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ALFONSO, Carlo P.

JD4202

A. What is the best agreement that should be drafted to serve the purposes of the
ten friends?
The best agreement that should be drafted by the ten friends would be a
partnership agreement. Under Article 1767 of the Civil Code, by the contract of
partnership two or more persons bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the profits among themselves. In
this case, since the ten friends wanted to pool their funds together to purchase a
condominium unit to be rented out, and thereafter divide the profits among themselves, a
partnership agreement would certainly serve their evident intention and purpose.
Moreover, every partnership under the Law on Partnerships of New Civil Code is
endowed with the following essential attributes: Non-solemn or consensual juridical
personality; mutual agency; delectus personae; and unlimited liability of partners.
Firstly, the consensual attribute of partnership makes it easier to create. Under
Article 1171 of the Civil Code, a partnership may be constituted in any form x x x. In this
case, the ten friends would be able to execute their purpose considering that a separate
juridical personality is created which would make its dealings with the public easier and
pursued with more efficiency.
Secondly, the mutual agency among the partners gives them the right to participate
in the business. Under Article 1818 of the Civil Code, every partner is an agent of
partnership for the purpose of its business, and the act of every partner, including the
execution in the partnership name of any instrument x x x. In this case, the ten friends, in
creating a partnership, would be able to exercise their prerogative to participate in the
management of the venture.
Thirdly, the doctrine of delectus personae brings the partners together in the most
personal relationship. As a rule, delectus personae entails that one select his partners on
the basis of their personal qualifications and qualities, such as solvency, ability, honesty,
and trustworthiness, among others. Hence, the friends in this case had the opportunity to
take into consideration the abovementioned basis in choosing who would be their
partners.
Lastly, partnership binds the partners with unlimited liability that may propbably
extend to the separate properties of the partners. Under Article 1816 of the Civil Code, all
partners, including industrial ones, shall be liable pro rata with all their property and after
all the partnership assets have been exhausted, for the contracts which may be entered
into in the name and for the account of the partnership, under its signature and by a
person authorized, under the partnership x x x. It may seem that unlimited liability is a
downside of partnership. However, this attribute of partnership would compel the partners
to act diligently in performing their respective duties so that the partnership would not
incur liabilities that might extend to the individual properties of each partner.
B. Anticipate the problems and risks that may be encountered by friends during
the implementation of their agreement. How would you resolve or mitigate risk
posed by these problems?

The possible problems and risks that may be encountered by the ten friends during
the implementation of their partnership agreement would be the management of the
business, the contribution profit and loss sharing and other rights which are inherent in a
partnership agreement, the dissolution of the partnership, and the liquidation of assets.
To mitigate or resolve these anticipated problems, the solution is to include everything in
their written contract of partnership because the evident intent and purpose of the
partners would be best exemplified by their agreement in writing.

As to the management, the general rule under Article 1803 of the Civil Code is that all
partners shall be considered agents and whatever any one of them may do alone shalll
bind the partnership, without prejudice to the provisions of Article 1801 x x x. However,
the number of the partners in this case would be unfavorable for the partnership if all of
them would be given the right to just participate and do whatever they want in the
business. Therefore, Under Article 1800 of the Civil Code, the partner who has been
appointed manager in the articles of partnership may execute all acts of administration
despite the opposition of his partners, unless he should act in bad faith; and his power is
irrevocable without just or lawful cause. Consequently, irreconcilable differences as to
management would be avoided since there would be a managing partner with more or
less stable authority to manage the partnership entriprise.

As to the contribution of the partners, Article 1790 provides that unless there is a
stipulation to the contrary, the partners shall contribute equal shares to the capital of the
partnership. On the other hand, the profits and losses, under Article 1797 of the Civil
Code, shall be distributed in conformity with the agreement and if only the share of each
partner in the profits has been agreed upon, the share of each in the losses shall be in
the same proportion. Accordingly, the abovecited provisions with respect to partnership
agreement allow the ten friends to stipulate as to how they would contribute and share in
the capital, profits and even losses of the business which would curtail ambiguity as to
the matter.

