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Partnership Explained (Civil Code of the Philippines Article 1767) Civil Code of the Philippines ARTICLE 1767. 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. Two or more persons may also form a partnership for the exercise of a profession. (1665a) (Source: http://www.philippinejustice.com/partnership.htm) Breaking Down the Definition A contract is considered a partnership when at least to persons bind themselves to contribute money, property or industry to a common fund to earn and divide those earnings among themselves. Contract by definition is a written or spoken agreement that is intended to be enforceable by law. It is important to note that a contract usually signifies intention to make the agreement legally binding, whether written or spoken initially. The Civil Code Article specifically mentioned persons, and not artificial beings. Meaning, partners must simply be persons and not anything else. The Civil Code article enumerated what partners may contribute, these are money, property, and industry. These are basically everything what a partner can contribute. Anything can fall under those enumerated. Money may be physical cash, cash in banks, or any other things that can be considered as legal tender. Properties can be sub-classified further: Real and Personal. Real properties are land and buildings, and any other immovable properties that you can think of. Personal properties are any movable properties. It could be a thing, animal, or anything that can be considered as a property. Industry is hard work. A person can contribute his or her skills to be a partner. Any work such as accounting, auditing, marketing, advertising, drawing, clerical work, other specialized skills depending on the business being formed by the partnership, anything. All these money, properties, and industries of each and every partner who contributed, must be gathered to a common fund. Intentions must be there that these must be used by the partnership in order to earn. These money, properties, and industries must be dedicated for partnership use. The intention of a partnership must be to earn, and to maximize profit. Lastly, the earnings must be divided among partners by the end of every operating cycle of the partnership, usually yearend. If the intention of a partnership is not to earn, it shall not be recognized by law. If the intention of a partnership is to accumulate earnings without any intention of dividing said earning to partners, it shall not be considered as partnership according to the Philippine Law. To end, the following must be present before a contract can be considered as a partnership: Two or more persons must form the partnership Partners must contribute money, properties, or industries Contributions must be gathered to a common fund There must be intention to earn There must be intention to divide the earnings among partners
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