PARTNERSHIP

INTRODUCTION

The law on partnership is a special kind of contract that constitutes a status and
a fiduciary relations subsisting between persons carrying on a business in
common with a view on profit.

By the contract of partnership two or more person bind themselves to contribute money,
property or industry to a common fund, with the intention of dividing the profits among
themselves (CIVIL CODE, Art. 1767)

Two or more persons may also form a partnership for the exercise of a profession
(CIVIL CODE, Art. 1767).

INTENDED LEARNING OUTCOMES

This module intends to impart upon the student the following:

1. The basic principles and characteristics of the law on partnership

2. The different kinds of partnership
3. The liabilities of partnership and each partners
4. Dissolution and winding up of partnership affairs, among others.

The purpose of this subject matter is to introduce the student to the principles of
partnership and for him or her to understand the effects of partnership as a status in
conducting businesses and in dealing with its concerns

DISCUSSION

Basic Characteristics of Partnership:

(P2C2BON)

1. Principal – does not depend on other contracts

2. Preparatory – entered as a means to an end (for example, to conduct legitimate
business affairs)
3. Commutative – undertaking of each one is considered equal with others
4. Consensual – perfected by mere consent
5. Bilateral – entered by two or more persons
6. Onerous – contributions have to be made
7. Nominate – has a special designation in law

Essential Requisites:
(C3OP-G)

1. There must be a valid Contract;

a. The partnership relation is fundamentally contractual. The essential elements
(Cause, Object, & Consideration) of a contract are still required.
Note: the partnership relation is not the contract itself, but the result of the contract (DE
LEON, Comments and Cases on Partnership, Agency and trusts (2010), p. 13)

b. It is fiduciary in nature.

A contract of partnership is a personal relation in which the element of delectus

personae exist.

Delectus Personae – (choice of person or persons) it involves trust and confidence

between the partners. No one become a member of the partnership association without
the consent of all the other associates

c. The principle of estoppel applies (CIVIL CODE, Art. 1767)

2. The parties must have legal Capacity to enter into the contract;

Partnership as Partner

There is no prohibition against a partnership being a partner in another partnership (DE

LEON, Partnership, Agency and Trusts, supra at 171).

Corporation as a Partner

Unless authorized by a statute or by its articles, a corporation is without capacity of

power to enter into a contract of partnership (Mendiola v. CA, G.R. No. 159333, July 31,
2006).

3. There must be a mutual Contribution of money, property, or industry to a common

fund;

4. The Object or purpose must be lawful (CIVIL CODE, Art. 1770);

5. The primary Purpose must be to obtain profits to divide the same among the
parties; and

6. There must be at least one General partner.

Mercantile View of the Nature of a Partnership

(CIVIL CODE, Art. 1768)

A 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, par. 1).

Article 1768 provides that the partnership retains its juridical personality even if it fails to
register, so long as the contract has the essential requisites (Sunga-chan v.Chua, G.R.
No. 143340, August 15, 2001).

Partnership for the Practice of Law

The right to practice law is not a natural or constitutional right but a privilege or franchise
which may be enjoyed only under such terms as the State may deem necessary (DE
LEON, Partnership, Agency, and Trusts, supra at 27).
The use of a nom de plume, assumed, or trade name in law practice is improper.

Rules to Determine Existence of a Partnership

(CIVIL CODE, Art. 1769)

The issue as to whether a partnership exists is a factual matter (DE LEON, Partnership,
Agency and Trusts, supra at 29).

1. General Rule: Persons who are not partners as to each other are not partners as to
third persons.

Exception: Partnership by estoppel

Illustration: If A and B are not partners as to each other, neither will they be partners
with respect to C, a third person. But if A, with the consent of B, represents to C that
they are partners, then A and B will be considered partners as to C even if they are not
partners as a matter of fact.

2. Co-ownership or co-possession of a property does not of itself establish a

partnership, whether such co-owners or co-possessors do or do not share any profits
made by the use of the property.

Reason: The law does not imply a partnership between co-owners or co-possessors
because of the fact that they develop or operate a common property, since they may
rightfully do this by virtue of their respective titles or common dominion over the property
(DE LEON, Partnership, Agency and Trusts, supra at 31)

3. Sharing of gross returns alone does not indicate 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.

Reason: When a business is carried on in behalf of a given person as a partner, he is

conceived as being interested in its failures as well as its successes; it is the chance of
gain or loss, which characterizes a business. Take note that in a partnership, the
partners share profits after satisfying all of the partnership’s liabilities.
(DE LEON, Partnership, Agency and Trusts, supra at 35).

