PARTNERSHIP developmnet of partnership --to permit combinations of, or capital and experience, and to secure economy by eliminating some

of the overhead costs of individual enterprises, the partnership plan of business association was developed ancient origin of partnership as a business organization --development often credited to the Romans --historically, however, the partnership as a business organization was used long before the Romans. 1. As early as 2300 BC, Hammurabi, king of Babylon 2. jewish law--shutolin the relative newness of the law of partnership --because disputes between merchants were considered and disposed of by special courts (because merchants moved more rapidly than the law and they required justice be more speedy and that it be in general accord with their customs) 1. Courts Staple 2. admiralty courts 3. court of piepoudre laws on partnership 1. law of merchants 2. english law of partnership -Lord Mansfield sought to establish a common law for commercial matters -1778, Fox vs Hanbury dealt with the relative rights of partners as well as rights of partnership and separate creditors so far as partnership property was concerned -1794, William Watson wrote a text on the subject of partnership -1890, partnership act american uniform acts 1. uniform partnership act, October 1914 2. uniform limited partnership act

the

modern partnership law may be said to contain a combination of principles and concepts developed from 3 sources: 1. roman law 2. law of merchants and equity 3. common law courts governing law in our jurisdiction 1. code of commerce--commercial or mercantile partnerships 2. spanish civil code--non-commerical or civil partnerships 3. civil code(august 30, 1950)--expressly repealed code of commerce provisions relating to partnerships; there is no more distinction between commercial and civil partnerships sources of our law on partnership 1. old civil code 2. american uniform partnership act 3. uniform limited partnership act 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

definition partnership--a contract of two or more competent persons to place their money, effects, labor and skill or some or all of them, in lawful commerce or business and to divide the profits and bear the losses in certain proportions --an association of 2 or more persons to carry on as co-owners of a business for profit --is a legal concept, but the determination of the existence of a partnership may involve inferences drawn from an analysis of all the circumstances attending its creation and operation civil law concept and American concept distinguished 1. basis of concept civil code--a contract american--a relation 2. possession of separate personality civil code--partnership has juridical personality of its own; entity theory american and english law--does not recognize such separate juridical personality; aggregate theory Two or more persons may also form a partnership for the exercise of a profession --relates to the exercise of a profession; the latter being 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. --it is the individual partners, and not the partnership, who engage in the practice of a profession and are responsible for their own acts as such --the law does not allow a practice of profession as a corporate entity characteristic elements of partnership 1. consensual--perfected by mere consent 2. nominate--has a special name or designation in law 3. bilateral--entered into by 2 or more persons and the rights and obligations arising therefrom are always reciprocal 4. onerous--each of the parties aspires to procure from himself a benefit through the giving of something 5. commutative--undertaking of each of the partners is considered as the equivalent of that of the others 6. principal--it does not depend for its existence or validity upon some other contracts 7. preparatory--it is entered into as a means to an end, ie. to engage in business or specific venture for the realization of profits with the view of dividing them among the contracting parties 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 primary purpose must be to obtain profits and to divide the same among the parties --it is also required that the articles of partnership must not be kept secret among the members; otherwise, the assoc shall have no legal personality and shall be governed by the provisions of the CC relating to co-ownership (art 1775) 1. there must be a valid contract --express or implied contract; no such thing as contract created by operation of law --partnership relation is the result of the contract --evidenced by: 1. the terms of the contract 2. the acts and declarations of the parties therefore, election to be a member is sufficient, no necessity of signing the articles of partnership --all the essentials of a valid contract must be present; these must, therefore, concur:

