Dissolution Part 4

Prepared by:
ATTY. MICHELLE G. BERNARDO, OP, LL.M.

ATTY. JESSA G. BERNARDO, OP
1. Dissolution
2. Winding up
3. Termination (Emnace vs. CA, GRN 126334,
November 23, 2001; Idos vs. CA, 296 SCRA 194
(1998))
 The change in the relation of the partners caused by
any partner ceasing to be associated in the carrying on
the business together. (Art. 1828; Idos vs. CA, supra.)
 On dissolution, the partnership is not terminated, but
continues until the winding up of partnership affairs is
completed. (Art. 1829)
 Winding up – The process of settling business affairs

after dissolution.
 Termination – the point in time after all the

partnership affairs have been wound up. (Idos, supra.)
 By Act of partners without violation of agreement among them:
 Causes of dissolution without violation of agreement:
1. Termination of the definite term or particular undertaking

specified in the agreement;
2. Express will of any partner in a partnership at will, who must
act in good faith;
3. Express will of all the partners, either before or after the
termination of any specified term or particular undertaking;
4. Expulsion of any partner from the business bona fide in
accordance with such power conferred by the agreement
between the partners. (Art. 1930, par. 1)
1. Partnership is dissolved upon the arrival of the period
agreed upon or upon the completion of the particular
undertaking specified in the agreement, without need of
any other act;
2. Since there is no violation of the partnership agreement,

the dissolution does not give rise to any liability for
damages;
3. There being no partner at fault, none of the partners shall

be disqualified to participate in the winding up of the
affairs of the partnership.
 If the partnership has no fixed term or no particular
undertaking is specified in the agreement, it is
therefore a partnership at will predicated on their
mutual desire and consent, and it may be dissolved by
the will of a partner.
 The partner dissolving partnership at will must,
however, act in good faith.
 A partnership may be dissolved at any time, even
before the expiration of the term agreed upon or the
completion of its particular undertaking, provided it is
so expressly willed by all the partners who have not
assigned their interests or suffered them to be charged
for their separate debts.
 Expulsion of any partner bona fide: Requirement: It is
necessary that the power of expulsion is conferred by
the agreement between the partners and is exercised
in good faith.
 If the expulsion is valid, the expelled partner has no

right to wind up the affairs of the partnership (Art.
1836) or to elect to continue the business of the
partnership. (Art. 1837, 2nd par., No. 2)
 In the absence of an express agreement providing for
the power of expulsion, there exists no right or power
of any members, or even a majority of the members, to
expel all other members from the firm at will.
 By act of partners in contravention of agreement
among them:
 Dissolution is also caused in contravention of the

agreement between the partners, where the
circumstances do not permit a dissolution under any
other provision of Art. 1830, by the express will of any
partner at any time. (Art. 1830 (2)).
 By operation of law:
 Causes for dissolution through operation of law:
1. 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 (Art. 1830 (3))
2. Loss of the thing in the following cases: (Art.1830(4))
a. The specific thing which a partner had promised to contribute to the

partnership perished before the delivery; or
b. Loss of thing before or after delivery, when the partner who

contributed it having reserved ownership thereof, has only
transferred to the partnership the use or enjoyment of the same
3. Death of any partner (Art. 1830 (5))
4. Insolvency of any partner or of the partnership (Art.

1830 (6))
5. Civil interdiction of any partner.

 By judicial decree: The dissolution of the partnership
may also be decreed by the court on application by or
for a partner or on application of the purchaser of a
partner’s interest –
1. On application by or for a partner;

2. At the instance of purchaser of a partner’s interest.
 Effect on partnership existence: On dissolution the
partnership is not terminated, but continues until the
winding up of partnership affairs is completed. (Art.
1825)
 Effect on partner’s liability for existing firm

obligations: The dissolution of the partnership does
not of itself discharge the existing liability of any
partner.
 Liability of retiring partner: A retiring partner remains
liable to creditors of the partnership for any existing
liability upon the dissolution of the partnership (Art.
1835, 2nd par.)
 Effect on authority of partner to act for partnership:
 Effect between the partners: The dissolution

terminates all authority of any partner to act for the
partnership, except:
1. so far as may be necessary to wind up partnership

affairs; or
2. to complete transaction begun but not then finished.
(Art. 1832, 1st par.)
 Effects as to third persons: After dissolution, a partner
can bind the partnership to third persons:
1. By any act appropriate for winding up partnership

affairs or completing transactions unfinished at
dissolution; (Art. 1834, par. 1, No. 1)
2. By any transaction which would bind the partnership

if dissolution had not taken place
 Extent of liability of unknown or dormant partner: The
dissolution of the partnership does not of itself
discharge the existing liability of any partner, (Art.
1835, 1st par.) including the unknown or dormant
partner.
 Liquidation upon dissolution:
 Right and duty to wind up:
 In the absence of agreement: The partners who have not

wrongfully dissolved the partnership or the legal
representative of the last surviving partner, not insolvent,
has the right to wind up the partnership affairs.
 In case there is agreement: If there is agreement, it is the

partner provided in the agreement who has the right to
wind up the partnership affairs (Ibid.) and the other have
no right to participate in the settlement of the partnership
affairs.
 Effects of acts of partner without authority to wind up: The
partnership is not bound by any act of a partner after
dissolution where the partner has no authority to wind up
partnership affairs. (Art. 1834, par. 3, No. 3)
 Exception: Even if the partner has no authority to wind up

partnership affairs, the partnership is bound by his acts if
he transacted with one who:
1. Had extended credit to a partnership prior to dissolution

and had no knowledge or notice of his want of authority;
or
2. Had not extended credit to the partnership prior to

dissolution but known of the partnership prior to its
dissolution, and, having no knowledge or notice of his
want of authority.

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Prepared by:

ATTY. MICHELLE G. BERNARDO, OP, LL.M.

 Winding up – The process of settling business affairs

 Termination – the point in time after all the

 Causes of dissolution without violation of agreement:

1. Termination of the definite term or particular undertaking

2. Since there is no violation of the partnership agreement,

3. There being no partner at fault, none of the partners shall

 If the expulsion is valid, the expelled partner has no

 Dissolution is also caused in contravention of the

 Causes for dissolution through operation of law:

1. Any event which makes it unlawful for the business of the

2. Loss of the thing in the following cases: (Art.1830(4))

a. The specific thing which a partner had promised to contribute to the

b. Loss of thing before or after delivery, when the partner who

4. Insolvency of any partner or of the partnership (Art.

5. Civil interdiction of any partner.

1. On application by or for a partner;

 Effect on partner’s liability for existing firm

 Effect between the partners: The dissolution

1. so far as may be necessary to wind up partnership

1. By any act appropriate for winding up partnership

2. By any transaction which would bind the partnership

 In the absence of agreement: The partners who have not

 In case there is agreement: If there is agreement, it is the

 Exception: Even if the partner has no authority to wind up

1. Had extended credit to a partnership prior to dissolution

2. Had not extended credit to the partnership prior to

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