PARTNERSHIP - Art. 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.

REQUISITES FOR EXISTENCE OF PARTNERSHIP

1. INTENTION to create a partnership
2. COMMON FUND obtained from contributions
3. JOINT INTERESTS in the PROFITS

KINDS OF PARTNERS
1. CAPITALIST - one who contributes money or property to the common fund

2. INDUSTRIAL - one who contributes only his industry or personal service

3. GENERAL - one whose liability to 3rd persons extends to his separate property

4. LIMITED - one whose liability to 3rd persons is limited to his capital contribution

5. MANAGING - one who manages the affairs or business of the partnership

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 a partner for the protection of
innocent 3rd persons

8. CONTINUING PARTNER - one who continues the business of a partnership after it has been dissolved by
reason of the admission of a new partner, retirement, death or expulsion of one of the partners

9. SURVIVING PARTNER - one who remains after a partnership has been dissolved by death of any partner

10. SUBPARTNER - one who is not a member of the partnership who contracts with a partner with reference
to the latter's share in the partnership

11. OSTENSIBLE - one who takes active part and known to the public as partner in the business

12. SECRET - one who takes active part in the business but is 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 and is not known or held out as a partner

WHEN A PARTNERSHIP BEGINS

(a) Generally, from the moment of the execution of the con- tract.
(b) Exception When there is a contrary stipulation.

RULES ON CAPACITY TO BECOME A PARTNER

1. a person capacitated to enter into contractual relations may become a partner
2. an UNEMANCIPATED MINOR CANNOT be a partner UNLESS his parent or guardian consents
3. a MARRIED WOMAN, cannot contribute conjugal funds as her contribution to the partnership UNLESS
she is permitted to do so by her husband OR UNLESS she is the administrator of the conjugal partnership,
in which the COURT must give its consent authority
4. a PARTNERSHIP being a juridical person by itself can form another partnership
5. a CORPORATION cannot become a partner on grounds of public policy; a partner shares not only in profits
but also in the losses of the firm
RULE: the partnership has a PERSONALITY SEPARATE and DISTINCT from that of each partner

3 IMPORTANT DUTIES OF EVERY PARTNER [C, D-F, W]

1. duty to CONTRIBUTE what had been promised

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 2. duty to DELIVER the FRUITS of what should have been delivered
3. duty to WARRANT

RIULES ON THE DUTY TO CONTRIBUTE

1. it must be made at the time the partnership is entered into UNLESS different period is stipulated
2. no demand is needed to put the partner in default
3. partner must exercise due diligence in preserving the property to be contributed before he actually
contributes the same
4. a partner who promises to contribute to the partnership becomes a promissory debtor of the partnership

OBLIGATIONS OF THE PARTNERS: RULE:

1. a PARTNERSHIP BEGINS from the moment of the EXECUTION of the CONTRACT
2. even if contributions have not yet been made the firm already exists, for partnership is a consensual
contract

SOME OBLIGATIONS OF A PARTNER

(a) To give his contribution
(b) Not to convert firm money or property for his own use.
(c) Not to engage in unfair competition with his own firm.
(d) To account for and hold as trustee, unauthorized personal profits.
(e) Pay for damages caused by his fault.
(f) Duty to credit to the firm, payment made by a debtor who owes him and the firm. (Art. 1792, Civil Code).
(g) To share with other partners, the share of the partnership credit which he has received from an insolvent
firm debtor.

PROPERTY RIGHTS OF PARTNERS [P, I, M]

1. rights in specific PARTNERSHIP PROPERTIES
2. INTERESTS in the PARTNERSHIP
3. right to PARTICIPATE in the MANAGEMENT

SOME RIGHTS OF A PARTNER

(a) property rights
1) rights in specific partnership property (example rights in a car contributed to the firm).
2) interest in the partnership (share in the profits and surplus).
3) right to participate in the management.
(b) right to associate with another person in his share.
(c) right to inspect and copy partnership books.
(d) right to demand a formal account.
(e) right to ask for the dissolution of the firm at the proper time.

