Professional Documents
Culture Documents
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Contract of Partnership
DEFINITION
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.
Two or more persons may also form a partnership for
the exercise of a profession. [Article 1767]
CHARACTERISTICS
The contract of partnership is:
(1) Consensual, because it is perfected by mere
consent.
(2) Nominate, because it has a specific name.
(3) Bilateral or multilateral, because it is entered into
between two or more persons.
(4) Principal, because its existence does not depend
on another contract.
(5) Onerous, because money, property or industry are
contributed by the parties.
(6) Preparatory, because it is entered into to carry out
a business or specific venture.
(7) Commutative, because the undertaking of each is
considered as equivalent of that of the others.
ELEMENTS
There is a contract of partnership when:
(1) There is a meeting of the minds;
(2) To form a common fund;
(3) With intention that profits and losses will be
divided among the contracting parties.
ESSENTIAL FEATURES
A partnership contract has the following essential
features:
(1) There must be a valid contract.
(2) The parties must have legal capacity.
(3) There must be a mutual contribution of money,
property, or industry to a common fund.
(4) The object must be lawful.
(5) The primary purpose must be to obtain profits
and to divide the same among the parties.
(6) The partnership has a juridical personality
separate from individual partners [Article 1768].
As such, "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." [Article 1774]
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COMMENCEMENT
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AS TO LIABILITY OF PARTNERS
RELATIONS CREATED
(1) Among the partners themselves.
(2) Between the partners and the partnership.
(3) Between the partnership and third persons with
whom it contracts.
(4) Between the partners and such third persons.
A professional partnership
partnership. [Article 1783]
is
particular
KINDS OF PARTNERS
(1) Capitalist, whose contribution is money or
property;
(2) Industrial, whose contribution is only his industry;
(3) General, whose liability to third persons extends
to his separate property;
(4) Limited, whose liability to third persons is limited
to his capital contribution;
(5) Managing, designated to manage the affairs or
business of the partnership;
(6) Liquidating, takes charge of the winding up of
partnership affairs;
(7) By estoppel, who is not really a partner but is
liable as such for the protection of innocent third
persons;
(8) Continuing, who continues the business after
dissolution of the partnership by admission of a
new partner, or retirement, death or expulsion of
existing partners.
(9) Surviving, who remains a partner after dissolution
by death of any partner;
(10)Subpartner, who is not a member of the
partnership but contracts with a partner with
KINDS OF PARTNERSHIP
AS TO LEGALITY OF EXISTENCE
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Share in losses
Exempted as to losses as
between partners, but
liable to third persons,
without prejudice to
reimbursement from
capitalist partners
According to agreement; if
none, in proportion to
agreed share in the
profits;
if none, in proportion to
contribution
Engaging in business
Cannot engage in
Cannot engage, for his
business for himself,
own account, in the same
unless the partnership
kind of business as that of
expressly permits him to the partnership, unless
do so; should he do so
there is a stipulation to
without permission, the the contrary; should he do
capitalist partners (as well so, he shall bring to the
as industrial partners [De common fund any profits
Leon (2010)]) may (a)
accruing to him from his
exclude him from the firm, transactions and shall
or (b) avail themselves of personally bear all the
the benefits obtained in losses [Article 1808]
violation of the
prohibition, with right to
damages in either case
[Article 1789]
There is no mutual
representation among coowners
Death or incapacity of a
partner dissolves the
partnership
Death or incapacity of a
co-owner does not
dissolve the co-ownership
Partnership
Corporation
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Partnership
Corporation
Partnership
Has no juridical
personality
Commencement date
may be stipulated
Commencement is on the
date of the celebration of
the marriage, and any
stipulation to the contrary
is void
Taxable as a corporation
Created by agreement
Partnership
Governed by agreement
Governed by law
Administration belongs to
the spouses jointly, but
decision of husband
prevails in disagreement
Voluntary Association
Has no juridical
personality
Capital is contributed
Partnership is primarily
liable; the partners are
liable only subsidiarily
Conjugal
Partnership of Gains
Created by voluntary
agreement of 2 or more
partners of either sex
Management shared by
all partners, unless
otherwise agreed upon
Partnership
Conjugal
Partnership of Gains
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Management shared by
all partners, unless
otherwise agreed upon
Administration belongs to
the spouses jointly, but
decision of husband
prevails in disagreement
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Requisites:
(1) There is an imminent loss of the business of the
partnership;
(2) The majority of the capitalist partners are of the
opinion that an additional contribution to the
common fund would save the business;
(3) The capitalist partner refuses deliberately (not
because of financial inability) to contribute an
additional share to the capital; and
(4) There is no agreement that even in case of
imminent loss of the business, the partners are not
obliged to contribute.
