I. The Obligations of the Partnership

The partnership, as a separate juridical entity under Philippine law, holds obligations that arise from its business dealings and transactions. This separation of entity establishes that the partnership itself, distinct from the partners, is liable for its actions. Key legal frameworks governing partnership obligations to third parties in the Philippines include:

Civil Code Provisions: Under the Philippine Civil Code, specifically Articles 1767 to 1867, the partnership is responsible for fulfilling obligations arising from lawful acts performed by its partners in the regular course of business, and it is liable for damages arising from torts committed in the pursuit of partnership activities.
Contractual Obligations: Partnerships in the Philippines are bound by all contracts entered into by any partner who has acted within the scope of the partnership’s business or authority. These contracts can include sales agreements, loans, leases, and employment contracts, among others.
Tax Obligations: Partnerships are subject to income tax, value-added tax (VAT), and withholding taxes. They must also comply with other obligations like filing annual and quarterly income tax returns, registering with the Bureau of Internal Revenue (BIR), and issuing tax-compliant receipts or invoices.
Statutory Liabilities: Philippine partnerships are also governed by laws such as the Corporation Code (applicable to limited partnerships under specific provisions), the Tax Code, and regulatory laws (e.g., the Securities Regulation Code) when dealing with public financial matters. These laws hold the partnership liable to third parties for ensuring transparency, honesty, and adherence to financial regulations.
Social Security Obligations: If the partnership has employees, it is required to register with the Social Security System (SSS), PhilHealth, and Pag-IBIG and comply with contributions on behalf of its employees.
Employment Obligations: The partnership is also accountable for ensuring compliance with labor laws, such as the Labor Code, minimum wage requirements, and other labor standards.

II. The Obligations of Partners to Third Persons

The Civil Code of the Philippines specifies the responsibilities of individual partners, especially in relation to third parties, focusing on both the authority and liability of partners in transactions and legal matters involving outsiders.

Binding Authority of Partners:
- Authority in Transactions: Partners can bind the partnership when acting within the scope of the partnership’s ordinary business. Any act performed by a partner within the scope of authority granted to them by the partnership binds the partnership and other partners, even if other partners did not consent, provided the partner acted in good faith and in the ordinary course of business.
- Limitations on Authority: If a partner exceeds their authority, the partnership may not be bound by such acts unless it ratifies the act or benefits from it.
Liability of Partners for Partnership Obligations:
- Joint and Several Liability: Under Philippine law, partners are jointly and severally liable to third parties for obligations incurred by the partnership. This means that any one partner can be held responsible for the entire obligation if the partnership itself cannot meet its debts. This liability includes both contractual obligations (debts and agreements entered in good faith) and tortious liabilities (acts causing injury or damage).
- Extent of Liability: In a general partnership, partners’ liability to third parties is unlimited, extending even to their personal assets. This liability, however, does not extend to limited partners in a limited partnership, whose liability is restricted to their investment in the partnership unless they participate in managing the partnership.
Fiduciary Duties to Third Parties:
- Duty of Good Faith and Loyalty: Partners owe a duty of loyalty and must avoid conflicts of interest that could harm the partnership or third parties. A partner cannot use partnership property for personal benefit or engage in activities that compete with the partnership’s interests.
- Duty of Transparency and Fair Dealing: Partners must ensure honest and open disclosure when dealing with third parties on behalf of the partnership. Any misrepresentation or fraudulent behavior by a partner can expose the partnership and other partners to liability.
Liability for Acts Beyond the Scope of Partnership Business:
- Unauthorized Acts: If a partner undertakes activities beyond the usual business scope without consent, the partnership may not be bound by these acts. However, third parties may still hold that individual partner personally liable if the partner misrepresented their authority.
- Exceptions in Case of Negligence or Bad Faith: If a partner acts with gross negligence or in bad faith, other partners can claim indemnity from that partner if third parties hold the partnership liable for the consequences.
Third Party Rights Under the Law of Obligations:
- Enforceability: Contracts made by partners within their authority are enforceable against the partnership. However, contracts executed without authority may only be enforced if ratified by other partners or if they pertain to acts in the regular course of business.
- Good Faith Transactions: Philippine law favors third parties who transact in good faith with a partner, ensuring they are protected even if the partner later violates internal agreements within the partnership.
Obligations under Dissolution and Winding-Up:
- Notice to Third Parties: Upon dissolution, the partnership must provide notice to known creditors and public notice to protect third-party interests. Failing to give notice can hold the partners liable for any ensuing debts.
- Settlement of Claims: The partnership is obligated to settle all its debts to third parties before distributing any remaining assets to the partners. If assets are insufficient, the individual partners may need to contribute additional funds to cover liabilities.

III. Special Considerations in Philippine Law for Partnerships with Foreigners

The Constitution and existing laws in the Philippines impose special obligations on partnerships with foreign equity or partners. Under the Foreign Investments Act (Republic Act No. 7042), certain business sectors have limits on foreign ownership, which indirectly affects the obligations and rights of partners when engaging with third parties.

Compliance with Nationality Restrictions: Partnerships must ensure compliance with ownership restrictions in areas like natural resource extraction, public utilities, and certain professional practices, affecting the partnership’s scope of obligations to third parties.
Foreign Partners’ Liability and Restrictions: Foreign partners must adhere to the same liability standards as local partners, except in sectors where liability protections are given to foreign investors by Philippine law or international agreements.

IV. Remedies for Third Parties

In cases where the partnership or any individual partner fails to meet obligations to third parties, the following remedies are available:

Demand for Payment: Third parties can demand payment from the partnership and, if necessary, from individual partners.
Attachment of Partnership Assets: Third-party creditors have the right to attach and liquidate partnership assets to satisfy debts before accessing personal assets of the partners.
Personal Action against Partners: In the case of partnerships with unlimited liability, third parties can pursue individual partners’ personal assets.

Summary

In essence, both the partnership entity and individual partners bear considerable obligations toward third parties in Philippine law. Partners must adhere to fiduciary duties, contractual obligations, and regulatory compliance, and they are jointly and severally liable for partnership debts. Adherence to these obligations ensures protection for third parties while upholding the integrity of partnership relationships and business practices under Philippine law.