2. Material y Métodos
2.2. Criterios de selección
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]
Article 1767 defines partnership from the viewpoint of
a contract. From the contract arises the partnership relation. As a form of business organization, partnership falls between two extremes – single proprietorship and corporation. [De Leon, Comments
and Cases on Partnership, Agency and Trusts (2010),
hereinafter referred to as "De Leon (2010)"] 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.
ESSENTIALFEATURES
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]
EFFECT OF UNLAWFUL OBJECT
If the partnership has an unlawful object or purpose: (1) The contract is void ab initio. [Article 1409(1)] (2) Once dissolved by judicial decree:
(a) The profits shall be confiscated by favor of the State;
(b) The instruments or tools and proceeds of the crime shall also be forfeited in favor of the State. [Article 1770]
(c) The contributions of partners shall not be confiscated unless they are instruments or tools of the crime. [De Leon (2010)]
Note: A partnership is dissolved by operation of law
(even without judicial decree) when the business becomes unlawful.
ASSOCIATIONS WITHOUT LEGAL PERSONALITY
Associations and societies with the following characteristics has no legal personality and is governed by the provisions of co-ownership:
(1) The articles are kept secret among the members; and
(2) Any one of the members may contract in his own name with third persons. [Article 1775]
It may, however, be sued by third persons under the common name it uses. [Section 15, Rule 3, Rules of
Court]
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. PARTIESTOTHECONTRACT
General rule: Any person capacitated to contract may
enter into a contract of partnership.
As such, the following persons cannot enter into a contract of partnership:
(1) Those suffering from civil interdiction; (2) Minors;
(3) Insane or demented persons;
(4) Deaf-mutes who do not know how to write; (5) Incompetents who are under guardianship.
Exceptions: The capacity of the following persons to
enter into a contract of partnership, though capacitated to contract generally, are limited: (1) Those who are prohibited from giving each other
any donation or advantage cannot enter into a universal partnership. [Article 1782]
(2) A corporation cannot enter into a partnership in the absence of express authorization by statute or charter.
Ratio: Otherwise, as a result of the mutual agency
between partners, a corporation would be bound by the acts of persons other than its duly appointed or authorized officers or agents. This is inconsistent
with the policy of the law that a corporation should manage its own affairs.
Also, the arrangement would allow corporate property to be subject to risks not contemplated by the stockholders when they originally invested. [Mendiola v. CA (2006)]
Although a corporation cannot enter into a partnership contract, it may, however, engage in a joint venture with others [Auerbach vs. Sanitary
Wares Manufacturing Corp. (1989)].
There is no prohibition against a partnership being a partner in another partnership. [De Leon (2010)] OBJECTOFTHECONTRACT
OBJECT OF UNIVERSAL PARTNERSHIP A universal partnership may refer to: (1) All present property:
(a) The partners contribute all the property which belongs to them to a common fund, with the intention of dividing the same among themselves, as well as the profits they may acquire therewith. [Article 1778]
(b) The property contributed includes all those belonging to the partners at the time of the constitution of the partnership.
(c) A stipulation for the common enjoyment of any other profits may also be made. However, the property which the partners may acquire subsequently by inheritance, legacy or donation cannot be included in such stipulation, except the fruits thereof. [Article 1779]
(2) All the profits:
(a) It comprises all that the partners may acquire by their industry or work during the existence of the partnership.
