CHAPTER 1
GENERAL PROVISIONS
PARTNERSHIP
PARTNERSHIP (Article 1767)
– It is a contract whereby 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, or in order to exercise a profession.
CHARACTERISTIC ELEMENTS OF A PARTNERSHIP (P2C2BON)
A. CONSENSUAL
– It is perfected by mere consent, although such consent must be manifested in
certain cases by the proper formalities.
B. BILATERAL OR MULTILATERAL
– Entered into between two or more persons.
PARTNERSHIP
C. NOMINATE
– It is designated by a specific name.
D. PRINCIPAL
– It does not depend for its existence upon the life or validity of another contract.
E. ONEROUS
– Each of the parties aspires to procure for himself a benefit through the giving of
something.
F. PREPARATORY
– Entered into as a means to an end, i.e., to engage in business for the realization of profits
with a view of dividing them among the contracting parties.
F. COMMUTATIVE
– The undertaking of each of the partner is considered as the equivalent of that of the
others.
PARTNERSHIP
ESSENTIAL FEATURES/REQUISITES OF A PARTNERSHIP (C3PO)
A. THERE MUST BE A VALID CONTRACT
– The essential elements of a contract must exist.
B. THE PARTIES MUST HAVE LEGAL CAPACITY TO ENTER INTO THE CONTRACT
– As a general rule, any person may be a partner who is capable of entering into
contractual relations.
C. THERE MUST BE A MUTUAL CONTRIBUTION OF MONEY, PROPERTY, OR INDUSTRY TO A
COMMON FUND
– Without the element of mutual contribution to a common fund there can be no
partnership.
D. THE OBJECT MUST BE LAWFUL (Article 1770)
– 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.
PARTNERSHIP
E. THE PRINCIPAL PURPOSE MUST BE TO OBTAIN PROFIT AND TO DIVIDE THE SAME
AMONG THE PARTNERS
– There must be an intention of dividing the profit among the partners since the
firm is the common benefit or interest of the partners.
PARTNERSHIP AS A JURIDICAL PERSON (Article 1768)
– A partnership duly formed under the law is a juridical person to which the law
grants a juridical personality separate and distinct from that of each of the
partners.
DETERMINING THE EXISTENCE OF A PARTNERSHIP
RULES IN DETERMINING WHETHER A PARTNERSHIP EXISTS (Article 1769)
A. PERSONS WHO ARE NOT PARTNERS AS TO EACH OTHER ARE NOT PARTNERS AS TO THIRD
PERSONS
– Partnership is a matter of intention.
B. CO-OWNERSHIP OR CO-POSSESSION DOES NOT 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
– The profit must be derived from the operation of the business or undertaking by the
members of the association and not merely from property ownership.
C. THE SHARING OF GROSS RETURNS DOES NOT OF ITSELF ESTABLISH A PARTNERSHIP,
WHETHER OR NOT THE PERSON SHARING THEM HAVE A JOINT OR COMMON RIGHT OR
INTEREST IN ANY PROPERTY FROM WHICH THE RETURNS ARE DERIVED
– The mere sharing of gross returns alone does not indicate a partnership, since in a
partnership; the partners share profits after satisfying all of the partnership liabilities.
DETERMINING THE EXISTENCE OF A PARTNERSHIP
D. 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
WHEN PRIMA FACIE PRESUMPTION DOES NOT APPLY (DIWAG)
1. When such profits were received in payment of a debt by installments or otherwise.
2. When such profits were received in payment of wages of an employee or rent to a
landlord.
3. When such profits were received in payment of as an annuity to a widow or
representative of a deceased partner.
4. When such profits were received in payment of as interest on loan, though the amount of
payment vary with the profits of the business.
5. When such profits were received in payment of as the consideration for the sale of
goodwill of a business or other property by installments or otherwise.
