PEÑA, ALIAH EUNICE C.

(4) A partner willfully or persistently commits a breach

BSA 2-1 of the partnership agreement, or otherwise so conducts
BUSINESS LAW himself in matters relating to the partnership business
that it is not reasonably practicable to carry on the
CHAPTER 3: Dissolution and Winding Up business in partnership with him;

Article 1828 (5) The business of the partnership can only be carried on at a
The dissolution of a partnership is the change in the relation loss;
of the partners caused by any partner ceasing to be
associated in the carrying on as distinguished from the winding (6) Other circumstances render dissolution equitable.
up of the business. (n)
On the application of the purchaser of a partner’s interest
Article 1829 under Article 1813 or 1814:
On dissolution the partnership is not terminated, but continues
until the winding up of partnership affairs is completed.(n) (1) After the termination of the specified term or
particular undertaking;
Article 1830
Dissolution is caused: (2) At any time if the partnership was a partnership at will when
(1) Without violation of the agreement between the partners: the interest was assigned or when the charging order was
(a) By the termination of the definite term or issued.(n)
particular undertaking specified in the agreement;
Article 1832
(b) By the express will of any partner, who must act Except so far as may be necessary to wind up
in good faith, when no definite term or particular partnership affairs or to complete transactions begun but not
undertaking is specified; then finished, dissolution terminates all authority of any partner
to act for the partnership.
(c) By the express will of all the partners who (1) With respect to the partners:
have not assigned their interests or suffered them to (a) When the dissolution is not by the act, insolvency or
be charged for their separate debts, either before or death of a partner; or
after the termination of any specified term or
particular undertaking; (b) When the dissolution is by such act, insolvency or
death of a partner, in cases where Article 1833 so
(d) By the expulsion of any partner from the requires;
business bona fide in accordance with such a
power conferred by the agreement between the (2) With respect to persons not partners, as declared in
partners; article1834. (n)

(2) In contravention of the agreement between the Article 1833

partners,where the circumstances do not permit a dissolution Where the dissolution is caused by the act, death or
under any other provision of this article, by the express will of insolvency of a partner, each partner is liable to his co-partners
any partner at any time; for his share of any liability created by any partner
acting for the partnership as if the partnership had not been
(3) By any event which makes it unlawful for the business of dissolved unless:
the partnership to be carried on or for the members to carry it (1) The dissolution being by act of any partner, the partner
on in partnership; acting for the partnership had knowledge of the dissolution; or

(4) When a specific thing, a partner had promised to contribute (2) The dissolution being by the death or insolvency of a
to the partnership, perishes before the delivery; in any case by partner,the partner acting for the partnership had knowledge or
the loss of the thing, when the partner who notice of the death or insolvency.
contributed it having reserved the ownership thereof,
has only transferred to the partnership the use or Article 1834
enjoyment of the same; but the partnership shall not be After dissolution, a partner can bind the partnership,except as
dissolved by the loss of the thing when it occurs after the provided in the third paragraph of this article:
partnership has acquired the ownership thereof; (1) By an act appropriate for winding up partnership
affairs or completing transactions unfinished at dissolution;
(5) By the death of any partner;
(2) By any transaction which would bind the
(6) By the insolvency of any partner or of the partnership; partnership if dissolution had not taken place, provided the
other party to the transaction:
(7) By the civil interdiction of any partner; (a) Had extended credit to the partnership prior
to dissolution and had no knowledge or notice of
(8) by decree of court under the following article. (1700a and the dissolution; or
1701a
(b) Though he had not so extended credit, had
Article 1831 nevertheless known of the partnership prior to
On application by or for a partner, the court shall dissolution,and having no knowledge or notice of
decree dissolution whenever: dissolution, the fact of dissolution had not been
(1) A partner has been declared insane in any judicial advertised in a newspaper of general circulation in the
proceeding or is shown to be of unsound mind; place (or in each place if more than one) at which the
partnership was regularly carried on.
(2) A partner becomes in any other way incapable of
performing his part of the partnership contract; The liability of a partner under the first paragraph, No. 2, shall
be satisfied out of partnership assets alone when such partner
(3) A partner has been guilty of such conduct as tends to affect had been prior to dissolution:
prejudicially the carrying on of the business;
(1) Unknown as a partner to the person with whom the (1) Each partner who has not caused dissolution wrongfully
contract is made; and shall have:
(a) All the rights specified in the first paragraph of
(2) So far unknown and inactive in partnership affairs that the this article, and
business reputation of the partnership could not be said to
have been in any degree due to his connection with it. (b) The right, as against each partner who has caused the
dissolution wrongfully, to damages for breach of
The partnership is in no case bound by any act of a partner the agreement.
after dissolution:
(1) Where the partnership is dissolved because it is (2) The partners who have not caused the dissolution
unlawful to carry on the business, unless the act is wrongfully, if they all desire to continue the business in the
appropriate for winding up partnership affairs; or same name either by themselves or jointly with others, may do
so, during the agreed term for the partnership and for that
(2) Where the partner has become insolvent; or purpose may possess the partnership property, provided they
secure the payment by bond approved by the court, or pay to
(3) Where the partner had no authority to wind up any partner who has caused the dissolution wrongfully, the
partnership affairs, except by a transaction with one who— value of his interest in the partnership at the dissolution, less
(a) Had extended credit to the partnership prior to any damages recoverable under the second paragraph, No.
dissolution and had no knowledge or notice of his want of 1(b) of this article, and in like manner indemnify him against all
authority; or present or future partnership liabilities.

