PARTNERSHIPSARTICLE 1767a contract whereby two or more persons come together and bind themselves:

1. to contribute a common fund money, property, service2. with the intention to divide the profit among

themselves agreement to engage or pursue a business enterprise

together

2ND PARAGRAPH OF ARTICLE 1767 Exercise of profession is not considered as business

endeavor.o it is a special form of partnershipo does not adhere to general rule

PARTNERSHIPS1. A Contractual Relationship

a. coming together 2. A Juridical Person (ARTICLE 1768)

a. a separate and distinct “person” different from the partners/owners

3. A Business Enterprisea. Going Concernb. Economic Unit c. Profit-Loss Center

SOLE PROPRIETORSHIP equity or a proprietary interest in a business enterprise if equity is owned by one, it is sole proprietorship

PARTNERSHIP CAPITAL equity owned by partners medium of owning in a business

SHARES OF STOCK equity owner by stockholders in a corporation

PARTNERSHIP aggregation of different sole proprietorships

ATTRIBUTES OF PARTNERSHIP1. A Contractual Arrangement

ARTICLE 1769 partnerships does not exist unless partners

agree to enter into business together2. The Weak/Informal/Consensual Juridical Personality

weak separate juridical personality3. Mutual Agency

by the fact that the partners come together, each partner becomes agent of the other

relationship among partners are fiduciary of the highest character

the moment a contract is entered into, partnership begins, as well as mutual agency

every person dealing with a partner has a right to expect to bind the other partner to be liable;

LAW ON PARTNERSHIP is formed in order for commerce to go on;

- public no longer needs to question the authority of the partners as agents

- as opposed to agents and principals 4. Delectus Personality/Personalum (?)

Concept of Relativity only those who give consent to contract would be bound by a contract and entitled to rights thereof

manifestation of principle of relativity only those people whose defects I accept can

be my partners “we tolerate one another” if one dies/withdraws, the bond among the

whole partners is broken 5. Unlimited Liability

LIMITED LIABILITY: a shareholder does not become liable for the obligations of the corporation which is a separate juridical personality

- norm UNLIMITED LIABILTIY: partners are personally

liable for their separate assets for partnership obligations

GENERAL RULE IN COMMON LAW/CIVIL LAW: a partnership is a form of co-ownership

- a partnership does not have a separate personality; an aggregate of sole proprietorships

those who own business are liable for the obligations of the business, even separate and distinct from the owner’s properties

creditors can go after the properties of the owner, even not from the business

ABERRATION in AGENCY & PARTNERS: how do you make partners personally liable for the contracts entered into by the partnership, just because the law says so?

THE HIGHEST HIERARCHICAL VALUE: agreement to be associated with one another;

ARTICLE 1784 6. partnership is a consensual contract juridical personality is constituted ipso jure, upon

agreement or meeting of the minds of the partners to enter into a business together

PARTNERSHIP CORPORATIONconsensual (?)

not durable, durable, cannot be dissolved easily

weak medium of business strong medium of businesspersonal impersonal

unlimited liability limitaed liability

CHARACTERISTICS OF PARTNERSHIP1. Principal and Nominate 2. Consensual

perfected by mere consent

agreement to be bound is the one that creates the partnership

even partners have to contribute to a common fund

agreement that is created by meeting of the minds

no particular form is required for it to be formed

i. ARTICLE 1773: however, if an immovable agreed to be contributed, it must be in a public instrument, otherwise it is VOID

1. SC: this was not meant to render partnership “void”

2. only basis to sue one if not in a public instrument

3. only to inform public who owns the immovable

ii. P3K or more contribution, it has to be:1. registered in SEC

a. failure to register does not affect partnership (?)

2. in a public instrument3. Multi-Lateral/Reciprocal4. Onerous

each of partners are bound to contribute money, property or service in a common fund

the olbgiation to contribute is clear in every contract of partnership

unlawful for one to enter into partnership if he cannot contribute anything

REGULAR PARTNER – money/propertyi. if such partner does not contribute the

money on a due date, there is substantial breach; other partners can ask for rescission

INDUSTRIAL PARTNER – service equity is a debt in partnership each partner is indebted to all other partners

5. Preparatory if the purpose of partnership is to create a

business business = to deal with the public purpose of partnership is to ensure that the

contracts entered into good faith with the public are valid and binding

if there is a situation that would render the contract binding…look into law (?)

partnership’s purpose is to promote business enterprise

6. Progressive vows in marriage are general a contract usually is bounded by the doctrine of

mutuality and obligatory force within the 4 corners, obligatory force is high;

one cannot get away with it; subject to specific performance

i. most contracts are like that ii. but not all are like that, since future is

unpredictable

as the transactions change with technology and competition, relationship of partnership changes

a contract of partnership is not a strangling relationship; it is flexible; it allows future development in relation to the changes of time

NO DUTY OF OBEDIENCEDUTY:

1. to reimburse 2. of dligence

PARTNERS1. GENERAL PARTNERS

a. unlimited liability2. LIMITED PARTNERS

a. not general ruleb. limited liability

PARTNERS (?) 1. CO-OWNERSHIP INTEREST

a. not all co-ownerships are partnerships, even co-owners distribute properties among themselves

b. each partner is a co-owner of the properties of partnership

c. partners exercise co-ownership to run the operations of the partnership

d. co-ownership interest is to allow them to operate partnership

e. even if property is not named after the partnership, the partners already own it

f. jus diponendi g. this is the aspect that makes them equity

owners2. RIGHT TO MANAGE THE BUSINESS ENTERPRISE

a. brings out mutual agencyb. each partner can bind the partnership

3. EQUITY RIGHTS

ARTICLE 1769 just because 2 or more persons are bound in an

operation/transaction does not necessarily mean that a partnership is formed;

in the end, every partnership is a co-ownership There must be an express/implied consent that they

become co-owners/partners. when there is a business and a person is entitled to

receive gross receipts, NO PARTNERSHIP PRESUMEDo when business makes profit, a partner owns

equityo gross receipts does not allow partner to

participate in losses o GROSS RECEIPT/INCOME = REVENUE – COST OF

GOODS SOLDo NET INCOME = GROSS INCOME - EXPENSES

when a person is entitled to receive a net profit, PARTNERSHIP IS PRESUMED

o EXCEPT: when the receipts are proven to be received for other purposes

LIABILITIES OF A PARTNERSHIP1. LIMITED LIABILITY- partners are liable for their separate property, pro rata- partners v. creditor

PROFITS & LOSSES IN PARTNERSHIP- distributed to the partners according to their stipulation - in absence of agreement, but only an agreement o how to distribute profit, losses will be distributed- if without agreement to distribute losses, partners must contribute according to:1. the proportion of property2. equally

industrial partners- by law exempt from participating to losses- not liable for losses- only participates in profits- only a reasonable share in profit, determined by other partners or 3rd parties- stipulation that exempts one from loss, is VOID, because each is an equity owner, EXCEPT industrial partner

EXAMPLE5 of us. Distribute as follows: - I am entitled to 10% gross receipt- all others equal to net incomeCLV: entitled to gross receipts- stipulation is void, because CLV is not an industrial partner

- every partner in a partnership is liable pro rata for the oblgiaitons of the partnership

RULES ON INDUSTRIAL PARTNERS- all partners are liable for the - although not liable for losses of partnership, not exempted from “limited liability” as to creditors.