COVERAGE

 Partnerships
 Corporations
 Insurance
 Cooperatives
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
 CHARACTERISTICS:
1. CONSENSUAL - perfected by mere consent or
the meeting of the minds between parties
2. BILATERAL or MULTILATERAL - entered into
between 2 or more persons
3. PREPATORY- entered into as a means to an
end.
4. NOMINATE - designated by a specific name &
rules applicable only to it
 CHARACTERISTICS:
5. Onerous – contributions in the form of either
money, property and/or industry must be made
6. Commutative – the undertaking of each partner
is considered as the equivalent of that of the
others
7. Principal – its existence or validity does not
depend on some other contract
ARTICLE 1768
❏ Partnership has a juridical personality
separate & distinct from that each of
the partners
 PARTNERSHIP CORPORATION

❏ Created by a contract, by
mere agreement of the ❏ Created by Law
parties
❏ Has a juridical personality ❏ Has a juridical personality
separate & distinct from separate & distinct from
that of each partner that of each partner
❏ Realization of profits ❏ Depends on AOI
❏ Partner may not dispose of ❏ Stockholder has a right to
his individual interest transfer shares without
unless agreed upon by all prior consent of other
partners stockholders
 PARTNERSHIP CORPORATION
❏ In absence of stipulation to ❏ Management is vested with
contrary, a partner may bind the Board of Directors
partnership (each partner is
agent of partnership)
❏ Death of partner results in ❏ Death of stockholder does
dissolution of partnership not dissolve corporation
❏ May be dissolved at any time
❏ Can only be dissolved with
by the will of any or all of the
the consent of the State.
partners
❏ From the moment of ❏ From date of issuance of
execution of contract of certificate of incorporation
partnership by the SEC
ARTICLE 1776
❏As to its object, a partnership is either
universal or particular
❏As regards the liability of the partners,
it may be general or limited (1671a)
CLASSIFICATION OF PARTNERSHIP
(1)As to the extent of its subject matter - A
partnership may be:
❏ UNIVERSAL PARTNERSHIPS - or one which
refers to all the present property or to all
profits (Art. 1777)
❏ PARTICULAR PARTNERSHIPS - has for its
object determinate things, their fruits, or a
specific undertaking, or the exercise of a
profession or vocation
(2) As to liability- A partnership may be:

❏ GENERAL PARTNERSHIPS - or one consisting

of general partners who are liable pro
rata & subsidiarily, sometimes solidarily,
with their separate property for partnership
debts or
❏ LIMITED PARTNERSHIPS - or one formed by
2 or more persons having as members one
or more general partners & limited partners,
the latter not being personally liable for the
obligations of the partnership
(3) As to its duration- A partnership may be:
❏ at will or no time is specified & is
not formed for a particular undertaking
which may be terminated anytime by
mutual agreement
❏ with a fixed term or formed upon for a
particular undertaking, & expiration
(4) As to the legality of its existence

❏ De jure partnership - complied

with all the legal requirements
❏De facto partnership- failed to
comply with all the legal
requirements
ESSENTIAL FEATURES OF PARTNERSHIP
1. A valid contract
2. 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. Purpose or primary purpose must be to obtain
profits and to divide the same among the partners
 RULES OF MANAGEMENT
❏ As a general rule, any person may be a
partner if capable under the law of
entering into contractual relations.

❏ Any person who cannot legally give

consent to a contract cannot be a
partner
The following cannot give their consent
to a contract of partnership:

(a)Unemancipated minors
(b)Insane or demented persons
(c)Deaf-mutes who do not know how to write
(d)Persons who are suffering from civil
interdiction &
(e)Incompetents who are under guardianship
 EXCEPTIONS
Under Art. 1782, persons who are
prohibited from giving each other any
donation or advantage cannot enter into a
universal partnership.
❏ A married woman may enter into a
contract of partnership even without her
husband’s consent, but the latter may
object under certain conditions.
Capacity of partnership/corporation to be a Partner

❏ There is no prohibition against a partnership being a

partner in another partnership. Unless authorized by law,
a corporation is without capacity or power to enter into a
contract of partnership.

