THE LAW ON PARTNERSHIP

OUTLINE

General Provisions
 Formation
 Kinds of Partnership
 Rights and Obligations of the Partnership
 Dissolution and Winding Up
 Limited Partnership

Art. 1767 of the Civil Code of the Philippines

"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."

PARTNERSHIP
• created by contract
• entered into by two or more persons who have mutual desire
• contribute their money, property, and service to a common fund
• Intent to divide profit among themselves
* exercise of a profession

Concept of Partnership
 It has personality separate and distinct from the partners.
 It may acquire and possess all kinds of properties, incur obligations and file
cases in courts or become defendants in cases.
 As a business organization, it is between the sole proprietorship and
corporation.

PURPOSE
A partnership purpose can either be:
1. For the intention of dividing the profits among themselves, or
2. In order to exercise a profession
Nonetheless, it is required that a partnership must have a LAWFUL object or
purpose, otherwise it maybe declared dissolved by judicial decree, and the profits
shall be confiscated in favor of the state. (Art. 1770)

CHARACTERISTICS
1. Consensual - perfected by mere consent.
2. Bilateral - rights and obligations of the partners is always reciprocal.
3. Principal - it does not depend for its validity or existence upon some other
contract
4. Commutative - the undertaking of each partner is the same with others
5. Preparatory - entered into as a means to an end
6. Onerous - partners contribute something so that they may share in the profits
7. Nominate - it has a special name or designation under the law.

ESSENTIAL FEATURES
1. There must be a valid contract;
2. The parties must have legal capacity to enter into the contract;
3. There must be a mutual contribution of money, property or industry to a
common fund;
4. The object must be lawful;
5. The primary purpose is to obtain profits and to divide the same among the
parties.

Existence of a Valid Contract

Valid Contract - consent, object and cause

1. A form of voluntary and personal association

- The element of delectus personae (personal choices) exists. (the right to choose
who to associate with)

2. Creation and proof of existence

- Maybe formally created or existence may be created by the conduct or acts of
the parties.
- It is just customary to embody the agreement in a written document known as
Articles of Partnership.

Legal Capacity of the Parties

GENERAL RULE: Any person
EXCEPTION:
1. Unemancipated minors
2. Insane or demented persons
3. Deaf-mutes who do not know how to write
4. Persons who are suffering from civil interdiction (convicted with accessory
penalty of civil interdiction for crimes with imposable penalties of reclusion
perpetua and reclusion temporal)
5. Incompetents who are under guardianship

LIMITED CAPACITY
1. Persons who are prohibited from giving each other any donation or
advantage cannot enter into a universal partnership.
2. A corporation which cannot enter into a partnership in the absence of
express authorization by statute or charter, but may engage in a joint
venture with others.

Can a partnership be a partner in another partnership? YES

Can a corporation be a partner in a partnership?

As a general rule, a corporation cannot become a partner. This limitations based
on public policy, since in a partnership, the corporation would be bound by the
acts of persons who are not duly appointed and authorized agents and officers.

This would be entirely inconsistent with the policy of the law that the corporation
shall manage its own affairs separately and exclusively.
It may nonetheless validly enter into a joint venture agreement where the nature
of the ventures in line with the business authorized by its charter.

Mutual Contribution to a Common Fund

1. Propriety or financial interest
- The partners must have a propriety or financial interest in the business.
- Without the element of mutual contribution to a common fund, there can be no
partnership.
2. Forms of Contribution
A) Money - Legal Tender
B) Property - Real or personal
C) Industry - work or services which may be either personal manual efforts or
intellectual

Lawful Object
* Since a partnership is really a contract between the parties, the parties are free
to choose the business or transaction they want to enter into provided this is
lawful and for the common benefit of the parties.
* Otherwise, no partnership can arise as the contract is void ab initio.

Intention to realize and divide profits

 It is the very essence of a partnership.
 It is what separates a partnership from voluntary religious or social
organizations.
 Profits need not shared equally among the partners.
 Sharing of profits is only a mere evidence of partnership.
 Agreement as to how profits shall be shared is not necessary.

FORM OF PARTNERSHIP
GENERAL RULE: A contract of partnership maybe made orally or
In writing.
EXCEPTION:
1. When cash or property worth P3,000.00 or more is contributed.
2. When real or immovable property are contributed.

