Name: Class number: Date:

Section:
Schedule:

Lesson title: LAW ON Materials:

PARTNERSHIP Lesson Student Activity Sheets, Pen
Objectives
At the end of this module, I should be able to: References:
1. Explain the concept of dissolution, Soriano, F. R. (2016). Notes in Business Law.
liquidation, and termination. Manila: GIC Enterprises & Co., Inc.
2. Identify the causes of dissolution.
3. Discuss the effects of dissolution on the
authority of a partner.

A. LESSON PREVIEW/REVIEW
1) Introduction

Hi, future accountant! Welcome to the sixth session of the law on partnership. The immediately
preceding module presented the application of payment, the obligations of the partnership, the rules on
the conveyance of real property by a partner or the partners, the effect of admission or representation
of a partner, the effect of notice to and knowledge of a partner, and the preference of partnership
creditors in partnership assets over private creditors of a partner. As a continuation, partnership
dissolution and winding are discussed in this module and continued in module #7.

2) Activity 1: What I Know Chart, part 1

Try answering the questions below by writing your ideas under the first column What I Know. It’s okay if
you write key words or phrases that you think are related to the questions.

What I Know Questions: dies, will the partnership

1. Differentiate be dissolved?
dissolution and winding 3. What are the
up of partnership. effects of dissolution on
the authority of
2. In a partnership of
partners?
three, when one partner
What I Learned (Activity 4)
 Name: Class number: Date:

Section:
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B. MAIN LESSON
1) Activity 2: Content

Notes DISSOLUTION AND

WINDING UP

Dissolution, winding up and termination, concept

1. Dissolution is the change in the relation of the partners caused by any partner ceasing to be
associated in the carrying on of the business. (Art. 1828)
2. Winding up is the process of settling the business or affairs of the partnership after dissolution.
(See Art. 1829.) 3. Termination refers to the point when all the business or affairs of the partnership are
completely wound up.

Causes of dissolution
1. Without violation of the agreement of the partners.
a. By the termination of the definite term or particular undertaking specified in the agreement.
b. By the express will
1) Of any partner who must act in good faith, when no definite term or particular
undertaking is specified.
2) 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
undertaking.
c. 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, by the express will of any partner at
any time. The withdrawing partner can be held liable for damages.
3. When any event makes it unlawful for the business of the partnership to be carried on or for the
members to carry it on in partnership.
4. In the following cases of loss:
a. Loss before or after delivery of property where the partner contributed only its use or enjoyment,
he having reserved the ownership thereof. The partner who owns the property bears the loss.
b. Loss before delivery of specific thing, which a partner had promised to contribute to the
partnership. If the loss occurs after delivery, the partnership is not dissolved. The partnership, being
already the owner, bears the loss.
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. (Art. 1930)
8. By decree of court in the following cases:
a. On the application by or for a partner (i.e., a partner or his legal representative files the
application) to dissolve the partnership 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 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 a breach of
the partnership agreement, or otherwise
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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 render a dissolution equitable. (Art. 1831)
b. On the application of the purchaser of a partner's interest
1) Alter the termination of the specific term or particular undertaking.
2) At any time when the partnership was a partnership at will when the interest was
assigned or the charging order was issued. (Art. 1831)

Effect of dissolution on authority of a partner

Dissolution terminates all authority of any partner to act for the partnership, except with respect to the
following:
1. Acts to wind up partnership affairs.
2. Acts to complete transactions begun before dissolution. This applies to wholly or partly
executory contracts.

In the above cases, the act of the partner binds the partnership. If the assets of the partnership are not
sufficient to pay the liabilities, the partners can be held liable to the extent of their separate properties.
(Arts. 1832, 1833, 1834 and 1839)

When authority of a partner to enter into new transactions is terminated among the partners
(Arts. 1832, 1833, 1834)
1. If the cause of dissolution is not by the act, insolvency or death of a partner (such as by the
expiration of the term for which the partnership was constituted or by decree of court). Notice or
knowledge of the acting partner of the cause of dissolution is immaterial.
2. If the cause of dissolution is the act of a partner and the partner who entered into the new
transaction had knowledge of the dissolution.
3. If the cause of dissolution is the insolvency or death of a partner and the partner who entered
into the new transaction had notice or knowledge of such insolvency or death.

When authority of a partner to enter into new transaction is not terminated among the partners
(Art. 1832)
1. If the cause of dissolution is the act of a partner and the acting partner had no knowledge of the
dissolution. 2. If the cause of dissolution is the insolvency or death of a partner and the acting partner
had no notice or knowledge of such insolvency or death.

