PARTNERSHIPS

GENERAL PROVISIONS
Partnership under the Civil Code
Art. 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.
Characteristic Elements of Partnership
1. CONSENSUAL
2. NOMINATE
3. BILATERAL
4. ONEROUS
5. COMMUTATIVE
6. PRINCIPAL
7. PREPARATORY
 Essential Features of Partnership
1. There must be a valid contract
2. The parties must have legal capacity to enter into
the contract
3. There must be a mutual contribution of money,
property, or industry to a common fund
4. The object must be lawful
5. The purpose or primary purpose must be to obtain
profits and to divide the same among the parties
Partnership under the Civil Code
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.
 Partnership: Determination
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;
 Partnership: Determination
(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.
 Partnership: Lawful Purpose
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.
 Partnership: As to FORM
Art. 1771. A partnership may be constituted in any form,
except where immovable property or real rights are contributed
thereto, in which case a public instrument shall be necessary.
Art. 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.
Partnership: Immovable Property
Art. 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.

Art. 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.
Partnership: Articles are kept Secret
Art. 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.
 Partnership: KINDS
Art. 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.
 KINDS of Universal Partnerships
1. Universal Partnership of all present property.
Art. 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.

2. Universal Partnership of profits.

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.
 Particular Partnership
Art. 1783. A particular partnership has for its
object determinate things, their use or fruits, or
specific undertaking, or the exercise of a
profession or vocation.
 As to LIABILITY of Partners

a. GENERAL PARTNERSHIP
Consisting of general partners who are liable pro rata and
subsidiarily, sometimes solidarily, with their separate
property for partnership debts
b. LIMITED PARTNERSHIP
Having members: one or more general partners and one
or more limited partners, the latter not being personally
liable for the obligations of the partnership
 As to DURATION

a. Partnership at will
One which NO TIME IS SPECIFIED and is not formed for a
particular undertaking or venture
b. Partnership with a fixed term
One in which the term for which the partnership is to exist is
fixed or agreed upon or one formed for a particular undertaking,
and upon the expiration of the term or completion of the
particular enterprise, the partnership is dissolved, unless
continued by the parties
As to LEGALITY of EXISTENCE

a. DE JURE Partnership
One which has complied with all the legal requirements for its
establishment
b. DE FACTO Partnership
One which has failed to comply with all the legal requirements
for its establishment
As to REPRESENTATION to others

a. Ordinary or Real partnership

One which actually exists among the partners and also as to third
persons
b. DE FACTO Partnership
PARTNERSHIP BY ESTOPPEL
One which in reality is not a partnership but is considered a
partnership only in relation to those who, by their conduct or
admission, are precluded to deny or disprove their existence
 As to PUBLICITY

a. SECRET Partnership
One wherein the existence of certain persons as partners is not
avowed or made known to the public by any of the partners
b. OPEN & NOTORIOUS Partnership
One whose existence is avowed or made known to the public by
the members of the firm
 As to PURPOSE

a. Commercial or Trading Partnership

One formed for the transaction of business

b. Profession or non-trading Partnership

One formed for the exercise of a profession
KINDS of PARTNERS
1. Capitalist Partner
2. Industrial Partner
3. General Partner
4. Limited Partner
5. Managing Partner
6. Liquidating Partner
7. Partner by estoppel
8. Continuing Partner
9. Surviving Partner
10. Subpartner
Other Classifications of PARTNERS
1. Ostensible Partner
2. Secret Partner
3. Silent Partner
4. Dormant Partner
5. Original Partner
6. Incoming Partner
7. Retiring Partner
 Universal Partnership
Art. 1777. A universal partnership may refer to
all the present property or to all the profits.
Universal Partnership: All Present Property
Art. 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.
Universal Partnership: All Present Property
Art. 1779. In a universal partnership of all present property,
the property which belongs 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.

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.
 Universal Partnership: Profits
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.
Universal Partnership: Without Nature
Art. 1781. Articles of universal partnership,
entered into without specification of its nature,
only constitute a universal partnership of profits.
 Particular Partnership
Art. 1783. A particular partnership has for its
object determinate things, their use or fruits, or
specific undertaking, or the exercise of a
profession or vocation.