In the Philippines, the law on partnerships is primarily governed by the Civil Code of the Philippines (Articles 1767 to 1867). A partnership is a contract whereby 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.

Because a partnership is founded on mutual trust and confidence (delectus personae), the law prescribes specific rights and responsibilities to balance the interests of the partners and protect third parties.

I. Rights of Partners

Under the Civil Code, partners enjoy several fundamental rights necessary for the protection of their investment and participation in the business.

Right to Share in Profits: Every partner has the right to a share in the profits. If there is no agreement on the distribution, it is proportionate to their capital contribution. An industrial partner (one who contributes services) is entitled to a just and equitable share before the capitalists divide the rest.
Right to Participate in Management: Unless a managing partner is appointed, all partners are agents of the partnership. Their acts for the configuration of the business bind the partnership.
Right to Information and Inspection: Partners have the right to inspect and copy partnership books at any reasonable hour. These books must be kept at the principal place of business.
Right to Property: A partner has a right in specific partnership property, an interest in the partnership (share of profits and surplus), and the right to participate in management.
Right to Dissolution: Under certain conditions, a partner has the power to withdraw or petition the court for judicial dissolution if the business can only be carried on at a loss or if another partner’s conduct prejudices the business.
Right to Reimbursement: The partnership must reimburse every partner for disbursements made and obligations reasonably incurred in the interest of the business.

II. Responsibilities and Obligations of Partners

The law imposes strict fiduciary duties on partners, treating them as trustees for one another.

1. Obligations Among Partners

Contribution of Property: A partner is a debtor to the partnership for whatever they promised to contribute. If the contribution is money, they are liable for interest and damages from the time they should have complied.
Warranty Against Eviction: A partner is liable for eviction regarding specific and determinate things contributed to the partnership, similar to a vendor in a contract of sale.
Obligation to Render Information: Partners must render on demand true and full information of all things affecting the partnership to any partner or the legal representative of a deceased or disabled partner.
Accountability for Profits: Every partner must account to the partnership for any benefit and hold as trustee any profits derived by them without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership.

2. Obligations Regarding Management and Business

Duty of Diligence: A partner is responsible to the partnership for any damages suffered by it through their fault. They cannot compensate these damages with the profits/benefits they may have earned for the partnership via their industry.
Prohibition Against Conflict of Interest: * Capitalist Partners cannot engage in businesses of the same kind as the partnership unless there is a stipulation to the contrary.
Industrial Partners are strictly prohibited from engaging in any business for themselves unless the partnership expressly permits it.

III. Liability to Third Persons

A critical aspect of Philippine partnership law is the nature of liability regarding external creditors.

Subsidiary and Pro-Rata Liability: All partners (including industrial ones) are liable pro-rata with all their property for partnership debts after partnership assets have been exhausted.
Solidary Liability for Torts/Quasi-Delicts: If a partner, acting in the ordinary course of business, causes loss or injury to a third person through a wrongful act or omission, the partnership and all partners are liable solidarily (meaning any one partner can be held liable for the full amount).
Liability of Newly Admitted Partners: A person admitted as a partner into an existing partnership is liable for all obligations of the partnership arising before their admission, but this liability is satisfied only out of partnership property.

IV. Rules on Loss Distribution

The distribution of losses follows the agreement of the partners. In the absence of an agreement:

Losses are shared in the same proportion as profits.
If only the profit-sharing ratio was agreed upon, the loss-sharing follows that same ratio.
If there is no agreement at all, losses are shared in proportion to capital contribution.

Note: A stipulation that excludes one or more partners from any share in the profits or losses is generally void, except that an industrial partner is not liable for losses (as between partners), though they remain liable to third-party creditors.

V. Formal Requirements

While a partnership can be constituted in any form, if immovable property or real rights are contributed, a public instrument is required, and an inventory of said property must be attached to the instrument; otherwise, the partnership is void. If the capital exceeds P3,000, the contract must appear in a public instrument and be recorded with the Securities and Exchange Commission (SEC).