RULE:
a partner is CO-OWNER with his partners of SPECIFIC PARTNERSHIP PROPERTY

RIGHTS of a PARTNER in SPECIFIC PARTNERSHIP PROPERTY

1. he has equal rights with his partners to POSSESS the property BUT only for
PARTNERSHIP PURPOSES; he may possess such property for other purposes
PROVIDED the other partners expressly or impliedly gives their CONSENT

2. he CANNOT ASSIGN his right to the property EXCEPT if all the other partners assign
their rights in the same property

3. his right to the property is NOT SUBJECT to ATTACHMENT or EXECUTION, EXCEPT

on a claim against partnership

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 4. his right to the property is NOT SUBJECT to LEGAL SUPPORT

if there is PARTNERSHIP DEBT, the specific property can be attached

CONSEQUENCES OF THE PARTNERSHIP BEING A JURIDICAL ENTITY

1. its juridical personality is SEPARATE and DISTINCT from that of each partner
2. the partnership CAN in GENERAL:
A) acquire and possess property of all kinds
B) incur obligations
C) bring civil and criminal actions
D) can be adjudged insolvent even if the individual members be each financially solvent
3. unless he is generally sued, a partner has no right to make a separate appearance in court, if the
partnership being sued is already represented

LIMITATIONS ON ALIEN PARTNERSHIP

1) if 60% capital is not owned by Filipinos
the firm cannot acquire by purchase or otherwise AGRICULTURAL Philippine lands
2) foreign partnership may lease lands provided the period does not exceed 99 years
3) foreign partnership may be MORTGAGEES of land
period of 5 years, renewable for another 5 years
they cannot purchase it in a foreclosure sale

PARTNERSHIP BY ESTOPPEL
IF 2 persons not partners represent themselves as partners to strangers, a partnership by estoppel results
WHEN 2 persons, who are partners, in connivance with a friend who is not a partner inform a stranger
that said friend is their partner, a partnership by estoppel also result to the end that the stranger should not
be prejudiced

RULE: if CAPITAL is P3,000 or more

REQUIRED:
1. PUBLIC INSTRUMENT
2. RECORDED S.E.C.

LIMITATIONS ON ALIEN PARTNERSHIP

1) if 60% capital is not owned by Filipinos
the firm cannot acquire by purchase or otherwise AGRICULTURAL Philippine lands
2) foreign partnership may lease lands provided the period does not exceed 99 years
3) foreign partnership may be MORTGAGEES of land
period of 5 years, renewable for another 5 years
they cannot purchase it in a foreclosure sale

LIMITATIONS ON ACQUISITION
1. AGRICULTURAL LANDS 1024 HECTARES
2. lease of public lands (GRAZING) 2000 HAS.

Classification General and Limited

(a) A general partnership is one where all the partners are general partners (that is, they are liable even with
respect to their individual properties, after the assets of the partnership have been exhausted).

(b) A limited partnership is one where at least one partner is a general partner and the others are limited
partners. (A limited partner is one whose liability is limited only up to the extent of his contribution.) (NOTE:
A partnership where all the partners are limited partners cannot exist as a limited partnership; it will even
be refused registration. If at all it continues, it will be a general partnership, and all the partners will be
general partners.)

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LIABILITY - Art. 1788. A partner who has undertaken to contribute a sum of money and fails to do so becomes a
debtor for the interest and damages 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 stroll begin
from the time he converted the amount to his own use.

RULES OF FAILURE TO VONTRIBUTE AND FOR CONVERSION - Cases covered by the Article:
(a) when money promised is not given on time;
(b) when partnership money is converted to the personal use of the partner.

COVERAGE OF LIABILITY - covers ALSO interest and damages:

(a) Interest at the agreed rate; if none, at the legal rate of 6% per annum.
(b) Damages that may be suffered by the partnership.

DEMAND IS NEEDED TO PUT A PARTNER IN DEFAULT

(a) In the case of the contribution, because time is of the essence, a partnership is formed precisely to make
use of the contributions, and this use should start from its for- mation, unless a different period has been
set; otherwise the firm is necessarily deprived of the benefits thereof. Thus, the injury is constant.

(b) In the case of conversion, because the firm is deprived of the benefits of the money, from the very moment
of conversion. [NOTE: Even if no actual injury results, the liability exists, because the article is absolute.