LAW ON PARTNERSHIP
&
DISSOLUTION
ARTICLE
1828
Dissolution, Winding up
and Termination
DISSOLUTION
WINDING UP
TERMINATION
It is that point in
time when the
partners cease to
carry on the
business together.
It is the process of
settling the
business or
partnership affairs
after dissolution.
It is that point in
time when all
partnership affairs
are completely
wound up and
finally settled.
ARTICLE
1829
Partnership Not Terminated
by Dissolution
Affairs should be liquidated and distribution made to
those entitled to the partners interest.
The dissolution of a partnership must not be
understood to mean its extinguishment.
Dissolution refers to the change in partnership relation
and not the actual cessation of the partnership
business.
ARTICLE
1830
Causes of Dissolution
Without violation of the agreement between the partners:
By the termination of the definite term or particular undertaking specified in
the agreement;
By the express will of any partner, who must act in good faith, when no
definite term or particular is specified;
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;
By the expulsion of any partner from the business bona fide in accordance
with such a power conferred by the agreement between the partners;
ARTICLE
1830
Causes of Dissolution
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
Dissolution may be for any cause or
reason and power of dissolution always
exist.
The withdrawing partner is liable for
damages for unjustified dissolution.
ARTICLE
1830
Causes of Dissolution
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
A partnership must have a lawful
object or purpose.
ARTICLE
1830
Causes of Dissolution
Loss of Specific Thing
Loss before Delivery
Loss after Delivery
If the specific thing to
be contributed by a
partner is lost before
delivery, the
partnership is
dissolved.
If the loss occurred
after the delivery of
the thing promised,
then partnership is
not dissolved.
Loss where only use or
enjoyment is contributed
The loss of this thing
before or after the
delivery dissolves the
partnership.
ARTICLE
1830
Causes of Dissolution
By the Death of any Partner
ARTICLE
1830
Causes of Dissolution
By the Insolvency of any Partner or of the Partnership
The insolvency of a partner subjects his interest in the
partnership to the right of is creditors and makes it
impossible for him to satisfy partnership obligations to its
creditors.
ARTICLE
1830
Causes of Dissolution
By civil interdiction of any partner
A convicted person suffering from the
accessory penalty of civil interdiction cannot
validly give consent as his capacity is limited
thereby
By decree of court under the following Article
(1700a and 1701a)
ARTICLE
1831
Grounds for Dissolution
On application by a partner
INSANITY
OTHER
CIRCUMSTANCES
BUSINESS CAN BE
CARRIED ONLY AT
LOSS
INCAPACITY
MISCONDUCT AND
PERSISTENT BREACH
OF PARTNERSHIP
AGREEMENT
ARTICLE
1831
Grounds for Dissolution
On application by a purchaser of a partners interest
ARTICLE
1832
EFFECT OF DISSOLUTION ON
AUTHORITY OF PARTNER
GENERAL RULE
QUALIFICATION TO THE RULE
In so far as the partners themselves are concerned.
With respect to third persons.
ARTICLE
1833
AUTHORITY OF PARTNERS, AS AMONG
THEMSELVES, TO ACT FOR THE PARTNERSHIP
The cause of the dissolution is the act of a partner
and the acting partner had knowledge of such
dissolution.
The cause of the dissolution is the death or insolvency
of a partner and the acting partner had knowledge
or notice of the death or insolvency.
ARTICLE
1834
Power of partner to bind dissolved
partnership to third persons
By an act appropriate for winding up
partnership affairs of completing transactions
unfinished at dissolution;
ARTICLE
1834
Power of partner to bind dissolved
partnership to third persons
By any transaction which would bind the
partnership if dissolution had not taken place,
provided the other party to the transaction:
(a) Had extended credit to the partnership prior to
dissolution and had knowledge or notice of the dissolution
(b) Though he had not so extended credit, had
nevertheless known of the partnership prior to dissolution,
and, having no knowledge or notice of dissolution, the fact of
dissolution had not been advertised in a newspaper of
general circulation in the place (or in each place if more that
one) at which the partnership was regularly carried on.
ARTICLE
1834
Notice of dissolution to
partners
As to persons who extended credit to partnership
to dissolution
As to persons who had known of partnerships
existence
Where acting partner has no authority to wind up
partnership affairs
Where acting partner has become insolvent
ARTICLE
1835
Effect of dissolution on
partners existing liability
The dissolution of a partnership does not of itself
discharge the existing liability of a partner.
A partner may be relieved from all existing liabilities
upon dissolution only by an agreement to that effect
between himself, the partnership creditor and the
other partners.
ARTICLE
1835
Liability of estate of deceased
partner
The individual property of a deceased partner shall be
liable for all obligations of the partnership incurred while
he was a partner with preference to his individual
creditors.
