Partnership Notes

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.

A status and a fiduciary relation subsisting between persons carrying on a business in common
with a view on profit.

***While strictly speaking the exercise of a profession is not a business undertaking nor an
enterprise for profit – the law considers the joint pursuit thereof, for mutual help, as a
partnership. PARAS

Even if the dividing of the profits is not equal (one partner getting the lion’s share), the “Articles
of Agreement” stipulated that the signatories shall share the profits of the business in a 70-15-
15 manner; therefore the stipulation clearly proved the establishment of a partnership.
[Fernando Santos v. Sps. Arsenio and Nieves Reyes GR 135813, Oct. 25, 2001]

Characteristics of the Contract:

1. Consensual – perfected by mere consent, although must be manifested in certain
cases by the proper formalities
a. Bilateral or multilateral
b. Nominate
c. Principal – existence does NOT depend on the life of another contract
d. Onerous – certain contributions have to be made
e. Preparatory – after entering into, other contracts can be entered into
2. Contribution of money, property, or industry
a. Credit and goodwill can be considered as property
 A license to construct and operate a cockpit can be given as a contribution to
a partnership [Baron v. Parajillo, et al., CA 146-R, Nov. 29, 1956]
3. Must have a lawful object
 The object must be for profit and not merely for common enjoyment;
otherwise, only a co-ownership has been formed. However, pecuniary profit
need not be the only aim; it is enough that it is the principal purpose. Thus,
other ends – like social, moral, or spiritual objectives – may also properly
exist. MANRESA
4. Must have an intention of dividing profits
5. Must have an affectio societatis (desire to formulate an active union) with people
among whom there exist a delectus personarum (mutual confidence and trust)
** Just because the terms “partnership and partners” appear in a contract between certain
persons does not necessarily mean that a partnership has been entered into. [Paterson v.
Eppler]

** Where two people jointly borrowed from their father a sum of money which, together with
their own personal funds, was used by them in buying real properties for lease to third parties,
such investment consisting of a series of transactions and the management thereof being
undero one person for more than ten years, the legal entity created by them is a partnership.
[Evangelista, et. al v. Coll. of Int. Reve., L-9996, Oct. 15, 1957] similar with [Duterte v. Rallos, and
Kial v. Estate of Saber]

Capacity to become a Partner

a. Generally, a person capacitated to enter into contractual relations may become a
partner.
b. An unemancipated minor cannot become a partner unless his parents or guardian
consents. Without such consent, the partnership contract is voidable, unless other
partners are in the same situation, in which case the contract is unenforceable. Arts.
1327, 1403, 1407 CC
c. A married woman, even if already of age, cannot contribute conjugal funds as her
contribution to the partnership, unless she is permitted to do so by her husband, or
unless she is the administrator of the conjugal partnership, in which latter case, the
court must give its consent/authority. Arts, 124 & 125 FC
d. A partnership being a juridical person by itself can, it is believed, form another
partnership, either with private individuals or with other partnerships, there being no
prohibition on the matter.
e. The majority view is that a corporation cannot become a partner on grounds of public
policy; otherwise, people other than its officers may be able to bind it. However, a
corporation can enter into a joint venture with another where the nature of that venture
is in line with the business authorized in its charter. Thus, a corporation, like the
Gregorio Araneta Co., may act as a sort of “managing partner” of another corporation,
for the purpose of conducting a lawsuit in line with the corporate business of the
corporations concerned. [J.M.T. Wason and Co., Inc. v. Bolanos, L-4935, May 28, 1968]