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ATENEO CENTRAL BAR OPERATIONS 2007
Civil Law
SUMMER REVIEWER  

CHAPTER 1: GENERAL PROVISIONS

PARTNERSHIP -  a contract wherein two or more CHAPTER 2: OBLIGATIONS OF PARTNERS

persons bind themselves to contribute money,
property, or industry to a common fund, with  Ar t. 1784. A partnership begins from the moment
the intention of dividing the profits among of the execution of the contract, unless it is
themselves. (see Art. 1767, CC) otherwise stip ulated.

EXCEPTIONS:
(General Professional Partnership, Art.1767¶2)  1. Where immo vable prop erty/real rig hts are
Two or more persons may also form a partnership contributed ( Ar t. 1771) 
for the exercise of a profession. a. Public instrument is necessary 
b. Inventory of the property contributed
ELEMENTS OF A PARTNERSHIP: must be made, signed by the
There shall be a partnership whenever: parties and attached to the public
1. There is a meeting of the minds; instrument otherwise it is VOID 
2. To form a common fund; 2. When the contract falls under the
3. With intention that profits (and losses) will be coverage of the Statute of Frauds ( Ar t.
divided among the contracting parties. 1409)
3. Where capital is P3,000 or m ore, in mo ney
ESSENTIAL FEATURES: or property ( Ar t. 1772) 
1. There must be a VALID CONTRACT. a. Public instrument is necessary
2. The parties must have LEGAL CAPACITY to b. Must be registered with SEC
enter into the contract.
3. There must be a mutual contribution of NOTE:
money, property, or industry to a COMMON   SEC Opin ion, 1 Jun e 1960: For purposes of
•

FUND. convenience in dealing with government

4. There must be a LAWFUL OBJECT. offices and financial institutions, registration
5. The purpose or primary purpose must be to of partnership having a capital of less than
obtain PROFITS and DIVIDE the same Php 3,000 is recommended.
among the parties.
SEPARATE JURIDICAL PERSONALITY 
•   It is also required that the articles of partnership
must NOT be kept SECRET among the  Ar t. 1768.  The partnership has a juridical
members; otherwise, the association shall have personality separate and distinct form that of
no legal personality and shall be governed by the each of the partners, even in c ase of failure to
provisions on CO-OWNERSHIP ( Ar t. 1775).  comply with th e requirements of Artic le 1772,
first paragraph.
•   "kept secret among the members" = secrecy
directed not to third persons but to some of the
partners   As a JURIDICAL PERSON, a partnership may:
1. acquire and possess property of all kinds;
CHARACTERISTICS: 2. incur obligations; and
QuickTime™ and a
1. Essentially TIFF
contractual nature ( Ar t. 1767,
inpicture.
(Uncompressed) decompressor  3. bring civil or criminal actions,
are needed to see this
1784)  in conformity with the laws and regulations of their
2. Separate juridical personality ( Ar t. 1768)  organization. (See Ar t. 46)
3. Delectus personae 
4. Mutual Agency ( Ar t. 1803)  PRINCIPLE OF DELECTUS PERSONARUM
5. Personal liability of partners for partnership DELECTUS PERSONAE —The selection or choice of
debts  the person.
FORM OF PARTNERSHIP CONTRACT
Implications: (Dean Villanueva)
GENERAL RULE: No special form is required for the
validity of a contract. ( Ar t. 1356)
—Adviser: Dean Cynthia Roxas-Del Castillo; Heads: Joy Marie Ponsaran, Eleanor Mateo; Understudies: Joy Stephanie
Tajan, J ohn Paul Lim;Subject Head: Thea Marie J imenez; Pledgee s: Naealla Rose Bainto, Sandra May Maclang—

