Midterms SET B
Midterms SET B
Midterms SET B
MIDTERM EXAMINATIONS
PARTNERSHIP AND CORPORATION
SET B
NAME:________________________________________
SECTION:_____________________________________ DATE:_____________
1. Co-ownership is not the same as partnership. A partner is considered co-owner with his partners of
specific partnership property.
2. Every partner is a debtor of the partnership for whatever he may have promised to contribute thereto.
When a partner fails to comply with his obligation to deliver what he has promised to contribute to the
partnership, the remedy that is available to the other partners is rescission.
3. The partnership is always bound by any act of a partner after dissolution even if the partner has no
authority to wind up partnership affairs. The partnership will be bound by the act of a partner who is
not authorized to wind up when he transacted with one who had extended credit to a partnership
before dissolution and had no knowledge or notice of his want of authority.
4. Every partner is an agent of the partnership so long as he is appointed as a managing partner. When
the manager is appointed, he may execute all acts of administration but only upon consent of the
other partners.
5. The other partners can overturn the act of administration of the managing partner if he acted in bad
faith. If two or more of the partners were entrusted with management without specification of their
respective duties, each one may separately execute all acts of administration, but if any of them
should oppose the acts of the others, majority decision shall prevail.
6. A partnership whose capital is P1 million must appear in a public instrument, else it will not attain
juridical personality of its own. Failure to register the contract of partnership with the Securities and
Exchange Commission does not affect the partnership’s separate juridical personality.
7. Associations with articles kept secret among the members and wherein any one of the members
may contract in his own name with third persons shall have no juridical personality. A contract of
partnership is unenforceable whenever immovable property is contributed thereto, and an inventory
of which is not made, signed by the parties and attached to the public instrument.
8. A universal partnership of all present property is one wherein all that the partners may acquire by
their industry or work during the existence of the partnership are contributed to the common fund. A
universal partnership of profits is one where the partners contribute all the property which actually
belongs to them to a common fund, with the intention of dividing the same among themselves, as
well as all the profits they may acquire therewith.
9. Although not an actual partner, a partner by estoppel has made himself liable as such by holding
himself out as a partner or allowing himself to be so held out. This liability of a partner by estoppel is
based on the Doctrine of Apparent Authority.
10. The incoming partner may become liable to old obligations (obligations incurred before his
admission), but only up to the extent of the partnership property. He may become liable to old
obligations up to the extent of his personal property if he so agrees.
11. The distribution of losses and profits shall be in accordance with the respective contributions of the
partners even in the presence of an agreement as to the respective shares. None of the capitalist
partners can be excluded from participation in the profits and losses.
12. The industrial partner shall not be accountable for the debts of the partnership. The industrial partner
cannot also be liable for losses.
13. Every partner can have access to and may inspect and copy any of the partnership books any time
for any reasonable cause. A partner may demand true and full information from other partners of all
things affecting the partnership.
14. A sub-partnership is not authorized by law since this is when a partner of a firm makes a stranger a
partner with him in his share of the profits and losses of that firm. Among the partners, mutual
agency arises and the doctrine of delectus personae allows them to have the power although not
necessarily the right, to dissolve the partnership.
15. Prior to the actual delivery of specific things promised to be contributed to the partnership, the risk of
loss is borne by the partner. After delivery, the risk of loss shall be borne by the partnership when the
specific thing contributed is perishable.
16. When a partner takes from the partnership coffers any amount and applies it to his personal use, he
becomes a debtor for the interest and damages, without need of demand. The partnership is entitled
to the profits derived by said partner using the partnership funds.
17. Once the partnership has acquired ownership of a thing contributed, loss will dissolve the
partnership. The partnership is not automatically dissolved when a specific thing, which a partner
had promised to contribute to the partnership, perishes before the delivery.
18. An industrial partner cannot be required to contribute capital even in the presence of a stipulation. A
capitalist partner, who refuses to give additional contribution to save venture shall be obliged to sell
his interest to the other partners, except if there is a contrary agreement.
