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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
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. (Article 1767, New Civil Code)
Joint venture is defined as an association of persons or companies jointly undertaking some commercial enterprise; generally all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and duty, which may be altered by agreement to share both in profit and losses. (Kilosbayan, Inc. vs. Teofisto Guingona, G.R. No. 113375, May 5, 1994)
Partnerships and joint ventures are two common ways for people to come together and work towards a shared goal. But what exactly are they, and how do they differ?
What is a Partnership?
Imagine you and a friend decide to start a business together. That is essentially what a partnership is – an agreement between two or more people to pool their resources (like money, property, or skills) and share in the profits. Whether it is a formal contract or just a handshake, partnerships can take various forms.
One important thing to note about partnerships is that they are considered separate legal entities from the individuals involved. In other words, the partnership itself is seen as its own “person” in the eyes of the law, distinct from the partners themselves.
The law says:
Partnership is essentially a result of an agreement or a contract, either express or implied, oral or in writing, between two or more persons. (Merian Santiago vs. Spouses Edna Garcia, G.R. No. 228356, March 9, 2020)
The partnership has a juridical personality separate and distinct from that of each of the partners. (Luzvimina Villareal vs. Donaldo Efren Ramirez, G.R. No. 144214, July 14, 2003)
What about Joint Venture?
Now, let us say you and your friend team up with another couple of friends to tackle a specific project together. That is where a joint venture comes into play. A joint venture is like a temporary partnership formed for a specific purpose or project.
In a joint venture, everyone involved contributes something – whether it is money, skills, or resources – and they all share in the risks and rewards of the venture. While joint ventures can be formalized with contracts, they are generally understood to be more temporary in nature compared to long-term partnerships.
The law says:
The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has been generally understood to mean an organization formed for some temporary purpose. (Carlos Valdes vs. La Colina Development Corporation, G.R. No. 208140, July 12, 2021)
A joint venture “presupposes generally a parity of standing between the joint co-ventures or partners, in which each party has an equal proprietary interest in the capital or property contributed, and where each party exercises equal rights in the conduct of the business. (Heirs of Tan Eng Kee vs. Court of Appeals, G.R. No. 126881, October 3, 2000)
Spotting the Similarities
Here’s where it gets interesting: despite their different names, partnerships and joint ventures share many similarities. Both involve people coming together to achieve a common goal, pooling their resources, and sharing in the profits (or losses). They both also come with a level of control and decision-making power for all parties involved.
So, what’s the difference?
While partnerships and joint ventures may seem pretty similar, there’s one key distinction that sets them apart: duration. Partnerships are typically seen as more permanent arrangements, geared towards ongoing businesses or ventures. On the other hand, joint ventures are usually formed for a specific project or endeavor and are meant to dissolve once that project is complete.
In conclusion, a joint venture is akin to partnership.
Joint venture is in fact hardly distinguishable from the partnership, since their elements are similar – community of interest in the business, sharing of profits and losses, and a mutual right of control. The main distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a general business with some degree of continuity, while the joint venture is formed for the execution of a single transaction, and is thus of a temporary nature. This observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a particular partnership may have for its object a specific undertaking. It would seem therefore that under Philippine law, a joint venture is a form of partnership and should be governed by the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others.
A joint venture, therefore, is akin to a partnership, the essential elements of which are as follows: (1) an agreement to contribute money, property, or industry to a common fund; and (2) an intent to divide the profits among the contracting parties. (Carlos Valdes vs. La Colina Development Corporation, G.R. No. 208140, July 12, 2021)
Related Article/s:
Things to know about entering a joint venture
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