Civil Law Summer Reviewer 

ATENEO CENTRAL BAR OPERATIONS 2007 

•  The assignment of a partner of his share •   A newly admitted partner into an existing
does not make assignee a partner ( Ar t. partnership is liable for all the obligations of the
1804 and 1813)  partnership arising before his admission but out
•  The existence of the partnership is closely of partnership property shares ( Ar t. 1826) 
tied-up to the particular contractual •   Partnership creditors are preferred to those of
relationship of the partners (see instances of each of the partners as regards the partnership
dissolution of the partnership upon change of property ( Ar t. 1827) 
contractual relationship.)  •   Upon dissolution of the partnership, the partners
hall contribute the amounts necessary to satisfy
Ortega v. CA, G.R. No. 109248, July 3, 1995 the partnership liabilities  (Ar t. 1839[4], [7]) 
Doctrine of Delectus Personae: PARTNERSHIP DISTINGUISHED FROM CO-
The birth and life of a partnership at will is OWNERSHIP AND CORPORATION
predicated on the mutual desire and consent of the
partners. The right to choose with whom a person CO-
PARTNERS CORP
wishes to associate himself is the very foundation OWNERS
HIP
and essence of that partnership. HIP
Creation Created by a Created by Created by
MEANING of MUTUAL AGENCY contract, by law law
(According to Dean Villanueva) mere
•   In the absence of contractual stipulation, all agreement of
partners shall be considered agents and the parties
whatever any one of them may do alone shall Juridical Has a None Has a
bind the partnership ( Ar t. 1803[1], 1818) personal  juridical  juridical
•   Partners can dispose of partnership property ity personality personality
even when in partnership name ( Ar t. 1819) separate and separate
•   An admission or representation made by any distinct from and distinct
partner concerning partnership affairs is evidence that of each from that of
against the partnership ( Ar t. 1820) partner each
•   Notice to any partner of any matter relating to stockholder
partnership affairs is notice to the partnership Purpose Realization of Common Depends
( Ar t. 1821) profits enjoyment on AOI
•   Wrongful act or omission of any partner acting for of a thing
partnership affairs makes the partnership liable or right
( Ar t. 1822) Duration/ No limitation 10 years 50 years
•   Partnership bound to make good losses for acts Term o f maximum maximum,
or misapplications of partners ( Art. 1823) existenc extendible
e to not more
UNLIMITED L IABILITY than 50
(According to Dean Villanueva)  years in
•   All partners are liable pro rata with all their any one
properties and after partnership assets have instance
been exhausted, for all partnership debts ( Ar t. Disposal Partner may Co-owner Stockholde
1816)  / not dispose may freely r has a
•   Any stipulation against personal liability of Transfer  of his do so right to
partners for partnership debts is void , except as ability of individual transfer
 Art.
among them (TIFF QuickTime™ and a
1817)  interest interest shares
(Uncompressed)  decompressor 
unless without
•   All partners areareneeded to see this picture.
liable solidarily with the
agreed upon prior
partnership for everything chargeable to the
by all consent of
partnership when caused by the wrongful act or
partners other
omission of any partner acting in the ordinary
stockholder 
course of business of the partnership or with
s
authority from the other partners and for partner's
Power to In absence of Co-owner Manageme
act or misapplication of properties ( Ar t. 1824) 
act with stipulation to cannot nt is vested
rd
3   contrary, a represent with the

