DISSOLUTION AND WINDING UP -CHAPTER 3

Question 1

It is the change in the relation of the partners due to any partner ceasing to be associated in the carrying on of the business.

Answer 1

Dissolution

Question 2

TRUE OR FALSE. General rule - If the cause of the dissolution is death, act, or insolvency of a partner, the authority of a partner to bind ceases upon the consent of the partners

Answer 2

False. It ceases upon the knowledge of the dissolution.

Question 3

TRUE OR FALSE. In dissolution, the partnership is not yet terminated and does not continue to operate until winding up of the partnership affairs is completed.

Answer 3

FALSE. It is not yet terminated and it continues to operate for the sake of winding up partnership affairs.

Question 4

What are the causes of dissolution?

Answer 4

1. Partnership agreement has not yet been violated.
2. Contravention of the partnership agreement.
3. Death of any partner
4. Insolvency of any partner
5. Unlawful act ceases for the partnership to continue to operate.
6. Specific thing promised by the partner to contribute even the ownership to the partnership has perished before its delivery to the partnership.
7. Decree of court.
8. Civil interdiction of any partner.

Question 5

What are the differences between winding up, termination, and dissolution?

Answer 5

Dissolution is the point of time where any partner ceases to carry on the operation of the business.

Winding up is the process of settling the partnership affairs.

Termination is the point of time when the partnership affairs are completed.

Question 6

What are the effects of dissolution?

Answer 6

1. Partnership is not terminated
2. Partnership continues for a limited purpose
3. Transaction of a new business is prohibited.

Question 7

TRUE OR FALSE. A partnership has ceased to exist, the partnership has no more juridical personality nor capacity to sue and be sued.

Answer 7

TRUE

Question 8

TRUE OR FALSE. If the cause of the dissolution is not justified or no cause is given, the withdrawing partner is liable for the damages and he is compelled to stay in the partnership.

Answer 8

FALSE. He is not compelled to stay in the partnership.

Question 9

TRUE OR FALSE. If there is a specified term, but one partner causes its dissolution, the partnership may be dissolved.

Answer 9

TRUE

Question 10

When the dissolution is caused by the act, death, insolvency of a partner, each partner is liable to other co-partners for his share in the liability made by the partner acting unless:

Answer 10

1. Has knowledge about the dissolution.

2. Has knowledge about the death or insolvency of the partner

Question 11

Who may petition for the dissolution?

Answer 11

1. Partners

2. Assignee

Question 12

When can the court decide the dissolution of the partnership or decree of a court of the dissolution? (Art 1831)

Answer 12

1. Partner becomes insane or has an unsound mind.
2. Does not have the capability to participate in the business or do his duties.
3. Persistently breaching the contract of the partnership.
4. only carried at loss.
5. guilty of civil interdiction.
6. other circumstances

Question 13

Dissolution terminates all authority of any partner to act for the partnership:

Answer 13

• A. With respect to the partners
  
  1. when the dissolution is not by the act, insolvency, death, etc of a partner.
  2. When the dissolution is by such insolvency, act, death of a partner.
• B. With respect to persons, not partners.

Question 14

TRUE OR FALSE. The liability of a partner by any transaction which would bind the partnership if dissolution had not taken place shall be satisfied out of the separate assets of the general partners when such before the dissolution (a) unknown as a partner to the person with whom the contract is made (b) so far unknown and inactive in PS affairs.

Answer 14

FALSE. Must be paid out from the partnership assets first.

Question 15

After the dissolution, a partner can bind the partnership except:

Answer 15

1. Unlawful to still carry on the business
2. partners become insolvent.
3. Partners have no authority to wind up unless the extended credit had knowledge of the dissolution or had no extended credit but had knowledge of the dissolution.

Question 16

TRUE OR FALSE. After dissolution, a partner can bind the partnership. (Art 1834)

Answer 16

TRUE

Question 17

TRUE OR FALSE. If the dissolution is caused by an act of one of the parties, co-partners are not liable to contribute towards the liability as if no dissolution has happened, provided that there is no notice or he does not have knowledge of the dissolution. (Art 1833)

Answer 17

FALSE. He is liable.

Question 18

After the dissolution, a partner can bind the partnership:

Answer 18

1. by the appropriate action for the winding up of the affairs.
2. any transaction that will bind the partnership if there is no dissolution such as the transaction that extends credit with knowledge of dissolution and does not extend credit but with knowledge.

1834

Question 19

TRUE OR FALSE. The individual property of a deceased partner shall not be liable for all the obligations of the partnership while he was a partner but subject to the prior payment of his separate debts.

Answer 19

FALSE. The property of the deceased partner is liable and can be paid to the liabilities of the partnership when he was still in the partnership.

