is no specification as to the management of partnership, the partner with the
highest contribution becomes the manager.

FALSE. The partners may fail to designate who among them shall act as manager, either when their
contract is perfected or subsequently. In such a case, all partners shall have equal rights in the
management and conduct of partnership affairs. This is true regardless of the amount of their capital
contributions or extent of their services to the partnership. All of them shall be considered managers and
agents (Art. 1818.) and whatever any one of them may do alone shall bind the partnership, subject,
however, to the provision of Article 1801 that in case of timely opposition of any partner, the matter shall
first be decided by the majority vote, for the presumed intent is for all the partners to manage regardless
Agency/Partnership/Trusts

of the amount of capital they contributed. In case of a tie, then the matter shall be decided by the vote of
the partners representing the controlling interest.

26. The capitalist partners may exclude from the partnership an industrial partner who engages
himself in a business without the required authority even if the industrial partner also contributed
a parcel of land to the partnership.

TRUE. ART. 1789. An industrial partner cannot engage in business for himself unless the partnership
expressly permits him to do so; and if he should do so, the capitalist partners may either exclude him from
the firm or avail themselves of the benefits which he may have obtained in violation of this provision,
with a right to damages in either case.

27. A limited partner is actually a creditor of the partnership.

False.

A limited partner is not actually a creditor of the partnership BUT he/she MAY be a creditor of the
partnership. A limited partner has a limited liability, that is, his liability to third persons is limited to
his/her capital contributions or the amount he/she has invested in the partnership.

Note: In Art. 1863 (1) of the Civil Code, limited partners are included in the term “creditors”.

ART. 1863. In settling accounts after dissolution, the liabilities of the partnership shall be entitled to
payment in the following order:

(1) Those to creditors, in the order of priority as provided by law, except those to limited
partners on account of their contributions, and to general partners;
(2) Those to limited partners in respect to their share of the profits and other compensation by way of
income on their contributions;
(3) Those to limited partners in respect to the capital of their contributions;
(4) Those to general partners other than for capital and profits;
(5) Those to general partners in respect to profits;
(6) Those to general partners in respect to capital.

Hence, it follows that a limited partner is NOT actually a creditor of the partnership ALTHOUGH he/she
MAY be a creditor of the partnership.

28. A limited partner who is also a general partner is liable to the creditors of the partnership but
only up to his contribution.

False.

ART. 1853. A person may be a general partner and a limited partner in the same partnership at
the same time, provided that this fact shall be stated in the certificate provided for in article 1844.

A person who is a general, and also at the same time a limited partner shall have all the rights and
powers and be subject to all the restrictions of a general partner; except that, in respect to his
contribution, he shall have the rights against the other members which he
would have had if he were not also a general partner.
Agency/Partnership/Trusts

Generally, his rights and powers are those of a general partner. Hence, he is liable with his
separate property to third persons. (Art. 1816.) However, with respect to his contribution as a
limited partner, he would have the right of a limited partner insofar as the other partners are
concerned. (Arts. 1855-1858.) This means that while he is not relieved from personal liability to third
persons for partnership debts, he is entitled to recover from the general partners the amount he
has paid to such third persons; and in settling accounts after dissolution, he shall have priority
over general partners in the return of their respective
contributions. (Art. 1863.)

29. Limited partnership is dissolved upon retirement, death, insolvency, insanity, or civil
interdiction of a general or limited partner.

FALSE. Of a general partner only. (Art. 1860: The retirement, death, insolvency, insanity, or civil
interdiction of a general partner dissolves the partnership, xxx)

30. A partnership contract is valid even if no inventory of real property is made when only the
usufruct thereof is contributed to the partnership.

FALSE. Art.1773 applies even if only real rights over real properties are contributed. (PARAS, p.608)
(Art. 1773: A contract of partnership is void, whenever immovable property is contributed thereto, if an
inventory of said property is not made, signed, by the parties, and attached to the public instrument.)

31.Universal partnership of all present property includes title to all present property and future
property as well as future properties acquired through succession.

FALSE. It does not include properties subsequently aquired by inheritance/ succession. Art.1779,par 2.

xxxxxx

47. a person admitted as partner in an already existing partnership is also liable with his individual
properties for all obligations of the partnership arising before his admission unless there is a
contrary stipulation.