As to other rights of the partners such as the right to be reimbursed for expenses
incurred on behalf of the partnership, the right to inspect, the right to demand true an full
information and the right to demand accounting. Article 1796 of the Civil Code provides
that the partnership shall be responsible to every partner for the amounts he may had
incurred on behalf of the partnership as well as the interest accrued from the time the
expenses were made. Also, under Article 1805, every partner shall, at any reasonable
hour, have access to and may inspect and copy the partnership books. Moreover, Article
1806 allows every partner or his legal representative to demand true and full information
from other partners of all things affecting the partnership. Lastly, Article 1807 and 1809
of the Civil Code provide that every partner may demand from every other partner an
accounting to the partnership for the benefit and profits derived by him with the consent
of other partners from any transaction in relation to the partnership and shall have the
right to a formal account as to the partnership affairs. The aforementioned rights of every
partner in a partnership agreement, even if inherent and expressly granted by law, may
be agreed upon by the parties, in writing,to suit their desired conditions and terms and to
give them a better hold over such rights.

As to the dissolution of the partnership, the same may, among others, be terminated
under Aticle 1830 by the definite term or particular undertaking specified in the
agreement; by the express will of any partner, who must act in good faith, when no definite
term or particular undertaking is specified; by the express will of all partners who have not
assigned their interests or suffered them to be charged for their separate debts, either
before or after the termination of any specified term or particular undertaking; by expulsion
of nay partner from the business bona fide in accordance with such a power conferred by
the agremeent between the partners; and in contravention of the agreement between the
partners, where the circumstances do not permit a dissolution under any other provision
of thi article, by the express will of any partner at any time. In this case, the ten friends
may definitely include in their agreement the modes of terminating the partnership be it
by the will of all of them or by reasonable grounds which would benefit all of them. For
instance, if a managing partner failed to collect and remit the montly rental or his failure
to pay the taxes and assessments required to the detriment of the partnership.

As to the liquidation of the assets of the partnership, Article 1836 of the Civil Code
provides that unless otherwise agreed, the partners who have not wrongfully dissolved
the partnership or the legal representative of the last surviving partner, not insolvent, has
the right to wind up the partnership affairs, provided, however, that any partner, his legal
representative or his assignee, upon cause shown, may obtain winding up by the court.
In this case, the parties may also agree on who would be liquidating partner/partners who
would wind up the partnership affairs to put an end to the partnership agreement.
Therefore, if the term of the partnership of the ten friends has ceased, then liquidating
partner may take care of the liquidation of the assets and the division of the remainder
after the payment of the liabilities of the partnership.
ARTICLES OF PARTNERSHIP

OF

TEN FRIENDS AND CO.

KNOW ALL MEN BY THESE PRESENTS:

That we, the undersigned partners, all of legal age, residents and citizens of the
Philippines, have on this day voluntarily associated ourselves together for the purpose of forming
a general partnership under the following terms and conditions and subject to existing and
applicable laws of the Republic of the Philippines:

AND WE HEREBY CERTIFY:

ARTICLE I. Partnership Name: That the name of this partnership shall be


TEN FRIENDS AND CO. and shall transact business under the said company name.

ARTICLE II. Business Purpose: That the purpose/s for which this partnership is formed
is/are: To buy a condominium unit/s and to lease out the same in order to gain profits out of rentals
that would be used by the partnership enterprise in its operation and management.

ARTICLE III. Principal Place of Business: That the principal place of business of this
partnership shall be located at : GF, Rm. 110, Cityland 8, 98 Sen. Gil J. Puyat Ave, Makati, 1230
Metro Manila

ARTICLE IV. Term of Existence: That this partnership shall have a term of 15 years
from and after the original recording of its Articles of Partnership by the Securities and Exchange
Commission.

ARTICLE V. Partners Circumstances: That the names, nationalities and residence


addresses of the partners are as follows:
Name Nationality Address
Aaron A. Arenas Filipino Acacia St., 1st Ave., Caloocan
Baron B. Bueno Filipino Buko St., 2nd Ave., Manila
Carol C. Castro Filipino Camote St., 3rd Ave., Pasay
Dexter D. De Leon Filipino Dalandan St., 4th Ave., Makati
Esther E. Esperanza Filipino Eros St., 5th Ave., Taguig
Frederick F. Fugoso Filipino Figeroa St., 6th Ave., Malabon
Gina G. Guitierrez Filipino Gracepark St., 7th Ave., Marikina
Hector H. Hilbay Filipino Harbor St., 8th Ave., Pasig
Ivan I. Isip Filipino Ibon St., 9th Ave., Navotas
Jestoni J. Javier Filipino Jelly St., 10th Ave., San Juan

ARTICLE VI. Capital Contributions: That the capital of this Partnership shall be the
amount of five million pesos (P5, 000, 000.00), Philippine Currency, contributed in cash by the
partners, as follows:

