Overview
This lecture covers key concepts, elements, rights, and obligations related to partnerships under Philippine civil law, including differences from other associations, important doctrines, formation, dissolution, and limited partnerships.
Definition and Elements of Partnership
- A partnership is a contract where two or more people contribute money, property, or industry to a common fund with intent to divide profits.
- Found in Article 1767 of the Civil Code.
- Two types: ordinary/business partnerships (for profit) and general professional partnerships (for a profession).
- Essential elements: agreement to contribute, intention to divide profits or exercise a profession.
Distinction from Other Associations
- Co-ownership does not establish a partnership; intent to share profits is required.
- Sharing gross returns does not alone prove a partnership; sharing profits is prima facie evidence but exceptions apply (e.g., debt, wages, rent).
Types and Features of Partnerships
- Joint ventures are treated as partnerships but usually limited to a single transaction.
- Partnership by estoppel arises if non-partners represent themselves as partners, leading third parties to act based on that belief.
- De facto partnerships lack formalities but function as partnerships among members.
Key Doctrines in Partnership Law
- Doctrine of delectus personae: Partners may choose with whom to associate; membership is based on personal trust.
- Doctrine of mutual agency: Each partner acts as agent and may bind the partnership in transactions related to partnership business.
- Partners are guarantors of partnership obligations, meaning creditors can run after partners if the partnership cannot pay.
Formation and Formalities
- Partnerships are generally binding in any form; must be in writing if: performance is after a year, involves real property or real rights, or capital is ≥₱3,000.
- If involving immovable property, must be written, notarized, and attached with an inventory.
- Registration with SEC is for third-party notice; among partners, absence of registration does not void the partnership.
Rights and Obligations of Partnerships and Partners
- Partnership is a juridical person distinct from its partners, may own property, incur obligations, and sue/be sued.
- Partners have rights to specific partnership property (cannot be attached for personal debts), share in profits (assignable), participate in management, and demand accounting.
- Obligations include contributing agreed money, property, or industry; not engaging in competing businesses (stricter for industrial partners); answering for partnership losses/faults.
Profit, Loss, and Liability Sharing
- Profit sharing follows agreement or, absent agreement, proportionate to contribution.
- Loss sharing also follows agreement or, if none, mirrors profit sharing; industrial partners generally not liable for losses.
- Partners’ liability to third parties is pro rata and subsidiary after partnership assets are exhausted.
- Certain acts (e.g., misappropriation, negligence) may result in solidary liability with the partnership.
Dissolution and Winding Up
- Causes include expiration, withdrawal, death, insolvency, illegality, or court decree.
- Winding up involves settling debts in order: outside creditors, partners’ advances, partners’ capital, then profits.
- Continuing business after dissolution allows old creditors to claim against the new firm.
Limited Partnerships
- Formed by at least one general and one limited partner.
- Limited partner’s liability is only up to their contribution; cannot manage or their liability becomes general.
- Limited partners cannot contribute industry, only money or property.
- Limited partner’s surname generally cannot be in the firm name.
Key Terms & Definitions
- Partnership — Contract where persons contribute to a common fund for profit sharing.
- Delectus personae — Right to choose partnership members.
- Mutual agency — Each partner may bind the partnership in usual business.
- Limited partner — Partner whose liability is limited to their contribution and who cannot manage the partnership.
Action Items / Next Steps
- Review Articles 1767–1854 of the Civil Code.
- Wait for the scheduled lecture/video on Agency and Trusts.
- Prepare questions for clarification on partnership dissolution and limited partnerships.