FALSE. Liable only to the extent of his capital contribution/investment for liabilities incurred prior to his
admission in the partnership

48. A partner may transfer his interest to another over the objection of another partner.
True. 1813 a partner may assign his interest(1812. Interest- share in the profits and surplus) in the
partnership to any of his co-partners or to a third person wihout the consent of the other partners, in the
absence of agreement to the contrary.

49. A dormant partner is one who has no voice in the management in the partnership and who is
not know to other partners.
true. Dormant partner does not take active part in the business and is not known or held out as partner. He
is both silent and secret partner.

50. The partnership begins from the moment it is recorded with the Securities and Exchange
Commission. Ans. FALSE, Registration/Recording is merely an exception as when the capital exceeds P
3000. Art. 1784 provides that a partnership begins from the moment of the execution of the contract,
unless it is otherwise stipulated.
Agency/Partnership/Trusts

51. The fruits of the property promised to be contributed by a partner shall also be delivered
without need of demand.
Ans. True. Art. 1786. The partner "shall also be liable for the fruits thereof from the time they should
have been delivered, without need of any demand.

52. In case of imminent loss of the business of the partnership, all partners, including an industrial
partner, shall be required to contribute additional capital or service to the partnership

FALSE. Only capitalist partner, not industrial partner, must cobtribute additional capital. (Article 1791)

53. An industrial partner can engage in other business, but must not compete with the partnership,
unless otherwise stipulated

FALSE. General rule, industrial partner cannot engage in business unless expressle provided for. (Article
1789)

54. A partner, as agent, cannot assign partnership property in payment of partnership debt.
TRUE.
Art. 1818. xxx
“Except when authorized by the other partners or unless they have abandoned the business, one or more
but less than all partners have no authority to:

(1) Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of
the partnership; xxx”

55. Dissolution terminates the partnership.

FALSE.

Art. 1829. On dissolution the partnership is not terminated, but continues until the winding up of
partnership affairs is completed.
56. Insolvency of a partner is one of the causes for voluntary dissolution of a partnership.
FALSE. It is involuntary dissolution.

57. A partnership may be dissolved even without winding up of a business operations.

TRUE. Dissolution is different from winding up. “ the partnership although dissolved, continues to exist
until its termination, at which time the winding up of its affairs should have been completed and the net
partnership assets are partitioned and distributed to the partners.” Albano, p 692

58. A partnership may be discharged from liabilities with the consent of the said partner,
the partnership debtors and the persons continuing the business.
FALSE. Art. 1835 xxx A partner is discharged from any existing liability upon the dissolution of the
partnership by an agreement to that effect between himself, the partnership creditor and the person or
partnership continuing the business.

59. Creditors of the old partnership are no longer considered as creditors of the continued
partnership.
Agency/Partnership/Trusts

FALSE: The law makes the creditors of the dissolved partnership also creditors of the persons or
partnership continuing the business. Both classes of creditors, the old and the new, are treated alike, being
given equal rights in partnership property. The purpose of the law is to maintain the preferential rights of
the old creditors to the partnership property as against the separate creditors of the partners. (Yu v. NLRC,
224 SCRA 75 [1993]; De Leon, Partnership, Agency, and Trusts [2014] p. 267)

60. The individual property of a deceased partner, whose name is being used by the continuing
partnership, shall be held liable for debts contracted after his death.

FALSE. Art. 1840, the use by the person or partnership continuing the business of the partnership name,
or the name of a deceased partner as part thereof, shall not of itself make the individual property of the
deceased partner liable for any debts contracted by such person or partnership.

61. A limited partner may contribute services to the partnership.

FALSE. Art. 1845, the contributions of a limited partner may be cash or other property, but not services

62 false.1846 liable lang sa creditors hndi sa partners

xxxx
77 true

78. Among partners themselves, the authority of the partner to act for partnership is immediately
terminated upon the death of the partner or expiration of the term of the partnership, unless
otherwise agreed by the partners.
FALSE - As general rule, 1832 Dissolution terminates all the authority to act for partnership. Exceptions:
those acts necessary to wind up the partnership affairs or acts necessary to complete transactions begun
but not then finished. (Art. 1829 On dissolution, the partnership is not terminated but continues until the
winding up of the partnership affairs is completed.) Dissolution does not automatically result in the
termination of the legal personality of the partnership nor the relations of the partners among themselves.
The partners remain as co-partners until the partnership is terminated. (Deleon, p. 215)

79. The dissolution of a partnership because of the death of a partner shall result to the discharge of
the liability of the deceased partner.
FALSE. As a general rule, 1835 dissolution does not automatically discharge the existing liability of any
partner. Exception: A partner may be relieved from existing liability upon dissolution only by agreement
between partner concerned, person or partnership continuing the business and partnership creditor.

