Published — March 4, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
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.
Learn more about partnership: Types of Businesses: Their Advantages and Disadvantages
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Two or more persons may enter a contract of partnership
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Partners contribute money, property, or industry for the partnership
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The contract of partnership is for the division of the profits among themselves
Meeting of the minds is essential to the formation of any contract.
In creating an agreement or any contract, say partnership, there are at least two persons needed.
What is a contract of partnership?
The law says:
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 profit among themselves. A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of the partners.
Here, it is clear that in a partnership, partners may contribute either money, or property, or industry to what is called common fund. Thus, it is not necessary that all the partners contribute money to the partnership as partners can have an agreement as to what could or should be contributed by a partner. So, if a partner contributes his industry alone, it is still within the context of law.
Also, a partnership may be constituted in any form, except where immovable property or real rights are contributed in the partnership. In such a case, where an immovable property or real right is contributed to the partnership, the contribution must be stated in a public instrument. This means that the contribution must be specified in notarized document. In addition, every contract having a capital of Three Thousand Pesos (Php3,000.00) or more, in money or property, the same shall appear in a public instrument and must be recorded in the office of the Securities and Exchange Commission. However, failure to comply with such requirement, still, does not affect the liability of the partnership and the partners to the third persons.
Earlier, we have said that where an immovable property was contributed in a partnership, the same must appear in a public instrument. Take note that the inventory of such property must be made, signed by the parties, and attached to the public instrument. Otherwise, the contract of partnership is void.
What are the kinds of partnership?
The law says:
As to its object, a partnership is either universal or particular. A universal partnership may refer to all the present property or to all the profits. A partnership of all present property, the property which belonged to each of the partners at the time of the time of the constitution of the partnership, becomes the common property of all the partners as well as the profits that they may acquire. 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 excluded in such stipulations except as to its fruits.
Furthermore, a universal partnership of profits comprises all that the partners may acquire by their industry or work during the existence of the partnership. Real or personal 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. Do note that person who are prohibited from giving each other any donation or advantage cannot enter into universal partnership.
On the other hand, particular partnership has for its object determinate things, their use or fruits, or a specific undertaking, or exercise of a profession or vocation.
As regards the liability of the partners, a partnership may be limited or general.
What is a limited partnership? A related article will be posted in a few days.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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