📌 Article 1767 –
Contribution + Common Fund + Profit
Sharing
Definition of Partnership
A partnership is formed when two or more
persons agree to combine their money,
📌 Article 1768 –
property, or services into one business Partnership Has Separate
and share the profits.
Legal Personality
In simple terms:
The law treats the partnership as a
“We put something together, run a business separate legal person, distinct from the
together, and divide the earnings.” partners.
General Rule General Rule
A partnership exists when: The partnership can:
1. There is a valid contract. ● Own property
2. There are at least two persons. ● Enter into contracts
3. Each contributes money, property, or ● Sue and be sued
industry (services). ● Borrow money
4. The contributions form a common
fund. Exception
5. The parties intend to divide profits.
The partnership has legal personality even if
it is not registered, unless a specific legal
Exceptions / Important Notes
requirement is needed for validity.
● Sharing profits alone does not
automatically create a partnership Example
(see Article 1769).
● Professionals such as lawyers and If the partnership buys a delivery van, the
accountants may form partnerships. van belongs to the partnership, not
● Losses are usually shared unless personally to the partners.
otherwise agreed.
Key Words to Remember
Example
Separate Legal Entity
A contributes ₱100,000 and B contributes
his labor to open a restaurant. They agree
to divide profits equally. A partnership
exists.
Key Words to Remember
,📌 Article 1769 – Rules in A partnership must be organized for a lawful
purpose.
Determining Whether a
Partnership Exists General Rule
If the purpose is legal, the partnership is
Sometimes people share profits without
valid.
intending to be partners. This article
provides tests to determine whether a true
partnership exists.
Exception
If the business is illegal, the partnership is
General Rule void.
Receiving a share in profits is prima facie
evidence of partnership.
Example
A partnership formed to sell prohibited
Exceptions drugs is void.
A person is not necessarily a partner if the
profits are received as:
Key Words to Remember
1. Payment of a debt Illegal Purpose = Void Partnership
2. Salary or wages
3. Rent
4. Annuity to a widow or representative
of a deceased partner
5. Interest on a loan
📌 Article 1771 – Form of
6. Consideration for the sale of Partnership
goodwill
A partnership can generally be formed in
any form.
Example
A lender receives 5% of profits as interest. General Rule
He is still a creditor, not a partner.
The contract may be oral or written.
Key Words to Remember
Exception
Profit Sharing Suggests Partnership, But
Not Always Special formalities are required when:
● Capital is ₱3,000 or more (Article
📌 Article 1770 – Lawful
1772)
● Real property is contributed (Article
1773)
Purpose Required
,Example
Two friends verbally agree to start a small
online business. A valid partnership may
📌 Article 1773 –
exist. Contribution of Real
Key Words to Remember Property
Any Form, Unless Law Requires Special If a partner contributes land, a building, or
Form any immovable property, strict requirements
must be followed.
📌 Article 1772 – Public
General Rule
There must be:
Instrument and SEC 1. A public instrument (notarized
Registration contract)
2. An inventory signed by the parties
If the partnership capital is ₱3,000 or more, 3. The inventory attached to the public
the contract should be notarized and instrument
registered with the Securities and Exchange
Commission (SEC). Exception
General Rule If any of these requirements is missing, the
partnership is void.
The partnership agreement must appear in
a public instrument and be registered with Example
the SEC.
A contributes land, but the parties fail to
Exception attach an inventory. The partnership is void.
Failure to comply does not invalidate the Key Words to Remember
partnership.
Real Property + Public Instrument +
Example Inventory
The partners invest ₱50,000 but fail to
register with the SEC. The partnership is
still valid.
📌 Article 1774 – Rules
Key Words to Remember Governing Partnerships
Registration Required but Not Essential
for Validity
, The special provisions on partnership apply, Key Words to Remember
together with general contract rules when
appropriate. Co-Ownership Is Not Automatically
Partnership
📌 Article 1786 –
General Rule
Partnerships are governed primarily by
partnership law. Obligation to Contribute
Exception What Was Promised
When partnership law is silent, general rules When a person becomes a partner, he must
on obligations and contracts apply. deliver the money, property, or services that
he promised to contribute. The partnership
Example relies on these contributions to start and
operate the business.
Questions about consent and fraud are
resolved using contract law. General Rule
Key Words to Remember Every partner is a debtor of the
partnership for whatever he promised to
Partnership Law + Contract Law contribute.
Important Effects
📌 Article 1775 – If a partner fails to contribute on time:
● He is automatically in default.
Associations Not Intended
● No demand is necessary.
as Partnerships ● He must pay interest from the time
contribution should have been
Some groups jointly own property or share made.
income without forming a partnership. ● He is liable for damages caused by
the delay.
General Rule
Example
Co-ownership and sharing of gross returns
do not by themselves create a partnership. A promised to contribute ₱200,000 on June
1 but delivered it only on August 1. He must
Example pay interest and compensate the
partnership for any losses caused by the
Two siblings inherit land and divide rental delay.
income. They are co-owners, not
necessarily partners. Key Words to Remember
Contribution + Common Fund + Profit
Sharing
Definition of Partnership
A partnership is formed when two or more
persons agree to combine their money,
📌 Article 1768 –
property, or services into one business Partnership Has Separate
and share the profits.
