ARTICLE 1776 ARTICLE 1776. As to its object, a partnership is either universal or particular. As regards the liability of the partners, a partnership may be general or limited. (1671a) Classifications of Partnership 1. Subject matter / object a. Universal partnership – present property or all profit (1777) i. Universal partnership to all present property (1778) – ii. Universal partnership of profits (1780) – b. Particular partnership – 2. Liability of the partners a. General partnership – liable pro rata, subsidiarily, or sometimes solidarily b. Limited partnership – not personally liable i. One or more general partners and one or more limited partners 3. Duration a. Partnership at will i. time / particular undertaking is required to form ii. may be terminated by mutual agreement of partners, will of any one partner, fixed term or undertaking b. Partnership with a fixed term i. formed upon agreement / undertaking ii. will dissolve upon expiration or completion of particular enterprise (unless continued by partners) 4. Legality of existence a. De jure partnership – complied to all legal requirements b. De facto partnership – failed to comply with all legal requirements 5. Representation of its a. Ordinary or real partnership – actually exist to partners and third party b. Ostensible partnership or partnership by estoppel – in reality is not in a partnership but become considered a partnership to those, by their conduct, are precluded to deny its existence i. A told X that (A), B, C are partners and with B’s consent. X gave credit to A. Therefore, A, B, C become partners by estoppel. BUT since C did not consent, only A and B are liable as partners. 6. Publicity a. Secret partnership – existence of some partners is not made known to public b. Open or notorious partnership – existence is know to public 7. Purpose a. Commercial or trading partnership – formed for the transaction of business b. Professional or non-trading partnership – formed for the exercise of profession Kinds of Partners e. f. g. Partners are classified according to their interest in the business or their obligations to the partnership or their liabilities to thirds persons. 1. Under the Civil Code a. Capitalist partner – contributes money or property b. Industrial partner – contributes only his industry or personal service c. General partner – liability to third persons extend to personal property (can also become capitalist or industrial partner) d. Limited partner i. liability to third persons is limited to capital contribution ii. a.k.a special partner h. i. iii. does not participate in management managing partner i. manages the business ii. appointed either in the article of partnership or after the constitution of the partnership iii. a.k.a general or real partner liquidating partner – incharge of winding up (distributing) partnership assets after dissolution partner by estoppel i. not really a partner but is liable as a partner for the protection of innocent third person ii. a.k.a partner by implication / nominal partner / quasipartner iii. liable for the debts of the firm to those who in good faith believed him to be a partner Continuing partner – partner who continues the business after it has been dissolved (due to death, retirement, admission of new partner, expulsion) Surviving partner – remains after the partnership has been dissolved due to death of any partner j. Subpartner i. Not a member of a partnership ii. Contracts with a partner with reference to the latter’s share in the partnership (agreement to share profit to an outsider) iii. Does not hold any rights to the firm / not liable to any debts 2. Other classifications a. Ostensible partner – takes active part + known to public b. Secret partner – takes active part + NOT known to public c. Silent partner i. does NOT take active part + known to public ii. if they withdraw, they must give notice to persons who do business to escape liability in the future d. Dormant partner i. Does NOT take active part + NOT known to public ii. A.k.a sleeping partner iii. May retire without giving notice + cannot be held liable even after withdrawal - iv. Only interest is sharing profit e. Original partner – member from the time of the partnership’s organization f. Incoming partner – about to be taken in a partnership g. Retiring member – withdrawing/withdrawn from a partnership All partners in any of these six classes are subject to liability for all partnership obligation (1816, 1822, 1824, 1826, 1844, 1241) ARTICLE 1777 ARTICLE 1777. A universal partnership may refer to all the present property or to all the profits. (1672) ARTICLE 1778 ARTICLE 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 which they may acquire therewith. (1673) Guide Questions a. Universal partnership of all present property a. Partners contribute all the properties which actually belong to each of them at the time of the constitution with the intention of dividing the same among themselves as well as profits that may acquire therewith b. What properties are included? a. Properties that belong to the partners like building, land, machinery – as long as it is determinate c. What about properties they may acquire in the future? a. No. only determinate properties can be contributed ARTICLE 1779 ARTICLE 1779. 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. 