1 JF GALLENTES NOTES ; SSC-R; AY 22-23

Title X: PARTNERSHIP
Partnerships contemplated herein are those formed for private interest or purpose.

4. Onerous
- Because each of the parties aspires
Partnership Defined to procure himself a benefit through
the giving of something.
ART 1767. BY THE CONTRACT OF 5. Commutative
PARTNERSHIP TWO OR MORE PERSONS BIND - Because the undertaking of each of
partners is considered as the
THEMSELVES TO CONTRIBUTE MONEY,
equivalent of that of the others.
PROPERTY, OR INDUSTRY TO A COMMON
6. Principal
FUND, WITH THE INTENTION OF DIVING THE
- Because it does not depend for its
PROFIT AMONG THEMSELVES. existence or validity upon some
TWO OR MORE PERSONS MAY ALSO FORM - other contracts (as opposed to
A PARTNERSHIP FOR THE EXERCISE OF A accessory contract)
PROFESSION 7. Preparatory
- Because it is entered into as a means
NOTES:
to an end (i.e. to engage in business
 A partnership contract, in its essence, is a
or specific venture for the realization
contract of agency. (see Art. 1818)
of profits with the view of dividing
them among the contracting parties.
 Elements of Partnership:
 Essential Features of Partnership:
1. An agreement to contribute money,
(1) There must be a valid contract; (2) The
property, or industry to a common fund;
parties (two or more persons) must have
and
legal capacity to enter into the contract;
2. Intent to divide the profits among
(3) There must be a mutual contribution
themselves.
of money, property, or industry to a
common fund;
 Requisites of Partnership:
(4) The object must be lawful; and (5) The
1. Intention to create a partnership;
primary purpose must be to obtain profits
2. Common fund obtained from
and to divide the same among the parties
contributions; and
3. Joint interest in diving the profits.
1. There must be a valid contract
partnership relation is fundamentally
 Characteristics of Partnership:
contractual.
1. Consensual
- Note: there is no such thing as
- because it is perfected by mere
partnership created by law or by
consent, that is, upon the express or
operation or implication of law alone
implied agreement of two or more
(precisely because partnership is
persons;
created by trust)
2. Nominate
- Note: The partnership relation s not
- Because it has a special name or
the contract itself, but the result of
designation in our law
the contract.
- Example: Partnership for Growth
a. Form:
Program (Its primary objective is to
 May be oral or written,
address the binding constraints to
express or implied from
economic growth and development
the acts and declarations
in the Philippines; Ph and US)
of the parties subject to
3. Bilateral
the provisions of Art 1771
- Because it is entered into by two or
to 1773 and to the stature
more persons and the rights and
of frauds.
obligations arising therefrom are
always reciprocal.
- Example: Philippine-Japan Economic
Partnership
2 JF GALLENTES NOTES ; SSC-R; AY 22-23
Q: How is a partnership formed?
A: It is created by agreement of the parties
(Consensual)’
Q: When is a partnership required to be in writing
(for purpose of enforceability)?
A: GR: No special from is needed for its
validity or existence (Art 1771, NCC).
EXCPTNS:
a. Art 1403 – When, by its terms, it
is not to be performed within a
year from the making thereof.
b. Art 1771 – When an immovable
property or real rights are
contributed thereto, it must be in
writing and public instrument. An
inventory of the contributed
property must also be made
which is attached to the public
instrument.
c. Art 1772 – when the capital is
P3,000 or more, in money or
property, it must be in a public
instrument which must be
recorded in the Securities and
Exchange Commission.
d. Limited Partnerships- must be
registered as such with SEC,
otherwise it is not valid as a
limited partnership but may still
be considered as a general
partnership with juridical
personality.
b. Articles of Partnership
 Though partnership maybe
informally created, it is
customary to embody
“articles of partnership”
(states the name, nature
or purpose and location of
the firm, and defining,
among others, the powers,
rights, duties, and liabilities
of the partners among
themselves, their
contributions, the manner
by which the profits and
losses are to be shared,
and the procedure for
dissolving the partnership)
c. Requisites:
 Since it’s fundamentally
contractual, the requisites
of a valid contract must be
present namely:
1. Consent and
capacity of the
contracting parties;
2. Object which is the
subject matter of
the contract; and
3. Cause which is
established (the
prestation or
promise of
partners to
contribute money,
property, or
industry to a
common fund)
Partnership relation is fiduciary in nature.
- It is based on trust and confidence;