 Cash or property worth P3,000.00 or more is contributed

Requirements:
1. The contract must appear in a public instrument.
2. It must be recorded or registered with the Securities and
Exchange Commission (SEC)
 HOWEVER, failure to comply with the foregoing requirements does NOT
prevent the formation of the partnership
 Failure to comply will also not affect liability of the partners to third
persons.
 Real or Immovable Property are contributed
Requirements:
1. The contract must be in a public instrument; and
2. An inventory of the property contributed must be made, signed by the parties
and attached to the public instrument.
 If it is not made, the contract of partnership is VOID.

DURATION OF PARTNERSHIP
 It exists from the moment of the execution of the contract, UNLESS the
parties stipulated otherwise.
AS TO DURATION:
1. FIXED TERM
2. BY AGREEMENT or AT WILL

RULES TO DETERMINE EXISTENCE

When the intent of the parties is clear, such intent shall govern.
Otherwise, the following rules shall apply:

* Persons who are not partners to each other are not partners
as to third persons unless there is estoppel.

PARTNERSHIP BY ESTOPPEL
When persons by their acts, consent, or representations have misted third
persons into believing that those persons are partners, they shall be subject to
liabilities to those who believed them in good faith.

Co-ownership or co-possession

Co-ownership or co-possession - ownership of an undivided thing belongs to

different persons
* It does not establish a partnership, even when there is sharing of profits in the
use of the property.

> Partnership exists when profits are derived from the operation of the business
or undertaking by the members.

Ex. NO partnership: A and B inherited property and leased it to C.

Partnership exists: A and B contributed to buy lotto ticket for the purpose of
dividing their winnings.
KINDS OF PARTNERSHIP
As to legality and existence:
1. Partnership De Jure - has complied with all the requisites for its lawful
establishment.
2. Partnership De Facto - failed to comply

Ex. A, B and C entered into a universal partnership of all present

property, and they agreed that all properties subsequently acquired would belong
to the partnership. Subsequently, A received a parcel of land by inheritance from
his father. B received a parcel of land with fruit-bearing trees as payment for his
services from his client.
Only B's parcel of land with fruit-bearing trees will go to the
partnership. The parcel of land which A inherited will not go into the partnership
since future inheritance cannot be stipulated upon.
However, the fruits of A's land belong to the partnership if there is a stipulation to
that effect because they may be considered as properties subsequently acquired.

KINDS OF PARTNERSHIP
As to liability of the partners:
1. General Partnership - consist of general partners who are
Liable pro rata and subsidiarily or at times solidarily with their separate property
for partnership obligations.
2. Limited Partnership - formed by two or more persons having
As partners and who are NOT partnership members one or more general one or
more limited partners personally liable for the obligations.

KINDS OF PARTNERSHIP
As to its publicity:
1. Secret Partnership - one where the existence of certain persons as partners is
not made known by the partners.
2. Open or Notorious Partnership - whose existence is made known to the public
by the parties.

KINDS OF PARTNERSHIP
As to its purpose:
1. Commercial or Trading Partnership - exists for the transaction of business.
2. Professional or Non-trading Partnership - exists for the exercise of a profession.

KINDS OF PARTNERSHIP
As to its duration:
1. Fixed Term or Particular Undertaking - term is specified.
2. Partnership at will - mutual agreement of the parties.

Kinds of Partners
1. Capitalist Partner - contributes money or property.
2. Industrial Partner - contributes only his industry, skills or services
3. General Partner - liability to third persons extends to his
separate property
4. Limited Partner - liability to third persons is limited to his
capital contribution
5. Managing Partner - designated to manage the affairs or business of the
partnership
6. Liquidating Partner - takes charge of winding up the partnership affairs.
7. Partner by Estoppel - not really a partner but is liable as such for the protection
of innocent third persons
8. Continuing Partner - continues the business after the dissolution of the
partnership by admission of a new partner, or retirement, death, or expulsion of
existing partners.
9. Surviving Partner - remains a partner after dissolution by
death of any of the partner
10. Sub-partner - not a member of the partnership and, technically and legally
speaking, not a partner as he only contracts with a partner concerning the share
of the latter in the partnership
11. Ostensible Partner - takes an active part in the business of the partnership and
is known by the public
12. Secret Partner - takes an active part in the business, but is
unknown to the third person as a partner.
13. Silent Partner - does not active part in the business, but maybe known to be a
partner by third persons.
14. Dormant Partner - does not take an active part in the business and is not
known or held out as a partner
15. Original Partner - a partner since the constitution of the
partnership
16. Incoming Partner - about to join or be taken as a member into an existing
partnership
17. Retiring Partner - withdrawing from partnership.

