1. General Principles

1. General Provisions

• Definition and Separate Juridical Personality
• Rules to Determine Existence
• Separate Juridical Personality
• Partnership by Estoppel
• Kinds of Partnership

Definition –Civil Code, Article 1767¹

Effects of an Unlawful Partnership

• Void ab initio such that it never existed in the eyes of the law (Art. 1409[1]²)
• When an unlawful partnership is dissolved by a judicial decree, its profits shall be confiscated in favor of the State (Art. 1770³)
• If the unlawful activity constitutes a crime, the proceeds and instruments or tools of that crime shall be forfeited in favor of the Government, unless they are the property of a third person not liable for the offense (Art. 1770; Revised Penal Code, Art. 45⁴)
• The contributions of the partners shall not be confiscated unless they fall under (c) (Arts. 1411⁵ and 1412)

Judicial decree is not necessary to dissolve an unlawful partnership.

That there is no legally constituted partnership does not mean that there are no contractual or legal relations among the parties.

Effect of Partial Illegality

Where a part of the business of a partnership is legal and a part illegal, an account of that which is legal may be had.

Where, without the knowledge or participation of the partners, the firm's profits in a lawful business have been increased by wrongful acts, the innocent partners are not precluded as against the guilty partners from recovering their share of the profits.