DECREE No. 38D REFERRING TO CONTRACT AND OTHER LIABILITIES
This Decree was adopted by the Council of State in Phnom Penh on October 28, 1988
· Pursuant to the Constitution of the People's Republic of Kampuchea (PRK);
· Pursuant to the Law on the Organization of the National Assembly and the Council of State of the PRK and its promulgation by Decree No. 04D, dated February 10, 1982;
· Pursuant to the Law on the Organization of the Council of Ministers of the PRK and its promulgation by Decree 03D, dated February 10, 1982;
· Pursuant to the Law on the Formation of the Judiciary and Prosecutor’s Office and its promulgation by Decree 02D, dated February 10, 1982;
· Pursuant to the Law on the Establishment of the People’s Supreme Court and the Prosecutor General's office attached to the People's Supreme Court, and its promulgation by Decree 28D, dated July 31, 1985;
· Pursuant to the Decree 34D, dated August 26, 1987, on the Organization of the People's Supreme Court and the Prosecutor General's Office attached to the People's Supreme Court;
· Pursuant to the Decree 07D, dated July 13 1982, regarding the competency and procedure for adoption of laws and regulations, and
· Pursuant to a request by the Council of Ministers, it is hereby decided that:
CHAPTER I: CONTRACTS
Section 1: General Provisions
Article 1:
A contract is an agreement freely entered into by two or more persons to create, change or terminate one or more obligations which bind them.
In the above definition, a person may be a natural person or a legal entity. A legal entity can enter into a contract through his/her own representative.
Article 2 :
Every contract shall link the personal interests of the contracting parties with the interests of society. The contracting parties shall deal in an atmosphere of trust and honesty, and every contract shall be executed according to the principles of social ethics, especially so as to abolish the exploitation of one party by another.
Section 2: Validity and Form of the Contract
Article 3:
A contract is valid provided that it:
· arises out of a real and free agreement.
· is made by parties who have capacity to enter into a contract.
· has a subject matter that is certain, possible to perform, lawful, and consistent with public order and good customs.
Article 4:
Contracts can be made orally or in writing . The law shall set up precise formalities in making a contract. Every contract not consistent with the formalities fixed by law shall be deemed void. Except where there is any provision to the contrary, contracts involving money, or item(s) worth more than 5000 Riels must be in writing.
Section 3: Voidness of Contracts
Article 5:
Every contract shall be deemed void
· that is illegal, and not consistent with public order or good customs.
· that is contrary to social interests or violating social ethics.
· whose subject matter is impossible to perform.
Article 6:
Every contract shall be deemed voidable
· that is not resulting from a real or free agreement
· that is made by a party lacking capacity to contract.
Article 7:
An agreement that is the result of mistake, duress, or fraud is not a valid agreement.
Article 8:
Mistake shall be a ground for avoiding a contract if there is a mistake as to the substance of the object which is the subject matter of the contract. Mistake as to person cannot be a ground for avoiding a contract except where the identity of the person is the basis of the contract.
Article 9:
Duress is a ground for avoiding a contract if such duress is in the form of mental or physical duress against a party to the contract, his/ her husband or wife, any ascendants, or any descendants of the party.
Article 10:
Fraud is a ground for avoiding the contract when there are acts of deception, dishonesty, or misrepresentation committed by one party to the contract without which the other party would not have entered into the contract.
Article 11:
When entering into a contract, should any party take advantage of the situation of another party to that party's detriment, then the aggrieved party can always sue to rescind the contract.
Article 12:
When making a contract, if there is a difference between the value of the subject matter offered by one party and the value of the consideration in return, then the aggrieved party can sue to rescind the contract on the ground that he/she never intended the difference to be a gift.
Article 13:
A party, who asserts that he/she entered into a contract because of mistake, duress or fraud, in order to avoid the execution of his/her obligations in the contract, shall bear the burden of proof of their assertion.
Article 14:
People who have fully reached 18 years of age can enter into a contract at any time, except detainees as provided in the law.
Article 15:
Minors under 18 years of age cannot create rights or duties and especially cannot enter into a contract without consent from their legal guardian.
A contract by a minor without prior consent from his/her legal guardian can be executed on condition that his/her guardian has agreed to such a contract after it has been entered into by the minor, but all contracts made by a minor to meet everyday life needs shall not require the consent of his/her legal guardian.
Article 16:
A party who enters into a contract with someone who lacks capacity cannot attempt to get out of his/her contract obligations on the ground of the incapacity of the other party.
Article 17:
Every contract dealing with items used in commercial trade shall clearly and separately describe the items according to their quality and quantity.
Future happenings can also be the subject matter of a contract. However, one cannot contract to sell the inheritance of a person who is still alive even with his consent.
Article 18:
Any person can sue to absolutely rescind a contract defined in Article 5, at any time .
Article 19:
Where a contract is voidable because of incapacity, mistake, duress, or fraud, a claim to avoid the contract can be made by the aggrieved party or by any person who has lawful interest in the claim. The aggrieved party or any person who has a lawful interest in the claim shall notify the other party. The party receiving the notification shall reply without delay.
After the notification the aggrieved party or any person having a lawful interest in the claim can sue to rescind the contract within a maximum period of 12 months.
Article 20:
The right to sue to rescind a contract as provided for in Article 19 shall cease to exist if, after suing, the party who has such a right agrees to carry out his/her obligations or agrees, in writing, to withdraw the action.
Article 21:
In the case where there is nullity of a contract, the situation prior to entering into contract shall be restored.
Section 4: Effects and Interpretation of the Contract
Article 22:
A contract is a legally binding agreement between the parties. Amendments to the contract can only be made with the consent of both contracting parties.
A contract shall be executed with honesty and according to the will of the parties.
A contract binds only the parties to the contract.
Article 23:
If the contract is not clear in meaning, that contract shall be interpreted according to common practices or customs of the place where the contract has been made, but the interpretation shall not conflict with the provisions of this law. If there is any ambiguity, the contract shall be interpreted in favor of the debtor party.
Article 24:
The debtor party shall fulfill his obligations under the contract by payment from his personal and real properties available now and in the future.
Section 5: Statute of Limitations for Contracts
Article 25:
Except where the law prescribes differently, obligations resulting from a contract shall be deemed to have expired if the creditor party has not sued for performance within 5 years of the date defined in the contract. Where such a date is not defined in the contract, the date of entering into the contract shall be such date.
Article 26:
The limitation period shall be postponed if the debtor party is absent from his/her residence and this absence has been certified by the local authorities according to the law. The complaint of the creditor shall also postpone the limitation period.
Article 27:
A debtor or guarantor can assert the statute of limitations. If the debtor or the guarantor fails to assert the statute of limitations, then the People's Court can do so on their behalf.
Article 28:
A debtor or guarantor who executes his/her obligations under the contract after the limitation period has expired cannot then make a claim for the amount of money or value given on the grounds that the limitation period has expired.
Section 6: The Execution of the Contract
Article 29:
Obligations in the contract shall be carried out in a timely and proper manner, particularly with regard to quality, quantity, place, and duration prescribed.
Article 30:
A party to the contract is
· a debtor when he has obligations to be executed.
· a creditor regarding the rights that he/she is entitled to receive.
Article 31:
A creditor shall not be compelled:
· to accept an object other than that which he/she is entitled to receive even though the value of the other object is equal or higher.
· to accept the partial execution of the contract. But depending on the goodwill and the difficulty of the debtor, the People's Court can extend or delay the time for execution of the contract and make an order to suspend the creditor's action. In such a case, the reasons for the decision shall be clearly stated, and the People’s Court shall exercise this power with great care.
Article 32:
The execution of the contract shall take place at the residence of the debtor if the contract has not specified a place.
Article 33:
If there is no specific duration of time within which to execute the contract, then the debtor can pay or provide at any time, and the creditor can request payment at any time.
CHAPTER II: SOME FREQUENTLY USED CONTRACTS
Section 1: Sale
Article 34:
A sale is a contract in which one person has the obligation to transfer ownership of an object or right to another person who has the obligation to compensate for the value of that object or right.
Article 35:
Contracts involving the following shall be deemed void:
· the sale of another's property.
· the sale of a husband's belongings to his wife and vice-versa.
· the sale of joint-tenancy property "that can not be divided " by one co-owner without the consent of the other co-owner.
1. Obligations of the vendo
Article 36:
The vendor shall maintain the sale item in good condition until the due date for delivery so that he is able to execute his obligations under the contract.
