PARTNERSHIP Personal a.

Capital is < P3,000- may be ORAL

Property
b. Capital is > P3,000-must be:
Article 1767. By the contract of partnership, two or
more persons bind themselves to contribute money, I. In a public instrument

property, and industry to a common fund, with the II. Recorded in the office of SEC
intention of dividing the profits among themselves.

Note: Non-compliance shall not affect

the liability of the partnership and the
members thereof to third persons.
Two or more persons may also form a partnership for
(Art. 1772)
the exercise of a profession.
Real Regardless of the value must be:
Property or
Real Rights

Elements: [VLM-LP] 1. In a public instrument

2. An inventory of said property

should be made:

1. There must be a valid contract  signed by parties

 registered in the Registry of

2. The parties must have legal capacity to enter Property of the province where
into the contract the real property is located to
bind 3rd persons,
3. There must be a mutual contribution of money,  attached to the public
property, or industry to a common fund instrument

Limited  Registered with the SEC

4. The object must be lawful
5. The primary purpose must be to obtain profits
and divide the same among the parties
Partnership
Non-compliance: not valid as limited
partnership but considered as general
partnership

Object:
How Partnership is Formed/Formalities 1. Universal

2. Particular

GR:

Art 1771. A partnership may be constituted Universal Partnership

in any form - May refer to all the present property to all the
profits. (Article 1776)

XPN: All Present Property All Present Profit

- is that in which the - comprises all that the

except where immovable property or real rights
partners contribute all partners may acquire by
contributed thereto, in which case, a public the property which their industry or work
actually belongs to them during the existence of
instrument shall be necessary.
to a common fund, with partnership.
the intention of dividing
the same among
themselves, as well as
the profits they may
 acquire therewith.
(Article 1778)
- comprises all the
property which belonged
to each of the partners
at the time of the
contribution of the
partnership, becomes
the common property of
all the partners, as well
as all the profits which
they may acquire
therewith. (Article 1779)
1. Relations among the partners themselves
2. Relations of the partners with the
- only usufruct of the
properties of the partnership
partners become
common property 3. Relations of the partnership with third
persons
4. Relations of the partners with with third
persons

Obligations of the Partners among Themselves

Particular Partnership

- Has for its object determinate things, their use

1. To contribute a property (Art. 1786)
or fruits, or a specific undertaking, or the exercise of
a profession or vocatio. (Article 1783) 2. Contribution of money and money converted to
personal use (Art. 1788)

3. Obligation not to engage in another business for

Liability:
himself (Art. 1789)
1. General
4. Obligation to contribute additional capital (Art.
2. Limited 1791)

5. Obligation of the managing partner who collects

debts (Art. 1792)
General Partnership

6. Obligation of the partner who receives share of

- It is a partnership where all partners are
general partners who are liable even with respect to
their individual properties after the assets of the
partnership have been exhausted.
partnership credit (Art. 1793)
7. Obligation of partner for damages to partnership
(Art. 1794)

Limited Partnership 8. Obligation to keep the partnership books (Art.

1805)
- A limited partnership is one formed by two or
more persons under the provisions of the following 9. Obligation to render information (Art. 1806)
articlem having as members one or more general
10. Obligation to account for any benefit and hold as
partners and one or more limited partners. The
trustee to unauthorized personal profits (Art. 1807)
limited partners as such shall not be bound by the
obligations of the partnership. (Article 1843)

Relations created by Contract of Partnership

 Rights of Partners

1. Right to reimbursement for amounts advanced to

the partnership and to indemnification for risks in
consequence of management (Art. 1796)

2. Right on the distribution of profits and losses (Art.

1797)

3. Right to associate another person with him in his

share without the consent of the other partners.
*Subpartnership (Art. 1804)

4. Right of access and inspection of partnership

books (Art. 1805)

5. Right to true and full information of all things

affecting the partnership (Art. 1806)

6. Right to a formal account of partnership affairs

under certain circumstances (Art. 1809)

7. Right to have the partnership dissolved

8. Property rights of a partner (Art 1810)

a. His rights in specific partnership property

b. His interest in the partnership

c. His right to participate in the management

 a) His share in the partnership property for
existing obligations

b) His separate property for subsequent

obligations (Art. 1806)

9. Creditors of partnership are preferred in

partnership property and may attach partner’s share
in partnership assets (Art. 1827)

Obligations of Partnership/Partners to Third Persons

1. Every partnership shall operate under a firm name

(Art. 1815)

2. All partners shall be liable for contractual

obligations of the partnership with their property,
after all the partnership assets has been exhausted:

a) Pro-rata

b) Subsidiary (Art. 1816)

Xpn: All partners shall be liable solidarily with

the partnership for everything chargeable to the DISSOLUTION
partnership under Art. 1822 and 1823
- The dissolution of a partnership is the change in the
3. Partner as an agent of the partnership (Art. 1818) relation of the partners caused by any partner
ceasing to be associated in the carrying on as
4. Conveyance of real property belonging to the
distinguished from the winding up of the business.
partnership (Art. 1819)
(Art. 1828)
5. Admission or representation made by any partner
concerning partnership affairs within the scope of his
authority is evidence against the partnership (Art. - On dissolution the partnership is not terminated,
1820) but continues until the winding up of partnership
affairs is completed. (Art. 1829)
6. Notice to partner of any matter relating to
partnership affairs separates as notice to partnership
except in cases of fraud (Art 1821)

7. Partners and the partnership are solidarily liable to

3rd persons for the partner’s tort or breach of trust
(Art 1822-24)

8. Liability of incoming partner is limited to:

 Kinds of Dissolution

1. Extrajudicial Dissolution (Art. 1830)

Causes:

a. Without violation of the agreement between

the partners

b. In contravention of the agreement between the

partners. Where the circumstances do not
permit a dissolution under any other provision
of the article, by the express will of any partner
at any time

c. By any event which makes it unlawful for the

business of the partnership to be carried on or
for the members to carry it on in partnership

d. When a specific thing which a partner had

promised to contribute to the partnership,
perishes before the delivery; in any case by the
loss of the thing, when the partner who
contributed it having reserved the ownership
thereof, has only transferred to the partnership
the use or enjoyment of the same, but the
partnership shall not be dissolved by the loss of
the thing when it occurs after the partnership
has acquired the ownership thereof

e. By the death of any partner

f. By insolvency of any partner or of the

partnership
g. By the civil interdiction of any partner

h. By decree of court under the following article

 2. Judicial Dissolution (Art. 1831)

On application by or for a partner, the court shall

decree a dissolution whenever:

a. A partner has been declared insane in any judicial

proceeding or is shown to be of unsound mind

b. A partner becomes in any ither way incapable of

performing his part of the partnership contract

c. A partner has been guilty of such conduct as tends

to affect prejudcially the carrying on of the business

d. A partner wilfully or persistently commits a breach

of the partnership agreement, or otherwise so
conducts himself in matters relating to the
partnership business that is not reasonably
practicable to carry on the business in partnership
with him

e. The business of the partnership can only be carried

on at loss

f. Other circumstances render a dissoultion equitable.