2022 BS-AIS 3B Law on Pa nerships- Chapter 3

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1. What is the difference between dissolution and termination? *

Dissolution. It is the change in the relation of the partners caused by any partner ceasing to
be associated in the carrying on of business, while on Termination, all partnership affairs
are completely wound up and finally settled. this signifies the end of the partnership life.

According to Art. 1828. The dissolution of a partnership is the change in the relation of the
partners caused by any partner ceasing to be associated in the carrying on as distinguished
from the winding up of the business.
According to Art. 1829. On dissolution the partnership is not terminated, but continues until
the winding up of partnership affairs is completed.
2. What is the difference between knowledge of a fact and notice of a fact? *

Knowledge of a fact – he has actual knowledge thereof, when he has knowledge of such
other facts it shows bad faith

Notice of a fact – person who claims the benefit of the notice:

(a) States the fact to such person or

(b) Delivers thru mail or by other means of communication.

(Note: this article protects the innocent partner from those partner with BAD FAITH)

3. What is the effect if the specific property to be contributed by a partner is *

lost before delivery?

LOSS BEFORE DELIVERY:

a. If a specific thing is contributed by a partners is lost before the delivery, the partnership is
dissolved

b. Loss before or after delivery of property where the partner contributed only its use or
enjoyment, he having reserved the ownership thereof. The partner who owns the property
bears the loss.
4. What is the effect if the specific property to be contributed by a partner is *
lost after delivery?

LOSS AFTER DELIVERY:

a. If the lost occurred after the delivery of the thing promised, then the partnership is not
dissolved,. The partnership, being already the owner, bears the loss.

b. Loss before or after delivery of property where the partner contributed only its use or
enjoyment, he having reserved the ownership thereof. The partner who owns the property
bears the loss.

5. Enumerate the rights of a partner who has not caused the dissolution of a *
partnership wrongfully when such dissolution is in violation of partnership
agreement.

a. to have partnership property applied for the payment of its liabilities and to receive in
cash his share of the surplus

b. to be indemnified for damages caused by the partner guilty of wrongful dissolution

c. to continue the business in the same name during the agreed term of the partnership, by
themselves or jointly with others

d. to possess partnership property should they decide to continue the business

6. Who are authorized to wind-up the affairs of a dissolved partnership? *

(1) The partners designated by the agreement

(2) In the absence of such agreement, all the partners who have not wrongfully dissolved
the partnership

(3) The legal representative of the last surviving partner (when all partners are already
dead), not insolvent
7. Give the rights of an injured partner when a partnership is rescinded or *
annulled on the ground of fraud or misrepresentation committed against him.

Art. 1838. Where a partnership contract is rescinded on the ground of the fraud or
misrepresentation of one of the parties thereto, the party entitled to rescind is, without
prejudice to any other right, entitled:
1. To a lien on, or right of retention of, the surplus of the partnership property after
satisfying the partnership liabilities to third persons for any sum of money paid by him for
the purchase of an interest in the partnership and for any capital or advances contributed by
him.

2. To stand, after all liabilities to third persons have been satisfied, in the place of the
creditors of the partnership for any payments made by him in respect of the partnership
liabilities.

3. To be indemnified by the person guilty of the fraud or making the representation against
all debts and liabilities of the partnership.

RIGHT OF PARTNER TO RESCIND CONTRACT OF PARTNERSHIP

if one is induced by fraud or misrepresentation to become a partner, the contract is

voidable. If the contract is annulled, the injured party is entitled to restitution. Here, the fraud
or misrepresentation vitiates consent. However, until the partnership contract is annulled by
a proper action in court, the partnership relations exist and the defrauded partner is liable
for all obligations to third persons.