When the act of a partner after dissolution binds the partnership (Art 1834)
1. When the act is necessary for winding up of partnership affairs.
2. When the act is necessary to complete transactions begun before dissolution.
3. In case of a new transaction or business in the following cases:
a. If the other party to the transaction had extended credit to the partnership before dissolution
(i.e., a previous
creditor) and he had no knowledge or notice of the dissolution. A previous creditor is entitled to a
special attention; hence, he must be specially notified of the dissolution. Mere publication of the
dissolution is not
 Name: Class number: Date:

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notice to him. However, he will be bound by the dissolution if he had read the publication if there was
one or had obtained knowledge of the dissolution in some other manner. Without such notice or
knowledge, the partnership will be bound by the transaction.
b. If the other party to the transaction had not so extended credit before dissolution (i.e., a new
creditor) but had nevertheless known of the partnership before dissolution, and the fact of dissolution
had not been advertised in a newspaper of general circulation in the place (or in each place if more
than one) at which the business is regularly carried on. A new creditor is not entitled to a special
attention; hence, mere publication of the dissolution is constructive notice to him although he had not
read it. So if there was no publication and he had not come to learn of the dissolution in some other
manner, he will not be bound by the dissolution. The partnership will thus be liable to him.

In the above cases [No. 3(a) and (b) a partner is not liable with his separate property after the
exhaustion of partnership assets:
a. If he is unknown as a partner to the person with whom the contract is made, and
b. So far unknown and inactive in partnership affairs that the business reputation of the partnership
could not be said to have been in any degree due to his connection with it.

4. Where although the partner has no authority to wind up Partnership affairs, the other party to
the transaction is:
a. One who had extended credit to the partnership before dissolution (i.e., previous creditor), and
he had no notice or knowledge of the partner's lack of authority.
b. One who had not so extended credit before dissolution (i.e., new creditor) and having no notice
or knowledge of the partner's lack of authority, the fact of want of authority has not been advertised in a
newspaper of general circulation in the place (or in each place if more than one) at which the business
is conducted.

Except for the subject matter of the notice or knowledge which is the lack of authority of the partner to
wind up, the explanation for No. 4 (a) and (b) is similar to No. 3 (a) and (b), first paragraph.

When the act of a partner after dissolution does not bind the partnership (Art. 1834)
1. Where the partnership is dissolved because it is unlawful to carry on the business, unless the
act is appropriate for winding up partnership affairs.
2. Where the acting partner is insolvent.
3. Where the partner had no authority to wind up partnership affairs, except with innocent third
persons. [Please refer to No. 4 (a) and (b) of the immediately preceding topic.]
4. Where a partner's authority is already terminated among the partners and the third person had
actual or constructive knowledge, as the case may be, of the dissolution of the firm.
 Name: Class number: Date:

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2) Activity 3: Skill-building Activities

INSTRUCTIONS: Classify the causes of dissolution according to the categories listed below. Write the
letter of your answers before each number.

CATEGORIES
A. Causes of dissolution of a partnership without violation of the agreement of the parties
B. Automatic causes of dissolution of general partnership
C.Grounds for court-ordered dissolution of partnership also known as non-automatic
causes of dissolution

1. In contravention of the agreement between the partners, by the express will of any partner
at anytime such as withdrawing from the partnership
2. By the expulsion of any partner bona fide or in good faith from the business in accordance
with such power conferred by the agreement of the parties
3. Loss before delivery of specific thing, which a partner has promised to contribute to the
partnership or in case of universal partnership of all present property
4. By the death of the partner
5. The business of the partnership can be carried only at a loss.
6. Other circumstances that render dissolution equitable
7. By the termination of the definite term or particular undertaking specified in the agreement.
8. 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 undertaking
9. When any event makes it unlawful for the business of the partnership to be carried on or for
the members to carry it on in partnership.
10. Loss before delivery of property where the partner contributed only its use or enjoyment or
in case of universal partnership of profits.
11. Loss after delivery of property where the partner contributed only its use or enjoyment or in
case of universal partnership of profits.
12. A partner becomes in any way incapable of performing his part in the partnership contract.
13. A partner has been guilty of such conduct as tend to affect prejudicially the carrying on of
the business.
14. A partner willfully or persistently commits a breach of the partnership contracts
15. By the insolvency of any partner.
16. By the insolvency of the partnership.
17. By the civil interdiction of any partner.
18. A partner has been declared insane in any judicial proceeding or is shown to be of unsound
mind.
Check your answers against the Key to Corrections found at the end of this SAS. Write your score on your
paper.

3) Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers in the third
column.

4) Activity 5: Check for Understanding

MULTIPLE CHOICE. Select the best answer by writing the letter of your choice before each number.