4. Receipt by a person of share in the profits is a prima facie evidence that he is a

partner in the business. However, sharing in the net profits presupposes sharing in
the losses.

Test of Partnership Existence:

1. Whether or not there is an agreement to contribute money, property, or industry to a

common fund; and

2. Whether or not there is intent of the contracting parties to divide the profits among
themselves.

Burden of Proof
The burden of proving the existence of a partnership rests on the party having the
affirmative of that issue

Incidents of a Partnership:

1. The partners share in profits and losses (CIVIL CODE, Art. 1767, 1797, 1798);

2. They have equal rights in the management and conduct of the partnership
business (CIVIL CODE, Art. 1803);

3. Every partner is an agent of the partnership, and entitled to bind the other
partners by his acts, for the purpose of its business (CIVIL CODE, Art. 1818);

4. All partners are personally liable for the debts of the partnership with their
separate property (CIVIL CODE, Art. 1843);

5. A fiduciary relation exists between the partners (CIVIL CODE, Art. 1767) (CIVIL
CODE, Art. 1767) (CIVIL CODE, Art. 1807); and

6. On dissolution, the partnership is not terminated, but continues until the winding
up of partnership is completed (CIVIL CODE, Art. 1828).

Effects of Unlawful Partnership:

1. The said contract is void ab initio (CIVIL CODE, Art. 1409, par. 1);
2. The profits shall be confiscated in favor of the government;
3. The instruments or tools and proceeds of the crime shall be forfeited in favor of the
government; and
4. The contributions of the partners shall not be confiscated unless they fall under No. 3.

Decree of Dissolution
A judicial decree is not necessary to dissolve an unlawful partnership. However, it may
sometimes be advisable that a judicial decree of dissolution be secured for the
convenience of the parties
(DE LEON, Partnership, Agency and Trusts, supra at 57).

Partnership and Voluntary Association Distinguished

Partnership Voluntary
Association
Juridical Personality
Has juridical Has no juridical
personality personality
Purpose
Always for profit Not always for
profit
Contribution of Members
There is no
There is contribution of
 contribution of capital although
capital fees are usually
collected from the
members to
maintain the
organization
Liability of Members
The partnership is Members are
the one liable individually liable
for the debts of
corporation

(DE LEON, Partnership, Agency and Trusts, supra at 50).

Partnership and Co-ownership Distinguished

(CJP3D2AFT)

Partnership Co-ownership
Creation
Always created by Generally created
a contract, either by law, but may
express or implied exist even without
a contract
Juridical personality
Has a juridical
personality Has no juridical
separate and personality
distinct from that of
each partner
Purpose
Realization of Common
profits enjoyment of a
thing or right;
Profits
May be stipulated Must always
upon depend upon
proportionate
shares and any
stipulation to the
contrary is void
Duration
No limitation upon An agreement to
the duration is set keep the thing
by law undivided for more
than 10 years is
not allowed
Dissolution
Death or Death or
incapacity of a incapacity of a co-
partner dissolves owner does not
 the partnership necessarily
dissolve the co-
ownership

Agency or Representation
As a rule, there is As a rule, there is
mutual agency no mutual
representation
Form
In general there is No public
no required form instrument is
(see exceptions) needed even if real
property is the
object of the co-
ownership
Transfer of Interests
A partner may not
dispose of his
individual interest A co-owner can
in the partnership dispose of his
so as to make the share without the
assignee a partner consent of the
without unanimous others
consent
(ld. At 46 and 47).

Partnership and Corporation Distinguished

(CNJ-PMERET2-FDG)

