Reviewer partner and the partnership, shall be obliged
to apply the proceeds proportionately, unless
Q: What is a partnership: is a contract whereby
two or more persons bind themselves to
contribute money, property or service to a
common fund, with the intention of dividing
the profits among themselves.
Q: Elements of Partnership: a. there is a
meeting of minds; b. to form a common fund;
c. with the intention that profits and losses of
the common fund will be distributed among
the contracting parties.
Q: Requisites for partnership to have juridical
personality: 1. Two or more persons bind
themselves to contribute money, property or
industry to a common fund; and 2. Intention
on the part of the partners to divide the profits
among themselves.
Q: Characteristics of Partnership: 1. Essentially
contractual in nature; 2. Constitute juridical
personality; 3. Animated by the principle of
delectus personarum; 4. Power of partners vis
– a vis the partnership is that of mutual
agency; 5. Partners assume personal liability
for partnership debts.
Q: Obligations of partners: 1. Every partner is a
debtor of the partnership for whatever he
promised to contribute thereto and also for
the interests and damages from the time he
fails to comply as well as for partnership funds
he used for his own purpose; 2. A partner is
bound to warranty against eviction for specific
objects contributed to the partnership; 3. An
industrial partner cannot engage in business
for himself, unless expressly permitted;
otherwise, he may be excluded or must
account for the benefits received, with
damages in either case; 4. A partners who
collects from a person who owes both the
payment is for partnership credit which must
then be applied to totally to the partnership; 5.
Every partner shall be responsible for damages
he caused the partnership and cannot be
compensated from profits and benefits due
him from the partnership; 6. Partners shall
render on demand true and full information of
all things affecting the partnership to any
partner or legal representative of any
deceased partner; 7. The capitalist partners
cannot engage for their own account in any
operation which is of the kind of business in
which the partnership is engaged, unless there
is a stipulation to the contrary.
Q: Rights of Partners: 1. The property rights of
a partner are his rights in specific partnership
property which is in the nature of co –
ownership interest, his interest in the
partnership constitute his rights to share in the
profits and surplus and his right to participate
in the management. 2. The partnership books
shall be kept, subject to any agreement
between the partners, at the principal place of
business and every partner shall at any
reasonable hour have access to and may
inspect and copy any of them; 3. Any partner
shall have the right to a formal account as to
partnership affairs if he is wrongfully excluded
from the partnership business, if the right
exists under the terms of any agreement, for
any partnership funds held by any partner,
whenever other circumstances render it just
and reasonable.
Q: Limited Partnership: the limited partners
shall not be bound personally for the
obligations of the partnership, provided the
following conditions are met: 1. Register with
SEC articles of limited partnership; 2. Limited
partner cannot choose to contribute service; 3.
Surname of the limited partners shall not
appear in the partnership name; 4. Limited
partner shall not take part in the management
of the partnership; 5. Upon dissolution, the
right of the limited partners to receive
partnership property is conditioned upon full
payment of partnership creditors.
Q: Dissolution may be caused by: 1. Expiration
of partnership term or termination of specific
undertaking in the agreement; 2. By the
express will of any or all of the partners; 3.
Expulsion of any partner in accordance with
the power conferred by the agreement or by
will of all the partner; 4. When partnership
business becomes unlawful; 5. When property
promised to be contributed is lost before the
partnership obtains ownership thereof; 6. By
the death, insolvency, civil interdiction of any
partner; 7. When so decreed by the courts.
Q: The liabilities of the partnership shall rank
in order of payment as follows: 1. Those owed
to creditors other than partners; 2. Those
owed to partners other than capital and
profits; 3. Those owed to partners in respect of
capital; 4. Those owned to partners in respect
of profits.
Instances not constituting a partnership: 1.
Persons not partners as to each other are not
partners as to 3rd persons; 2. co – ownership or
co – possession does not of itself establish a
partnership, whether or not there is a sharing
of profits made by the use of the property; 3.
The sharing of gross returns does not establish
a partnership, whether or not the persons
sharing them have a joint or common right in
any property upon which the return are
derived; 4. Receipt of a share of profits in a
business however is prima facie evidence that
he is a partner, unless such receipt has a
business purpose other than partnership, like
payment of debt, wages, interest on loan,
proceeds from the sale of goodwill.
