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    Source: ATP by De Leon | CARRASCO 1 PARTNERSHIP  I. GENERAL PROVISIONS (ARTICLES 1767-1783) ! #$%&' )*+* DEFINITION OF PARTNERSHIP 1.   A CONTRACT of two or more competent person to place their money, effects, labor and skill, or some, or all of them. 2.   An ASSOCIATION of two or more persons to carry-on as co-owners of a business for profit. 3.   A LEGAL RELATION whereby parties unite their property, labor, or skill in carrying on some lawful business as principals for their joint profit. 4.   The STATUS arising out of a contract whereby they agree to share as common owners the profits of a business. 5.   An Organization for production of income 6.   An ENTITY, distinct and apart from the members composing it. 7.   A JOINT UNDERTAKING to share in the profit and loss. CONCEPT OF PARTNERSHIP CIVIL LAW CONCEPT *AMERICAN CONCEPT 1. Art. 1767 is based on the agreement itself out of which a partnership is created. 1. based on the result of the contract or agreement of the parties out of which the partnership is created, that is, the JURIDICAL RELATION 2. has a juridical personality of its own, distinct and separate from that of each of the partners. 2. does not recognize such separate juridical personality GENERAL PROFESSIONAL PARTNERSHIP -the practice of a profession is not a business or an enterprise for profit. However, the law allows the joint pursuit thereof by two or more persons as partners. -it is the individual partners who engage in the practice of the profession and not the partnership. CHARACTERISTICS OF A LEGAL PROFESSION 1.   a duty of public service 2.   A relation as an ! officer of court  to the administration of justice 3.   A relation to clients in the highest fiduciary degree 4.   A relation to colleagues at the bar characterized by candor, fairness and unwillingness. *enumerations above are used to distinguish from business. CHARACTERISTICS OF PARTNERSHIP 1.   CONSENSUAL- perfected by mere consent 2.   NOMINATE- has special name or designation 3.   BILATERAL- entered into by two or more persons and the rights and obligations are reciprocal 4.   ONEROUS- each of the parties aspires to procure for himself a benefit through the giving of something 5.   COMMUTATIVE- undertaking of each of the partners is considered as the equivalent of that of the others. 6.   PRINCIPAL- independent for its existence and validity 7.   PREPARATORY- entered into as a means to an end. ELEMENTS OF PARTNERSHIP 1.   VALID CONTRACT 2.   PARTIES #  LEGAL CAPACITY 3.   MUTUAL CONTRIBUTION OF MONEY, PROPERTY, OR INDUSTRY TO A COMMON FUND 4.   LAWFUL OBJECT 5.   PRIMARY PURPOSE MUST BE TO OBTAIN PROFITS AND TO DIVIDE THE SAME AMONG THE PARTIES EXISTENCE OF A VALID CONTRACT A.   FORM - terms may be oral or written, express or implied from the acts and declarations of the parties subject to the provisions of 1771-1773. B.   ARTICLES OF PARTNERSHIP a)   name, b)   nature/purpose and location of the firm, and c)   defining the powers, rights, duties and liabilities of the partners, d)   their contributions, e)   the manner by which the profits and losses are to be shared, and f)   the procedure for dissolving the partnership. C. REQUISITES OF A VALID CONTRACT *RIGHT TO CHOOSE CO-PARTNERS -The fiduciary nature of the partnership relation $ require that each person be granted the RIGHT TO CHOOSE with whom he will be associated in the firm. *POWER TO DISSOLVE PARTNERSHIP -Among partners, mutual agency arises and the DOCTRINE OF DELECTUS PERSONAE allows them to have the power, although nit necessarily the right, to dissolve the partnership. -HOWEVER, he must have acted 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. *APPLICATION OF PRINCIPLES OF ESTOPPEL    Source: ATP by De Leon | CARRASCO 2 -A partnership liability may be imposed upon a person under principles of estoppel where he holds himself out, or permits himself to be held out, as a partner in an enterprise. *NOTES: -A partnership MAY BE CREATED WITHOUT ANY DEFINITE INTENTION TO CREATE IT. -In case there is no written agreement, the existence or non-existence of a partnership must be determined from the >conduct of the parties >any documentary evidence >testimony of the parties LEGAL CAPACITY OF THE PARTIES 1.   INDIVIDUAL *The ff. cannot give consent to a contract of partnership. a.   Unemancipated minors b.   Insane or demented persons c.   Deaf-mutes who do not know how to write d.   Persons who are suffering from civil interdiction e.   Incompetents who are under guardianship. f.   Persons who are prohibited from giving each other any donation or advantage cannot enter into a universal partnership. g.   A married woman if there # s an objection on the part of the husband. (however, husband # s consent is not necessary as long as the latter do not object) 2.   PARTNERSHIP 3.   