Partnership as Distinguished from other Contracts

Partnership Joint Venture
Operates with a firm name and legal Operates without a firm name and
personality legal personality

Relates to a continuing business of Usually limited to a single transaction

various transactions of a certain kind

Partnership as Distinguished from other Contracts

Partnership Co-ownership
Created by either an express or Created by law and may exist even
implied contract without contract

Has a separate juridical personality Has no separate juridical personality

Purpose: to obtain profits Common enjoyment of a thing or

right

Duration: has no limitation An agreement to keep a thing

undivided for more than 10 years is
not allowed, but maybe extended

There is mutual agency between There is no mutual representation

partners among co-owners

Death or incapacity of a partner Death or incapacity of a co-owner

dissolves the partnership does not dissolve the co-ownership

A partner cannot dispose of his Co-owner can dispose of his share

interest so as to make the assignee a without the consent of others.
partner without the consent of others

Partnership Corporation
Both have a juridical personality separate and distinct from its members.

Both consist of an aggregate of individuals and distributes profits to those

who contributed capital to the business.

Both taxable

No limitation on duration

Partnership Corporation
Created by agreement Created by operation of law

Involves at least two persons Can exist with a single stockholder

Commences from the moment of the Commences from the issuance of the
execution of the contract Certificate of Incorporation by the
SEC

Can exercise any power authorized by Can exercise only powers conferred
the partners by the Revised Corporation Code or
by its Articles of Incorporation

When management is not agreed Management is vested in the Board

upon, every partner may act for the of Directors or Trustees
partnership

Partners are generally liable for Stockholders are liable only to the
 partnership debts extent of their shares in the
corporation

A partner cannot disposed of his A stockholder has the right to transfer

interest, so as to make the assignee a his shares without the consent of
partner, without the consent of others
others

Maybe dissolved at any anytime by May only be dissolved with the

any partner or all of the partners consent of the State

COMMENCEMENT OF A PARTNERSHIP

GENERAL RULE:
From the moment of celebration of the contract

EXCEPTION:
UNLESS it is otherwise stipulated
a. Formed at some future time
b. Happening or fulfillment of some condition or future contingency

POWER/RIGHT OF A PARTNER TO TERMINATE PARTNERSHIP

 Anyone of the partners can dictate a dissolution of the partnership at will,
PROVIDED THAT he acts in GOOD FAITH. Dissolution must not be made at
an improper or unreasonable time;
 If such partners who wants to dissolve the partnership acts in BAD FAITH,
partnership shall still be dissolved but he or she shall be liable for damages.
 There is no such thing as an indissoluble partnership.

OBLIGATIONS OF THE PARTNERS

A.DUTY TO CONTRIBUTE
money
 To contribute at the beginning of the partnership or at the stipulated time
the property, or industry which he may have promised to contribute.
B. DUTY TO WARRANT AGAINST EVICTION

property
 To answer for eviction in case the partnership is deprived of the
determinate contributed

C. DUTY TO DELIVER FRUITS

 In case of delay, to answer for the fruits of the property which he or she
delayed contribution thereof

D. DUTY TO PRESERVE PROPERTY

 To preserve said property with the diligence of a good father of a family
pending deliver.

E. DUTY TO INDEMNIFY FOR DAMAGES

 To indemnify the partnership for any damage caused to the property in case
of delay.

The property contributed by a partner to the partnership becomes the property

of the partnership.

The contributed property CANNOT be withdrawn or disposed of by the

contributing partner without the consent or approval of the partnership or of the
other partners.

