CHAPTER 1 Concept of Partnership Association Legal relation Undertaking Organization Entity Characteristics elements of partnerships Consensual Nominate Bilateral

ilateral Onerous Commutative Principal Preparatory Essential features of partnership There must be a valid contract The parties must have legal capacity to enter into the contract There must be a mutual contribution of money, property, or industry to a common fund The object must be lawful The purpose or primary purpose must be to obtain profits and to divide the same among the parties Existence of a valid contract Form of voluntary and personal association Creation and proof of existence Other forms of association excluded Legal capacity of parties to enter into the contract General rule Unemancipated persons Insane or demented persons Deaf mutes who do not know how to write Persons who are suffering from civil interdiction Incompetents who are under guardianship. Exceptions Capacity of partnership/corporation to be a partner Mutual contribution to a common fund Proprietory or financial interest Form of contribution Money Property Industry Legality of object Effect of illegality Business partnership not permitted to engage in Intention to realize and divide profits Very reason for existence of partnership Sufficient if obtaining profit principal purpose Sharing of profits Not necessarily in equal shares Not conclusive evidence of partnership Sharing of losses Necessary corollary of sharing in profits Agreement not necessary ART 1769. In determining whether a partnership exists, these rules shall apply: Except as provided by article 1825, persons who are not partners as to each other are not partners as to third persons Co-ownership or co-possession does of itself establish a partnership, whether such coowners or co-possessors do or do not share any profits made by the use of the property. The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived. 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, but no such profits were received in payment. as a debt by instalments or otherwise as wages if an employee or rent to a landlord Interest on a loan, though the amounts of payment vary with the profits of the business. as the consideration for the sale of a goodwill of a business or other property by instalments or otherwise Persons not part as to each other partnership, matter of intention partnership by estoppels Partnership distinguished from co-ownership creation juridical personality purpose duration disposal of interests power to act with third persons effect of death Partnership distinguishes from conjugal partnership of gains parties laws which govern juridical personality commencement

purpose distribution of profits management disposition of shares

Partnership distinguished from voluntary associations juridical personality purpose contribution of members Effects of an unlawful partnership The contract is void ab initio and the partnership never existed in the eyes of the law The profit shall be confiscated in favour of the government The instruments or tools and procedures of the crime shall be forfeited in favour of the government The contribution of the partners shall not be confiscated unless they fall under no. 03 Classifications of partnership As to the subject matter Universal Partnership Universal partnership of all present property Universal partnerships of profit Particular partnership As to the liability of the partners General partnership Limited As to its duration Partnership at will Partnership with a mix term As to its legality of its existence De Jure partnership De Facto partnership As to representation to others Ordinary or real Ostensible partnership or partnership by estoppels As to its publicity Secret partnership Open or notorious partnership As to its purpose Commercial or trading partnership Professional/non-trading partnership Kinds of partner Under the civil code Capitalist partner Industrial partner Managing partner General partner Limited partner Liquidating partner

other

Partner by estoppels continuing partner surviving partner sub partner classifications ostensible partner secret partner silent partner dormant partner original partner incoming partner retiring partner

universal partnership of profits explained ownership of present and future property profit acquired through chance fruits of the property subsequently acquired Art 739: those made between persons who were guilty of adultery or concubinage at the time if the donation those made between persons are found guilty of the same criminal offense in consideration thereof those made to a public officer or his wife descendants and ascendants by reason of his office Relations created by a contract of partnership relations among the partners themselves relations of the partners with the partnership relations of the partnership with third persons with whom it contracts relations of the partners with such third persons Executor agreement of partnership future partnership agreement to create partnership Continuation of partnership beyond fixed term rights and duties partners in a partnership at will termination of the partnership Obligations with respect to contribution of property To contribute at the beginning of the partnership or at the stipulated time the money, property or industry which he may have promised to contribute. To answer for eviction in case the partnership is deprived of the determinate property contributed To answer the partnership for the fruits of the property the contribution which he delayed, from the date they should ace been contributed up to the time of actual delivery

to preserve said property with the diligence of a good father of a family pending delivery to the partnership to indemnify the partnership for any damage cause to it by the retention of the same or by the delay in its contribution

right to subrogation in place of partnership creditors after payment of partnership liabilities right of indemnification by the guilty partner against all debts and liabilities of the partnership

Effect of failure to contribute property promised liability as debtor to partnership remedy of other parties Liability of guilty partner for interest and damages accrual of liability justification for double responsibility Prohibition against engaging in business as regards an industrial partner as regards capitalist partners Compensation of damages with profits earned for partnership by guilty partner damages not generally subject to set-off exception Persons who cannot give consent to a contract of partnership

Unemancipated persons Insane or demented persons Deaf-mutes who do not know how to write Persons who are suffering from civil interdiction Incompetents who are under guardianship

ART 1830 Dissolution is caused 1. without violation of the agreement between the partners a. by the termination of the definite term or particular undertaking specified in the agreement b. by the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified c. by the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking d. by the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners 1. in contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this article, by the express will of nay partner at any time.

2. By any event which it makes it unlawful for the

3. business of the partnership to be carried on or for the members o carry it on in partnership When a specific thing, which a partner had promised to contribute to the partnership, perishes before the delivery; in any case by the loss of the things, when the partner who contributed it having reserved the ownership thereof, has only transferred to the partnership the use or enjoyment of the same; but the partnership shall not be dissolved by the loss of the things when occurs after the partnership has acquired the ownership thereof; By the death of any partner By the insolvency of any partner or of the partnership By the civil interdiction of any partner By decree of court under the following article (1700a and 1701a)

Obligations of the partner to capital (money) Contribute on the date due the amount he has undertaken to contribute to the partnership Reimburse any amount he may have taken from the partnership coffers and converted to his own use Pay the greed or legal interest, if he fails to pay his contribution on time or in case he takes any amount from the common fund and converts it to his own use Indemnify the partnership for the damages caused to it by the delay in the contribution or the contribution of any sum for his personal benefit Responsibility of the partnership to the to refund amount disbursed To answer for the obligation to answer for risks Rights of injured partner where partnership contract rescinded right of a lien on, or retention of, the surplus of partnership property after satisfying partnership liabilities for any sum of money paid or contributed by him

4. 5. 6. 7.

ART 1831 partner has been declared insane in any judicial proceeding or is shown to be of unsound mind partner becomes in any other way capable of performing his part of the partnership contract

partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business partner wilfully or persistently commits breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that is not reasonably practicable to carry on the business in partnership with him the business of the partnership can only be carried on at a loss other circumstances render a dissolution