the loss of the thing, when the partner who contributed
DISSOLUTION AND WINDING UP
1. Define dissolution of a partnership.
The dissolution of a partnership is the change in the
relation of the parties caused by any partner ceasing to
be associated in the carrying on, as might be
distinguished from the winding up of the business.
2. Does dissolution terminate the partnership?
No. Upon its dissolution, the partnership continues and
its legal personality is retained until the complete
winding up of its business culminating in its
termination.
3. What are the causes of dissolution of a
partnership?
Dissolution is caused:
1.Without violation of the agreement between the
partners:
(a) Termination of the definite term or
particular undertaking specified in the agreement;
(b) Express will of any partner, who must act in
good faith, when no definite term or particular is
specified;
(c) Express will of all the partners who have not
assigned their interests or suffered them to be charged
for their separate debts, either before or after the
termination of any specified term or particular
undertaking;
(d) Expulsion of any partner from the business
bona fide in accordance with such a power conferred by
the agreement between the partners;
(2) In contravention of the agreement between the
partners, where the circumstances do not permit a
dissolution under any other provision of this article, by
the express will of any partner at any time;
(3) By any event which makes it unlawful for the
business of the partnership to be carried on or for the
members to carry it on in partnership;
(4) When a specific thing which a partner had promised
to contribute to the partnership, perishes before the
delivery;
it having reserved the ownership thereof, has only
transferred to the partnership the use or enjoyment of
the same
Partnership shall not be dissolved by the loss of the
thing when it occurs after the partnership has acquired
the ownership thereof;
(5) Death of any partner;
(6) Insolvency of any partner
(7) Civil interdiction of any partner;
(8) By decree of court under the following article.
(1700a and 1701a)
4. Does the death of a partner always dissolve the
partnership?
Yes, but does not immediately terminate.
5. Who may apply for a judicial dissolution of a
partnership?
1. A partner or any of the 1 to 6 grounds for judicial
dissolution.
2. The purchaser of a partner's interest in the
partnership under Art. 1813 or 1814
6. What are the grounds for a judicial dissolution of
partnership upon the application of a partner?
A partner:
(1) Has been declared insane in any judicial proceeding
or is shown to be of unsound mind;
(2) Becomes in any other way incapable of performing
his part of the partnership contract;
(3) Has been guilty of such conduct as tends to affect
prejudicially the carrying on of the business;
(4) Wilfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts
himself in matters relating to the partnership business
that it is not reasonably practicable to carry on the
business in partnership with him;
(5) The business of the partnership can only be carried
on at a loss;
(6) Other circumstances render a dissolution equitable.
7. If it is a purchaser of a partner's interest who
applies for judicial dissolution of the partnership,
within what time shall he do so?
After the termination of the specified term or particular
undertaking or if the partnership is at will when the
interest was assigned or when the charging order was
issued.
8. Upon dissolution can a partner still act for the
partnership?
Dissolution terminates all authority of any partner to act
for the partnership.
9. Under what cases may a partner bind the other
partners or the partnership on a new contract
entered into by the partner after dissolution of the
partnership?
After dissolution, a partner can bind the partnership:
(1) By any act appropriate for winding up partnership
affairs or completing transactions unfinished at
dissolution;
(2) By any transaction which would bind the
partnership if dissolution had not taken place, provided
the other party to the transaction:
(a) Had extended credit to the partnership prior to
dissolution and had no knowledge or notice of the
dissolution; or
(b) Though he had not so extended credit, had
nevertheless known of the partnership prior to
dissolution, and, having no knowledge or notice of
dissolution, the fact of dissolution had not been
advertised in a newspaper of general circulation in the
place (or in each place if more than one) at which the
partnership business was regularly carried on.
10. What is the extent of the liability of a partner for
any liability under a transaction with a third person
who had extended credit prior to dissolution and had
no knowledge or notice of the dissolution?
The liability of a partner shall be satisfied out of
partnership assets alone when such partner had been
