CHAPTER 1 GENERAL PROVISIONS
the other associates. The right to
Article 1767: 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.
Concepts of Partnership:
1. An association of two or more persons to carry
on as co-owners a business for profit.
2. A legal relation based upon the expressed or
implied agreement of two or more competent
persons whereby they unite their property,
labor or skill in carrying on some lawful business
as principals for their joint profits.
3. A joint undertaking to share in the profit and
loss.
Profession: 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.
Characteristic Elements of Partnership
The contract of a partnership in the essence is a
contract of agency.
1. Consensual, perfected by mere consent, upon
the express or implied agreement of members.
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
for himself a benefit through the giving of
something.
5. Commutative, the undertaking of each of the
partner is considered as the equivalent of that
of the others.
6. Principal, it does not depend for tis existence or
validity upon some other contract.
7. Preparatory, entered into as a means to an end,
to engage in business 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.
a. Delectus Personae no one can become
a member of the partnership
association without the consent of all
choose with whom a person wishes to
associate or continue to associate
himself is the very foundation and
essence of partnership.
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.
a. Money Philippine currency.
b. Property Real or personal, tangible or
intangible. Credit such as promissory
note or other evidence of obligation or
even a mere goodwill may be
contributed as it is considered property.
c. Industry the work or services of the
party associated may be either personal
manual efforts or intellectual, and for
which he receives a share of profits of
the business.
4. The object must be lawful.
5. The purpose must be to obtain profits and to
divide the same among the parties. The parties
intend to share the profits in certain
proportions.
The sharing of the profits is prima facie evidence of a
partnership.
Article 1768: The partnership has a juridical
personality separate and distinct from that of each of
the partners, even in case of failure to comply with the
requirements of article 1772, 1st paragraph (n).
As a juridical person, a partnership may acquire
and possess property of all kinds, as well as incur
obligations and bring civil or criminal actions in
conformity with the laws and regulations of its org.
Article 1769: In determining whether a partnership
exists, these rules shall apply:
1. Except as provided by article 1825, persons who
are not partners as to each other are not
partners as to 3rd persons;
2. Co-ownership or co-possession does not of
itself establish a partnership, whether such co-
owners or co-possessors do or do not share any
profits made by the use of the property;
3. The sharing of the gross returns does not of
itself establish a partnership, whether or not
the persons sharing them have a joint or
common right or interest in any property from
which the returns are derived;
 4. The receipt by a person of a share of the profits
of a business is prima facie evidence that he is a
partner in the business, but no such inference
shall be drawn if such profits were received in
payment:
a. As a debt by installments or otherwise;
b. As wages of an employee or rent to a
landlord;
c. As an annuity to a widow or
representative of a deceased partner;
d. As interest on a loan, though the
amounts of payments vary with the
profits of the business;
e. As the consideration for the sale of a
goodwill of a business or other property
by installments or otherwise.
Article 1770: A partnership must have a lawful object
or purpose, and must be established for the common
benefit or interest of the partners.
When an unlawful partnership is dissolved by a
judicial decree, the profits shall be confiscated in favor
of the State, without prejudice to the provisions of the
Penal Code governing the confiscation of the
instruments and effects of a crime.
Effects of an unlawful partnership
1. Contract is void ab initio and the partnership
never existed in the eyes of law.
2. Profits shall be confiscated in favor of the
government.
3. Instruments or tools and proceeds of the crime
shall also be forfeited in favor of the
government.
4. Contributions of the partners shall not be
confiscated unless they fall under no.3.
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
instrument shall be necessary.
General Rule: No special form is required for
the validity or existence of the partnership.
Article 1772: Every contract of partnership having a
capital of P3000.00 or more, in money or property, shall
appear in a public instrument, which must be recorded
in SEC.
Failure to comply with the requirements of the
preceding paragraph shall not affect the liability of the
partnership and the members thereof to third persons.
Article 1773: A contract of partnership is void,
whenever immovable property is contributed thereto, if
an inventory of said property is not made, signed by the
parties and attached to the public instrument.
1. Contract must be in a public instrument.
2. An inventory of the property contributed must
be made, signed by 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 be conveyed only in the partnership
name.
Article 1775: Associations and societies, whose articles
are kept secret among the members and wherein
anyone of the members may contact in his name with
the third persons, shall have no juridical personality and
shall be governed by the provisions relating to co-
ownership.
Article 1776: As to its object, a partnership is either
universal or particular.
As regards the liability of the partners, a
partnership may be general or limited.
Classification of partnership.
As to the extent of its matter
1. Universal partnership
a. Of all present property property which
belonged to each of the partners at the
time of the constitution of the
partnership. Profits which they acquire
from all the property contributed.
a. Of profits comprises all that the
partners may acquire by their industry
or work during the existence of
partnership.
