Partnership, Agency and Trust (Atty.
Espedido Discussion)
404 (A.Y. 2018-2019)
August 9, 2018
1. Why is business law important? Business is very
prevalent. Many people venture into business and thus,
there is a need to regulate the business community and
impose order upon it. Honesty, goodwill and fairness
should be present in the relationships made in
businesses.
Laws on partnership began when 2 parties are involved
in the relationship. Conflicts arise, and then there is a
need to establish a law to regulate the business
organization.
2. When you talk of business organizations, we are
talking of juridical persons. God created natural
persons; the law created juridical persons. Tell me
the story of Genesis. (tell the story of Genesis;
emphasize that first, si Adam [SOLE
PROPRIETORSHIP], sunod si Eve [PARTNERSHIP] nya
Cain and Abel [CORPORATION])
3. What are the types of business organization? Sole
proprietorship, Partnership and Corporation
4. It is important to recall the concepts of ObliCon since
Partnership is just a contract. What do you remember
of ObliCon? The essential elements of a contract are
Cause, Object and Consideration. Absence of one would
render the contract void.
5. Consent must be freely given. If not, it is not a binding
agreement. Then, there is no contract at all. A minor,
for example has no capacity to enter into a contract
because the consent he gave is not freely given and
not binding. If the minor, for example, agrees to
marry, and the husband later on enters in a later
marriage, can he be guilty of bigamy? No, the first
marriage is not valid because the party was still a minor.
But of course, he may be liable for something else.
Subject matter— there must be something that they have
agreed upon, either to give something or render a service.
Contracts can either be Real (to deliver or give
something) or Personal (to do or render a service).
When we say consideration, we refer to the reason why
he entered into the contract. However, although
consideration is not indicated sometimes, it is presumed
unlike consent. Consent and subject matter must be
established. Consideration, on the other hand is
presumed, it need not be provided.
6. There can be several sources of obligations. What are
these? Law, contracts, quasi-contracts, delicts and
quasi-delicts.
The laws are sources of obligations (e.g. labor law to pay
minimum wage, taxation law to pay taxes, etc.). Delicts
are also a source (the Penal laws assign different
obligations when one commits a crime; criminally and
civilly liable). Quasi-delicts or torts are acts or omissions
without observing the required diligence and you cause
another injury or damage. Your obligation arises from
your failure to observe proper diligence and it caused
damage to another. Contracts and quasi-contracts are
self-explanatory.
1
In every relationship, basically the relationship is between
a debtor and a creditor. A contract talks about a debtor
and a creditor—somebody owes and someone is entitled
to collect. There is a difference however between a
creditor and an investor. In a debtor-creditor relationship,
the lender lends you money and the borrower obliges
himself to pay. Most likely, with interest after a certain
period. So that if the borrower fails to pay, the lender can
demand payment and foreclose the collaterals, if there
are any.
An investor, however, puts up the money but he cannot
demand the payment of his investment. An investor is not
a creditor, he invests on the condition that if the
investment succeeds, he will be entitled to his investment
plus more. If the business fails however, he cannot insist
to be given back his investment. He has to bear the risk
of loss.
In other words, the difference between a creditor and an
investor is that the investor assumes a risk.
7. A partnership is just a relationship. What have you
learned about partnership? The NCC defines
partnership as a contract where 2 or more persons bind
themselves to contribute money, property or industry in a
common fund with the intention of sharing the profits
among themselves.
8. What kind of contract is the contract of partnership?
It can either be personal or real. It would depend on what
the partners contribute to the common fund. It will be a
real contract if the partners contribute their money or
property. It will be a personal contract if the partners
contribute their industry.
9. How else do you want to describe partnership as a
contract? It is Consensual (perfected by mere consent),
Nominate (given a name under the law), Bilateral
(reciprocal; entered into between at least 2 people),
Onerous (there are obligations to perform), Commutative
(obligations are reciprocal), Principal (no need for another
contract to be valid) and Preparatory (it is a means to an
end).
10. It is consensual because? Because it is perfected by
mere consent. This means that there has already been a
meeting of the minds with regard the consideration and
subject matter of the contract.
11. It is a principal contract because? As distinguished
from accessory contracts, it does not depend for its
existence or validity upon some other contract.
12. It is onerous because? For them to reap benefits, they
still have to do something.
13. It is a preparatory contract because? It is a means to
start another contract during the partnership (e.g.
contracts of sale or contracts of loan)
14. It is nominate because? There is a special name or
designation in our law.
15. It is a commutative contract because? The undertaking
of one partner is equivalent to the other partner.
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Partnership, Agency and Trust (Atty. Espedido Discussion) 2
404 (A.Y. 2018-2019)

16. It is bilateral because? It is entered into by at least 2

people and the obligations are usually reciprocal.

17. Your parents gave you and your brother a brand-new

apartment. You will be sharing the rentals of the
apartment with your brother. Are you and your
brother partners? No, we are just co-owners of the
apartment. We own the indivisible thing together. The
main purpose of co-ownership is the common enjoyment
of the thing. Co-ownership is generally created by law, no
juridical personality and has a maximum period of 10
years where no division is made. Co-owners may dispose
his interest in the co-ownership, may not represent the co-
ownership and his death does not necessarily dissolve
the co-ownership.

18. When we say juridical personality, what do we mean?

It means a personality created by fiction of law. As a result
of which, the entity acquires rights (right to be sued,
acquire property, etc)

19. When a partnership is created, how many persons are

created? 3—partner 1, partner 2 and the partnership
itself. The partnership is the only juridical person in this
example.

20. Natural persons enjoy the Bill of Rights like right to

due process, equal protection clause, presumed
innocent until proven guilty, against double jeopardy,
against illegal searches and seizures, etc. Would a
juridical person enjoy those rights? The juridical
person enjoys right to due process, equal protection, to
acquire properties, to sue and be sued, to enter into
contracts, against illegal searches and seizures.

Some authors argue that the partnership enjoys the right

to life but we refer only to right to natural life so it does
not. The partnership does not enjoy the right to liberty
because liberty means freedom of movement. You cannot
send to jail the partnership itself but the partners
themselves. It is only right to property is enjoyed by the
partnership.

It may enjoy civil rights which is the right to property. The

partnership may acquire land and dispose the property. If
the property is named under the names of the partners, it
may be a co-ownership not a partnership. The partnership
also enjoys the rights of an owner of the property to
possess (jus possidendi), dispose (jus dispondendi), to
the fruits (jus fruendi) and use (jus utendi).

21. By corporations, what do you understand? A

corporation is created by law or operation of law,
incorporated by at least 5 incorporators. Its juridical
personality commences only form the date of the
issuance of the certificate of incorporation by the SEC. it
enjoys the powers expressly granted by law and those
implied from those granted and to its existence. Its
managements is vested with the board of directors or
trustees. The suit against a member of the BOD or BOT
must be in the name of the corporation. It has a right of
succession. The stockholders are liable only to the extent
of their subscribed shares. The stockholder can transfer
his share without the consent of the others. It has a max
of 50 years, extendible for another 50 years. It may adopt
any firm name as long as it is not the same as or similar
to any registered firm name. Its dissolution is only with the
consent of the state. The Corporation Code governs it.

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