PARTNERSHIP a.
Partnership contract must be in a
A partnership is a contract of two or more persons
who 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 profession. It is both:
1. A contract (1768)
2. A business organization
It is a juridical entity which has a personality
separate from partners. IT BEGINS FROM THE
EXECUTION OF THE CONTRACT, unless it is
otherwise stipulated.
+Characteristics of a contract of Partnership+
1. Consensual – perfected by mere consent
2. Principal – does not depend upon any other
contract for its validity or existence
3. Bilateral/Multilateral – 2 or more persons
whose rights and obli are reciprocal
4. Nominate – has name given by law
5. Preparatory – that other contracts will be
entered into as the partnership pursues its
business
6. Onerous – partners contribute money,
property or industry to a common fund
(1767)
REQUISITES of Partnership
1. There must be a valid contract
2. There must be a mutual contribution of
money, property or industry to a common
fund. (1767)
3. It must have a lawful object or purpose
(1770)
4. The partnership must be established for the
common benefit or interest of the partners
which is to obtain profits and to divide the
profits among the partners. (1768, 1770)
Form of a partnership contract
A partnership contract may be constituted in any
form, i.e., oral or written, except
1. Immovable property or real rights
contributed to the partnership (regardless
of the amount)
public instrument
b. Inventory of the said property must be
signed and attached to a public
instrument
Effect if not implied
Partnership is void, no juridical personality.
2. If the capital is P3,000 or more (money or
property)
a. Partnership contract must be in a
public instrument
b. Must be registered with Securities and
Exchange Commission (SEC) (1771)
(p638)
Effect if not implied
Partnership is valid, liability of the
partnership and partners to third persons
are not affected. Known as General
Partnership.
WHO MAY BECOME PARTNERS
1. Any natural person who is capacitated
2. Artificial persons except corporation to
prevent pseudo partnership (not real)
RULES TO DETERMINE WHETHER A PARTNERSHIP
EXISTS
1. Persons who are not partners as to each
other are not partners as to third persons
except, partners by estoppel
2. Co-ownership or co-possession does not
itself establish a partnership
3. The sharing of gross returns does not itself
establish a partnership, whether or not is
involve the company.
4. The receipt by a person of a share of the
profits of a business is a prima facie (1st
presume) evidence that he is a partner in
the business. EXCEPT
a. Debt by installment
b. Salary/wage or rent to a landlord
c. Annuity to a widow/representative of a
deceased partner
KINDS OF PARTNERSHIP
AS TO OBJECT
1. UNIVERSAL PARTNERSHIP
a. Universal partnership of all present
property
 Contributes all the property which
actually belonged to them to the
common fund, with the intention of
dividing the same among themselves,
as well as the profits which they acquire
therewith. (1778)
Property which shall belong to the common
fund
a. Profits
b. Present property (at the time of
constitution)
c. Future Property (property acquired
after formation) only if stipulated.
(except inheritance, legacy or donation,
only the profits and fruits)
b. Universal partnership of profits
 This comprises all that the partners
may acquire by their work or industry
during the existence of the partnership.
(1780)
Profits/property which shall belong to the
partnership
a. Profits obtained by their work/industry
during the existence of the partnership
(except acquired by chance or lucrative
title, ex. Lottery)
b. The usufruct (use) of the property
(movable/immovable) belonging to
each partner at the time of constitution
of partnership.
c. Profits and fruits from properties
aforementioned
d. Profits/fruits, if stipulated, of future
property.
Universal partnership of profits if no specification of
its nature.
Prohibition to enter into a Universal Partnership
1. Donation between spouses during marriage
except, moderate gifts on occasions of a
family rejoicing.
2. Persons who were guilty of adultery or
concubinage at the time of the donation
3. Two persons found guilty of the same
criminal offense
4. Those made to a public officer or his wife,
descendants or ascendants by reason of his
office
2. PARTICULAR PARTNERSHIP
 Has for its object, determinate things,
their use of fruits, or a specific
undertaking, or the exercise of
profession. (1783)
Example:
1. A real estate partnership whereby partner A
contributed a parcel of land and partner B a building.
2. A real estate lessor partnership whereby A
contributed cash and B the use and lease of his
building.
3. A partnership formed for the exercise of the law
profession.
AS TO LIABILITY
a. General Partnership – liable to the extent of
their separate property after partnership
assets have been exhausted.
b. Limited Partnership – atleast 1 limited and 1
general partner. Limited partners are only
liable to the extent of their investment in
the partnership
AS TO DURATION
a. Partnership for a fixed term – duration is
fixed by the partners.
b. Partnership for a particular undertaking –
when attain, will cause the termination of
the partnership. (dissolution -> winding up
-> termination)
c. Partnership at will – no period is fixed for its
duration.
If the partnership for a fixed term or a particular b. Liquidating partner – takes charge of
undertaking is continued after the expiration or the winding up of the affairs of the partnership
attainment, without any express agreement, the after it is dissolved.
partnership becomes Partnership at will. c. Nominal partner – not actually a partner
but can be liable (ex. Partner by estoppel)
AS TO REPRESENTATION TO OTHERS
d. Secret partner – whose connection is not
a. Ordinary partnership – actually exists known to public
among the partners as well as to third e. Silent partner - doesn’t take active part in
persons. the business but share profit and losses
b. Partnership by estoppel – in reality is not a f. Ostensible partner – active and known to
partnership but is considered as one by the public
consent of the original partners. g. Dormant – both secret and silent
h. Real partner – in a legal partnership
Partnership by estoppel may arise from: i. Partners by estoppel – (p37)
1. A partnership by estoppel is created and As to continuation of business after dissolution
gave consent between ALL actual partners
and third person, ASSETS of partnership -> j. Continuing partner
separate properties use to pay liability. k. Discontinuing partner
2. A partnership by estoppel is created and
As to nature of membership
gave consent between NOT ALL actual
partners and third person, shall be liable l. Original partner
jointly or pro rata with their separate m. Incoming partner
properties. n. Retiring partner