2. Particular partnership has for its objects:
a. Determinate things
b. Their use or fruits
c. Specific undertaking
d. Exercise of profession or vocation
Note: Persons who are prohibited from giving donations
or advantage to each other cannot enter into a
universal partnership. (Art. 1782)
As to liability of the partners
1. General partnership consists of general
partners who are liable pro rata & subsidiarily,
sometimes solidarily with their separate
property for partnership debts;
 2. Limited partnership -- one form by 2 or more
persons having as members one or more
general partners & one or more limited
partners, the latter not being personally liable
for the obligations of the partnership.
As to its duration
1. Partnership at will one in which no time is
specified & is not formed for a particular
undertaking or venture & which may be
terminated anytime by mutual agreement.
2. Partnership with a fixed term the form for
which the partnership is to exist is fixed or
agreed upon or one formed for a particular
undertaking.
As to legality of existence
1. De jure has complied with all the legal
requirements for its establishment
2. De facto has failed to comply with all the legal
requirements for its establishment.
As to representation to others
1. Ordinary or real one which actually exists
among the partners & also to third persons.
2. Ostensible or partnership by estoppel one in
which in reality is not partnership but is
considered only in relation to those who, by
their conduct or admission are precluded to
deny or disprove its existence.
As to its publicity
1. Secret existence of certain persons as partners
is not avowed or made known to the public.
2. Open or notorious known to public.
As to its purpose
1. Commercial or trading formed for the
transaction of the business
2. Professional or non-trading existence for
profession
Kinds of Partners
1. Capitalist contributes money or property to
the common fund.
2. Industrial contributes only his industry or
personal service
3. General one whose liability to 3rd persons
extends to his separate property
4. Limited or special partner liability to 3rd
persons is limited to his capital contributions.
5. Managing- one who manage the business.
6. Liquidating one who takes charge of the
winding up of partnership affairs upon
dissolution
7. Partners by estoppel one who is not really a
partner but is liable as partner for the
protection of innocent 3rd persons. Also known
as partner by implication or nominal partner.
8. Subpartner one who is not a member of the
partnership who contracts with a partner with
the reference to the latters share in partnership
9. Continuing partner one who continues the
business after it has been dissolved.
10. Surviving partner one who remains after a
partnership has been dissolved by the death of
any partner.
Partners that are subject to liability for all partnership
obligations.
11. Ostensible one who takes active part & known
to the public as partner in the business.
12. Secret one who takes active part in the
business but not known to be a partner by
outside parties.
13. Silent one who does not take any active part
in the business although he may be known to
be a partner.
14. Dormant one who does not take active part in
the business & is not known or held out as
partner.
15. Incoming person lately or about to be, taken
into a partnership as a member.
16. Retiring one withdrawn from the partnership
Article 1777: A universal partnership may refer to all
the present property or all profits.
Article 1778: A partnership of all present property is
that in which the 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 which they may acquire
therewith.
Article 1779: In a universal partnership of all present
property, the property which belong to each of the
partners at the time of the constitution of all
partnership, become the common property of all the
partnership, as well as all the profits which they may
acquire therewith.
A stipulation for the common enjoyment of any
other profits may also be made; but the property which
the partners may acquire subsequently by inheritance,
legacy, or donation cannot be included in such
stipulation, except the fruit thereof.

Article 1780: A universal partnership of profit
comprises all that the partner may acquire by their
industry or work during the existence of the
partnership.
Movable or immovable property which each of
the partners may possess at the time of the celebration
of the contract shall continue to pertain exclusively to
each, only the usufruct passing to the partnership.
Partners retain their ownership over their present &
future property. Pass to the partnership are the profits
or income and the usufruct gives a right to enjoy the
property of another with the obligation of preserving its
form & substance.
Article 1781: Articles of universal partnership, entered
into without specification of its nature, only constitute a
universal partnership of profits.
Article 1782: Persons who are prohibited from giving
each other any donation or advantage cannot enter into
a universal partnership.
For the reason that each of the partners virtually makes
a donation. Ff. donations shall be void:
1. Those made between persons who were guilty
of adultery or concubinage.
2. Those made between persons found guilty of
the same criminal offense.
3. Those made to a public officer or his wife,
descending & ascendants by reason of his office
Article 1783: A particular partnership has its object
determinate things, their use or fruits or a specific
undertaking or the exercise of a profession or vocation.
CHAPTER 2 OBLIGATIONS OF THE PARTNERS
Four Distinct Juridical Relations
1. Relations among the partners themselves
2. Relations of the partners with the partnership
3. Relations of the partnership with the 3rd
persons with whom it contracts
4. Relations of the partners with such 3rd persons
Article 1784: A partnership begins from the moment of
the execution of the contract, unless it is stipulated.