Q: May a corporation enter into a
partnership?: Yes, a corporation may enter
into partnership agreements on the following
conditions: 1. The authority to enter into a
partnership relation is expressly conferred by
the charter or the articles of incorporation of
the corporation; 2. If it is a foreign corporation,
it must obtain a license to transact business in
the country in accordance with the corporation
code.
NOTES
When an “Articles of Agreement” stipulates for
a division of profits among the contractual
parties, there is created a partnership, since 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.
The issue of whether or not a partnership
exists is a factual matter which are within the
exclusive domain of the trial court
The essence of a partnership is that the
partners share in the profits and losses. A
demand for a periodic accounting is evidence
of partnership.
FORM and REGISTRATION OF PARTNERSHIP
A partnership may be constituted in any form,
except where immovable property or real
rights are contributed, in which case a public
instrument shall be necessary.
A partnership with capital of 3 thousand or
more shall appear in public instrument and
registered with the SEC; but failure to register
shall not affect the liability of the partnership
and the partners to 3rd person. So long as the
contract has the essential requisites, because
the main purpose of registration is to give
notice to 3rd parties and it can be assumed that
the members themselves know of the contents
of their contract.
A partnership may be constituted in any form,
except where immovable property of real
rights are contributed thereto, in which case a
public instrument shall be necessary. Hence,
based on the intention of the parties, as
gathered from the facts of and ascertained
from their language and conduct, a verbal
contract of partnership may arise.
A contract of partnership is void whenever
immovable property is contributed and no
inventory thereof is made, signed by the
parties and attached to the public instrument.
Failure to prepare an inventory of the
immovable property contributed, in spite of
Article 1773 declaring the partnership void,
would not render the partnership void when:
1. No 3rd party is involved since Article 1773
was intended for the protection of 3rd parties.
2. the partners have made a claim on the
partnership agreement.
An association and societies, whose articles are
kept secret among the members and wherein
any one of the members may contract in his
own name with 3rd persons, shall have no
juridical personality and shall be governed by
the co – ownership provisions.
Although a partnership may acquire and
dispose of immovable and other properties in
its own name; nevertheless, partners may
individually dispose of real property of the
partnership even when in partnership name.
Dissolution
Dissolution can come about easily by the
change in the relationship of the partners, such
as: 1. When a partner chooses to cease being
part of the partnership; 2. Expulsion of
partner; 3. Loss of the thing promised to be
contributed to the partnership; 4. Death,
insolvency or civil interdiction of a partner
dissolves the partnership.
A partner may petition for dissolution when
another partner: 1. A partner has been
declared insane; 2. A partner has become
incapable of performing his part of the
partnership contract; 3. A partner has been
found guilty of such conduct as tends to affect
prejudicially the partnership business; 4. A
partner has willfuly or persistently commits
breach of partnership agreement; 5.
Partnership business can only be carried at a
loss; other equitable reason.
Any one of the partners may, at his sole
pleasure, dictate dissolution of the partnership
at will, though he must however, act in good
faith, not that the attendance of bad faith can
prevent the dissolution of the partnership but
that it can result in a liability for damages. An
unjustified dissolution by a partner can subject
him to action for damages.
As a general rule, the death of a partner
dissolves the partnership by operation of law,
except if the articles of partnership stipulate
for the continuance of the partnership relation
upon the death of any of the partners.
“Partners at will” happens if the remaining
partners of the dissolved partnership intended
for all legal intents and purposes, to continue
business even after the death of a partner,
there is continuity of personality of the
partnership.
It bears stressing that while a partner’s death
dissolved the partnership, the dissolution did
not immediately terminate the partnership.
Article 1830 of the Civil Code expressly
provides that upon dissolution, the partnership
continues and its legal personality is retained
until the complete winding up of its business,
culminating in its termination, as provided in
Article 1828 of the civil code.
On dissolution, the partnership continues but
only for winding up of its affairs, but it shall
terminate all authority of any partner to act for
the partnership outside of winding up and to
complete unfinished transaction.
