ARTICLE 1767.

By contract to or more person bind profits with the view of dividing them among the
themselves to contribute money, property, or industry contracting parties.
to a common fund, with the intention of dividing the
PARTNERSHIP RELATION FIDUCIARY IN
profits among themselves. Two or more persons may NATURE
also form partnership for the exercise of profession.
Partnership is a form of voluntary associations entered
CONCEPT OF PARTNERSHIP into by associates. It is a personal relation in which the
1. It is an association of two or more persons to carry element of delectus personae’ exist, involving as it does
on as co-owners a business for profit. trust and confidence between partners

2. It is a legal relation upon expresses or implied 1. Right to choose co-partners- Unless otherwise
agreement provided in the partnership agreement, no one can
become a member of the partnership associations
3. A joint undertaking to share in the profits and loss without the consent of all the other associates.
2. Power to dissolve partnership- Neither would
4. A partnership is the status arising out of contract the presence of a period for its specific duration or
entered into by two or more persons whereby they the statement of a particular purpose for its
agree to share as a common owners the profits of a creation prevent the dissolution of any partnership
business carried on by all or any of them on behalf of by an act or will of a partner.
all of them.
DELECTUS PERSONAE- choice of the person or
5. It is an organization for production of income to choice of the persons
which each partner contributes one or both of the
 To choose a person that they want to be
ingredients of income, which are capital or service.
associated with.
6. A partnership is an entity, distinct and apart from the
ESSENTIAL FEATURESOF PARTNERSHIP
members composing it, and, for the purpose of which
it was created. 1. There must be a valid contract
2. The parties must have legal capacity to enter
into the contract
CHARACTERISTIC ELEMENTS OF 3. There must be a mutual contribution of money,
PARTNERSHIP
property, or industry to a common fund
1. Consensual, because it is perfected by mere 4. The object must be lawful
consent, that is, upon the express or implied 5. The purpose or primary purpose must be to
agreement of two or more persons. obtain profits and divide the same among the
parties.
2. Nominate, because it has a special name or
designation in our law Partnership must not be kept secret among the
members otherwise associations shall have no legal
3. Bilateral, because it is entered into by two or more
personality and shall be governed by the provision of
person and the rights and obligations arising
the Civil Code relating to co-ownership
therefrom are always reciprocal
EXISTENCE OF A VALID CONTRACT
4. Onerous, because each of the parties aspires to
procure for himself a benefit through the giving of 1. A form of voluntary and personal
something. association- form voluntary association entered into by
the associates. No one can become a member of the
5. Commutative, because the undertaking of each of
partnership association without the consent of all the
the partner is considered as equivalent of that of
other associates. (delectus personae)
the others
 Act on their own will.
6. Principal, because it does not depend for its
existence or validity or upon some other contract 2. Creation and proof of existence
7. Preparatory, because it is entered into as a means 3. Other form of association excluded
to an end to engage in business for the realization of
 t t fid bt t t LEGALITY OF OBJECT
d h
LEGAL CAPACITY OF PARTIES TO ENTER 1. Effect of Illegality- the object is unlawful when it is
contrary to LAW, MORALS, GOOD CUSTOMS, and
INTO THE CONTRACT
PUBLIC ORDER OR PUBLIC POLICY.
1. GENERAL RULES
2. Business partnership not permitted to engage in-
The following cannot give their consent to a contract Subject to this general limitation on contracts, a
partnership may be organized for any purpose except
of partnership:
that it may be enterprise to which the law requires a
1. Unemancipated specific form of business org.
2. Insane or demented persons INTENTION TO REALIZE AND DIVIDE