ARTICLE
1836
MANNER OF WINDING UP
ARTICLE
1836
PERSONS AUTHORIZED TO WIND UP
ARTICLE
1837
Right of partner to application of
partnership property on dissolution
Dissolution without contravention of the
partnership agreement.
Dissolution in contravention of the
partnership agreement.
A. Rights of partner who has not caused
the dissolution wrongfully.
B. Rights of partner who has caused the
dissolution wrongfully.
Right of Partner to Rescind
1838 Contract of Partnership
ARTICLE
Inducement of an individual to become a partner by
means of fraud or misrepresentation makes the
partnership contract voidable and annullable.
INJURED PARTNER IS ENTITLED TO RESTITTUTION
Continuous existence of partnership.
DEFRAUDED PARTNER LIABLE FOR ALL OBLIGATIONS
TO THIRD PERSONS.
ARTICLE
1838
Right of Injured Partner where
Partnership Contract Rescinded
Right of a lien on, or retention of, the surplus of partnership
property after satisfying partnership liabilities for any sum of
money paid or contributed by him.
Right to stand in the place of the creditors of the partnership
after payment of partnership liabilities
Right of indemnification by the guilty partner against all
debts and liabilities of the partnership.
ARTICLE
1839
Rules in Settling Accounts between
Partners after Dissolution
ASSETS OF THE PARTNERSHIP
Partnership Property
Contributions of Partners
ARTICLE
1839
Rules in Settling Accounts between
Partners after Dissolution
ORDER OF APPLICATION OF THE ASSETS
Partnership Creditors
Loans to Partners
Return of capital contributions
Share in profits
ARTICLE
Rules in Settling Accounts between
Partners after Dissolution
1839
Right of a partner where assets insufficient
Capital Loss of a Partner
Enforce contributions of the Partners
All partners contributed
Only few partners contribute
Sue non-paying partners for indemnification.
ARTICLE
1839
Rules in Settling Accounts between
Partners after Dissolution
Liability of deceased partners individual property
Only liabilities of the partnership incurred while the deceased partner
is a partner will be attached to individual property as his share.
Liabilities covered by
individual property of
a deceased partner
ARTICLE
1839
Rules in Settling Accounts between
Partners after Dissolution
PRIORITY TO PAYMENT OF PARTNERSHIP CREDITORS / PARTNERS CREDITORS
PARTNERSHIP PROPERTY
INDIVIDUAL PROPERTY
PARTNERSHIP CREDITORS
INDIVIDUAL CREDITORS
ARTICLE
1839
Rules in Settling Accounts between
Partners after Dissolution
DISTRIBUTION OF PROPERTY OF INSOLVENT PARTNER
SEPARATE
CREDITORS
PARTNERSHIP
CREDITORS
CONTRIBUTION
TO PARTNERS
Dissolution of Partnership
1840 by Change in Membership
ARTICLE
ADMISSION OF NEW PARTNER
RETIREMENT, DEATH, WITHDRAWAL OR EXPULSION OF A
PARTNER
PARTNERS ASSIGNMENT OF RIGHTS TO SOLE REMAINING
PARTNER
ALL PARTNERS ASSIGNMENT OF RIGHTS TO THIRD PERSONS
ARTICLE
1840
DISSOLVED
PARTNERSHIP
CREDITORS
Rights of Creditors of Dissolved
Partnership which is Continued
NEW
PARTNERSHIP
CREDITORS
CONTINUING PARTNERSHIP
CREDITORS
ARTICLE
1840
Liability of Persons Continuing
Business of Dissolved Partnerships
The liability of the new or incoming
partners shall be satisfied out of
partnership property only unless there is
stipulation to the contrary.
Obligations to the debts of the dissolved
partnership of one or more third persons
who continue the partnership shall apply
only when the continuing partners
promise to pay such.
ARTICLE
1841
Rights of Retiring or of Legal Representative
of Deceased Partner when Business is Deceased
To have the value of the interest of the retiring partner
or deceased partner in the partnership ascertained as
of the date of dissolution.
To receive thereafter, as an ordinary creditor, an
amount equal to the value of his share in the dissolved
partnership with interest, or, at his option, in lieu of
interest , the profits attributable to the use of his right.
Partners Right to Account
1842
of His Interest
ARTICLE
Accrual Right
The right to demand an accounting of the
value of his interest accrues to any
partners or his legal representative after
dissolution in the absence of an
agreement to the contrary.
Partners Right to Account
1842
of His Interest
ARTICLE
Person liable to render an account
The right of a partner or the one who
represents him as owner of his interest
to an account to a payment of the
amount of his interest, may be exercised
as against:
1. The winding up partner
2. The surviving partner
3. The person or partnership
continuing the business.