19. Nini, the managing partner, is not correct in applying solely to her personal credit the P500,000 she
collected from Sugar Enterprises, who owes her, P1,000,000, and the partnership, P500,000, which
are both due and demandable. Having regard to this situation in the first sentence, she can apply the
collection to her credit if Sugar Enterprises declared it to be so at the time of payment.
20. The presence of a period for partnership’s specific duration or the statement of a particular purpose
for its creation prevents the dissolution of the partnership by an act or will of a partner. The
dissolution terminates all authority of any partner to act for the partnership, except if the dissolution is
by act of any partner, who enters into new/subsequent contracts with knowledge of the dissolution.
21. The partners are agents of the partnership, and, as far as innocent third persons are concerned, the
act of one partner binds the partnership. Hence, a corporation cannot enter into a partnership
agreement.
22. The death of a co-owner has no effect upon the existence of the co-ownership. The death of a
partner does not affect the existence of the partnership.
23. In co-ownership, the co-owners have the power to represent the co-ownership, unless there is an
agreement to the contrary. In partnership, the partners have the power to represent the partnership
unless there is an agreement to the contrary.
24. The Industrial partner cannot engage in business for himself. This rule is absolute.
25. In case of imminent loss of the business of the partnership, the partners can be compelled to
contribute an additional share to the capital to save the venture. The industrial partner cannot be
compelled to make such additional contribution.
Other questions (26-50):
26. Anne is a partner of Rogelio and Mario in a syphoning business (ARM Syphoning). For five years,
their business went smoothly. In fact, Anne felt that she and Mario are meant to be partners, not
just for business but for life. When she decided to finally tell Mario of her love, she was surprised
when Mario told her that he and Rogelio are inviting her for their marriage in New York. Broken-
hearted, Anne decides to back-out of their partnership. Assuming that ARM Syphoning is a
limited partnership, what is the arrangement of the payment? (1.) Unpaid wages of employees;
(2.) Anne’s share as a limited partner in the profits; (3.) Anne’s property, which he contributed in
the common fund of the partnership; (4.) Rogelio’s share as a general partner in the profits; (5.)
Mario’s P100,000, which she lent to the partnership.
a. 23451
b. 12345
c. 23415
d. 13245
27. How should the following liabilities of the partnership be ranked in the order of payment?
28. Arnold and Bruno are partners in their shop offering Auto-Mechanic Services. Arnold is the
mechanic. When he felt that his profits are not sufficient to achieve his dream of putting up his
own Car Rental Services, he alone decided to offer in the Auto-Mechanic Shop coffee for a fee to
those who are waiting for their cars to be fully done. When Bruno learned about this coffee offer of
Arnold, he confronted the latter. Which argument is the best?
a. Arnold’s argument: The coffee is separate and of a different nature from the Auto-Mechanic
Shop; thus, I did not violate anything.
b. Arnold’s argument: The offer is done in good faith and not as a competition or an undue
advantage against the auto-mechanic services.
c. Bruno’s argument: You cannot offer coffee since you are not even allowed to engage in any
kind of business.
d. Bruno’s argument: We did not have an agreement that you can a do a business of your own,
hence offering coffee for a fee, even if not of the same nature and non-competitive with our
shop, is not allowed.
29. Win, Bright and Charlie entered into a partnership to operate a restaurant business. When the
restaurant had gone past break-even stage and started to garner considerable profits, Charlie
died. Win and Bright continued business without dissolving the partnership. They in fact opened a
branch of the restaurant, incurring obligation in the process. Creditors started demanding for the
payment of their obligations. Who are liable for the settlement of the partnership’s obligations?
a. The two remaining partners because when any partner dies and the business is continued
without any settlement of accounts as between him or his estate, the surviving partners are
being held liable for continuing the business despite the death of the other partner.
b. The managing partner because he runs the day-to-day business of the partnership
c. The estate of the deceased partner because there is a need to settle all the assets and
liabilities, or debts, that the person had when they died.
d. The liquidating partner because he is the one in charge of the liquidation and winding up of
the partnership.
30. Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal
amounts to the capital, they also agree on equal distribution of whatever net profit is realized per
fiscal period. After two years of operation, however, Una conveys her whole interest in the
partnership to Justine, without the knowledge and consent of Dielle and Karlo. Is the partnership
dissolved?
a. Yes, because the conveyance of the whole interest of one partner should be with the
knowledge and consent of the other partners.
b. Yes, because the partnership is based on trust and confidence
c. No, because a conveyance by a partner of his whole interest in a partnership does not of
itself dissolve the partnership in the absence of an agreement.
d. No, because the remaining shares in the partnership is bigger than that which is conveyed
to Justine.
31. Pauline, Patricia and Priscilla formed a business partnership for the purpose of engaging in neon
advertising for a term of five (5) years. Pauline subsequently assigned to Philip her interest in the
partnership. When Patricia and Priscilla learned of the assignment, they decided to dissolve the
partnership before the expiration of its term as they had an unproductive business relationship
with Philip in the past. On the other hand, unaware of the move of Patricia and Priscilla but
sensing their negative reaction to his acquisition of Pauline's interest, Philip simultaneously
petitioned for the dissolution of the partnership. Is the dissolution done by Patricia and Priscilla
without the consent of Pauline or Philip valid?
a. Yes, it is valid. The consent of Pauline is not necessary because she had already assigned
her interest to Philip, while the consent of Philip is not also necessary because the
assignment to him of Pauline's interest did not make him a partner.
b. Yes, it is valid. Partners are agents of each other.
c. No, it is not valid. A contract of partnership is consensual. Hence, since Pauline is the
original partner, there is a need to secure her consent before the partnership could be
dissolved.
d. No, it is not valid. A contract of partnership is consensual. Hence, there is a need to secure
the consent of Philip in dissolving the partnership
a. A partner owes duty to inform his or her co-partners of all information regarding partnership
affairs.
b. Every partner is the agent of the partnership for the purpose of its business.
c. Partners share in the profits and any stipulation which includes one or more from any share
in the profits (or losses is void.
d. The partners choose with whom they will enter into a partnership agreement, who will be
accepted int heir partnership and whether they will remain to be partners.
33. Dielle, Karlo and Una are general partners in a merchandising firm. Having contributed equal
amounts to the capital, they also agree on equal distribution of whatever net profit is realized per
fiscal period. After two years of operation, however, Una conveys her whole interest in the
partnership to Justine, without the knowledge and consent of Dielle and Karlo.
TRUE OR FALSE: Justine can interfere or participate in the management or administration of the
partnership business or affairs. She may also receive the net profits to which Una would have
otherwise been entitled.
34. X and Y are partners in a shop offering portrait painting. Y provided the capital and the marketing
while X was the portrait artist. They accepted the PS0,000.00 payment of Kyla to do her portrait
but X passed away without being able to do it. Can Kyla demand that Y deliver the portrait she
had paid for because she was dealing the with business establishment and not with the artist
personally?
35. Diana, Bruce and Clark formed a partnership under the following terms and conditions:
Could Diana alone, opposed by Bruce and Clark, have Clark removed as manager?
a. Yes. Being an agent of each other and of the partnership, each partner has the power to
remove his employees of the partnership, including its manager.
b. Yes. It was under the management of Clark that the partnership became bankrupt. Thus, his
acts is equivalent to breach of contract between him and his partners.
c. No. The vote of the partners representing the controlling interest shall be necessary for such
revocation of power, and Diana does not represent the controlling interest in the partnership.
d. No. The bankruptcy of the partnership is beyond the control of Clark, and thus his removal from
office is baseless.
