GENERAL PROVISIONS Definition (Art.

1767) Partnership is a contract of two or more persons binding 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. Profession is a group of men pursuing a learned art as a common calling in the spirit of public service no less a public service because it may incidentally be a means of livelihood. Elements (Art. 1767, 1770) 1. Consensual perfected by mere consent. 2. Nominate has a special name of designation in our law. 3. Bilateral entered by two or more persons. 4. Onerous each of the parties aspires to obtain for himself a benefit through giving of something. 5. Commutative actions of a partner is equivalent of that of the others. 6. Principal independent contract. 7. Preparatory a means to an end. 8. Lawful must have lawful object of purpose. 9. Communal for common benefit or interest of the partners. Characteristics (Art. 1768, 1775) It has juridical personality separate and distinct from that of each of the partners. Articles or agreement must be known to third persons. Failure of this result to partnership having no juridical personality. General rule The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. Exception Such profits were received in payment: 1. As a debt by installments or otherwise. 2. As wages of an employee or rent to a landlord. 3. As an annuity to a widow or representative of a deceased partner. 4. As interest on a loan, though the amounts of payment vary with the profits of the business. 5. As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. Requirements for its creation a. Formal (Art. 1772) Where the capital of the partnership is P3,000.00 or more, in money or property 1. The contract must appear in a public instrument. Public instrument is one which is acknowledged before a notary public or any official authorized to administer oath, by the person who executed the same. 2. It must be recorded or registered with the Securities and Exchange Commission. NOTE: Failure to comply with the above requirements does not prevent the formation of the partnership or affect its liability and that of the partners to third persons. b. Legal (Art. 1771, 1773) General rule No special form is required for the validity or existence of the contract of partnership. Exception

Rules to determine its existence (Art. 1769, 1825) In general, to establish the existence of a partnership, all of its essential features or characteristics must be present. In case of doubt, the following will apply: 1. Except for partners by estoppel, persons who are not partners as to each other are not partners as to third persons. 2. Co-ownership or co-possession does not of itself establish a partnership. 3. Sharing of gross returns does not of itself establish a partnership.

When immovable property is contributed, failure to comply with the following requirements will render the partnership contract void: 1. The contract must be in a public instrument. 2. An inventory of the property contributed (a) must be made, (b) signed by the parties, and (c) attached to the public instrument. Kinds of partners Capitalist partner contributes money or property to the common fund. Industrial partner contributes his industry or personal service. General partner liability to third persons extends to his separate property. Limited partner liability to third persons is limited to his capital contribution. Also known as special partner. Does not participate in the management of the business. Managing partner manages the affairs or business of the partnership. May be appointed either in the articles or after constitution of the partnership. Known as a general or real partner. Silent partner does not take any active part in the business although he may be known to be a partner. Secret partner takes active part in the business but is not known to be a partner by outside parties nor held out as a partner by the other partners. Dormant partner does not take active part in the business and is not known or held out as partner. Ostensible partner takes active part and known to the public, whether or not he has actual interest in the firm. Partner by estoppel not really a partner, but is liable as a partner for the protection of innocent third persons.

Known as partner by implication or nominal partner. Liquidating partner takes charge of the winding up of partnership affairs upon dissolution. Classification of Partnership A. As to object (Art. 1776) Universal Partnership 1. All present property (Art.1778-1779) Partners contribute all the properties which actually belong to each of them at the time of the constitution of the partnership to a common fund, with the intention of dividing the same among themselves as well as the profits which they may acquire therewith. In this kind of partnership, the following become the common property of all the partners: 1. Property which belonged to each of them at the time of the constitution of the partnership. 2. Profits which they may acquire from the property contributed. General rule Future properties, such as inheritance, legacy and donation, cannot be contributed nor included by stipulation. Exception Fruits of the said properties may be included by stipulation. 2. All profits (Art. 1780-1781) Comprises all that the partners may acquire by their industry or work during the existence of the partnership and the usufruct of movable or immovable property which each of the partners may possess at the time of the celebration of the contract. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.

Possession visible power or control over a thing, as distinct from lawful ownership. NOTE: o Partners retain their ownership over present and future property. o Profits acquired by chance, such as lottery, are not included. o Fruits of property subsequently acquired by the partners do not belong to the partnership but may, however, be included by express stipulation. Presumption Where the articles of the partnership do not specify the nature of the partnership, it will be presumed that the parties intended merely a partnership of profits. Reason Universal partnership of all profits imposes less obligations on the partners, since they preserve the ownership of their separate property. NOTE: The presumption applies only when a universal partnership has been organized. Persons who cannot join/form a universal partnership (Art. 739, 1782; Art. 87 FC) 1. Married Spouses 2. Persons living together as spouses without a valid marriage. 3. Persons who were guilty of adultery or concubinage. 4. Persons found guilty of the same criminal offense, in consideration thereof. Particular Partnership (Art. 1783) Types: For its object, determinate things, their use or fruits. A specific undertaking The exercise of a profession or vocation. B. As to term 1. Fixed term/Particular undertaking (Art. 1783) the term for which the partnership is to exist is fixed or agreed upon; or Formed for a particular undertaking. 2. At will (Art. 1785)

No time is specified and is not formed for a particular undertaking or venture. C. As to liability of the partners 1. General Partnership Consisting of general partners who are liable pro rata and subsidiarily, sometimes solidarily, with their separate property for partnership debts. 2. Limited partnership (Art. 1843) Formed by two or more persons having as members one or more general partners and one or more limited partners. When a partnership begins (Art.1784) General rule A partnership begins from the moment of the execution of the contract. Exception 1. Future partnership Partners may stipulate some other date future time or on the happening or fulfillment of some condition or future contingency for the commencement of the partnership. 2. Agreement to create partnership So long as the agreement remains executory, no partnership can be said to exist.