EFFECT OF FAILURE TO CONTRIBUTE PROPERTY PROMISED

 The partner automatically becomes a debtor of the partnership even in the

absence of demand;
 The remedy of the partnership or the other partner is to file an action for
specific performance (to collect from the defaulting partner who failed to
contribute) with damages and interest from the defaulting partner;
 Rescission of cancellation of the contract of partnership is NOT ALLOWED,
unless fraud or misrepresentation is committed by one of the parties.
LIABILITY OF PARTNER IN CASE OF EVICTION

 According to the Law on Sales, eviction takes place whenever by final

judgment, the buyer or vendee is or part of the things purchased is
deprived of the whole or part of the thing purchased;
The partner is bound in the same case as the seller or vendor is bound to the
buyer or vendee who was evicted.

LIABILITY OF PARTNER FOR FRUITS OF PROPERTY IN CASE OF DELAY

 No demand is necessary to put the partner in default of delay;

 From the moment of failure to contribute what was promised, the
partnership fails to receive the benefits which the said contribution ought
to produce.

LIABILITY OF PARTNER FOR PARTNERSHIP MONEY CONVERTED FOR PERSONAL

USE

 Reimburse the amount to the partnership;

 Pay agreed or legal interest (6%) until he pays such amount;
 lndemnify the partnership for damages caused to the partnership.

OBLIGATIONS OF INDUSTRIAL PARTNER

 Render exclusive work for the partnership, unless permitted expressly by

the partnership that he can also work elsewhere and put up his own
business;
-The partnership acquires an exclusive right to avail of the industrial
partner's industry
.
 Industrial Partner cannot engage in business for himself.
PROHIBITION AGAINST ENGAGING IN BUSINESS

I. As regards an industrial partner - Prohibition applies whether or not the

industrial
partner engages in the same kind of business the partnership is in. This is to
ensure
faithful compliance by the industrial partner with his obligation to the
partnership;
2. As regards a capitalist partner - Prohibition only applies to any business which is
of
the same kind of business the partnership is in.

REMEDIES WHERE INDUSTRIAL PARTNER ENGAGES IN BUSINESS WITHOUT

EXPRESS AGREEMENT OF PARTNERSHIP

I. The other partners may exclude him from the partnership; or

2. The other partners may avail themselves of the benefits which the industrial
partner may
have obtained.
 In all cases, the other partners have a right to damages.

OBLIGATION AGAINST CAPITALIST PARTNER TO CONTRIBUTE ADDITIONAL

CAPITAL

 In case of imminent loss of the business, and there is no agreement to the

contrary of contribution of additional share to save the business, the
capitalist partner must contribute additional capital.
 If he or she refuses, he or she can be obliged to sell his or her interest to the
other partners.
REQUISITES IN OBLIGING THE CAPITALIST PARTNER TO SELL HIS SHARE TO
OTHER PARTNERS:

I. There is an imminent loss of the business of the partnership;

2. Majority of the capitalist partners believe that an additional contribution to the
common
fund will save the business;
3. The capitalist partner deliberately refuses to contribute an additional share to
the capital;
and
4. There is no agreement that even in case of an imminent loss of the business,
the partners
are not obliged to contribute.

OBLIGATION OF MANAGING PARTNER WHO COLLECTS DEBT

 GENERAL RULE: If the managing partner has a personal credit against a

debtor who is also a debtor to the partnership, ANY SUM received by the
managing partner shall be applied to the two credits in proportion to
their amounts.
 EXCEPTION: If the money is paid on the account of the partnership's
credit only, the WHOLE amount shall be paid to the partnership's
account only.
 EXCEPTION TO THE EXCEPTION: The debtor is given the right to prefer
payment to the managing partner if the credit of the managing partner
is more onerous (burdensome) to the debtor. For example, the debt to
the managing partner has a higher interest rate than the debt to the
partnership.

OBLIGATION OF PARTNER WHO RECEIVES PARTNERSHIP CREDIT WHEN OTHER

PARTNERS HAVE NOT RECEIVED THEIRS AND THEN THE DEBTOR BECOMES
INSOLVENT
  The partner who receives the partnership credit must bring back the
amount to the partnership or share it with the other partners, even if he
gave a receipt for his share only.
 There is a community of interest among the partners.

RISK OF LOSS OF THINGS CONTRIBUTED AFTER DELIVERY TO THE PARTNERSHIP

(RES PERIT DOMINO)

The thing perishes with the owner

Fungible- measure the same as the other kind

Insolvent- higher liability than asset
After delivery- partnership
Before delivery- partner

1.Determinate things which are not fungible and where only the use is
contributed- The partner bears the risk of loss because he remains the owner, i.e.
car, house, office space;

2. Determinate things which are transferred in the name of the partnership- The
partnership bears the risk of loss.

3. Fungible goods or things which are perishable or cannot be kept without

deteriorating- The partnership bears the risk of loss even if only the usage is
contributed because those things are consumed every time they are used.