1. consent and capacity of the contracting parties 2. object which is the subject matter of the contract 3. cause which is established woodhouse vs halili may a person be compelled against his will to carry out the agreement or execute the partnership papers? --no. it falls under what commentators call a very personal act (acto personalismo) of which courts may not compel compliance, as it is considered an act of violence to do so. --partnership relation fiduciary in nature --among the 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 --application of the principles of estoppel: a partnership liability may be imposed upon a person under the principles of estoppel where he holds himself out, as a partner in an enterprise; no actual or legal partnership relation but merely a partnership liability imposed by law in favor of 3rd persons 2. the parties must have legal capacity to enter into the contract individuals--any person may be a partner who is capable of entering into contractual relations --any person who cannot give consent cannot enter into a contract of partnership; thus, the ff cannot enter: 1. unemancipated minors 2. insane or demented persons 3. deaf-mutes who do not know how to write 4. persons who are suffering from civil interdiction 5. incompetents who are under guardianship partnerships--no prohibition against a partnership being a partner in another partnership; all the members of the constituent partnerships will be individually liable to the creditors of the new partnership corporations--GR:unless authorized by statute or by its charter, a corporation is without capacity or power to enter into a contract of partnership(reason: public policy) exceptions: 1. may enter into joint venture partnership with another where the nature of the venture is in line with the business authorized by its charter 2. partnership agreement provides that the two partners will manage the partnership so that the management of corporate interest is not surrendered, the partnership may be allowed 3. where the entry of the foreign corporation as a limited partner in a limited partnership is merely for investment purposes and it shall not take part in the management and control of the business operation of the partnership--deemed not doing business in the Philippines 3. there must be a mutual contribution of money, property, or industry to a common fund --partners must have a proprietary interest in the business or undertaking --money: legal tender --property: real or personal, corporeal or incorporeal; credit(ex PN) or even a mere goodwill may be contributed --industry:active cooperation, the work of party associated, which may be either personal manual efforts or intellectual and for which he receives a share in the profits of the business (not salary) evangelista vs abad-santos --the law does not specify the kind of industry that a partner may contribute estanislao vs CA --in partnership, proof is necessary that there by contribution of money, property or industry to a common fund with the intention of dividing the income or profits obtained therefrom 4. the object must be lawful

--should not be contrary to law, morals, good customs, public order or public policy, otherwise, void ab initio --partnership may be organized for any purpose except that it may not engage in an enterprise for which the law requires a specific form of business organization, such as banking(under General Banking Law, only stock corporations may undertake) --examples of unlawful object: 1. to create illegal monopolies or combinations in restraint of trade 2. to carry on gambling (arbes vs polistico) 3. to engage in smuggling 4. ro lease furnished apartments to prostitutes 5. to prevent competition in bidding for government contracts 6. to control the price of a commodity in the interest of its members 5. the primary purpose must be to obtain profits and to divide the same among the parties --to obtain pecuniary benefit is the very reason of the business --need only be the principal, not exclusive aim --it is necessary that there be an intention to divide the profits among the members, although not necessarily in equal shares --sharing of profits merely presumptive and not conclusive evidence of partnership --corollary is the sharing of losses; not necessary for the parties to agree upon a system of sharing losses, for the obligation is implied from the partnership relation

CHAPTER 2 - OBLIGATIONS OF THE PARTNERS Relations created by a contract of partnership 1. relations among the partners themselves 2. relations of the partners with the partnership 3. relations of the partnership with third persons with whom it contracts 4. relations of the partners with such third persons Section 1--obligations of the partners among themselves rights and obligations, in general, of partners inter se 1. partnership relationship essentially one of mutual trust and confidence --> applies to general partnership only 2. relationship in a limited partnership does not involve the element of trust and confidence 2. fiduciary relationship remains until partnership terminated Art 1784- A partnership begins from the moemnt of the execution of the contract, unless it is otherwise stipulated a partnership is a consencual contract, hence, it exists from the moment of the celebration of the contract by the partners in general partnership (not in limited partnership), contract of partnership may be oral. -except: those partnerships by the terms of the agreement are to be formed by the parties for more than 1 year from the making thereof; falls under the statute of frauds the partners may fix in their contract any term, therefore, may be for lifetime (unlike corporations= 50 years, extendible from another 50) general rule: what is necessary for the existence of a contract of partnership is that the essential requisites of a contract of partnership are present (consent, object, consideration) even when the partners have not yet actually begun the carrying on of its business or given their contributions or given their contributions, etc, for these pertain to the accidental and not to the essential parts of the contract exception: 1. future partnership: the partners may stipulate some other date for the commencement of the

partnership, or on the happening of sime future contingency 2. agreement to create partnership where a partnership relation results, the law itself fixes the incidents and consequences of this relation, if the parties fail to do so this article must be read in relation to articles 1771(contract in any form) and 1773 (required inventory for immovables) Articles 1785--When a partnership for a fixed term or particular untertaking is continued after the termination of such term or particular undertaking without any express agreement , the rights and duties of the partners remain the same as the were at such termination, so far as is consistent with a partnership at will. A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation od the partnership affairs, is prima facie evidence of a continuation of the partnership.