I. B. Kinds of Partnership

Question 1

What are the kinds of partnership?

Answer 1

• Universal Partnership
• Particular Partnership
• General Partnership
• Limited Partnership
• Partnership At will
• Partnership for a Term or Undertaking
• Commercial Partnership
• Professional Partnership
• Partnership by Estoppel

Question 2

What are the kinds of partnerships as to its object?

Answer 2

Art. 1776 par. 1. As to its object, a partnership is either universal or particular.

Question 3

What are the kinds of partnership as regards the liability of partners?

Answer 3

Art. 1776 par. 2. As regards the liability of the partners, a partnership may be general or limited.

Question 4

What are the two kinds of universal partnerships?

Answer 4

Art. 1777. A universal partnership may refer to all the present property or to all the profits.

Question 5

What is a partnership of all present property?

Answer 5

Art. 1778. A partnership of all present property is that in which the partners contribute 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 therewith.

Keywords: Contribute all property; common fund; intention of dividing.

Question 6

What happens to the property that belongs to each of the partners in a universal partnership of all present property?

Answer 6

Art. 1779 par. 1. 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.

Question 7

May there be a stipulation fro the common enjoyment of any other profits? Is there an exception to this rule?

Answer 7

Yes, a stipulation may be made but there is an exception. Under Art. 1779 par. 2. A stipulation for the common enjoyment of any other profits may also be made; but the property which the partners may acquire subsequently by inheritance, legacy, or donation cannot be included in such stipulations, except the fruits thereof.

Question 8

What does a universal partnership of profits comprise of?

Answer 8

Art. 1780. A universal partnership of profits comprises 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.

Question 9

Does title to the properties which are owned by the partners pass on to the partnership upon the constitution of a universal partnership of profits?

Answer 9

No, only the usufruct of the properties pass on to the partnership. Under Art. 1780 par. 2, “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.”

Question 10

What is the kind of contract when it is executed for universal partnership but without specification as to its nature?

Answer 10

The contract shall only be a universal partnership of profits. Art. 1781 provides, “Articles of universal partnership, entered into without specification of its nature, only constitute a universal partnership of profits.”

Question 11

Are all persons allowed to enter into a universal partnership?

Answer 11

No. Under Art. 1782, “Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership.”

Question 12

Who are the specific persons prohibited from entering into a universal partnership?

Answer 12

Art. 1782 provides that persons who are prohibited from giving each other any donation or advantage are prohibited from entering into a universal partnership.

Under Art. 739, the following donations are void:

• (1) Those made between persons who were guilty of adultery or concubinage at the time of the donation;
• (2) Those made between persons found guilty of the same criminal , in consideration thereof;
• (3) Those made to a public officer or his wife, descendants or ascendants, by reason of his office.

In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donor and donee may be proved by preponderance of evidence in the same action.

Under Art. 87 of the Family Code, “Every donation or grant of gratuitous advantage, direct or indirect, between the spouses during the marriage shall be void, except moderate gifts which the spouses may give each other on the occasion of any family rejoicing. The prohibition shall also apply to persons living together as husband and wife without a valid marriage.”

Question 13

What is a particular partnership?

Answer 13

Art. 1783 provides, “A particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or the exercise of a profession or vocation.”

Question 14

What is a general partnership?

Answer 14

A general partnership is one consisting of general partners who are liable pro rata and subsidiarily (see Art. 1816) and sometimes solidarily (see Arts. 1822-1824) with their separate property for partnership debts. [De Leon, 72]

Question 15

What is the liability of the partners in a general partnership?

Answer 15

Pro-rata liability: Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract.

Solidary liability of partners WITH THE PARTNERSHIP– Art. 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823.

Wrongful act or omission of any partner acting in the ordinary course of the business and loss or injury is caused to a third person, or penalty is incurred [Art. 1822].

Money received from third person is missapplied by a partner acting within the scope of his apparent authority. [Art. 1823(1)]

Money received by the partnership from a third person, in the course of the partnership’s business, and the money or property is misapplied by any partner while it is in the custody of the partnership.

Question 16

What is a limited partnership?

Answer 16

A limited partnership is one that is formed by two (2) or more persons having as members one (1) or more general partners and one (1) or more limited partners, the latter not being personally liable for the obligations of the partnership (see Art. 1843). [De Leon, 72]

Question 17

What are the kinds of partnership as to its duration?

Answer 17

The two kinds of partnership as to its duration are:

(1) Partnership at will;
(2) Partnership with a fixed term (or undertaking).

Question 18

What is a partnership at will?

Answer 18

A partnership at will is one in which no time is specified and is not formed for a particular undertaking or venture and which may be terminated at anytime by mutual agreement of the partners, or by the will of any one (1) partners alone; or

one for a fixed term or particular undertaking which is continued by the partners after the termination of such term or particular agreement without express agreement. [De Leon, 72]

Question 19

What is a partnership with a fixed term?

Answer 19

A partnership with a fixed term is one in which the term for which the partnership is to exist is fixed or agreed upon or one formed for a particular undertaking and upon the expiration of the term or completion of the particular enterprise, the partnership is dissolved, unless continued by the partners. [De Leon, 73]

If continued by the partners, it becomes a partnership at will (see Art. 1785)

Art. 1785. When a partnership for a fixed term or particular undertaking is continued after the termination of such term or particular undertaking without any express agreement, the rights and duties of the partners remain the same as they were at such termination, so far as is consistent with a partnership at will.

Question 20

What are the kinds of partnership as to the legality of their existence?

Answer 20

• De jure partnership* – complied with all the legal requirements;
• De facto partnership* – one which has failed to comply with all the legal requirements for its establishment;

Question 21

What are the two kinds of partnership as to representation to others?

Answer 21

Ordinary or real partnership or one which actually exists among the partners and also as to third persons;

Ostensible partnership or partnership by estoppel – which in reality is not a partnership but is considered as a partnership but is considered as a partnership only in relation to those who, by their conduct or admission, are precluded to deny or disprove its existence.

Question 22

What are the kinds of partnerships as to publicity?

Answer 22

Secret partnership - one wherein the existence of certain persons as partners is not avowed made known to the public by any of the partners; or

Open to notorious partnership - one whose existence is avowed or made known to the public by the members of the firm

Question 23

What is a commercial partnership?

Answer 23

A commercial partnership is one which is made by the partners for the purpose of dividing the profits among themselves (see Art. 1767 par. 1.);

Question 24

What is a professional partnership?

Answer 24

A professional partnership is one that is made for the purpose of the exercise of a profession (see Art. 1767 par. 2).

Question 25

What is a partnership by estoppel?

Answer 25

A partnership by estoppel exists when a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to anyone, as a partner in an existing partnership, or with one or more persons not actual partners. The said person making the representation or consenting to the representation becomes a partner by estoppel, and cannot deny the existence of a partnership to deny the liability incurred. (see Art. 1825).

Question 26

What is the doctrine in the case of Ortega v. CA

Answer 26

A partnership that does not fix its term is a partnership at will.

The birth and life of a partnership at will is predicated on the mutual desire and consent of the partners. The right to choose with whom a person wishes to associate himself is the very foundation and essence of that partnership.

Among partners, mutual agency arises and the doctrine of delectus personae allows them to have the power, although not necessarily the right to dissolve the partnership.