EFFECTS OF AN UNLAWFUL PARTNERSHIP
EFFECTS OF AN UNLAWFUL PARTNERSHIP (Article 1770)
A. An unlawful partnership has no legal personality.
B. The profits shall be confiscated in favor of the government.
C. The instruments or tools and proceeds of the crime shall be confiscated in favor of
the Government.
D. The contributions of the partners shall not be confiscated unless they fall under
instruments or tools and proceeds of the crime.
FORM OF PARTNERSHIPS
FORM OF PARTNERSHIPS
A. GENERAL RULE (Article 1771)
– For validity of the contract (among the parties) as well as for enforceability, no form is
required as a general rule, regardless of the value of the contributions. A partnership
contract is not one of those covered by the Statute of Frauds and it is a consensual
contract.
B. EXCEPTION (Article 1773)
– Whenever real properties or real rights in real properties are contributed, the contract of
partnership itself must be in a public instrument; moreover, there must be an inventory
of the immovables.
REGISTRATION OF PARTNERSHIPS (Article 1772)
– Registration is to set “a condition for the issuance of licenses to engage in business or
trade. In this way, the tax liabilities of big partnerships cannot be evaded and the public
can also determine more accurately their membership and capital before dealing with
them.” (Dean Capistrano, Civil Code of the Philippines, Volume IV, page 260)
PROPERTY RIGHTS AND SECRET PARTNERSHIPS
ACQUISITION OR CONVEYANCE OF PROPERTY BY PARTNERSHIP (Article 1774)
– Since a partnership has juridical personality separate from and independent of
that of the persons or members composing it (Article 1768), it is but logical and
natural that immovable property may be acquired in the partnership name. Title
so acquired can, therefore, be conveyed only in the partnership name (Article 46).
SECRET PARTNERSHIPS WITHOUT JURIDICAL PERSONALITY (Article 1775)
– Associations whose articles or agreements are kept secret among the members
and wherein anyone of them may contract in his own name with third persons
are, by this article, deprived of juridical personality for evidently such
associations are not partnerships.
UNIVERSAL PARTNERSHIPS
UNIVERSAL PARTNERSHIP OF ALL PRESENT PROPERTY (Articles 1777, 1778 and 1779)
– In a universal partnership of all present property, the property which actually
belonged to each of the partners at the time of the constitution of the
partnership, becomes the common property of all the partners with the intention
of dividing the same among themselves, 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 PARTNERSHIPS
UNIVERSAL PARTNERSHIP OF ALL PROFITS (Article 1780)
– One which comprises all that the partners may acquire by their industry or work
during the existence of the partnership and the usufruct of movable or
immovable property which each of the partners may possess at the time of the
celebration of the contract.
– Profits acquired by the partners through chance, such as lottery or by lucrative
title without employment of any physical or intellectual efforts, are not included.
– Fruits of property subsequently acquired by the partners do not belong to the
partnership. Such profits may, however, be included by express stipulation. But
profits which the partners may acquire by their industry or work during the
existence of the partnership as well as the usufruct of their present properties
belong to the partnership as a matter of right. An express stipulation is
necessary to exclude any of them.
UNIVERSAL PARTNERSHIPS
PRESUMPTION (Article 1780)
– Articles of universal partnership, entered into without specification of its nature,
only constitute a universal partnership of profits.
PERSONS WHO CANNOT FORM A UNIVERSAL PARTNERSHIP (Article 1782)
A. HUSBAND AND WIFE
– Every donation or grant of gratuitous advantage, direct or indirect, between the
spouses during the marriage shall be void, except moderate gifts which the
spouses may give each other on the occasion of any family rejoicing. The
prohibition shall also apply to persons living together as husband and wife
without a valid marriage (133a) (Article 87, Family Code of the Philippines,
Executive Order No. 209 as amended, December 13, 1989).
B. THOSE PERSONS ENUMERATED UNDER ARTICLE 739
PARTICULAR PARTNERSHIPS
PARTICULAR PARTNERSHIP (Article 1783) (D-FUSE)
– 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 (Article
1780).