Dissolution does not of itself discharge the
existing liability of any partner, except when
there is an agreement to that affect.
Unless otherwise agreed, the partners who
have not wrongfully caused dissolution or the
legal representative of the last surviving
solvent partner shall have the right to wind up
partnership affairs.
The liabilities of the partnership shall rank in
order of payment as follows: 1. Those owed to
creditors other than partners; 2. Those owed
to partners other than capital and profits; 3.
Those owed to partners in respect of capital; 4.
Those owned to partners in respect of profits.
Implication of Delectus personarum
Every partner may associate another person
with him in his share, but the associate shall
not be admitted into the partnership without
the consent of all the other partners, even if
the partner having an associate should be a
manager.
A partner’s right in specific partnership
property is not assignable except in connection
with the assignment of rights of all the
partners in the same property; nor it can be
attached or levied upon, except as a claim
against the partnership, nor can it be subject
to the legal support.
The conveyance of a partner of his whole
interests in the partnership does not itself
dissolve the partnership, nor does it constitute
the assignee a partner but merely gives him
the right to receive his share of the profits.
Meaning of Mutual Agency
As a general rule, all partners shall be
considered agents and whatever any one of
them may do alone binds the partnership,
except if there is stipulation to the contrary.
None of the partners may, without the consent
of the others, make any important alteration in
the immovable property, even if it may be
useful to the partnership; but if refusal is
prejudicial to the partnership, the court’s
intervention may be sought.
Partners can dispose of partnership property
even when in partnership name
Admission or representation made by any
partner concerning partnership affairs is
evidence against the partnership.
Notice to any partner is notice to the
partnership.
Wrongful act or omission of any partner makes
the partnership liable.
Partnership bound to make good losses for
acts or misapplication of partners.
When there are appointed managers
A partner appointed manager in articles of
partnership may execute all acts of
administration despite opposition of his
partners, unless he acts in bad faith; and his
power is irrevocable without a lawful cause,
which revocation shall then require the vote of
partners representing controlling interest.
When 2 or more partners are entrusted with
management without specification, each one
may separately execute all acts of
administration, but if any of them should
oppose the acts of the other, the decision of
the majority shall prevail; a tie shall be decided
by the partners owning the controlling
interest.
When stipulated that none of the managing
partners shall act without the consent of the
others, the concurrence of all shall be
necessary, and the absence or disability of any
one of them cannot be alleged, unless there is
imminent danger of grave abuse or irreparable
injury to the partnership.
A stipulation which excluded one or more
partners from any share in the profits or losses
is void.
Implication of Partners “Unlimited Liability”
All partners are liable pro rata with all their
properties and after partnership assets have
been exhausted, for all partnership debt and
any stipulation against personal liability of
partners for partnerships debts is VOID, except
as among themselves.
All partners are liable solidarily with the
partnership for everything chargeable to the
partnership when caused by the wrongful act
or omission of any partner acting in the
ordinary course of business of the partnership
or with authority from the other partners and
for partner’s act or misapplication of
properties.
A newly admitted partner into an existing
partnership is liable for all the obligation of the
partnership arising before his admission, but
out of partnership property shares.
Partnership creditors are preferred to those of
each of the partners as regards the partnership
property.
Upon dissolution, the partners shall contribute
the amounts necessary to satisfy the
partnership liabilities.
Capital, profits and losses
As a general rule, partners shall contribute
equal shares to the capital of the partnership,
unless otherwise stipulated.
Except for industrial partner, all partners who
refuse to give additional capital to save the
partnership from an imminent loss or business,
shall be obliged to sell his equity to the other
partners.
Profits and losses shall be distributed in
conformity with the agreement; if only profit
sharing has been agreed upon, then losses
sharing shall be in the same proportion.
As a general rule, partners shall share in profits
and losses in proportion to their capital
contribution, unless otherwise agreed.
Industrial partner shall not be liable for losses
and shall receive such chare in profits as may
be just and equitable under the circumstances;
if besides his services he has contributed
capital, he shall also receive a share in the
profits in proportion to his capital.
