Article 1771.
Purpose:
1. General rule -- no special form is required for the
validity or existence of the partnership; may be
made orally or in writing regardless of the value of
contributions.
2. Exceptions --
a) if real properties are contributed, public
instrument is necessary. Otherwise, the
contract is void. To affect third persons,
the transfer of real property to the
partnership must be duly registered in
the Registry of Property of the province
or city where the property is located.
b) If covered by Statute of Frauds -- when an
agreement to enter in a partnership which
is not to be performed within a year from
the making thereof, such is unenforceable
unless in writing or at least evidence by
some note or memorandum subscribed by
the parties.
3. Partnership implied:
a) Its existence may be implied from the acts
or conduct of the parties, as well as from
other declarations; such implied contract
shall be binding as a written and express
contract.
b) The intention as disclosed by the entire
transaction, and as gathered from the
facts and from the language employed
by the parties as well as their conduct,
should be ascertained.
c) If the parties intend a general partnership,
they are general partners although their
purpose is to avoid the creation of such
relation.
Article 1772.
1. Two requirements when partnership is with
capital of P3,000 or more:
a) Contract must appear in a public
instrument
b) Must be recorded or registered with the
SEC
2. Failure to comply does not prevent the
formation of partnership, or affect its liability
and that of the partners to third persons.
3. However, the partners have the right to compel
each other to execute a contract in a public
instrument. Note: this cannot be availed of if the
contract of partnership is void.
4.
a) A condition for issuance of licenses
to engage in business or trade
b) For tax purposes (tax liabilities
cannot be evaded)
c) Public can determine more
accurately their membership and
capital before dealing with them
5. The recording of articles of partnership
is not for the purpose of giving the
partnership juridical personality; the only
objective of the law is to make the
recorded instrument open to all and to
give notice thereof to interested parties.
The objective is achieved from the date the
partnership papers are presented to and left
for record in the Commission.
6. When the certificate recording of the
instrument is issued on a date
subsequent to the date of presentation
thereof, its effectivity retroacts as of the
later date.
Article 1773.
1. The failure to comply with the following
requirements shall render the partnership
void insofar as the contracting parties are
concerned:
a) Contract must be in a public
instrument
b) Inventory of the property
contributed must be made, signed
by the parties, and attached to the
public instrument
2. Article 1773 is intended primarily to
protect third persons. With regard to them, a
de facto partnership or partnership by
estoppel may exist.
3. Article 1773 does not apply in the case of
immovable property which may be
possessed or even owned by the
partnership but not contributed by any of
the partners.