4.Things contributed to be sold- The partnership bears the risk of loss;

5. Things brought and appraised in the inventory- The partnership bears the risk of
loss.

 Before delivery of the goods or things, the contributing partner bears the
risk of loss.
RULES FOR DISTRIBUTION OF PROFITS AND LOSSES

I. Distribution of profits:
a)FIRST RULE: The partners share the profits ACCORDING TO THEIR AGREEMENT.
Any agreement to exclude one or more partners from any share in the profits is
VOID.
Example: A, B, and C formed a partnership whereby each of them contributed
PI00,000.00.
They agreed to distribute profits among them at a ratio of 20%, 20% and 60%,
respectively. The
partnership realized profits in the amount of PI00,000.00
• Question: How shall the partnership distribute such profits?
• Answer: A, B, and C shall receive, P20,000, P20,000 and P60,000, respectively.

I. Distribution of profits:
b) IF THERE IS NO AGREEMENT:
The share of each capitalist partner shall be in proportion to his capital
contribution. This is the presumed will of the partners.
il.
The industrial partner will first receive a just and equitable share. It is not fixed
because it is difficult to ascertain the value of services of a person.
Example: A, B, and C formed a partnership whereby each of them contributed
P200,000. P300,000 and P500,000, respectively. The partnership realized profits in
the amount of PI00,000.
Question: How shall the partnership distribute such profits?
Answer: A, B, and C shall receive, P20,000 (200,000/1,000,000), P30,000
(300,000/1,000,000) and P50,000 (500,000/1,000,000) respectively.

2. Distribution of losses:
a) FIRST RULE: The partners share the losses. CORDING TO THEIR AGREEMENT.
Any agreement to exclude one or more partners, except an industrial partner,
from any share in the losses is VOID.
b) If there is no agreement as to sharing of losses but there is agreement as to
sharing of profits, the same agreement as to sharing of profits will be followed as
to sharing of losses. However, the industrial partner shall NOT be liable for losses.
Example: A, B, C, and D formed a partnership whereby each of them except D
contributed PI 00,000. D is as an industrial partner: They agreed to distribute
profits among them at a ratio of 20%, 20% and 40%, respectively. The partnership
suffered losses
in the amount of PI00,000.
Question: How shall the partnership distribute such losses?
Answer: A, B, and C shall suffer, P33,333.33 (1/3 x P100,000), P33,333 and
P33,333, respectively.

2. Distribution of losses:
c) If there is no agreement as to sharing of losses nor any profit-sharing
agreement, the losses
shall be borne by the partners in proportion to their capital contributions, but the
industrial
partner shall not share in the losses.
Example: A, B, and C formed a partnership whereby each of them contributed
P200,000, P300,000 and P500,000, respectively. D was admitted as an industrial
partner. The partnership suffered losses in the amount of P I 00,000.
Question: How shall the partnership distribute such losses?
Answer: A, B, and C shall suffer P20,000 (200,000/1,000,000), P30,000 (300,000/
1,000,000),
and P50,000 (500,000/ 1,000,000) respectively.

THE DESIGNATION OF PROFITS AND LOSSES CANNOT BE ENTRUSTED TO ONE OF

THE PARTNERS

 To prevent impartiality
 A third person may designate profits and losses sharing, provided that there
is common consent by the partners.

BINDING FORCE OF DESIGNATION BY THIRD PERSON IN THE SHARING OF PROFITS

AND LOSSES
 Binding unless manifestly inequitable.
  Partner can no longer complain after he has begun execution thereof OR
after three (3) months from the time he had knowledge of the designation
by the third person.
 The said partner is already guilty of estoppel.
 It is deemed that he already gave his consent or ratification to the
designation.

STIPULATION EXCLUDING PARTNER FROM ANY SHARE OF PROFITS OR LOSSES IS

VOID

 It contravenes the very purpose of a partnership contract which is profit

sharing among the partners.
 Even if the stipulation is void, the partnership still subsists. It is treated as if
there was no agreement as to profit sharing at all.
 Only an industrial partner may be stipulated to be exempt from sharing in
partnership losses. He cannot withdraw the work or labor already done by
him.