Deletus personae – may be literally translated to
“choice of person or choice of the persons.”;
- a partner has a right to choose with
whom he wishes to associate himself.
Only true in the case of a general
partner, but not as regards a limited
partner.
- Unless otherwise provided in the
partnership agreement, no one can
become a member of the
partnership association without the
consent of the other associates.
- Any one of the partners may, at his
sole pleasure, dictate a dissolution of
the partnership at will provided that
he acts in good faith otherwise it can
result in liability for damages
(presence of bad faith cannot
prevent the dissolution)
A partnership liability may be imposed
upon a person under the principles of
estoppel where he holds himself out, or
permits himself to be held out, as a
partner in an enterprise.
Partnership by estoppel – where persons by
their acts, consent, or representations have
misled third persons or parties into believing that
the former are partners in a non-existing
partnership, such persons become subject to
liabilities of partners to all who, in good faith,
deal with them in their apparent relations (Art
1825)
o (Estoppel is a bar which precludes a
person from denying or asserting
anything to the contrary of that
which has, in contemplation of law,
been established as the truth, either
by the acts of judicial or legislative
officers or by his own deed or
representation, either expressed or
implied.)
3 JF GALLENTES NOTES ; SSC-R; AY 22-23
- A partnership may be created without any
definite intention to create it. It is the
substance and no the name of the
arrangement, which determines the legal
relationship, although the designation adopted
by the partners should be considered as
indicative of their intention (68 C.J.S.. 415-417).
2. Legal Capacity of the parties to enter into
the contract
Individuals:
- GR: any person may be a partner who
is capable of entering into
contractual relations.
- EXC: (therefore)
a. Unemancipated minors; (have
not attained the age of majority
which is 18 y/o; unmarried
minors)
b. Insane or demented persons;
c. Deaf-mutes who do not know
how to write;
d. Persons who are suffering from
civil interdiction; and
e. Incompetents who are under
guardianship
Partnership
- Partnership can enter into a contract
of partnership with another
partnership
Corporations
- GR: Corporations does not have a
capacity to enter into a contract of
partnership
o Reason: since in a partnership,
the corporation would be bound
by the act of persons who are not
its duly appointed and authorized
agents and officers, inconsistent
with the policy of the law that the
corporation shall manage its own
affairs separately and exclusively
(13 Am. Jur. par. 823; see Sec. 23,
B.P. Blg. 68.)
- EXPTNS: unless authorized by statute or
by its charter (The Uniform Partnership
Act expressly allows a corporation to
become partners)
o Corporation may enter into joint
venture
o Corporation may enter into a
contract of partnership where
the partnership agreement
provides that the two partners
will manage the partnership so
that the management of
corporate interest is not
surrendered.
o Foreign corporation can only
enter into a limited partnership.
Its purpose is merely for
investment and shall not take
part in the management and
control of the business operation
of the partnership. (not deemed
“doing business” in the Ph and
therefore not required to obtain
a license).
3. Contribution of money, property, or
industry
Money – legal tender
o Checks, drafts, promissory notes
payable to order, and other
mercantile documents are not
money but only representatives of
money thus there is no
contribution unless they have been
cashed.
o Borrowed or loaned money may be
contributed.
Property – may be real or personal.
o credit such as promissory note or
other evidence of obligation or
even mere goodwill may be
contributed, as they are considered
property.
Industry - active cooperation, the
work of the party associated (either
manual or intellectual efforts).
4. Legality of the object
- must be lawful otherwise no
partnership can arise as the contract
is considered inexistent and void ab
initio
- The object is unlawful when it is
contrary to law, morals, good
customs, public order, or public
policy. Examples:
o Partnership to create
monopolies or
combinations in restraint
of trade (Art 185, RPC);
o To carry on gambling;
o to engage in smuggling; etc
5. Purpose to obtain profit (cause)
- a partnership is formed to carry on a
business.
6. Sharing of Profits
- The essence of a partnership is to
gain profits.
- “there must be a joint interest in the
profits” although not necessarily
equal shares.
4 JF GALLENTES NOTES ; SSC-R; AY 22-23