A stipulation which excluded one or more
partners from any share in the profits or losses
is void.
Although designation of profits and losses
cannot be entrusted a partner, it can be
impugned (challenged) only when manifestly
inequitable. A partner who has begun to
execute the decision or who has not impugned
the same within 3 months from the time he
has knowledge thereof, can no longer
complain.
For purposes of determining the profits that
should go to an industrial partner who’s shares
in the profits but is not liable for the losses, the
gross income from all the transaction carried
on by the firm must be added together, and
from this sum must be subtracted the
expenses or the losses sustained in the
business; but if, on the contrary, the losses
exceeds the income, the industrial partner
does not share in the losses.
The capitalist partners cannot engage for their
own account in any operation which of the
kind of business in which the partnership is
engaged, unless there is a stipulation to the
contrary. The violator shall bring the common
funds any profits accruing to him from his
transaction, and shall personally bear all the
losses.
Universal Partnership
As to object or coverage, partnership may
either be universal or particular partnership.
A universal partnership may either: 1. Cover all
the present property, in which the partners
contribute all the property which actually
belongs to them to a common fund, as well as
the profits which they may acquire therewith;
2. Cover only profits, which comprises all the
profits that the partners may acquire by their
industry or work during the existence of the
partnership.
Persons prohibited from donating to each
other cannot enter into universal partnership.
Articles of universal partnership without
specification of their nature shall only
constitute universal partnership of profits.
A particular partnership has for its object
determinate things, their use or fruits, or a
specific undertaking, or the exercise of a
profession.
Joint Venture
A joint venture is like a particular partnership.
It has been generally understood to mean an
organization formed for some temporary
purpose.
A particular partnership is distinguished from a
joint venture, to wit:
1. a joint venture is sort of information
partnership, with no firm name and no legal
personality.
2. a joint venture is limited to a single
transaction.
 Cases
Before the partners can be paid their shares,
the creditors of the partnership must first be
compensated.
The partnership has a juridical personality
separate and distinct from that each of the
partners
The “Dead Man’s Statute” provides that if one
party to the alleged transaction is precluded
from testifying by death, insanity, or other
mental disabilities, the surviving party is not
entitled to undue advantage of giving his own
uncontradicted and unexplained account of
the transaction.
A partnership that does not fix its term is a
partnership at will.
The birth and life of a partnership at will is
predicated on the mutual desire and consent
of the partners.
A complaint for delivery and accounting of
partnership property based on such void or
legally non – existent actionable document is
dismissible for failure to state a cause of
action.
A partnership may be deemed to exist among
parties who agree to borrow money to pursue
a business and to divide the profits or losses
that may arise therefrom, even if it is shown
that they have not contributed any capital of
their own to a “common fund”, as their
contribution to such fund could be an
intangible like credit or industry.
A 3rd party who, knowing an association to be
unincorporated, nonetheless treated it as a
corporation and received benefits from it, may
be barred from denying its corporate existence
in a suit brought against the alleged
corporation.
Under the law on estoppel, those acting in
behalf of a corporation and those benefited by
it, knowing it to be without valid existence, are
held liable as general partners.
A person who has reaped the benefits of a
contract entered into by persons with whom
he previously had an existing relationship is
deemed to be part of said association and is
covered by the scope of the doctrine of
corporation by estoppel.
In order to constitute a partnership, it must be
established that: 1. Two or more persons
bound themselves to contribute money,
property or industry to a common fund, and: 2.
they intended to divide the profits among
themselves.
In the spirit of fair play, it is a better rule that a
partner must first be impleaded before he
could be prejudiced by the judgement against
the partnership.
Resort to the properties of a partner may be
made only after efforts in exhausting
partnership assets have failed or that such
partnership assets are insufficient to cover the
entire obligation.
Duly registered general partnership is
exempted from tax upon corporation.
Corporation includes partnerships no matter
how organized.
Partnership without legal personality subject
to residence tax on corporation.
Mere failure to register the contract of
partnership with the SEC does not invalidate a
contract that has the essential requisites of
partnership.

A partnership may exist even if the partners do

not use the words “partner” or “partnership”