(b) Only the usufruct over the property of the partners passes to the partnership. [Article
1780]
When the articles of universal partnership does not specify its nature (all present property or all the profits), the partnership will be considered as one only of all the profits. [Article 1781]
OBJECT OF PARTICULAR PARTNERSHIP
A particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation. [Article 1783]
FORMOFTHECONTRACT
General rule: The contract may be constituted in any
form. [Article 1771]
Exceptions: (1) Where immovable property or real
rights are contributed:
(a) The contract must appear in a public instrument; and
(b) Attached to such instrument must be an inventory, signed by the parties, of the property contributed. [Articles 1771 and 1773]
(2) Where the capital is at least P3,000, in money or property:
(a) The contract must appear in a public instrument; and
(b) It must be recorded in the SEC. Failure to
comply with these requirements, however, does not affect the liability of the partnership
and the partners to third persons. [Articles
1768 and 1772]
DURATIONOFTHECONTRACT
COMMENCEMENT
A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated. [Article 1784]
TERM
As to period, a partnership may either be: (1) For a fixed term or particular undertaking; or (2) At will, the formation and dissolution of which
depend on the mutual desire and consent of the parties. Any one of the partners may, at his sole pleasure, dictate the dissolution of the partnership, even in bad faith, subject to liability for damages. [Ortega v. CA (1995)]
EXTENSION
A partnership term may be extended by: (1) Express renewal of the agreement; or (2) Implied renewal, when the requisites concur:
(a) The partnership is for a fixed term or particular undertaking;
(b) It is continued after the termination of the fixed term or particular undertaking without any express agreement.
A continuation of the business by the partners or such of them as habitually acted therein during the term, without any settlement or liquidation of the partnership affairs, is prima facie evidence of a continuation of the partnership. The effect of such continuation is that the right and duties of the partners remain the same as they were at such termination of the period, but this time, the partnership is considered to be at will. [Article 1785]
RULESTODETERMINEEXISTENCE
When the intent of the parties is clear, it shall govern. When it does not clearly appear, the following rules apply:
(1) Persons who are not partners to each other are not partners as to third persons.
Exception: A person not a partner may be considered a partner by estoppel.
(2) Co-ownership or co-possession does not of itself establish a partnership, even when there is sharing of profits in the use of the property. (3) Sharing of gross returns does not of itself
establish a partnership, even when the parties have joint or common interest in any property from which the returns are derived.
(4) The receipt by a person of a share in the profits of a business is prima facie evidence that he is a partner.
Exceptions: No such inference is drawn if the profits are received in payment:
(a) As a debt by installments or otherwise; (b) As wages of an employee of rent to a landlord; (c) As an annuity to a widow or representative of a
deceased partner;
(d) As interest on a loan, though the amount of payment vary with the profits of the business; (e) As the consideration for the sale of a goodwill of a
business or other property by installments or otherwise. [Article 1769]
RELATIONSCREATED
(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.
KINDSOFPARTNERSHIP
AS TO LEGALITY OF EXISTENCE
(1) Partnership de jure is one which has complied with all the requisites for its lawful establishment. (2) Partnership de facto is one which failed to so comply.
AS TO OBJECT
(1) Universal partnership: (a) Of all present property; (b) Of profits;
(2) Particular partnership. AS TO DURATION
(1) For a fixed term or particular undertaking; (2) At will.
AS TO LIABILITY OF PARTNERS
(1) General partnership, consisting of general partners only, who are liable pro rata for partnership obligations with all their after exhaustion of partnership assets;
(2) Limited partnership, includes, aside from general partner/s, limited partners, who are not personally liable for partnership obligations. AS TO PUBLICITY
(1) Secret partnership, where the existence of certain persons as partners is not made known by the partners;
(2) Open or notorious partnership, the existence of which is made known to the public by the partners.
AS TO PURPOSE
(1) Commercial or trading partnership, for transaction of business;
(2) Professional or non-trading, for exercise of a profession.
A profession has been defined as "a group of men pursuing a learned art as a common calling in the spirit of public service — no less a public service because it may incidentally be a means of livelihood." [In the Matter of the Petition for Authority
to Continue Use of Firm name "Sycip, Salazar, etc."/"Ozaeta, Romulo, etc." (1979)]
A professional partnership is a particular partnership. [Article 1783]
KINDSOFPARTNERS
(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
regard to the share of the latter in the partnership;
(11) Ostensible, who takes active part in the business of the partnership and is known by the public; (12)Secret, who takes active part in the business, but
is unknown to the third persons as a partner;
(13) Silent, who does not take active part in the business, but may be known to be a partner by third persons; (14)Dormant, who does not take active part in the
business and is not known or held out as a partner;
(15)Original, who has been a partner since the constitution of the partnership;
(16)Incoming, who is about to be taken as a member into an existing partnership;
(17) Retiring, who is withdrawing from the partnership.
