BUSINESS LAW and TAXATION

PROGRAM
COLLEGE OF BUSINESS
ADMINISTRATION
SILLIMAN UNIVERSITY

THE LAW ON
PARTNERSHIPS
Articles
1767 to 1867 of the Civil Code
By: ATTY. DON ADA DUPIO

GENERAL PROVISIONS
Articles 1767 to 1783

CONCEPT OF PARTNERSHIP
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.

PARTNERSHIP
FOR THE
EXERCISE OF A
PROFESSION
Doctors

Accountants

Lawyers

CHARACTERISTIC ELEMENTS OF
PARTNERSHIP
1. Consensual
2. Nominate
3. Bilateral
4. Onerous
5. Commutative
6. Principal
7. Preparatory

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 purpose or primary purpose must be TO OBTAIN

PROFITS and to divide the same among the parties.

QUESTION: 5 POINTS
Does the sharing of the profits also

carries the duty to contribute in the

losses?

Article 1768.

The partnership has a juridical personality separate and

distinctfromthatofeachofthepartners,evenincaseof
failure to comply with the requirements of article 1772,
firstparagraph.
Article 1772.

Everycontractofpartnershiphavingacapitalofthreethousandpesos
ormore,inmoneyorproperty,shallappearinapublicinstrument,
whichmustberecordedintheOfficeoftheSecuritiesandExchange
Commission.

Article 1769.

Indeterminingwhetherapartnershipexists,theserulesshallapply:

(1)Exceptasprovidedbyarticle1825,personswhoarenotpartnersastoeachotherarenotpartnersastothird
persons;

(2)Co-ownershiporco-possessiondoesnotofitselfestablishapartnership,whethersuch-co-ownersorcopossessorsdoordonotshareanyprofitsmadebytheuseoftheproperty;

(3)Thesharingofgrossreturnsdoesnotofitselfestablishapartnership,whetherornotthepersonssharingthem
haveajointorcommonrightorinterestinanypropertyfromwhichthereturnsarederived;

(4)Thereceiptbyapersonofashareoftheprofitsofabusinessisprimafacieevidencethatheisapartnerinthe
business,butnosuchinferenceshallbedrawnifsuchprofitswerereceivedinpayment:

(a)Asadebtbyinstallmentsorotherwise;

(b)Aswagesofanemployeeorrenttoalandlord;

(c)Asanannuitytoawidoworrepresentativeofadeceasedpartner;

(d)Asinterestonaloan,thoughtheamountofpaymentvarywiththeprofitsofthebusiness;

(e)Astheconsiderationforthesaleofagoodwillofabusinessorotherpropertybyinstallmentsorotherwise.

TEST AND INCIDENTS OF PARTNERSHIP

1. Terms of the contract as agreed by the parties.
2. Incidents of a partnership.
a. Share in profits and losses;
b. Rights in the management and conduct of business;
c. Partner as an agent;
d. Liabilities for debts;
e. Fiduciary relations;

Article 1770.

A partnership must have a lawful object or purpose, and must be

establishedforthecommonbenefitorinterestofthepartners.

When an unlawful partnership is dissolved by a judicial decree, the

profitsshallbeconfiscatedinfavoroftheState,withoutprejudiceto
the provisions of the Penal Code governing the confiscation of the
instrumentsandeffectsofacrime.

Unlawfulobject-voidabinitio

Article 1771.

A partnership may be constituted in any form,

except where immovable property or real rights
are contributed thereto, in which case a public
instrumentshallbenecessary.

Article 1773.

A contract of partnership is void, whenever

immovable property is contributed thereto, if an
inventoryofsaidpropertyisnotmade,signedby
the parties, and attached to the public
instrument.

Article 1774.

Any immovable property or an interest therein may be

acquired in the partnership name. Title so acquired can
beconveyedonlyinthepartnershipname.

Article 1775.

Associations and societies, whose articles are kept secret among the
members,andwhereinanyoneofthemembersmaycontractinhisown
namewiththirdpersons,shallhavenojuridicalpersonality,andshallbe
governedbytheprovisionsrelatingtoco-ownership.

Article 1776.

Astoitsobject,apartnershipiseitheruniversalorparticular.

As regards the liability of the partners, a partnership may be general or

limited.

