PARTNERSHIP

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June 25, 2016

Atty. E: Define Partnership.

Regalado: According to the Civil Code, 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 profits among
themselves.
Atty. E: So clearly, therefore, partnership is a contract. A
contract establishes relationships. Because it is a
partnership, what relationships are established?
Regalado: Relationship among partners.
Atty. E: The moment relationships are established,
problems may arise, that is why we have to study the law
to establish order in the business. What other
relationships?
Sibay: Aside from the relationship between the partners,
a relationship may also be created between two
partnerships because a partnership has a separate
juridical personality.
Atty. E: Possibly.
Sibay: There could also be a relationship between the
consumers if the partnership is engaged in commercial
business.
Atty. E: Relationships between the partnership and third
parties! Because they have to deal with third parties and

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the business and problems may

relationship. (Question inaudible)

arise

from

this

Sibay: It could be the State.

Atty. E: Could the partnership really have anything to do
with the relationship between third parties and the State?
I dont see it. What other relationships? Because were
talking only about the contract of partnership.
Sibay: The relationship between the partnership and the
State.
Atty. E: That could be a third relationship. Because the
establishment of a partnership is not a right, it is a mere
privilege granted by the State. Therefore the partnership
must comply with all the terms imposed in the granting of
that privilege. So there could be a possible conflict there
as well. Any other relationship?
Rudas: The relationship between third parties who may
want to create a partnership.
Atty. E: But how could that involve the partnership that
you want to form? Were talking about relationships as a
result of the existence of the partnership. To simplify the
question, Rudas Do you have a boyfriend, Rudas?
Rudas: Yes, sir.
Atty. E: Therefore, you are maintaining that relationship.
Having that relationship, you and your boyfriend, what
could be the other relationships in consequence of your

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relationship with your boyfriend? Do you bring your

boyfriend at home? Introduce him to the family?
Rudas: Yes, sir.
Atty. E: And therefore, theres a relationship established!
Between?

Atty. E: The partners not the partnership? That is correct.

The relationship. Because once a partnership, Rudas, is
established, how many persons do we now have? If you
and Sibay agreed to form a partnership?
Rudas: Three, sir
Atty. E: There could now be three. Namely?

Rudas: My parents and my boyfriend.

Rudas: Me, Rudas, Sibay, and the partnership.

Atty. E: Thats correct! Any other relationship?

Atty. E: And the partnership which becomes a person

itself. What kind of person?

Rudas: My friends.
Atty. E: Third parties, friends! Hey, this is my boyfriend.
Look at him, hes handsome! Paglakaw ni Rudas, hmp
bati! So these are the relationships. Alright, bring me to
partnership! Weve mentioned how many so far?
Rudas: Three. Among the partnership themselves. The
partnership and third parties. The partnership and the
State.
Atty. E: Any other?
Rudas: Other organizations. Or other Umm.. I think
Atty. E: After the break first (6:00 prayer)
Rudas: So I think sir. Another the partners and the third
parties.

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Rudas: A juridical person.

Atty. E: A juridical person. So three persons. And
therefore, the partnership may establish a relationship
with 3rd parties, the partners themselves, the individual
partners, also might have a relationship with 3rd parties.
Okay so. Those could be the possible relationships that
could be established. What are they again, Rudas?
Rudas: The possible relationships that may be established
by the contract of partnership are the relationship
among the partners in a partnership, and then, the
partnership and 3rd parties, the partners and the 3rd
parties, the partnership and the state.
Atty. E: Okay. So it is a contract. And as a consequence,
relationships could be established, and so long as there
are relationships, conflicts could arise. That is why we
would try to study how to avoid conflicts (inaudible)
And if you still remember contracts, what is a contract?

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Rudas: A contract is where there is a meeting of minds

wherein one binds himself to do (UBO SI SIR) an act and
the other....

the other to give something or to render some service.

Thats why, a contract is a source of what?
Regalado: It is the source of law between the parties.

Rudas: An obligation...

Atty. E: The source of law it is the law, even! It becomes

the law between the contracting parties. But when we
talk about the sources of obligations, remember?
Obligations and contracts, sources of obligations what
could be the sources of your obligations, Rudas?

Atty. E: Sibay, contract, Sibay, we define partnership as a

contract and we cannot even say what a contract is.

Rudas: The sources of obligations are contracts, the law,

quasi-contracts, quasi-delicts

Sibay: A contract is an agreement between the parties

whereby the other party agrees to perform an obligation,
in consideration... Uhm.. Let me rephrase sir.. Uhm... This is
an agreement between the parties whereby one party
agrees to perform an obligation or an act in
consideration for the...

Atty. E: What are delicts?

Atty. E: To do an act? It is very dangerous, to do an act

To dance before him?

Atty. E: Regalado. Contract, Regalado.

Regalado: Contract is the meeting of the minds between
two persons
Atty. E: Only two persons? Only two?
Regalado: Two or more persons, whereby one binds
himself to render some service or to do something...
Atty. E: A contract is a meeting of the minds between
two persons whereby one binds himself with respect to

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Rudas: Those are crimes, sir.

