PARTNERSHIP

GENERAL PROVISIONS (Art 1767-1783)

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

ESSENTIAL ELEMENTS/REQUISITES OF PARTNERSHIP

1. There must be a valid contract (art 1305. A contract is a meeting of minds

between two persons whereby one binds himself, with respect to the other, to give
something or to render some service… art 1318. There is no contract unless the
following requisites concur (1) consent of the contracting parties, (2) Object certain
which is the subject matter of the contract, (3) cause of the obligation which is
established).
2. There must be a contribution of money, property, or industry to a
common fund.
3. The partnership must be organized for gain or profit.
4. There must be an intention of dividing the profits among the partners.

NOTE: the appearance of the term “partnership” in the contract does not necessarily
mean that a partnership has been entered into. It must comply with the essential
requisites as well as the formal legal requirements which will be discussed later on.

Who may be Parties to a partnership: Two or more persons

Are the parties limited to natural persons only?
Can a Juridical person enter into partnership?

Any person capacitated or who can enter into a contract may become a partner.

Two or more persons may also form a partnership for the exercise of a profession.
= Lawyers may form a partnership (the law offices of Bernardo and Lim)
= Accountants may form a partnership

An unemancipated minor cannot become a partner unless his parent or guardian

consents. Without such consent, the contract is voidable, unless other partners are in the
same situation, in which case the contract is unenforceable.

A married woman even if already of age, cannot contribute conjugal funds, unless she is
permitted to do so by her husband.

A partnership being a juridical person can in itself enter and form another partnership
with either private individuals or other partnerships)

Art. 1768. The partnership has a judicial personality separate and distinct from
that of each of the partners, even in case of failure to comply with the
requirements of Article 1772, first paragraph. (n)

Once the partnership is formed, the partnership obtains a distinct and separate
personality from of each of the members. Meaning:
a) the partnership can acquire and possess property of all kinds (art. 46 civil
code)
b) Incur obligations (Art. 46), and
c) bring civil or criminal actions (art 46).

So if A and B entered into partnership x, there will be 3 personalities:

a) that of A individually,
b) that of B individually, and
 c) partnership X.

Q: can partnership ABC purchase a land in the name of the partnership?

Q: Can the partnership borrow money from a person? Can it bring an action to the court?

Q: Assuming Mr. A and Mr. B formed a valid AB partnership. AB partnership borrowed

money from Mr. X, can Mr. X sue A in his personal capacity for the payment of the debt?
How about the partnership?

Recite Art. 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;
(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, but 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;
(c) As an annuity to a widow or representative of a deceased
partner;
(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. (n)

Mere co-ownership or co-possession and mere sharing of gross returns do no establish a

partnership. To show the existence of partnership, all essential requisites must be
proved.

Q:C borrowed 100K pesos from D to be used as a capital in a business. It was agreed
that C shall pay D 10K pesos monthly for ten months and that the payment shall come
from the C’s profit in the established business. Is there a partnership?

Q: A is a computer programmer, he entered into an agreement with B that A will work as

a programmer in the programming business previously established by B, wherein A will
receive 15% of the profit monthly. Is there a partnership?

Presumption: If the person is receiving a share from the profits of a business, there is a
presumption that he is a partner, except from the 5 instances enumerated in the article.

Annuity- pension. A series of payments made at equal interval of times. Eg. House rents,
mortgage payments.

Note: Partnership by estoppels= when two persons not partners represent

themselves as partners to strangers, a partnership by estoppels results.

Art. 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)
Q: A and B entered into a partnership by contributing their properties for operation of
jueteng through the execution of a public instrument for that effect, is there a
partnership?

Q: How about if A and B entered into a partnership and A contributes a license to

operate a cockpit? Is there a valid partnership?

It is not sufficient that the partnership complied with all the requirements set forth in
Article 1767. The object or purpose must be lawful, that is, it must be within the
commerce of man, possible, and not contrary to law, morals, good customs, public order
or public policy. Otherwise the partnership contract is void ab initio.

if a partnership has several purposes, one of which is unlawful, the partnership can still
validly exist so long as the illegal purpose can be separated from the legal purpose

EX. A partnership formed to furnish apartment houses which would be used for
prostitution; A partnership formed to create illegal monopolies or combinations in
restraint of trade; A partnership for gambling purposes.

Judicial decree is not necessary to dissolve an unlawful partnership because the contract
is void and therefore never existed from the viewpoint of the law.