Partnership Corporation
Creation
Created by mere Created by law or
agreement by operation of law
Number of Incorporation
At least two Requires at least
persons five incorporators
(except a
corporation sole)
Commencement of Juridical
Personality
From the moment From the date of
of execution of the issuance of the
contract of certificate of
partnership incorporation by
the SEC
Powers
May exercise any Can exercise only
power authorized the powers
by the partners expressly granted
by law or implied
from those granted
 or incident to its
existence
Management
When
management is Management is
not agreed upon, vested in the board
every partner is an of directors or
agent of the trustees
partnership
Effect of mismanagement
A partner as such The suit against a
can sue co- member of the
partner who board of directors
mismanages or trustees who
mismanages must
be in the name of
the corporation
Right of Succession
No such right Has such right
Extent of Liability to Third Persons
Partners are Stockholders are
generally liable for liable only to the
partnership debts extent of the
to third persons shares subscribed
by them
Transferability of Interest
Partner cannot
transfer his interest Stockholder has
in the partnership generally the right
so as to make the to transfer his
transferee a shares without
partner without the prior consent of
unanimous the other
consent of all the stockholders
existing partners
Term of Existence
Partnership may Corporation may
be established for not be formed for a
any period of time term in excess of
stipulated by the 50 years
partners extendible to not
more than 50
years in any one
instance
Firm Name
Limited partnership Corporation may
is required by law adopt any name
to add the word provided it is not
“Ltd.” to it name the same as or
similar to any
registered firm
 name
Dissolution
May be dissolved Can only be
at any time by any dissolved with the
or all of the consent of the
partners State
Governing Law
Governed by the Governed by the
contract and the Corporation Code
Civil Code
(ld. At 53 to 55).

Partnership and Conjugal Partnership of Gains Distinguished

Partnership Conjugal
Partnership of
Gains
Parties
Created by Only between a
voluntary man and a woman.
agreement of two
or more persons
belonging to either
sex.
Governing Laws
Governed by the Governed by law.
stipulation of the
parties
Juridical Personality
Has juridical Has no juridical
personality personality
Commencement
Partnership begins Commences
from the moment precisely on the
of the execution of date of celebration
the contract, of the marriage,
unless otherwise any stipulation to
stipulated. the contrary is
void.
Purpose
To obtain profits To regulate
property relations
Distribution of Profits
According to
agreement of Shares of spouses
partners or in are divided
proportion to their equally.
respective capital
contributions.
Management
It is shared equally Although the
 by all partners administration
unless one or belongs to both
more of them are spouses jointly, the
appointed husband’s decision
managers in the shall prevail in
articles of case of
partnership. disagreement.
Disposition of Shares
The whole interest The share of each
of a partner may spouse cannot be
be disposed of disposed of during
without the the marriage even
consent of other with the consent of
partners the other.
(ld. at 48 to 50)

Joint Venture
An association of persons or companies jointly undertaking some commercial
enterprise; generally all of the members contribute assets and share risks (Kilosbayan,
Incorporated v. Guingona, Jr., G.R. No. 113375, May 5, 1994).

Requisites of a Joint Venture:

1. A community of interest in the performance of the subject matter;

2. A right to direct and govern the policy in connection therewith; and
3. Duty to share profits and losses.

Distinction Between Partnership and Joint Venture:

The main distinction in common law jurisdiction is that partnership contemplates a

general business with some degree of continuity, while joint venture is formed for the
execution of a single transaction and is thus of temporary nature
(Aurbach v. Sanitary Wares Manufacturing Corporation, G.R. No. 75875, December 15,
1989).

Note: A partnership that does not fix its term is a partnership at will. The birth and life of
a partnership at will is predicated on the mutual desire and consent of the partners.
Verily, any one of the partners may, at his sole pleasure, dictate the dissolution of the
partnership at will. He must, however, act in good faith, not that the attendance of bad
faith can prevent the dissolution of the partnership but that it can result in a liability for
damages
(Ortega, et al. v. CA, G.R. No. 109248, July 3, 1995).

UNIVERSAL PARTNERSHIP

A. Universal Partnership of All Present Property

One wherein the partners contribute all the property which actually belong to them to a
common fund, with the intention of dividing the same among themselves, as well as all
the profits which they may acquire therewith
(CIVIL CODE, Art. 1778).
Rule on after-acquired Properties

As a rule, aside from the contributed properties, only the profits of the contributed
common property (not other profits) are included. Thus, should a partner subsequently
acquire a property as remuneration for his work, such property and its fruits are not to
be enjoyed by the universal partnership of all present property
(PARAS, Civil Code Volune V, supra at 573).

However, profits from other sources may become common, only if there is a stipulation
to such effect
(ld. at 615).

Properties subsequently acquired by:

(1) inheritance,
(2) legacy or
(3) donation, cannot be included in the stipulation BUT the fruits thereof can be included
in the stipulation
(ld. at 616).

B. Universal Partnership of Profits

One which comprises all that the partners may acquire by their industry or work during
the existence of the partnership and the usufruct of movable or immovable property
which each of the partners may possess at the time of the celebration of the contract
(CIVIL CODE, Art. 1780).

