Business Law

• Limited partner


  Liability to third persons is limited to his capital contributions. Does not participate in the management of the business
• Capitalist partner

  Contributes money or property
• Existence of an open or notorious partnership is avowed or made known to the public.
• Open or notorious partnership means it is made known to the public by the members of the firm
• Industrial partner

  Contributes only his industry or personal service
• Kinds of partners

  • Capitalist
  • Industrial
  • General
  • Limited
  • Managing
  • Liquidating
  • Partner by estoppel
  • Continuing
  • Surviving
  • Subpartner
• Partner by estoppel

  Not really a partner, but is liable as a partner for the protection of innocent third persons
• General partner

  Liability to third persons extends to his separate property. May either be a capitalist or industrial
• Managing partner

  Manages the affairs or business of the partnership, known as a general or real partner
• Purpose of partnership

  • Commercial/trading partnership
  • Professional/non-trading partnership
• Continuing partner

  Continues the business of a partnership after it has been dissolved
• Liquidating partner


  Takes charge of the winding up of partnership affairs upon dissolution
• Subpartner


  Not being a member of the partnership, contracts with a partner with reference ter the latter's share in the partnership
• Surviving partner

  Remains after a partnership has been dissolved by the death of any partner
• Legal capacity of parties to enter into the contract
• Intention to realize and divide profits

  • Very reason for existence of partnership - Even an unprofitable business can be a partnership provided the goal is to obtain profits
  • It is sufficient if obtaining profit is the principal purpose even if there are, incidentally, moral, social, or spiritual ends. The parties intend to share the profits in certain proportions
• Property may be real (immovable) or personal (movable), tangible or intangible. Other forms of property include promissory notes and goodwill
• Legality of object

  1. Object is unlawful when it is contrary to law, morals, good customs, public order, or public policy

  2. No partnership can arise as contract is void ab initio - void from the beginning
• Mutual contributions to a common fund


  1. Without the element of mutual contribution to a common fund, there can be no partnership

  2. Must contribute money, property, and for industry or service to the common business
• Exceptions to the general rule include unemancipated minors, insane or demented persons, deaf-mutes who do not know how to write, persons suffering from civil interdiction (mental incapacity), incompetents under guardianship, and persons prohibited from giving each other any donation or advantage
• Power to dissolve partnership - neither the presence of a period for its specific duration nor the statement of a particular purpose for its creation prevent the dissolution of any partnership by an act
• General Rule - any person who is capable under the law of entering into contractual relations can give their consent to a contract of partnership
• Sharing of profits

  • Not necessarily in equal shares - there must be a joint interest in the profits. One without any right to participate in the profits cannot be deemed a partner
  • Sharing profits is merely presumptive and not conclusive evidence of partnership. If the division of profits is merely used as a guide to determine the compensation due to one of the parties, such one is not a partner
• Business Partnership not permitted to engage in

  • Enterprise for which the law requires a specific form of business organization, such as banking, which only stock corporations may undertake
• Capacity of partnership/corporation to be a partner - no prohibition against a partnership being a partner in another partnership. A corporation is without capacity or power to enter into a contract of partnership
• Money must be legal tender in the Philippines. Checks, drafts, promissory notes payable to order are not money but only representatives of money. There is no contribution of money until they have been cashed
• Types of property

  • Real (immovable)
  • Personal (movable)
  • Tangible
  • Intangible
• Partner wanting to dissolve the partnership

  Must act in good faith
• Essential features of partnership

  • Valid contract
  • Legal capacity
  • Mutual contribution
  • Object must be lawful
  • Purpose/primary purpose must be to obtain profits and divide them among the parties
• Bad faith in dissolution of partnership

  Can result in liability for damages
• Articles of partnership must be known by each partner for the association to have legal personality
• Partnership can be dissolved by an act or will of a partner regardless of the duration or purpose stated in the partnership agreement
• Property may be real (immovable) or personal (movable), tangible or intangible
• Partnership is a principal contract
• Right to choose co-partners (delectus personae) in a partnership
• Partnership is onerous and commutative
• Partnership is a consensual agreement
• Partnership is fiduciary in nature with trust and confidence between partners
• Existence of a valid partnership contract
• Partnership is bilateral with reciprocal rights and obligations