CORPORATIONS -GENERAL RULE: -A corporation is WITHOUT CAPACITY OR POWER to enter into a contract of partnership. -EXCEPTION: unless authorized bu statute or by its charter. Reason:-based on public policy, since in a partnership the corporation would be bound by the acts of persons who are not its duly appointed and authorized agents and officers. -ANOTHER EXCEPTIONSS TO THE GENERAL RULE: a.   A corporation may enter into a JOINT VENTURE PARTNERSHIP with another where the nature of the venture is in line with the business authorized by its charter. b.   Where the partnership agreement provides that the two partners will manage the partnership. c.   Where the entry of the foreign corp. as a limited partner in a limited partnership is merely for investment purposes and it shall not take part in the management and control of the business operation of the partnership. CONTRIBUTION OF MONEY, PROPRIETY, OR INDUSTRY A.   MONEY -currency which is the legal tender in the PH. B. PROPERTY -may be real or personal, corporeal or incorporeal. C. INDUSTRY -it has been interpreted to mean the active cooperation, the work of the party associated, which may either personal manual efforts or intellectual, and for which he receives a share in the profits (not merely salary) of the business. NOTES: -The contribution of a partner may be in three forms, or any two or one of them. -The law does not specify the kind of industry that a partner may contribute. -A LIMITED PARTNER IN A LIMITED PARTNERSHIP, HOWEVER, CANNOT CONTRIBUTE MERE INDUSTRY OR SERVICES. -The partner contributing his industry or services must not be subject to the supervision of the other partners. -PROOF OF CONTRIBUTION is NOTE NCESSARY to a common fund with the intention of dividing the income or profits obtained therefrom. -HOWEVER, if the agreement provide =s simply that one of the parties is to give and the other is to receive a half interest in the profit without anything being promised toward the accomplishment of its object, NO ENFORECEABLE CONTRACT EXITS. -but if the latter takes part in carrying on the enterprise and subjects himself to partnership liability to outsiders, he furnishes sufficient consideration. LEGALITY OF THE OBJECT -the object is unlawful when it is contrary to law, morals, good customs, public order or public policy. EFFECT: Contracts is inexistent and void ab initio -a partnership may be organized for any purpose EXCEPT that it may not engage in an enterprise for which the law requires a specific form of business organization such as banking which only stock corporations may undertake.    Source: ATP by De Leon | CARRASCO 3 INSTANCES OF UNLAWFUL OBJECT 1.   to create illegal monopolies or combinations in restraint of trade 2.   To carry on gambling 3.   To engage in smuggling 4.   To leased furnished apartments to prostitutes 5.   To prevent competition in bidding for government contracts 6.   To control the price of a commodity in the interest of its members PURPOSE TO OBTAIN PROFITS -1. THE VERY REASON FOR EXISTENCE OF PARTNERSHIP: The idea of obtaining pecuniary profit or gain directly through or as a result of the business to be carried on. NOTE: One without any right to participate in the profits, cannot be deemed as partner since the essence of partnership is that the partners share in the profits and losses. -2. THE REALIZATION OF PECUNIARY PROFIT need not be the exclusive aim of a partnership. -it is sufficient that it is the principal purpose even if there are, incidentally, moral, social, or spiritual ends. NOTE: In a partnership, the parties intend to share the profits in CERTAIN PROPORTIONS. SHARING OF PROFITS 1.   It is necessary that there be an intention to divide the profits among the members, although NOT NECESSARILY in equal shares. *Without the sharing of profits, it cannot be said that an agreement of partnership has been entered into, and exists. NOTE: a stipulation which excludes one or more partners from any participation in the profits (or losses) is VOID. 2.   the sharing in profits is merely PRESUMPTIVE and NOT CONCLUSIVE. Thus, if the division of profits is merely used as a guide to determine the compensation due to one of the parties, such one is NOT A PARTNER. SHARING OF LOSSES 1.   the right to share in the profits carries with it the duty to contribute to the losses, if any. 2.   AGREEMENT IS NOT NECESSARY upon a system of sharing losses, for the obligation is IMPLIED from the relation. -BUT if only the share of each partner in the profits has been agreed upon, the share of each in the losses shall be in the SAME PROPORTION. NOTE: a stipulation which EXCLUDES one or more partners from any share in the profits or losses is VOID. ! #$%&' )*+, PARTNERSHIP AS A JURIDICAL PERSON -Like the corporation, a partnership is a JURIDICAL PERSON to which the law grants a juridical personality, SEPARATE AND DISTINCT from that of each of the partners. -AS AN INDEPENDENT JURIDICAL PERSON, a partnership may enter into contracts acquire and possess property of all kinds in its name, as well as incur obligations and bring civil or criminal actions in conformity with the laws and regulations of its organization. -In view of the separate juridical personality, the partners cannot be held liable for the obligations of the partnership UNLESS it is shown that the legal fiction of a different juridical personality is being used for a fraudulent, unfair or illegal purpose and except as provided in Article 1816. FAILURE TO COMPY WITH STATURORY REQUIREMENTS 1.   