Chapter 1

• ARTICLE 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. (1665a)
• ARTICLE 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.
• ARTICLE 1769. In determining whether a partnership exists, these rules shall apply: (1) Except as provided by article 1825, 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, whether such-co-owners or co-possessors do or do not share any profits made by the use of the property;
• ARTICLE 1769. (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; (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 the business
• ARTICLE 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. (1666a)
• Article 1771: A partnership may be constituted in any form, except where immovable property or real rights are contributed, in which case a public instrument is necessary
• ARTICLE 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 requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons.
• ARTICLE 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.
• ARTICLE 1774. Any immovable property or an interest therein may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name.
• ARTICLE 1775. Associations and societies, whose articles are kept secret among the members, and wherein any one of the members may contract in his own name with third persons, shall have no juridical personality, and shall be governed by the provisions relating to co-ownership.
• ARTICLE 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.
• ARTICLE 1777. A universal partnership may refer to all the present property or to all the profits.
• ARTICLE 1778. A partnership of all present property is that in which the partners contribute all the property which actually belongs to them to a common fund, with the intention of dividing the same among themselves, as well as all the profits which they may acquire therewith.
• ARTICLE 1779. In a universal partnership of all present property, the property which belonged to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as all the profits which they may acquire therewith.
• ARTICLE 1779. A stipulation for the common enjoyment of any other profits may also be made; but the property which the partners may acquire subsequently by inheritance, legacy, or donation cannot be included in such stipulation, except the fruits thereof.
• ART 1780. A universal partnership of profits comprises all that the partners may acquire by their industry or work during the existence of the partnership. Movable or immovable property which each of the partners may possess at the time of the celebration of the contract shall continue to pertain exclusively to each, only the usufruct passing to the partnership.
• ARTICLE 1781. Articles of universal partnership, entered into without specification of its nature, only constitute a universal partnership of profits.
• ARTICLE 1782. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership.
• 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.
• Characteristics of Partnership

  • Consensual – perfected by mere consent
  • Bilateral – formed by two or more persons creating reciprocal rights and obligations
  • Preparatory - entered into as a means to an end
  • Nominate – has a special name or designation
  • Onerous – contributions in the form of either money, property and/or industry must be made
  • Commutative – the undertaking of each partner is considered as the equivalent of that of the others
  • Principal – its existence or validity does not depend on some other contract
  • Principle of Delectus Personae (choice of persons) – a person has the right to select persons with whom he wants to be associated with in partnership
• Essential requisites of a contract of partnership (4)

  1. valid contract 2. contribution of money, property, or industry to a common fund 3. organized for gain or profit 4. have a lawful object or purpose, and established for the common benefit or interest of the partners
• Two test to determine existence of a partnership

  1. whether or not there is an agreement to contribute 2. whether or not there is an intent too divide the profits among themselves
• Requisites to be considered a juridical personality

  1. two or more persons bind themselves to contribute money, property, or industry to a common fund 2. intention to divide profit among themselves
• 7 Characteristics of contract of partnership

  1. Consensual 2. Commutative 3. Bilateral 4. Nominal 5. Principal 6. Onerous 7. Preparatory
• Money is


  medium of exchange authorized or adopted by a government as part of its currency
• Property


  Any external thing over which the rights of possession, use, and enjoyment are exercised
• Industry


  Diligence in the performance of a task A particular form or branch of productive labor.
• Doctrine of Delectus Personae


  'choice of the person' = The right to choose whom a person wishes to associate himself is the very foundation and essence of partnership.
• Artificial/Juridical Person


  An entity, such as a corporation, created by law and given certain legal rights and duties of a human being
• ARTICLE 1769. (4) no such inference shall be drawn if such profits were received in payment; a. As a debt by installments or otherwise; b. As wages of an employee or rent to a landlord; (contract of employment) c. As an annuity to a widow or representative of a deceased partner;
• Art. 1769. d. As interest on a loan, though the amount of payment vary with the profits of the business; e. As the consideration for the sale of a goodwill of a business or other property by installments or otherwise
• Art. 1769. Rule 3 sharing of gross returns does not of itself establish a partnership


  a.) Sharing of net profit—a contract of partnership is presumed b.) Sharing of gross returns—no presumption of a contract of partnership
• Art. 1769. Rule 4: Sharing of the profits of the business(prima facie)


  Prima facie—sufficient to establish a fact
• NOT A PARTNERSHIP: 1. Agreement of sharing gross returns 2. Joint purchase of property (they are merely tenants) 3. Agreement of sharing the profits or losses on sale of such property 4. Common ownership of property
• Lawful Object of Purpose

  a.) Must be within the commerce of man b.) Not impossible c.)Must not be contrary to law, morals, good customs, public order, or public policy
• Effects of unlawful partnership

  1.) Contract is void from the beginning 2.) Profits shall be confiscated in favor of the government 3.) Instruments/tools and proceeds of the crime shall be forfeited in favor of the government 4.) Contributions of partners shall not be confiscated unless they are #3
• General rule: No form is required

  Exception: If real properties or real rights in real properties are contributed, THERE SHOULD BE A PUBLIC INSTRUMENT & AN INVENTORY ATTACHED TO THEPUBLIC INSTRUMENT Otherwise, the contract of partnership is VOID
• Real rights

  right connected with a thing rather than a person (personal right)
• Public instrument


  document prepared by a notary public in the presence of the parties who sign it before witnesses
• KINDS OF PARTNERSHIP

  • As to object- Universal partnership, Particular partnership