Partnership Notes (Art. 1767-1783) PDF

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Summary

PARTNERSHIPArt. 1767-Article 1767. By the contract of partnership two or more persons bind themselvesto contribute money, property, or industry to a common fund, with the intentionof dividing the profits among themselves.Two or more persons may also form a partnership for the exercise of a professio...

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PARTNERSHIP Art. 1767-1783 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. Two or more persons may also form a partnership for the exercise of a profession. What are the requisites of a contract of partnership? 1. Must be a valid contract- delectus personae (choice of the person) 2. Must have legal capacity to enter into the contract 3. Mutual contribution  Money- should be in cash  Property- real or personal, tangible or intangible  Industry- personal manual efforts or intellectual 4. Intention of dividing profits- not necessarily in equal shares 5. Object must be lawful Persons who cannot give their consent to a contract of partnership are: a) b) c) d) e)

Unemancipated minors; Insane or demented persons; Deaf-mutes who do not know how to write; Suffering from civil interdictions; and Incompetents who are under guardianship.

Note: Any person who cannot legally give consent to a contract cannot be a partner. Article 1768. The partnership has a juridical personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of article 1772, first paragraph. Article 1772. Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission. Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons. When does a partnership exist? 1

These rules shall apply: 1. Except as provided by article 1825, persons who are not partners as to each other are not partners as to third persons; 2. Co-ownership or co-possession does not of itself establish a partnership 3. The sharing of gross returns does not of itself establish a partnership 4. The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, except if such share is for: a) b) c) d) e)

Payment of debt; Wages; Annuity; Interest of loan; and Consideration for sales of goodwill or property (Art. 1769)

Partnership

Co-ownership

Creation

Always created by contract either express or implied

Generally created by law; Exist even without contract

Juridical personality

Has juridical personality separate and distinct

None

Purpose

Realization of profits

Common enjoyment of a thing or right

Duration

No limitation

Not more 10 years

Disposal of interest

May not dispose of his individual interest

Co-owner may freely do so

Effect of death

Results in the dissolution

Not necessarily dissolve the co-ownership

A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners (Art. 1770). 2

When an unlawful partnership is dissolved by a judicial decree, the profits shall be confiscated in favor of the State, without prejudice to the provisions of the Penal Code governing the confiscation of the instruments and effects of a crime.

Does drugs, marijuana, and other illegal drugs is TAXABLE? YES.

What are the effects of an unlawful partnership? 1. Contract is void ab initio and the partnership never existed in the eyes of the law; 2. Profits shall be confiscated in favor of the government; 3. Instruments or tools and proceeds of crime shall be forfeited in favor of the government; and 4. Contributions of the partners shall not be confiscated unless they fall under no. 3. Article 1771. A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. Article 1773. A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.

Note: Contract may be made orally or in writing regardless of value.

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Universal Partnership Particular Partnership -Its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation. -Example: Auditing and Accounting firm

All present property -Partners contribute all the property. -The property which belonged to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners.

Profits -Comprises all that the partners may acquire by their industry or work during the existence of the partnership. -What pass to the partnership is the profits and the usufruct or use of the same. (Example: leases or income of the building but not the building itself) -Upon the dissolution, property is returned to the partners who own it.

Note: If articles of universal partnership do not specify the nature presumed it is merely a partnership of profits.

Article 1782. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership. 4

The following donations shall be void: 1. Made between persons who were guilty of adultery or concubinage; 2. Found guilty of same criminal offense; 3. Made to a public officer or his wife, descendants, and ascendants by reason of his office.

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