Dissolution, winding up, and termination defined

1. Dissolution- It is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of business.
2. Winding up - The process of settling the business or partnership affairs after dissolution
3. Termination - All partnership affairs are completely wound up and finally settled. It signifies the
end of the partnership life.

Article 1830. Dissolution is caused:

(1) Without violation of the agreement between the partners:

(a) By the termination of the definite term or particular undertaking specified in
the agreement;
(b) By the express will of any partner, who must act in good faith, when no
definite term or Particular is specified;
(c) By the 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) By the 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; in any case by the loss of the thing, when the partner who
contributed it having reserved the ownership thereof, has only transferred to the
partnership the use or enjoyment of the same; but the partnership shall not be
dissolved by the loss of the thing when it occurs after the partnership has acquired the
ownership thereof;
(5) By the death of any partner;
(6) By the insolvency of any partner or of the partnership;
(7) By the civil interdiction of any partner;

Explain:

2. By the express will of any partners - May be dissolved at any time by any partner without
the consent of his co-partners without breach of contract. Each partners have both the
power and the right to terminate the partnership relations at any time but it must be acted
in good faith, no fraud
 3. By the express will of all partners - To protect third persons agreement to dissolve the
partnership before the termination of the specified term or particular undertaking must be
unanimous. The consent of the partners who have assigned their interests or suffered from
them to be charged for their separate debts. Wala dapat maapektuhan na interest ng third
person.

4. By expulsion by any partners - The expulsion has the effect of decreasing the number of the
partner; hence, the dissolution You remove a partner from the partnership, may changes na sa
relation nila.

Death of any partner

The death of any partner will cause a dissolution. The surviving partners have no authority to continue
the business except so far as is necessary to wind up.

Insolvency of any partner or of the partnership

1. Insolvency of a partner - subjects his interest in the partnership to the right of his creditors.
 Pag insolvent na sya, pwedeng habulin ng personal creditors niya yung interest niya
sa partnership.

2. Insolvency of a partnership - Render its property in the hands of the partners liable for the
satisfaction of partnership obligations
 Partners na yung bahala to settle
3. Interdiction of any partner - a convicted person suffering from the accessory penalty of civil
interdiction for cannot validly give consent at his capacity to act is limited thereby civil
interdiction deprives the offender during the time of his sentence of the right to manage his
property and dispose of such property by any act.
 with that, dissolve na ang partnership

Grounds for dissolution by decree of court

1. On application by a partner
a) Insanity - The fact of his being of unsound mind must be duly proved. An insane Person
is incapacitated to enter into a contract. Since di niya kayang makapagbigay ng consent.
Gg sya
b) Incapacity - The incapacity must be one which affects the ability of a partner to perform
his duties. For example, brain dead or comatose, it means he can’t perform his duties to
the partnership
c) Misconduct and persistent breach of partnership agreement conduct prejudicial to the
carrying on of the business and persistent breach of the partnership agreement are
grounds for judicial dissolution.
 If ever yung isang partner is nag aact of misconduct, and pinapaalis na sya ng ibang
partner pero ayaw niya umalis. Pwede makialam yung court.
d. Business can be carried on only at a loss - Main purpose of the partnership is
to generate profit; it may be dissolved by decree of court when it becomes
 apparent that the business is unprofitable with no reasonable prospects of
success valid ground kung puro loss lang yung naeearn
d) Other circumstances - Abandonment of the business, fraud in the management of the
business, Refusal without justifiable cause to render accounting of partnership affairs.

Legal Opinion:

The partnership was dissolved on February 14, 1987 when the restaurant was closed, assuming that LJ
Villa and Carmen Jose acted in good faith in closing down the restaurant. It appears that the partnership
that was formed is a partnership at will since no definite term was stated in the contract of partnership.
Hence, the partnership was dissolved on the basis of Article 1830 letter (b) of the Civil Code of the
Philippines. On the other hand, Mr. Donald Ramses cannot be entitled for the amount of P250,000.00.
Well settled is the rule that a share in a partnership can be returned only after the completion of the
latter’s dissolution, liquidation and winding up of the business. Since it is the partnership that must
refund the shares of the partners, the amount to be refunded is necessarily limited to its total resources.
In other words, it can only pay out what it has in its coffers, which consists of all its assets. However,
before the partners can be paid their shares, the creditors of the partnership must first be compensated.
After all the creditors have been paid, whatever is left of the partnership assets becomes available for
the payment of the partners’ shares. Evidently, in the present case, the exact amount of refund
equivalent to Mr. Ramses’ share in the partnership cannot be determined until all the partnership assets
will have been liquidated in other words, sold and converted to cash and all partnership creditors, if any,
paid.”

Explain:

Nabuwag ang partnership noong Pebrero 14, 1987 nang isara ang restaurant, sa pag-aakalang kumilos
sina LJ Villa at Carmen Jose nang may mabuting loob sa pagsasara ng restaurant. Lumilitaw na ang
partnership na nabuo ay isang partnership sa kalooban dahil walang tiyak na termino ang nakasaad sa
kontrata ng partnership. Kaya naman, ang partnership ay nabuwag batay sa Article 1830 letter (b) ng
Civil Code of the Philippines. Sa kabilang banda, hindi maaaring maging karapatan si G. Donald Ramses
sa halagang P250,000.00. Mahusay na naayos ang panuntunan na ang isang bahagi sa isang
pakikipagsosyo ay maibabalik lamang pagkatapos makumpleto ng huli ang pagbuwag, pagpuksa at
pagwawakas ng negosyo. Dahil ang pagsososyo ang dapat mag-refund ng mga bahagi ng mga kasosyo,
ang halagang ibabalik ay kinakailangang limitado sa kabuuang mapagkukunan nito. Sa madaling salita,
maaari lamang nitong bayaran kung ano ang mayroon ito sa kanyang kaban, na binubuo ng lahat ng mga
ari-arian nito. Gayunpaman, bago mabayaran ang mga kasosyo sa kanilang mga bahagi, ang mga
pinagkakautangan ng pakikipagsosyo ay dapat munang mabayaran. Matapos mabayaran ang lahat ng
mga pinagkakautangan, kung ano ang natitira sa mga asset ng pakikipagsosyo ay magagamit para sa
pagbabayad ng mga bahagi ng mga kasosyo. Maliwanag, sa kasalukuyang kaso, ang eksaktong halaga ng
refund na katumbas ng bahagi ni Mr. Ramses sa partnership ay hindi matutukoy hanggang ang lahat ng
mga asset ng partnership ay naliquidate sa ibang salita, ibinebenta at na-convert sa cash at lahat ng
pinagkakautangan ng partnership, kung mayroon man. , binayaran.”