Understanding the Contract of Partnership

Sep 10, 2024

Notes on Contract of Partnership

Introduction

  • Presenter: Attorney Marie-Kris Bathan-Lasco
  • Channel Purpose: Simplifying the law, explaining concepts and principles in under 10 minutes.

Definition of Partnership

  • Partnership: An agreement between two or more persons to contribute money, property, or industry to a common fund with the intention of obtaining profits.
  • Legal Reference: Civil Code Article 1767.

Reasons for Forming a Partnership

  • Lack of capital to start a business.
  • Presence of capital but lacking the talent or industry to make the business prosper.
  • Need for contributions of property or industry to achieve business goals.

Key Consideration: Trust

  • Delectus Personae: A principle indicating that partnerships are fiduciary in nature and based on trust and confidence.
  • Importance of choosing a trustworthy partner due to the ability of partners to bind the partnership legally.

Who Can Enter into a Contract of Partnership?

  • Anyone not disqualified by law can form a partnership.
  • Exceptions:
    • Minors
    • Deaf-mutes who cannot read or write
    • Insane or demented persons
    • Incompetent individuals under guardianship
    • Those under civil interdiction
    • Individuals prohibited by law from making donations to each other (circumvention of donation laws).

Professional Partnerships

  • Allowed for various professions:
    • Lawyers (law firm)
    • Accountants (accounting partnership)
    • Architects, engineers, etc.

Legal Personality of a Partnership

  • Formation creates a juridical person: e.g., A, B, and C form "ABC Partnership" represents four entities (A, B, C, and ABC Partnership).
  • Legal Reference: Article 1768 of the Civil Code - Partnerships have a personality separate and distinct from that of individual partners.

Implications of Juridical Personality

  • Obligations of the partnership remain with the partnership, not individual partners.
  • Creditors can only pursue the partnership for debts, not individual partners, except in cases of fraud.
  • Advantage over Sole Proprietorship:
    • In a sole proprietorship, the owner is personally liable for business debts due to the absence of a separate legal personality.
    • In a partnership, debts belong to the partnership, protecting individual partners from personal liability.

Conclusion

  • Overview of partnership concepts and distinctions from sole proprietorship.
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