PROHIBITION AGAINST ENGAGING IN BUSINESS
AMOUNT OF CONTRIBUTION
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Exceptions:
(1) In case the receipt was issued for the account of
the partnership credit only, however, the sum
shall be applied to the partnership credit alone.
(2) When the debtor declares, pursuant to Article
1252, at the time of making the payment, to which
debt the sum must be applied, it shall be so
applied [Article 1792].
COMPENSATION OF LIABILITY
General rule: The liability for damages cannot be setoff or compensated by profits or benefits which the
partner may have earned for the partnership by his
industry.
Ratio: The partner has the obligation to secure the
benefits for the partnership. As such, the
requirement for compensation, that the partner be
both a creditor and a debtor of the partnership at the
same time, is not complied with [Article 1278; De Leon
(2010)].
Requisites:
(1) There exist at least two debts, one where the
collecting partner is creditor, and the other,
where the partnership is the creditor;
(2) Both debts are demandable; and
(3) The partner who collects is authorized to manage
and actually manages the partnership.
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ACCRUAL OF RIGHT
SUBPARTNERSHIP
PERSON OBLIGED
PRESCRIPTION OF ACTION
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NATURE OF ACTION
Capital
With constant value
Property
RIGHTS OF ASSIGNEE
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FIRM NAME
Every partnership shall operate under a firm name,
which may or may not include the name of one or
more of the partners.
Requisites:
(1) Two or more partners have been appointed as
managers;
(2) There is no specification of their respective duties;
and
(3) There is no stipulation that one of them shall not
act without the consent of all the others.
STIPULATION ON UNANIMITY OF MANAGING PARTNERS
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Obligations of partnership/
partners to third persons
The fact that a partner has left the country and the
payment of his share of the liability cannot be
enforced [Co-Pitco v. Yulo (1907)] or his liability is
condoned by the creditor [Island Sales v. United
Pioneers (1975)] cannot increase the liability of the
other partners.
Muoz (1907)].
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NATURE OF LIABILITY
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BY OPERATION OF LAW
CAUSES OF DISSOLUTION
WITHOUT VIOLATION OF THE AGREEMENT
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BY DECREE OF COURT
OTHER CAUSES
LIABILITY OF
DISSOLUTION
PARTNERS
IN
TRANSACTIONS
AFTER
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MANNER OF WINDING UP
Exceptions:
(1) The dissolution being by act of any partner, the
partner acting for the partnership had knowledge
of the dissolution; or
(2) The dissolution being by death or insolvency of a
partner, the partner acting for the partnership
had knowledge or notice of the death or
insolvency. [Article 1833]
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EXISTENCE OF RIGHT
Personally, but
subsidiarily, liable for
obligations of the
partnership
General Partner
Limited Partner
Extent of liability
Nature of contribution
Cash, property or industry Cash or property only, not
industry
Limited partnership
DEFINITION
A limited partnership is one formed by two or more
persons under the provisions of the following article,
having as members one or more general partners
and one or more limited partners. The limited
partners as such shall not be bound by the
obligations of the partnership. [Article 1843]
Proper party
CHARACTERISTICS
(1) A limited partnership is formed by compliance
with the statutory requirements [Article 1844].
(2) The business is controlled or managed by one or
more general partners, who are personally liable
to creditors [Articles 1848 and 1850].
(3) One or more limited partners contribute to the
capital and share in the profits but do not
manage the business and are not personally
liable for partnership obligations beyond their
capital contributions [Articles 1845, 1848 and
1856].
(4) Obligations or debts are paid out of the
partnership assets and the individual property of
the general partners.
(5) The limited partners may have their contributions
back subject to conditions prescribed by law
[Articles 1844 and 1957].
Not prohibited
Assignability of interest
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General Partner
Limited Partner
Not assignable
Assignable
Limited Partnership
Creation
PURPOSE OF FILING
NO SUBSTANTIAL COMPLIANCE
Composition
Only general partners
Firm name
Must contain the word
Must include the word
"Company" (SEC Memo "Limited" (SEC Memo Circ
Circ No. 14-00), except for No. 14-00)
professional partnerships
FIRM NAME
Articles 1860-1863
Requisites:
(1) The partner knew the statement to be false at the
time he signed the certificate, or subsequently,
but having sufficient time to cancel or amend it,
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Contract of agency
DEFINITION
By the contract of agency, a person binds himself to
render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter [Article 1868].
AMENDMENT OR CANCELLATION OF
CERTIFICATE
WHEN CERTIFICATE IS CANCELLED
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