1. Right of injured partner where partnership contract rescinded

2. Right of retention of partnership property

3. Right to be subrogated in place of creditors of partnership

4. Right to be indemnified by the guilty partner against all liabilities of the partnership.
8. Give at least four (4) grounds for the judicial dissolution of a partnership. *

a.) Insanity - The partner may have been previously declared insane in a judicial proceeding;
otherwise, the fact of his being of unsound mind must be duly proved.

b.) Incapacity- Affects the ability of a partner to perform his duties as a partner.

c.) Misconduct and persistent breach of partnership agreement - Misconduct of a partner

prejudicial to the carrying of the business and the persistent breach of the partnership
agreement defeat and materially affect and obstruct the purpose of the partnership.

d.) Business can be carried only at a loss - If the business becomes apparent to be
unprofitable with no reasonable prospects of success or if it can be carried on only at a
loss.
9. X,Y, and Z are partners in a partnership which was dissolved by the *
withdrawal of X. Y who was notified by Z of X's withdrawal, entered into a new
transaction with W in the name of the partnership. Is the partnership liable to
W? Are X and Z liable to Y for their share of the liability? Explain your answer.

It depends: either yes or no.

Yes. According to Article 1833, each partner is liable to his co-partners for his share of any
liability created by any partner acting for the partnership as if the partnership had not been
dissolved unless, the dissolution being by the act of any partner, the acting partner had
knowledge of the dissolution. With that being said, the partnership is liable to W because Y
only had notice of the withdrawal, not knowledge.

No, because X and Z are only liable for their share in the liability of the partnership and not
to Y.
10. Assume the same partnership from the preceding number. X, acting for the *
partnership, bought a car from W. The car was being claimed by C. Y acquired
knowledge of the claim of C. Neither W nor Y informed X of the claim. C was
able to recover the car. Is W liable to the partnership under Article 1821?

It depends: either yes or no.

No, the partnership is not liable to W. Because partnership was desolve when x withdrawals
his share and y knows this before entering into contract with w. And they did not made any
contract so we can say that for w share partnership is not liable. Instead of partnership y
will be liable.

yes, x and z liable. To y for their share of the liability.

When partnership desolve that time every partnership set off their accounts and might be
they can become responsible for other partners while calculating their shares from
partnership. .
11. Assume the same partnership from the preceding number. The term of *
existence of the partnership expired. This notwithstanding, X enters into a
contract with W in the name of the partnership. Is the partnership liable to W?
What right, if any, is given to Y and Z?

(a) It depends; According to Article 1834, after dissolution, X can bind the partnership if it is:
(a) an act appropriate for winding up partnership affairs or completing transaction
unfinished at dissolution;
(b) by any transaction which would bind the partnership if dissolution had not taken place.

However, X cannot bind the partnership after dissolution if:

(a) the act is unlawful to carry on the business;

(b) the partner has become insolvent; (c) where the partner had no authority to wind up
partnership affairs except by a transaction mentioned in Article 1834, paragraph

If the partnership is liable to W under Article 1834, Y and Z are entitled to indemnity from X.
Y and Z may also acquire all the rights mentioned in Article 1834 about the power of a
partner to bind a dissolved partnership.
12. Assume the same partnership from the preceding number. The partnership *
was dissolved. Assume the following information: Partnership assets-
P320,000; Advances by X to the partnership- P20,000; Capital contribution of
each partner- P30,000; Liability of partnership to M- P150,000. Compute the
share of each partner in the profits.

Partnership Assets ₱320,000

Less: Liability of Partnership (₱150,000)
Less: Advances by X (₱20,000)
Less: Capital Contribution (₱90,000)
Total ` ₱60,000
Divided by: 3
Share of each partner ₱20,000

13. Using the same facts from the preceding number, suppose the liability of *
the partnership to W is P335,000; Y is indebted to C (separate creditor)-
P15,000; Z is indebted to D (separate creditor) - P10,000. Separate property of
Y and Z each amounts only to P20,000 and P10,000, respectively; and advance
by X to partnership- P30,000. Settle the accounts of the parties.

Partnership Assets ₱320,000

Less: Partnership liability to W (₱335,000)
Remaining Liability to W (₱15,000)
Divided by: 3
Personal liability of each partner
to W ₱5,000

Although Y and Z is liable to X for ₱10,000 each, separate creditors of Y and Z have
preference over separate property of Y and Z.

So, X gets only ₱5,000 from Y (₱20,000 -₱15,000).

Meanwhile, X gets nothing from Z (₱10,000- ₱10,000).
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