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PART 1

PARTNERSHIP
Chapter 1
General Provisions
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. (1665 a)

Concept of partnership
The above article gives the legal definition of partnership (often called co-
partnership) from the viewpoint of a contract. There are, however, other definitions.
Thus-
(1) “A partnership is an association of two or more persons to carry on as
co-owners a business for profit.” (Uniform Partnership Act, Sec. 6)
(2) “ A partnership is a legal relation based upon the expressed or implied
agreement of two (2) or more competent persons whereby they unite
property, labor or skill in carrying on some lawful business as principals
of their joint profit.” (Mechem, Elements of the Law of Partnership
[1923], p. 1.)
(3) “ A partnership is a joint undertakin to share in the profit and loss.”
(Eastman vs. Clark, 53 N.H.276,16 Am. Rep. 192)
(4) “ A partnership is the status arising out of a contract entered into by two
(2) or more persons whereby they agree to share as common owners
the profits of a business carried on by all or any of them in behalf of all
of them.” (31 Words and Phrases [1957 ed.], p. 291)
(5) “ A partnership is an organization for production of income to which
each partner contributes one (1) or both ingredients of income, which
are capital or service.” ( Ibid., p. 292)
(6) “ A partnership is an entity, distinct and apart from the members
composing it, and, for the purpose of which it was created; it is a person
having its own assets and liabilities and any benefit or liability attaching
to a member of the partnership, results from the partnership relation.”
( Ibid., p. 293.)

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Note: As a form of business organization, a partnership falls between two (2)
extremes of organizational form- the single proprietorship and the corporation.

Partnership for the exercise


of a profession

A profession is calling for preparation for or practice of which academic learning is


required and which has its primary purpose the rendering of public service. It may also
refer to the whole body of a person or a group of persons engaged in calling. Thus, i has
been defined as “ a group of men pursuing a learned art as a common calling in the spirit
of public service- no less a public service because it may incidentally be a means of
livelihood.”
Paragraph 2 relates to general professional partnership or a partnership for the
exercise of a profession. Strictly speaking, the practice of a profession is not a business or
an enterprise for profit. However, the law allows the joint pursuit thereof by two (2) or
more persons as partners. The law does not allow individuals to practice a profession as
a corporate entity. The reason is that personal qualifications (e.g. age, good moral
character, college degree) for such practice cannot be possessed by a corporation.

Characteristic Element of Partnership

The contract of partnership is:


a. Consensual, because it is perfected by mere consent, that is, upon the agreement
of two (2) or more persons;
b. Nominate, because it has a special name or designation in our law;
c. Bilateral, because it is entered by two (2) or more persons and the rights and
obigations arising therefrom are always reciprocal;
d. Onerous, because each of the parties aspires to procure for himself a benefit
through the giving of something;
e. Cumutative, because the undertaking of each partner is equivalent of that of the
partner;
f. Principal, because it does not depend on other contract for its validity and
existence; and
g. Preparatory, because it is entered into as a means to an end, i.e., to engage in
business for the realization of profits with the view of dividing them among the
contracting parties.
PARTNERSHIP IS A IHD BCU IDCIS JSS CJB HFHFWEHBJDU HFHF HBDFU

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Partnership relation feduciary in nature
Partnership is a form of voluntary association entered into by the associates. It is
a personal relation in which the element of delectus personae exists, involving as it does
trust and confidence between the partners.
(1) Right to choose co-partners.- Unless otherwise provided in the partnership
agreement, no one can become a member of the partnership association without
the consent of all other associates. The fiduciary nature of a partnership and the
liability of each partner for the acts of the others within the scope of the
partnership business (Art. 1818) require that each person be granted the right to
choose with whom he will be associated in the firm.

(2) Power to dissolve partnership.- Neither would the presence of a period for its
specific duration or the statement of a particular purpose for its creation prevent
the dissolution of any partnership by an act or will of a partner. Among partners
mutual agency arises and the doctrine of delectus personae allows them to have
the power, although not necessarily the right, to dissolve the partnership. Verily,
anyone of the partners may, at his sole pleasure, to dictate a dissolution of the
partnership at will. He must, however, act in good faith. The attendance of bad
faith cannot prevent dissolution of the partnership but that it can result for a
liability for damages.

Essential features of partnership


Below are the five (5) essential features of a partnership contract.
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; and
5. The purpose or primary purpose is to obtain profits and to divide the same
among the parties.
It is also required that articles of partnership must not be kept secret among the
members; otherwise, the association shall have no legal personality and shall be
governed by the provisions of the Civil Code realting to co-ownership. (Art. 1775)

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Existence of a valid contract
(1) A form of voluntary and personal association – Partnership is a form of voluntary
association entered into by the associates. It is a personal relation in which the
element of delectus personae* exists. No one can become a member of the
partnership association without the consent of all other associates.
*This Latin phrase, sometimes written delectus personarum which is the plural of the phrase, may
be literally translated- choice of the person/s.

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