Applicability of Article 1773 on Partnerships Involving Land Usufruct
(Philippine Legal Context)

1. Overview of Article 1773 of the Civil Code

Article 1773 of the Civil Code of the Philippines states:

“A contract of partnership is void, whenever immovable property or real rights are contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument.”

This provision addresses the formation of partnerships wherein any immovable property (e.g., land) or real rights (e.g., usufruct, mortgage rights, easements) are contributed by one or more partners. The law imposes two key requirements to avoid nullity of such a partnership agreement:

Preparation of an inventory of the immovable property or real right contributed.
Attachment of the inventory to the public instrument (i.e., the notarized partnership contract), with the inventory duly signed by all the partners.

In the absence of these formalities, the entire partnership contract is deemed void.

2. Defining “Usufruct” and Its Nature as a Real Right

Under Philippine law, a usufruct is a real right (i.e., a right enforceable against the whole world) that grants a person, called the usufructuary, the right to enjoy the property of another with the obligation of preserving its form and substance. The usufructuary may derive benefits (e.g., collect fruits such as rent, harvest crops, etc.) as though they were the owner, but title and “naked ownership” remain with the property owner.

Why Usufruct is Considered a Real Right

Usufruct is listed among the real rights recognized by the Civil Code (particularly under Articles 562–612).
A usufruct burdens the immovable property itself, “running with the land” and therefore binding subsequent acquirers of the property.

Since Article 1773 applies not only to the contribution of immovable property itself but also to the contribution of real rights over such property, the contribution of a land usufruct is covered by Article 1773’s requirements.

3. Partnerships That Involve Land Usufruct

When partners agree that one partner’s contribution will be a usufruct over land, the following rules become relevant:

Inventory Requirement
- An inventory describing the usufruct over the land must be prepared.
- The inventory should detail the nature of the usufruct, including the terms, the scope of use and enjoyment, and any limitations or obligations imposed upon the usufructuary.
- It must also indicate relevant details—such as a description of the property subject to the usufruct, the extent of the usufruct (e.g., area, allowed uses), and any existing encumbrances.
Public Instrument and Signatures
- Like all partnerships involving real property or real rights, the partnership contract itself must be drawn up in a public instrument (i.e., a notarized document).
- The inventory of the contributed usufruct must be attached to the notarized partnership instrument.
- It must be signed by all the partners, affirming that they acknowledge the contribution and its specific details.
Void Partnership if Requirements Are Not Met
- If the inventory of the contributed usufruct is omitted, or if it is not properly attached to the public instrument, Article 1773 renders the entire partnership void.
- A void contract of partnership has no legal effect; any transactions entered into under such void partnership can be challenged by third parties, and the partners themselves may be unable to claim partnership rights or enforce obligations arising from the agreement.

4. Purpose and Rationale of Article 1773

Protection Against Fraud and Misrepresentation
- Requiring a detailed, signed, and notarized inventory aims to prevent fraudulent claims about what was contributed and to ensure clear documentation of ownership and rights.
- This requirement protects third parties who might deal with the partnership, giving them certainty about which immovable properties or real rights are validly part of the partnership’s assets.
Promotion of Certainty in Ownership and Transfer of Rights
- By mandating an official record, the law ensures that issues concerning the title, tenure, or encumbrances on the land are properly disclosed from the outset, helping avert future legal disputes.
Balancing the Interests of Partners
- The inventory requirement also ensures that all partners have full knowledge of the exact property or right contributed, preventing internal disagreements about partner contributions.

5. Jurisprudence and Commentaries

Although Philippine Supreme Court rulings specifically referencing Article 1773 and usufruct as the only real right in issue are relatively sparse, the established principle remains that any real right over immovable property triggers Article 1773’s formal requirements. Some points gleaned from case law and recognized legal commentaries include:

Broad Interpretation of “Real Rights”
Courts interpret “real rights” broadly to include ownership, usufruct, easements, mortgages, and any other rights affecting the title or use of immovable property.
Strict Construction of Form Requirements
Because Article 1773 explicitly states that any partnership without the required inventory is void, Philippine courts often apply these requirements strictly. This strict approach is meant to uphold the legislative intent of protecting public interest and third-party rights.
Effect of Partial Compliance
Merely mentioning a piece of property or usufruct in the notarized contract without attaching a detailed, signed inventory generally does not cure the defect. Courts have declared partnerships void for failure to comply meticulously with the attachments requirement.
Doctrine of “Inexistent and Void Contracts”
Partnerships void under Article 1773 can be treated as inexistent from the beginning, meaning no partnership rights or obligations ever legally arose. If the parties performed as if there was a valid partnership, they may face complications in settling assets, profits, or liabilities later on.

6. Practical Implications for Partners Contributing a Usufruct

Importance of Proper Documentation
- The partner contributing the usufruct must prepare an inventory describing in detail the nature, extent, and duration of the usufruct, as well as identifying the land and any limitations to its use.
Notarization and Attachment
- The entire partnership agreement should be notarized, with the inventory physically attached to the notarized document.
- All partners should review and sign the inventory to acknowledge their acceptance of the terms of the usufruct.
Consequences of Non-Compliance
- If these formalities are overlooked, the partnership can be challenged as void—with significant consequences in potential disputes over assets, liabilities, and profit-sharing.
Registration and Public Notice
- While not always mandatory, registering the partnership and the contributed real right (if allowed or required by law) in the corresponding Registry of Property can further solidify third-party notice and minimize future legal issues.
Legal Advice
- Parties are strongly encouraged to seek the assistance of legal counsel in drafting and notarizing the partnership contract and ensuring compliance with Article 1773.
- This helps avoid pitfalls that may invalidate the partnership arrangement altogether.

7. Summary

Article 1773 of the Civil Code imposes strict formal requirements for partnership contracts involving immovable property or real rights like usufruct.
The key requirement is a detailed inventory that is signed by all partners and attached to the public instrument constituting the partnership.
Failure to comply results in the absolute nullity (voidness) of the entire partnership.
The provision exists to protect third parties, ensure transparency among partners, and safeguard the integrity of transactions involving real property.
Since a usufruct over land is recognized under Philippine law as a real right, Article 1773 definitively applies, necessitating strict compliance to avoid voiding the partnership.

In sum, when forming a partnership in the Philippines that involves contribution of a land usufruct, parties must meticulously observe the requirements of Article 1773. By preparing a comprehensive, notarized, and signed inventory and attaching it to the partnership instrument, the parties ensure the partnership’s validity and safeguard themselves and third parties against future legal uncertainties.