PARTNERSHIP

Article 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.
Essential Requisites
1. There must be a valid contract.
2. There must be a mutual contribution of money, property or industry to a common
fund.
3. It must have a lawful object or purpose.
4. The partnership must be established for the common benefit or interest of the
partners which is to obtain profits and to divide such among the partners.
Characteristics:
1. Consensual
2. Principal
3. Bilateral
4. Nominate
5. Preparatory
6. Onerous
Forms of Partnership Contract
A partnership contract may be constituted in any form, except as follows:
1. Where immovable property or real rights are contributed to the partnership
(regardless of the amount thereof).
2. Where the capital of the partnership is P3,000 or more, in money or property.
3. If the partnership is a limited partnership.
Who may become Partners
1. Any natural person who is capacitated.
2. Artificial persons like partnership and corporation.

Rules to Determine Whether a Partnership Exists

1. Persons who are not partners as to each other are not partners as to third
persons except when a person represents himself or consents to another
representing him to anyone, as a partner in an existing partnership or with one or
more persons not actual partners.
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 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 profits of a business is a prima facie
evidence that he is a partner in the business except when such profits were
received in payment:
a. As a debt by installment
b. As a wage of an employee or rent to a landlord
c. As annuity to a widow or representative of a deceased partner
d. As interest on loan
e. As consideration for sale of goodwill of a business or other property.

Kinds of Partnership
1. As to Object
a. Universal Partnership
i. Universal partnership of all present property – all contribution from
partners which actually belonged to them to the common fund, with
the intention of dividing the same among themselves, as well as the
profits which they acquire therewith.
1. Present property of partners
2. Profits acquired from the present property.
3. Property acquired by each partner after the formation of the
partnership ONLY if stipulated. It shall include
a. The property itself EXCEPT that the stipulation shall
not include property acquired by inheritance, legacy
or donation.
b. The profits and fruits including from property acquired
by inheritance, legacy or donation.
Example:
X and Y formed a universal partnership of all present property. At the of the establishment of the
partnership, X owned a fleet of taxis which he had purchased and an agrilot which he had inherited. Y
owned an apartment and shares of stock which were donated to him. They agreed that property acquired
by each partner after the formation of the partnership shall belong to the partnership. During the 1 st year
of operations, the following transactions took place:
 Fare revenues of 100,000 from fleet of taxis
 Crops gathered from the agrilot, 150,000
 Rentals from apartment, 200,000
 Dividends of 30,000 received from shares of stocks
 A coconut plantation which was purchased by X from his own funds
 Coconuts gathered from the plantation, 75,000
 Fish pond received by Y by way of donation from his uncle
 Fish harvested from the fishpond, 50,000.
 ii. Universal partnership of profits – this comprises all that the partners
may acquire by their work or industry during the existence of the
partnership.

Example:
X and Y formed a universal partnership of profits. At the of the establishment of the partnership, X owned
a fleet of taxis which he had purchased and an agrilot which he had inherited. Y owned an apartment and
shares of stock which were donated to him. They agreed that the fruits of future property shall belong to
the partnership. During the 1st year of operations, the following transactions took place:
 Fare revenues of 100,000 from fleet of taxis
 Crops gathered from the agrilot, 150,000
 Rentals from apartment, 200,000
 Dividends of 30,000 received from shares of stocks
 Salary received by X from his profession as a teacher
 500,000 won by Y in lotto draw
 A coconut plantation which was purchased by X from his own funds
 Coconuts gathered from the plantation, 75,000
 Fish pond received by Y by way of donation from his uncle
 Fish harvested from the fishpond, 50,000.

b. Particular Partnership
2. As to Liability
a. General Partnership
b. Limited Partnership
3. As to Duration
a. Partnership with a fixed term
b. Partnership for a particular undertaking
c. Partnership at will
4. As to Representation to others
a. Ordinary Partnership
b. Partnership by Estoppel
Kinds of Partners
1. As to Liability
a. General Partner – liable for the partnership debts to the extend of his
separate property.
b. Limited Partner – liable only to the extent of his capital contribution.
 c. General-Limited Partner – one who has all the rights and powers and is
subject to all the restrictions of a general partner, except that in respect to
his contribution, he shall have the rights against the other members which
he would have had if he were not also a general partner.
2. As to Contribution
a. Capitalist Partner – one who contributes money or property.
b. Industrial Partner one who contributes his services or industry.
c. Capitalist-industrial Partner - one who contributes money or property and
his services to the partnership.
3. Other Classifications
a. Managing Partner – one who manages the business affairs of the
partnership.
b. Liquidating Partner – one who takes charge of the winding up of the affairs
of the partnership after it is dissolved.
c. Nominal Partner – one who is not actually a partner but who may become
liable as such third persons.
d. Ostensible Partner – one who is active and known to the public as a
partner.
e. Secret Partner – one whose connection with the partnership is kept from
the public.
f. Silent Partner – one who has no voice in the management of the business.
g. Dormant Partner – one who does not participate in the management of the
business and nor known to the public as partner.