Partnership Agreements & Liabilities

General Provisions - Article 1767

• By a partnership contract, two or more individuals commit to pooling money, property, or industry into a common fund
• Aims to distribute profits among themselves
• Partnerships can also be formed for practicing a profession

Elements of a Partnership

• Valid Consent of all contracting parties
• Mutual contribution of money, property, or industry
• The object must be lawful based on Article 1306 of the Civil Code
• The purpose is to make a profit, divide the said profits among themselves
• Transparency among partners is also necessary based on Article 1775 of the Civil Code

Characteristics of Partnerships

• Consensual: Perfected by mere consent/ agreement of two or more persons
• Nominate: Has a special name/ designation in law
• Bilateral: Rights and obligations are always reciprocal with 2 or more people and voluntary
• Onerous: Each party aspires to secure a benefit through giving something
• Commutative: Each partner's undertaking is considered the equivalent of the others
• Principal: Existence/ validity does not depend on another contract
• Preparatory: Entered into as a means to an end

Basic Partnership Features

Partnerships necessitate a valid contract, referencing Article 1318 of the Civil Code, with three requisites:

• Consent of Contracting Parties
• Object Certain
• Cause of Obligation

Consent of Partners

• Joining a partnership requires the consent of all existing partners
• Introduction of a new partner dissolves the old partnership
• Need to form a new one in its place with the consent of all partners, original and the new one

Principle of Delectus Personae

• Individuals have the right to choose their associates/ members in a partnership
• Based on trust, which creates a fiduciary relationship
• It is the right/ power, not the obligation, to dissolve a partnership

Following the Civil Code

• Partnerships must adhere to Article 1306 of the Civil Code regarding stipulations
• Terms and conditions should not violate the law, morals, customs, public order, or public policy

Capacity to Enter a Contract

• Individuals must be competent + capable in order to enter a contract
• Minors, those Civil interdiction, insane/ demented persons, deaf-mutes who can't write, + incompetent individuals lacking legal consent

Association for Profits

• The primary goal of a partnership is to generate profits.
• Profit sharing ratios may vary, determined by partner agreements or contributions in absence of an agreement.
• Industrial partners are exempt from losses, focusing on rendering of public service

Juridical Personality - Article 1768

• The partnership is an entity legally separate from its partners
• Distinct regardless of compliance with Article 1772 requirements
• The state and its subdivisions, public corporations/ institutions, + private entities granted juridical personality by law

Partnerships Authority

• Enter contracts/ posses properties
• Incur obligations
• Bring civil or criminal actions
• Can be declared insolvent, if one is declared

Mutual Agency

• Each partner serves as an agent w/ implied authority to bind the partnership
• This mutual agency binds the partners to each other and the larger partnership.

Separate Juridical Personality

• The juridical personality of a partnership differs from that of its partners, shielding partners from firm obligations
• It may include fraudulent, unfair, or illegal purposes

Relations in Regards to Articles

• Based in compliance with the Securities and Exchange Commission, every partnerships and its partners must ensure compliance with
• Article 1772 of the Civil Code
• Article 1773 of the Civil Code
• Article 1775 of the Civil Code
• Article 1769

Rules for Determining Whether Partnership Exists

Key considerations:

• Non-partners concerning each other aren't partners to third parties unless specified by act. 1825
• Profit sharing suggests partnership, UNLESS for debt repayment, wages, rent, annuity, interest on a loan or business goodwill installment

Agreements

• Unenforceable if within the Statute of Frauds and without written agreement.
• Partnership requires clear intent, a common fund + an interest in profits distribution.

Partnership Dissolution

• An unlawful partnership dissolves + forfeits profits via decree
• It’s a result from an unlawful object/ purpose or violates laws/ morals

Partnership Forms - Article 1771

• These can be constituted in any form
• Public instruments are needed only when immovable property is involved

Public Instruments, Real Rights & Immovable Property - Article 415

Includes:

• Land, buildings, structures fixed to the soil
• Trees, plants, growing fruits
• Statues, painting use for ornamentation
• Machinery for an industry and receptacles
• Animal enclosures intended as a permanent attachment etc

Rights Defined

• Rights empower a person to demand action from another/ involve title to property, with active + passive entities present
• These rights can classify real rights/ personal rights that apply for the whole world/ in contact to individuals
• All which are to be registered with a public or a private entity

Capital Contribution Guidelines - Article 1772

• Contracts above P3,000 should be public and registered w/ Securities and Exchange Commission for transparency
• The article exists for third-party convenience
• All which must be consistent with existing code references, like code 1357

Determinants for A Partnership

• Intention is required for a partnership, in that it be a verbal or written contract
• A Common fund is require from contribution
• There must exist joint interest in the profits, and losses/ profits share

Partnership Requirements - ICJ

• Intention
• Common Fund
• Joint Interest

Operation

If a partnership has an existence in business/ commercial operations-

• Article 1780
• Universal partnership that should adhere code principles

Universal Partnership Operations

The universal partnership allows for two types of operations

• Those where the partnership shares present property
• Present properties are where the partners share the property at stake of the partnership, as well as the profits

