Short answer. No, as a rule it is void. The Civil Code strikes down a stipulation excluding one or more partners from any share in the profits or losses. The one real exception is the industrial partner, whom the Code itself relieves of losses because he contributes only his work.
What the law says
A stipulation which excludes one or more partners from any share in the profits or losses is void.
Civil Code, Article 1799 — Void Exclusion From Profits/Losses. Read the full provision →
Why the law refuses to enforce it
A partnership is, at bottom, a shared venture: two or more persons bind themselves to contribute money, property or industry to a common fund with the intention of dividing the profits between them. A partner who is guaranteed the upside while carrying none of the downside is not really in that venture — he is a lender, or an investor with a fixed return, wearing a partner's title. Article 1799 of the Civil Code therefore refuses to enforce the arrangement outright. Note the symmetry: the article voids exclusion from profits in the same breath as exclusion from losses. A clause squeezing a partner out of the earnings is just as void as one shielding a favoured partner from the debts.
The industrial partner exception
One partner genuinely can be free of losses. The Civil Code separately provides that a partner who contributes only his industry — his skill and labour, no capital — is not liable for the losses of the partnership, because a failed venture already costs him everything he put in: the work itself, unpaid. That exemption comes from the statute, not from your agreement, and it does not stretch. It does not cover a partner who put in both cash and effort, and it does not cover a capitalist partner simply because his contribution was small. If the clause in your contract is doing anything more than restating this rule, it is on very thin ice.
What being void actually costs you
Voiding the clause does not void the partnership. The rest of the agreement stands and the losses are then distributed under the Code's default rules — in the proportion agreed for profits, and failing that, in proportion to what each partner contributed. Note also what this article does not touch: liability to outsiders. A clause among partners cannot bind a creditor at all, so a supplier or a bank can still pursue the partners on the partnership's debts under the ordinary rules, whatever the internal sharing arrangement says. The shielded partner may find that he pays the creditor first and argues about the internal split afterwards.
If this clause is already in your contract
Treat it as a live exposure, not a dead letter — the partner relying on it is likely making decisions on the strength of it. Read the whole agreement together: how profits are shared, what each partner actually contributed and how it was valued, whether any partner is described as contributing industry only, and whether a separate clause promises a fixed return regardless of results. Then have the arrangement re-papered so that the risk each of you is really carrying is the risk written down. If the venture is already losing money and partners are pointing at that clause, get the agreement and the books reviewed before anyone pays or refuses to pay; you can book a consultation with us.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Miguel Cuenco vs. Concepcion Cuenco Vda. De Manguerra, G.R. No. 149844, October 13, 2004 — read the decision on LawPhil →