Legal Personality
In simple terms:
The law treats the partnership as a
“We put something together, run a business separate legal person, distinct from the
together, and divide the earnings.” partners.
General Rule General Rule
A partnership exists when: The partnership can:
1. There is a valid contract. ● Own property
2. There are at least two persons. ● Enter into contracts
3. Each contributes money, property, or ● Sue and be sued
industry (services). ● Borrow money
4. The contributions form a common
fund. Exception
5. The parties intend to divide profits.
The partnership has legal personality even if
it is not registered, unless a specific legal
Exceptions / Important Notes
requirement is needed for validity.
● Sharing profits alone does not
automatically create a partnership Example
(see Article 1769).
● Professionals such as lawyers and If the partnership buys a delivery van, the
accountants may form partnerships. van belongs to the partnership, not
● Losses are usually shared unless personally to the partners.
otherwise agreed.
Key Words to Remember
Example
Separate Legal Entity
A contributes ₱100,000 and B contributes
his labor to open a restaurant. They agree
to divide profits equally. A partnership
exists.
Key Words to Remember
,📌 Article 1769 – Rules in A partnership must be organized for a lawful
purpose.
Determining Whether a
Partnership Exists General Rule
If the purpose is legal, the partnership is
Sometimes people share profits without
valid.
intending to be partners. This article
provides tests to determine whether a true
partnership exists.
Exception
If the business is illegal, the partnership is
General Rule void.
Receiving a share in profits is prima facie
evidence of partnership.
Example
A partnership formed to sell prohibited
Exceptions drugs is void.
A person is not necessarily a partner if the
profits are received as:
Key Words to Remember
1. Payment of a debt Illegal Purpose = Void Partnership
2. Salary or wages
3. Rent
4. Annuity to a widow or representative
of a deceased partner
5. Interest on a loan
📌 Article 1771 – Form of
6. Consideration for the sale of Partnership
goodwill
A partnership can generally be formed in
any form.
Example
A lender receives 5% of profits as interest. General Rule
He is still a creditor, not a partner.
The contract may be oral or written.
Key Words to Remember
Exception
Profit Sharing Suggests Partnership, But
Not Always Special formalities are required when:
● Capital is ₱3,000 or more (Article
📌 Article 1770 – Lawful
1772)
● Real property is contributed (Article
1773)
Purpose Required
,Example
Two friends verbally agree to start a small
online business. A valid partnership may
📌 Article 1773 –
exist. Contribution of Real
Key Words to Remember Property
Any Form, Unless Law Requires Special If a partner contributes land, a building, or
Form any immovable property, strict requirements
must be followed.
📌 Article 1772 – Public
General Rule
There must be:
Instrument and SEC 1. A public instrument (notarized
Registration contract)
2. An inventory signed by the parties
If the partnership capital is ₱3,000 or more, 3. The inventory attached to the public
the contract should be notarized and instrument
registered with the Securities and Exchange
Commission (SEC). Exception
General Rule If any of these requirements is missing, the
partnership is void.
The partnership agreement must appear in
a public instrument and be registered with Example
the SEC.
A contributes land, but the parties fail to
Exception attach an inventory. The partnership is void.
Failure to comply does not invalidate the Key Words to Remember
partnership.
Real Property + Public Instrument +
Example Inventory
The partners invest ₱50,000 but fail to
register with the SEC. The partnership is
still valid.
📌 Article 1774 – Rules
Key Words to Remember Governing Partnerships
Registration Required but Not Essential
for Validity
, The special provisions on partnership apply, Key Words to Remember
together with general contract rules when
appropriate. Co-Ownership Is Not Automatically
Partnership
📌 Article 1786 –
General Rule
Partnerships are governed primarily by
partnership law. Obligation to Contribute
Exception What Was Promised
When partnership law is silent, general rules When a person becomes a partner, he must
on obligations and contracts apply. deliver the money, property, or services that
he promised to contribute. The partnership
Example relies on these contributions to start and
operate the business.
Questions about consent and fraud are
resolved using contract law. General Rule
Key Words to Remember Every partner is a debtor of the
partnership for whatever he promised to
Partnership Law + Contract Law contribute.
Important Effects
📌 Article 1775 – If a partner fails to contribute on time:
● He is automatically in default.
Associations Not Intended
● No demand is necessary.
as Partnerships ● He must pay interest from the time
contribution should have been
Some groups jointly own property or share made.
income without forming a partnership. ● He is liable for damages caused by
the delay.
General Rule
Example
Co-ownership and sharing of gross returns
do not by themselves create a partnership. A promised to contribute ₱200,000 on June
1 but delivered it only on August 1. He must
Example pay interest and compensate the
partnership for any losses caused by the
Two siblings inherit land and divide rental delay.
income. They are co-owners, not
necessarily partners. Key Words to Remember
