Dissolution and Winding Up

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DISSOLUTION AND WINDING UP
DISSOLUTION - change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business; partnership is not terminated but continues until the winding up of partnership affairs is completed WINDING UP - process of settling the business or partnership affairs after dissolution

CAUSES OF DISSOLUTION:
1. Without violation of the agreement between the partners
a. By termination of the definite term/ particular undertaking specified in the agreement b. By the express will of any partner, who must act in good faith, when no definite term or particular undertaking is specified c. By the express will of all the partners who have not assigned their interest/ charged them for their separate debts, either before or after the termination of any specified term or particular undertaking d. By the expulsion of any partner from the business bonafide in accordance with power conferred by the agreement  2. 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 3. By any event which makes it unlawful for business to be carried on/for the members to carry it on for the partnership 4. Loss of specific thing promised by partner before its delivery 5. Death of any partner

6. Insolvency of a partner/partnership
7. Civil interdiction of any partner
8. Decree of court under art 1831

GROUNDS FOR DISSOLUTION BY DECREE OF COURT (art 1831)
1. Partner declared insane in any judicial proceeding or shown to be of unsound mind 2. Incapacity of partner to perform his part of the partnership contract 3. Partner guilty of conduct prejudicial to business of partnership 4. Willful or persistent breach of partnership agreement or conduct which makes it reasonably impracticable to carry on partnership with him 5. Business can only be carried on at a loss

6. Other circumstances which render dissolution equitable

Upon application by purchaser of partner's interest:
1. After termination of specified term/particular undertaking 2. Anytime if partnership at will when interest was assigned/charging order issued

EFFECTS OF DISSOLUTION:

A. AUTHORITY OF PARTNER TO BIND PARTNERSHIP
General Rule: Authority of partners to bind partnership is terminated Exception:
1. Wind up partnership affairs
2. Complete transactions not finished

Qualifications:
1. With respect to partners - 
a. Authority of partners to bind partnership by new contract is immediately terminated when dissolution is not due to ACT, DEATH or INSOLVENCY (ADI) of a partner (art 1833); b. If due to ADI, partners are liable as if partnership not dissolved, when the ff. concur: i. If cause is ACT of partner, acting partner must have knowledge of such dissolution ii. If cause is DEATH or INSOLVENCY, acting partner must have knowledge/ notice 

2. With respect to persons not partners (art 1834) -
a. Partner continues to bind partnership even after dissolution in ff. cases: (1) Transactions in connection to winding up partnership affairs/completing transactions unfinished (2) Transactions which would bind partnership if not dissolved, when the other party/obligee: (a) Situation 1 - 

i. Had extended credit to partnership prior to dissolution &  ii. Had no knowledge/notice of dissolution, or
(b) Situation 2 -
i. Did not extend credit to partnership
ii. Had known partnership prior to dissolution
iii. Had no knowledge/notice of dissolution/fact of dissolution not advertised in a newspaper of general circulation in the place where partnership is regularly carried on b. Partner cannot bind the partnership anymore after dissolution: (1) Where dissolution is due to unlawfulness to carry on with business (except: winding up of partnership affairs) (2) Where partner has become insolvent

(3) Where partner unauthorized to wind up partnership affairs, except by transaction...
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