CHAPTER 1 partners.

GENERAL PROVISIONS
b. Limited Partnership At least one general partner
1. Define PARTNERSHIP and one limited partner.
 By the contract of partnership, two or more
According to duration
persons bind themselves to contribute
money, property or industry to a common a. Partnership at will No fixed term or not formed for
fund, with the intention of dividing the profits a particular undertaking.
among themselves.
 Two or more persons may also form a b. Partnership with a Life of existence of the
partnership for the exercise of a profession. partnership has been agreed
fixed term upon by the partners.
2. Characteristic elements of the contract of c. Partnership for a Exist until the purpose is
partnership accomplished.
i. Consensual – perfected by a mere consent particular undertaking
ii. Commutative – the contribution of each
partner is considered as the equivalent of According to representation to others
that of the others
a. Ordinary Partnership Two or more persons bind
iii. Principal – its existence or validity does not
themselves to contribute
depend on some other contracts
iv. Bilateral – formed by two or more persons money, property or industry to
creating reciprocal rights and obligations a common fund, with the
v. Onerous – each partner must contribute intention of dividing the profits
money, property or industry among themselves.
vi. Nominate – has a special name or
designation b. Partnership by Persons, by words spoken or
vii. Preparatory – a contract in preparation for written or by conduct,
estoppel represent themselves, as
another contract/s
partners in an existing
3. Essential features of a partnership partnership, but are not actual
i. Voluntary agreement partners.
ii. Association for profit
iii. Mutual contribution to a common fund According to the legality of its existence
iv. Lawful purpose or object
a. De jure partnership Has complied with all the legal
v. Mutual agency of partners
requirements for its creation.
vi. Articles must not be kept secret
vii. Separate juridical personality b. De facto partnership Has not complied with all the
legal requirements for its
4. Legal characteristics of a partnership
creation.
i. Juridical personality.
ii. Partners are liable pro-rata in the absence of According to publicity
an agreement.
iii. Mutual agency to act for the partnership a. Secret Partnership Existence of certain persons
iv. Partners are liable up to their personal as partners is not made known
assets after exhausting the partnership to the public.
assets, except the limited partners.
b. Open/Notorious Existence is made known to
5. Classification of partnerships the public.
Partnership
According to object
According to purpose
a. Universal Partnership
a. Commercial/Trading Formed for the transaction of
(1) U/P of all present The partners contribute what business.
Partnership
actually belong to them, to
property divide the same among b. Professional/ Formed for the exercise of a
themselves, as well as the profession.
profits they may acquire Non-trading
therewith.
Partnership
Comprises of all that the
partners may acquire by their
industry or work during the 6. Kinds of partners
(2) U/P of all profits existence of the partnership.
As to contribution
b. Particular Partnership Has its object determinate a. Capitalist partners Contribute money or
things, their use or fruits, or property or both to the
common fund
specific undertaking, or the
b. Industrial partners Contribute their industry or
exercise of a profession or
labor to the common fund
vocation.
c. Capitalist-Industrial Contribute money or
According to liability partners property, and industry
As to liability
a. General Partnership All partners are general a. General partners Liable to third persons for
 partnership obligations even property is not made, signed by the parties,
to the extent of their and attached to the public instrument.
separate property
b. Limited partners Liable only to the extent of
their capital contributions 10. Rules determining the existence of a
partnership
As to management
i. Persons who are not partners as to each
a. Managing partners Actively manage the affairs
other are not partners as to third persons
of the partnership
ii. Co-ownership does not of itself establish a
b. Silent partners Do not take active part in the
partnership
affairs of the partnership
iii. Sharing of gross returns does not of itself
c. Liquidating partners Takes charge of the establish a partnership
liquidation of the partnership iv. Receipt by a person of a share of the profits
affairs after dissolution of a business is a prima facie evidence that
As to third persons he is a partner in the business, except when
a. Ostensible partners Active and known to the such profits were received in payment:
public as a partner a. As a debt by installments;
b. Secret partners Active, but not known to the b. As wages of an employee or rent to a
public as a partner landlord;
c. Dormant partners Not active and not known to c. As an annuity to a widow or
the public representative of a deceased partner;
As to membership d. As interest on a loan, though the
a. Real partners Partners in an existing legal amounts of payment vary with the
partnership profits of the business;
b. Partners by Not real partners but e. As the consideration for the sale of a
estoppel represent themselves as goodwill of a business or other
such property by installments.
As to continuation of the business affairs after
dissolution
a. Continuing partners Continue the business after
dissolution 11. Partnership vs. Co-ownership
b. Discontinuing Do not continue the
partners business after dissolution Partnership Co-ownership
As to the nature of partnership Created by contract Created by contract and
a. Original partners Members of the partnership
law
from the time of its formation
b. Incoming partners Became members after the
partnership’s formation Has legal or juridical No juridical personality;