Article 37:
The vendor shall not change or modify the sale item by any means from the date of the sale until its delivery.
Article 38:
The vendor shall be liable for damage occurring to the sale item up until the time of delivery. The sale can be canceled if the item has been lost or substantially damaged prior to delivery or when the vendor cannot find a substitute. If the sale has been canceled, the vendor shall pay damages to the purchaser relating to the loss of the sale item or any damages resulting from the vendor’s fault.
Article 39:
The vendor shall inform the purchaser of all essential attributes and other substantial conditions relating to the sale item, particularly information concerning rights that others have in the sale item, if any. The vendor shall hand deliver to the purchaser all documents relevant to the sale.
Article 40:
The vendor shall hand over not only the main sale item but also any derivatives and accessories.
In the case of real property sale, the delivery of the property deed is deemed to be delivery of that real property. Expenses incurred in the delivery shall be the vendor’s responsibility unless otherwise stated in the sale contract.
Article 41:
Regarding real property, the conveying of the vendor's rights to the purchaser is deemed valid providing that the sale deed has been certified and registered. From the certification and registration date, a third party has no rights to the property. Regarding personal property, the conveying of the vendor's right is deemed valid and a third party has no right to object from the time the personal property is delivered into the hands of the purchaser except where the sale is done through certified deed. In the latter case, the third party cannot object from the day the deed has been certified.
Article 42:
The vendor is not responsible for any external defects but shall be liable for latent defects in existence prior to the sale. If the purchaser can prove that such a defect existed prior to the sale, then the purchaser can ask to rescind the contract or to reduce the price.
Where the purchaser refrains from buying or asks to reduce the price, the purchaser shall bring his claim within 1 year of the date of delivery. If no claim is brought within 1 year, the purchaser's silence shall constitute agreement.
Article 43:
The vendor shall guarantee the purchaser protection from any action by a third party to deprive the purchaser of the sale item, such action being a third party claiming a right to the sale item.
Article 44:
In the event of a third party threatening suit to deprive the purchaser of the sale item, the purchaser can refer the third party to the vendor immediately. The vendor, by any means, shall use his or her documents to prevent the third party from bringing a claim against the purchaser, or to defeat the third party interest by means of a court decision.
Article 45:
If the vendor, so called upon by the purchaser to act on his behalf, succeeds in resolving the problem with the third party, the purchaser is not entitled to damages.
If the vender is unable to resolve the situation, then legal action shall proceed as usual.
Article 46:
If the court decides to deprive the purchaser of the subject matter, the vendor shall return the amount received to the purchaser. In addition, the vendor shall be liable for damages. The amount of damages shall include the expense of making the contract and other relevant expenses incurred since the date of the sale.
Article 47:
In the event of vendor’s death, his obligations shall fall to his heirs.
Article 48:
If the vendor obtained the property by way of a felony or misdemeanor, then the purchaser, if so aware, can ask to rescind the contract even though there is no threat from a third party to deprive the purchaser of the property.
Contracts contrary to this shall be deemed void.
Article 49:
If the same property has been sold successively to many persons the last purchaser shall refer back to the immediate vendor to guarantee his rights. And this vendor, if need be, shall refer back respectively to his/her immediate vendor in the sale chain.
2. Obligations of the purchaser
Article 50:
The purchaser shall pay the contract price on the day and at the place already determined. If the date and the place are not stipulated in the contract, payment shall take place at the place of delivery.
Article 51:
The contract can impose on the purchaser an obligation to pay interest on the contract price if payment is late. The interest rate shall not exceed 5% per annum. Should the interest rate not be stipulated in the contract, the purchaser is liable to pay only the price mentioned in the contract, but where the sale item yields income or profit, the interest shall be calculated according to the rate set by law.
Article 52:
If the purchaser has received the sale item, and if a third party brings a claim to deprive the purchaser of the sale item, then the purchaser can postpone payment. The purchaser shall pay the vendor only if and after the problem with the third party is resolved.
Article 53:
The vendor is entitled to retain possession of the sale item until the purchaser delivers payment.
Article 54:
On the due date if no payment is made by the purchaser, the vendor can rescind the contract if he does not wish to bring an action for payment. As long as full payment is not made, the vendor can always rescind the contract.
Article 55:
The rescission of the contract requires both contracting parties to return to each other what they have received. The purchaser shall return the sale item with any interest and income gained. The vendor shall pay back the amount paid by the purchaser and shall pay interest according to the rate provided by law, calculated from each last payment date.
Section 2: Interest Bearing Loan
Article 56:
An interest bearing loan is a contract whereby one person delivers money to another person and the latter is obligated to repay that amount together with an additional amount according to the duration of the contract.
Article 57:
The contract shall be in writing. The contract shall clearly state the names of the parties, residence of the parties, loan amount, amount of interest, loan duration and maturity date. The borrower shall sign his name to the contract.
Article 58:
If the maturity date and the interest rate have not been provided for in the contract, it is presumed that the parties agree to contract for 1 year period without interest.
Article 59:
A lender shall be allowed to charge interest on a loan provided that there is an agreement to this between the contracting parties. The interest rate shall not exceed 5% per annum unless otherwise provided by law.
Article 60:
Any interest overcharged by the lender during the debt period shall be deducted from the principal amount. If the repayment is in excess of the principal amount and the interest allowed by law, the creditor shall be compelled to refund such excess to the borrower together with interest calculated from the date of repayment by the borrower. In this case the lender will be criminally liable according to the provisions of the criminal law in effect.
Article 61:
A legal action as to the interest cannot be commenced prior to the discharge of the contract. In the event of a borrower’s death, repayment of the entire debt can be demanded immediately by the lender and the obligation for repayment shall pass to the heirs of the deceased who shall be bound to pay the outstanding debt out of the deceased's estate and before the estate is distributed.
Article 62:
The lender shall deliver the loan deed or document certifying payment to the borrower when he repays the loan fully.
Article 63:
A interest bearing loan relating to personal property must comply with the provisions regarding the loan of money.
Section 3: Secured Personal Property
Article 64:
A secured personal property contract is a contract whereby a debtor delivers his personal property to a creditor to be held as security for a debt.
A creditor in possession of such secured property is entitled to be paid out of the proceeds of the sale of such property in priority to all other creditors.
Article 65:
A secured personal property contract must be in writing. The contract shall only be considered valid when the creditor is in possession of the secured property.
The amount of the debt and the secured property must be specified and described clearly in the contract. If the contract fails to specify the amount of interest and the date of payment, the debt shall be considered to have no interest for one year from the date the contract is signed.
Article 66:
A creditor is not entitled to dispose of the secured personal property as he pleases. The creditor is obligated to take reasonable care of and preserve the secured property. In the event that the secured property is damaged or lost through the creditor’s fault, he must repair the damage or compensate the debtor for the loss of, or damage to, the secured property.
Article 67:
Unless otherwise stipulated in the written contract, a creditor may not use or take profit from the secured personal property. The creditor is allowed to receive only the profit from the secured loan. Such profit shall be used for necessary expenses in priority to other uses.
If a creditor uses the secured property in breach of the terms of the contract, the debtor may file a complaint to withdraw the secured property.
Article 68:
If the creditor disposes of the secured property without the prior consent of the debtor, the creditor shall be criminally liable under the provisions of the criminal law in effect.
Article 69
When payment is due and the debt is fully paid, the creditor must restore possession of the secured property to the debtor. If a portion of the debt is still outstanding on the due date, the creditor may still maintain possession of the secured property until the outstanding balance is paid.
Article 70:
When payment is due and the debtor does not fulfill his obligations, the creditor may submit a request to the People's Court to have the secured property liquidated.
The proceeds acquired from the sale of the secured property shall be paid first to the creditor who is in possession of the secured property. The balance of the sale proceeds shall be paid to the debtor, or paid to any creditors to whom payment is due.
If the proceeds from the sale of the secured property are not sufficient to satisfy the debt, then the debtor still remains liable to the creditor for the outstanding balance.
Article 71:
A personal property secured contract shall be considered void if the contract stipulates that the creditor shall become the actual owner of the secured personal property in the event that the debtor fails his obligations under the contract .
Section 4: Services Contracts
Article 72:
A services contract is a contract whereby one party undertakes to perform the work for another party for a fee proportionate to the work.
Article 73:
If the fee is not specified in the contract, the court shall determine the fee according to customary practices at the place where the work was performed.
