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This article was originally published on March 4, 2021 and has been updated to reflect recent legal developments.
This article is provided for general informational purposes only and does not create, nor shall it be construed as creating, a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. For advice on specific legal concerns, you are encouraged to engage the services of a qualified lawyer. You may also directly consult Alburo Alburo and Associates Law Offices for proper guidance tailored to your situation.
The views and information presented herein are based on the laws, rules, and jurisprudence prevailing at the time of writing. They do not take into account subsequent legal developments and should not be relied upon as a substitute for professional legal advice.
AT A GLANCE:
Article 1767 of the Civil Code of the Philippines states that 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.
Meeting of the minds is essential in the creation of any contract, including a partnership agreement.
What is a Contract of Partnership?
Article 1767 of the Civil Code of the Philippines provides:
“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.”
The law further provides that a partnership must have a lawful object or purpose and must be established for the common benefit or interest of the partners.
From the definition itself, it is clear that partners may contribute money, property; or industry to what is known as the common fund.
Thus, it is not necessary that all partners contribute money. The partners may agree on the nature and extent of each contribution. A partner who contributes only industry may still validly become a partner within the contemplation of law.
Form and Registration of Partnership
Under Article 1771 of the Civil Code of the Philippines, a partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary.
Moreover, Article 1772 of the Civil Code of the Philippines provides that Every contract of partnership having a capital of Three Thousand Pesos (PhP3,000.00)or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.
Nevertheless, failure to comply with such requirements does not affect the liability of the partnership and the partners to third persons.
Contribution of Immovable Property
Where immovable property is contributed to the partnership, Article 1773 of the Civil Code of the Philippines requires that contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.
Kinds of Partnership
Under Article 1776 of the Civil Code of the Philippines, as to its object, a partnership is either universal or particular.
Universal Partnership
A universal partnership may refer to all the present property or to all the profits. (Article 1777, Civil Code)
In a universal partnership of all present property, the property which belonged to each of the partners at the time of the constitution of the partnership, becomes the common property of all the partners, as well as all the profits which they may acquire therewith. (Article 1779, Civil Code)
On the other hand, a universal partnership of profits comprises all that the partners may acquire through their industry or work during the existence of the partnership. (Article 1780, Civil Code)
However, property acquired subsequently by inheritance, legacy, or donation generally remains exclusive to each partner, except as to its fruits. (Article 1779, Civil Code)
The law likewise provides that persons prohibited from giving donations or advantages to each other cannot enter into a universal partnership. (Article 1782, Civil Code)
Particular Partnership
A particular partnership has for its object:
- Determinate things;
- Their use or fruits;
- A specific undertaking; or
- The exercise of a profession or vocation. (Article 1783, Civil Code)
Liability of Partners
As regards the liability of the partners, a partnership may either be general or limited. (Article 1776, Civil Code)
Dissolution and Winding up
The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business. (Article 1828, Civil Code)
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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