Nielgem S.

Beja
Partnership Notes 2016
Dean Villanueva

Dissolution: Summary

Dissolution does not terminate the firm

Termination happens only after the WINDING UP
CAUSES OF DISSOLUTION
1. A - Act
I

- Insolvency

of a partner

D -Death

2. Those not due to partner(s)

- Expiration of a term
- Fulfilment of the undertaking
- Unlawfulness of the business
Upon dissolution the power of a partner to bind or act in behalf of the Partnership is
automatically terminated
Exception:
1. Transactions involving Winding up of partnership affairs
2. Continue Contracts that already begun before dissolution
- But were unfinished
3. When dissolution is due to A.I.D.
- And a partner entered into a contract as if the Partnership has not been
dissolved
Exception to no. 3
a. If dissolution is due to a Partners act
o The partner acting had knowledge of the dissolution
b. If dissolution is due to the DEATH/Insolvency of a partner
o The partner acting has Knowledge/notice of the fact of dissolution
Hence: ONLY THE PARTNER ACTING IS LIABLE
4. Any transaction that will bind the partnership if there was no dissolution (1834 )
Provided the party to the transaction :
a. Had extended credit to the partnership
o Prior to the dissolution
o And had no knowledge or notice of dissolution
b. He had not extended credit
o but he knew the existence of the partnership even before the
o
o

dissolution
he had no knowledge or notice of the dissolution
and the fact of dissolution has not been published in a news paper of
general circulation
in the place where the business is carried regularly
note : It does not matter that he had not actually read the news paper

Nielgem S. Beja
Partnership Notes 2016
Dean Villanueva

The liability here shall be fulfilled by

Assets of the partnership alone
Provided :
a. The partner acting is unknown to the person who did
not extend credit
b. The partner acting is unknown/inactive and has not

contributed to the reputation of the firm

When is a partnership not Bound
a. Unlawfulness of the business
b. The partner transacting is insolvent
c. Partner transacting has no authority to wind up Partnership affairs
Exception
1. When the transaction is w/ the one who extended credit for the partnership
- Such person has no knowledge/notice of lack of authority of the partner
transacting
2. The person has not extended credit
- But he had no knowledge of the partners lack of authority
- Such lack of authority has not been advertised in a news paper of general
circulation

When is a partner discharged from EXISTING PARTNERSHIP LIABILITIES?

- If there is an agreement among the
o The concerned partner(s)
o Other Partners
o Creditors.
- If there is NOVATION
When creditor cannot hold a partner Liable
o If Novation occurred after the retirement of a Partner
o And the retired partners consent was no obtained
o And the Creditor knew of the dissolution

Knowledge and notice.

(1) A person knows a fact if the person has actual knowledge of it.
(2) A person has notice of a fact if the person:
(a) Knows of it;
(b) Has received a notification of it;
(c) Has reason to know it exists from all of the facts known to the person at the time in question; or
(d) Has notice of it under subsection (3) or (4) of this section.
(3) A certificate of limited partnership on file in the office of the secretary of state is notice that the partnership is a limited partnership and the
persons designated in the certificate as general partners are general partners. Except as otherwise provided in subsection (4) of this section, the
certificate is not notice of any other fact.
(4) A person has notice of:
(a) Another person's dissociation as a general partner, ninety days after the effective date of an amendment to the certificate of limited partnership
that states that the other person has dissociated or ninety days after the effective date of a statement of dissociation pertaining to the other person,
whichever occurs first;
(b) A limited partnership's dissolution, ninety days after the effective date of an amendment to the certificate of limited partnership stating that the
limited partnership is dissolved;
(c) A limited partnership's termination, ninety days after the effective date of a statement of termination;
(d) A limited partnership's conversion under article 11 of this chapter, ninety days after the effective date of the articles of conversion; or
(e) A merger under article 11 of this chapter, ninety days after the effective date of the articles of merger.

Nielgem S. Beja
Partnership Notes 2016
Dean Villanueva

(5) A person notifies or gives a notification to another person by taking steps reasonably required to inform the other person in ordinary course,
whether or not the other person learns of it.
(6) A person receives a notification when the notification:
(a) Comes to the person's attention; or
(b) Is delivered at the person's place of business or at any other place held out by the person as a place for receiving communications.
(7) Except as otherwise provided in subsection (8) of this section, a person other than an individual knows, has notice, or receives a notification of a
fact for purposes of a particular transaction when the individual conducting the transaction for the person knows, has notice, or receives a notification of
the fact, or in any event when the fact would have been brought to the individual's attention if the person had exercised reasonable diligence. A person
other than an individual exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual
conducting the transaction for the person and there is reasonable compliance with the routines. Reasonable diligence does not require an individual
acting for the person to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know
of the transaction and that the transaction would be materially affected by the information.
(8) A general partner's knowledge, notice, or receipt of a notification of a fact relating to the limited partnership is effective immediately as
knowledge of, notice to, or receipt of a notification by the limited partnership, except in the case of a fraud on the limited partnership committed by or with
the consent of the general partner. A limited partner's knowledge, notice, or receipt of a notification of a fact relating to the limited partnership is not
effective as knowledge of, notice to, or receipt of a notification by the limited partnership.