The law requires that 

a party to a contract has capacity to enter a contract. This means that

the person is recognised in law as being able to commit to a contract. Most people and
companies have capacity and so in the vast majority of contracts this is not a problem.
LEGAL CAPACITY TO ENTER A CONTRACT

KINDS OF PARTNERSHIP

1. General partnership
A general partnership is the most basic form of partnership. It does not require forming
a business entity with the state. In most cases, partners form their business by signing a
partnership agreement.

Ownership and profits are usually split evenly among the partners, although they may
establish different terms in the partnership agreement.

In a general partnership, all partners have independent power to bind the business to
contracts and loans. Each partner also has a total liability, meaning they are personally
responsible for all of the business's debts and legal obligations.

That's a lot of power and a lot of mutual responsibility. For example, say a general
partnership has three partners. One of the partners takes out a loan that the business
cannot repay. All partners may now be personally liable for the debt.

General partnerships are easy to form and dissolve. In most cases, the partnership
dissolves automatically if any partner dies or goes bankrupt.

2. Limited partnership
Limited partnerships (LPs) are formal business entities authorized by the state. They
have at least one general partner who is fully responsible for the business and one or
more limited partners who provide money but do not actively manage the business.

Limited partners invest in the business for financial returns and are not responsible for
its debts and liabilities.

This silent partner limited liability means limited partners can share in the profits, but
they cannot lose more than they've invested. In some states, limited partners may not
qualify for pass-through taxation.

If they begin actively managing the business, they may lose their status as a limited
partner, along with its protections.
Some LPs appoint a limited liability company (LLC) as the general partner so no one
has to bear unlimited personal liability for the business. That option may not be
available in all states, and it's much more complicated than an LP.

3. Limited liability partnership

A limited liability partnership (LLP) operates like a general partnership, with all partners
actively managing the business, but it limits their liability for one another's actions.

The partners still bear full responsibility for the debts and legal liabilities of the business,
but they're not responsible for the errors and omissions of their fellow partners.

LLPs are not permitted in all states and are often limited to certain professions such as
doctors, lawyers, and accountants.

4. Limited liability limited partnership

A limited liability limited partnership (LLLP) is a newer type of partnership available in
some states. It operates like an LP, with at least one general partner who manages the
business, but the LLLP limits the general partner's liability so all partners have liability
protection.

LLLPs are currently authorized in Alabama, Arizona, Arkansas, Colorado, Delaware,

Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maryland, Minnesota, Missouri,
Montana, Nevada, North Carolina, North Dakota, Oklahoma, Pennsylvania, South
Dakota, Texas, Virginia, Washington, and Wyoming.

PRINCIPLE OF DELECTO PERSONAE

Principle of Delectus Personae (choice of persons) – a person has the right to select persons with whom
he wants to be associated with in partnership.

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of the
partners even in case of failure to comply with the requirements of Article 1772, first paragraph.

No one can be a partner without the consent of all the partner.

CAPITALIST VS INDUSTRY PARTNERSHIP

HOW DOES A PARTNERSHIP IS FORMED

A partnership (also known as a general partnership) is an informal business structure consisting
of two or more people. You don't have to file paperwork to establish a partnership -- you create
a partnership simply by agreeing to go into business with another person
CONSEQUENCES OF UNLAWFUL PARTNERSHIP

Effects of an unlawful partnership

1. The contract is void and the partnership never existed in the eyes of the law;

2. The profits shall be confiscated in favor of the government;

3. The instruments or tools and proceeds of the crime shall also be forfeited in favor of the government;
4. The contributions of the partners shall not be confiscated unless they fall under #3. A partnership is
dissolved by operation of law upon the happening of an event which makes it unlawful. A judicial decree
is not necessary to dissolve an unlawful partnership. However, advisable that judicial decree be secured.
3rd persons who deal w/ partnership w/o knowledge of illegal purpose are protected.

RULES FORMED

What are the rules of partnership?

Thus as per the above definition, there are 5 elements which constitute of a partnership
namely: (1) There must be a contract; (2) between two or more persons; (3) who agree
to carry on a business; (4) with the object of sharing profits and (5) the business must
be carried on by all or any of them acting for all.

DETERMINE CLASSIFICATION OF PARTNERSHIP

1. According to object
2. According to liability
3. According to duration
4. According to purpose

All the partners are liable in proportion beyond the partnership assets for all the
contracts which may have been entered into on behalf of the partnership or in the
partnership’s name. They are even liable with their properties for the partnership
There are one or more general partners whose libility is unlimited. There is one or mre
limited partners. They are only liable for partnership debts to the extent of their
stipulated contribution