Article 1785: When a partnership for a fixed term or
particular undertaking is continued after the
termination of such term or particular undertaking
without any express agreement, the rights & duties of
the partners remain the same as they 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 of the
partnership affairs, is prima facie evidence of
continuation of the partnership.
Article 1786: Every partner is a debtor of the
partnership for whatever he may have promised to
contribute thereto.
He shall also be bound for warranty in case of
eviction with the regard to specific & determinate
things which he may have contributed to the
partnership, in the same cases & in the same manner as
the vendor is bound with the respect to the vendee. He
shall also be liable for the fruits thereof from the time
they should have been delivered, without the need of
nay demand.
Obligations with respect to contribution of property
1. To contribute at the beginning of the
partnership or at the stipulated time the
money, property or industry which he may have
promised to contribute.
2. To answer for eviction in case the partnership is
deprived of the determinate property
contribute
3. To answer to the partnership for the fruits of
the property the contribution of which he
delayed, from the date they should have been
contributed up to the time of actual delivery.
4. To preserve said property with the diligence of
a good father of a family pending delivery to the
partnership; and
5. To indemnify the partnership for any damage
caused to it retention of the same or by the
delay in its contribution.
Eviction shall take place whenever by a final
judgment based on a right prior to the sale or an act
imputable to the vendor, the vendee is deprived of
the whole or part of the thing purchased.
Article 1787: When the capital or a part thereof
which a partner is bound to contribute consists of
goods, their appraisal must be made in the manner
prescribed in the contract of partnership, and in the
absence of the stipulation, it shall be made by
experts chosen by the partners, and according to
 current prices, the subsequent changes thereof
being for the account of the partnership.
Appraisal of goods or property contributed
1. The appraisal of the value of the goods
contributed is necessary to determine how
much has been contributed by the partners.
2. In the case of immovable property, the
partnership made in the inventory of said
property.
Article 1788: A partner who has undertaken to
contribute a sum of money and fails to do so become a
debtor for the interest and damage from the time he
should have complied with his obligation.
The same rule applies to any amount he may
have taken from the partnership coffers, and his liability
shall begin from the time he converted the amount to
his own use.
Obligations with respect to the partnership capital
1. To contribute on the date due the amount he
has undertaken to contribute to the partnership
2. To reimburse any amount he may have taken
from the partnership coffers & converted to his
own use.
3. To pay the agreed or legal interest
4. To indemnify the partnership for the damages
caused to it by the delay in the contribution or
the conversion of any sum for his personal
benefit.
Article 1789: An industrial partner cannot engage in
business for himself, unless the partnership expressly
permits him to do so; and if he should do so, the
capitalist partners may either exclude him from the firm
or avail themselves of the benefits which he may have
to obtained in violation of this provision, with a right to
damage in either case.
Prohibitions against engaging in business
1. As regards an industrial partner the
prohibition is absolute & applies whether the
partner is to engage in the same business in
which the partnership is engaged.
2. As regards capitalist partners the prohibition
extends only to any operation which is of the
same kind of business in which the partnership
is engaged.
Article 1790: Unless there is a stipulation to the
contrary, the partners shall contribute equal shares to
the capital of the partnership.
Article 1791: If there is no agreement to the contrary,
in case of an imminent loss of the business of the
partnership, any partner who refuses to contribute an
additional share to the capital, except an industrial
partner, to save the venture, shall be obliged to sell his
interest to the other partners.
Requisites for application of rule
1. There is an imminent loss of the business
2. The majority of the capitalist partners are of the
opinion that an additional contribution to the
common fund would save the business
3. The capitalist partner refuses to contribute an
additional share to the capital
4. There is no agreement that even in case of an
imminent loss of the business the partners are
not obliged to contribute.
Article 1792: If a partner authorized to manage
collects a demandable sum, which was owed to him in
his own name, from a person who owed the partnership
another sum also demandable, the sum thus collected
shall be applied to the two credits in proportion to their
amounts, even though he may have given a receipt for
his own credit only; but should he have given it for the
account of the partnership credit, the amount shall be
fully applied to the latter.
Requisites for application to the rule
1. There exist at least 2 debts, one where the
collecting partner is creditor & the other, where
the partnership is the creditor
2. Both debts are demandable
3. The partner who collects is authorized to
manage & actually manages the partnership
Article 1793: A partner who has received, in whole or
in part, his share of a partnership credit, when the other
partners have not collected theirs, shall be obliged, if
the debtor should thereafter become insolvent, to bring
to the partnership capital what he received even though
he may have given receipt for his share only.
Requisites for application of rule
1. A partner has received, in whole or in part, his
share of the partnership credit
2. The other partners have not collected their
shares
3. The partnership debtor has become insolvent