Industrial Partner Capitalist Partner
Form of contribution
Industry Money or property
Share in profits
Just and equitable share According to agreement; if none, in proportion to contribution
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 business for himself,
unless the partnership
expressly permits him to do so; should he do so without permission, the capitalist partners (as well as industrial partners [De
Leon (2010)]) may (a)
exclude him from the firm, or (b) avail themselves of the benefits obtained in violation of the
prohibition, with right to damages in either case [Article 1789]
Cannot engage, for his own account, in the same kind of business as that of the partnership, unless there is a stipulation to the contrary; should he do so, he shall bring to the common fund any profits accruing to him from his transactions and shall personally bear all the losses [Article 1808]
DISTINGUISHEDFROMOTHERCONTRACTS
Partnership Joint Venture Operates with firm name
and legal personality Operates with no firm name and legal personality
Generally relates to a continuing business of various transactions of a certain king
Usually limited to a single transaction
Corporations may not
enter into a partnership Corporations may enter into joint ventures It would seem therefore that under Philippine law, a joint venture is a form of partnership and should thus be governed by the laws of partnership. [Auerbach vs.
Sanitary Wares Manufacturing Corp. (1989)]
Partnership Co-Ownership
Generally created by either express or implied contract
Generally created by law, and may exist even without a contract Has a separate juridical
personality Has no separate juridical personality Generally, the purpose is
to obtain profits The purpose is common enjoyment of a thing or right
Duration has no limitation An agreement to keep a thing undivided for more than 10 years is not allowed
There is mutual agency
between partners There is no mutual representation among co- owners
Death or incapacity of a partner dissolves the partnership
Death or incapacity of a co-owner does not dissolve the co-ownership Partner cannot dispose of
his interest so as to make the assignee a partner, without consent of others
Co-owner can dispose of his share without consent of others
Partnership Corporation
Has juridical personality separate and distinct from its individual members
Partnership Corporation Composed of an aggregate of individuals Distributes its profits to those who contributed capital to the business
Can only be organized where there is a law authorizing its organization
Taxable as a corporation
Created by agreement Created by law (with SEC approval)
Involves at least 2 persons Except for a corporation sole, requires at least 5 incorporators
Personality commences from the moment of execution of the contract
Personality commences from the issuance of certificate of incorporation Can exercise any power
authorized by partners Can exercise only powers granted by law or those incidental to its existence When management is not
agreed upon, every partner may act for the partnership
Management is vested in the board of directors of trustees
Partners are generally liable for partnership debts
Stockholders are liable only to the extent of their shares
Partner cannot dispose of his interest so as to make the assignee a partner, without consent of others
Stockholder has the right to transfer his shares without consent of others Duration has no limitation The term is 50 years, but
may be extended May be dissolved at any
time by one or all of the partners
May only be dissolved with the consent of the state
Partnership Partnership of Gains Conjugal Created by voluntary
agreement of 2 or more partners of either sex
Arises in case the spouses, of opposite sex, agree before marriage Governed by agreement Governed by law
Partnership Partnership of Gains Conjugal Has juridical personality 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
Share in profits may be stipulated; otherwise, in proportion to contribution
Share in profits is equal
Management shared by all partners, unless otherwise agreed upon
Administration belongs to the spouses jointly, but decision of husband prevails in disagreement Partner can dispose of
Interest even without consent of others
Spouse cannot dispose of interest during marriage, even with consent
Partnership Voluntary Association Has juridical personality Has no juridical
personality
Organized for profit Not always organized for profit
Capital is contributed Capital is not contributed, although fees are
collected from members Partnership is primarily
liable; the partners are liable only subsidiarily
The members are liable individually for debts which they authorized or ratified
Share in profits may be stipulated; otherwise, in proportion to contribution
Share in profits is equal
Management shared by all partners, unless otherwise agreed upon
Administration belongs to the spouses jointly, but decision of husband prevails in disagreement Partner can dispose of
Interest even without consent of others
Spouse cannot dispose of interest during marriage, even with consent