Partners retain their ownership over their present and future property. What passes to
the partnership are the profits and the use of the same
(DE LEON, Partnership, Agency and Trusts, supra at 76).

Articles of Universal Partnership entered into without specification of its nature, only
constitute a Universal Partnership of Profits
(CIVIL CODE, Art. 1781).

Reason: A universal partnership of profits imposes less obligations on the partners,

since they preserve the ownership of their separate property
(DE LEON, Partnership, Agency and Trusts, supra at 77).

PROFESSIONAL PARTNERSHIP

Under Art. 1767 of the Civil Code, two or more persons may also from a partnership for
the 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”.

A partnership that has for its object the exercise of a profession is a particular
partnership
(CIVIL CODE, Art. 1783).

This is one case where a partnership is composed entirely of industrial partners

(TOLENTINO, Civil Code Volume V, supra at 329).

Capitalist and Industrial Partner Distinguished

 (CP2L)

Capitalist Partner Industrial Partner

Contribution
Contributes money Contributes his
or property (CIVIL industry or
CODE, Art. 1767). personal service
(CIVIL CODE, Art.
1789, 1767).
Prohibition to Engage in Other
Business
Cannot generally
engage in the Cannot engage in
same or similar any business for
enterprise as that himself (CIVIL
of his firm (CIVIL CODE, Art. 1797)
CODE, Art. 1808)
Losses
1. First, the Exempted as to
stipulation as to losses as between
losses; partners; but is
2. If none, the liable to third
agreement as to persons, without
profits; and prejudice to
3. If none, pro rata reimbursement
to contribution from the capitalist
(CIVIL CODE, Art. partners (CIVIL
1784) CODE, Art. 1784)

OBLIGATIONS OF THE PARTNERS

Partnership Term

General Rule: A partnership begins from the moment of the execution of the contract
(CIVIL CODE, Art. 1784).

Duration
In a sense, a partnership is unlimited to its duration as no time limit is fixed by law.
The term may be agreed upon expressly, as when there is a definite period, or
impliedly, as when there is a particular enterprise is undertaken – it being understood
that the firm ends as soon as its purpose is achieved
(PARAS, Civil Code Volume V, supra at 580).

Rights and Duties of Partners

When a partnership for a fixed term or particular undertaking is continued after the
termination of such term or particular undertaking without any express agreement, the
rights and duties of the partners remain the same as they were at such termination, so
far as is consistent with a partnership at will
(CIVIL CODE, Art. 1785 par. 1).

New Partnership is Created

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
(CIVIL CODE, Art. 1785 par. 2).

Obligations of Partners Among Themselves

A. Obligation with respect to contribution of property

(CW-DADI)

1. To Contribute what had been promised

(CIVIL CODE, Art. 1786);

Reason: The mutual contribution to a common fund is the essence of partnership

(DE LEON, Partnership, Agency and Trusts, supra at 92).

2. To Warrant property contributed in case of eviction

(CIVIL CODE, Art. 1786);

Reason: The obligation of warranty against eviction is the necessary consequence

of the nature, of the partnership which is an onerous contract
(PINEDA, Partnership, Agency & Trusts (2006) p. 53)

3. To deliver the fruits of the property from the time they should have been
delivered, without the need of any demand
(CIVIL CODE, Art. 1786);

Reason: Without the contributions, the partnership is useless (time is of the

essence); failure to contribute makes the partner ipso jure a debtor of the
partnership even in the absence of demand
(DE LEON, Partnership, Agency and Trusts, supra at 99).

4. When contribution is in goods, the amount thereof must be determined by proper

appraisal of the value thereof at the time of contribution
(CIVIL CODE, Art. 1787);

5. To preserve the property with the diligence of a good father of a family pending
delivery to the partnership
(CIVIL CODE, Art. 1763); and

6. To indemnify for any damages caused by the retention of the property or by

delay in its contribution
(CIVIL CODE, Art. 1788 & 1170)

Obligation Not to Engage in Other Business for Himself

Industrial Partner – cannot engage in ANY business for himself unless the
partnership expressly permits him to do so. The other partners have the remedy
of either excluding the erring partner form the firm or of availing themselves of
the benefits which he may have obtained
(CIVIL CODE, Art. 1789).
 Obligation to Contribute Capital and Additional Capital

1. Contribution to Partnership Capital

General Rule: The partners shall contribute equal shares
(CIVIL CODE, Art. 1790).
2. Contribution of Additional Capital
General Rule: A partner is not bound to contribute additional capital
(CIVIL CODE, Art. 1791).