- Note: A stipulation which excludes Art 1772 (3k; public Arts 1773 & 1775
one or more partners form any instrument; Securities and (immovable property
participation in the profits (or losses) Exchange Commission) and secret association/
is Void (art 1799). societies)
Failure to comply still creates In 1773, it does not
a juridical personality create a juridical
Q: How are profits distributed? (But any of the partners is personality since the
A: a. the partners share in the profits granted the right by the law contract itself is void
according to their agreement. (see Arts. 1357, 1358.) to (having no inventory of
b. In the absence of such: compel each other to execute the immovable
the contract in a public property.
i. Capitalist partner – in
instrument. Of course, this In 1175, no juridical
proportion to his right cannot be availed of if personality as well.
contribution. the partnership is void under
ii. Industrial partner – what is Article 1773
just and equitable under the
circumstances. Rules in determining existence of a partnership
7. Sharing of losses
- Partners share the losses. The
obligation is implied from the ART 1769. IN DETERMINING WHETHER
partnership relation. But, if only the PARTNERSHIP EXIST, THESE RULES SHALL
share of each partner in the profits APPLY:
has been agreed upon, the share of 1. EXCEPT AS PROVIDED BY
each in the losses shall be in the ARTICLE 1825, PERSONS WHO
same proportion (art. 1797) ARE NOT PARTNERS AS TO EACH
OTHER ARE NOT PARTNERS AS
Q: How are losses distributed? TO THIRD PERSONS;
A: a. the partners share in the losses 2. CO-OWNERSHIP OR CO-
according to their agreement. POSSESSION DOES NOT OF
b. In the absence of such: ITSLEF CREATE PARTNERSHIP,
i. according to their WHETHER SUCH SO-OWNER OR
agreement as to profits; CO-POSSESOR DO OR DO NOT
ii. in the absence of profit SHARE ANY PROFITS MADE BY
agreement, in proportion to THE USE OF THE PROPERTY;
his capital contribution. 3. THE SHARING OF GROSS
RETURNS DOES NOT OF ITSELF
Juridical Personality ESTABLISH PARTNERSHIP,
WHETHER OR NOT THE PERSONS
SHARING THEM HAVE A JOINT
ART 1768. THE PARTNERSHIP HAS A OR COMMON INTEREST IN ANY
JURIDICAL PERSONALITY SEPARATE AND PROPERTY OF WHICH THE
DISTINCT FROM THAT OF EACH OF THE RETURNS ARE DERIVED;
PARTNERS EVEN IN CASE OF FAILURE TO 4. THE RECEIPT BY A PERSON OF A
COMPLY WITH THE REQUIREMENTS OF SHARE OF THE PROFITS OF A
ARTICLE 1772, FIRST PARAGRAPH. BUSINESS IS PRIMA FACIE
EVIDENCE THAT HE IS A
PARTNER IN THE BUSINESS, BUT
NOTES: NO SUCH INFERENCE SHALL BE
 A partnership is an entity separate from its DRAWN IF SUCH PROFITS WERE
aggregate individual partners. RECEIVED IN PAYMENT:
 As an independent juridical person, it may a. AS A DEBT BY
enter into contracts, acquire and possess INSTALLMENT OR
property of all kinds in its name, as well as incur OTHERWISE;
obligations and bring civil or criminal actions in b. AS WASGES OF
conformity with the laws and regulations of its AN EMPLOYEE
organization (art 46). OR RENT TO A
 Effects to the juridical personality of a LANDLORD;
partnership upon failure to comply with Art
1772 vs failure to comply with Arts 1773 and
1775:
5 JF GALLENTES NOTES ; SSC-R; AY 22-23