CLASSIFICATION OF PARTNERSHIP
1. As to the extent of the subject matter.
a. Universal partnership
b. Particular partnership
2. As to liability of the partners.
a. General
b. Limited
3. As to its duration.
a. At will
b. With a fixed term

4. As to the legality of its existence.

a. De jure
b. De facto
5. As to representation to others.
a. Ordinary or real
b. Ostensible or estoppel
6. As to publicity.
a. Secret
b. Open or notorious
7. As to purpose.
a. Commercial or trading
b. Professional or non-trading

ILLUSTRATION:

WE ARE PARTNERS

NOT PARTNERS

CONSENTED

KNEW NOTHING AT ALL

As against JEJO and GRACE,
the
3
constitute
a
partnership by estoppel.

EXTENDED CREDIT

As against MAR, there is no

partnership
and
RUDY
cannot hold him liable as
partner.

KINDS OF PARTNERS
1. Capitalist

5. Managing

2. Industrial

6. Liquidating

3. General

7. Partner by

4. Limited

estoppel
8. Sub-partner

OTHER KINDS OF PARTNERS

1. Ostensible
2. Secret
3. Silent
4. Dormant
5. Incoming
6. Retiring

Article 1777.

Auniversalpartnershipmayrefertoallthepresentproperty
ortoalltheprofits.

Article 1778.

Apartnershipofallpresentpropertyisthatinwhichthe
partnerscontributeallthepropertywhichactuallybelongsto
themtoacommonfund,withtheintentionofdividingthe
sameamongthemselves,aswellasalltheprofitswhichthey
mayacquiretherewith.

Article 1779.

Inauniversalpartnershipofallpresentproperty,thepropertywhich
belongedtoeachofthepartnersatthetimeoftheconstitutionofthe
partnership,becomesthecommonpropertyofallthepartners,aswellas
alltheprofitswhichtheymayacquiretherewith.

Astipulationforthecommonenjoymentofanyotherprofitsmayalso
bemade;butthepropertywhichthepartnersmayacquiresubsequently
byinheritance,legacy,ordonationcannotbeincludedinsuchstipulation,
exceptthefruitsthereof.

UNIVERSAL PARTNERSHIP OF ALL PRESENT

PROPERTY
All the property actually belonging to the partners are
CONTRIBUTED and said properties become COMMON
PROPERTY (owned by all the
partners and by the
partnership
As a rule aside from the contributed properties only the
profits of said contributed COMMON PROPERTY (not
other profits)

Can future properties be contributed to the partnership?

REASONS WHY FUTURE PROPERTIES CANNOT BE MADE:

1. contracts regarding successional rights cannot be

made.
2. a partnership demands that the contributed things

be determinate, known and certain.

3. universal partnership of all present properties really

implies a donation, and it is well known that

generally future property cannot be donated.

Article 1780.

Auniversalpartnershipofprofitscomprisesallthatthepartners
mayacquirebytheirindustryorworkduringtheexistenceofthe
partnership.

Movableorimmovablepropertywhicheachofthepartnersmay
possess at the time of the celebration of the contract shall
continue to pertain exclusively to each, only the usufruct passing
tothepartnership.

Article 1781.

Articles of universal partnership, entered into without

specification of its nature, only constitute a universal
partnershipofprofits.

Article 1782.

Persons who are prohibited from giving each other any

donation or advantage cannot enter into universal
partnership.

PERSONS WHO TOGETHER CANNOT FORM A

PARTNERSHIP
1. husband and wife (spouses however can enter into

particular partnership and be members thereof)

2. those guilty of the crime of concubinage and adultery
3. those guilty of the same criminal offense, if the

partnership was entered into in consideration of the

same.
A partnership violating this article is null and void. No
legal personality is acquired.

Article 1783.

A particular partnership has for its object determinate

things, their use or fruits, or a specific undertaking, or the
exerciseofaprofessionorvocation.
OBJECTOFAPARTICULARPARTNERSHIP

1. determinatethings;
2. theiruseorfruits;
3. specificundertaking;
4. exerciseofprofessionorvocation;

LIMITED
PARTNERSHIP
married

Limited Partner Limited Partner

Selling and marketing of electronic
appliances.
Sold his share.

Issue: Was the Partnership dissolved after the

marriage of GLORIA AND NOYNOY and the
subsequent sale to them by MANNY of his share to
them?