prior to dissolution:
(1) Unknown as a partner to the person with whom the
contract is made; and
(2) So far unknown and inactive in partnership affairs
that the business reputation of the partnership could not
be said to have been in any degree due to his connection
with it.
11. Under what circumstances is a partnership not
bound by any act of a partner after dissolution?
(1) Partnership is dissolved because it is unlawful to
carry on the business, unless the act is appropriate for
winding up partnership affairs; or
(2) Partner has become insolvent; or
(3) Partner has no authority to wind up partnership
affairs; except by a transaction with one who:
(a) Had extended credit to the partnership prior to
dissolution and had no knowledge or notice of his want
of authority; or
(b) Had not extended credit to the partnership prior to
dissolution, and, having no knowledge or notice of his
want of authority, the fact of his want of authority has
not been advertised in the manner provided for
advertising the fact of dissolution in the first paragraph,
No. 2 (b).
12. Discuss the effect of dissolution upon the existing
liability of a partner. 1835
General rule: Dissolution does not itself discharge
existing liability of any partner.
Partner’s liability is discharged when the following
agree:
1. The partner
2. The other partners
3. The creditors
13. Respecting the individual property of a deceased
partner, who shall be preferred between the
partnership creditors and the separate creditors of
said deceased partner?
Separate creditors
14. How many partnership affairs be wound up?
All partnership affairs be wound up
15. Who may wind up partnership affairs?
 1. The liquidating partner or partners as agreed
upon by all of the partners
2. The partners who have not wrongfully
dissolved the partnership
3. The legal representative of the last surviving
partner who is not insolvent
4. The court in a judicial winding up
16. Who may obtain winding up judicially?
The person appointed by court
17. What are the rights of the partners upon
dissolution of the partnership?
I. Without contravention or violation of the partnership
agreement
1. To have the partnership property applied to
discharge the liabilities of the partnership; and
2. To have the surplus, if any, applied to pay in
cash the net amount owing to the respective partners.
II. In contravention or violation of the partnership
agreement
1. Rights of partner who has not caused
dissolution wrongfully
a. To have the partnership property applied to
discharge the liabilities of the partnership;
b. To have the surplus, if any, applied to pay in
cash the net amount owing to the respective
partners;
c. To be indemnified for damages caused by the
partner who caused the dissolution wrongfully;
and
d. To continue the business in the same name
either by themselves or jointly with others
during the agreed term of the partnership and
for that purpose may possess the partnership
property.
2. Rights of partner who wrongfully caused the
dissolution
a. If the business is not continued by the other
partners. To have the partnership property
applied to discharge the liabilities of the
partnership and to receive in cash his share of
the surplus less damages caused by his
wrongful dissolution.
b. If the business is continued by the other
partners:
(a) To have the value of his interest less
any damage caused to his co-partners by the
dissolution, ascertained and paid to him in cash,
or the payment secured by a bond approved by
the court; and
(b) To be released from all existing liabilities
of the partnership.
18. In case a partnership contract is rescinded on the
grounds of fraud or misrepresentation of one of the
parties thereto, what are the rights of the partner
who is entitled to rescind?
1. Right of lien or right of retention
2. Right of subrogation
3. Right of indemnification
19. How shall the assets of the partnership be
distributed upon dissolution?
Assets of the partnership
a. Partnership property; and
b. Contributions of the partners necessary for the
payment of all liabilities.
Liabilities of the partnership shall rank in order of
payment
a. Partnership creditors other than partners;
b. Partners (e.g., the partner or partners who
gave a loan to the partnership);
c. Partners in respect of capital; and
Note: An industrial partner is not entitled to participate
in the capital because he did not contribute money or
property or both.
d. Partners in respect of profits.
Note: An industrial partner is entitled to participate in
the profits.
20. Who may enforce the contributions necessary to
satisfy the partnership liabilities from the other
partners?
 1. An assignee for the benefit of creditors or any
person appointed by the court shall have the
right to enforce the contributions.
2. 2. Any partner or his legal representative shall
have the right to implement the said enforced
