THE LAW ON

PARTNERSHIPS
Arts. 1767-1867
PART 1
ASSIGNED READING: To be
summarized
1. Kinds of persons under the la
!. Kinds of business or"anizations
#. $artnership: definition
%. &hara'teristi' elements of partnership
(. Essential elements of partnership
). Rules in determinin" e*isten'e of partnership
+. Kinds of partnership
,. &lassifi'ations of businesses
-. Kinds of partners
1.. &omparison beteen "eneral and limited
partners
INTR/D0&TI/N
KINDS /1 $ERS/NS 0NDER T2E &I3I4 &/DE
1. NAT0RA45INDI3ID0A4
!. ARTI1I&IA4560RIDI&A4
7 A. $artnership
7 8. &orporation
7 &. &ooperati9es
KINDS /1 80SINESS /RGANI:ATI/NS
7 A. Sole proprietorship
7 8. $artnership
7 &. &orporation
7 D. &ooperati9es
$ARTNERS2I$
ART 1+)+
7 8; a 'ontra't of partnership< to or more persons
bind themsel9es to 'ontribute mone;< propert; or
industr; to a 'ommon fund< ith the intention of
di9idin" the profits amon" themsel9es.
7 To or more persons ma; also form a
partnership for the e*er'ise of a profession.
&2ARA&TERISTI& E4E=ENTS /1 $ARTNERS2I$
1. &onsensual (. &ommutati9e
!. Nominate ). $rin'ipal
#. 8ilateral +. $reparator;
%. /nerous ,. 1idu'iar;
ESSENTIA4 1EAT0RES /1
$ARTNERS2I$
1. There must be a 9alid 'ontra't >delectus
personae 7 ?&hoi'e of the person@A
!. 4e"al 'apa'it; of the parties >Art 1#!+B1#!-A
#. =utual 'ontribution of mone;< propert; and
industr;
7 =/NEC 7 'urren'; >medium of e*'han"eA 5' is
le"al tender in the $hilippines
7 $R/$ERTC 7 tan"ible5intan"ible< real5personal<
mo9ables5immo9ables< res ali'uDus
7 IND0STRC 7 ph;si'al or mental
ESSENTIA4 1EAT0RES /1
$ARTNERS2I$
%. 4aful purpose5obDe't 7 subDe't to the ?1reedom to
'ontra't@ 'lause
7 ART 1++. par ! 7 Effe'ts of an unlaful partnership
&ontra't is 9oid ab initio
$rofits ill be 'onfis'ated in fa9or of the "o9ernment
Instruments5pro'eeds5tools of the 'rime shall be forfeited in
fa9or of the "o9Et unless belon"in" to a #
rd
person ho did not
parti'ipate but those not ithin the 'ommer'e of man ill be
destro;ed.
%. 4aful purpose5obDe't 7 subDe't to the ?1reedom to 'ontra't@
'lause
(. $rimar; purpose is to di9ide profitsF 'arries ith it
the obli"ation to share in loss e*'ept for industrial
partners but N/T in liabilities >Art 1+)- 9s Art 1,1)A
1/R=AT /1 $ARTNERS2I$
&/NTRA&T
GEN R04E: Art 1++1: $artnership 'ontra'ts
are 9alid in hate9er form.
Art 1+),: $artnership has Duridi'al personalit;
e9en if there is no 'omplian'e ith Art 1++!
>de factoA 5' reGuires that a partnership ith
'apital of more than $#K must be in a publi'
instrument and re'orded ith the SE&
Art 1++#: If immo9able is 'ontributed< an
in9entor; si"ned b; the parties should be
atta'hed to the publi' instrument.
H2EN D/ES A
$ARTNERS2I$ EIISTJ
GEN R04E: Intention of the parties pre9ail
Art. 1+)- 7 Rules to determine hether a
partnership e*ists or not
1. $ersons ho are not partners to ea'h
other are not partners as to third persons
e*'ept those in estoppel >Art 1,!(A
!. &oBonership5'oBpossession does not b;
itself establish partnership
#. Sharin" of "ross returns does not b; itself
establish partnership
H2EN D/ES A
$ARTNERS2I$ EIISTJ
%. Re'eipt of a person of share in the profits is
PRIMA FACIE e9iden'e of partnership<
e*'ept if su'h share is for:
a. pa;ment of debt
b. Ha"es
'. Annuit;
d. Interest of loan
e. &onsideration for sale of "oodill or
propert;
KINDS /1 $ARTNERS2I$
0NI3ERSA4 $ARTNERS2I$ /1 A44
$RESENT $R/$ERTC 7 all properties of the
partners before< durin" and after 'onstitution of
the partnership belon" to the partnership
0NI3ERSA4 $ARTNERS2I$ /1 $R/1ITS 7
onl; those a'Guired after the 'onstitution of the
partnership belon" to the partnership
7 Note: husband and ife 'annot enter into
uni9ersal partnerships
KINDS /1 $ARTNERS2I$
$ARTI&04AR $ARTNERS2I$ 7 obDe't is
determinateF for a spe'ifi' undertaKin" or for the
e*er'ise of a profession
GENERA4 $ARTNERS2I$ 7 all partners are
"eneral partners ho are liable e9en ith their
on properties
4I=ITED $ARTNERS2I$ 7 at least has one
"eneral partner ith other limited partners ho
are onl; liable to the e*tent of their
'ontributions.