with reference to the execution of a public instrument and registration of the same with SEC in cases when the partnership capital exceed 3000 pursuant to Art. 1772, SUCH PARTNERSHIP STILL ACQUIRES JURIDICAL PERSONALITY. 2.   In Article 1773, The partnership SHALL NOT ACQUIRE JURIDICAL PERSONALITY because the contract itself is void 3.   In Article 1775, with regard to secret associations or societies, the partnership SHALL NOT ACQUIRE JURIDICAL PERSONALITY NOTE: To organize a corporation or a partnership is NOT A MATTER OF RIGHT BUT A PRIVILEGE which may be enjoyed only under such terms as the State may deem necessary to impose. ! #$%&' )*+- RULES TO DETERMINE EXISTENCE OF PARTNERSHIP -GENERALLY, all of its essential features or characteristics must be shown as being present. -ARTICLE 1769 lays down the rules W/N an association is one of partnership. 1.   PERSONS NOT PARTNERS AS TO EACH OTHER -if they are NOT partners as between themselves, they CANNOT be partners as to third persons. -INTENTION TO CREATE PARTNERSHIP    Source: ATP by De Leon | CARRASCO 4 -However, where the parties EXPRESSLY DECLARE THEY ARE NOT PARTNERS, this, as a rule, settles the question as between themselves. -W/N the partners call their relationship or believe their relationship a partnership is IMMATERIAL. -a partnership can never exist as to third persons if no contract of partnership, express or implied, has been entered into between the parties themselves. -EXCEPTION: refers to PARTNERSHIP BY ESTOPPEL. -Example: -A and B are not partners as to each other,neither will they be partners with C(third person). But if A, with the consent of B, represents to C that they are partners, A and B will be considered partners as to C even if they are not really partners. 2.   CO-OWNERSHIP OR CO-POSSESSION -There is a CO-OWNERSHIP/CO-POSSESSION whenever the the ownership/possession of an UNDIVIDED THING or RIGHT belongs to different persons. (Art.484) -CLEAR INTENT TO DERIVE PROFITS FROM OPERATION OF BUSINESS -Two or more persons may become a CO-OWNER without a contract BUT they cannot be partners in the absence of contract. -The profits must e derived from the operation of the business or undertaking by the members of the association and not merely from property ownership. -There must be a clear intent to form a partnership. -EXISTENCE OF FIDUCIARY RELATIONSHIP PARTNERS CO-OWNERS - there is a fiduciary relationship - NONE -the REMEDY for a dispute or difference between them would be an ACTION FOR DISSOLUTION, TERMINATION, & ACCOUNTING -ACTION FOR NON- PERFORMANCE OF CONTRACT. -Example: -A & B inherited from their father an apartment which is leased to third persons. Partners? Ans. -They are merely CO-OWNERS -PERSONS LIVING TOGETHER WITHOUT BENEFIT OF MARRIAGE -Pursuant to ART. 147, their wages and salaries shall be owned by them in equal shares and the property acquired by both of them through their work or industry shall be governed by the rules on co-ownership. 3.   SHARING OF GROSS RETURNS -The mere sharing of gross returns alone DOES NOT INDICATE A PARTNERSHIP. -When a business is carried on in behalf of a given person as partner, he is conceived as being interested in its failures as well as its successors. -HOWEVER, where there is evidence of mutual management and control, a partnership may result, even though the agreement calls for a portion of ! gross returns . -Example: -A, owner of the jeepney, agrees with B(Driver) that b shall have full control and use of the jeepney to carry passengers, pay for gasoline and oil, and shoulder the cost of repairs, and that the gross receipts are to be divided between them. Is there a partnership? -Ans. NONE as no sharing of profits is contemplated. 4.   RECEIPT OF SHARE IN THE PROFITS -An agreement to share both profits and losses tends strongly to establish the existence of a partnership, conversely, lack of such agreement, tends to negate the existence of a partnership. -HOWEVER, the sharing of profits and losses is PRIMA FACIE EVIDENCE OF AN INTENTION TO FORM A PARTNERSHIP BUT it is not a conclusive evidence. -SHARING OF PROFITS BY A PESON IS NOT A PRIMA FACIE EVIDENCE THAT HE IS A PARTNER IN THE BUSINESS in the cases enumerated under sub-paragraphs of Art. 1769((4)a,b,c,d,e). -to pay a debt to creditor -wage to an employee or rent to a landlord -annuity to a widow or legal representative of a deceased partner, -or interest on a loan, -or consideration for the sale of property, though the amount of profits varies with the net profits of the business.
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