Atty. E: Crimes. So a crime is a source of an obligation
because any person criminally liable is also civilly liable.
Quasi-delicts, why are they a source of obligation?
Rudas: Quasi-delicts are a source of obligation because
one has done damage or wrong to a person. They are
those that are damages or wrongs that one may have to
another, although not intentionally.
Atty. E: Are they crimes?
Rudas: There are some.
Atty. E: What are crimes again?

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Rudas: They are wrongs made by a person against the

State. It is an unlawful done by a person against the
State.

Atty. E: They are acts or omissions? They are acts

punished by law except that there was no intention.
Crimes are intentional. If there is no intention, that is not a
crime, but still you are punished because?

Atty. E: Unlawful acts If I dont pay tax, do I commit a

crime? Its unlawful not to pay tax. Do I commit a crime?

Rudas: You have caused wrong or damage.

Rudas: Yes, sir.

Atty. E: What crime?
Rudas: Tax evasion, sir.
Atty. E: Uh-huh. And tax evasion is a crime
Rudas: Its not punished under the Revised Penal Code.
Atty E: Maybe punishable, but not a crime. See the
distinction now? You must pay. If you do not pay your
taxes, penalty will be imposed. But when we define
crimes, it was not the definition (inaudible) otherwise
your professors in Criminal Law will not own you as their
students. When we define crimes, its defined by the
penal code and the definition is specific.

Atty. E: How did I cause it?

Rudas: Negligently.
Atty. E: Negligence! In other words, what the law
punishes is not the act itself because you did not intend
to do that. What the law punishes is your failure to
observe the diligence and necessary diligence required
under the circumstances as to persons, time, and place.
If you drive your car 120 km/hr along Carbon Market and
you hit somebody. Are you liable for homicide?
Rudas: No, sir.

Rudas: I think theyre acts and omissions

Atty. E: You did not intent to kill! You could never be

liable for homicide. You could be liable for negligence
resulting to homicide. (Mumbles something about
supposing to master) Anyway, thats Criminal Law. Im
poor in Criminal Law but I remember some basic
principles. Alright, sources of obligations again?

Atty. E: They are acts or omissions punished by law! They

could be general laws or special laws. Quasi-crimes?

Rudas: The sources of obligations are law, contracts,

quasi-delicts, delicts, quasi-contracts.

Rudas: Quasi-crimes are omissions

Atty. E: Were talking of a contract. Therefore, a contract

is one of the sources of an obligation. We have to know
what exactly a contract is. To be considered a contract,

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there should be the proper elements of a contract,

namely
Rudas: The consent, the object, and the consideration.
Atty. E: Alright. The consent, object or subject matter,
cause or consideration when we say consent, what do
we mean?
Rudas: It means the parties agree to it. There is a meeting
of the minds between the parties, the intent to establish,
for example, the partnership.
Atty. E: Theres a meeting of the minds. The parties have
freely agreed. They did not give their consent just
because there was force or intimidation. However, there
are occasions when someone freely gives his consent but
still, consent is not recognized. How does this happen?

Atty. E: That is rape! Even if the girl will say Go ahead, do

what you want. That is still rape. In other words, even if
she gave her consent, the law does not recognize it as
such. Why?
Moreno: Because that man abused his authority and he
exercises moral ascendancy over the girl.
Atty. E: Torcal. Why?
Torcal: Because the girl is considered to be incapable of
giving her consent, sir.

Rudas: An exception to this is when there are other

requirements such as in formal contracts.

Atty. E: Exactly! Even if she gave her consent, even if she

volunteered, the consent that she gave is not admissible
by law. It is not recognizable by law because she is not
capable of giving her consent. And so there are
instances like those. Therefore the contract by the 11year old girl is not binding. Even if mo ingon siya nga oh
daghan kau kog kwarta oh! Mo contribute ko because
that girl has no capacity to give her consent. What else?

Atty. E: Moreno! Were talking of consent and we said

consent must be freely given. However, there are
occasions when even if the consent is freely given, that
consent is not recognized by law.

Torcal: Incapacitated person or persons who cannot give

their consent such as: unemancipated minors, insane or
demented persons, deaf mutes who does not know how
to read and write, persons suffering from civil interdiction,

If somebody goes to bed with an 11-year old girl and the

girl was the one who even said lets go to bed cge
syag hagad!! SHE GAVE HER CONSENT! The man is still
liable for?

Atty. E: Civil interdiction which means?

Moreno: He is still liable for rape, statutory rape.

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Torcal: Civil interdiction is a penalty which strips the

parent/s of parental authority.

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Atty. E: Moreno? What can you remember of civil

interdiction?
Moreno: Civil interdiction, sir, is when a person is
convicted by final judgment and then one of the
penalties thereof is that he can no longer give his
consent or deal with contracts because he does not
have that civil right anymore.
Atty. E: That civil right may include?
Moreno: Civil rights may include right not to dispose of his
own properties.
Atty. E: Right to manage or administer his property. He
can no longer exercise his right to administer or decide
what to do with his properties because he is suffering
from civil interdiction. Can he still contribute any property
into the partnership?
Moreno: No longer.
Atty. E: No longer. He is not qualified to give his consent.
So that is consent. Object?
Moreno: To be valid, the object of the partnership should
be lawful.