(b) Had not extended credit to the partnership (3) A partner who has caused the dissolution wrongfully shall
prior to dissolution, and, having no knowledge or notice of have:
his want of authority, the fact of his want of authority has (a) If the business is not continued under the provisions of
not been advertised in the manner provided for the second paragraph, No. 2, all the rights of a
advertising the fact of dissolution in the first paragraph, partner under the first paragraph, subject to liability for
No. 2(b). damages in the second paragraph, No. 1(b), of this
article.
Nothing in this article shall affect the liability under article 1825
of any person who after dissolution represents himself or (b) If the business is continued under the
consents to another representing him as a partner in a second paragraph, No. 2, of this article, the right as
partnership engaged in carrying business. (n) against his co-partners and all claiming through them in
respect of their interests in the partnership, to have
Article 1835 the value of his interest in the partnership, less any
The dissolution of the partnership does not of itself damage caused to his co-partners by the dissolution,
discharge the existing liability of any partner. A partner is ascertained and paid to him in cash, or the payment
discharged from any existing liability upon the secured by a bond approved by the court and to be
dissolution of the partnership by an agreement to released from all existing liabilities of the partnership; but
that effect between himself, the partnership creditor in ascertaining the value of the partner’s interest, the
and the person or partnership continuing the business; and value of the good will of the business shall not be
such agreement may be inferred from the course of dealing considered. (n)
between the creditor having knowledge of the dissolution
and the person or partnership continuing the business. Article 1838
Where a partnership contract is rescinded on the
The individual property of a deceased partner shall be liable ground of the fraud or misrepresentation of one of the
for all obligations of the partnership incurred while he was a parties thereto, the party entitled to rescind is, without
partner, but subject to the prior payment of his separate debts. prejudice to any other right, entitled:
(n) (1) To a lien on, or right of retention of, the
surplus of the partnership property after satisfying the
Article 1836 partnership liabilities to third persons for any sum of money
Unless otherwise agreed, the partners who have not paid by him for the purchase of an interest in the partnership
wrongfully dissolved the partnership or the legal representative and for any capital or advances contributed by him;
of the last surviving partner, not insolvent, has the right to wind
up the partnership affairs, provided, however, that any (2) To stand on, after all liabilities to third persons
partner, his legal representative or his assignee, upon have been satisfied, in the place of the creditors of the
cause shown, may obtain winding up by the court. (n) partnership for any payments made by him in respect of the
partnership liabilities; and
Article 1837
When dissolution is caused in any way, except in (3) To be indemnified by the person guilty of the fraud of
contravention of the partnership agreement, each making the representation against all debts and
partner, as against his co-partners and all persons claiming liabilities of the partnership. (n)
through them in respect of their interests in the
partnership, unless otherwise agreed, may have the Article 1839
partnership property applied to discharge its liabilities, and the In settling accounts between the partners after
surplus applied to pay in cash the net amount owing to the dissolution, the following rules shall be observed, subject to
respective partners. But if dissolution is caused by expulsion of any agreement to the contrary:
a partner, bona fide under the partnership agreement and if (1) The assets of the partnership are:
the expelled partner is discharged from all partnership (a) The partnership property,
liabilities, either by payment or agreement under the (b) The contributions of the partners necessary
second paragraph of article 1835, he shall receive in cash for the payment of all the liabilities specified in No. 2.
only the net amount due him from the partnership.
(2) The liabilities of the partnership shall rank in order of
When dissolution is caused in contravention of the payment,as follows:
partnership agreement, the rights of the partners shall be as (a) Those owing to creditors other than partners,
follows:
 (b) Those owing to partners other than for capital and
profits, The liability of a third person becoming a partner in
