business law questions

Question

Question 1

I. A partnership is a separate juridical entity, the shares to be paid out to the partners is necessarily limited only to its total resources

II. A partnership must refund the shares of the partners, the amount to be refunded is necessarily limited to its total resources.

III. Before the partners can be paid their shares, the creditors of the partnership must first be compensated. After all the creditors have been paid, whatever is left of the partnership assets becomes available for the payment of the partner’s shares.

a. Only I is correct

b. Only II is correct

c. All are true

d. All are false

Question 2

The change in the relation of the parties caused by any partner ceasing to be associated in the carrying on, as might be distinguished from the winding up of, the business.

a. Dissolution

b. Liquidation

c. Termination

d. Winding up

 

Question 3

X, Y and Z are partners in XYZ partnership. X and Y contributed P10,000 each while Z contributed his service. After payment of the partnership liabilities to creditors, only P15,000 remains. In the absence of stipulation to the contrary the share of Z shall be:

a. P5,000.00

b. P10,000.00

c. P3,000.00

d. Zero

 

Question 4

If a partner is insolvent, the first in the order of preference in the distribution of his assets is:

a. Partnership creditors

b. Separate creditors of the partner-debtor

c. Partner’s contribution to the partnership

d. Pro-rata between the separate creditors and the partnership creditors

 

Question 5

I. The dissolution of the partnership means that the juridical entity was immediately terminated and that the distribution of the assets to its partners should perfunctorily follow.

II. 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 divided and distributed to the partners.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 6

I. A universal partnership of present property shall include the profits which the partner’s may acquire therewith such as properties to be acquired through legacy, donation or inheritance.

II. After dissolution, the partners may still enter into contracts in the name of the dissolved Partnership if it is for the purpose of winding up.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 7

I. The legal personality of the expiring partnership persists for the limited purpose of winding up and closing of the affairs of the partnership.

II. After dissolution, all the transactions of the partnership should not only pertain to liquidation which will happen over a period of time.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 8

I. The transfer by a partner of his partnership interest does not make the assignee of such interest a partner of the firm, nor entitle the assignee to interfere in the management of the partnership business or to receive anything except the assignee’s profits.

II. Generally understood to mean an organization formed for some temporary purpose, a joint Venture is likened to a particular partnership.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 9

I. As a rule, when a partnership is dissolved, any of the partners can bind the partnership.

II. Where the dissolution is caused by the act, death or insolvency of a partner, each partner is Liable to his co-partners for his share of any liability created by any partner acting for the Partnership as if the partnership had not been dissolved.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 10

I. The dissolution of the partnership discharges the existing liability of any partner.

II. The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner, but subject to the prior payment of his separate debts.  

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

 

Question 11

In extra-judicial liquidation, the following will wind-up the partnership, except:

a. The liquidating partner or partners as agreed upon by all of the partners.

b. The partner who have not wrongfully dissolved the partnership.

c. The legal representative of the last surviving partner who is not insolvent.

d. The managing partner who has the controlling interest.

 

Question 12

The following are the rights of a partner who has not caused dissolution wrongfully, except:

a. To have the partnership property applied to discharge the liabilities of the partnership.

b. To have the surplus, if any, applied to pay in cash the net amount owing to the respective partners.

c. To be indemnified for damages caused by the partner who did not caused the dissolution wrongfully.

d. To continue the business in the same name either by themselves or jointly with others during the agreed term of the partnership and for that purpose may possess the partnership property.

 

Question 13

Where a partnership contract is rescinded on the ground of fraud or misrepresentation of one of the parties thereto, the party entitled to rescind is entitled to, except:

a. Right of lien or right of retention

b. Right of subrogation

c. Right of dissolution

d. Right of indemnification

 

Question 14

I. Generally, in the pursuit of a partnership business, its capital is either increased by profits earned or decreased by losses sustained.

II. As a general rule, upon the dissolution of a commercial partnership the succeeding partners or parties have the right to carry on the business under the old name.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

Question 15

I. The use by the person or partnership continuing the business of the partnership name, or the name of a deceased partner as part thereof, he shall make the individual property of the deceased partner liable for any debts contracted by such person or partnership.

II. The liability of a third person becoming a partner in the partnership continuing the business to the creditors of the dissolved partnership shall be satisfied out of the partnership property only, unless there is a stipulation to the contrary.

a. Only I is correct

b. Only II is correct

c. Both are true

d. Both are false

Answer 1

These questions appear to be based on the Philippine Civil Code provisions on partnership, dissolution, and winding up.

1. C — All are true. A partnership has a juridical personality separate from its partners. On liquidation, partnership creditors must first be paid; only the remaining assets can be distributed to the partners.
2. A — Dissolution. Dissolution is the change in the relationship of the partners caused by a partner ceasing to be associated in carrying on the business, as distinguished from winding up.
3. D — Zero. Z is an industrial partner who contributed services rather than capital. After outside liabilities are paid, the remaining P15,000 is insufficient even to return X's and Y's combined P20,000 capital contributions. Therefore, Z receives nothing from the remaining capital.
4. B — Separate creditors of the partner-debtor. When an individual partner is insolvent, his separate creditors have priority with respect to his separate property.
5. B — Only II is correct. Dissolution does not immediately terminate the partnership. The partnership continues for the limited purpose of winding up its affairs and terminates after winding up is completed.
6. B — Only II is correct. Statement I is false because property subsequently acquired by inheritance, legacy, or donation generally cannot be included in a universal partnership of present property, although its fruits may be included by stipulation. Statement II is true because partners may act after dissolution when necessary to wind up partnership affairs.
7. A — Only I is correct. The partnership's legal personality continues during winding up. Statement II is false because after dissolution, transactions generally should relate to winding up rather than continuing ordinary partnership business.
8. C — Both are true. Assignment of a partnership interest does not automatically make the assignee a partner or give management rights. A joint venture is also generally treated as analogous to a partnership formed for a particular undertaking.
9. C — Both are true. Dissolution does not automatically eliminate a partner's authority to bind the partnership; authority continues for winding-up transactions and can exist in certain transactions that would have bound the partnership before dissolution. The Civil Code also addresses contribution among partners for liabilities created following dissolution caused by a partner's act, death, or insolvency.
10. B — Only II is correct. Dissolution does not by itself discharge a partner's existing liability. A deceased partner's individual estate remains liable for partnership obligations incurred while the person was a partner, subject to the prior payment of separate debts.
11. D — The managing partner who has the controlling interest. This is not, merely by virtue of that status, one of the persons specifically entitled to conduct an extrajudicial winding up. Winding up may be performed by the partners designated by agreement, partners who did not wrongfully dissolve the partnership, or the legal representative of the last surviving non-insolvent partner.
12. C — To be indemnified for damages caused by the partner who did not cause the dissolution wrongfully. This is incorrect. The partner who wrongfully caused the dissolution is the one who may be liable for damages.
13. C — Right of dissolution. In rescission for fraud or misrepresentation, the special statutory rights include a lien/retention right, subrogation, and indemnification. “Right of dissolution” is not one of the three listed remedial rights.
14. A — Only I is correct. Profits normally increase partnership capital while losses decrease it. Statement II is too broad; succeeding parties do not have an unrestricted general right to continue using the old partnership name.
15. B — Only II is correct. Statement I is false because merely continuing to use the partnership name or a deceased partner's name does not make the deceased partner's individual property liable for new debts. Statement II correctly states the rule concerning the liability of a new partner joining the continuing business to creditors of the dissolved partnership.