1. PROPERTY RIGHTS OF A PARTNER ARTICLES 1810-1814

2. ARTICLE 1810 The property rights of a partner are:  (1) His rights in specific partnership
property;  (2) His interest in the partnership; and  (3) His right to participate in the
management
3. Extent of property rights of a partner 1. PRINCIPAL RIGHTS- The property rights of a
partner enumerated under the law are as follows: (1) His rights in specific partnership
property; (Art. 1811) (2) His interest in the partnership; (Art. 1812) and (3) His right to
participate in the management (Art. 1803)
4. 2. RELATED RIGHTS- A partner has other rights which are related to principal rights,
namely: a. the right to reimbursement for amounts advanced to the partnership and to
indemification for risks in consequence of management. b. the right of access and inspection
of partnership. c. the right to true and full information of all things affecting the partnership. d.
the right to a formal account of partnership affairs under certain circumstances e. the right to
have the partnership dissolved also under certain conditions.
5. PARTNERSHIP PROPERTY and PARTNERSHIP CAPITAL DISTINCTIONS: 1. Changes
in value – Partnership property is variVARIABLE. Its value may vary from day to day with
changes in the market value of the partnership assets, while partnership capital is
CONSTANT. 2. Assets included - Partnership property includes all the property subsequently
acquired on account of the partnership or with the partnership funds.
6. OWNERSHIP OF CERTAIN PROPERTY 1. Property used by the partnership- A partner
may contribute to the partnership only the use or enjoyment of property reserving the
ownership thereof; or he may allow the partnership to use his separate property without
having it become part of the partnership property. 2. Property acquired by a partner with
partnership funds- Unless a contrary intention appears, property acquired by a partner in his
own name with the partnership funds is presumed to be partnership property.
7. 3. Property carried in partnership books as partnership asset- This fact create a very
strong inference that is partnership property. The inference is stronger if the record scary as
a partnership liability an unpaid balance on the property. 4. Other factors tending to indicate
property ownership- The fact that the income generated by the property is received by the
partnership or the taxes thereon are paid by the partnership is evidence that the partnership
is the owner. But the sole fact that the partnership funds were later used to repair or maintain
property purchased with funds of an individual partner is not sufficient as basis to show that
the property now belongs to the partnership.
8. ARTICLE 1811 A partner is co-owner with his partners of specific partnership property.
The incidents of this co-ownership are such that:  (1) A partner, subject to the provisions of
this Title and to any agreement between the partners, has an equal right with his partners to
possess specific partnership property for partnership purposes; but he has no right to
possess such property for any other purpose without the consent of his partners;
9. (2) A partner's right in specific partnership property is not assignable except in connection
with the assignment of rights of all the partners in the same property; (3) A partner's right in
specific partnership property is not subject to attachment or execution, except on a claim
against the partnership. When partnership property is attached for a partnership debt the
partners, or any of them, or the representatives of a deceased partner, cannot claim any
right under the homestead or exemption laws; (4) A partner's right in specific partnership
property is not subject to legal support under article 291.
10. Limitations: (1)Not Exclusive – One partner is not entitled to the exclusive possession or
control of the firm assets; the excluded partner or partners may ask for a formal account from
the excluding partner and/or to petition for a decree of dissolution (2) For partnership
purposes only – partner has no right to possess property for any other purpose without the
consent of his partners. If he does, he is accountable for the value of such and the profits he
may have derived therefrom.
11. (3) Subject to agreement and provisions of Code • By agreement, exclusive possession
and control of partnership property may be vested in one partner • By express provision of
the Code: a. None of the partners may, without the consent of the others, make any
important alteration in the immovable property of the partnership even if such alteration may
be useful to the partnership
12. b. The partner who has been appointed manager in the article s of partnership may
execute all acts of administration despite opposition of his partners, unless he should act in
bad faith c. If any of the partners should oppose the acts of the other partners, the decision
of the majority shall prevail, or in case of a tie, the decision of those owning the controlling
interests d. Certain acts enumerated in Art. 1818 (e.g. assignment of partnership property in
trust, disposal of the good-will of the business, etc.) must be authorized by all the partners.
13. Nature of partner's right in specific partner property 1. Equal right of possession of the
property for partnership purposes. 2. Assignment of rights to the property 3. Attachment or
execution 4. Legal support 5. Partner’s interest is not a debt due from partnership.
14. ARTICLE 1812 A partner's interest in the partnership is his share of the profits and
surplus.
15. Nature of partners interest in the partnership 1. Share of the profits and surplus The
partners interest in the partnership consists of his proportionate share in the profits during
the life of the partnership as a going concern and you share in the surplus after its
dissolution. This interest is assignable by the partner in the absence of any agreement to the
contrary, being personal property:
16. a. Profit means the excess of returns over expenditure in a transaction or series of
transactions; or the net income of the partnership or given period of time. b. Surplus refers to
the assets of the partnership after partnership debts and liabilities are paid and settled and
the rights of the partners among themselves are adjusted.
17. 2. Extent of the partners interest Nothing is to be considered as the share of a partner but
his proportion of the residue or balance after an account has been taken of the debts and
credits, including the amount paid by the several partners and liquidating firm debts or in
making advances to the partnership, and until that occurs, it is impossible to determine the