Article 74:
The work must be clearly described in the contract. If the work to be performed is not performed in compliance with the terms of contract, the hiring party may:
a) or may not accept the results of the work done by asking the contractor to pay damages and other compensation for any loss, if that occurs, to the employer, and in such case the contract may be terminated; or
b) shall require the contractor to make the necessary corrections within a specific time agreeable to both parties and require the contractor to pay out of his or her own money in order to comply with the terms of the original contract; or
c) shall accept the resulting work by reducing the fee.
Article 75:
If the time for completion of the work is specified in the contract and if the work is not completed within that period of time, the contract may be terminated notwithstanding the possible damages which the hiring party may claim for.
However, if delay in the work results from a force majeure, the hiring party may not claim for damages.
Article 76:
If the hiring party fails to advance money or supply raw materials within a certain time frame as stipulated in the contract, he may not terminate the contract on the basis of the work delay. The contractor can cancel the contract on the ground of such delays. In such a case, the contractor is entitled to receive a reasonable fee for the work that he has already completed.
Article 77:
The hiring party may terminate the contract at any time before performance has been completed, provided he pays to the contractor the fees and other expenses related to the work already performed.
Article 78:
If the work is destroyed before it is completed through the contractor’s fault and if the hiring party has paid the contractor in advance and/or supplied materials, the hiring party is entitled to receive compensation equal to the value of the loss and other expenses which he has paid toward the works. However, if the damage is caused by a force majeure, both contracting parties have no legal recourse against each other .
Article 79:
The contractor shall be liable for the performance of the work by his employees.
Article 80:
If the work is completed, the contractor may collect his fees upon delivery of the contracted work. Payment of the fee shall be deemed to be an implied acceptance of the work done.
Article 81:
If, after delivery of the work to the employer, any defects in the work become apparent as the result of the contractor’s fault, the contract can
· be rescinded; or
· part of the fee shall be refunded to the hiring party; or
· the repairs shall be done at the contractor's expense.
The hiring party may only make such a claim when the defect becomes apparent during the period under warranty. If the period of warranty is not stipulated in the contract, the hiring party may claim anytime within three years from the date of acceptance of the work.
Article 82:
Where the contractor is a natural person and where the contractor dies, the contract shall be void.
Section 5: Contract for Carriage
Article 83:
A contract for carriage is a contract whereby a person who is a carrier undertakes to transport passengers, luggage or goods from one place to another for a fee determined by an agreement of the parties or a fee determined by the state .
Article 84:
Where a carrier delays in delivery, a sender is entitled to terminate the contract and require:
the carrier to pay transportation fees and any money paid in advance to other carriers;
·the carrier to pay compensation for any damage caused by delay in delivery, loss or destruction of the transported luggage or goods, or decrease in price caused by such delay in delivery.
Article 85:
Where the sender delays in delivering the luggage or goods being transported, a carrier is entitled to require the sender to pay compensation for any loss or damages and to terminate the contract.
Article 86:
A carrier is liable for the loss of, or damage to, the transported luggages or goods. A carrier is also liable for any accidents to the passengers during his transport.
A carrier is not liable if the injury is caused by a force majeure or by the negligence of the passengers themselves.
If the luggages or goods being transported are stolen, the carrier shall be liable to pay for the stolen luggages or goods.
Article 87:
A carrier is liable, with respect to the luggages or goods, for any loss or damage that is not caused by a force majeure or by the natural destruction of the luggages or goods themselves.
The carrier is particularly liable for any loss or damage resulting from unreasonable delays in the transport.
Article 88:
Any action for compensation for loss or damage shall be commenced within one year from the date an owner becomes aware that the luggage or goods have been lost or damaged or from the date the passengers become victims.
Section 6: Bailment Contract
Article 89:
A bailment contract is a contract whereby a person (the "bailee") keeps in custody the personal property of another person ("the bailor") gratuitously or for a fee, and returns that property to the bailor or to a person clearly designated by the bailor at a specified time or at the time when the property is demanded back.
Article 90:
As a fundamental rule, if no fee is specified in the contract, a bailee shall receive no fee.
Article 91:
A bailee must preserve and return the bailed property at a specified time or at the time when the bailor demands it back.
The bailee is not entitled to use the bailed property without the authorization of the bailor.
Article 92:
A bailee is liable for any damage or loss to bailed property resulting from fault on the part of bailee.
If the bailed property is damaged or lost by reason of a force majeure, no compensation shall be awarded.
Article 93:
If the bailment is for a fee and the bailed property is lost by reason of theft, a bailee is bound to pay compensation.
If the bailment is gratuitous and the bailed property is lost by reason of a theft, the bailee is not bound to pay compensation if the bailee has sufficient evidence proving that he carefully safeguarded the bailed property.
However, a hotel owner, store owner or restaurant owner is liable for the loss through theft of the property of its guests or customers where such property is kept in the custody of the hotel owner or restaurant owner.
Section 7: Loan for Use
Article 94:
A loan for use is a loan without any interest or fee. A person who lends property to someone else for use retains ownership in the property.
Article 95:
A borrower may not sell, exchange or lend the loan property without the consent of a lender.
Article 96:
A borrower must use the loaned property in a good and proper manner, safeguard it as if he is the owner and use it in a manner consistent with its purpose.
The borrower is liable for the expenses of safeguarding and maintaining the loaned property.
Article 97:
If the loan property is damaged or lost by reason of a force majeure, the borrower is not liable for any compensation. However, where the damage or loss is the result of the borrower’s fault, the borrower shall be liable for compensation to the lender.
Article 98:
A borrower must return the loaned property to the lender at the time specified in the contract. If no time is specified in the contract, the lender may demand the return of the loaned property at any time.
Article 99:
If a borrower improperly uses the loaned property in a manner inconsistent with its normal function, the lender may immediately demand back his property, even prior to the time for return as specified in the contract.
Section 8: Lease
Article 100:
A lease is a contract wherein a lessor promises to lease his property for a fee to a lessee to use temporarily.
The property to be leased may be either real property or personal property.
Article 101:
The duration of a lease may or may not be limited, but where the duration of the lease is not limited, the duration of the lease may not exceed 12 years.
A lease contract which has as its duration a period of more than one year must be in writing.
Article 102:
Where a lease contract is not in writing and one party denies the existence of the lease, the evidence to prove the lease shall be based on the testimony of witnesses so long as the duration of such lease contract does not exceed one year.
Article 103:
A lessor shall lease to a lessee only property which is in good condition so as to prevent any incidents that may cause the lessee undue problems, and shall guarantee the lessee protection from claims of any third person who asserts any right to the leased property such as a right of mortgage.
Article 104:
A lessor is liable for major repairs to the leased property except where otherwise provided by law or in the contract.
Article 105:
A lessee shall pay rent according to the price fixed in the terms of the contract, shall use the property in accordance with its normal function and for the term specified in the contract, shall maintain the leased property in good condition and shall be liable for any minor or simple repairs except where otherwise provided for in the law or the contract.
Article 106:
When discharging the contract, the lessee shall return the leased property to the lessor in the same state or condition as when he took the property--that is, with no destruction, no damage and no alteration to the leased property resulting from use of the property by lessee during the lease.
Article 107:
A lessor may terminate the contract if a lessee does not perform his obligations or if the lessee improperly uses the leased property in a manner inconsistent with its normal function or uses it in a manner which causes damage to the leased property
Article 108:
A lessee may not sublet the leased property to any other persons without the consent of the lessor except where otherwise provided for in the contract.
Article 109:
A lessee who sublets the property shall still be bound by the same obligations under the contract with the lessor, and in particular shall be liable to the sub-lessee regarding unpaid rent, and any destruction or damage to the leased property resulting from the sublease.
Article 110:
Where a lease contract has no limited duration period, a party may not terminate the contract unless there is notification in advance of at least one month or at most two months.
Article 111:
Where a lessor dies, the contract remains in effect. If a lessee dies, the contract shall not remain in effect unless the lessee's heirs want to continue with the lease contract.
Section 9: Contract of Guarantee
Article 112:
A contract of suretyship is a contract whereby a third party called a "guarantor" agrees with the creditor by contract to undertake or to perform the obligations of the debtor in the event that the debtor fails to perform his obligations to the creditor. This contract shall be in writing.
Article 113:
One debt may have any number of guarantors.
