1.

Definition of Partnership
 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

2. How is a partnership formed?

 There must be a valid contract
 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 others

3. Contributions in a partnership
 Money, property, and/or industry or services

4. Property rights of a partner

 His rights in the specific partnership property
 His interest in the partnership
 His right to participate in the management

5. Failure to contribute

6. Universal partnership (as to object)

 Refers to all the present property or to all profits
 Dominion over the thing you owned should belong to the partnership
2 Kinds
Universal partnership of all present property- partners contribute to all the property
which actually belongs to them to a common fund, with the intention of dividing the same
among themselves, as well as all the profits they may acquire
Universal partnership of profits- all that the partners may acquire by their industry or
work during the existence of the partnership.
Movable or immovable property which each of the partners may possess at the
time of the celebration of the contract shall continue to pertain exclusively to each, only
the usufruct passing to the partnership

7. Particular Partnership (as to object)

 Has for its object determinate things, their use or fruits, or a specific undertaking,
or the exercise of profession/vocation
As to liability:
 General partnership- one consisting of general partners who are liable pro rata or
subsidiarily, with their separate property for partnership debts
  Limited- formed by 2 or more persons having as members one or more general
partners and 1 or more limited partners, the latter not being personally liable for
the obligations of the partnership

8. When can there be a partnership at will?

 No term of existence has been fixed and which may be terminated at the will of
any partners
 When a partnership for a fix term or particular undertaking is continued after the
termination of such term or particular undertaking without any express
agreement, the rights & duties of the partners remain the same

9. Kinds of Partners
 Capitalist- one who contributes money or property to the common fund
 Industrial- one who contributes only his industry/personal service
 General- one whose liability to third persons extends to his separate property;
may either be capitalist/industrial
 Limited- one whose liability to third persons is limited to his capital contribution.
Also known as special partner. Does not participate in the management of
business
 Managing- manages the affairs/business of the partnership; may be appointed
either in the articles of partnership or after the constitution of the partnership
 Liquidating- takes charge of the winding up of partnership affairs upon dissolution
 By estoppel- one who is not really a partner, but liable as a partner for the
protection of innocent third persons. Also known as nominal partner, liable for the
debts of the firm to those who in good faith believed him to be a partner
 Continuing- continues the business after it has been dissolved by reason of the
admission of a new partner, or the retirement, death or expulsion of one or more
partners
 Surviving- one who remains after partnership has been dissolved by death or any
partner
 Subpartner- one who, not being a member of the partnership, contracts with a
partner with the reference to the latter’s share in the partnership
 Ostensible- one who takes active part and known to the public as a partner in the
business, whether or not he has an actual interest in the firm
 Secret- one who takes active part in the business but is not known to be a partner
by outside parties nor held out as a partner by other partners, although he
participates in the profits and losses of the partnership
 Silent- one who does not take any active part in the business although he may not
be known to be a partner
 Dormant- one who does not take active part in the business and is not known or
held out as partner. May retire without giving notice & cannot be held liable for
the obligations of the firm subsequent to his withdrawal.
 Original- one who is a member of the partnership from the of its organization
 Incoming- person lately or about to be taken into a partnership as a member
  Retiring- withdrawing partner

10. Consummation of Partnership

 Dissolution- change in the relation of the partners caused by any partner ceasing
to be associated in the carrying on of the business. Point in time when the partners
cease to carry on the business together. Affairs should be liquidated & distribution
is made to those entitled to the partners’ interest.
 Winding up- process of settling the business or partnership affairs after
dissolution
 Termination- point in time when all partnership affairs are completely wound up
and finally settled. End of partnership

11. Solidary & joint

 All partners are solidarily liable even though the other partners did not participate
or ratify, or had no knowledge of the act or omission, without prejudice to their
right to recover from the guilty partners

12. Partnership with capital of 3K or more

 Contract must appear in a public instrument
 Must be recorded or registered with the Securities & exchange commission
*failure to comply with the requirements does not prevent the formation of partnership
or affect its liability to third persons
*recording or registration of the articles or contract of a partnership is not for the purpose
of giving it a juridical personality but to make it open to all and give notice to interested
parties

Inventory of immovable
 Contract of partnership is void, whenever immovable prop is contributed and
inventory is not made, signed by the parties, and attached to the public
instrument
 Inventory- to show how much is due from each partner to complete his share in
the common fund & how much is due to each in case of liquidation

13. Doubt on partnership

 Partnership by estoppel- one which in reality is not a partnership, but is
considered a partnership only in relation to those who, by their conduct or
admission, are precluded to deny or disprove its existence

14. Profit Sharing

RULES:
 The partners share the profits in accordance with the ratio established by their
contract.
 If there is no such stipulation in the partnership contract, then:
a. If all are capitalist partners they have the profits in proportion to their capital
contributions;
b. If there are capitalist as well as industrial partners, the industrial partner gets
a share each that is just and equitable while the capitalist partners divide the
remainder in proportion to their capital contributions; and
c. If there is a capitalist-industrial partner, he gets a share in the profits as an
industrial partner and an additional share in proportion to his capital
contribution to be determined as in (b), above.