Article 1792 Article 1793

As to Number of Credits
Two distinct credits
– one in favor of Only one credit –
the partnership in favor of the
and another in partnership
favor of the
managing partner.
As to Applicability
Applies if the Applies whether
partner is a the partner is
managing partner. authorized to
manage or not.

Responsibility of the Partnership to the Partners

(ROR)

1. To Refund amounts disbursed by the partner in behalf of the partnership plus the
corresponding interest from the time the expenses are made. This refers to loan
and advances made by the partner other than capital.
2. To answer for the Obligations the partner may have contracted in good faith in
the interest of the partnership business.
3. To answer for Risks in consequence of management
(CIVIL CODE, Art. 1796).

Note: The partner must be free from all fault, provided, he acted within the scope of his
authority.

Contract of Sub-Partnership

Every partner may associate another person with him in his share, but the associate
shall not be admitted into the partnership without the consent of all the other partners,
even if the partner having an associate should be a manager
(CIVIL CODE, Art. 1804).

Purpose: One formed between a member of a partnership and a third person for a
division of profits owing to him from the partnership enterprise.

Nature: It is a partnership within a partnership distinct and separate from the main or
principal partnership
(DE LEON, Partnership, Agency and Trusts, supra at 130).
 Partnership Capital and Partnership Property Distinguished

Partnership Partnership
Capital Property
Susceptibility to change in value
Its value is Its value varies
constant. It is not from time to time in
affected by accordance with
fluctuations in the the fluctuations in
value of the the market value of
property. the partnership
assets.
Extent
It includes only the It includes not only
actual capital the original capital
contributed and contributed but
promised to the also all property
partnership. subsequently
acquired on
account of the
partnership.

Firm Name
Every partnership shall operate under a firm name, which may or may not include the
name of one or more of the partners (CIVIL CODE, Art. 1815).

General Rule: The partners may use any firm name desired by them.

Exception: They cannot use a misleading name

i.e. that which is identical or deceptively confusingly similar to that of any existing
partnership or corporation or to any other name already protected by law or is patently
deceptive or confusingly similar to existing laws (CORPORATION CODE, Sec. 18).

Use of Names of Deceased Partners

The continued use of the name of a deceased partner is permissible provided that the
firm indicates in all its communications that said partner is deceased.

Use of Names of those who are not Partners

Persons who, not being partners, include their names in the firm name do not acquire
the rights of a partner, but under Art. 1815, they shall be subject to the liability of a
partner insofar as third persons without notice are concerned. Such persons become
partners by estoppel (DE LEON, Partnership, Agency and Trusts, supra at 169).

Admission by a Partner
An admission or representation made by any partner concerning partnership affairs
within the scope of his authority in accordance with this Title is evidence against the
partnership (CIVIL CODE, Art. 1820).

Instances where knowledge of a partner is considered knowledge of the

partnership:

1. Knowledge of the partner acting in the particular matter acquired whie a partner.
2. Knowledge of the partner acting in eh particular matter then present to his mind;
3. Knowledge of any other partner who reasonably could and should have
communicated it to the acting partner
(CIVIL CODE, Art. 1821).

Applicability of the Rule of Respondeat Superior

The rule of respondeat superior (also called the rule of vicarious liability) applies to the
law of partnership in the same manner as other rules governing the agency relationship.

Criminal Liability for Criminal Acts

A non-acting partner in a partnership engaged in a lawful business is not criminally
liable for the criminal acts of another partner but he is criminally liable if the partnership
is involved in an unlawful enterprise with his knowledge or consent.

Mutual Agency
Partnership is a contract of “mutual agency”; each partner acts as a principal on his own
behalf, and as an agent of his co-partners and the partnership.

Partnership by Estoppel
Arises when a person by any means represents himself or consents to another
representing him to anyone, as partner in an existing partnership, or with one or more
persons not actual partners; he is liable to any such person to whom such
representation has been made, who has, on the faith of such representation given credit
to the actual or apparent partnership (CIVIL CODE, Art. 1825).