RIGHTS AND OBLIGATIONS WITH RESPECT TO MANAGEMENT

 Unless the partnership agreement provides otherwise, each partner has a
right to an equal voice in the conduct and management of the partnership
business, regardless of the amount of capital contribution or services
rendered.
 Partners may select a managing partner and appoint him either:
I. In the articles of partnership; or
2. After the constitution of the partnership.

APPOINTMENT AS MANAGER AFTER CONSTITUTION OF THE PARTNERSHIP

 It is merely a simple contract of agency.
 The appointment is not a condition of entering into the contract.
 The management may be revoked at any time for any cause whatsoever, by
a vote representing the controlling interest (more than 50% share of the
partnership capital)
APPOINTMENT AS MANAGER IN THE ARTICLES OF PARTNERSHIP
 The managing partner may execute all acts of administration
notwithstanding the opposition of the other partners, unless he acts in bad
faith;
 His power is revocable only upon just and lawful cause AND upon the vote
of the partners representing the controlling interest (more than 50% of
partnership capital).

SCOPE OF POWER OF A MANAGING PARTNER

- GENERAL RULE: All the necessary and incidental powers to carry out the object
of the partnership in the transaction of its business.
- EXCEPTIONS:
1. When the powers of the manager are specifically restricted or expressly
withheld
2. Manager cannot exercise powers which are neither necessary nor incidental to
carry the object of the partnership.
- The management may be revoked at any time for any cause whatsoever, by a
vote representing the controlling interest (more than 50%share of the partnership
capital)

POWERS OF TWO OR MORE MANAGING PARTNERS

I. When respective duties are not specified- Each managing partner may
separately
perform acts of administration.
V If one or more of the managing partners shall oppose the acts of the others,
then the decision
of the majority (per head) will prevail.
In case of a tie, the matter will be decided by the vote of the partners owning the
controlling
interest (more than 50% share of partnership capital)
2. When respective duties are specified- The decision of the managing partner
shall
prevail subject only to the limitation that he should act in good faith.
RULES WHEN MANNER OF MANAGEMENT HAS NOT BEEN AGREED UPON
I. All partners are considered managers- All of the partners will be considered
agents and whatever they may do alone shall bind the partnership, SUBJECT to
any timely opposition by any partner. The matter shall first be decided by majority
vote (per head).If there is a tie, the matter shall be decided by the partners
representing the controlling interest.
2. Unanimous consent required of any important alteration in immovable
property
of partnership- Consent may be express or implied (no objection)

strict
 Any important alteration in the immovable property of the partnership is an
act of dominion, not act of administration. Therefore, even the managing
partner cannot act by himself. He needs the consent of all the partners.

CONTRACT OF SUB-PARTNERSHIP

 A partner may associate another person with him in his share without the
consent of the other partners.
 That other person is called a sub partner.
 Sub-partnership agreements do not in any way affect the partnership.
 The sub partner does not acquire the rights of a partner. He is also not
liable for debts of the partnership.
 The sub partner does not become a member of the partnership, unless he is
accepted to be such by all the partners and the sub partner agrees to be a
partner.

EVERY PARTNER ACCOUNTABLE AS FIDUCIARY

(INVOLVES TRUST AND CONFIDENCE)
I. Duty to act for common benefit- Any partner cannot, at the expense or the
detriment of the other partners, use or apply exclusively to his own individual
benefit partnership assets or the results of the knowledge and information gained
by him in the partnership;
2. Duty to account for earnings accruing even after termination of the partnership-
The partner is duty bound to account such profit or commission with his co-
partners;
3. Duty to account for earnings accruing even after termination of the partnership;
4. Duty to make full disclosure of information affecting the partnership.

RIGHT OF CAPITALIST PARTNER TO ENGAGE IN BUSINESS

 Prohibition against the capital partner to engage in business is relative,
unlike the prohibition against the industrial partner who is absolutely
prohibited from engaging in any business.
 Prohibition applies only to a business which is the same as or similar to the
business of the partnership. Any capitalist partner violating this prohibition
shall bring to the common fund of the partnership any profits derived by
him from the business. In case of losses, the offending capitalist partner
shall bear them alone.

