PARTNERSHIPS As for Partnerships, consent requires at

least two things:

(by Atty. Javier Philippine Law Lectures)
- the parties must have legal capacity
Definition Under Article 1767: - the parties must consent to be
associated with the other partners,
- It is a contract whereby two or more
under the principle of delectus
persons bind themselves to
personae.
contribute money, property or
industry to a common fund with the Delectus Personae - the right to select a
intention of dividing the profits specific person to occupy a specific position.
among themselves.
Partnership relation is fiduciary (involving
trust) in character, it is imbued with utmost
- It is a special contract because it has
trust and confidence so a person is allowed
its own special rules nevertheless in
to choose his partners as they will act as
case of silence or absence of a special
agents towards each other and of the
rule on a specific matter, we can
partnership who can be held liable for the
apply the general principles of
acts of their fellow partners.
obligations and contracts because a
partnership is still a contract.
For Object:
- Therefore, for a partnership to exist,
the Essential Elements of consent Partners may choose any purpose for
object and cause must be present. which they will contribute money property
or industry to a common fund, may be to
transact business, in which case it is a
Essential Elements commercial or trading partnership or it may
In law, an essential element is a be to practice a profession as in a general
necessary requirement for a claim or professional partnership.
defense to be valid in court. For example, in In any case, the object must be lawful
a negligence claim, the existence of a legal otherwise the partnership will be void.
duty is an essential element. If there is no
evidence that a legal duty was owed, then For Cost:
there is no negligence. The partnership must be established
Essential elements can also be for the common benefit or interest of the
required for other legal documents, such as partners. Which as per the definition, it is the
contracts and zoning general plans. division of profits, which is the reason why
they enter the partnership to divide the
profits among themselves.
 The definition together with the Nevertheless, the partner still has to
Essential Elements of contracts gives us the give their contributions, because a
two tests to determine whether a contribution of money, property or industry
partnership exists: to a common fund is the second requirement
needed for a partnership to exist.
1.) Agreement or Consent to make a
mutual contribution of money,
property, or industry to a common
Q: How much should a partner contribute?
fund (the object)
2.) Is there an intention to obtain profits A: It depends.
and divide it among themselves? (the
cost)
If a person joins the partnership as an
Once the consent for object and for cost
industrial partner, he does not have to
concur (or in agreement) then the contract is
contribute money or property, his
perfected and a partnership with a separate
contribution is labor or industry.
judical personality from the partnership will
now be created unless the partners agree For capitalist partners, they may
that the partnership is subject to a period or agree on what property or how much money
condition, in which case the contract is to contribute, but if there is no agreement,
merely executory and the partnership will they should contribute equal shares to the
only begin to exist once the date arrives or capital.
the condition happens.
They may agree to go all in, by
Otherwise if there is no period or contributing all the properties that they
condition, then the partnership begins at currently own to a common fund, so they
once, only the essential elements are can divide the properties and its profits
needed and no specific form is required to among themselves.
create a partnership.
Also known as Universal Partnership
It can be created orally, or in writing, of all present property, under which only
thus a partnership is perfected by mere current property can be contributed and not
consent, making it consensual in nature. future properties such as those acquired by
inheritance, legacy, or donation.
Instead of going all in, the partners
AS CONSENSUAL CONTRACT: may choose to retain their ownership of
Delivery is not required to perfect their properties and instead contribute only
this contract; therefore, the contract of a usufruct, granting only a right of use to the
partnership exists even though the promised partnership and putting everything they
contributions have not yet been given. earn or acquire in the common fund.
[Usufruct the right to enjoy the use and If immovable property like land is
advantages of another's property short of the contributed, the partners must attach an
destruction or waste of its substance.] inventory to the notarized partnership
This common fund will now belong to the contract. Without this, the partnership will
partnership. be void.

Also known as Universal Partnership Every partner is a debtor of the

of profits, and in case of doubt, whether it partnership for whatever he may have
belongs to the partnership of profits or promised to contribute, being a debtor, each
property, the partnership will presumed to partner has the following obligations
be one of the profits, because it is less Before delivery, he has the duty to
honorable as it imposes less obligations by preserve the thing with the diligence of a
preserving the partner’s separate ownership good father of a family. And if a determinate
of their respective properties. thing is lost before delivery, the partnership
The partners may also choose to will be automatically dissolved, because it
form a partnership instead, where the object cannot exist without the promised
can be the use of determinate thing or their contribution. But if the thing lost is generic,
fruits or to complete a specific undertaking then there is no issue because the debtor
or the exercise of a profession. partner can deliver another thing of the
same kind and quality.
In any case, if the value of the money,
or the property contributed is 3000 pesos or However, if title over the
more, then the contract of partnership must determinate thing was transferred to the
appear in a public instrument, which means partnership before delivery, the partnership
that the contract has been notarized and now exists, and the partnership bears the
then submitted to the Securities and loss as owner, following the principle of Res
Exchange Commission or the SEC for Perit Domino (the property is lost to its
registration owner).

If the contract is not notarized or The partner must also the deliver the
registered, that will not affect the existence thing promised, together with its fruits on
of the partnership, because it is consensual the date agreed upon, without need of
in nature and created by mere consent. demand. And in case of delay, he will be
Registration is not needed to create the liable for interest and damages.
partnership but it’s only for the purpose of After delivery, he cannot be held
setting a condition for the issuance of license liable for breach of warranty against
to engage in business or trade and to give eviction, if the partnership is judicially
notice to third parties. Even without these, evicted from the thing. And once your
the partnership will still exist and can be held partner has made his contribution, he has no
liable for contractual obligations. more duty to make any additional
contribution. However, if subsequently the
partnership faces an imminent loss, and that In case there is such a stipulation,
is no stipulation prohibiting it, and the only the stipulation will be void, but the
capitalist partners, they agree to give partnership will still be valid.
additional contributions to save the
To determine the profit of each
partnership.
partner, you check what is in the agreement
Since the partnership is a voluntary on how to distribute the profits.
relation, no one can be forced to give
If there is none:
additional contributions against his will. In
case if partner refuses to give additional 1.) you pay the industrial partner, his
contributions, he will instead be required to share in an amount commensurate
sell his interest in the partnership to the the work he performed.
others who want to save it. 2.) The capitalist partners can now
divide what is the remainder, they
This rule is not applied to industrial
can divide the shares based on what
partner, who only contributes their industry.
they have contributed (eg. Equal
contributions = equal pay)
3.) The dividing of loss must not let the
Q: What do the partners get in turn for their
industry partner involve for the loss.
contributions?
Because he cannot take back the
A: The division of profits. The partners may work he performed, since his work is
agree on how profits and losses be his contribution, if his partnership
distributed. (write their shares in the fails, then his work was in vain. His
partnership agreement, or agree to let a share in the losses is the fact that he
third person determine their respective will not get paid for the work he
shares) but they cannot assign the performed.
determination of shares to one or some of
the partners , due to the possibility of abuse,
that the partner may choose to receive all of To determine how to distribute losses:
the profits, but not the losses and assigned
1.) Exclude the industrial partner
to someone else.
2.) Follow what was written in the
Which is why in crafting the rules in partnership agreement. If there is
distribution of profits and losses, the nothing written in how to distribute
partners cannot insert what is known as losses, then the losses will be
Factum Leonina, which excludes one or distributed in the same proportion as
more partners from any share of the profits profits that are distributed.
or losses, making them bear the lion’s share 3.) If there is no agreement on how to
of the risk. distribute profits, then losses will be
distributed according to how much
each partner has contributed