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 stipulation, except the fruits thereof. (1674a) Universal partnership of all present property, explained Universal partnership of all present property - Partners contribute all the properties which actually belong to each of them at the time of the - constitution with the intention of dividing the same among themselves as well as profits that may acquire therewith Thus, the following become common property o Property belonged to each of them at the time of constitution o Profits which they may acquire from the property contributed Contribution of future property - - - As a general rule, future property CANNOT be contributed The position of a partner is like of a donor, and donations cannot comprehend future property Inheritance, legacy, or donation cannot be included by stipulation except fruits Profits from other sources (not from the properties contributed) will become common property only upon stipulation Guide Questions a. Why exclude property subsequently acquired through inheritance, legacy, or donation? a. Contract of partnership entails that the properties contributed to be included in the partnership requires the contribution of things determinate b. What about lotto winnings or winnings in a casino? ARTICLE 1780 ARTICLE 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. (1675) Universal partnership of profits, explained Universal partnership of profits - Comprises of what partners may acquire by their industry or work during the existence of partnership and the usufruct (right to use) of movable and immovable property 1. Ownership of future and present property a. Ownership of future and present property retain to the partners b. The profits, income, and usufruct are passed to partnership c. Upon dissolution, they are returned to partners 2. Profits acquired through chance a. Profits acquire through chances such as lottery or by lucrative title without employment of any physical or intellectual efforts are NOT included 3. Fruits of property subsequently acquired a. Fruits of property subsequently acquired do not belong to the partnership b. Profits may be included upon stipulation c. Profits that the partners may acquire by their industry as well as usufruct of their present properties belong to the partnership. Exclusion must be stated upon stipulation Guide Questions a. Who owns the properties? a. The partners. Only usufruct can be passed to partnership b. What is usufruct? a. Right to use ARTICLE 1781 ARTICLE 1781. Articles of universal partnership, entered into without specification of its nature, only constitute a universal partnership of profits. (1676) Presumption in favor Partnership of Profits - - of Universal If the nature is not specified whether it is “present property” or “profits,’ it is presumed that the parties intend merely a partnership of profits Imposes lesser obligations Applies only when a universal partnership has been organized Guide Questions a. Why not include specification? a. Universal profits obligations ownership partners properties if no partnership of holds lesser since the remains to the ARTICLE 1782 ARTICLE 1782. Persons who are prohibited from giving each other any donation or advantage cannot enter into universal partnership. (1677) - - To allow them to give each other donation or advantage to form a universal partnership is like allowing them to do what the law prohibits Partnership formed in violation is null / void/ no legal personality is acquired Pertinent legal provisions 1. ART. 87 a. Donation between spouses during the marriage shall be void except moderate gifts given on the occasion of family rejoicing 2. ART 739: donations shall be void for: a. Those made between persons who are guilty of concubinage/ adultery b. those guilty of the same criminal offense c. those made to a public officer, his wife, descendants, or ascendants Guide Questions a. Who are people prohibited from giving each other any donation or advantage? (Husband and wife Art. 87, Family Code; Void Donations under Art. 739, Civil Code) Why? a. To allow them to give each other donation or advantage to form a universal partnership is like allowing them to do what the law prohibits b. what happens if they form a partnership? (See Art. 1409) a. Partnership formed in violation is null / void/ no legal personality is acquired ARTICLE 1783 ARTICLE 1783. 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. (1678) Particular partnership – neither a universal partnership of present proper nor a universal partnership of profits Examples: 1. those formed for the acquisition of an immovable property for the purpose of reselling it at a profit or for the common enjoyment of its use and the benefits derived 2. established for the purpose of carrying out a specific enterprise such as the construction of a building 3. Formed for the practice of a profession or vocation Guide Questions a. Why do you need to have different kinds of partnerships? a. So that the parties who are planning to enter in a partnership would know what structure to follow. For example, if all the partners are willing to put their personal properties at stake, then they could follow general partnership. In contrast, if some of the partners prefer having lesser obligations, they could follow limited partnership. b. What type of partnership would you choose to use if you are to set up one and why?