OWNERSHIP OF CERTAIN PROPERTY

1. Property used by the partnership but still owned by the partner- A partner may
contribute to the partnership only the use or enjoyment of the property. The
intent of the parties is the controlling factor.
2. Property acquired by the partner in his own name using partnership funds-
Presumed to be partnership property.
3. Property carried in partnership books as partnership asset- Strong inference
that it is partnership property.
4. Other factors tending to indicate property ownership- When income generated
by
the property is received by the partnership or when the taxes on the property are
paid by the partnership, they are also evidence that the property is partnership
property.
NATURE OF PARTNER'S RIGHT IN SPECIFIC PARTNERSHIP PROPERTY
I. Equal right of possession of the property for partnership purposes
A partner has an equal right to possess specific partnership property for
partnership purpose.
No partner can possess and use partnership property other than for partnership
purposes.
However, the right to use specific partnership property may be surrendered, upon
the partners' agreement, to the managing partner, especially with a partnership
with a large membership.

2. Assignment of right to the property

- A partner cannot assign his right to the land, BUT all of them can assign their
rights in the same property altogether.
" A partner cannot mortgage or assign his interest in the partnership property,
because it is actually impossible to determine the extent of his beneficial interest
in the property until after the liquidation of partnership affairs.
- To protect the other partners
-To prevent interference by outsiders
- A retiring partner can assign his rights in partnership property to the other
partners continuing the business

3. Attachment or execution
Partnership property is not considered a separate or individual property of a
partner. It belongs to the partnership as a juridical person.
- Partnership property is not subject to attachment or execution, except on a claim
against the partnership.
- When it comes to partnership debts, no partner can claim any right under the
homestead or exemption laws when partnership property is attached for
partnership debts.
- However, a partner's interest in the partnership itself may be levied upon by a
judgment creditor because its is actually his property.

4. Legal Support
- Partnership property is not subject to legal support under the Family Code. The
property belongs to the partnership.
- However, a partner's interest in the partnership itself may be subject to legal
support because it is actually his property.

5. Partner's interest not a debt due for partnership

- A partner is not a creditor of the partnership for the amount of his share. His
interest in the partnership is not a debt of the partnership.
- A partner's creditors cannot go after partnership property. They can only go after
the interest of the partner in the partnership. However, the creditors do not
become partner of the partnership.

Article 1812. A partner's interest in the partnership is his share of the profits and
surplus.

A, B and C entered into a business for the

operation of a restaurant. A contributed cash in
the amount of P50,000 while B contributed his
only car. Meanwhile, C contributed his talent in
cooking by being the Chef of the restaurant
business. They also agreed to share the profits
equally among themselves. Discuss whether
partnership exists between A, B and C.

The partnership between A, B, and C exists. They bind themselves to contribute

money in which A contributed cash, B contributed property, his car and C
contributed industry, his talent. Their contributions are for a common fund with
the intention of dividing the profits among themselves. Therefore, partnership
exists between A, B, and C.

Why is partnership a nominate contract?

A partnership is a nominate contract because it

has a special name or designation under the
law. It is a type of contract that is enforceable
by law. It is an agreement between two or more
parties that creates obligations that can be
legally enforced.

A and B agreed to form a partnership where A

promised to contribute his only parcel of land
while B undertook to contribute P100,000. Is
there a need for A to execute their contract in a
public instrument? Cite legal basis.
According to the General Rule: A contract of
partnership maybe made orally or in writing
EXCEPTION:
1. When cash or property worth P3,000.00 or more is contributed
2. When real or immovable property are
contributed.
In conclusion, the contract should be executed
in a public instrument because the cash and
property that they contributed is more than
P3,000 and there is land, a Real or Immovable
Property contributed.

A contract of partnership is consensual. Why?

A contract of partnership is consensual

because it is perfected by mere consent. It
should be perfected upon the agreement of
other parties or it is done with the willing
agreement of all the people involved.
Since a partnership is a contract between the
parties, the parties are free to choose any
business or transaction they want to enter into.
True or False? Explain.

Since a partnership is really a contract between

the parties, the parties are free to choose the
business or transaction they want to enter into
provided this is lawful and for the common
benefit of the parties. The partnership can
choose any business or transaction as long as
it is legal.