36. In the problem stated in No. 35, could Clark be personally held liable for debts of partnership not
satisfied with the assets of the partnership?
a. Yes. Despite the exclusion of “C” in the losses, such agreement is not applicable insofar as the
partnership creditors are concerned. He is solidarily liable with his co-partners for partnership
debts not satisfied with the assets of the partnership.
b. Yes. Despite the exclusion of “C” in the losses, such agreement is not applicable insofar as the
partnership creditors are concerned. He is jointly liable with his co-partners and, thus, can only
be compelled to pay 20% of the partnership debt.
c. No. Under our partnership law, the industrial partner is always excluded from any participation in
the losses in the absence of an agreement to the contrary.
d. No. The agreement in this case is that Clark is not liable for the losses of the partnership, and
this agreement is binding even to third parties outside of the partnership.
37. In the problem stated in No. 35, state which of the following sentences is TRUE:
a. Clark can be compelled to pay by the partnership creditors for the 20% of the partnership debts,
and he can ask for the reimbursement of what he paid from his co-partners.
b. Clark cannot be compelled to answer for the partnership debt considering that he is an industrial
partner.
c. Clark cannot be compelled to pay for the partnership debt considering that there is an
agreement in the partnership contract that he is not liable for the losses of the partnership.
d. Clark can be compelled to pay for the full amount of the partnership debt subject to
reimbursement of the 80% share of his co-debtors.
38. Maverick, Goose and Iceman entered into a partnership under the firm name “Top Gun Avionics
Supplies”. Subsequently, upon mutual agreement, Goose withdrew from the partnership and the
partnership was dissolved. However, the remaining partners, Maverick and Iceman, did not
terminate the business of “Top Gun Avionics Supplies” apparently without objection from Goose.
The withdrawal of Goose from the partnership was not published in the newspapers. Could Goose
be held liable for any obligation or indebtedness Maverick and Iceman might incur while during
business in the name of “Top Gun Avionics Supplies” after his withdrawal from one partnership?
a. Yes, Goose can be held liable since the partnership merely continued its existence after he
withdrew from it.
b. Yes, Goose can be held liable under the doctrine of estoppel since there was no proper
notification or publication of his retirement from the partnership.
c. No, Goose already withdrew from the partnership and he cannot be held liable for debts which
were incurred after he retired from the same.
d. No, under the law, only Maverick and Iceman, who are the retaining partners, are liable to third
persons as regards partnership debts after its dissolution.
39. Lisa used her savings from her salaries amounting to a little more than P2,000.00 as capital in
establishing a restaurant. Rose gave the amount of P4,000.00 to Lisa as financial assistance with
the understanding that Rose would be entitled to 22% of the annual profits derived from the
operation of the restaurant. After the lapse of 22 years, Rose filed a case demanding her share in
the said profits. Lisa denied that there was a partnership and raised the issue of prescription as
Rose did not assert her rights at anytime within ten (10) years from the start of the operation of the
restaurant. Is Rose a partner of Lisa in the business?
a. Yes, because there is an agreement to contribute to a common fund and an intent to divide
profits.
b. Yes, because Rose donated to Lisa the amount of P4,000.00 to add to her capital.
c. No, because Lisa merely borrowed the amount of P4,000.00 from Rose and she will be paying
the same by giving to Rose 22% of the annual profits derived from the operation of the
restaurant.
d. No, Rose gave the amount of P4,000.00 to Lisa by way of gratuity and it was Lisa who
volunteered to give Rose a 22%-share in the annual profits of the restaurant.
40. In the problem stated in No. 39. What is the nature of the right to demand one’s share in the profits
of a partnership?
41. Wei, Lan, Jiang and Jin organized a general partnership with Wei and Lan as industrial partners
and Jiang ang Jin as capitalist partners. Jiang contributed P50,000.00 and Jin contributed
P20,000.00 to the common fund. By a unanimous vote of the partners, Wei and Lan were
appointed managing partners, without any specification of their respective powers and duties. Yuan
applied for the position of Secretary and Yi applied for the position of Accountant of the partnership.
The hiring of Yuan was decided upon by Wei and Lan, but was opposed by Jiang and Jin. The
hiring of Yi was decided upon by Wei and Jin, but was opposed by Lan and Jiang. Can Yuan be
hired as Secretary?
a. Yes, the industrial partners have the obligation to select and hire the employees for the
partnership
b. No, the hiring of office employees should be with the unanimous decision of all partners.
c. Yes, the decision of hiring Yuan prevails because it is an act of administration which can be
performed by the duly appointed managing partners, Wei and Lan.
d. No, the decision of hiring Yuan should be with the concurrence of the partner who has the
majority share in the partnership.