Article 114:
Any contract of guarantee relating to obligations which are void by law shall be of no effect. But if such voidness results from the debtor being a minor, then the contract shall be deemed valid.
Article 115:
Legal action against the guarantor can be taken either concurrently with an action against the debtor, or later.
Article 116:
After the decision of the People's Court, the guarantor can request that the properties of the debtor be seized prior to the guarantor's property.
Article 117:
After the sale of the debtor's properties, if the amount obtained is not sufficient to satisfy the debt, then the guarantor shall be liable for the balance.
Article 118:
In a case where there are many guarantors, each guarantor shall be liable for the entire debt as though there were only one guarantor. All guarantors shall be jointly liable for the payment of debt.
Article 119:
Where the guarantor has paid the debt of the debtor, all rights vested in the creditor shall pass to the guarantor. The guarantor is entitled to demand from the debtor repayment of the amount he has paid, as well as any interest and other expenses incurred from the date the debt was paid.
Article 120:
Where one guarantor pays the debt of the debtor, and the debtor is in a state of insolvency, this guarantor can take legal action to recover such payment from any other guarantors who shall in turn pay their share individually.
CHAPTER III: OTHER LIABILITIES
Article 121:
Any person who causes damages to others by reason of his own fault shall be liable in compensation for such damage. Even where the damage is caused by involuntary acts such as carelessness or negligence in control or maintenance, the offender shall be liable.
Article 122:
The insane and minors under 14 years old are deemed incompetent. These persons shall not be liable for damage they have caused to others.
Article 123:
Parents, guardians, and other persons who are in charge of or take care of incompetent persons shall be personally liable for damage caused by those incompetent persons.
Article 124:
Minors aged over 14 years but less than 18 years shall be liable for damage they have caused to others. To compensate for the damage such minors and their parents or guardians shall be jointly liable. In a case where the minors have no funds or no property out of which to compensate for the damage, their parents or guardians shall pay instead.
Article 125:
State, social, and collective organizations or enterprises shall be liable for damage resulting from the actions of their officials, staff, workers, at the time of, or while performing work for their employer.
Article 126:
Employers shall be liable for damage caused to others, due to acts committed by their employees during, or at the time of, performing work for the employer.
Article 127:
Owners of animals, or persons who use animals, shall be liable for damage caused to others by such animals while under their control or where such damage occurred during any time that the animals had escaped or were lost.
Article 128:
Property owners shall be liable for damage caused to others if such damage is due to negligently failing to properly maintain, control or repair the property.
Article 129:
Where damage is caused by a group of offenders, that group shall be jointly liable to the victim. In some cases, the People's Court can decide that each offender shall compensate the victim in proportion to his level of participation in the commission the offense.
Article 130:
Where an offender who is jointly liable with others has paid by himself the whole compensation, he can request a proportionate contribution from the others according to their level of their involvement in the commission of the offence.
Article 131:
Where an organization or a person is responsible for damage caused by another person, that organization or person is entitled to take legal action against that other person to recover the damages.
Article 132:
In a case where the damage is caused partly by the victim, he shall be liable for his part of that damage.
Article 133:
Any person who has caused damage to others is not liable to bear the responsibility resulting from such damages if:
1. The damage was caused by a force majeure,
2. The damage was caused entirely by the fault of the victim.
Article 134:
If the damage occurs in a situation where the victim voluntarily agreed to assume the risk of such damage, and if it does not affect or threaten the social interests, no compensation for such damage will be awarded.
Article 135:
The limitation period for claiming compensation for damages will be limited to three years.
CHAPTER IV: FINAL PROVISIONS
Article 136:
All contracts which have been signed before the promulgation of this Decree and are not consistent with it shall be solved through the policies of the Party and of the state, or through equity, customs, and traditions.
The settlement of the above said contracts is available only for five years since this Decree has become effective.
Article 137:
The Council of Ministers, the People's Supreme Court, the Prosecutor General attached to the People's Supreme Court shall be responsible for the implementation of this Decree within their respective capacities .
Article 138:
This Decree shall become effective upon its promulgation.
Phnom Penh, 28 October 1988
For the Council of State
President
Signature and Seal
HENG SAMRIN
Saturday, January 17, 2009
Adultery Law (law on monogamy)
Kingdom of Cambodia
Nation Religion King
Law on Monogamy
Chapter I
General Provisions
Article 1:
The purpose of this law is to protect dignity, to strengthen harmony and happiness in families, and to ensure rights and respect between a husband and a wife in accordance with article 45 of Constitution of Kingdom of Cambodia and in addition to the laws already in force.
Article 2:
A Khmer citizen of either sex who is married must sincerely respect the principles of monogamy, of one husband and one wife, by registering their marriage in front of Commune Council Members pursuant to the Law on Marriage and Family.
Chapter II
Definition, Guilty and Procedure
Article 3:
Monogamy is a marriage in which one man has only one wife and one woman has only one husband. Marriage is a solemn contract by which one man and one woman establish a union that is sanctioned by law and may not be broken only at their wishes.
The marriage shall be dissolved if:
§ a spouse is dead
§ a court has made a final decision for divorce
§ A spouse has been missing for more than one year without any news about him/her whether he/she is still alive or dead
Article 4:
Bigamy is the act of a person who is already married contracting another marriage.
A person commits the offence of bigamy if they register his/her new marriage to another person while his or her prior marriage has not been dissolved..
An accomplice shall be equally liable for conviction and punishment.
Article 5:
It shall be considered as incest if a man and a woman who are closely related by blood or affinity have sexual intercourse.
Article 6:
A person commits the offence of incest if:
§ he/she has sexual intercourse with a person closely related by blood or all direct lines of affinity, either legitimate or illegitimate or adoptive.
§ he/she has sexual intercourse with a person within his/her collateral lines, whether legitimate, illegitimate, adoptive, born from the same mother, born from the same father, born from the same parents, related by blood, or related by marriage up to and including the third level.
A person does not commit incest if after their spouse dies they have sexual intercourse with a person within his or her collateral lines of second or third level.
Article 7:
Adultery is the act of a married man having sexual intercourse with a woman who is not his wife, or the act of a married woman having sexual intercourse with a man who is not her husband
A person commits the offence of adultery if:
§ he has sexual intercourse with another woman while he is still married to his wife, and his marriage is not yet dissolved.
§ she has sexual intercourse with another man while she is still married to her husband, and her marriage is not yet dissolved.
Article 8:
At the request of the spouse of the suspect, the prosecutor may discontinue any prosecution under article 7.,
Chapter III
Penalties
Article 9:
Anyone convicted of the offences in article 4 of this law will be sentenced to a term of imprisonment of between 6 months and 1 year or a fine of between 200,000 riels to 1,000,000 riels or both,.
Article 10:
Anyone convicted of the offences in article 6 and article 7 of this law will be sentenced to a term of imprisonment of between 1 month and 1 year or a fine of between 200,000 riels and 1,000,000 riels, or both.
Chapter IV
Final Provisions
Article 11:
This law is not retroactive.
Article 12:
Any provisions of earlier laws contrary to this law are hereby nullified.
Nation Religion King
Law on Monogamy
Chapter I
General Provisions
Article 1:
The purpose of this law is to protect dignity, to strengthen harmony and happiness in families, and to ensure rights and respect between a husband and a wife in accordance with article 45 of Constitution of Kingdom of Cambodia and in addition to the laws already in force.
Article 2:
A Khmer citizen of either sex who is married must sincerely respect the principles of monogamy, of one husband and one wife, by registering their marriage in front of Commune Council Members pursuant to the Law on Marriage and Family.
Chapter II
Definition, Guilty and Procedure
Article 3:
Monogamy is a marriage in which one man has only one wife and one woman has only one husband. Marriage is a solemn contract by which one man and one woman establish a union that is sanctioned by law and may not be broken only at their wishes.
The marriage shall be dissolved if:
§ a spouse is dead
§ a court has made a final decision for divorce
§ A spouse has been missing for more than one year without any news about him/her whether he/she is still alive or dead
Article 4:
Bigamy is the act of a person who is already married contracting another marriage.
A person commits the offence of bigamy if they register his/her new marriage to another person while his or her prior marriage has not been dissolved..
An accomplice shall be equally liable for conviction and punishment.
Article 5:
It shall be considered as incest if a man and a woman who are closely related by blood or affinity have sexual intercourse.
