DISSOLUTION

WINDING UP
TERMINATION
1. Without violation of the partnership agreement
2. In contravention of the agreement
3. By operation of law
4. Supervening illegality
5. Loss of specific thing promised
6. Death
7. Insolvency
8. Civil interdiction
 Expiration of term or undertaking
By the express will of a partner in a
partnership at will
Mutual assent
Expulsion of a partner pursuant to an
agreement granting such right
 GROUNDS FOR DISSOLUTION BY
DECREE OF COURT
Partner declared insane or unsound mind
Incapacity of a partner to perform his part
Partner guilty of conduct
Willful breach of partnership agreement
Business carried on at a loss
Other circumstances
 GENERAL RULE:
Authority of partners to bind
partnership is terminated

EXCEPTION:
1. Wind up partnership affairs
2. Complete transactions not finished
 with respect to partners
a. Authority of partners to bind partnership by
new contract is immediately terminated
when dissolution is not due to ACT, DEATH or
INSOLVENCY (ADI) of a partner.
 with respect to partners
b. If due to ADI, partners are liable as if
partnership not dissolved, when the
following concur:
1. If cause is ACT of a partner, acting partner must
have knowledge of such dissolution
2. If cause is DEATH or INSOLVENCY, acting partner
must have knowledge/notice.
 with respect to persons not partners
a. Partner continues to bind partnership even
after dissolution
b. Partner cannot bind the partnership anymore
after dissolution
Partner continues to bind partnership even
after dissolution in ff. cases:
a. Transactions in connection to winding up
partnership affairs/completing transactions
unfinished
b. Transactions which would bind partnership if not
dissolved.
 Transactions which would bind
partnership if not dissolved, when the
other party/ obligee:
a. Situation 1-
a. Extended credit to partnership prior to
dissolution
b. no knowledge/notice of dissolution
 Transactions which would bind
partnership if not dissolved, when the
other party/ obligee:
a. Situation 2-
a. Did not extend credit to partnership
b. Had known partnership prior to dissolution
c. Had no knowledge/notice of dissolution/fact of
dissolution
Partner cannot bind the partnership anymore
after dissolution
1. Where dissolution is due to unlawfulness to
carry on with business
2. Where partner has become insolvent
3. Where partner unauthorized to wind up
partnership affairs
 GENERAL RULE:
Dissolution does not discharge
liability of partners
EXCEPTION:
Partner and himself
Person/partnership continuing the business
Partnership creditor
 Apply partnership to discharge liabilities of
partnership
Apply surplus, if any to pay in cash the net
amount owed to partners
 Partner who did not cause dissolution
wrongfully
Partner who wrongfully caused dissolution
1. Right to lien on surplus of partnership property
after satisfying partnership liabilities
2. Right to subrogation in place of creditors after
payment of partnership liabilities
3. Right of indemnification by guilty partners
 Partnership property (including goodwill)
Contributions of the partners
 1. Partnership creditors
2. Partners as creditors
3. Partners as investors-return of capital
contribution
4. Partners as investors- share
of profits if any
1. Creditors of old partnership are also creditors
of the new partnership
2. Creditors have an equitable lien on the
consideration paid to the retiring/deceased
partner sold his interest without final
settlement with creditors
3. Rights if retiring/estate of deceased partner:
a. To have the value of his interest ascertained as of
the date of dissolution
b. To receive as ordinary creditor the value of his
share in the dissolved partnership with interest
or profits attributable to use of his right, at his
option
 1. Partners designated by the agreement
2. In absence of agreement, all partners who
have not wrongfully dissolved the
partnership
3. Legal representative of
last surviving partner