Atty. E: Alright! So in a contract of partnership, what

could be the object?
Moreno: In a contract of partnership, sir, would be their
intent to gain profit.
Atty. E: That could be the purpose. But what is the object
to the contract? What do we refer to as the object?
Moreno: The business itself.
Atty. E: What is the business?
Moreno: Any like the business to render service, the
business to
Atty. E: What could be the object to the partnership?
Why do they enter into partnership? As you said, engage
in business. Which business? What business?
Torcal: The partnership can have the business of earning
profits, for the very reason that the partnership is
established or organized.
Atty. E: Would they engage in business for buying and
selling bodies of dead persons?
Torcal: No, sir.

Atty. E: Must be lawful. Therefore?

Atty. E: No! So what business can they engage in?

Moreno: Therefore, if the object is unlawful, there could

be no partnership.

Torcal: Anything.
Atty. E: Anything

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Torcal: Yes, sir, so long as it is not contrary to law, morals,

public policy.
Atty. E: Alright! They could pursue any business so long as,
you said?

Atty. E: Supposed you approached one of your

classmates tonight, You know, I have a feeling the two
of us ought to go together. Then the girl said, Ill think it
over, ask me again tomorrow Do you already have an
agreement? Is she already your girlfriend?
Rudela: Not yet, sir.

Torcal: So long as they are not contrary to morals,

customs and public policy.

Atty. E: There was no consent yet. Could you already

start holding her hand?

Atty. E: What basic principle of contract is that?

Rudela: Not yet, sir.

Torcal: Principle of Liberality the partners in the

partnership are free to agree and stipulate on anything
as long as it is not contrary to law, morals, customs, public
order and public policy.

Atty. E: You cannot even hold her hand, much less, throw
your hand around her. When can you start holding her
hand?

Atty. E: If you enter into a contract with Moreno and

Moreno agreed to contribute 50 million but you have
been waiting for weeks and Moreno has not delivered
her 50 million. Can you go to Archbishop Palma and
demand the 50 million from him?
Rudela: No, sir. If we base it on the Principle of Privity of
Contracts
Atty. E: Only the contracting parties are bound by that
stipulation. Since it is a contract between Torcal and
Moreno, no one else will be liable except Torcal and
Moreno. Do you have a girlfriend?
Rudela: Not anymore, sir.

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Rudela: By the time consent is given.

Atty. E: Which brings us to the 3rd Principle of Contracts
which means?
Rudela: Consensuality of Contracts Contracts are
perfected by mere consent.
Atty. E: Except?
Rudela: The formal contracts, sir. These are the contracts
perfected by executing some formalities.
Atty. E: Is a contract of partnership consensual or a
formal contract?

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Rudela: Generally, sir, a contract of partnership is

consensual but there some instances that certain
formalities are required. One is when a contribution is
more than 3,000 pesos, it should be in a public
instrument.
Atty. E: How else will you want to describe a contract of
partnership?

Rudela: It is bilateral. It is nominate.

Atty. E: Why?
Rudela: It is nominate because the Civil Code itself
provided its name which is a contract of partnership. It is
bilateral because it is between two persons. It is also
onerous because it provides or imposes certain
obligations. It is also principal and commutative, sir.
IMPORTANT POINTS:
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.
Relationships established by the contract of
partnership
o Among the partners
o Between the partnership and third persons
o Between the partnership and the State
o Between the partners and third persons
The partnership may establish a relationship with
3rd parties and the partners themselves.

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In a contract of partnership, three or more persons

are involved, two or more partners and the
partnership itself since the latter is a separate
juridical entity.
A contract is a meeting of the minds between two
persons whereby one binds himself, with respect to
the other, to give something or to render some
service.
Sources of Obligations:
o Law
o Contracts
o Acts and omissions punished by law
o Quasi-contracts
o Quasi-delicts
Elements of a Contract
o Subject matter must be lawful
o Consent freely given
o Consideration
Persons Not Capable of Giving their Consent
o Unemancipated minors
o Those suffering from civil interdiction no
right to manage and administer their
properties
o Insane and demented persons
o Deaf-mutes who do not know how to read
and write
o Those under guardianship (not discussed)
Basic Principles of Contracts
o Principle of Liberality the parties are free
to agree and stipulate on anything as long
as it is not contrary to law, morals, customs,
public order and public policy.

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Principle of Privity - only the contracting

parties are bound by the stipulations in a
contract.
o Principle of Consensuality contracts are
perfected by mere consent.
EXCEPT: Formal contracts
Characteristics of a Contract of Partnership
o Consensual
o

o
o
o
o
o
o

(not yet discussed)

Nominate
Bilateral
Onerous
Principal
Commutative
Aleatory

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