Article 6:
A person commits the offence of incest if:
§ he/she has sexual intercourse with a person closely related by blood or all direct lines of affinity, either legitimate or illegitimate or adoptive.
§ he/she has sexual intercourse with a person within his/her collateral lines, whether legitimate, illegitimate, adoptive, born from the same mother, born from the same father, born from the same parents, related by blood, or related by marriage up to and including the third level.
A person does not commit incest if after their spouse dies they have sexual intercourse with a person within his or her collateral lines of second or third level.
Article 7:
Adultery is the act of a married man having sexual intercourse with a woman who is not his wife, or the act of a married woman having sexual intercourse with a man who is not her husband
A person commits the offence of adultery if:
§ he has sexual intercourse with another woman while he is still married to his wife, and his marriage is not yet dissolved.
§ she has sexual intercourse with another man while she is still married to her husband, and her marriage is not yet dissolved.
Article 8:
At the request of the spouse of the suspect, the prosecutor may discontinue any prosecution under article 7.,
Chapter III
Penalties
Article 9:
Anyone convicted of the offences in article 4 of this law will be sentenced to a term of imprisonment of between 6 months and 1 year or a fine of between 200,000 riels to 1,000,000 riels or both,.
Article 10:
Anyone convicted of the offences in article 6 and article 7 of this law will be sentenced to a term of imprisonment of between 1 month and 1 year or a fine of between 200,000 riels and 1,000,000 riels, or both.
Chapter IV
Final Provisions
Article 11:
This law is not retroactive.
Article 12:
Any provisions of earlier laws contrary to this law are hereby nullified.
Starbusk's Marketing Plan in Cambodia
Starbucks’ 2009 Marketing Plan
Executive Summary
Starbucks Corporation is the largest company in the world which has its branch 43 countries and become the most respect and well-known company in the world. Starbucks plan is to look up the third world country to increase its market share in order making more profit. According to Starbucks research showed that Cambodia is excellent place that it should invest company to other third world countries. Starbucks will open its head branch office in Cambodia in the beginning of 2009. Therefore, Starbuck need a solid marketing plan which necessary to archive its marketing objectives.
The 2009 Starbuck Marketing Plan in Cambodia is not looking up profit in its initial year; however, its marketing objective is e to increase Market Share and Expand Consumer Awareness between 40 and 60 percent in Phnom Penh territory over 2009 planning period.
The sale revenue is $500,000 where the profit margin stays in approximately between $0 and $5000. The requirement of marketing budget will be $100,000. There would be details information as below:
Market Situation
Starbucks Market’s Definition: is the business that mainly sale coffee with providing quality and service, and there are more products of coffee related items and bakery.
Starbucks Target Market: Starbucks target customer is mainly focus on the wealth people who generally drink coffee in the modern shop, and their expected focus on maximizing quality, service, and something new (innovation). According to research, only 20 percent of the customers within Phnom Penh territory who generally are the potential customers drink coffee in the modern coffee shop. Starbucks mission is to catch up 10 percent of its potential customer in its 2009 planning period. Starbucks potential target market will specialize extremely on Men from 18 that have middle income and high income who want drink coffee with maximizing quality and service.
Market Trend: Even though financial crisis of the world, but it does not affect the buying behavior of the customer because it is general habit that customer need to drink coffee everyday.
Product situation
Coffee: Starbucks offers coffee lovers a selection of coffees from around the world. Starbucks coffee buyers personally travel to the coffee growing regions of Latin America, Africa/Arabia and Asia/Pacific to select the highest-quality Arabica beans. When these quality beans arrive at one of the company’s four roasting facilities, starbucks professional roasters pursue the art of creating the rich signature Starbucks RoastTM. This dark roast is not just a color. It is the cumulative result of expert roasters knowing coffee and bringing balance to its entire flavor attributes.
Coffee & More: In addition to quality coffee, Starbuck features a variety of hand-crafted beverages, Tazo*teas, EthosTM water, pastries and, in some markets a selection of sandwiches and salads. Starbucks merchandise includes exclusive espresso machines and coffee brewers, unique confections and other coffee- and tea-related items.
Competitive Situation
Starbucks major competitors in the coffee market are Sentiment, Presco, and Lucky. Each competitor has a specific strategy and niche in the market. Sentiment is an example that it offers a lot of products of coffee and more related products which covering the whole price range. It plans to dominate the market by pricing strategy and expand a heavy advertising.
Microenvironment situation
Economy: As the survey conducted by ministry of economy and finance (MoCaF) reported that Cambodia economic will growing up at least 7 percent even though there are instability economic due to financial crisis, so this is the significance of Starbuck to operate its invest.
Law concerning on business investment: For these several year, National Assembly (N.A) have made and adopted many commercial laws and Intellectual Property (IP) Rights laws such as
· The Law Concerning on Marks, Trade Names, and Acts of Unfair Competition
· Law on the Patents, Utility Model Certificates and Industrial Designs
· Law on Copyrights and Related Rights
· The law on the Management of Quality and Safety of Products and Services
· Law on Commercial Rules and Register and Law
This law is necessary for the current investor like starbucks to concentrate.
Government Regulation: Government plays important roles in the body which to regulate and maintain the stability of society as well as the business aspects. More importantly, one aspect of Cambodia Government Policy is to motivate investors to invest in its own country.
SWOT Analysis
Opportunity/Threats
The main opportunities facing Starbucks’ line are:
· There are few major competitors in the market.
· Since 1998 Starbucks formed a joint-venture partnership with Urban Coffee Opportunity. Now there are more than 114 Starbucks stores developed by UCO in cities that include Los Angeles, New York, so it will developed in Cambodia as well.
· Receive many awards which become the most respect and well-known brand in the world.
The main threats facing Starbucks’ line are:
· Financial Crisis bomb from USA which spread all over the world.
· 95 percent of domestic customers still do not know what Starbuck is.
· Cambodia still poor country which has not very much rich people.
Strength/Weakness Analysis
The strength of Starbucks:
· Starbucks’ name is the most respect and well-known brand in the world and a high quality and service image.
· Starbucks is massive corporation which have solid management, technique, and huge budget for investment.
The weakness of Starbucks:
· Starbuck is the new entrance in market which have lack market information
· Even though Starbucks is the famous brand in the world, they seem a new company as local people do not know about Starbucks yet
· Financial crisis that Threat Company invest abroad.
Issues Analysis
In this section of the marketing plan, there will be use the SWOT Analysis to define the main issues that the plan must consider which basically following:
· In the beginning of operation, should it sell only coffee product or more?
· Should it advertising its brand before entering market or after?
· Should it expand more budget to marketing research in order to get more concrete information about market and competitors or not?
Financial Objectives
In order to make an effective and efficiency at the beginning, Starbucks General Manager has clarified that each its departments must deliver a good financial performance. Starbucks’ Marketing Manager on the other hand has a special mission which set its objective are to produce only net profit about $0 to $5000.
Marketing Objectives
· Achieve total sales revenue of $500,000 in 2009
· Expand consumer awareness of the Starbuck brand from 40 – 60 percent
· Catch up Market Share about 10 percent the 50 percent of its potential customers
Marketing Strategy
Target Market: particular emphasis on Men buyer from 18 to more
Positioning: maximizing quality and service
Product line: add two-lower priced model to attract customers
Price: price somewhat above competitive brands
Service: quick and widely available service
Sale promotion: make two new events with promotion campaign that focus on luck draw prides and coupons discount
Marketing research: expand $15,000 Advertise on TV, Radio, Billboard, and so on.
Action Programs
Starbucks will carry out its marketing strategy as following:
· Before opening its central store at January 1st,2009 in Phnom Penh two weeks, Starbucks will expands its advertise on TV (including CTN, Bayon, TVK,…), Radio (98FM, 103FM, and 107FM,…), and Billboard (Somdech Hun Sen Garden, Chry JangVa Bridge,…). Mr. Sombo Sok, promotion manager will response this project at a planned cost $4500.
· January 1st, 2009, the ceremonies of celebrating new central Store will be take place. There will be invited many special guests including Managers of companies/NGOs, businessmen/women, government officers, and so on. There will be the lucky draw contest event which including many prides such as: 1st pride is one Honda Dream 2009 Motor, 2nd pride is three months free coffee drink at Starbuck, 3rd pride is Sony TV 29 inches. Mr. Tep Virak Marketing Manager will handle this event and assist by Mr. Sombo Sok, the Promotion Manager and Mrs. Chan Sophea, the Production Manager at estimate plan cost $10,000.
