PARTNERSHIP

• A formal agreement by two or more parties to manage and operate a business and
agreed to share the profit and loss of a business.
• Is a contract whereby 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. A partnership is a separate legal entity from that of the members
in the partnership.
- First, it is a contract. It is something that is entered into considering a contract.
CONTRACT is the law that binds the parties.
- Contract, hindi ito basta bagay or papel na pinirmahan lang, kundi once you entered a
contract, it serves as law the contracting parties. Also, provided na ang ilalagay sa kontrata
ay naaayon sa batas, dahil kapag hindi, hindi ito maaaring maging parte ng inyong
agreement o ng batas sa inyong dalawa. Pero kapag hindi naman kontra sa batas, then valid
pa rin ito. So that, the partneship in itself is also a contract.
- Partnership, isang kontrata na may dalawang tao or higit pa na nag f-form ng isang contract
ng partnership. They entered to a contract to specific agreement to bind themselves. They
are bounded to a specific law na dapat nilang sundin.

Partnership – meron ding consent, object, and consideration. Ang consent ay maaari ring tawagin
na meeting of the minds.

ENTITY THEORY

- Si partnership ay maaaring mag-acquire ng property under on its own name. Pwede sila
mag-acquire ng property sa name mismo ng kanilang partnership.

In partnership, it does not have to be in writing except kapag there are immovable properties that
are contributed. Hindi naman lahat ng bagay within a partnership kailangan ay in writing, it means
pwede kayo maging in partnership verbally or consensual kahit na meron kayong meeting of the
minds lamang ay pwede na kayo mag-form ng partnership.

Pero may mga instances na required ang partnership to be in writing, such as immovable property
or real rights are contributed, it must be in a public instrument and the inventory must be signed
by the parties, otherwise, the partnership may be invalid.

Next is, when the partnership’s capital is 3,000 or more then it must be in a public instrument, it
means, it should be in writing, and should be notarized. If may capital na at least 3,000 pesos, it
should be registered with the securities exchange commission.

DELECTUS PERSONAE – It means the partners make choose whom they will enter into a
partnership, who will be accepted in their partnership and whether they will remain as partners. It
means, hindi mo pwedeng pilitin ang isang partnership na hindi naman pwede.
 – The agreement must be respected. And when we say agreement, it is considered as law
between the parties, this is not something that is not statuette, this is not something that is not a
law pero tinatawag siyang law between the parties because it has a binding effect between the
parties, wherein kailangan sundin ng bawat party 'yong nakalagay sa agreement nila.

DISQUALIFICATIONS IN UNIVERSAL PARTNERSHIP

Those who are prohibited from making donations cannot be partners.

1. Persons guilty of adultery or concubinage at the time of the donation.

2. Persons found guilty of the same criminal offense in consideration thereof.
3. Made to a public officer or his wife, defendants, ascendants by reason of his office.

PARTNERSHIP AND CORPORATION

Partnership – Is created by mere agreement, a consensual form of partnership is sufficient. For

the moment there’s a meeting of the minds then the partnership can already be created.
Corporation – commences only from the issuance of the certificate of registration with SEC.

Partnership - There's should be two or more person who will enter a partnership.
Corporation - There could be one person, kahit isang tao lang pwede siyang mag-form ng one
person corporation. Then, two or more are considered a regular corporation.

Partnership - There's what we call mutual agency, it means that its general partner may represent
and bind the partnership.
Corporation - Stockholders are not agents of the corporation.

If ang isang incorporator ng corporation, dapat meron pa rin siyang treasurer and someone who
will take over the position of that person

PARTNERSHIP AND CO-OWNERSHIP

Partnership – It has a juridical personality. It does not need to be created by the law; it may be
created through an agreement since it is merely consensual. Intent to distribute profit.

Co-ownership – It has no juridical personality. Only by agreement Can be created by law and by
agreement. No intent to distribute profit, hindi kailangan ng intention to divide the profit among
themselves. Also, death does not extinguish ownership.
– Ang isang bagay ay pag mamay-ari ng dalawang tao
– There's only one property, however there are two owners kaya nagkaroon ng co-ownership
– There's no mutual agency
The purpose and the intention in entering the partnership.

Partnership - Your intention is to gain profit

Co-ownership - There could be no intent, you can be co-ownership with one property without
the intention to gain profit from that.

UNIVERSAL PARTNERSHIP – This may refer to all the present property or all the profits.

It has two types.

1. Universal partnership of all present property – the partners contribute all of their
present (current and existing) properties with the intention of dividing the
properties as well as the profits among themselves. Basically, they are going to
utilize the properties to generate profits.
2. Universal partnership of profits – the properties contributed are still owned by
the individual partner and NOT by the partnership. Only the profits resulting
from the utilization of the properties will form part of the partnership and be
divided among the partners.

GENERAL PARTNERSHIP – The partners are all liable for all partnership obligations even upto
the extent of their personal properties. There is no limited partner.

- In general, when a partnership becomes insolvent, the creditors may go after the personal
properties of solvent partners. These are general partners.

LIMITED PARTNERSHIP – There are limited and general partners. The limited partners as such
shall not be bound by the obligations of the partnership.

PARTNERSHIP AT WILL – Does not fix its term. The birth and life of this type is predicated on
the mutual desire and consent of the partners.

- A partnership that may be terminated by the will of the partners. If they want to discontinue,
they could simply agree to liquidate.
- Dipende pa rin sa kanila kung gusto pa rin nila manatili sila sa isang partnership.
-
DE FACTO PARTNERSHIP – Partnership if legal formalities are not complied with. It cannot
exist because partnership is perfected by mere consent. One that has not complied with all the legal
requirements pertaining to its formation.