c. AS AN ANNUITY PARTNERSHIP CO-OWNERSHIP/ CO-

TO A WIDOW OR POSSESSION
REPRESENTATIVE Creation
OF A DECEASED Is always created by a Generally created by law and
PARTNER; contract, either expressly may exist even without a
d. AS INTEREST ON or impliedly. contract (Art 1767)
A LOAN, Juridical personality
Has a juridical personality none
THOUGH THE
separate and distinct from
AMOUNT OF that of each partner (Art
PAYMENT VARY 1768)
WITH THE Purpose
PROFITS OF THE Realization of profit (art Common enjoyment of a
BUSINESS; 1767) thing or right( Art 486) which
e. AS A does not necessarily involve
CONSIDERATION the sharing of profits.
FOR THE SALE OF Duration
A GOODWILL OF No limitation (Arts 1767, An agreement to keep the
A BUSINESS OR 1785) thing undivided for more
than ten (10) years is not
OTHER
allowed (Art 494)
PROPERTY BY Disposal of interests
INSTALLMENTS A partner may not dispose May freely dispose of his
OR OTHERWISE. of his individual interest in individual interest.
the partnership (Art 1812)
so as to make the assignee
Notes: a partner unless agreed
 In case of doubt (terms are uncertain or no upon by all of the partners.
formal expression of the relations of Power to act with third persons
partners), Article 1779 shall apply. In absence of any A co-owner cannot
 In sub-paragraphs a – e, the profits in the stipulation to the contrary represent the co-ownership,
business are not share as profits of partners, (Art 1803), a partner may hence a judgement secured
but in some other purpose. bind the partnership. against only one of the co-
owners will not bind the
1. Persons are not partners as to each other are other co-owners.
not partners as to third persons Effect of Death
- GR: if they are not partners Death of a partner results Death of co-owner does not
between themselves, they cannot in the dissolution of the necessarily dissolve the co-
be partners to third persons. partnership. ownership.
- EXCPTN: Partnership by Estoppel
- Example:
- Illustrative case:

If A and B are not partners as to each other, Heirs, after partition of common properties, sold the
neither will they be partners with respect to C, a same with the intent of making profit and dividing the
third person. But if A, with the consent of B, same proportional to their respective share of the
represents to C that they are partners, then A inheritance.
and B will be considered partners as to C even if
they are not really partners Facts: A and B are co-owners of inherited properties.
They agreed to use the said common properties and the
income derived therefrom as a common fund with the
2. Co-ownership and co-possession intention to produce pro-fits for them in proportion to
- There is co-ownership (or co- their respective shares in the inheritance as determined
possession) whenever the ownership
in a project of partition.
(or co-possession) of an undivided
thing or right belongs to different Issue: What is the effect of such agreement on the
persons. existing co-ownership?
- PARTNERSHIP VS CO-OWNERSHIP/
CO-POSSESSION Held: The co-ownership is automatically converted into
a partnership. From the moment of partition, A and B, as
heirs, are entitled already to their respective definite
6 JF GALLENTES NOTES ; SSC-R; AY 22-23
shares of the estate and the income thereof, for each of
them to manage and dispose of as exclusively his own
without the intervention of the other heirs, and,
accordingly, he becomes liable individually for all taxes in
connection therewith. If, after such partition, an heir
allows his shares to be held in common with his co-heirs
under a single management to be used with the intent of
making profit thereby in proportion to his share, there
can be no doubt that, even if no document doubt that,
even if no document or instrument were executed for the
purpose, for tax purposes, at least, an unregistered17
partnership is formed. (Ona vs. Commissioner of Internal
Revenue, 45 SCRA 74 [1972].)
Two persons contributed money to buy a sweepstakes
ticket with the intention to divide the prize which they
may win.
Facts: A, B, etc. put up money to buy a sweepstakes
ticket for the sole purpose of dividing equally the prize
which they may win as they did in fact the amount of
P50,000.00. If a partnership had been formed by A, B,
etc. then it was liable for income tax pursuant to law then
in force; if merely a community of property, then such co-
ownership was not liable, not having a legal personality
of its own.
Issue: Did A, B, etc. form a partnership or merely a
community of property?
Held: A, B, etc. formed a partnership. The partnership
was not only formed, but upon the organization thereof
and the winning of the prize, it appeared that B
personally appeared in the office of the Philippine Charity
Sweepstakes, in his capacity as co-partner, and as such
collected the prize. All these circumstances repel the idea
that A, B, etc. organized and formed a community of
property only. (Gatchalian vs. Collector of Internal
Revenue, 67 Phil. 666 [1939].)
Children sold lots given by their father and divided the
proceeds.
Facts: O, after completing payment to S on two lots,
transferred his rights to his four children, C, etc. to enable
them to build their residences. S sold the two lots for
P178,708.12 to C, etc. who resold them more than a year
later to T
for P313,050, treating the profit of P134,341.88 as
capital gains and paying an income tax on one-half of
their respective shares (or P33,584) of the profit.
Issue: Did C, etc. form a partnership under Article 1767?
Held: No. (1) Division of profits was merely incidental.
— They were co-owners pure and simple. To consider
them as partners would obliterate the distinction
between a co-ownership and a partnership. C, etc. were
not engaged in any joint venture by reason of that
isolated transaction.
The original purpose was to divide the lots for
residential purposes. If later on they found it not feasible
to do so because of the high cost of construction, then
they had no choice but to resell the same to dissolve the
co-ownership. The division of the profits was merely
incidental to the dissolution of the co-ownership which
was, in the nature of things, a temporary state. It has to
be terminated sooner or later.
(3) There must be an unmistakable intention to form a
partnership. — Article 1769(3) provides that “the
sharing of 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.” There must be an
unmistakable intention to form a partnership or joint
venture.
3. Sharing of Gross Returns
-
- The sharing of gross returns alone does not
indicate that a partnership exists (gross
means before anything else is deducted i.e.
labilities) because the partners will only share
the profits only after they have satisfied all
the liabilities of the partnership.
4. Receipt of share in the profits
- The sharing of profits and losses is a prima facie
evidence of an intention to form a partnership
but not a conclusive evidence, it may be
rebutted and outweighed by other
circumstances.
- Receipt of share in the profit is not considered
a prima facie evidence of partnership when it is
received as:
o Payment of debt;
o Wage to an employee or rent to a
landlord;
o Annuity to a widow or representative
of a deceased partner;
o Interest on a loan; or
o Consideration for the sale of property
ART 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 dissolves 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.
7 JF GALLENTES NOTES ; SSC-R; AY 22-23
Notes:
 Effects of an unlawful partnership. The
following are the consequences of a
partnership formed for an unlawful purpose:
1. The contract is void ab initio and the
partnership never existed in the eyes of
the law (Art. 1409[1].);
2. The profits shall be confiscated in favor of
the government;
3. The instruments or tools and proceeds of
the crime shall also be forfeited in favor of
the government;22 and
4. The contributions of the partners shall not
be confiscated unless they fall under No.
3.23
 Judicial decree is not necessary to dissolve an
unlawful partnership but sometimes it is
advisable to do so for security and
convenience.
Partnership Form
ART 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.
Notes:
 GR: No special form is required for the validity
or existence of the contract of partnership. The
contract may be made orally or in writing
regardless of the value of the contributions.
EXCPTNS: [page 2] When an immovable
property or real rights are contributed thereto,
it must be in writing and public instrument. An
inventory of the contributed property must
also be made which is attached to the public
instrument.
ART 1772. Every contract of partnership
having a capital of three thousand pesos or
more, in money or property, shall appear in a
public instrument, which must be recorded in
the Office of the Securities and Exchange
Commission.
Failure to comply with the requirements of
the preceding paragraph shall not affect the
liability of the partnership and the members
thereof.
Notes:
 Two requirements of Partnership with a capital
of P3,000 or more, in money or property:
1. The contract must appear in a public
instrument; and
2. It must be recoded or registered with the
Securities and Exchange Commission.
 Failure to comply with the above requirements
does not prevent the formation of the
partnership (Art 1768) or affect its liability and
that of the partners to third persons.
 Rationale for registration: to prevent tax
evation of big partnerships.
ART 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.
Notes:
 Importance of making inventory of real property
in partnership:
o To show how much is due from each
other to complete his share in the
common fund and how much is due
to each of them in case of liquidation
(Tablason vs Bollozas, [CA} 51 O.G.
1996.)
o Without it, the property cannot be
subject to inscription in the Registry
of Deeds and the contribution
cannot prejudice third persons.
Q: What is the status of the partnership, as
regards to inventory of immovable property or
real rights, if such is not complied with?
A: The partnership is void.
Note : in the case of Torres vs CA, GR No. 134559,
12-9-1999, the court ruled that a void
partnership under art 1773, in relation
to Art 1771, may still be considered as
an ordinary contract as regards the
parties thereto from which rights and
obligations to each other may be
inferred and enforced.
ART 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.
Notes:
 Since a partnership has a juridical personality
separate and distinct from that of the persons
or members composing it (Art 1768), it is but
logical and natural that immovable property ay
be acquired in the partnership name. Title so
acquired can, therefore, be conveyed only in
the partnership name. (see Art. 46.)
8 JF GALLENTES NOTES ; SSC-R; AY 22-23

