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PARTNERSHIP RECITATION Q’s iv.
1. Characteristics of partnership contract
 consensual, because it is perfected by mere consent, although
such consent must be manifested in certain cases by the proper
formalities;
 bilateral or multi-lateral, because it is entered into between two or
more persons;
 nominate, because it is designated by a specific name;
 principal, because its existence does not depend on the life of
another contract;
 onerous, because certain contributions have to be made; and
 preparatory, in the sense that after it has been entered into, other
contracts essential in the carrying out of its purposes can be
entered into
 There must be a contribution of money, property or industry to a
common fund
 The object must be a lawful one
 There must be an intention of dividing the profit among the
partners (Art. 1767) since the firm is for the common benefit or
interest of the partners
 There must be the affectio societatis — the desire to formulate an
ACTIVE union with people among whom there exist mutual
confidence and trust (delectus personarum).
2. doctrine delictus personalum - there exist mutual confidence and trust
among each partners
3. origin of partnership in the Philippines
a. Under Roman Law, partnerships existed. Such partner ships had,
among other things, the following features:
i. There was no limit as to the number of partners.
ii. In the Roman partnership (societas) one partner was not
considered the implied agent of the oth ers. Thus, to bind
others, a partner had to obtain an express mandate
(mandatum or authorization) from each of the others.
iii. The partners were liable jointly, not solidarily.
The partners had the right to the beneficium
competentiae, that is, they were held financially liable
only insofar as they would not be reduced to destitution.
v. The heirs (heres) of a deceased partner could not succeed
to the rights of the deceased, even by express stipulation.
vi. A Roman partner could not retire in order to enjoy alone a
gain which he knew was awaiting him
b. Before the new Civil Code became effective on Aug. 30, 1950
(Lara v. del Rosario, L-6339, 50 O.G. 1957) there were two kinds
of partnerships in the Philippines, namely, the civil partnership,
and the commercial or mercantile partnership. (Art. 1665, old Civil
Code; Art. 116, par. 1, Code of Commerce). While the fi rst was
engaged in civil purposes, the latter’s object was to deal in
mercantile transactions. (Prautch, Scholes and Co. v. Hernandez,
1 Phil. 705, decided Feb. 10, 1903). Whether it was registered or
not was not important — for the difference lay in the ends
desired, not the manner of organization — although, in the
absence of a clear showing as to whether the object was civil or
commercial, the form of organization, that is, registration in the
mercantile registry, was held indicative of its nature as a
commercial partnership. (Compania Agricola de Ultramar v. Reyes,
4 Phil. 2). While the civil partnership was governed by the old Civil
Code, the Code of Commerce controlled the mercantile variety.
 With the advent of the new Civil Code, the provisions of the Code
of Commerce relating to mercantile partnerships, and the
provisions of the old Civil Code concerning civil partnerships have
been repealed. (Art. 2270, No. 2). Therefore, without prejudice to
the transitional provisions of the new Civil Code, the new Code
now governs all transactions of all partnerships, whether the
object be civil or mercantiles.
4. Partnership vs Corporation
Partnership Corporation
Manner of creation is created by mere created by law or by
agreement of the parties operation of law
Number of incorporators may be organized by only (except a corporation
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two persons sole) requires at least five partnership is based on

incorporators the principle of delectus
from the moment of the begins to have juridical personarum
execution of the contract personality only from the may be established for may not be formed for a
of partnership date of issuance of the any period of time term in excess of 50
Commencement of
certificate of Term of existence stipulated by the partners years extendible to not
juridical personality
incorporation by the more than 50 years in
Securities and Exchange any one instance
Commission A limited partnership is a corporation may adopt
may exercise any power can exercise only the required by the law to any firm name provided it
authorized by the powers expressly granted Firm name add the word “Ltd.” to its is not the same as or
partners provided it is not by law or implied from name similar to any registered
Powers contrary to law, morals, those granted or incident firm name
good customs, public to its existence may be dissolved at any can only be dissolved
order, or public policy Dissolution time by the will of any or with the consent of the
(Art. 1306.), all of the partners State
when the management is the power to do business governed by the Civil governed by the
Governing law
not agreed upon, every and manage its affairs is Code Corporation Code.
Management
partner is an agent of the vested in the board of
partnership (Art. 1803.), directors or trustees 5. Partnership vs Co-ownership
a partner as such can sue the suit against a Partnership Co-ownership
a co-partner who member of the board of
partnership is always generally created by law.
