Overview
This module introduces the fundamentals of partnership law, including its definition, essential characteristics, types, contractual requirements, and distinctions from other forms of business organization.
Definition and Nature of Partnership
- A partnership is a contract where two or more persons contribute money, property, or industry to a common fund with the intention of dividing profits.
- Partnerships may also be established for the exercise of a profession.
- A partnership has a juridical personality separate from its partners.
Essential Requisites and Characteristics
- There must be an intention to create a partnership, a common fund, and joint interest in profits.
- Essential features: valid contract, legal capacity, mutual contribution, lawful object, primary purpose to gain profits.
- Partnership contract is consensual, nominate, bilateral, onerous, commutative, principal, and preparatory.
Requirements for Formation
- Partnerships may be created orally except when immovable property is contributed, which requires a public instrument.
- If capital is at least P3,000, contract must be in a public instrument and recorded with the SEC, but failure does not affect liability to third parties.
- For immovable property contributions, an inventory signed by all parties must be attached to the public instrument.
Rules for Determining Existence
- Co-ownership or sharing of gross returns does not necessarily establish partnership.
- Sharing in net profits is prima facie evidence of partnership, unless profits are from specific exceptions (debts, rent, wages, etc.).
- Criteria: capital contribution, right to manage, sharing in profits and losses.
Classifications of Partnership
- By object: universal (all property or all profits), particular.
- By liability: general (all liable), limited (at least one general partner, others liable only for contributions).
- By duration: fixed-term/particular undertaking, or at will.
- By purpose: commercial/trading or professional/non-trading.
- By legality: de jure (legally compliant), de facto (not fully compliant).
- By representation: ordinary/real or ostensible/by estoppel.
Partnership vs. Corporation and Co-ownership
- Partnership formed by agreement; corporation by law.
- Partnerships may have two or more persons; corporations require at least five.
- Partnerships have no right of succession and terminate on death/incapacity; corporations have right of succession.
- Partnerships have mutual agency; co-ownership lacks mutual agency and juridical personality.
Other Similar Contracts
- Joint ventures are like partnerships but for single transactions or limited projects.
- Collaborations and associations are forms of working together, but do not create partnerships unless requirements are met.
Key Terms & Definitions
- Partner — one who contributes to and shares profits/losses in a partnership.
- Juridical personality — legal recognition of an entity as a person separate from its members.
- General partnership — all partners liable with separate properties.
- Limited partnership — liability limited to contribution except for at least one general partner.
- Universal partnership — covers all property or all profits.
- Particular partnership — specific objects or undertakings.
- At will — partnership with no specified term or end.
Action Items / Next Steps
- Review Civil Code Articles 1767–1783 on partnerships.
- Complete practice multiple choice and problem questions at the end of the module.
- Study distinctions between partnership, corporation, and co-ownership for upcoming quizzes.