BUSINESS ORGANIZATION 1

Atty. Charles Jules Romero

Article 1767 – Concept of Partnership Articles of Partnership must be disclosed among

the members, otherwise, the association has no
Elements of Partnership legal personality and shall be governed by the
1. Consensual provisions of Civil Code on Co-ownership (Art.
2. Nominate 1775)
3. Bilateral
4. Onerous May a person be compelled against his will to
5. Commutative execute the partnership papers?
6. Principal - No. The law recognizes individual’s freedom or
7. Preparatory liberty to do an act or not to do it. Courts may
not compel compliance, as it is considered an
Essential Features of Partnership act of violence to do so (Woodhouse v. Halili)
1. Valid contract
2. Legal capacity Doctrine of Delectus Personae – The power to
3. Mutual contribution of Money, Property, or dissolve the partnership
Industry to a common fund
4. Object is lawful Application of the Principle of Estoppel – A
5. Purpose is profit partnership liability may be imposed upon a
person who holds himself out as a partner in an
Existence of a Valid Contract enterprise
 Created by agreement of parties
 No partnership created by law, by A partnership may be created without a
operation or by implication of law definite intention to create it since it is the
 Partnership relation is the result of the substance, and not the name of arrangement,
contract which determines the legal relationship

A. Form of a Contract In case there is no written agreement between

 It may be oral or written, express or implied
from the acts and declarations of the
parties subject to provisions of Articles 1771
to 1773 and Statute of Frauds
 As a rule, no formality is required unless it
falls within the Statute of Frauds (Art. 1403)
 CD – It is not necessary that the member
should sign any Articles of Partnership to be
a member of a partnership (Montgomery v.
Busyrus)
B. Articles of Partnership – Terms of association
in a written document and consists of the
following:
1. Name
2. Purpose of the firm
3. Location of the firm
4. Powers
5. Rights
6. Duties
7. Liabilities
8. Contributions
9. Manner how profits and losses shall be
shared
10. Procedure for dissolution of Partnership
the parties, conduct of the parties determines
the existence of a partnership
Rule on Corporations in Partnership – A
corporation is without capacity to enter into a
contract of partnership, unless authorized by
the statute or by its charter. Instances when a
corporation is allowed to enter into it:
a. Nature of the venture is in line with the
business authorized by its charter (Tuazon v.
Bolanos)
b. It was provided that two partners will
manage the partnership so that the
corporate interest is not surrendered
c. Entry of a foreign corporation as a limited
partner is for investment purposes. It shall
not be deemed doing business in the
Philippines
Form of Contribution
1. Money
2. Property – Real or personal; Corporeal or
incorporeal
 Credit, promissory note, evidence of
obligation, goodwill (City of Manila v.
Cumbe)

Notes By: Aya Mae Maravilla

 BUSINESS ORGANIZATION 1
Atty. Charles Jules Romero
 License to construct and operate a
cockpit (Balon v. Pajarillo)
3. Industry – Active cooperation, the work of
the party associated for which he receives
a share in the profits
 As a rule, there is no specified industry
provided, however, a limited partner
cannot contribute mere industry or
services
 Partner v. Lessor of services – Former is
not subject to supervision of other
partners. Latter is subject to supervision
of lessee or employer
A partnership exists even if parties have not
contributed any capital for the contribution
may be in the form of credit or industry (Lim
Tong Lim v. Philippine Fishing)
No enforceable contract exists when it was
agreed that one party is to give and the other
is to receive interest in the profits. However, if
the latter takes part in carrying on the
enterprise and subjects himself to a partnership
liability, he acquires all the rights of a co-
partner
Doctrine of Corporation (Partnership) by
Estoppel – Petitoner who did not directly act on
behalf of the corporation but reaped the
benefits of the contract is deemed to be part
of said association and is covered under this
doctrine (Lim Tong Lim v. Philippine Fishing)
Limitations of the Object of Partnership
1. Not contrary to law, morals, good customs,
public order, public policy (art. 1306)
2. Lawful object or purpose established for the
common benefit or interest of partners (Art.
1770)
3. When the law requires a specific form of
business organization, such as banking,
partnership may not engage in that
enterprise
Purpose of Partnership
 It is to obtain profit
 It is sufficient that it is the principal purpose
and need not be the exclusive aim of
partnership
Notes By: Aya Mae Maravilla
Sharing of Profits
 It need not be in equal shares
 But if there is no sharing of profits, it cannot
be said that a contract of partnership has
been entered into
 A person who has no right to participate in
the profits is not deemed as partner since
the essence of partnership is that partners
share in the profits and losses (Tacao v.
Court of Appeals)
 A stipulation which excludes a partner from
any participation in the profits or losses is
void (Art. 1799)
 It is presumptive and not conclusive since
there are instances where parties have
common interest in profits and losses but
are not partners (Art. 1769)
Sharing of Losses
 The right to share in profits carries with it the
duty to contribute to losses
 It is not necessary to agree upon a system
of sharing losses since it is an implied
obligation
Article 1768 – Partnership has a juridical
personality separate and distinct from partners
Partners cannot be held liable for the
obligation of partnership unless said partnership
is being used for a fraudulent or illegal purpose
(Aguila, Jr. v. Court of Appeals)
A partnership is not an absolute right, but a
privilege which is subject to regulation by the
State
Article 1769 – Rules to determine existence of
Partnership
In case of doubt, this article shall apply
As a rule, partnership does not exist as to third
persons if no such contract, express or implied,
was entered into by the parties. Exception is
when there is Partnership by Estoppel (Art. 1825)