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How to Master Partnership, Agency and Trust Concepts with this PDF Reviewer


What is Partnership Agency and Trust?




Partnership, agency and trust are three legal concepts that involve the relationship between two or more parties who agree to cooperate for a common purpose. They are different forms of business organization that have their own advantages and disadvantages. In this article, we will discuss the definition, types, formation, rights and obligations of each concept.




Partnership Agency And Trust Reviewer Pdf 16



Types of Partnership




A partnership is a contract whereby 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. Two or more persons may also form a partnership for the exercise of a profession. (See Art. 1767, Civil Code).


There are three types of partnership:


  • General partnership This is a partnership where all the partners have unlimited liability for the debts and obligations of the partnership. They also have equal rights in the management and conduct of the partnership business. (See Art. 1775, Civil Code).



  • Limited partnership This is a partnership where one or more partners have limited liability for the debts and obligations of the partnership, while one or more partners have unlimited liability. The limited partners do not participate in the management and control of the partnership business, unless they agree otherwise. (See Art. 1843, Civil Code).



  • Professional partnership This is a partnership formed by persons who are authorized to exercise a profession, such as lawyers, doctors, accountants, etc. The partners are liable for their own professional acts, but not for those of their co-partners. The partnership name must include the word "professional" or an abbreviation thereof. (See Art. 1767 par. 2, Civil Code).



Formation of Partnership




A partnership is formed by a contract of partnership, which may be oral or written. However, if the capital contribution consists of immovable property or real rights over immovable property, the contract must be in a public instrument. (See Art. 1771, Civil Code).


The contract of partnership may also be embodied in articles of partnership, which is a document that specifies the terms and conditions of the partnership, such as the name, purpose, duration, capital, profit-sharing, management, dissolution, etc. The articles of partnership may be amended by the consent of all the partners. (See Art. 1772, Civil Code).


A partnership must also be registered with the Securities and Exchange Commission (SEC) in order to acquire juridical personality and to enjoy the benefits and privileges granted by law to registered partnerships. The registration must be accompanied by a sworn statement of the assets and liabilities of the partnership, a copy of the articles of partnership, and other documents required by the SEC. (See Art. 1773, Civil Code; Sec. 14, Corporation Code).


Rights and Obligations of Partners




The partners have the following rights and obligations:


  • Fiduciary relation The partners must act with utmost good faith and loyalty towards each other. They must not engage in any activity that is contrary to the interest of the partnership or that may bring them an advantage over their co-partners. They must also account for any benefit or profit they derive from the partnership or from the use of its property or name. (See Art. 1807, Civil Code).



  • Contribution to common fund The partners must contribute to the common fund whatever they have promised in the contract of partnership, whether it is money, property or industry. They are also liable for any damage or loss caused by their negligence or fraud in making such contribution. (See Art. 1784, Civil Code).



  • Sharing of profits and losses The partners have the right to share in the profits and losses of the partnership in proportion to their respective contributions, unless they agree otherwise. However, a partner who has agreed to contribute only his industry cannot be obliged to share in the losses. (See Art. 1797, Civil Code).



  • Management and representation The partners have equal rights in the management and conduct of the partnership business, unless they agree otherwise. They may also appoint one or more managers who will have full authority to act on behalf of the partnership. However, any act that is not in accordance with the purpose of the partnership or that requires the consent of all the partners cannot be done by any partner or manager without such consent. (See Art. 1803, Civil Code).



  • Dissolution and liquidation The partners have the right to dissolve the partnership at any time by mutual agreement or by any cause provided by law, such as death, incapacity, insolvency, expiration of term, accomplishment of purpose, etc. Upon dissolution, the partnership must be liquidated, which means that its assets must be applied to pay its debts and obligations, and the remaining balance must be distributed among the partners according to their respective shares. (See Art. 1828-1841, Civil Code).



What is Agency?




Agency is a contract whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. (See Art. 1868, Civil Code).


The person who binds himself is called the agent; the person on whose behalf he acts is called the principal; and the person with whom he contracts is called the third person.


Types of Agency




There are three types of agency:


  • Express or implied agency This is an agency where the consent or authority of the principal is manifested by words, either orally or in writing. The words may be explicit or implicit from the conduct of the parties. (See Art. 1869-1870, Civil Code).



  • Ostensible or apparent agency This is an agency where the consent or authority of the principal is manifested by his acts or omissions which give rise to a reasonable belief that he has authorized or ratified the acts of another as his agent. (See Art. 1871-1873, Civil Code).



  • Agency by estoppel or ratification This is an agency where a person who is not really an agent acts as such without authority from another, but such other person accepts or confirms his acts as if he had authorized them beforehand. (See Art. 1874-1875, Civil Code).



Formation of Agency




the service or to do something for him. (See Art. 1868-1869, Civil Code).


Rights and Obligations of Principal and Agent




The principal and the agent have the following rights and obligations:


  • Fiduciary duty The agent must act with utmost good faith and loyalty towards the principal. He must not act beyond the scope of his authority or contrary to the instructions of the principal. He must also account for any benefit or profit he obtains from the agency or from the use of the principal's property or name. (See Art. 1887, Civil Code).



  • Compensation and reimbursement The principal must pay the agent the agreed compensation for his services, or if there is no agreement, a reasonable compensation. The principal must also reimburse the agent for all the expenses and damages he incurred in carrying out the agency, unless they are due to his fault or negligence. (See Art. 1872, Civil Code).