80. During the winding up of the corporations, the managing partner should no longer enter into a
contract without the consent of the partners, otherwise the contract shall be unenforceable for want
of authority.
FALSE. The managing partner as liquidating partner may enter into contract but for mere liquidation
purposes. (p. 437 2016 Memaid)
Agency/Partnership/Trusts

81. A contract of agency to sell personal property is a real contract which requires the delivery of
the thing sold.
FALSE. It is consensual. (P 1065-66 Jurado 2009 Ed)

82. An agency "coupled with interest" survives the grantor's death

TRUE

83. In case there are two/more principals, any one of them may revoke the agency provided the
consent of the other is sought.
FALSE art. 1925

84. If a person specially informs another or states by public advertisement that he has given a
power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the
former case with respect to the person who received the special information, and in the latter case
with regard to any person even if the latter did not read the publication when he transacted with
the agent.
TRUE. ART. 1873. If a person specially informs another or states by public advertisement that he has
given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the
former case with respect to the person who received the special information, and in the latter case with
regard to any person. Power shall continue to be in full force until the notice is rescinded.

85. A special power of attorney is necessary to make gifts for charity or to employees in the business
management by the agent.
FALSE. An agent without special power from the principal cannot make gifts.39 But the making of
customary gifts for charity, or those made to employees in the business managed by the agent, are
considered acts of administration.

86. A SPA is necessary to loan or borrow money, unless the latter act be urgent and indispensable
for the improvement or preservation of the things which are under administration.
Answer: FALSE, Art. 1878, par. 7 only excludes borrowing money for the preservation of the things
under administration and not for the improvement because the former are mere acts of administration.
(Note: Inferences ko lang 'to, wala akong mahanap na explicit answer from the book. Sorry).

87. An agent may be relieved by agreement from the obligation to make an accounting.

Answer: FALSE, Art. 1891. An agent is bound to render an account of his transactions and to deliver to
the principal whatever he may have received by virtue of the agency, even though it may not be owing to
the principal. Every stipulation exempting the agent from the obligation to render an account shall be
void.

88.if the commission agent receives a guaranty commission in addition to the ordinary commission,
the agent shall bear the risk of collection and shall pay the principal the proceeds of the sale on he
same terms agreed upon with the purchaser unless the principal consents to the sale on credit.

False. Even if the principal consents to the sale on credit, the same rule still applies; the agent will still be
Agency/Partnership/Trusts

liable to the principal upon failure to pay the price. Article 1907 applies to both cash and credit sales. (de
leon book page 523)

89. If the third person does not know that the agent exceeded his authority, he may hold the agent
liable as well as the principal, even if he has not inquired into the authority Of the agent.

FALSE. A person who deals with an agent is "put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is chargeable with the knowledge of the
authority and his ignorance of that authority will not be an excuse.
90. Agency by ostensible authority consists in the conscious permission of acts beyond those powers
granted. TRUE

91. If two or more principals have appointed an agent for a common transaction or undertaking,
they are jointly liable unless solidarity is agreed upon.
FALSE. ART. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences
of the agency.

92. An agency is not revoked by the principal's death if it has been constituted in the interest of
third person without notice or knowledge of the interest.
FALSE. Art. 1930 The agency shall remain in full force and effect even after the death of the principal, if
it has been constituted in the common interest of the latter and of the agent, or in the interest of a third
person "who has accepted the stipulation in his favor."

93. An agent may be bound to render service without compensation provided that there is a special
power of attorney. FALSE. Art. 1878 (9) it should be to bind the PRINCIPAL.

94. In all cases, a special power of attorney is required to loan or borrow money
FALSE. Art. 1878(7). An SPA is not necessary when a loan is urgent and indispensable for the
preservation of the things which are under administration.

95. A special power to compromise authorizes submission to arbitration.

FALSE. Art. 1880, a special power to compromise does not authorize submission to arbitration.

96. There is an implied acceptance if the principal delivers his power of attorney to the agent and
the latter receives it without objection.

