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Partnerships- General Provisions

Partnerships- General Provisions

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Published by: bazinguh on Sep 14, 2011
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PARTNERSHIPS Chapter 1: General Provisions Article 1767: By the contract of partnership, two or more persons bind themselves to contribute

money, property or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession.

Concept of Partnership (other definitions) 1. A partnership is an association of two or more persons to carry on as co-owners a business for profit 2. A partnership is a legal relation based upon the expressed or implied agreement of two or more competent persons whereby the unite their property, labor or skill in carrying on some lawful business as principals for their joint profit 3. A partnership is a joint undertaking to share in the profit and loss 4. A partnership is the status arising out of a contract entered into by two or more persons whereby they agree to share as common owners the profits of a business carried on by all or any of them on behalf of all of them 5. A partnership is an organization for production of income to which each partner contributes one or both of the ingredients of income, which are capital or service 6. A partnership is an entity, distinct and apart from the members composing it and for the purpose of which it was created; it is a person having its own assets and liabilities and any benefit or liability attaching to a member of the partnership, results from the partnership relation **note: as a form of business organization, a partnership falls between two extremes of organizational form – the single proprietorship and the corporation Partnership for the exercise of a profession: - A profession is a calling in the preparation for or practice of which academic learning and which has

It may also refer to the whole body of persons or a group of persons engaged in a calling. to engage in business for the realization of profits with the view of dividing them among the contracting parties. Onerous – each of the parties aspires to procure for himself a benefit through the giving of something 5.for its prime purpose the rendering of public service . . Nominate – it has a special name or designation in law 3. Personal qualifications for such practice cannot be possessed by a corporation. . Preparatory – because it is entered into as a means to an end. i. the law does not allow individuals to practice a profession as a corporate entity.e. Characteristic elements of partnership: 1. However the law allows the joint pursuit thereof by two or more persons as partners. that is upon the express or implied agreement of two or more persons 2.Thus.Paragraph 2: exercise of a profession. it has been defined as a group of men pursuing a learned art as a common calling in the spirit of public service-no less a public service because it may incidentally be a means of livelihood. Bilateral – it is entered into by two or more persons and the rights and obligations arising therefrom are always reciprocal 4. Commutative . Strictly speaking. Consensual – perfected by mere consent. the practice of a profession is not a business or an enterprise for profit.the undertaking of each of the partner is considered as the equivalent of that of the others 6. A partnership contract in its essence is a contract of agency. Principal – it does not depend for its existence or validity upon some other contract 7. Essential features of partnership: .

2. Other forms of association excluded: partnership. The following cannot give consent to a contract of partnership a. No one can become a member of the partnership association without the consent of all the other associates. which do not have their origin in a contract. b. therefore excludes from its concept all other associations. c. A form of voluntary and personal association: partnership is a form of voluntary association entered into by the associates. Deaf-mutes who do not know how to write d.1. General rule: any person may be a partner who is capable under the law of entering into contractual relations. There is no such thing as a partnership created by law or by operation or implication of law. Persons who are suffering from civil interdiction . Religious societies. It is a personal relation in which the element of delectus personae exists. Unemancipated minors b. express or implied. Legal capacity of parties to enter into a contract A. *A limited partnership cannot be created by mere voluntary agreement alone. Obviously. Insane or demented persons c. Existence of a valid contract a. conjugal or community partnerships and others of a similar nature are not therefore included as they are not created by the express or implied contract of the parties. there must be at least two competent parties. a person cannot enter into a contract of partnership solely with himself. Creation and proof of existence: it may be informally created and its existence proved by the conduct or acts of the parties but it is customary to embody the terms of the association in a written document known as the articles of partnership. Consequently any person who cannot legally give consent to a contract cannot be a partner.

there can be no partnership B. Industry – in the absence of money or property or in concurrence with these two. Property – may be real or personal. Hence credit such as promissory note or other evidence of obligation or even a mere goodwill may be contributed as it is considered property c. A married woman may enter into a contract of partnership without her husband’s consent but the latter may object under certain conditions C. the law permits the contribution of industry. Unless authorized by law. The reason for this limitation is that in a partnership. But there is no prohibition against a partnership being a partner in another partnership. Industry: the work or services of the party associated which may be either personal manual efforts or intellectual and for which he receives a share in the profits (not merely salary) of the business . Money – legal tender. a corporation would be bound by the acts of persons who are not its duly appointed and authorized officers and agents and this is entirely inconsistence with the policy of the law that the corporation shall manage its own affairs separately and exclusively. Proprietory or financial interest – the very definition of partnership provides for this element (must have a proprietory or financial interest in the business). Exceptions: persons who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership. a corporation is without capacity or power to enter into a contract of partnership. Without the element of mutual contribution to a common fund. Capacity of partnership/corporation to be a partner: the typical partnership is composed of individual human beings. must be in cash b. Mutual contribution to a common fund A. Incompetents who are under guardianship B. tangible or intangible. property and/or industry or services to the common business a. Form of contribution: the partners must contribute money.e. 3.

Very reason for existence of partnership: the idea of obtaining pecuniary profit or gain directly as a result of the business to be carried on is the very reason for the existence of a partnership. There must be a joint interest in the profits.e. this element is what distinguishes the contract of partnership from voluntary religious or social organizations. As in other kinds of contract. Sharing of profits: a partnership is essentially a business enterprise established for profit. the parties intend to share the profits in certain proportions. B.*A limited in a limited partnership however cannot contribute mere industry or services 4. Legality of object A. . only stock corporations may undertake. Not necessarily in equal shares: must be shared but not necessarily equal. void or without force and effect from the beginning. 1. Businesses partnership not permitted to engage in – a partnership may be organized for any purpose except that it may not engage in an enterprise for which the law requires a specific form of business organization such as banking which is under the general banking of law of 2000. morals. social or spiritual ends. good customs. need not be the exclusive aim of a partnership. Intention to realize and divide profits A. As a matter of fact. the purpose of a partnership must be lawful. otherwise no partnership can arise as the contract is void ab initio. Effect of legality: the object is unlawful when it is contrary to law. 5. i. public order or public policy. In a partnership. it cannot be said that an agreement of partnership has been entered into and that it exists. B. however. Without the sharing or profits. It is sufficient that it is the principal purpose even if there are incidentally moral. Sufficient if obtaining profit principal purpose – the realization of pecuniary profit.

Thus if the division of profits is merely used as a guide to determine the compensation due to one of the parties.2. Necessary corollary of sharing in profits 2. there are numerous instances of parties who have a common interests in the profits and losses of an enterprise but who are not partners. Not conclusive evidence of partnership: sharing of profits is merely presumptive and not conclusive even if cogent evidence of partnership. such one is not a partner Sharing of losses 1. Agreement not necessary .

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