Representations
If he has made such representation or consented t its being made in a public manner,
he is liable to such person whether the representation has or has not been made or
communicated to such person so giving credit or with the knowledge or the apparent
partner making the representation or consenting to its being made (CIVIL CODE, Art.
1825).

Partner by Estoppel

A person not a partner may become a partner by estoppel and thus liable to third
persons as if he was a partner when by words or by conduct he does the following acts:

1. Directly represent himself to anyone as a partner in an existing partnership or in a

non-existing partnership (with one or more persons not actual partners); or
2. Indirectly represents himself by consenting to another representing him as a
partnership in an existing partnership or in a non-existing partnership.

DISSOLUTION OF PARTNERSHIP
A partnership does not last forever.
When it ends, it involves three separate stages, namely dissolution, winding up and
termination
(DE LEON, Partnership, Agency and Trusts, supra at 212).

1. Dissolution
Change in the relation of the partners caused by any partner ceasing to be associated
in carrying on the business (CIVIL CODE, Art. 1828).

Note: The dissolution of a partnership must not be understood in the absolute and strict
sense so that at the termination of the object for which it was created the partnership is
extinguished (Testate of Mota, v. Serra. G.R. No. L-22825, February 14, 1925).

2. Winding up
Process of settling the partnership business or affairs after dissolution.

Illustrations:
a. Collection and distribution of assets
b. Payment of debts
c. Determination of the value of each partner’s interest in the partnership (DE
LEON, Partnership, Agency and Trusts, supra 213).

3. Termination
Point in time when all partnership affairs are wound up or completed and is the end of
the partnership life (CIVIL CODE, Art. 1828).

On dissolution, the partnership is not terminated, but continues until the winding up of
partnership affairs is competed (CIVIL CODE, Art. 1829). The partners remain as co-
partners until the partnership is terminated.

Persons Authorized to Wind Up

1. Partners designated by the agreement;
2. In the absence of such agreement, all partners who have not wrongfully dissolved
the partnership;
3. Legal representative of last surviving partner not insolvent (CIVIL CODE, Art. 1836).

LIMITED PARTNERSHIP

One formed by two or more persons having as members one or more general partners
and one or more limited partners, the latter not being personally liable for partnership
debts (CIVIL CODE, Art. 1843).

Characteristics of a Limited Partnership:

(Co3RD L)

1. Formed by substantial Compliance in good faith with the statutory requirements;

2. One or more general partners Control the business and are personally liable to
creditors;
3. One or more limited partners Contribute to the capital and share in the profits but do
not participate in the management of the business;
4. The limited partners may ask for the Return of their capital contributions under the
conditions prescribed by law;
5. The partnership Debts are paid out of the common fund and the individual properties
of the general partners; and
6. Limited partners are not personally Liable for partnership obligations beyond the
amount of their capital contributions.

Limited and General Partner/

Partnership Distinguished: (R2EF-P2-AME)

Limited General
Partner/Partnershi Partners/Partnership
p
Rules Governing Dissolution and
Winding Up
Governed by Governed by
Art. 1863 Art. 1839
Right to Participate in the
Management of Partnership
Limited partner has General partners
no share in the have an equal right in
management of a the management of
limited partnership the business (when
and renders himself the manner of
liable to partnership management has not
creditors as a been agreed upon)
general partner if he
takes part in the
control of the
business
Extent of Liability
Limited partner’s General partner is
liability extends only personally liable for
to his capital partnership
contribution obligations
Firm Name
Generally, the name
of a limited partner Name of a general
must not appear in partner may appear in
the firm name. the firm name.

Firm name must be No such requirement.

followed by the word
limited
Proper Party to Proceedings by or
Against the Partnership
Limited partner is General partner is the
not a proper party to proper party to
proceedings by or proceedings by or
against a against a partnership
partnership Unless:
 1. He is also a
general partner (his
liability is to the
partners not to the
creditors) or
2. Where the object
of the proceeding is
to enforce a limited
partner’s right
against or liability to
the partnership
Prohibition to Engage in Other Business
1. Capitalist partner –
No such prohibition prohibited from
in the case of a engaging in a
limited partner for he business which is of
is considered a mere the same kind of
contributor to the business in which the
partnership partnership is
engaged; or
2. Industrial partner –
in ANY of business for
himself
Contribution
Limited partner must General partner may
contribute cash or contribute money,
property to the property or industry to
partnership but not the partnership
services
Creation
A limited partnership General partnership,
must be executed in as a general rule, may
a certificate of be constituted in any
limited partnership, form by contract or
duly signed and conduct of the
sworn to by all the partnership, unless
partners and immovable property is
recorded in the SEC. contributed.
Assignability of Interest
Freely assignable, Not assignable
with assignee without the consent of
acquiring all the the other partners,
rights of the limited although he may
partner subject to associate a third
certain qualifications person with him in his
share
Members of the Partnership
Composed of one or
more general Composed only of
partners and one or general partners
more limited
 partners
Effect of Retirement, Death, Insanity or
Insolvency
Retirement, death,
insanity or
insolvency of a Retirement, death,
limited partner does insanity or insolvency
not dissolve the of a general partner
partnership for his dissolves the
executor or partnership.
administrator shall
have the rights of a
limited partner for
the purpose of
selling his estate.

