Article 1831

On application by or for a partner, the court shall decree dissolution whenever:

(1) A partner has been declared insane in any judicial proceeding or is shown to be of
unsound mind;
(2) A partner becomes in any other way incapable of performing his part of the
partnership contract;
(3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying
on of the business;
(4) A partner willfully or persistently commits 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 that will render dissolution equitable
On the application of the purchaser of a partner’s interest under Article 1813 or
1814:
(1) After the termination of the specific term or particular undertaking
(2) At any time the partnership was a partnership at will when the interest was
assigned or when the charging order was issued.

Events that make it difficult to carry on the business as planned may necessitate the dissolution
of the partnership by court order. Such occurrences as a partner's illegality, death, or insolvency
are unmistakable. Their occurrence and consequences are undeniable.
Grounds for Dissolution by Decree of Court (JUDICIAL)
The term “dissolution” refers to the systematic closure of a business entity, while “liquidation”
refers to the sale of assets and repayment of debts prior to the closure of a business.

When can a partnership be dissolved judicially?

- 1831 is only lawful if one of the partners files a dissolution petition for the reasons
listed below

(1) When a partner is DECLARED insane

 - A person who is insane is unable to enter into a contract. (Art. 1327) The partner's
capacity to perform his contractual duties as a partner must be materially impacted by
his insanity.
- Partners with lucid intervals (also address) - partners regaining consciousness after a
short period of unconsciousness

(2) When he becomes incapable of performing his part in the partnership

- A partner implicitly agrees to contribute to the success of the partnership in which he is

a member, and fails to fulfill his obligations for any reason, they are deprived of the
benefits of the contract they have made, as well as the fruits to which they are
legitimately entitled, to a greater or lesser extent, depending on the extent of his failure.

- Incapacity of partner to perform his part of the partnership contract.

(3) Misconduct of a partner prejudicially to the business

- Guilty number of conduct prejudicial to business of partnership

- dissolved by the happening of unlawful event for the firm to carry out its business or for
the partners to carry it on in partnership.

-When a partner commits substantial misconduct, the only option for co-partners is to file
a dissolution petition with the court.

(4) Persistent breach of partnership agreement

- Willful or persistent breach of partnership agreement or conduct which makes it

reasonable impracticable to carry on partnership with him.

- Temporary grievances, discourtesies, conflicts, or judicial errors that do not result in

permanent harm or injury will not be enough to justify a dissolution decree. However,
where quarrels and conflicts are of such a type, courts may order the dissolution of a
partnership

(5) The business can only be carried out on a loss

- Insolvent

- Because the purpose of a partnership is to run a business for profit, it can be dissolved
by a court order if it becomes clear that it is unprofitable and has no reasonable chance of
succeeding.

(6) Other circumstances:

(a) Abandonment of the business

 (b) Fraud

(c) Refusal to render an accounting

(7) On application of 3rd parties’ (who purchased or have charged a partner’s interest)
right as per Articles 1813 and 1814

Article 1832

Except so far as may be necessary to wind up partnership affairs or to complete

transactions begun but not then finished, dissolution terminates all authority of any
partner to act for the partnership:

(1) With respect to the partners,

(a) When the dissolution is not by the act, insolvency or death of a partner; or

(b) When the dissolution is by such act, insolvency or death of a partner, in cases
where article 1833 so requires;

(2) With respect to persons not partners, as declared in article 1834. (n)

Article 1832 talks about the effect of dissolution on authority of partner.

If the partnership is in the process of dissolution, the only thing can be done is to complete the
transaction which is started before it dissolves with respect to the partners.

(1) With respect to the partners,

(a) When the dissolution is not by the act, insolvency or death of a partner the authority to
bind the another transaction is immediately terminated.
(b) When the dissolution is by such act, insolvency or death termination of authority will
depend on the knowledge or notice of dissolution.

(2) With respect to persons not partners, as declared in article 1834. (n)
When the dissolution without the knowledge of termination of authority the innocent partner can
be recover from the acting partner.

Example:

A, B and C form a partnership, if today the partnership is dissolved, then any of the partners
must not enter to contract because it is no longer binding the partnership.

As a rule, when a partnership is dissolved any of the partner cannot bind the partnership except if
the transaction is for the purpose of liquidation.

Basically, article 1832 after the dissolution of the partnership all you have to do is to wind up the
affairs, settlement of the account and complete any unfinished transaction that was started before
dissolution.