(c) Those owing to partners in respect of capital, the partnership continuing the business, under this
(d) Those owing to partners in respect of profits. article, to the creditors of the dissolved partnership shall be
satisfied out of the partnership property only, unless there
(3) The assets shall be applied in the order of their declaration is a stipulation to the contrary.
in No. 1 of this article to the satisfaction of the liabilities.
When the business of a partnership after dissolution is
(4) The partners shall contribute, as provided by article 1797, continued under any conditions set forth in this article the
the amount necessary to satisfy the liabilities. creditors of the dissolved partnership, as against the
separate creditors of there tiring partner or deceased
(5) An assignee for the benefit of creditors or any partner or the representative of the deceased partner, have a
person appointed by the court shall have the right to prior right to any claim of the retired partner or the
enforce the contributions specified in the preceding number. representative of the deceased partner against the person or
partnership continuing the business, on account of there tired
(6) Any partner or his legal representative shall have the right or deceased partner’s interest in the dissolved partnership or
to enforce the contributions specified in No. 4, to the extent of on account of any consideration promised for such interest or
the amount which he has paid in excess of his share of the for his right in partnership property.
liability.
Nothing in this article shall be held to modify any right of
(7) The individual property of a deceased partner shall be creditors to set aside any assignment on the ground of fraud.
liable for the contributions specified in No. 4.
The use by the person or partnership continuing the business
(8) When partnership property and the individual properties of of the partnership name, or the name of a deceased partner as
the partners are in possession of a court for distribution, part thereof, shall not of itself make the individual
partnership creditors shall have priority on partnership property property of the deceased partner liable for any debts
and separate creditors on individual property, saving the rights contracted by such person or partnership. (n)
of lien or secured creditors.
Article 1841
(9) Where a partner has become insolvent or his When any partner retires or dies, and the business is
estate is insolvent, the claims against his separate property continued under any of the conditions set forth in the
shall rank in the following order: preceding article, or in article 1837, second paragraph, No. 2,
(a) Those owing to separate creditors; without any settlement of accounts as between him or
(b) Those owing to partnership creditors; his estate and the person or partnership continuing the
(c) Those owing to partners by way of contributions. (n) business, unless otherwise agreed, he or his legal
representative as against such person or partnership may
Article 1840 have the value of his interest at the date of
In the following cases, creditors of the dissolved dissolution ascertained, and shall receive as an ordinary
partnership are also creditors of the person or creditor an amount equal to the value of his interest
partnership continuing the business: in the dissolved partnership with interest, or at his option or
(1) When any new partner is admitted into an existing at the option of his legal representative, in lieu of interest, the
partnership,or when any partner retires and assigns (or the profits attributable to the use of his right in the property of the
representative of the deceased partner assigns) his rights in dissolved partnership;provided that the creditors of the
partnership property to two or more of the partners, or to one dissolved partnership as against the separate creditors, or
or more of the partners and one or more third persons, if the the representative of the retired or deceased partner,
business is continued without liquidation of the partnership shall have priority on any claim arising under this article, as
affairs; provided by article 1840, third paragraph. (n)

(2) When all but one partner retire and assign (or Article 1842
the representative of a deceased partner assigns) their The right to an account of his interest shall accrue to any
rights in partnership property to the remaining partner, who partner, or his legal representative as against the winding up
continues the business without liquidation of partnership partners or the surviving partners or the person or
affairs, either alone or with others; partnership continuing the business, at the date of dissolution,
in the absence of any agreement to the contrary. (n)
(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.