extent of his interest. This interest in the surplus alone is available for the satisfaction of the
separate debts of the partners.
18. ARTICLE 1813 A conveyance by a partner of his whole interest in the partnership does
not of itself dissolve the partnership, or, as against the other partners in the absence of
agreement, entitle the assignee, during the continuance of the partnership, to interfere in the
management or administration of the partnership business or affairs, or to require any
information or account of partnership transactions, or to inspect the partnership books; but it
merely entitles the assignee to receive in accordance with his contract the profits to which
the assigning partner would otherwise be entitled. However, in case of fraud in the
management of the partnership, the assignee may avail himself of the usual remedies.
19. In case of a dissolution of the partnership, the assignee is entitled to receive his
assignor's interest and may require an account from the date only of the last account agreed
to by all the partners.
20. Effect of assignment of partner's whole interest in partnership 1. Rights with held from
assignee - However such aAssignment does not grant the assigned me the right: a. to
interfere in the management b. To require any information or account; or c. To inspect any of
the partnership books.
21. 2. Status and rights of assignor and partnership unaffected - The legal effect of such
conveyance is the same as that of a partner associating another in his name or interest.
Partnership is a relation in which delectus personae or mutual agency is an important
element. No one can become a partner without the consent of the other partners. The
assignment does not divest the assignor of his status and rights as a partner nor operate as
a dissolution of the partnership
22. 3. To receive the assignor’s interest in case of the solution and 4. To require an account
of partnership affairs but only in the case the partnership is dissolved and such account shall
cover the period from the date only of the last account agreed to buy all the partners.
23. Dissolution of the partnership 1. Dissolution not intended - The mere assignment of a
partner's interest does not dissolve the partnership. Many partnership agreements are made
merely as a security for loans, the assigning partner never intending to destroy the
partnership relation.
24. 2. Dissolution intended - A partner's conveyance of his interest in the partnership
operates as a dissolution of the partnership only when it is clear that the parties
contemplated and intended the entire withdrawal from the partnership of such partner in the
termination of the partnership as between the partners.
25. ARTICLE 1814 Without prejudice to the preferred rights of partnership creditors under
article 1827, on due application to a competent court by any judgment creditor of a partner,
the court which entered the judgment, or any other court, may charge the interest of the
debtor partner with payment of the unsatisfied amount of such judgment debt with interest
thereon; and may then or later appoint a receiver of his share of the profits, and of any other
money due or to fall due to him in respect of the partnership, and make all other orders,
directions, accounts and inquiries which the debtor partner might have made, or which the
circumstances of the case may require.
26. The interest charged may be redeemed at any time before foreclosure, or in case of a
sale being directed by the court, may be purchased without thereby causing a dissolution: 
(1) With separate property, by any one or more of the partners; or  (2) With partnership
property, by any one or more of the partners with the consent of all the partners whose
interests are not so charged or sold.
27. Nothing in this Title shall be held to deprive a partner of his right, if any, under the
exemption laws, as regards his interest in the partnership.
28. Remedies of separate judgment creditor of a partner Application for a charge in order
after securing judgment on this credit. A separate creditor of a partner cannot attach or levy
upon specific partnership property for the satisfaction of his credit.
29. You can however secure a judgment on his credit and then apply to the court for a
charging order subjecting the interest of a debtor-partner in the partnership with the payment
of the unsatisfied amount of such judgment with interest thereon
30. 2. Preferred rights of partnership creditors- The above remedies given the partner's
creditor are without prejudice to the preferred rights of a partnership creditors under article
1827. It means that the claims of partnership creditors must be satisfied first before the
separate creditors of the partners can be paid out of the interest charged.
31. 3. Availability of other remedies - In providing for the charger order above described,
article 1814 seems to have made this an exclusive remedy so that a writ of execution will not
be proper. The court may resort to other courses of action provided in article 1814 if the
judgment debt remains unsatisfied notwithstanding the issuance of the charging order.
32. Redemption or purchase of interest charged 1. Redemptioner- The interest of the debtor-
partner so charged may be redeemed with the separate property of anyone or more of the
partners, are with partnership property but with the consent of all the partners whose
interests are not so charged or sold.
33. 2. Redemption price In an ordinary sale the price of the thing sold theoretically
represents its market or actual value. This is not true in a foreclosure sale where mere
inadequacy of the price obtained at the sheriff's sale is not material because the mortgagor is
given the right to redeem. By the same token valley of the partners interest in the partnership
has no bearing on the redemption price which is likely to be lower since it will be dependent
on the amount of the unsatisfied judgment debt.
34. 3. Right of redeeming non-debtor-partner For this reason the redeeming non-debtor-
partner, it is believed, does not acquire absolute ownership over the debtor-partner's interest
but hold it in trust for him consistent with the principles of fiduciary relationship.
35. Right of partner on the exemption laws Under article 1811 a partner cannot claim any
right under the homestead loss or exemption lost one specific partnership property is a task
for partnership debt. With respect, however, the partner's interest in the partnership as
distinguished from his interest in specific partnership property, the partner may avail himself
of the exemption laws after partnership debts have been paid. A partner's interest or share in
a partnership is really his property.