· March 8, 2009, the Khmer New Year celebration, Starbucks will establish the promotion event take place in Phnom Penh. This event will discounts to customer that buy a cup of coffee at Starbucks will get one free cake. If a group of customers buy three cups of coffee, they will get extra 10 percent of three cups discount coupons. If a group of customers buy 5 cups of coffee, they will get extra 15 percent of 5 cups discounts coupons. In addition to this event, there will be a small concert joining, but we have invited some famous singers’ superstars to make a surprise and excitement. Mrs. Chan Sophea, the Production Manager and Mr. Sombo Sok, the Promotion Manager will be responsible for this event at planned cost $ 7,000.
· September 9, 2009, there will be a concert event which calls Triple Nine Concert Event (999 Event). Starbucks Coffee Corporation will be the main sponsor in this event. Mr. Keang San, Distribution Manager and Mr. Sombo Sok, the Promotion Manager will responsible for this event at planned cost $5000.
Executive Summary
Starbucks Corporation is the largest company in the world which has its branch 43 countries and become the most respect and well-known company in the world. Starbucks plan is to look up the third world country to increase its market share in order making more profit. According to Starbucks research showed that Cambodia is excellent place that it should invest company to other third world countries. Starbucks will open its head branch office in Cambodia in the beginning of 2009. Therefore, Starbuck need a solid marketing plan which necessary to archive its marketing objectives.
The 2009 Starbuck Marketing Plan in Cambodia is not looking up profit in its initial year; however, its marketing objective is e to increase Market Share and Expand Consumer Awareness between 40 and 60 percent in Phnom Penh territory over 2009 planning period.
The sale revenue is $500,000 where the profit margin stays in approximately between $0 and $5000. The requirement of marketing budget will be $100,000. There would be details information as below:
Market Situation
Starbucks Market’s Definition: is the business that mainly sale coffee with providing quality and service, and there are more products of coffee related items and bakery.
Starbucks Target Market: Starbucks target customer is mainly focus on the wealth people who generally drink coffee in the modern shop, and their expected focus on maximizing quality, service, and something new (innovation). According to research, only 20 percent of the customers within Phnom Penh territory who generally are the potential customers drink coffee in the modern coffee shop. Starbucks mission is to catch up 10 percent of its potential customer in its 2009 planning period. Starbucks potential target market will specialize extremely on Men from 18 that have middle income and high income who want drink coffee with maximizing quality and service.
Market Trend: Even though financial crisis of the world, but it does not affect the buying behavior of the customer because it is general habit that customer need to drink coffee everyday.
Product situation
Coffee: Starbucks offers coffee lovers a selection of coffees from around the world. Starbucks coffee buyers personally travel to the coffee growing regions of Latin America, Africa/Arabia and Asia/Pacific to select the highest-quality Arabica beans. When these quality beans arrive at one of the company’s four roasting facilities, starbucks professional roasters pursue the art of creating the rich signature Starbucks RoastTM. This dark roast is not just a color. It is the cumulative result of expert roasters knowing coffee and bringing balance to its entire flavor attributes.
Coffee & More: In addition to quality coffee, Starbuck features a variety of hand-crafted beverages, Tazo*teas, EthosTM water, pastries and, in some markets a selection of sandwiches and salads. Starbucks merchandise includes exclusive espresso machines and coffee brewers, unique confections and other coffee- and tea-related items.
Competitive Situation
Starbucks major competitors in the coffee market are Sentiment, Presco, and Lucky. Each competitor has a specific strategy and niche in the market. Sentiment is an example that it offers a lot of products of coffee and more related products which covering the whole price range. It plans to dominate the market by pricing strategy and expand a heavy advertising.
Microenvironment situation
Economy: As the survey conducted by ministry of economy and finance (MoCaF) reported that Cambodia economic will growing up at least 7 percent even though there are instability economic due to financial crisis, so this is the significance of Starbuck to operate its invest.
Law concerning on business investment: For these several year, National Assembly (N.A) have made and adopted many commercial laws and Intellectual Property (IP) Rights laws such as
· The Law Concerning on Marks, Trade Names, and Acts of Unfair Competition
· Law on the Patents, Utility Model Certificates and Industrial Designs
· Law on Copyrights and Related Rights
· The law on the Management of Quality and Safety of Products and Services
· Law on Commercial Rules and Register and Law
This law is necessary for the current investor like starbucks to concentrate.
Government Regulation: Government plays important roles in the body which to regulate and maintain the stability of society as well as the business aspects. More importantly, one aspect of Cambodia Government Policy is to motivate investors to invest in its own country.
SWOT Analysis
Opportunity/Threats
The main opportunities facing Starbucks’ line are:
· There are few major competitors in the market.
· Since 1998 Starbucks formed a joint-venture partnership with Urban Coffee Opportunity. Now there are more than 114 Starbucks stores developed by UCO in cities that include Los Angeles, New York, so it will developed in Cambodia as well.
· Receive many awards which become the most respect and well-known brand in the world.
The main threats facing Starbucks’ line are:
· Financial Crisis bomb from USA which spread all over the world.
· 95 percent of domestic customers still do not know what Starbuck is.
· Cambodia still poor country which has not very much rich people.
Strength/Weakness Analysis
The strength of Starbucks:
· Starbucks’ name is the most respect and well-known brand in the world and a high quality and service image.
· Starbucks is massive corporation which have solid management, technique, and huge budget for investment.
The weakness of Starbucks:
· Starbuck is the new entrance in market which have lack market information
· Even though Starbucks is the famous brand in the world, they seem a new company as local people do not know about Starbucks yet
· Financial crisis that Threat Company invest abroad.
Issues Analysis
In this section of the marketing plan, there will be use the SWOT Analysis to define the main issues that the plan must consider which basically following:
· In the beginning of operation, should it sell only coffee product or more?
· Should it advertising its brand before entering market or after?
· Should it expand more budget to marketing research in order to get more concrete information about market and competitors or not?
Financial Objectives
In order to make an effective and efficiency at the beginning, Starbucks General Manager has clarified that each its departments must deliver a good financial performance. Starbucks’ Marketing Manager on the other hand has a special mission which set its objective are to produce only net profit about $0 to $5000.
Marketing Objectives
· Achieve total sales revenue of $500,000 in 2009
· Expand consumer awareness of the Starbuck brand from 40 – 60 percent
· Catch up Market Share about 10 percent the 50 percent of its potential customers
Marketing Strategy
Target Market: particular emphasis on Men buyer from 18 to more
Positioning: maximizing quality and service
Product line: add two-lower priced model to attract customers
Price: price somewhat above competitive brands
Service: quick and widely available service
Sale promotion: make two new events with promotion campaign that focus on luck draw prides and coupons discount
Marketing research: expand $15,000 Advertise on TV, Radio, Billboard, and so on.
Action Programs
Starbucks will carry out its marketing strategy as following:
· Before opening its central store at January 1st,2009 in Phnom Penh two weeks, Starbucks will expands its advertise on TV (including CTN, Bayon, TVK,…), Radio (98FM, 103FM, and 107FM,…), and Billboard (Somdech Hun Sen Garden, Chry JangVa Bridge,…). Mr. Sombo Sok, promotion manager will response this project at a planned cost $4500.
· January 1st, 2009, the ceremonies of celebrating new central Store will be take place. There will be invited many special guests including Managers of companies/NGOs, businessmen/women, government officers, and so on. There will be the lucky draw contest event which including many prides such as: 1st pride is one Honda Dream 2009 Motor, 2nd pride is three months free coffee drink at Starbuck, 3rd pride is Sony TV 29 inches. Mr. Tep Virak Marketing Manager will handle this event and assist by Mr. Sombo Sok, the Promotion Manager and Mrs. Chan Sophea, the Production Manager at estimate plan cost $10,000.
· March 8, 2009, the Khmer New Year celebration, Starbucks will establish the promotion event take place in Phnom Penh. This event will discounts to customer that buy a cup of coffee at Starbucks will get one free cake. If a group of customers buy three cups of coffee, they will get extra 10 percent of three cups discount coupons. If a group of customers buy 5 cups of coffee, they will get extra 15 percent of 5 cups discounts coupons. In addition to this event, there will be a small concert joining, but we have invited some famous singers’ superstars to make a surprise and excitement. Mrs. Chan Sophea, the Production Manager and Mr. Sombo Sok, the Promotion Manager will be responsible for this event at planned cost $ 7,000.