1. I. Dissolution refers to the change in the relation of the partners caused by a partner ceasing to
be associated in the carrying on the business.
II. Termination is synonymous to Dissolution
A. Only I is false
B. Only II is false
C. Both are false
D. Both are true

2. All of the following losses of properties will cause the dissolution of the partnership, EXCEPT?
A. Loss before delivery to the partnership of property wherein only the use of which was
contributed by the partner who owned it.
B. Loss after its delivery to the partnership of property only the use of which was contributed by the
partner who owned it.
C. Loss before its delivery to the partnership of property which a partner had promised to
contribute to the partnership.
D. Loss after its delivery to the partnership of property which a partner had promised to contribute
to the partnership.

3. Who cannot file the petition for the dissolution of a partnership?

A. the partners themselves
B. the purchaser of a partners’ interest
C. either (a) or (b)
D. any person, whether or not he has an interest in the partnership

4. The following acts of partners after the dissolution of the partnership are presented to you:
I. Acts to wind up partnership affairs
II. Acts to complete transactions begun before dissolution
III. New transactions entered into by the managing partner who was aware that the partnership had
been dissolved because of the death of a general partner
Which of the following acts are binding on the partnership?
A. I and II
B. I and III
C. II and III
D. I, II, and III
 the business
Name:
III Dissolution may be caused involuntarily when a
supervening event makes the business itself of the
Section: partnership unlawful or makes it unlawful for the partners
Schedule: to carry it on together

5. I. When the partnership is dissolved A. Only I is true

by reason of the expiration of its term ,a B. Only I and II are true
partner’s authority to act after dissolution C. Only I and III are true
terminated among the partners although the D. I, II and III are true
acting partner had no notice of the cause of
dissolution
II. . When the partnership is dissolved
because of the insolvency of a general
partner ,a partner’s authority to act after
dissolution terminated among the partners
although the acting partner had no notice of
the cause of dissolution
III When the partnership is dissolved
because of the death of a general partner ,a
partner’s authority to act after dissolution
terminated among the partners although the
acting partner had no notice of the cause of
dissolution
A. Only I is true
B. Only I and II are true
C. Only I and III are true
D. I, II and III are true

6. I. Winding up is the process of settling the business or

partnership affairs after dissolution
II. Dissolution is that point in time when the partners cease to
carry on the business together.
III Termination is the point when all partnership affairs are
completely wound up and finally settled

A. Only I is true
B. Only I and II are true
C. Only I and III are true
D. I, II and III are true

7. I. Dissolution may be for any cause or reason

II. The doctrine of delectus personae allows a partner to
have power, although not necessarily the right, to dissolve
a partnership, even though his co-partners wish to continue
Class number: Date:
8. I. A partnership agreement, may provide that death, withdrawal, or admission of a partner will not effect a dissolution
II. An insolvent partner has no authority to act for the partnership nor the other partners to act for him
III Unless otherwise stipulated, every partner is considered the agent of the partnership with authority to bind partnership as
well as the other partners with respect to the transactions of its business.

A. Only I is true
B. Only I and II are true
C. Only I and III are true
D. I, II and III are true

9. Ara, Rona, and Tina were partners in ART Company. The term of existence of the partnership as fixed
in the articles of partnership expired yesterday. If today, Ara enters into a new transaction with Dona.
A. She alone assumes whatever liability may arise under the contract because her authority to act for
ART Co. terminated as of yesterday
B. The contract is still binding as to Rona and Tina because the Partnership was not yet terminated
C. The contract is still binding because of the principle of mutuality
D. The contract is void

10. Carlo is a partner in CUTE Law firm. Later on, Carlo is appointed Judge of the Regional Trial Court.
A. His appointment dissolves the partnership of which he is a member because he is prohibited from engaging in the
practice of law after being appointed as a Judge in the RTC.
B. His appointment did not dissolve the partnership because it is just a mere appointment not related to the affairs of law
firm.
C. The appointment has no effect in the affairs of CUTE Law firm however, the law firm should disclose the said
appointment to the public
D. B and C are correct
 Name: Class number: Date:

Section:
Schedule:

*Activity 5: Check for Understanding is a GRADED QUIZ.

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished.

Did you have challenges learning the concepts in this module? If none, which parts of the module
helped you learn the concepts?

Some question/s I want to ask my teacher about this module is/are:

FAQ
1. Will the partnership discontinue and lose its legal personality upon dissolution?
Upon its dissolution, the partnership continues and its legal personality is retained until complete winding up of its
business culminating in its termination. (Domingo, 2019)
 *KEY TO CORRECTIONS*

1.B 10.B
2.A 11.B
3.B 12.C
4.B 13.C
5.C 14.C
6.C 15.B
7.A 16.B
8.A 17.B
9.B 18.B

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