Article 1828

What is Dissolution?
What is Winding up / Liquidation?
What is Termination?
What is Retirement?

Article 1829
Dissolution the partnership is not terminated, but continues until the winding up of partnership
affairs is completed.

Article 1830
Kinds of Dissolution
 Extrajudicial Dissolution – dissolution without intervention of the court
1. Without violation of the agreement between the partners
a. By termination of definite terms or particular undertaking
b. By express will of any partner who must act in good faith
c. By the express will of all the partners who have not assigned their interest
d. By the expulsion of any partner from the business
2. In Contravention of the agreement between partners – if one of the partners does not want
to continue the partnership without any valid reason, then the partnership is dissolved and
he is liable for damages because of breach of contract.
3. By any event which makes it unlawful for the business of the partnership
4. When specific thing is contributed and perishes:
A. When specific thing contributed only use or enjoyment only
a. Was lost before delivery – dissolved
b. Was lost after delivery – dissolved
B. When specific thing contributed ownership
a. Was lost before delivery – dissolved
b. Was lost after delivery – not dissolved
5. By the death of any partner
6. By the insolvency of any partner or the partnership
7. By the civil interdiction of any partner

Article 1831
Who can sue for judicial dissolution?
 Judicial Dissolution – when the court order the partnership to be dissolves
1. On application by or for a partner
A. A partner has been declared insane
B. A partner becomes incapable of performing his part of the partnership contract
C. A partner has been guilty of such conduct that affects the partnership
D. A partner persistently commits a breach of the partnership agreement
E. The partnership can only be carried on at loss
F. Other circumstances render a dissolution equitable
2. On the application of the purchaser of a partner’s interest
Article 1832
Partnership after dissolution, the partners must not enter into a contract because it is no longer
binding to the partnership, except if the transaction is for the purpose of liquidation and those
provided in article 1833 and 1834
Article 1833
General rule: when a partner enters into a new contract with a third person after dissolution, the
new contract will bind the partnership unless;
1. By withdrawal
a. Without knowledge of the continuing partner – binding to the partnership
b. With knowledge of partners but not to the third person – created liability
2. By the death or insolvency
a. Without knowledge of the continuing partner – binding to the partnership
b. With knowledge of partners but not to the third person – created liability

Article 1834
1. Partnership is liable
A. Acts for winding up partnership affairs
B. Acts for completing transactions unfinished at dissolution
C. Any transaction which would bind the partnership if dissolution had not taken place
a. Had extended credit prior to dissolution and had no knowledge or notice of the
dissolution
b. He had no extended credit and having no knowledge or notice of the dissolution
2. Partnership is not liable
A. Partnership was dissolved because it was unlawful
B. Where the partner has became insolvent
C. When partner had no authority to wind up partnership affairs; except by a transaction
with a third person who is in good faith

Article 1835
 General Rule: the dissolution of the partnership does not of itself discharge the existing
liability of any partner.
 Exception: if the partner, other partners, and the creditors agreed that the liability of a
partner to be discharged.

Property of a deceased partner

 Partnership Creditor – paid by any remaining property of a deceased partner will be
available to satisfy his share in the partnership liability
 Private creditor of a deceased partner – must be paid first

Article 1836
Kinds of Winding-Up or Liquidation
 Extrajudicial – liquidation without intervention of the court

Who will wind-up?

1. The liquidating partners
2. The partners who have not wrongfully dissolved the partnership
3. The legal representatives of the last surviving partner who is not insolvent

 Judicial – liquidation with intervention of the court

Who will wind-up?
1. The person appointed by the court
Article 1837
Right of partners in case of liquidation caused by violation or non-violation of the partnership
contract
 Without contravention or violation of the partnership agreement (Art.1830)
1. To have the partnership property applied to discharge the liabilities of the partnership
and
2. To have the surplus
 In contravention or violation of the partnership agreement
1. Rights of partner who has not caused dissolution wrongfully
a. To have the partnership property applied to discharge the liabilities of the
partnership
b. To have the surplus
c. To be indemnified for damages caused by the partner who caused the dissolution
wrongfully
d. To continue the business in the same name either by themselves or jointly
2. Rights of partner who wrongfully caused the dissolution
a. If the business is not continued by the other partner, to have the partnership
property applied to discharge the liabilities of the partnership and to receive cash
on his share of the surplus less damages caused by his wrongful dissolution.
b. If the business is continued by the other partners
1. To have the value of his interest in the partnership at the time of the
dissolution ascertained and paid in cash or secured by bond approved by court
2. To be released from all existing and future liabilities of the partnership.

Article 1838
Three rights of a partner who is entitled to rescind
1. Right of lien or right of retention
2. Right of subrogation and
3. Right of indemnification
Article 1839
In settling accounts between partners after dissolution
 The assets of the partnership
a. Partnership property and
b. Contributions of the partners necessary for the payment of all liabilities
 The liabilities of the partnership shall rank in order of payment
a. Partnership creditors (outside creditors)
b. Partners (inside creditors)
c. Partners in respect to capital (except industrial partner)
d. Partners in respect to profit
 Required new contribution
- If the partnership assets were exhausted, the partners shall contribute the amount
necessary to satisfy the liabilities.
Who can enforce
1. An assignee or any person appointed by the court
2. Any partner or his legal representative
 Individual property of a deceased partner

Article 1840
 Dissolution of a partnership by change in membership – change in membership dissolves the
partnership and creates a new partnership.
- New partner admitted
- Partner dies/retire, withdraws, or expelled
- Other partners assign their rights to the sole remaining partner
- All the partners assign their rights in the partnership property to third persons

Article 1841
Rights of retiring or of legal representative of deceased partner when business is continued
1. To have the value of the interest of the retiring partner or deceased partner in the
partnership ascertained as of the date of dissolution and
2. To receive thereafter as an ordinary creditor, an amount equal to the value of his share in
the dissolved partnership with interest

Article 1842
Partner’s right to account of his interest
1. Accrual of right – right to demand an accounting of the value of his interest
2. Person liable to render b account- right of a partner or the one who represents him as
owner of his interest to an account
a. The winding up partner
b. The surviving partner
c. The person or partnership continuing the business