3. Deaf-mutes who do not know how to write PROFITS

4. Person who are suffering from civil intersection 1. Very reason for existence of partnership

5. Incompetents who are under guardianship. 2. Sufficient if obtaining profit principal purpose

2. EXCEPTIONS- Under article 1782, persons who are SHARING OF PROFITS

prohibited from giving each other any donation or 1. Not necessarily in equal shares- there must be a joint
advantage cannot enter into a universal partnership. interest in the profits.
3. CAPACITY OF 2. Not conclusive evidence of partnership- the sharing
PARTNERSHIP/CORPORATION TO BE A
of profits is merely presumptive and not conclusive,
PARTNER
even if cogent, evidence of a partnership.
SHARING OF LOSSES
MUTUAL CONTRIBUTION TO A COMMON 1. Necessary corollary of sharing in profits- the
FUND definition of partnership under art.1767 it refers to
“profit” only and is silent as to “losses”. The reason is
1. Proprietary or financial interest- The partners must
that the object of a partnership is primarily the sharing of
have a proprietary or financial interest in the business.
profits while the distribution of losses is but a possible”
Without the element of mutual contribution to a
consequence of the same”. Be that as it may, the right to
common fund, there can be no partnership
share in the profits carries with it the obligation to share
2. Form of Contribution-The partners must contribute also in losses if any.
money, property, and/or industry or service to the
2. Agreement not necessary- it is not necessary for the
common business.
partners to agree upon a system of sharing. The essence
a. Money- currency which is legal tender in the of partnership is that the profits and losses arising from
Philippines. Checks, drafts, promissory notes the undertaking will be shared between or among
and etc. partners. However, where a partnership has been validly
b. Property- It can be real or personal, intangible created, a subsequent stipulation which excludes one or
or tangible. Hence promissory note or other more partners from any shares in the profits will not
evidence of obligations or goodwill may be affect its existence, only the stipulation is void.
contributed.
c. Industry- the work or services of the party ARTCLE 1768. The partnership has a juridical
associated, which may be either personal personality separate and distinct from that of each of the
manual efforts or intellectual for which he partners, even in case of failure to comply with the
receives a share in the profits of business. requirements of Article 1772, first paragraph.