a. General Partnership – one

ART 1775. Associations and societies, whose
where all the partners are
articles are kept secret among the members,
general partners who are liable
and wherein any one of the members may with respect to their individual
contract in his own name with third persons, properties, after the assets of
shall have no juridical personally, and shall be the partnership have been
governed by the provisions relating to exhausted.
ownership. b. Limited Partnership – one
Notes: formed by 2 or more persons
 It is essential that the articles of partnership be having as members one or more
be given publicity for the protection not only of general partners and one or
the members themselves but also third more limited partners, the
persons from fraud and deceit to which latter not being personally liable
otherwise they would be easy victims for the obligations of the
partnership.
Classification of Partnership 3. Duration
a. Partnership at will – partnership
ART. 1776. As to its object, a partnership is for a particular undertaking or
either universal or particular. As regards the
liability of the partners, a partnership may be ART 1783 - A particular partnership has for
general or limited. its object determinate things, their use or
fruits, or a specific undertaking, or the
Notes: exercise of a profession or vocation.
 Classifications of partnership.
1. As to the extent of its subject matter. — venture which may be
A partnership may be: terminated anytime by mutual
a. Universal partnership (Art. 1777.) agreement.
i. Universal partnership of all b. Partnership with a fixed period –
present property (Article 1778); the term for which the
and partnership to exist is fixed or
 Property which agreed upon or one formed for
belonged to a particular undertaking.
each of the 4. Legality of existence
partners at the a. de jure partnership – one which
time of the has complied with all the legal
constitution of requirements for its
the partnership. establishment.
 Profits which b. de facto partnership – one
they may which has failed to comply with
acquire from all all the legal requirements for its
property establishment.
contributed. 5. Representation to others
ii. Universal partnership of a. Ordinary or real partnership –
profits. (Article 1780) one which actually exist among
 Comprises all the partners and also as to third
that the partners persons.
may acquire by b. Ostensible or partnership by
their industry or estoppel – one which in reality
work during the is not a partnership, but is
existence of the considered a partnership only in
partnership. relation to those who, by their
b. Particular partnership – it is one conduct or admission, are
which has for its object, precluded to deny or disprove
determinate things, their use its existence.
and fruits, or a specific 6. Publicity
undertaking or the exercise of a a. Secret partnership –
profession or a vocation. partnership that is not known to
(Article 1783). many but only as to its partners.
2. Liability of partners b. Notorious or open partnership –
it is known not only to the
9 JF GALLENTES NOTES ; SSC-R; AY 22-23
partners, but to the public as
well.
7. Purpose
a. Commercial or trading – one
formed for the transaction of
business.
b. Professional or non-trading –
one formed for the exercise of a Notes:
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
extend to his personal or separate property.
4. Limited – one whose liability to third persons is
limited to his capital contribution.
5. Managing – manages affairs or business of the
partnership; he may be appointed either in the
articles of partnership or after the constitution
of the partnership; also known as general or
real partner.
6. Liquidating – takes charge of the winding up of
partnership affairs upon dissolution.
7. Partner by estoppel – is not really a partner but
is liable as a partner for the protection of
innocent 3rd persons; the term “quasi-partner”
is sometimes used.
8. Continuing partner – 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 – remains after a partnership
has been dissolved by death of a partner.
10. Sub-partner – is not a member of the
partnership; contracts with a partner with
reference to the latter’s share in the
partnership.
11. Ostensible – takes active part and known to the
public as partner in the business.
12. Secret – takes active part in the business but is
not known to be a partner by outside parties.
13. Silent – does not take any active part in the
business although he may be known to be a
partner.
14. Dormant – does not take active part in the
business and is not known or held out as a
partner.
15. Original partner – one who is a member of the
partnership from the time of its organization;
16. Incoming partner – a person lately, or about ot
be, taken into an existing partnership as a
member.
17. Retiring partner – one withdrawn from the
partnership; a withdrawing partner.
Universal Partnership
ART. 1777 A universal partnership may refer
to all the present property or to all the profits.
 Two kinds:
1. Universal Partnership of all present
property
2. Universal partnership of all profits
Universal Partnership of all present property