- A de facto relationship, under the Family Law Act 1975, is defined as a relationship
between two people (who are not legally married or related by family) who, having regard
to all of the circumstances of their relationship, lived together on a genuine domestic basis.
 - Sinubukan ng mag-form ng partnership pero dahil may mga requirements ang batas tulad
ng it should be in writing, it should be in public instrument, it should be registered with
SEC, maaaring hindi pa sila nakakapag comply sa lahat ng requirements na iyon pero cino-
consider na sila as a partnership

- Colorable compliance

DE JURE PARTNERSHIP – Merely by consent as to the elements of the contract. One that has
complied with all the legal requirements pertaining to its formation.

- Vice versa of de facto partnership

CAPITALIST PARTNER - one who contributes money or property.

INDUSTRIAL PARTNER - one who contributes industry. He cannot be liable for losses. He
cannot engage in business unless expressly provided for in the agreement.

GENERAL PARTNER - One who controls and manages the partnership and is liable for
partnership obligations.

LIMITED PARTNERS - He is not personally liable for partnership obligations but is not involved
in the management

MANAGING PARTNER - One who is designated as the person who will administer the affairs of
partnership.

LIQUIDATING PARTNER - Winds up the affairs.

ASSOCIATE/ SUBPARTNER - He is not a real partner but he is the one with who a partner shares
his profits in partnership.

OBLIGATIONS OF PARTNERS

Partners - To contribute money, property, or industry. Whenever a partner contribute a property,

there's another obligation and that obligation is that to be liable for warranty against hidden defects
of eviction.

FIDUCIARY DUTIES OF PARTNER (LODI)

Fiduciary - States that fiduciary involves trust, especially with regards to the relationship between
trustee and beneficiary.
1. Loyalty - Duty not to act adversely to the interest of the partnership. Ibig sabihin ay wala ka
dapat gawin na maaaring ikapahamak ng partnership or magdulot ng something that's not
favorable to the partnership.

- Kapag industrial ang isang partner, hindi siya pwedeng mag-conduct ng any business under
his own name for himself unless there's an agreement between the partners na pwede na iyong
gawin.
- A capitalist partner cannot engage in the same line of business as to the partnership

Exemption: The agreement of the parties.

2. Obedience - Must adhere to the provisions of partnership agreement and decisions of partners
- A partner is liable to the partnership for any damage caused by his negligence.
- Kung ano 'yong napag usapan niyo, you comply with it in good faith, and you abide by the law
of the partnership.
- Hindi porket ikaw ang capitalist ay ikaw na ang palagi ang masusunod, kung ano 'yong agreement
ay dapat iyon pa rin ang masunod.

3. Diligence - Ito 'yong paggampan mo sa iyong obligation na dapat ay diligent ka, and you should
not do anything that is negligence.

4. Inform - Notice to the partner is notice to the partnership unless there is fraud.

- Each partner is liable to provide access to the books of accounts, statements of accounts, and
in any case na may partner or meron silang staff na in charge with safe keeping the books of
accounts pwede iyon tingnan, pwede humingi ng copy nun or pwede ma-access ang any partner in
the partnership, provided na ni-request naman nila 'yon sa reasonable time and date.

RIGHTS OF THE PARTNER

1. Participate in management - partner has the right to execute all the acts of administration in favor
of the partnership, not unless it is otherwise agreed na meron siyang hindi pwedeng gawin.

2. Rights to share in the profits.

3. Right to reimbursement of expenditures incurred on behalf of partnership

4. Right to return advances

5. Right to return of capital

6. Right to information and right to inspect and copy partnership's books at any reasonable hours
and to demand full information of things affecting partnership - So any partner, kahit industrial
partner pa siya, managing partner or capitalist partner pa siya with more reason, pwede siyang
mag-demand ng full information of things affecting the partnership.
7. Right to accounting

CASE NO. 1
(TAN ENG KEE VS COURT OF APPEAL) GR NO. 126881

- Decided, October 03, 2000

- Dinefine ang partnership, to constitute a partnership it must be establish that two or more person
must bound themselves to contribute money, property, or industry to a common fund and they
intend to divide the profits among themselves

- Sinabi rin dito na ang best evidence of a partnership is the contract of the partnership itself pero
ang ibang pang example ng evidence is a demand of periodic accounting.

CASE NO. 2

(TOCAO VS COURT OF APPEAL) GR NO. 127405

- Decided, October 04, 2000

- to be considered a juridical personality, the partners must fulfill this requirement:

> two or more persons should bind themselves to contribute money, property, industry to a
common fund
> an intention to divide the profit among themselves, it may be constituted in any form, a
public instrument is only a necessary when immovable or real rights are contributed there too.

CASE NO. 3
(PASCUAL VS CIR) GR NO. 78133

- the sharing of returns, it means the income or profit from the partnership, it does not itself
establish a partnership whether or not the person sharing have a joint common interest to the
property, there must be a clear intent to form a partnership.

DISSOLUTION BY OPERATION OF LAW

1. Illegality of the partnership business - illegal kaya hindi pwede magkaroon ng ganoong
partnership

2. Specific thing is promise to be contributed but it perishes before delivery

3. Death of a partner - it can dissolve a partnership

4. Insolvency - if the partnership no longer has funds or liquid enough to answer to answer the
partnership business and partnership losses, insolvency of the partnership can dissolve the
partnership

5. Civil interdiction of partners - may legal prohibition na or legal restraint na mai-manage na

ang kanyang mga sariling estate, in that case that person can no longer serve as an effective partner
rather the partnership can already be dissolve.