ARTICLE 1769. In determining whether a partnership

exists, these rules shall apply:
(1) Except as provided by article 1825, persons who are ARTICLE 1770. A partnership must have a lawful
not partners as to each other are not partners as to third object or purpose, and must be established for the
persons; common benefit or interest of the partners.
(2) Co-ownership or co-possession does not of itself When an unlawful partnership is dissolved by a
establish a partnership, whether such co-owners or co- judicial decree, the profits shall be confiscated in
possessors do or do not share any profits made by the favor of the State, without prejudice to the provisions of
use of the property; the Penal Code governing the confiscation of the
instruments and effects of a crime. (1666a)
(3) The sharing of gross returns does not of itself
establish a partnership, whether or not the persons ARTICLE 1771. A partnership may be constituted in
sharing them have a joint or common right or interest in any form, except where immovable property or real
any property from which the returns are derived; rights are contributed thereto, in which case a public
instrument shall be necessary. (1667a)
(4) The receipt by a person of a share of the profits of a
business is prima facie evidence that he is a partner in As a general rule, no special form is required for the
the business, but no such inference shall be drawn if validity or existence of the contract of partnership.
such profits were received in payment:
IN WHAT FORM MUST A CONTRACT OF
(a) As a debt by installments or otherwise;
PARTNERSHIP BE MADE?
(b) As wages of an employee or rent to a landlord;
 Articles 1356. Contracts are Obligatory
(c) As an annuity to a widow or representative of a in whatever form
deceased partner;  Contract supposed to be written
according to their, validity,
(d) As interest on a loan, though the amount of payment
enforceability and convenience
vary with the profits of the business;
ARTICLE 1772. Every contract of a partnership having
(e) As the consideration for the sale of a goodwill of a
a capital of 3 thousand pesos or more, in money or
business or other property by installments or otherwise.
property, shall appear in a public instrument, which must
(n)
be recorded in the office of SEC.
RULES TO DETERMINE THE EXISTENCE OF
Failure to comply with the said requirements of the
PARTNERSHIP preceding paragraph shall not affect the liability of the
partnership and the members thereof to third person.
1. Where terms of contract not clear- all its essential
features or characteristics must be shown as being 1. Contract must appear in public instruments
present because sometimes it is unclear or they never
2. It must be recorded or registered with the SEC
executed a formal contract.
However, failure to comply with above requirements
2. Where existence disputed- existence may be
does not prevent the formation of the partnership or
questioned or disputed by an affected party. The issue
affects its liability and that of partners to third persons
whether partnership exist or not is factual matter to
determine on the basis of all the facts and circumstances ARTICLE 1773. A contract of partnership is void
presented in evidence to support a finding of the whenever immovable property is contributed thereto, if
existence or non-existence of the parties intentions to an inventory of said property is not made, signed by the
create a partnership. parties, and attached to the public instruments.
PERSON NOT PARTNERS AS TO EACH OTHER When immovable properties regardless of its value, is
contributed by any of the partners; failure to comply
1. Partnership, a matter of intention- each party
with the following requirements will render the
giving his consent to become a partner.
partnership contract VOID.
2. Partnership by estoppel- person by their acts,
An inventory is very important in a partnership to show
consent or representation have misled third person or
how much is due from each partner to complete his share
parties into believing that the former are partners in a
non-existing partnership.
in the common fund and how much is due to each of  PARTNERSHIP WITH FIXED TERM-
them in case of liquidation or contract with period or day certain, or one
in which the term for which the partnership
ARTICLE 1774. Any immovable money property or an
interest therein may be acquired in the partnership name. is to exist is fixed or agreed upon or formed
for a particular undertaking, and upon
Title so acquired can be conveyed only in the expiration of the term or completion of
partnership name. particular enterprise, the partnership is
ARTICLE 1775. Association and societies, whose dissolved, unless continued by the partners.
articles are kept secret among the members, and wherein 4. As to the legality of its existence
anyone of the members may contract in his own name
with third persons, shall have no juridical personality,  DE JURE PARTNERSHIP-one which has
and shall be governed by the provision relating to compiled with all the requirements for its
coownership. establishment
ARTICLE 1776. As to its object, a partnership either  DE FACTO PARTNERSHIP- one which
universal or particular. fail to comply with all the legal
requirements for its establishments.
As regard the liability of the partners, a partnership may
be general or limited. 5. As to representation

CLASSIFICATIONS OF PARTNERSHIP  ORDINARY OR REAL

PARTNERSHIP- one which actually exist
1. As to the extent of its subject matter:
among the partners and also as to third
 UNIVERSAL PARTNERSHIP- one which
persons
refers to all the present property (more on
 OSTENSIBL PARTNERSHIP OR
capital) or to all profits (more on industry)
PARTNERSHIP BY ESTOPPEL-one on
2. As to liability of the partners:
which in reality is not partnership, but
 GENERAL PARTNERSHIP- one consisting
considered a partnership in relation to those
of general partners who are liable and pro rata
who, by their conduct or admission, are
subsidiary, sometimes solidarily, with their
precluded to deny or disprove its existence.
present separate property for partnership debts
 LIMITED PARTNERSHIP- one formed by 6. As to publicity
two or more persons having a members one or
 SECRET PARTNERSHIP- one wherein
more general partners and one or more limited
the existence of certain person as partners is
partners, the latter not being personally liable for
not vowed or made known to the public by
the obligations of the partnership.
any of the partners.
3. As to its duration/term  OPEN OR NOTORIOUS
PARTNERSHIP- one whose existence is
 PARTNERSHIP AT WILL- one in which
avowed or known to the public by the
no time is specified and is not formed for a
members of the firm
particular undertaking or venture and which
may be terminated anytime by mutual 7. As to purpose
agreement of the partners or by the will of
any partners alone, or one for fixed term or  COMMERCIAL OR TRADING
particular undertaking which is continued by PARTNERSHIP one is formed for the
the partners after termination of such term or transactions of business
particular undertaking without express  PROFESSIONAL OR NON-TRADING
agreement. PARTNERSHIP- formed by the existence
of profession.
“If no period agreed upon it is still partnership but at
the will of the partners” KINDS OF PARTNERS
1. Under the Civil Code: e) ORIGINAL PARTNER- one who is a member of
partnership form from the time of its organization.
a) CAPITALIST PARTNER- one who contributed
money or property to a common fund f) INCOMING PARTNERS- person lately, or about to
be, taken into a partnership as a member.
b) INDUSTRIAL PARTNER- one who contributes
industry or personal service. g) RETIRING PA RTNER- one withdrawn from the
partnership
c) GENERAL PARTNER- one whose liability to the
third persons extends to his separate property: he may ARTICLE 1777. Universal partnership may refer to all
either a capitalist or industrial partners. the present property or to all profits.

