Law on Partnership

Partnership
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. (1665a)
Characteristics
1. Consensual – perfected by mere consent.
2. Bilateral or multilateral – entered into 2 or more persons
3. Nominate – It is designated by a specific name and rules
4. Principal – Its existence need not to depend on the existence of other contract
5. Onerous – Contributions to made by partners
6. Preparatory – To meet the goals of divide profits or exercise profession.
Principles Applicable
Affectio Societatis – Desire to formulate an ACTIVE union
Delectus Personae – Right to choose who to associate with
Purpose
1. Intention of dividing the profits among themselves
2. In order to exercise common profession
Nevertheless, the object of partnership must be LAWFUL. (Art. 1770)
PARTNERSHIP vs. CORPORATION
Separate juridical personality
Determining the Existence of a Partnership
FORMAL REQUIREMENTS

KINDS OF PARTNERSHIP
OBLIGATIONS OF A PARTNER TO THE
PARTNERSHIP AND OTHER PARTNERS
OBLIGATIONS OF A PARTNER TO THIRD PERSONS
Rights of a Partner
Rules of Management
Other Rights of a Partner
Dissolution and Winding Up
Winding up
Distribution of assets
Partner’s liability

Limited Partnership
 BUSLAW COVERAGE
*Art. 1767 Definition of Partnership
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.

✓Can a Partnership be exercised in a Profession?

Yes, the same profession of partners. ARTICLE 1783. A particular partnership has for its object
determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or
vocation. (1678)

✓Elements of Partnership
1. agreement to contribute money property or industry to a common fun (mutual contribution to a
common stock)
2. Intention to divide the profits
or
1. Intention to form a contract of partnership
2. Participation in both profits and losses
3. Community of interests
Characteristics
1. Consensual – perfected by mere consent.
2. Bilateral – formed by two or more persons creating reciprocal rights and obligations.
3. Preparatory - entered into as a means to an end.
4. Nominate – has a special name or designation.
5. Onerous – contributions in the form of either money, property and/or industry must be made.
6. Commutative – the undertaking of each partner is considered as the equivalent of that of the
others.
7. Principal – its existence or validity does not depend on some other contract.

✓Meaning of Delectus personarum

(choice of persons) – a person has the right to select persons with whom he wants to be
associated with in partnership.

✓ Who are legally capacitated to enter Partnership:

Any person may be a partner who is capable under the law of entering contractual relations.
NOT LEGALLY CAPACITATED:
1. Unemancipated minors
2. Insane or demented
3. Deaf-mute who do not know how to write
4. Persons who are suffering from civil interdiction
5. Incompetents who are under guardship
6. Spouse
7. Who committed adultery and concubinage
*Art. 1770
ARTICLE 1770. A partnership must have a lawful object or purpose and must be established for
the common benefit or interest of the partners.
When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated in
favor of the State, without prejudice to the provisions of the Penal Code governing the
confiscation of the instruments and effects of a crime. (1666a)
*Art. 1771
ARTICLE 1771. A partnership may be constituted in any form, except where immovable
property or real rights are contributed thereto, in which case a public instrument shall be
necessary. (1667a)
*Art. 1772
ARTICLE 1772. Every contract of partnership having a capital of three thousand pesos or more,
in money or property, shall appear in a public instrument, which must be recorded in the Office
of the Securities and Exchange Commission.
Failure to comply with the requirements of the preceding paragraph shall not affect the liability
of the partnership and the members thereof to third persons. (n)
*Art. 1773
ARTICLE 1773. A contract of partnership is void, whenever immovable property is contributed
thereto, if an inventory of said property is not made, signed by the parties, and attached to the
public instrument. (1668a)
*Art. 1774
ARTICLE 1774. Any immovable property or an interest therein may be acquired in the
partnership name. Title so acquired can be conveyed only in the partnership name. (n)

✓ Classifications of Partnership
As to extent of its subject matter
1. Universal partnership. (Art. 1777)
a. Universal partnership of all present property. (Art. 1778)
b. Universal partnership of profits. (Art. 1780)
2. Particular partnership. (Art. 1783)

✓ Kinds of Partnership
As to liability of the partners
General partnership: one consisting of general partners who are liable pro rata and subsidiary and
sometimes solidarily w/ their separate property for partnership debts.
Limited partnership: one formed by two or more persons having as members one or more
general partners and one or more limited partners, the latter not being personally liable for the
obligations of the partnership.

✓ Kinds of Partners
1. Capitalist partner: one who contributes money or property to the common fund.
2. Industrial partner: one who contributes only his industry or personal service.
3. General partner: one whose liability to 3rd persons extends to his separate property.
4. Limited partner: one whose liability to 3rd persons is limited to his capital contribution.
5. Managing partner: one who manages the entity.
6. Liquidating partner: one who takes charge of the winding up of partnership affairs upon
dissolution.
7. Partner by estoppel: one who is not really a partner but is liable as a partner for the protection
of innocent 3rd persons. He is one represented as being a partner but who is not so between the
partners themselves.
8. Continuing partner: one who continues the business of a partnership after it has been dissolved
by reason of the admission of a new partner, or the retirement, death or expulsion of one or more
partners.
9. Surviving partner: one who remains after a partnership has been dissolved by the death of any
partner.
10. Sub partner: one who, not being a member of the partnership, contracts w/ a partner
w/reference to the latter’s share in the partnership.
Other classifications
1. Ostensible partner: one who takes active part and known to the public as a partner.
2. Secret partner: one who takes active part in the business but is not known to be a partner by
outside parties nor held out as a partner by the other partners. He is an actual partner.
3. Silent partner: one who does not take any active part in the business although he may be
known to be a partner.
4. Dormant partner: one who does not take active part in the business and is not known or held
out as a partner. He would be both a silent and a secret partner.
5. Original partner: one who is a member of the partnership from the time of its organization.
6. Incoming partner: a person lately, or about to be, taken into an existing partnership as a
member.
7. Retiring partner: one withdrawn from the partnership; a withdrawing partner.
*Art. 1777-1780
Art. 1777. A universal partnership may refer to all the present property or to all the profits.
ARTICLE 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. (1673)
ARTICLE 1779. In a universal partnership of all present property, the property which belonged
to each of the partners at the time of the constitution of the partnership, becomes the common
property of all the partners, as well as all the profits which they may acquire therewith.
A stipulation for the common enjoyment of any other profits may also be made; but the property
which the partners may acquire subsequently by inheritance, legacy, or donation cannot be
included in such stipulation, except the fruits thereof. (1674a)
ARTICLE 1780. A universal partnership of profits comprises all that the partners may acquire by
their industry or work during the existence of the partnership.
Movable or immovable property which each of the partners may possess at the time of the
celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing
to the partnership. (1675)

✓ Secret Partnership

✓ obligations of the partners

*Art. 1786
*Art. 1789 Industrial Partner
*Art. 1791
*Art. 1794-1796
*Art. 1799

✓ Rights of Partners
*Art. 1808
*Art. 1810 MEMORIZE
ARTICLE 1810. The property rights of a partner are:
(1) His rights in specific partnership property;
(2) His interest in the partnership; and
(3) His right to participate in the management. (n)
*Art. 1811
* Art. 1812

✓ Obligations of partners as to third persons

* Art. 1815
* Art. 1816
* Art. 1818
* Art. 1821

✓ Liability of a Partner
* Art. 1828 Dissolution
* Art. 1829
* Art. 1830

✓ Credit Transactions (5-8 questions)