Effect of mismanagement mismanages directors or trustees who
created by a contract It may exist even without
mismanages must be in Creation
(Art. 1767.), either a contract
the name of the
express or implied;
corporation
has a juridical personality has none
Right of succession has no right of succession has such right
Juridical personality separate and distinct
the partners (except the stockholders are from that of each partner
limited partners) are liable only to the extent
realization of profits the common enjoyment
Extent of liability to third liable personally and of the shares subscribed
of a thing or right (see
persons subsidiarily (sometimes by them
Purpose Art. 486.) which does not
solidarily) for partnership
necessarily involve the
debts to third persons
sharing of profits;
Transferability of interest cannot transfer his stockholder has generally
no limitation upon the an agreement to keep the
interest in the partnership the right to transfer his Duration
duration thing undivided for more
so as to make the shares without the prior
than ten years is not
transferee a partner consent of the other
allowed (see Art. 494.);
without the consent of all stockholders because a
Disposal of interests may not dispose of his a co-owner may freely do
the other existing corporation is not based
individual interest in the so (see Art. 495.);
partners because the on this principle
partnership (Art. 1812.)
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so as to make the into a joint venture with another where the nature of that venture
assignee a partner unless is in line with the business authorized in its charter.
agreed upon by all of the 9. Art 1769 no. 4. Rules when a person receives a profit of the share of the
partners business
Power to act with third In the absence of any a co-owner cannot
 net profits is the prima facie evidence that one is a partner and
persons stipulation to the contrary represent the co-
(Art. 1803.), a partner ownership; hence, a not gross
may bind the partnership judgment secured against 10. Consequences of unlawful partnership
only one of the co- i. If the firm is also guilty of a crime, the Revised Penal Code
owners will not bind the governs both the criminal liability and the “forfeiture of the
other co-owners proceeds of the crime and the instruments or tools with which it
Effect of death The death of a partner the death of a co-owner was committed. Such proceeds and instruments or tools shall be
results in the dissolution does not necessarily
confiscated and forfeited in favor of the Government, unless they
of the partnership dissolve the co-
ownership. be the property of a third person not liable for the offense, but
those articles which are not subject of lawful commerce shall be
6. Effects of having a separate legal juridical personality destroyed.” (Art. 45, Rev. Penal Code).
 Its juridical personality is SEPARATE and DISTINCT from that of ii. The partners forfeit the proceeds or profits, but NOT their
each of the partners. contributions, provided no criminal prosecution has been
 The partnership can, in general: instituted. (Arbes v. Polistico, 53 Phil. 489). If the contributions
i. acquire and possess property of all kinds (Art. 46, Civil have already been made, they can be RETURNED; if the
Code); contributions have not yet been made, the partners cannot be
ii. incur obligations (Art. 46, Civil Code); made to make the contribution. (See 1 Manresa 279).
iii. bring civil or criminal actions (Art. 46, Civil Code); iii. An unlawful partnership has no legal personality.
iv. can be adjudged INSOLVENT even if the individual 11. formalities required in a partnership
members be each financially solvent.  General rule: For VALIDITY of the contract (among the parties)
v. Unless he is personally sued, a partner has no right to as well as for ENFORCEABILITY, NO FORM is required as a
make a separate appearance in court, if the partnership general rule, regardless of the value of the contributions.
being sued is already represented. Therefore, the contract may even be ORAL.
7. Constitutional rights of partnership  Exception: Whenever real properties or real rights in real
 due process properties are contributed — regardless of the value — a PUBLIC
 equal protection INSTRUMENT is needed. (The contract itself must be in the public
8. Why are corporations not allowed to enter partnerships instrument; moreover, there must be an INVENTORY of the
 The majority view is that a corporation cannot become a partner immovables. This INVENTORY must be signed by the parties and
on grounds of public policy; otherwise, people other than its attached to the public instrument.)
officers may be able to bind it. However, a corporation can enter  NOTE:
i. Without the public instrument, the partnership is VOID.
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ii.
The inventory is important to show how much is due from
each partner to complete his share in the common fund
and how much is due to each of them in the event of
liquidation. Without such inventory, the contract is VOID.
 For EFFECTIVITY of the partnership contract insofar as innocent
third persons are concerned, the same must be REGISTERED if
REAL PROPERTIES are involved.
12. Purpose why it should be registered with SEC
 The registration is to set “a condition for the issuance of licences
to engage in business or trade. In this way, the tax liabilities of
big partnerships cannot be evaded, and the public can also
determine more accurately their membership and capital before
dealing with them.”
13. What is universal partnership of present property
 Art. 1778. A partnership of all present property is that in which the
partners contribute all the property which actually belongs to
them to a common fund, with the intention of dividing the same
among themselves, as well as all the profits which they may
acquire therewith.
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