  • Authority and liability The agent must act within the limits of his authority as conferred by the principal or as implied by law. The agent is liable to the principal for any damage caused by his non-performance or breach of his obligations. The agent is also liable to third persons for his own torts or crimes committed in the course of the agency. (See Art. 1884, Civil Code).



  • Termination of agency The agency may be terminated by mutual agreement of the parties, by revocation of the principal, by withdrawal of the agent, by death, incapacity, insolvency, or dissolution of either party, by accomplishment of the object or expiration of the term of the agency, or by any other cause provided by law. (See Art. 1919-1932, Civil Code).



What is Trust?




Trust is a legal relationship whereby a person called a trustor transfers property to another person called a trustee for the benefit of a third person called a beneficiary. The trustee holds legal title to the property and has the duty to administer it according to the trustor's instructions and for the beneficiary's interest. (See Art. 1440-1441, Civil Code).


Types of Trust




There are two types of trust:


  • Express or implied trust This is a trust that is created by the intention of the parties, either orally or in writing. An express trust concerning an immovable property or any interest therein must be proved by a written instrument signed by the trustor or by his last will; otherwise it is void. An implied trust is one that is deduced from certain facts or circumstances that indicate an intention to create a trust without an express declaration. (See Art. 1443-1444, Civil Code).



the person who paid for it. A constructive trust arises from certain acts or omissions that constitute a breach of trust or a fraud by the trustee, such as when a person acquires property through undue influence, abuse of confidence, mistake, or misrepresentation; in this case, there is an implied trust in favor of the person who is prejudiced by such acts or omissions. (See Art. 1448-1456, Civil Code).


Creation of Trust




A trust is created by the following elements:


  • Intention of trustor The trustor must manifest a clear and unequivocal intention to create a trust relationship and to impose fiduciary duties on the trustee. The intention may be expressed or implied from the circumstances. However, no trust will arise if the intention is merely to benefit another without imposing any obligation on the trustee. (See Art. 1444, Civil Code).



  • Subject matter of trust The trust property must be certain and determinate or capable of being ascertained at the time of the creation of the trust or thereafter. The trust property must also be validly transferred or delivered to the trustee, unless it is already in his possession. The transfer or delivery may be made by any mode recognized by law, such as sale, donation, succession, etc. (See Art. 1447, Civil Code).



  • Beneficiary of trust The beneficiary must be certain or capable of being ascertained at the time of the creation of the trust or thereafter. The beneficiary must also have a present or future interest in the trust property that is vested or contingent. The beneficiary may be a natural or juridical person, or even an unborn child who may acquire rights upon his birth. (See Art. 1445-1446, Civil Code).



Rights and Obligations of Trustor, Trustee and Beneficiary




The trustor, trustee and beneficiary have the following rights and obligations:


  • Fiduciary responsibility The trustee must act with utmost good faith and loyalty towards the trustor and the beneficiary. He must not use or dispose of the trust property for his own benefit or for any purpose contrary to the terms of the trust or the instructions of the trustor. He must also account for any income or profit he derives from the administration of the trust property. (See Art. 1459-1460, Civil Code).



  • Administration and disposition of trust property The trustee has the duty and the power to administer and dispose of the trust property according to the terms of the trust or the instructions of the trustor. He must exercise reasonable care and skill in performing his functions and follow the standard of a prudent man. He may delegate some of his duties to another person if it is necessary or advisable, but he remains liable for any negligence or misconduct of such person. (See Art. 1461-1469, Civil Code).



the contrary. (See Art. 1470-1479, Civil Code).


Conclusion




Partnership, agency and trust are three legal concepts that involve the relationship between two or more parties who agree to cooperate for a common purpose. They have different definitions, types, formation, rights and obligations that must be understood and respected by the parties involved. They also have different ways of ending or terminating depending on the circumstances. The following table summarizes the main features of each concept:


Concept Definition Types Formation Rights and Obligations Termination --- --- --- --- --- --- Partnership A contract whereby 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. - General partnership- Limited partnership- Professional partnership - Contract of partnership- Articles of partnership- Registration with SEC - Fiduciary relation- Contribution to common fund- Sharing of profits and losses- Management and representation- Dissolution and liquidation - Mutual agreement- Any cause provided by law Agency A contract whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. - Express or implied agency- Ostensible or apparent agency- Agency by estoppel or ratification - Consent of parties- Capacity of parties- Form of agency contract - Fiduciary duty- Compensation and reimbursement- Authority and liability- Termination of agency - Mutual agreement- Revocation of principal- Withdrawal of agent- Any cause provided by law Trust A legal relationship whereby a person transfers property to another for the benefit of a third person. The trustee holds legal title to the property and has the duty to administer it according to the trustor's instructions and for the beneficiary's interest. - Express or implied trust- Resulting or constructive trust - Intention of trustor- Subject matter of trust- Beneficiary of trust - Fiduciary responsibility- Administration and disposition of trust property- Enforcement and termination of trust - Mutual agreement- Accomplishment of purpose or expiration of term- Any cause provided by law FAQs




Here are some frequently asked questions about partnership, agency and trust:


What are the advantages and disadvantages of partnership?




Some advantages of partnership are:


  • It is easy to form and operate.



  • It allows for pooling of resources and skills.



  • It provides flexibility and adaptability.



  • It enjoys tax benefits as profits are taxed only once at the individual level.



Some disadvantages of partnership are:


  • It involves unlimited liability for general partners.



  • It may cause conflicts and disagreements among partners.



  • It has limited capital and credit availability.



  • It lacks continuity and stability as it may be dissolved by any cause.

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