c. Retiring partners Withdraw from the personality; can sue and cannot sue or be sued
partnership can be sued
As to state of survivorship
a. Surviving partners Continue the partnership For profit Common enjoyment of a
after dissolution by reason of thing or right
death of a partner
Profit may be stipulated Profit must always
b. Deceased partners Died while being a partner
upon depend on the
As to the effect of expulsion
proportionate shares; any
a. Expelled partners Expelled by other partners
stipulation to the contrary
for a valid cause
b. Expelling partners Caused the expulsion of a is VOID
partner for a valid cause Dissolved by death or Not dissolved by death or
As to the value of the contribution incapacity of a partner incapacity of a partner
a. Majority partners Contribution to the
partnership represents the When real property is No public instrument is
majority or controlling contributed, public needed even if real
interest instrument is required property is contributed
b. Nominal partners Contribution to the
partnership represents the No limitation An agreement to keep
minority interest the thing undivided for
more than 10 yrs. is not
allowed
7. Requisites of a contract of partnership with a
capital of P3,000 or more in money or May not dispose his May freely do so
property individual interest unless
i. Must appear in a public instrument agreed upon by all
ii. Must be recorded or registered with SEC partners
8. Will the partnership be void if it is not In the absence of any Co-owner cannot
registered with the Office of the SEC having stipulation to the contrary, represent the co-
a capital of P3,000 or more? a partner may bind the ownership
 No. partnership
9. When shall the partnership be considered
void? 12. Partnership vs. Joint-stock Company
 Whenever immovable property is
contributed thereto, if an inventory of said
  Joint venture is hardly distinguishable from  It shall continue to pertain exclusively to
and maybe likened to a partnership since each other.
their elements are similar; governed by law
on partnership 23. If such movable or immovable property shall
pertain exclusively to the partner who owns
13. Object or purpose of a partnership it at the celebration of the contract, what
 Must be within the commerce of man, and it then shall pass to the partnership?
must not be contrary to law, morals, good  Usufruct – the rights to enjoy the use, fruits,
customs, public order or public policy. profits, and advantages of another’s
property.
14. In case an unlawful partnership is dissolved
by judicial decree, how shall the profits be 24. Will the usufruct of properties subsequently
appropriated? acquired by the partners in a universal
 Profits shall be confiscated in favor of the partnership of profits belong to the
government. partnership?
 Yes. Only the usufruct of the properties of
15. Examples of unlawful partnerships the partners becomes common property of
 Those formed for gambling purposes all partners and the partnership.
 Those formed to furnish houses for
prostitution purposes 25. How shall the partnership be treated in case
 Those formed to create illegal monopolies or the articles of partnership fail to specify its
combinations in restraint of trade nature whether it is one of “present
property” or of “profits”?
16. Form in which a partnership shall be  Articles of universal partnership, entered into
constituted without specification of its nature, only
 In any form, except where immovable constitute a universal partnership of
property or real rights are contributed, in profits.
which case a public instrument shall be
necessary. Otherwise, the contract is VOID. 26. Persons prohibited from entering into a
universal partnership.
17. Can a partnership acquire immovable  Persons who are prohibited from giving each
property? other any donation or advantage cannot
 Yes. Title so acquired can be conveyed only enter into universal partnership.
in the partnership name.  Examples:
1. Legally married spouses
18. Define universal partnership of all present 2. Persons living together as husband and
property wife without valid marriage
 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 27. Donations that are considered void and
which they may acquire therewith. therefore prohibited.
i. Persons found guilty of adultery or
19. In a universal partnership of all present concubinage at the time of the donation.
property which property becomes the ii. Persons found guilty of the same criminal
common property of all partners? offense, in consideration thereof.
 All the properties actually belonging to all iii. Persons and a public officer or his wife,
the partners descendants and ascendants, by reason of
 The profits acquired with said properties his office.

20. May the partners contribute future properties 28. Define a particular partnership.
to a universal partnership of all present  A particular partnership has for its object
property? determinate things, their use or fruits, or
 No, because.. specific undertaking, or the exercise of a
i. Contracts regarding successional profession or vocation.
rights cannot be made
ii. Partnership demands that the 29. Can a husband and wife enter into a
contributed things be determinate, particular partnership?
known and certain  Yes.
iii. Universal partnership of all present
property implies a donation, and future 30. Fundamental difference between a universal
property cannot be donated partnership and a particular partnership.
 Scope of subject matter:
21. Define universal partnership of profits. i. Universal: vague and indefinite, with a
 A universal partnership of profits comprises degree of continuity
all that the partners may acquire by their ii. Particular: well-defined, confined to an
industry or work during the existence of the understanding of a single, temporary
partnership. or ad hoc nature

22. To whom shall movable and immovable