ART. 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.
ART. 1179. In a universal partnership of all
present property, the property which
belonged to each of the partners at the time
of the constitution of the partnership,
becomes the common property of all the
partners, 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 fruits thereof.
Notes:
 Universal partnership of all present property –
in this kind of partnership, the partners
contribute all of the property which actually
belonged to them into a common fund, with
the intention of dividing the same among
themselves, as well as the profits which they
may acquire through the properties
contributed.
 The following become a common property of
all partners:
1. Property which actually belonged to them
at the time of the constitution of the
partnership; and
2. Profits which they may acquire for the
property contributed.
 GR: future properties cannot be contributed/
Rationale: Contribution must be
determinate things since the position of a
partner is like of that a donor, and
10 JF GALLENTES NOTES ; SSC-R; AY 22-23
donations cannot comprehend future
property. Thus, property subsequently
acquired by (1.) inheritance; (2.) legacy; or
(3.) donation cannot be included by
stipulation.
EXCPTN: Fruits thereof.
 Any stipulation including
property so acquired is
void.
 Profits from other sources (not from the
properties contributed) will become a common
property only if there is a stipulation.
Universal Partnership of Profits
ART 1780. A universal partnership of profits
comprises all that the partners 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.
Notes:
 Universal partnership of profits – comprises all
that the partners may acquire by their industry
or work during the existence of the partnership 
and the usufruct of movable or immovable
property which each of the partners may
possess at the time of the celebration of the Who may be partners?
contract.
o in this class of partnership, the
partners retain their ownership over
their present and future property.
o Only the profits or income and the
use or usufruct of said property
passes to the partnership.
o Upon dissolution, such property is Notes:
returned to the partners who own it.
Example:
In the preceding example, if the agreement of A
and B is that they would retain the ownership over
their respective properties, only their usufruct
being transferred to partnership X & Co., and that
they would divide equally the net profits realized
during the existence of the partnership, then the
partnership formed is a universal partnership of
profits.
Upon the dissolution of the partnership, the
properties shall be returned to the respective
owners. The amount of P100,000 contributed by B
shall be paid to him as a loan to the partnership.
o Profits acquired by the partners
through chance, such as lottery or by
lucrative title without employment
of any physical or intellectual efforts,
are not included.
o In view if par 2, fruits of property
subsequently acquired by the
partners do not belong to the
partnership. Such profits may,
however be included by express
stipulation.
Presumption of universal partnership of profits
ART 1781 – Articles of universal partnership
entered into without specification of its
nature, only constitute a universal partnership
of profits.
Notes:
 If the partnership does not specify its nature,
whether it is one of “present property” or of
“profits” only, it will be presumed that the
parties intended merely a partnership of profits.
o Rationale: universal partnership of
profits imposes less obligations on
the partners, since they preserve the
ownership of their separate
property.
Applicable only when a universal partnership
has been recognized.
ART 1782 – Persons who are prohibited from
giving each other any donation or
advantage cannot enter into universal
partnership.
 GR: Any person capacitated to contract may
enter into a contract of partnership.
EXCPTN: Persons who are prohibited from
giving each other donation or advantages;
Rationale: partners virtually makes donation.
To allow persons who are prohibited to give
each other any donation or advantage to form
a universal partnership will be like permitting
them to do indirectly what the law expressly
prohibits.
Effects of violation of this Article: partnership is
null and void.
 Persons prohibited from giving each other
donations or advantage:
o Spouses (Art 87, FC);
 EXCPTN: husband and wife
may enter into a particular
partnership (professional
Partnership.)
o Common law spouses (Art 87, FC);
11 JF GALLENTES NOTES ; SSC-R; AY 22-23

o Persons guilty of adultery or

concubinage (Art 739); (conviction is
not necessary)
o Persons guilty of the same criminal
offense (Art 739);
o Public officers or his wife,
descendants, and ascendants, by
reason of his office;

Particular Partnership

ART 1783 – A particular partnership has for its

objective determinate things, their use of
fruits, or a specific undertaking, or the
exercise of a profession or vocation.

Note:
 Particular Partnership is a partnership that is
limited and well-defined, being confined to an
undertaking of a single, temporary, or ad hoc
nature.