Page 158 of 297

Civil Law Summer Reviewer 

ATENEO CENTRAL BAR OPERATIONS 2007 

persons partner may the co- Board of particular partnership which has for its object specific
bind ownership Directors undertaking.
partnership
(each partner  Au rb ach v. Sanitary Wares, 180 SCRA 130 (1989) 
is agent of The Supreme Court has, however, recognized a
partnership) distinction between these two business forms and
Effect of Death of Death of Death of has held that although a corporation cannot enter into
death partner co-owner stockholder a partnership, it may, however, engage in a joint
results in does not does not venture with others. 
dissolution of necessarily dissolve
partnership dissolve corporation WEAKNESSES OF A PARTNERSHIP 
co- (Dean Villanueva)
ownership •   Partners are co-owners of the partnership
Dissoluti May be May be Can only properties and enjoy personal possession ( Art.
on dissolved at dissolved be 1811) 
any time by anytime by dissolved •   Partners may individually dispose of real property
the will of any the will of with the of the partnership even when in partnership
or all of the any or all of consent of name ( Ar t. 1819) 
partners the co- the state •   Dissolution of the partnership can come about by
owners the change in the relationship of the partners,
# of Minimum of 2 Minimum of Minimum of such as when a partner chosses to cease being
incor- persons 2 persons 5 part of the partnership ( Ar t. 1828, 1830[1] b) 
porators incorporato •   Expulsion of partner dissolves the partnership
rs ( Ar t. 1830[1]d ) 
Commen From the None From date •   Dissolved by the loss of the thing promised to be
cement moment of of issuance contributed to the partnership ( Ar t. 1830[4]) 
of execution of of •   Death, insolvency, or civil interdiction of a partner
 ju ri di cal contract of certificate dissolves the partnership ( Ar t. 1830 [5],[6],[7]) 
personal partnership of •   Petition by partner will dissolve the partnership
ity incorporati when a partner has been declared insane; or the
on by the partner has become incapable of performing his
SEC part of the partnership contract; a partner has
been found guilty of such conduct as tends to
Heirs of Tan Eng Kee v. CA,  G.R. No. 126881,. affect prejudicially the partnership business;
October 3, 2000 partner willfully or persistently commits a breach
of partnership agreement; the partnership
Particular partnership distinguished from joint business can only be carried at a loss; other
venture equitable reasons ( Ar t. 1831) 
 A particular partnership is distinguished from joint
venture, to wit: NOTE:
1) a joint venture (an American concept similar to
  SEC Opinio n, 28 Apri l 1995: The death of a
•
our joint account) is a sort of informal partnership,
partner, as a general rule, dissolves the
with no firm name and no legal personality. In a joint
partnership by operation of law, except if the
account, the participating merchants can transact
articles of partnership stipulate for the
business under their own name, and can be
continuance of the partnership relations upon
individually liable therefore; and
the death of any of the partners. 
2) usually, but not necessarily
QuickTime™ and a a joint venture is
  SEC Opinion, 5 August 1997:
• If the
limited to a singleTIFF (Uncompressed) decompressor 
transaction,
are needed to see thisalthough
picture. the business
remaining partners of the dissolved
of pursuing to a successful termination may continue
partnership intended for all legal intents and
for a number of years; a partnership generally relates
purposes, to continue the partnership
to a continuing business of various transactions of a
business even after the death of a partner,
certain kind.
there is continuity of personality of the
partnership as there exists a "partnership at
It would seem that under Philippine law, a joint
will." 
venture is a FORM of PARTNERSHIP, specifically a

Page 159 of 297

Civil Law Summer Reviewer 

ATENEO CENTRAL BAR OPERATIONS 2007 

RULES TO DETERMINE EXISTENCE OF EFFECT OF PARTIAL ILLEGALITY:  

PARTNERSHIP 1. Where a part of the business of a partnership
is legal and a part illegal, an account of that
GENERAL RULE:  Persons who are NOT partners
which is legal may be had. 
as between themselves, CANNOT be partners as
2. Where, without the knowledge or
to third persons. ( Ar t. 1769(1))
participation of the partners, the firm's profits
EXCEPTION:
in a lawful business have been increased by
Partnership by Estoppel under Ar ti cl e 1825
wrongful acts, the innocent partners are not
precluded as against the guilty partners from
OTHER RULES TO DETERMINE WHETHER A
recovering their share of the profits. (De
PARTNERSHIP EXISTS: (See Ar t. 1769)
Leon, p. 65) 
1. Co-ownership or co-possession does not of
itself establish a partnership
2. The sharing of gross returns does not of itself
establish a partnership, whether or not the WHO MAY BE PARTNERS
persons sharing them have a joint or
GENERAL RULE:  Any person capacitated to
common right or interest in any property from
contract may enter into a contract of partnership.
which the returns are derived;
EXCEPTIONS:  
3. The receipt by a person of a share of the
1. Persons who are prohib ited from giving
profits of a business is prima facie evidence
each other any donation or advantage
that he is a partner in the business, UNLESS
cannot enter into a universal partnership.
such were received in payment:
( Ar t. 1782) 
a. As debt by installments or otherwise;
2. Persons suffering from civil interdiction.
b. As wages or rent;
3. Persons who cannot give consent to a
c. As annuity;
contract:
d. As interest on loan;
a. Minors
e. As consideration for sale of goodwill
b. insane persons
of business/other property by
c. deaf-mutes who do not know how to
installments
write

 Ar t. 1770. A partnership must h ave a lawful object

or purpose, and must be established for the
common benefit or interest of the partners.
When an unlawful partnership
dissolved by a judicial decree, the profits
shall be confiscated in favor of the State,
MAY CORPORATIONS ENTER INTO
PARTNERSHIP? 
is Philip pin e Corp orate Law (2001) by Dean
Villanueva (p. 902) citing various SEC Opinions: 
  Corporations may enter into partnership
•

without prejudice to the provisions of the agreements on the following conditions:

Penal Code governing the confiscation of the 1. Authority to enter into a partnership
instruments and effects of a crime. relation is expressly conferred by the
charter or the articles of
EFFECTS OF AN UNLAWFUL PARTNERSHIP:   incorporation (AoI), and the nature of
1. The contract is void ab initio and the the business venture to be
partnership never existed in the eyes of the undertaken by the partnership is in
law. ( Ar t. 1409[1] ) line with the business authorized by
2. The profits shall be confiscated in favor of the the charter or AoI.
government. ( Ar t. 1770) 2. If it is a foreign corporation, it must
3. The instrumentsQuickTime™or toolsandand a proceeds of the obtain a license to transact business
TIFF (Uncompressed) decompressor 
crime shall also
are beto see
needed forfeited
this picture. in favor of the in the country in accordance with the
government. ( Ar t. 1770, Ar t. 45-RPC) Corporation Code of the Philippines.
4. The contributions of the partners shall not be
confiscated unless they fall under no. 3. (See
 Ar ts . 1411 and 1412)
WHEN IMMOVABLES OR REAL RIGHTS
NOTE: Judicial decree is not necessary to dissolve CONTRIBUTED
an unlawful partnership.

Page 160 of 297

Civil Law Summer Reviewer 

ATENEO CENTRAL BAR OPERATIONS 2007 

 Ar t. 1773.  A contract of partnership is void, Partnerships void under Art.1773, in

whenever immovable property is contributed relation Art. 1771 may still be considered
thereto, if an inventory of said property is not either de facto or estoppel partnerships vis-
made, signed by the parties, and attached to à-vis third persons; may even be treated as
the public instrument.  an ordinary contract from which rights and
obligations may validly arise, although not
GENERAL RULE:  Failure to comply with the
exactly a partnership under the Civil Code.
requirement of appearance in public instrument
and SEC Registration will not affect the liability of !Failure to prepare an inventory of the
the partnership and the members thereof to third immovable property contributed, in spite of
persons. ( Ar t. 1772 ¶ 2) article 1773 declaring the partnership void
EXCEPTION: When IMMOVABLE PROPERTY/ would not render the partnership void when:
REAL RIGHTS are contributed, a. NO THIRD PARTY INVOLVED
*public instrum ent + inventory*  (since Art. 1773 was intended for the
made and signed by the parties and attached to protection of 3rd parties;
the public instrument ( Ar ts . 1771 and 1773) is b. Partners have MADE A CLAIM ON
required for the benefit of third persons. THE PARTNERSHIP AGREEMENT.

EFFECT OF ABSENCE OF REQUIREMENTS

UNDER ARTICLES 1771 AND 1773 CLA SSIFICATIONS OF PARTNERSHIP
CONDITION OF
 AS TO EXTENT OF ITS SUBJECT MATTER
P ARTNERSHIP
WHERE REAL B AUTISTA, E. DE L EON  1.
UNIVERSAL PARTNERSHIP
PROPERTY IS a. UNIVERSAL PARTNERSHIP OF
CONTRIBUTED   ALL PRESENT PROPERTY -
comprises the following:
No public
i. Property which belonged to
Instrument, No VOID VOID
Inventory each of the partners at the
time of the constitution of the
With Public partnership
Instrument, No VOID VOID ii. Profits which they may
Inventory acquire from all property
VALID contributed
b. UNIVERSAL PARTNERSHIP OF
but either party PROFITS - comprises all that the
may compel partners may acquire by their
execution of industry or work during the existence
public instrument of the partnership
so it may be
No Public NOTE:  Persons who are prohibited from giving
registered in the
Instrument, With VOID donations or advantage to each other cannot enter
registry of
Inventory into a universal partnership. ( Ar t. 1782)
property;
nonetheless,
partnership 2. PARTICULAR PARTNERSHIP—has for its
agreement may objects: 
be enforced (cf. a. Determinate things
 Ar ts . 1356 to b. Their use or fruits
1358) and a
QuickTime™ c. Specific undertaking
TIFF (Uncompressed) decompressor 
are needed to see this picture. d. Exercise of profession or vocation
With Public
Instrument, With VALID VALID
 AS TO LIA BILITY OF PARTNERS
Inventory
1. GENERAL PARTNERSHIP —consists of
(Source: Bar Review Notes for Partnership Law by general partners who are liable pro rata
 Atty. Villareal) and subsidiarily and sometimes solidarily
NOTE: with their separate property for
  Torres v . CA, 320 SCRA 428 (1999)
• partnership debts.

Page 161 of 297

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