Name Amount Contributed


Aaron A. Arenas P 500, 000.00
Baron B. Bueno 1, 000, 000.00
Carol C. Castro 250, 000.00
Dexter D. De Leon 500, 000.00
Esther E. Esperanza 750, 000.00
Frederick F. Fugoso 125, 000.00
Gina G. Guitierrez 250, 000.00
Hector H. Hilbay 125, 000.00
Ivan I. Isip 500, 000.00
Jestoni J. Javier 1, 000, 000.00

That no transfer of interest which will reduce the ownership of Filipino citizens to less than
the required percentage of capital as provided by existing laws shall be allowed or permitted to
be recorded in the proper books of the partnership.
ARTICLE VII. Sharing Ratios: That the profits and losses of this partnership shall be
divided and distributed proportionately on the ratio of the capital contribution of each partner as
stated in the next preceeding Article.

ARTICLE VIII. Management: That this partnership shall be under Gina G. Lopez, as
General Manager, who shall be in charge of the administraion of the affairs of the company. She
shall have the authority to use the partnership name and shall perform such acts as are necessary
and expedient in the management of the business and to carry out its lawful purposes.

ARTICLE IX. Liquidation: That this partnership shall be under Baron B. Bueno, as
Liquidating Partner, who shall be in charge of the winding up of the partnerships assets and
liabilities. He shall have the power to liquidate the properties owned by the partnership.

ARTICLE X. Reimbursement and Accounting: Every partner shall have the right
to be reimbursed for the amounts he may had incurred on behalf of the partnership as
well as the interest accrued from the time the expenses were made. Each of them may
demand from every other partner an accounting to the partnership for the benefit and
profits derived by him with the consent of other partners from any transaction in relation
to the partnership and shall have the right to a formal account as to the partnership affairs.

ARTICLE XI. Inspection of Partnership Books: All partners shall, at any


reasonable hour, have access to and may inspect and copy the partnership books and
they and their legal representative shall have the right to demand true and full information
from other partners of all things affecting the partnership.

ARTICLE XII. Undertaking to Change Name: That the partners undertake to change
the name of this partnership, as herein provided or as amended thereafter, immediately upon
receipt of notice or directive from the Securities and Exchange Commission that another
corporation, partnership or person has acquired a prior right to the use of that name or that the
name has been declared as misleading, deceptive, confusingly similar to a registered name, or
contrary to public morals, good customs or public policy.

Explanation of the provisions of the partnership agreement:

First, Article I speaks of the name of the partnership which is TEN FRIENDS AND
CO. As a rule, general partnership must have Company, or Co. in its name while Limited
or ltd. for limited partnership.
Second, Article II is about the business purpose of the partnership. Essentially,
partnership agreement is for the purpose of gaining profits that would be divided among
partners. Thus, it is important to indentify the exact nature of the partnership enterprise.

Third, Article III provides for the principal place of business of the partnership. It
is important to name a principal place of the partnership because consequential
documents such as partnership books are to be stored here.

Fourth, Article IV speaks of the term of exsistence of the partnership. As a rule,


one of the modes of terminating partnership is when the term for which it was constituted
has lapsed. Therefore, by including the term of the partnership, the partners likewise
stipulate until when should the partnership exist unless otherwise agreed by them.

Fifth, Article V states the name of the partners, their nationality and residences.
The name and nationality of the partners are significant. The partners must be named so
that creditors may go after them in case the partnerships assets are insufficient to cover
the debt of the partnership which is consistent with the unlimited liability attribute of a
partnership. As to the nationality, it is important to be indicated since there is a nationality
rule which must be followed unless the partnership shall be void.

Sixth, Articles VI and VII provides for the capital contributions and the sharing
ratios of the partners when it comes to the profits and losses of the partnership. It may be
said that this is one of the most relevant section of a parternship agreement considering
that the same is created for the purpose of earning profits to be divided among the
partners. Hence, it is but important to include how much contribution each partner has
given to determine the respective profits and losses that will be applied to each.

Seventh, Articles VIII and IX is about the management and liquidation of the
partnership assets and liabilities. As a rule, every partner is an agent of the partnership.
However, this rule admits an exception that is when a particular person has been
appointed as a general manager or the managing partner who has the power to
administer the properties of the partnership. Likewise, a liquidating partner may be
authorized by the agreement.

Lastly, Articles X, XI, and XII are about the rights of the partners to reimbursement
and accounting of exepenses for the benefit of the partnership and the right to inspect the
partnership books. These rights, however, are inherent in a partnership agreement but
the same may be agreed upon by the parties and be included in the articles of partnership
to strengthen such prerogatives.

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