GENERAL OVERVIEW OF THE LAW ON PARTNERSHIP

Title IX, Book IV of Republic Act No. 386, New Civil Code of the Philippines
LEGAL BASIS
(Arts. 1767-1867)

By the contract of partnership two or more persons bind themselves to

DEFINITION contribute money, property or industry to a common fund, with the intention
of dividing the profits among themselves (1767)

a) Implied agreement of two (2) or more capacitated persons to enter a

contract for joint undertaking to share in profit and loss.
b) There must be a mutual contribution of money, property or industry to
ELEMENTS
a common fund in order to build a legal business.
c) Commence out from a valid contract.

a) Consensual- perfected by mere consent, implied agreement of two or

more persons.
b) Nominate- it has special designated name in our law.
c) Bilateral- rights and obligations are always reciprocal.
CHARACTERISTICS
d) Onerous- each one aspires to have benefit through giving something.
e) Commutative- each partners undertaking is equivalent to others.
f) Principal- does not depend the existence to some contract.
g) Preparatory- entered for a cause.

How is the contract perfected?

It is perfected the moment all the requisites of a valid contract of partnership
presented, under the law such as:
1. Consent and capacity of the contracting parties.
2. Object which is the subject matter of the contract.
3. Cause which is establishes.

Who are capacitated and incapacitated to enter into a contract?

1. Any person may be a partner who is capable, capacitated or
CONSENT emancipated according to law could enter into contractual relations.
➔ How is the contract 2. The following are incapacitated to enter into a contract:
perfected?
➔ Who are capacitated and  Unemancipated minors
incapacitated to enter  Insane or demented persons
➔
into a contract?
How is consent
 Deaf-mutes who do not know how to write
manifested?  Persons who are suffering from civil interdiction
 Incompetents who are under guardianship (see Arts. 1327,
1329; Art.34, Revised Penal Code; Rules 93-94, new Rules of
Court.)

How is consent manifested?

A partnership could be perfected by mere consent that is express agreement
of two (2) or more persons.

GR: No one can become a member of the partnership association without the
consent of all the other associates or what we called delectus personae.

PARTIES PARTNERS

OBJECT Mutual contribution to a common fund

➔ What is the obligation of - to contribute money, property or industry to a common fund (1767)
the parties?

RFBT 2 Worksheet No. 1: General Overview of the Law on Partnership 1

LANDICHO, Karen C.
2BSAIS-1
 CAUSE/ Joint interest in the profits
CONSIDERATION - to divide the profits among themselves (1767)
➔ Why did the party agree
to the contract or
agreement?

Existence of a valid contract

1. It may be informally created and its existence proved by the conduct or
acts of the parties.
2. It is customary to have a written document of two (2) or more person’s
agreement. Presenting all the requisites of a valid contract;
FORMALITIES I. Consent and capacity of the contracting parties.
➔ Is a form required for this
kind of contract? II. Object which is the subject matter of the contract.
III. Cause which is establishes.

EXP. A limited partnership cannot be created by mere voluntary agreement

(Art. 1844), as distinguished from general partnership. (Art 1776)

Obligations of a Partner with respect to contribution of property

1. To contribute at the beginning of the partnership or at the stipulated
time the promised share such as money, property, or industry.
2. To answer for eviction in case the partnership is deprived of the
determinate property contributed.
3. To answer to the partnership for the fruits of the property the
contribution of which he delayed, from the date they should have been
contributed up to the time of actual delivery.
In addition, the partner has the obligation
4. To preserve said property with the diligence of a good father of a family
pending delivery to the partnership (Art. 1163.)
5. To indemnify the partnership for any damage caused to it by the
retention of the same or by the delay in its contribution (Arts. 1788,
1170)
Obligations of a Partner with respect to contribution of money and
OBLIGATIONS
money converted to personal use
1. To contribute on the date due the amount he has undertaken to
contribute.
2. To reimburse any amount he may have taken from the partnership
coffers and converted to his own use.
3. To pay the agreed or legal interest, if he fails to pay his contribution on
time.
4. To indemnify the partnership for the damages caused to it by the delay
in the contribution or the conversion of any sum for his personal
benefits.
Obligation of industrial Partner
1. Must give his exclusive service, labor, or industry to the partnership.
Obligation of Capitalist partner to contribute additional capital
1. Obligation to contribute additional share to save venture in case of
imminent loss.

1) Principal Rights
a. His rights in specific partnership property (Art.1811).
b. His interest in the partnership (Art. 1812).
c. His right to participate in the management (Art. 1893).
RIGHTS 2) Related Rights
a. The right to reimbursement for amounts advanced to the
partnership and to indemnification for risks in consequence of
management (Art.1796).
b. The right of access and inspection of partnership books (Art.

RFBT 2 Worksheet No. 1: General Overview of the Law on Partnership 2

LANDICHO, Karen C.
2BSAIS-1
 1805)
c. The right to true and full information of all things affecting the
partnership (Art. 1806)
d. The right to a formal account of partnership affairs under certain
circumstances (Art. 1809).
e. The right to have the partnership dissolved also under certain
condition. (Arts. 1830-1831.)

Art. 1830 Dissolution is caused:

1) Without violation of the agreement between the partners:
a) By the termination of the definite term or particular undertaking
specified in the agreement;
b) By the express will of any partner, who must act in good faith, when
no definite term or particular undertaking is specified;
c) By the expr4ess will of all the partners who have not assigned their
interests or suffered them to be charged for their separate debts,
either before or after the termination of any specified term or
particular undertaking;
d) By the expulsion of any partner from the business bona fide in
MODES OF accordance with such a power conferred by the agreement
EXTINGUISHMENT between the partners;
2) In contravention of the agreement between the partners, where the
circumstances do not permit a dissolution under any other provision of
this article by the express will of any partner at any time;
3) By any event which makes it unlawful or the business of the partnership
to be carried on or for the members to carry it on in partnership;
4) By losing the promised contribution for the partnership that was used
to reserve the ownership over the partnership.
5) By the death of any partner.
6) By the insolvency of any partner or of the partnership.
7) By the civil interdiction of any partner;
8) By decree of court under the following article. (1700 and 1701a)

 Art.234 (Family Code)

 Arts. 1327,1329
 Art.34, Revised Penal Code; Rules 93-94, new Rules of Court.
OTHER PERTINENT
 Art.87, Art.73
FACTS
 Mechem, Elements of the Law of Partnership [1923]
 Art.1318
 Art.1403

RFBT 2 Worksheet No. 1: General Overview of the Law on Partnership 3

LANDICHO, Karen C.
2BSAIS-1