Partnerships In Dought

• Art, 1178, partners contribute all of the property
• Art, 1179 are all partners in a similar position

Partnership Profits & Contributions

Partnerships are also expected to have the following:

• Articles 1780 where there industry is at stake
• Share of profits are at stake where all the profit can be claimed as that of the partnership

Relations in regards to liability

All must be equal with:

• General Partners
• Limited partners

Partnership Concerns of Time

• What is at will
• What is a fixed term

Representation

Both being:

• Real
• Estoppel

Kinds of Partners under the Civil Code

• Capitalist, Industrial, General, Limited, Management, Liquidating
• What it means and where they are in correlation
• What defines their operations within operations

All Partner Classifications

• Ostensible, Secret, Silent,Dormant
• Each of the partners classifications which define the role that the partners fill

New Partners

• Rights that new partners have which must correspond to the time of organization

Universal Partner

• Understanding the rights the partner receives on a universal scale that is the law

Agreement terms

• How they can and will affect profits
• How contributions affect each party and their ability to contribute to the partnership in question

Partner Restrictions

• Restriction for partners the are giving more than the time share for the effort they are placing into operations

Business Dealings

• Restrictions of conduct and management can be changed as seen fit

Partners who have violated what is lawful

• This is due to a partnership and must act normal

• If it in violation they are not to donate the amount, if that act occurs

Article 1783

Partnership may engage in several ways under certain and specific actions such as:

• Things

• Use of the property

• Conduct

• Professing to the public

CHAPTER 2: Obligations of the Partners

Section 1: Obligations of the Partners Among Themselves

Article 1784

-A partnership begins at time an agreement / execution occurs

• Unless said otherwise

Relations

Created by contract

• The relations of at least four parts are required to establish proper actions

1. Relations that must exist

2. Must be partner among the entity

3. Relations of third party interactions

Distinct Stages

Three stages are present for the partnership

1. Prep

2. Perfection

3. Execution

• Partnership perfection must have all requirements

• There to be contracts to SEC

• Future partnerships are all contractually solid between the individuals

Difference in the nature of a contract vs. a contract that is in execution

Implied Contract Requirements

1. All partners must agree upon the essential terms

2. One may then consider a partner at a point in due time

Article 1785

A partnership may continue during a fixed time

1. Any express / agreements are still binding due tot he new time established
2. Continuing agreement have the same rights/ aspects

Continuation: When a new set of operations occur

• Continuation is a prime aspect of time, with the same and original state established

Article 1786

• Every partner is the debtor of the partnership

• This has made it possible that the funds may correspond accordingly

• This can and must be accounted fairly and responsibly

Obligations to Property

• To continue, one must show proper good for and consideration-

1. All must contribute the items that they have pledged

2. That if a product is given but is not up to par the item must be fairly changed

Article 1163 of the Civil Code: Obligated to do so with caution to consideration and care

If a contribution has been delayed

1, then they are to answer for the damages that has occurred

• It now requires one to contribute the act that they have promised

• There becomes an act of immediate right

Code 1170

• There must be the element within the code which is required now

• This requires the act for a number of responsibilities and expectations

To Contribute

Effect of Failure to Contribute Properly Promised

1. By the means of what is the low at hand to the partners now must contribute ipso jure

2. By the fact, the right of partners to the aspect

This Article

Article 1189 all aspect require for the exception

• That there are proper requirements and expectations

• This may also allow the means to apply the right action under oath.

3. To allow for what article 1338 to occur due tot he fact that it is required for his obligations

• This allows for the immediate return of contributions

• This only happens and exist for very limited operations

Contribution has not yet been made

• This has been stated with the civil code

• This has now made all able to contribute at that moment

Article 1788

• With now all aspects properly taken one must contribute on a date to an organization

• Now, when these contributions where placed in the proper setting there is an expectation

After Contribution

• It must be stated and now recognized

• This requires on for the actions to have been in good standing

  • The partners are always under expectations

An Article -1505 is stated

• The way in which one is to conduct themselves is that of a partner

-That one does no impose the rights over anyone elses, with what was initially shared

-That all action are to uphold and provide the way for all others

Civil Code

Article 1790- all partners are to provide equals shares Unless stated otherwise

• This follows all those within the expectations that were given

Article 1791

• It is needed that when their is loss

• One is to contribute back in which they have made less than they have at any time for the other aspects involved in the partnership

General Rule

Capitalist partners do not have to provide.

• However the may have the right to do so

• This then means that the party involved may do so still

Imminent Loss

• The majority in operations have stated they can not continue

• One then must attempt to provide the rest

• One, as such, takes responsibilities for what has came and what continues

Capital Contributions

• When under the condition that what may fallow this with hold on the ability

• The partner must not claim any asset or revenue is required to contribute on his terms

1774

• When the right is being taken from the holder that the partner will not claim any debt

• That a new election my not hold any new or required aspect to be a right

• The individual does have some recourse

Under the UCC

1792

• Partners having management capabilities

• Partners on the ability to manage the entity