· September 9, 2009, there will be a concert event which calls Triple Nine Concert Event (999 Event). Starbucks Coffee Corporation will be the main sponsor in this event. Mr. Keang San, Distribution Manager and Mr. Sombo Sok, the Promotion Manager will responsible for this event at planned cost $5000.
Business Law The Limited Partnership
Limited Partnership
I. Introduction:
Limited Partnership is one of many business organizations that consist of one or more general partners and one or more limited partners. Limited partner has limited in control power, and decision making. Moreover, limited partners also have limited liabilities. In other word, they are liable to the partnership only the amount they invested. However, general partners have the control power, and decision making right. Unlike limited partners, who have limited liabilities, general partners have unlimited personal liabilities which are liable to the partnership not only the amount of money they invested but also the amount of their personal assets if the partnership does not have enough cash to settle all its debts. Therefore, this type of business organization is thought to be a good business form for most business people because it has little risk of paying personal assets if the investors are limited partners.
II. Formation of Limited Partnership:
Cost to form a limited partnership is higher than any other form of businesses, and also more complicated. A limited partnership must file a certificate to the government where the business is operated. That filing certificate must contain whatever information is required by the government and signed by the partners. To form a limited partnership, there are strict and flexible rules which must be followed. Otherwise, the attempt to form the limited partnership fails and a general partnership usually results instead[1].
According to article 14 new of Law on Commercial Rules and Register and Law, the declaration shall be written on a sample form determined by the Minister of Commerce. Such declaration shall include the following information:
1. Full name of the merchant and number of his/her identity card;
2. Name used in practice of trade or pseudonym;
3. His/her date of birth or address;
4. Nationality, and if other nationality,
5. The business objectives;
6. The place and address of the principal business or branches located in the Kingdom of Cambodia;
7. Trademark and sample of signature and the registration;
8. Identification card of the legitimate representative who is responsible and the registration;
9. The commercial establishment through which the applicant has previously conducted business, or establishment which is functioning under the competence of the Ministry of Commerce;
10. Freewill statement made by the applicant indicating that he/her has never been convicted for any commercial activities;
11. The registrar shall copy contents of such statement into commercial register and deliver one of the copies of such statement to the application with a certification appears on bottom to stated that: “have recorded into the Register”.
III. Management and Control:
As mentioned earlier, the limited partnership must have at least one general partner who is personally liable for the debts of the partnership debt. But since this general partner can be a corporation, this requirement does not mean that one of the members of the limited partnership needs to accept potentially ruinous liability. The general partner controls the limited partnership with the same scope of powers as a general partner would have in a standard general partnership. The general partner also owes the limited partnership at least the same level of fiduciary loyalty that a general partner in a general partnership owes, perhaps more. Limited partners in a limited partnership, however, generally do not owe fiduciary duties to one another[2].
According to the Law on Commercial Enterprises, Article 79, states that limited partners shall not participate in the management of the Limited Partnership’s business. However, limited partners may examine the reports and progress of the limited partnership and may give advisory opinions and with regard to the management of the limited partner. Moreover, limited partners may not negotiate any business, act as agent, or allow name to be used in any act of limited partnership. A limited partner who performs any of these acts is liable for the obligation of the limited partnership resulting from these acts. In addition, a limited partner may be held responsible in the manner as a general partner for all the obligations of the limited partnership. If the number of these acts, or the importance of them with respect to the partnership business, indicate that the limited partner in face acted as a general partner[3].
Example of Limited Partnership
Management and Control
Sivorn, Dara, and Sopheak agreed to form a limited partnership to start their cosmetic business. Sivorn and Sopheak agreed to contribute the same amount of money $5,000 and be the limited partner. Dara, who has knowledge in Business Management, is the general partner. They all agree to share the profit equally and file the certificate of partnership. Their grand opening was good. So Sivorn and Sopheak agreed to each other to order more goods from Korea and Japan without asking Dara. One week later the bill came. Dara was surprised because he did not know who ordered all those goods. Them Sivorn and Sopheak told Dara. Dara told them that they have no right to order all the goods because they are just limited partners. However, Sivorn and Sopheak told Dara back that they own two-thirds of the business. So they can order the goods. Are they right?
Answer: No, Sivorn and Sopheak are just limited partners. Generally, limited partners have no right in controlling the business only general partner can. Dara, a general partner, has the authority to order those goods even if Sopheak and Sivorn own two-thirds.
Example of limited Partnership
A limited partner acts like a general partner:
Nara, Sovann, and Cheata agreed to join the limited partnership of operating a restaurant, and contributed $50,000 each. Nara is a general partner, and Sovann and Cheata are the limited partners. During the first 6 months, the business operating is good. Sovann decided to expand the restaurant. Nara also agreed with Sovann and let Sovann handle all the things. Sovann went to get a loan for $250,000 from the bank for one year period with six percent interest rate. He then bought the land and bought some more items necessary for the business. Sovann put a land as collateral. Sovann did all the things on behalf of the limited partnership. Unfortunately, six months after Sovann got a loan from the bank, recession impact the country’s economy. The restaurant had few customers from day to day and got less profit. The majority date came. The bank had to seize those two lands because the partnership could pay back the money, which the partnership borrowed. The bank gave the land for a real estate company to calculate the price. At that time the price of land had dropped. So the land could not settle all the debts the partnership had. Nara had some assets but still could not compensate the debts. So the bank tried to recover their money from Sovann. Will the bank succeed?
Answer: The bank will be able to seize the personal assets of Sovann because he took an active part in management and control part of the business, and if the bank believes that Sovann is a general partner.
IV. Liability:
Limited partnerships have one very large advantage over the general partnership: limited partners do not take on personal liability for the obligations of the partnerships; they are only liable to the extent of the money contributed to the partnerships. The general partner in the limited partnership, however, retains all of the personal liability for partnership debts that one finds in the general partnership entity. Stated in Article: 82 in the law on commercial enterprises: where the property of limited partnership is insufficient, the general partners are jointly and severally liable for the debts of the partnership. A limited partner is liable for the debts up to the agreed amount of his/ [her] contribution, notwithstanding any transfer of his interest[4].
Example of Limited Partnership
Limited Personal Liability
David, Jack, Channa, Sith, and Deth formed a limited partnership to sell electronic merchandise. Channa had a Master degree in Business Administration and Jack had knowledge in computer. Channa and Jack become the general partners. David, Sith, and Deth are limited partners. Each one of them contributes $10,000. The money all of them contributed was enough for buying a building, repairing and decorating that building. They all agreed to get a loan for $59,000 from a creditor to buy their merchandise. After they got the money, they ordered the goods. Unfortunately, on the way of shipment, there was a storm on the sea. And the ship that carried that merchandise sank. The partnership lost everything. The majority date came. The creditor asked them to pay the debts but they could not. The Creditor sued the partnership to pay the debts. Channa and Jack had to sell their personal assets. All their personal assets cost only $10,000. Channa and Jack tried to ask the other three to contribute $3,000 for each of them. Can they do that?
Answer: No, Channa and Jack cannot. David, Sith, and Deth are only limited partners. They are only liable for the amount they contributed. In this case, the amount they contributed was $10,000 each. And that amount had been lost in the partnership already. Therefore, David, Sith, and Deth do not have to contribute any more.
V. Raising Capital:
Limited partnership is a type of business that created for effective raising capital without giving up some of the previous owners’ power. There are two types of capital raising (1) contribution of partners or (2) loan funds.
VI. Taxation:
The taxation of limited partnership is like the taxation in the general partnership. In general partnership the net profit is considered as personal income attributable to the partners based on each partner’s share in the profits.
VII. Transfer or Dissolve of Operations:
The death, retirement, withdrawal, or bankruptcy of a limited partner does not end the existence of the limited partnership, but instead only requires an amendment to the limited partnership's certificate. The limited partnership interest may be transferred to another person without the consent of the other limited or general partners. But the limited partner will still lack some rights unless there is approval by the other partners. The death, retirement, withdrawal, or bankruptcy of the general partner will dissolve the partnership[5].
In conclusion, limited partnership combines some advantages of general partnership with the limited liability that makes some businesspeople feel interested in doing this type of business. It is a type of business that can easily raise capital without reduce the general partners’ controlling power of the business.