ACTIVITIES AND EXERCISES

The study of law requires analysis of hypothetical but plausible circumstances. It

demands not only memorization, but also understanding and application. For this
reason, this subject will require students to have online recitations to ensure that
everyone can properly articulate what and how they understand the subject. Online
class schedules will be subject to future instructions.

Full discussion also requires the student to explain his answers eloquently in writing.
Hence, one is required to answer the questions below after reading, analyzing and
completely studying the Discussion on Partnership.

You will be required to submit your answers via email, in a Word Document. Further
instructions will be given.

1. A and B, husband and wife, decided to form a limited partnership to engage in online
selling during the pandemic. B decided that she will be a limited partner? Can the
spouses validly do this?

2. Meralco Corporation and ZAMECO Corporation, both juridical entities, decided to form a
partnership for the purpose of distributing sustainable energy. Can they validly do this
under the law?

3. Will your answer be the same if ZAMECO instead formed a Partnership with Charles
Bass, a billionaire?

4. Kim, Maja and Bea are general partners in a law firm. Having contributed equal
amounts to the capital, they also agree on equal distribution of net profits. After a year
of being in the firm, however, Bea decided to engage in solo practice and simply give
her shares to Julia, without the knowledge and consent of Kim and Maja. Is the
partnership dissolved?
5. What are the rights of Julia, in case she decides to participate in the management of the
partnership affairs and the distribution of the net profit of P400,000.00, which was
realized after she purchased Bea’s shares?

6. Will the death of a partner terminate a partnership? Why or why not?

7. TRUE or FALSE. A partnership may be entered into via verbal agreement.

8. Can a partner demand the return of his share in a partnership? Explain.

9. In 2019, L, M, N, O and P formed a partnership. L, M and N were capitalist partners who

contributed P500,000 each, while O, a limited partner, contributed P1 ,000,000. P joined
as an industrial partner, contributing only his services. The Articles of Partnership,
registered with the Securities and Exchange Commission, designated L and O as
managing partners; L was liable only to the extent of his capital contribution; and P was
not liable for losses.

In 2020, the partnership earned a net profit of P800,000. In the same year, P engaged
in a different business with the consent of all the partners. However, in 2007, the
partnership incurred a net loss of P500,000. In 2008,the partners dissolved the
partnership. The proceeds of the sale of partnership assets were insufficient to settle its
obligation. After liquidation, the partnership had an unpaid liability of P300,000.

Assuming that the share of the industrial partner, P, in the profit in 2020 amounted to
P100,000, how much is the share of O, a limited partner, in the P800,000 net profit?

(A) P160,000
(B) P175,000
(C) P280,000
(D) P200,000
(E) None of the above

10. Is a joint venture a partnership?

ASSESSMENT

For this course, online classes and recitations will be required at least twice a month.

The questions above will be submitted online and I will give instructions for the same.
Other quizzes will likewise be given via Facebook Messenger. Please have your
respective ZOOM accounts ready for the online classes.

SUGGESTED READINGS

For a better understanding of the Law on Partnership, it is highly suggested that the
student refer to the following as additional readings:

1. Civil Code of the Philippines

2. De Leon, The Law on Partnership, Latest Edition
3. https://www.chanrobles.com/legal5cc1c.htm#.X0twki2cZ-U
4. http://docshare02.docshare.tips/files/23068/230684758.pdf

RESOURCES

1. The Law on Partnership, De Leon, Hector S.

2. The Law on Partnership, Villanueva, Cesar L.
3. Civil Law Bar Exam Questions and Answers
4. San Beda College of Law Memory Aid 2015
5. Supreme Court Decisions on Partnership