d) LIMITED PARTNER- one whose liability to a third ARTCLE 1778. A partnership of all present property is
persons is limited to his capital contribution. It may be that in which the partners contribute all the property
known as special partners and it does not participate in which actually belongs to them to a common fund, with
the management of the business. the intention of dividing the same among themselves, as
well as the profits they may acquire therewith
e) MANAGING PARTNER- one who manages the
affairs or business of the partnership and may be ARTICLE 1779. In universal partnership of all present
appointed either in articles of partnership of after property, the property which belonged to each of the
constitutions of partnership. partners at the time of the constitution of the
partnership (those existing now, not the past or future
f) LIQUIDATING PARTNERS- takes charge of
property), becomes the common property of all the
winding up of partnership affairs dissolution
partners, as well as the profits which they may acquire
g) PARTNERS BY ESTOPPEL- one who is not really therewith.
a partner, not being a party to a partnership agreement,
Stipulation for the common enjoyment of any other
but is liable as a partner for the protection of innocent
profits may also be made; but the property which the
third person.
partners may acquire subsequently by inheritance,
h) CONTINUING PARTNER-one who continued the legacy, and donation cannot be included in such
business of a partnership after it has been dissolved by stipulation, except the fruit thereof.
reason of admission of new partner, retirement, death or
Inchoate right: right in expectancy such as for the
expulsion.
heirs or successors.
i) SURVIVING PARTNER- one who remain after the
ARTICLE 1780. A universal partnership of profits
partnership has been dissolved by death of any
comprises all that the partners may acquire by their
partnership
industry or work during the existence of the partnership.
j) SUBPARTNER- not being a member of partnership, Movable or immovable property which each of the
contracts with a partner partners may possess at the time of the celebration of the
contract shall continue to pertain exclusively to each,
OTHER CLASSIFICATION only the usufruct (use and fruit: enjoyment of fruit, civil,
a) OSTENSIBLE PARTNER- takes active part and industrial and natural) passing partnership.
known to the public as the partner of business

b) SECRET PARTNER- takes active part but not “What has been worked or earned by industry”
known to the public as the partner of the business
ARTICLE 1781. Articles of universal partnership
c) SILENT PARTNER- does not take active part in entered into without specification of its nature, only
business though known to be partner. constitute a universal partnership of profits.
d) DORMAT PARTNER- who does not take active ARTICLE 1782. Persons who are prohibited from
part in business and is not known or held out as partner. giving each other any donation or advantage cannot
enter into universal partnership. (A partnership formed
in violation of this article is considered null or void)

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.

“It is a partnership neither universal partnership of

present property nor universal partnership profits”

WHEN IS THE PARTNERSHIP IS VOID?

--Whenever real property or immovable property is

contributed or once there is an inventory of property
recorded in SEC

PROPERTY (CIVIL CODE 414) - All things that can

be appropriated or subject to appropriation are
PROPERTY.

KINDS: REAL/IMMOVABLE and

PERSONAL/MOVABLE

4 CLASSIFICATION OF IMMOVABLE

PROPERTY

1. Real property by their nature or something is fixed

2. By incorporation or something that is attached

or permanently attached/fixed.

3. By destination

4. By analogy