contributions, to the extent of the amount which
he has paid in excess of his share of the liability.
21. Will the individual property of a deceased
partner be liable for said contributions to satisfy
partnership liabilities?
The individual property of a deceased partner shall be
liable for his share of the partnership liability incurred
while he was a partner. (separate creditors have
preference over these individual properties)
22. When the partnership property and the
individual properties of the partners are in
possession of the court for distribution, which
creditors shall be paid first?
Partnership creditors shall have priority on partnership
property and separate creditors on individual property,
saving the rights of lien or secured creditors.
23. Suppose after paying the partnership liabilities,
there still remains partnership property, to whom
will said partnership property be applied?
Partners
24. In case a partner has become insolvent or his
estate is insolvent, in what order shall the claims
against his separate property be paid?
1. Those owing to separate creditors;
2. Those owing to partnership creditors;
3.Those owing to partners by way of contribution.
25. Under what conditions a business of a
partnership may after dissolution be continued?
(1) When any new partner is admitted into an existing
partnership, or when any partner retires and assigns (or
the representative of the deceased partner assigns) his
rights in partnership property to two or more of the
partners, or to one or more of the partners and one or
more third persons, if the business is continued without
liquidation of the partnership affairs;
(2) When all but one partner retire and assign (or the
representative of a deceased partner assigns) their rights
in partnership property to the remaining partner, who
continues the business without liquidation of
partnership affairs, either alone or with others;
(3) When any partner retires or dies and the business of
the dissolved partnership is continued as set forth in
Nos. 1 and 2 of this article, with the consent of the
retired partners or the representative of the deceased
partner, but without any assignment of his right in
partnership property;
(4) When all the partners or their representatives
assign their rights in partnership property to one or
more third persons who promise to pay the debts and
who continue the business of the dissolved partnership;
(5) When any partner wrongfully causes a dissolution
and the remaining partners continue the business under
the provisions of article 1837, second paragraph, No. 2,
either alone or with others, and without liquidation of
the partnership affairs;
(6) When a partner is expelled and the remaining
partners continue
the business either alone or with others without
liquidation of the
partnership affairs.
26. Under the above cases who shall be liable to the
creditors of the dissolved partnership?
Partners continuing the business
27. To what extent shall a third person who becomes
a partner in the partnership continuing the business
be liable to the creditors of the dissolved
partnership?
The liability shall be satisfied out of the partnership
property only, unless there is a stipulation to the
contrary.
28. As regards the retired or deceased partner's
interest in the dissolved partnership or on account of
any consideration promised for such interest or for
his right in partnership property, who has a prior
right between the creditors of the dissolved
partnership and the separate creditors of the retired
or deceased partner, where the business is continued
under the above cases?
Creditors of the dissolved partnership
29. If the business is continued under the same
partnership name where the name of the deceased
partner forms part thereof, will such use make the
individual property of the deceased partner be held
liable for the debts contracted by such partnership?

The use shall not of itself make the individual property

of the deceased partner liable for any debts contracted
by such person or partnership.

30. In case the business of the dissolved partnership

is continued without liquidation of partnership
affairs, what are the rights of the retiring partner or
the legal representative of the deceased partner?

Rights of a partner who retires or dies and the business

is continued without any settlement of accounts

1. To have the value of his interest at the date of

dissolution ascertained;

2. To receive as an ordinary creditor an amount equal

to the value of his interest in the dissolved partnership
with interest, or, at his option or at the option of his legal
representative, in lieu of interest, the profits attributable
to the use of his right in the property of the dissolved
partnership.

31. As of what date shall the rights to an account of

a partner's interest accrue?

At the date of dissolution except of any stipulation to

the contrary