Art.

1828, 1829 – Terms

Dissolution – change in the relationship of the
partners caused by any partner ceasing to be
associated in the carrying on of the business.
Partnership is not yet terminated.
Winding up – process of settling the business or
partnership affairs after dissolution.
Termination – point in time when all
partnership affairs are completely wound up
and finally settled.

Art. 1830 – causes of dissolution

A. Without violation of the agreement
a) Termination of the definite term or
particular undertaking
b) Express will in partnership at will by any
partner
c)Express will in partnership at will by all
partners
d) Bonafide expulsion of a partner
 B. With violation of the agreement
C. Unlawful business
D. Loss of the promised contribution
before the existence of the partnership; no
dissolution after existence
E. Death of any partner
F. Insolvency of any partner or partnership
G. Civil interdiction of any partner
H. Court decree

Art. 1831 – Grounds for dissolution by court

decree
On application by a partner
1) Insanity of a partner
2) Incapacity of a partner
3) Guilty of conduct prejudicial to the
partnership
4) Business can only be carried at a loss
5) Other circumstances
On application by a purchaser of a partner’s
interest
 1) Termination of specific term or
particular undertaking
2) Anytime if a partnership at will

Art. 1832 – effect of dissolution on authority of

partner

A.No more authority to act for the

partnership, EXCEPT to wind up partnership
affairs or complete transactions.

(1) With respect to the partners

(a) Dissolution is not by the act,
insolvency or death of a partner –
authority to contract is terminated;
partners may hold contracting partner
liable.
(b) Dissolution is by the act, insolvency
or death of a partner in cases where Art.
1833 so requires – authority to contract
depends on knowledge or notice of
dissolution; if no knowledge or notice
 then partners may not hold contracting
partner liable

(2) With respect to persons not partners –

partnership is bound by the new contract
in accordance with Art. 1834.

Art. 1834 – There is partnership liability

with respect to third persons in the ff:
1. Winding up
2. Complete unfinished transactions
3. Any transaction provided:
a) 3rd person extended credit to the
partnership prior to dissolution; no
knowledge or notice of dissolution;
satisfied out of partnership asset
alone when (1) unknown as a partner
and (2) inactive partner

b) other transactions (no credit

extended); no knowledge or notice of
dissolution; dissolution is not
 published in a newspaper of general
circulation
4. No partnership liability, in case a
partner acted after dissolution:
a) Dissolved due to unlawful business
b) Partner is insolvent
c) No authority to wind up except: no.
3(a) and 3(b) above.

Art. 1835 – Effect of dissolution on partner’s

liability
1. No discharge of partner’s liability except
when agreed by (a) partner, (b) partnership
creditor), (c) persons or partnership
continuing the business.
2. Separate property of the partner shall
be liable for partnership obligations
(subsidiary) but subject to prior payment of
separate debts (preferred)
Art. 1836 – Who has authority to wind up
partnership affairs.
1. By agreement.
2. Partners who have not wrongfully cause
the dissolution.
3. Legal representative of the last surviving
partner.
4. Any partner, legal representative, or
assignee, by court order.

Art. 1837 – Right of partners to application of

partnership property on dissolution.
A. When dissolution is caused (1) without
violation of partnership agreement
1. Payment of partnership liabilities.
2. Surplus to be distributed to the
respective partners.
3. In case of expulsion, the expelled
partner can received in cash his share.

B. When dissolution is caused (1) with

violation of partnership agreement:
1. Rights of the partners who has not
wrongfully caused the dissolution:
a) Same in A above.
b) Indemnity for damages against guilty
partner.
c) Continue the business upon payment of
a bond in court (prior to payment of his
interest) or pay the partner who
wrongfully caused dissolution the value
of his interest less damages.
2. Rights of the partners who has
wrongfully caused the dissolution:
a) If the business is not continued, Same in
A above subject to liability for damages
b) If business is continued, paid the value
of his interest less damages or require
the payment of a bond in court.
Art. 1838 – Right of partner to rescind contract
of partnership
1. If induced by fraud or misrepresentation
to join (voidable contract) – entitled to
restitution of contribution.
2. Right of lien on the surplus of
partnership property.
3. Right of subrogation in place of
partnership creditors after payment of
partnership liabilities.
4. Right of indemnity from guilty partners.

Art. 1839 – Liquidation and distribution of

assets of dissolved partnership.
1. Order of satisfaction of liabilities of the
partnership
a) Partnership creditors
b) Partners who are creditors
c) Return of capital
d) Surplus to the partners
2. Right of partners in case assets are
insufficient.
 a) Additional contribution
b) Reimbursement from non-
contributing partners.
3. Liability of separate property of partners
a) Pay partnership liability after
exhaustion of partnership assets
4. Partnership creditors are preferred with
regards to partnership assets while
separate creditors are preferred with
partner’s separate assets.

Art. 1840 –Rights of partnership creditors

of dissolved partnership by change of
membership
1. Creditors of the old partnership shall
become creditors of the new partnership
2. Maintain preferential rights to the
partnership assets.
3. Liability of incoming partners limited to
his contribution (Art. 1826)
Art. 1841 – Right of retiring or deceased
partner when business is continued.
1. Value of interest is ascertained.
2. Receive as an ordinary creditor his
interest.
3. Partnership creditors have preferred
rights over the right of retiring or deceased
partner.

Art. 1842 – Right to account of interest.

1. After dissolution.
2. Persons liable to account:
a) Winding up partner
b) Surviving partner
c) Continuing partner.