❏ In a partnership, a corporation would be bound by the

acts of persons who are not its duly appointed &
authorized officers & agents & this is entirely inconsistent
with the policy of the law that the corporation shall
manage its own affairs separately and exclusively.
 ❏ A contract of partnership gives rise to at
least 4 distinct judicial relations:

Relation among the partner themselves Relation of the partners with the partnership

Relation of the partnership with third Relation of the partners with such
persons with whom it contracts third persons
SECTION 2. – Property Rights of a Partner

ART. 1810. The property rights of a partner are:

(1)His rights in specific partnership property
(2)His interest in the partnership &
(3)His right to participate in the management
Extent of Property Rights of a Partner

(1) Principal Rights – property rights of a

partner enumerated under the law are as follows:
(a) His rights in specific partnership property
(b) His interest in the partnership &
(c) His right to participate in the management
Extent of Property Rights of a Partner

(1) Related Rights – a partner has other rights

which are related to the above, namely:
(a) The right to reimbursement for amounts
advanced to the partnership & to indemnification
for risks in consequence of management
(b) The right of access & inspection of partnership
books
Extent of Property Rights of a Partner

(c) The right to true & full information of all things

affecting the partnership
(d) The right to a formal account of partnership affairs
under certain circumstances
(e) The right to have the partnership dissolved also under
certain conditions
SHARING OF PROFITS
❏A partnership is essentially a business
enterprise established for profit
(1)Not necessarily in equal shares

❏ Since the partnership is for the common

benefit or interest of the partners, it is
necessary that there be an intention to
divide the profits, among the members,
although not necessarily in equal shares.

❏ In the words of the Supreme Court “there

must be a joint interest in the profits.”
(Fernandez vs. De la Rosa, 6 Phil. 671.)
(2) Not conclusive evidence of partnership

❏The sharing of profits is merely

presumptive and not conclusive, even
if cogent, evidence of partnership.

❏If the division of profits is merely used

as a guide to determine the
compensation due to one of the
parties, such one is not a partner.
SHARING OF LOSSES
(1)Necessary corollary of sharing in profits
❏ The definition of partner under Article 1767
refers to “profits” only and is silent as to
“losses.”
❏ The reason is that the object of a
partnership is primarily the sharing of
profits, while the distribution of losses is but
a possible “consequence of the same.”
❏ The right to share in the profits carries with
it the obligation to share also in the losses,
if any. (see Art. 1797.)
(2) Agreement not necessary
❏ Not necessary for the parties to agree upon a
system of sharing. The essence of a partnership
is that the profits and losses arising from the
undertaking will be shared between or among
the partners.
❏ However, where a partnership has been validly
created, a subsequent stipulation which
excludes one or more partners from any share
in the profits (or losses) will not affect its
existence. Only the stipulation is void. (Art.
1799.)
ARTICLE 1828
❏ The dissolution of a partnership is the
change in the relation of the partners
caused by any partner ceasing to be
associated in the carrying on as
distinguished from the winding up of the
business.
The terms are often confused. As they are used:

❏ Dissolution is the change in the relation of

the partners caused by any partner ceasing
to be associated in carrying on of the
business. (Art. 1828.)

❏ It is that point in time when the partners

cease to carry on the business together. It
represents the demise of a partnership. (68
C.J.S. 842.)
❏ Winding up is the process of settling the
business or partnership affairs after
dissolution.

❏ Termination is the point in time when all

partnership affairs are completely wound
up and finally settled. It signifies the end of
the partnership life.
ART. 1843.
A limited partnership is one formed by 2 or more
persons under the provisions of the following
article, having as members 1 or more general
partners & 1 or more limited partners. The
limited partners as such shall not be bound by the
obligations of the partnership.
Characteristics of Limited Partnership

(1)A limited partnership is formed by compliance with

the statutory requirements;
(2)1 or more general partners control the business &
are personally liable to creditors;
(3)1 or more limited partners contribute to the capital
& share in the profits but do not participate in the
management of the business & are not personally
liable for partnership obligations beyond their
capital contributions;
Characteristics of Limited Partnership

(4) The limited partners may ask for the return of

their capital contributions under the conditions
prescribed by law; &
(5) The partnership debts are paid out of the
common fund & the individual properties of the
general partners.
A limited partnership is thus composed of 2
classes of partners, general & limited. The
liability of a limited partner is limited to the
amount of money he has put into the
partnership. It is an exception to the general rule
that all partner including industrial partners are
liable pro rata with all their property for
partnership debts.