42. In problem No. 41, can Yi be hired as the Accountant for the partnership?
a. Yi cannot be hired because there is a deadlock between the decision of Wei and Lan, and
Jiang, who owns the controlling interest, also opposed the decision to hire Yi.
b. Yi can be hired because the decision of only one managing partner is enough to hire employees
for the partnership.
c. Yi cannot be hired because he is not qualified to be an accountant.
d. Yi can be hired because an accountant is needed in order to run the business of the
partnership.
a. General partners enjoy preference to general partners in the application of the firm assets to
their respective claims.
b. A continuing partner is liable to the new obligations of the partnership continuing business.
c. The firm creditor enjoy preference over the creditors of each partner as regards the partnership
property.
d. 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 debts or obligations of the firm.
45. Pete and Mitchell formed a partnership to operate a car repair shop in Quezon City. Pete provided
the capital while Mitchell contributed his labor and industry. On one side of their shop, Pete opened
and operated a coffee shop, while on the other side, Mitchell put up a car accessories store. Can
Pete engage in such separate business?
a. Yes, being a capitalist partner, he is allowed to engage in a business which is not the same kind
of business as the partnership is engaged in.
b. No, regardless of whether or not he is a capitalist or industrial partner, partners are not allowed
to engaged in another business.
c. Yes, because he had an agreement with Mitchell to the effect that both of them can open
businesses of their own.
d. No, only an industrial partner is allowed to engage in another business which is not similar to
the business of the partnership.
46. In the problem in No. 45, is Mitchell allowed to engage in such separate business?
a. Yes, being an industrial partner, he is allowed to engage in a business which is not the same
kind of business as the partnership is engaged in.
b. No, regardless of whether or not he is a capitalist or industrial partner, partners are not allowed
to engaged in another business.
c. Yes, because he had an agreement with Pete to the effect that both of them can open
businesses of their own.
d. No, being an industrial partner, he may not engage in any other business unless their
partnership expressly permits him to do so.
47. Hendrick, JP, and Jan entered into a contract of partnership with an agreement that their
contribution to the common fund would be as follows:
Hendrick – P10,000.00
JP – P20,000.00
Jan – 13 hectares of farmland.
However, no written contract was executed among them since, according to them, they are spiritual
brothers and they trust each other. Is their contract valid?
a. Yes, an oral contract of partnership is valid since no form is required for its validity.
b. Yes, a partnership is a contract between the parties and it is valid if legally competent parties
reach an agreement whether verbally or in writing as long as the essential requisites of a
contract: consent, object certain, and cause of obligation, are present.
c. No, if the partnership agreement involves contribution of an immovable property or a real right,
the contract of partnership shall be valid only if it is in a written instrument, and the inventory of
said property signed by the parties must be attached to said instrument.
d. No, if the partnership agreement involves contribution of an immovable property or a real right,
the contract of partnership shall be valid only if it is in a written public instrument, and the
inventory of said property signed by the parties must be attached to said public instrument.
49. A, B and C are siblings. They acquired lots with the intention of dividing the lots among themselves
for residential purposes. However, they abandoned their original purpose because of the high cost
of construction and decided to resell the properties and dividing the profits in the process. Is there
partnership between them?
a. Yes, because their intention in reselling the property is to divide the profits among themselves.
b. No, because the original intention of the siblings is to acquire lots with the intention of dividing
these among themselves for residential purpose.
c. No, because they just reimbursed each other with the money which they chipped in to buy the
lots.
d. No, because the division of profits was merely incidental to the dissolution of the co-ownership.
Prepared by: ATTY. MICHELLE G. BERNARDO, LL.M. and ATTY. JESSA G. BERNARDO
SET _____
SECTION_____________