[1] http://www.tannedfeet.com/partnership.htm
[2] http://www.tannedfeet.com/partnership.htm
[3] Article 79, Law on Commercial Enterprises.
[4] Article: 82, Law on Commercial Enterprises.
[5] http://www.tannedfeet.com/partnerships.htm
I. Introduction:
Limited Partnership is one of many business organizations that consist of one or more general partners and one or more limited partners. Limited partner has limited in control power, and decision making. Moreover, limited partners also have limited liabilities. In other word, they are liable to the partnership only the amount they invested. However, general partners have the control power, and decision making right. Unlike limited partners, who have limited liabilities, general partners have unlimited personal liabilities which are liable to the partnership not only the amount of money they invested but also the amount of their personal assets if the partnership does not have enough cash to settle all its debts. Therefore, this type of business organization is thought to be a good business form for most business people because it has little risk of paying personal assets if the investors are limited partners.
II. Formation of Limited Partnership:
Cost to form a limited partnership is higher than any other form of businesses, and also more complicated. A limited partnership must file a certificate to the government where the business is operated. That filing certificate must contain whatever information is required by the government and signed by the partners. To form a limited partnership, there are strict and flexible rules which must be followed. Otherwise, the attempt to form the limited partnership fails and a general partnership usually results instead[1].
According to article 14 new of Law on Commercial Rules and Register and Law, the declaration shall be written on a sample form determined by the Minister of Commerce. Such declaration shall include the following information:
1. Full name of the merchant and number of his/her identity card;
2. Name used in practice of trade or pseudonym;
3. His/her date of birth or address;
4. Nationality, and if other nationality,
5. The business objectives;
6. The place and address of the principal business or branches located in the Kingdom of Cambodia;
7. Trademark and sample of signature and the registration;
8. Identification card of the legitimate representative who is responsible and the registration;
9. The commercial establishment through which the applicant has previously conducted business, or establishment which is functioning under the competence of the Ministry of Commerce;
10. Freewill statement made by the applicant indicating that he/her has never been convicted for any commercial activities;
11. The registrar shall copy contents of such statement into commercial register and deliver one of the copies of such statement to the application with a certification appears on bottom to stated that: “have recorded into the Register”.
III. Management and Control:
As mentioned earlier, the limited partnership must have at least one general partner who is personally liable for the debts of the partnership debt. But since this general partner can be a corporation, this requirement does not mean that one of the members of the limited partnership needs to accept potentially ruinous liability. The general partner controls the limited partnership with the same scope of powers as a general partner would have in a standard general partnership. The general partner also owes the limited partnership at least the same level of fiduciary loyalty that a general partner in a general partnership owes, perhaps more. Limited partners in a limited partnership, however, generally do not owe fiduciary duties to one another[2].
According to the Law on Commercial Enterprises, Article 79, states that limited partners shall not participate in the management of the Limited Partnership’s business. However, limited partners may examine the reports and progress of the limited partnership and may give advisory opinions and with regard to the management of the limited partner. Moreover, limited partners may not negotiate any business, act as agent, or allow name to be used in any act of limited partnership. A limited partner who performs any of these acts is liable for the obligation of the limited partnership resulting from these acts. In addition, a limited partner may be held responsible in the manner as a general partner for all the obligations of the limited partnership. If the number of these acts, or the importance of them with respect to the partnership business, indicate that the limited partner in face acted as a general partner[3].
Example of Limited Partnership
Management and Control
Sivorn, Dara, and Sopheak agreed to form a limited partnership to start their cosmetic business. Sivorn and Sopheak agreed to contribute the same amount of money $5,000 and be the limited partner. Dara, who has knowledge in Business Management, is the general partner. They all agree to share the profit equally and file the certificate of partnership. Their grand opening was good. So Sivorn and Sopheak agreed to each other to order more goods from Korea and Japan without asking Dara. One week later the bill came. Dara was surprised because he did not know who ordered all those goods. Them Sivorn and Sopheak told Dara. Dara told them that they have no right to order all the goods because they are just limited partners. However, Sivorn and Sopheak told Dara back that they own two-thirds of the business. So they can order the goods. Are they right?
Answer: No, Sivorn and Sopheak are just limited partners. Generally, limited partners have no right in controlling the business only general partner can. Dara, a general partner, has the authority to order those goods even if Sopheak and Sivorn own two-thirds.
Example of limited Partnership
A limited partner acts like a general partner:
Nara, Sovann, and Cheata agreed to join the limited partnership of operating a restaurant, and contributed $50,000 each. Nara is a general partner, and Sovann and Cheata are the limited partners. During the first 6 months, the business operating is good. Sovann decided to expand the restaurant. Nara also agreed with Sovann and let Sovann handle all the things. Sovann went to get a loan for $250,000 from the bank for one year period with six percent interest rate. He then bought the land and bought some more items necessary for the business. Sovann put a land as collateral. Sovann did all the things on behalf of the limited partnership. Unfortunately, six months after Sovann got a loan from the bank, recession impact the country’s economy. The restaurant had few customers from day to day and got less profit. The majority date came. The bank had to seize those two lands because the partnership could pay back the money, which the partnership borrowed. The bank gave the land for a real estate company to calculate the price. At that time the price of land had dropped. So the land could not settle all the debts the partnership had. Nara had some assets but still could not compensate the debts. So the bank tried to recover their money from Sovann. Will the bank succeed?
Answer: The bank will be able to seize the personal assets of Sovann because he took an active part in management and control part of the business, and if the bank believes that Sovann is a general partner.
IV. Liability:
Limited partnerships have one very large advantage over the general partnership: limited partners do not take on personal liability for the obligations of the partnerships; they are only liable to the extent of the money contributed to the partnerships. The general partner in the limited partnership, however, retains all of the personal liability for partnership debts that one finds in the general partnership entity. Stated in Article: 82 in the law on commercial enterprises: where the property of limited partnership is insufficient, the general partners are jointly and severally liable for the debts of the partnership. A limited partner is liable for the debts up to the agreed amount of his/ [her] contribution, notwithstanding any transfer of his interest[4].
Example of Limited Partnership
Limited Personal Liability
David, Jack, Channa, Sith, and Deth formed a limited partnership to sell electronic merchandise. Channa had a Master degree in Business Administration and Jack had knowledge in computer. Channa and Jack become the general partners. David, Sith, and Deth are limited partners. Each one of them contributes $10,000. The money all of them contributed was enough for buying a building, repairing and decorating that building. They all agreed to get a loan for $59,000 from a creditor to buy their merchandise. After they got the money, they ordered the goods. Unfortunately, on the way of shipment, there was a storm on the sea. And the ship that carried that merchandise sank. The partnership lost everything. The majority date came. The creditor asked them to pay the debts but they could not. The Creditor sued the partnership to pay the debts. Channa and Jack had to sell their personal assets. All their personal assets cost only $10,000. Channa and Jack tried to ask the other three to contribute $3,000 for each of them. Can they do that?
Answer: No, Channa and Jack cannot. David, Sith, and Deth are only limited partners. They are only liable for the amount they contributed. In this case, the amount they contributed was $10,000 each. And that amount had been lost in the partnership already. Therefore, David, Sith, and Deth do not have to contribute any more.
V. Raising Capital:
Limited partnership is a type of business that created for effective raising capital without giving up some of the previous owners’ power. There are two types of capital raising (1) contribution of partners or (2) loan funds.
VI. Taxation:
The taxation of limited partnership is like the taxation in the general partnership. In general partnership the net profit is considered as personal income attributable to the partners based on each partner’s share in the profits.
VII. Transfer or Dissolve of Operations:
The death, retirement, withdrawal, or bankruptcy of a limited partner does not end the existence of the limited partnership, but instead only requires an amendment to the limited partnership's certificate. The limited partnership interest may be transferred to another person without the consent of the other limited or general partners. But the limited partner will still lack some rights unless there is approval by the other partners. The death, retirement, withdrawal, or bankruptcy of the general partner will dissolve the partnership[5].
In conclusion, limited partnership combines some advantages of general partnership with the limited liability that makes some businesspeople feel interested in doing this type of business. It is a type of business that can easily raise capital without reduce the general partners’ controlling power of the business.
[1] http://www.tannedfeet.com/partnership.htm
[2] http://www.tannedfeet.com/partnership.htm
[3] Article 79, Law on Commercial Enterprises.
[4] Article: 82, Law on Commercial Enterprises.
[5] http://www.tannedfeet.com/partnerships.htm
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