Part I
PARTNERSHIPS
(Arts. 1767-1867 of the Civil Code of
the Philippines)
Art. 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.
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1. Partnership is a form of contract, therefore, it must contain the
essential requisites.
2. Parties shall be two or more persons.
3. Mutual contribution of money, property or industry to a
common fund.
4. Object of the partnership should be lawful.
5. Purpose of forming partnership is to gain profit which shall be
divided among the parties.
6. In instances where the partnership suffers loss, the same shall
also be divided among the parties.
For partnership form for the exercise of profession, the objective is
not to gain profits but rendering of public service.
Art. 1768. The partnership has a juridical personality
separate and distinct from that of each of the partners,
even in case of failure to comply with the requirements
of article 1772, first paragraph.
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1. Partnership is a juridical person, being such, it has
rights, powers and obligations which are separate
and distinct from that of its partners.
2. Partnership acquires juridical personality from the
moment there is meeting of minds between the
partners regarding the formation of a partnership.
3. Partnership still acquires juridical personality
despite its failure to execute a public instrument and
register the same at the Securities and Exchange
Commission.
Art. 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.
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Effects of unlawful partnership:
1. Contract is void ab initio.
2. Profits shall be confiscated in favor to the
government.
3. Instruments or tools and proceeds of the crime shall
also be forfeited in favor of the government.
Art. 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.
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1. General rule: No special form is required for the
validity of the existence of the partnership, therefore,
it could be formed orally, in writing, partly oral and
partly in writing.
2. But if immovable property or real rights are
contributed, a public instrument is needed to effect
transfer of ownership of the contributed property
and to notify the whole world that the owner of the
object is the partnership already.
Art. 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 requirement of the
preceeding paragraph shall not affect the liability of the
partnership and the members thereof to third persons.
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Take note that failure to comply with the above
requirements does not prevent the formation of the
partnership (De Facto Partnership) or affect its
liability and that of the partners to third persons.
Purpose of registration is a condition for the issuance of
licenses to engage in business or trade.
Art. 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.
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Take note that the partnership is invalid as to the parties
only, with regards to third persons, a De Facto
Partnership may exist.
Art. 1776. As to its object, a partnership is either universal or particular.
As regards the liability of the partners, a partnership may be
general or limited.
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Classification of partnership:
1. As to extent of subject matter:
A. Universal partnership 0r one which refers to all the present
property or to all profits (Art. 1777)
i. Universal partnership of all present property – all properties
which actually belong to the partners are contributed to a common
fund (Art. 1778)
ii. Universal partnership of profits – all that the partners may
acquire by their industry or work during the existence of the
partnership are contributed thereto, but their properties, real or
personal, still belong to them except that the profits or income as
well as their use and possession (usufruct) now belongs to the
partnership (Art. 1780)
B. Particular partnership – has for its object determinate things,
their use or fruits, or a specific undertaking, or the exercise of a
profession or calling (Art. 1783)
2. As to liability of the partners:
a. General partnership – one consisting of general
partners who are liable up to extent of their personal
pocket
b. Limited partnership – one formed by two or more
persons having one or more general partners and one
or more limited partners
3. As to its duration:
a. Partnership at will – no time is specified for its
existence or not formed for a particular undertaking
b. Partnership with a fixed period – the term for which
the partnership to exist is fixed or agreed upon
4. As to legality of existence:
a. De jure partnership – one which has complied with all
the legal requirements for its establishment
b. De facto partnership – one which has failed to comply
with all the legal requirements for its establishment
KINDS OF PARTNERS:
1. Capitalist partners – one who contributes money or
property to the common fund
2. Industrial partner – one who contributes only industry or
personal service
3. General partner – one whose liability to third persons
extends to his separate property
4. Limited partner – one whose liability to third persons is
limited to his capital contribution
5. Managing partner – one who manages the affairs or
business of the partnership
6. Liquidating partner – one who takes charge of the
winding up of partnership affairs upon dissolution
7. Subpartner – one who, not being a member of the
partnership, contracts with a partner with reference to
the latter’s share in the partnership
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TOPIC ENDS FOR THIS WEEK.....
SEE YOU NEXT WEEK.