KINDS OF PARTNERSHIP As to state of survivorship

AS TO LIABILITY o. Surviving partner

p. Deceased partner
a. General partner – liable up to the extent of
his personal property As to the effect of expulsion
b. Limited partner – liable only up to the
q. Expelled partners – whose kicked out of the
extent of his capital contribution
partnership
c. General-limited partner – ex. Capital +
r. Expelling partners – the ones who expels
Industry, liability as to a Capitalist partner
and as to an Industrial partner. As to the value of the contribution
AS TO CONTRIBUTION s. Majority partners – has controlling interest
t. Nominal partners – has minority interest
a. Capitalist partner – contributes money or
property RULES ON DIVISION OF PROFIT AND LOSS (1797)
b. Industrial partner – contributes
service/industry (physical/intellectual) 1. If ALL are CAPITALIST, profits and losses
c. Capitalist-industrial partner – contributes shall be divided according to their
not only money or property but also agreement.
service/industry a. If only PROFITS has been agreed upon,
same with the LOSSES
Other classifications b. In the absence of both, profits and losses
shall be in proportion to his capital
a. Managing partner – one who manages the
contribution
partnership
 2. CAPITALIST and INDUSTRIAL partners,
profits shall be divided according to their
agreement., losses only to the capitalist
partner.
a. (PROFIT) In the absence of any
RULES OF MANAGEMENT
agreement thereon, the Industrial
partner shall first receive a just
and equitable share of the profits,
and thereafter each capitalist
partner shall share in the profits in
proportion to his capital
contribution.
Ex.
(industry, 50k, 50k)
1. Agreed 10%, 45%, 45%
2. Not agreed 30%, remaining
profit will be shared to the
capitalist in proportion to his
capital contribution
b. (ONLY THE CAPITALIST PARTNER
SHALL BARE LOSSES) According to
agreement, in the absence of any
agreement of losses, same as the
agreed proportion in profits. In the
absence of both, same in
proportion to his capital
contribution.
Ex.
1. Agreed 0%, 60%, 40%
2. Not agreed 0%, in proportion
to their agreed profits.
3. Absence of both, 0%, in
proportion to his capital
contribution.
NOTE: Any stipulation which excludes one or more
partners (except industrial) from any share in profits
and losses is void. (1799)
DESIGNATION OF SHARE IN THE PROFITS AND
LOSSES BY A THIRD PERSON OR BY A PARTNER
2. If entrusted to one of the partners
Designation is void. Profits and losses
shall be divided among the partners as
if there was no stipulation thereon.
1. Managing partner in the Articles of
partnership
 May execute all acts despite the
opposition of his partners unless he
acts in bad faith.(1800)
Revocation
 With just or lawful cause - vote of the
partners owning the controlling
interest
 Without just or lawful cause – all the
partners including managing partner.
2. Managing partner AFTER constitution
 May execute all acts but in case of
opposition, the partners owning the
controlling interest may resort to
voting for his removal.
Revocation
 With or without just or lawful cause –
vote of the partners owning the
controlling interest.
3. 2 or more managing partners
 If there’s specification of duty:
Only the specified duty shall be performed
 If there’s no specification of duty:
a. May separately execute all acts
b. In case of opposition
- Majority of managing partners (per
head)
- If tie, decision of managing partner
owning the controlling interest
shall prevail. (1801)

1. If entrusted by the partners to a third

person
 May be impugned only when it is
manifestly inequitable. However, it can
no longer be impugned if a partner has
begun to execute it or three months
lapsed from the time he obtained
knowledge thereof. (1793)