KINDS /1 $ARTNERS2I$
$ARTNERS2I$ AT HI44 7 has no spe'ified
term for its e*isten'e
DE JURE $ARTNERS2I$ 7 one hi'h e*ists in
fa't and in la
DE FACTO $ARTNERS2I$ 7 one hi'h has no
'omplete do'uments
/RDINARC5REA4 $ARTNERS2I$ 7 one hi'h
e*ists amon" themsel9es and as to #
rd
persons
SE&RET $ARTNERS2I$ 7 one here the
partners are not publi'l; Knon
KINDS /1 $ARTNERS2I$
/STENSI84E5A$$ARENT5E3IDENT5IN
ESTOPPE >Art 1,!(A
/$EN5N/T/RI/0S $ARTNERS2I$ 7 one
here the partners are publi'l; a9oed
&/==ER&IA45TRADING 7 one hose primar;
purpose is for profits
$R/1ESSI/NA45N/NBTRADING 7 one for
the e*er'ise of a profession or 9o'ation
KINDS /1 $ARTNERS
&A$ITA4IST 7 one ho 'ontributes mone; and5or
propert;F anserable for loss and liabilitiesF prohibited
from en"a"in" in similar Kind of business >Art 1,.,A
IND0STRIA4IST 7 one ho 'ontributes ser9i'es<
mental or ph;si'alF not liable for partnership loss >Art
1+)-A but ill anser for partnership liabilities or
'ontra'tual obli"ations to #
rd
persons subDe't to
reimbursement from 'apitalists >Art 1,1)AF prohibited
from en"a"in" in an; Kind of business >Art 1+)-A
L0ERC: Are the businesses of sellin" banana Gue
and sellin" banana onl; 'lassified the sameJ
KINDS /1 $ARTNERS
4I=ITED5S$E&IA4 $ARTNER 7 mere
'ontributor5in9estorF 'annot 'ontribute industr;
=ANAGING $ARTNER 7 one ho has been
tasKed to mana"e the affairs of the partnershipF
ma; nor ma; not ha9e been appointed in the
arti'les of partnership
4IL0IDATING $ARTNER 7 one ho is tasKed to
taKe 'har"e of the affairs of the partnership on
dissolution
KINDS /1 $ARTNERS
$ARTNER 8C EST/$$E45N/=INA4
$ARTNER 7 a partner b; impli'ation
/STENSI84E $ARTNER 7 one Knon to the
publi' as partner and parti'ipates a'ti9el;
SE&RET $ARTNER 7 one ho taKes a'ti9e part
in the partnerships affairs but is no publi'l;
Knon as a partner
SI4ENT $ARTNER 7 one ho does not taKe
a'ti9e part in partnership business
KINDS /1 $ARTNERS
D/R=ANT $ARTNER5 S4EE$ING $ARTNER 7
one ho is both silent and does not parti'ipate
IN&/=ING $ARTNER 7 one belatedl;
a''epted in the partnership
RETIRING $ARTNER 7 one ho has ithdran
from the partnership
S08$ARTNER 7 te'hni'all; not a
partner5member of the partnership but shares in
a partnerEs shares in the partnership
KINDS /1 $ARTNERS
GENERAL BASIS LIMITED
$ersonall; liable $ARTNERS2I$ &apital 'ontribution
/84IGATI/NS
EGual ri"hts =ANAGE=ENT RIG2TS No ri"hts
$roper part; $ARTI&I$ATI/N IN Not a part;
4AHS0ITS
Not assi"nable unless ith ASSIGNA8I4ITC /1 1reel; assi"nable
'onsent of other partners $ARTNERS2I$
INTEREST
&annot en"a"e in similar $R/2I8ITI/N No prohibition
business if 'apitalistF in an;
business if industrialist
Dissolution of partnership E11E&T /1 DEAT2< No effe't
INSANITC< INS/43EN&C
/1 $ARTNER
=one;< propert;< industr; &/NTRI80TI/N =one;< propert;
RE1EREN&ES
De 4eon< 2.S. >!.1.A< The Ne"otiable Instruments 4a< Luezon &it;: REI $rintin"
&ompan;< In'.
De 4eon< 2.S. >!.1.A< The 4a on $artnerships and &orporation &ode< Luezon &it;: REI
$rintin" $ress
RE1EREN&ES
8la'KMs la di'tionar; >,th edA >!..+A. St. $aul< =N. : Hest $ub.
&ommer'ial las of the $hilippines.N. >!..-A. =anila: Re*<
De'asa< 4u'ila =. >!..-A. 2andbooK on pri9ate 'orporations: domesti' and forei"n. =anila:
Re*.
De 4eon< 2e'tor S. >!.1.A. >1.th edA.The &orporate 'ode of the $hilippines: annotated.
=anila: Re*<
De 4eon< 2e'tor S. >!.1.A. >!.1. ed.A.The $hilippine ne"otiable instruments la and allied
las annotated =anila: Re*<
Torress< 6usto $. >!..,A. The la on business or"anizations >partnerships and
'orporationA. =anila: Re*<
3illanue9a< &esar 4. >!.1.A.$hilippine &orporate la. =anila: Re*<