Ans: TRUE (Art. 1871)

97. An agent may be exempted from rendering an accounting.

Ans: FALSE. Every stipulation exempting the agent from the obligation to render an account shall be
VOID. (Art 1891)

98. If the principal does not mention the power to substitute at all, the agent may appoint one but
he is responsible for the acts of the substitute.
Agency/Partnership/Trusts

True. According to Article 1892, the agent may appoiny a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute if:
(1) WHEN HE WAS NOT GIVEN THE POWER TO APPOINT ONE;
(2) when he was given such power, but without designating the person, and the person appointed was
notoriously incompetent or insolvent.

All acts of the substitute appointed against the prohibition of tge principal shall be void.

99. An agency is gratuitous unless compensation is agreed upon.

False. According to Article 1875, agency is presumed to be for a compensation, unless there is proof to
the contrary.

100. The accomplishment of the object of the agency extinguishes an agency even prior to the final
accounting.
TRUE. At least as between the parties, principal and agent, the fulfillment of the purpose for which
the agency is created ipso facto terminates the agency, even though expressed to be irrevocable. (De leon,
p. 586)

101. An agency at will is revoked even if the revocation is not brought to the knowledge of the
agent.
FALSE. Notice should be given to the agent of such revocation, although express or implied. A
revocation without notice to the agent will not render invalid an act done in pursuance of the authority.
(De leon, p. 598)

102. A commission agent cannot sell on credit goods or items without the express or implie d consent
of the principal. True.

103-107. Enumerate five instances where a special power of attorney is necessary.

Art. 1878. Special power of attorney are necessary in
the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was
constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to
waive objections to the venue of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration

108-110. What are some of the rules governing the interpretaiton of the power of agents.
(a) Contracts of Agencies as well as the general powers of atty must be interpreted in
accordance with the language used by the parties - article 1370;
(b) the real intention of the parties is primarily to be determined from the language used and
gathered from the whole instrument;
(c) Article 1361;
(d) the intention of the parties must be sustained than to be defeated;
(e) the act of the parties carrying out the contract will be presumed to be done in good faith and in
conformity with the contract. SOURCE: DE LEON 2010 Edition page 412
Agency/Partnership/Trusts

111-115. How does the agent observe care and diligence in the execution of the agency?

1. The agent is bound by his acceptance to carry out the agency, and is liable for the damages
which, through his non-performance, the principal may suffer. (Art. 1884)

2. In case a person declines an agency, he is bound to observe the diligence of a good father of a
family in the custody and preservation of the goods forwarded to him by the owner until the latter
should appoint an agent or take charge of the goods. (Art. 1885)

3. Should there be a stipulation that the agent shall advance the necessary funds , he shall be bound
to do so except when the principal is insolvent. (Art. 1886)

4. In the execution of the agency, the agent shall act in accordance with the instructions of the
principal. (Art. 1887)

5. An agent shall not carry out an agency if its execution would manifestly result in loss or damage
to the principal. (Art. 1888)

116-118 How does the agent observe fidelity in the execution of the agency?
116. To answer for damages if there being a conflict between his interest and those of the
principal, he should prefer his own. (Art. 1889)
117. Not to loan to himself if he has been authorized to lend money at interest. (Art. 1890)

118. To render an account of his transactions and to deliver to the principal whatever he may have
received by virtue of the agency. (Art. 1891)

119-124 Modes of extinguishing agency:

119. By revocation, express or implied, by the principal

120. By withdrawal of the agent
121. By death, civil interdiction, insanity, or insolvency of thw principal or agent
122. By dissolution of firm or corporation which entrusted or accepted the agency
123. By accomplishment of object or purpose of the agency
124. By expiration of the period which agency was constituted
(Article 1919)

125-128 What are the requisites for a valid revocation of agency

(not sure sa answers wala ako makita na requisites. )

a. Return of the document evidencing agency if the authority of the agent is in writing(Art. 1920)

b. Actual notice if agency has been entrusted for the purpose of contracting with specified persons 1921
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c. Notice by publication is sufficient as to other persons (1922)

d. Notice of revocation to the agent(1923)

129-131 When is the agency not revoked by the principal's death?

129. If a bilateral contract depends upon it

130. If the agency is the means of fulfilling an obligation already contracted
131. Agency coupled with interest