Question 20

TRUE OR FALSE. Partners who have not wrongfully dissolved the partnership or representative of the last surviving partner, not insolvent, unless otherwise agreed, has a right to wind up the partnership affairs, provided that any partner, legal representative, or assignee, may obtain winding up by the court. (Art 1836)

Answer 20

TRUE

Question 21

TRUE OR FALSE. If partners do not give notice to the persons extending credit which he is entitled to, they may not hold the retired partner for obligations made by the continuing partners after dissolution.

Answer 21

FALSE. HE IS LIABLE IF HE DID NOT GIVE NOTICE TO THE PERSONS EXTENDING THE CREDIT

Question 22

TRUE OR FALSE. The dissolution discharge the existing liability of any partner. (Art 1835)

Answer 22

FALSE. IT DOES NOT DISCHARGE THE PARTNER TO THEIR EXISTING LIABILITY

Question 23

TRUE OR FALSE. A partner is discharged from any existing liability upon dissolution of the partnership by an agreement between himself, the partnership creditor, and the person continuing the business.

Answer 23

TRUE

Question 24

Who may wind up partnership affairs?

Answer 24

1. Partners designated by agreement
2. All the partner that acted in good faith
3. the legal representative of the last surviving partner or the assignee if there’s one.

Question 25

TRUE OR FALSE. Winding up the dissolved partnership may be done extrajudicially.

Answer 25

FALSE. IT IS DONE EXTRAJUDICIALLY (PARTNERS) AND JUDICIALLY (COURT)

Question 26

TRUE OR FALSE. Managing partner or winding-up partner has no right to sell the firm property even after the life of the partnership has expired.

Answer 26

FALSE. THEY HAVE A RIGHT.

Question 27

TRUE OR FALSE. Persons extending credit prior to dissolution are entitled to notice of the dissolution.

Answer 27

TRUE

Question 28

TRUE OR FALSE. When the dissolution is caused in any way, except in contravention of the agreement of the partners, each partner may have the partnership property applied to pay its liabilities, and the surplus of the partnership property unless otherwise stipulated.

Answer 28

TRUE

Question 29

A partner who has caused the | dissolution wrongfully shall have:

Answer 29

1. If the business is not continued by the remaining partners, he is liable for the damages. 2. If the business I continued, his value of share less the damages.

Question 30

Rights of the partner who have caused dissolution wrongfully are safeguarded by?

Answer 30

1. The bond approved by the court | 2. The payment of his interest at the time of the dissolution less the damages

Question 31

What are the rights of the partners who have not caused dissolution wrongfully?

Answer 31

1. To have rights to the partnership property and receive the surplus excess from the partnership liabilities when the partnership property is sold. 2. Right for the damages against the guilty partner. 3. Right to continue the business

Question 32

TRUE OR FALSE. If one is induced by fraud or misrepresentation to become a partner, the contract can be rescinded.

Answer 32

FALSE. THE CONTRACT IS VOIDABLE.

Question 33

What are the rights of the partners who are entitled to rescind when the contract is rescinded on the ground of fraud or misrepresentation?

Answer 33

1. To lien on or right to retention of the surplus after satisfying the partnership liabilities. 2. To stand as an ordinary creditor to receive the amount he paid in satisfying the partnership liabilities. 3. To be indemnified by the guilty partner.

Question 34

TRUE OR FALSE. General rule - when the partner retires from the partnership, he is not entitled to the payment of what may be due to him before the liquidation.

Answer 34

FALSE. A RETIRED PARTNER IS ENTITLED TO RECEIVE THE PAYMENT THAT IS DUE TO HIM AFTER THE LIQUIDATION

Question 35

What are the rules that shall be observed in settling the accounts between partners after dissolution unless otherwise stipulated?

Answer 35

1. Partnership assets are made up of: a. Partnership property b. Partners' contribution 2. Partnership liabilities must be paid in the order of: a. Partnership creditors who are not partners b. partners except for their profits and capital, c. Partners in respect of their capital d. Partners in respect of their profits. 3. The settlement of the partnership liabilities must be paid using the partnership property first then the partners' contribution. 4. The partners shall contribute the amount of the partnership liabilities. 5. The assignee or persons authorized by the court may enforce the contribution 6. The partner or his legal representative may enforce the contribution to the extent of his payment to the partnership liabilities. 7. The individual properties of the deceased partner are liable for number 4. 8. When the partnership property and individual property are in the hands of the court, the partnership creditors have rights to the PS property while individual creditors have rights to the individual property. 9. When the partner or his estate becomes insolvent, his separate property shall be used to pay his individual creditor first then the partnership creditors and the partners as a way of contribution.

Question 36

TRUE OR FALSE. The right to an account of his interest shall accrue to any partner, or his legal representative against the winding-up partners, surviving partners, or persons continuing the business at the date of the winding-up, in the absence of the contrary.

Answer 36

FALSE. IT IS AT THE TIME OF THE DISSOLUTION.

Question 37

What are the rights of the retiring of properties of the deceased or retiring partner?

Answer 37

1. The value of his interest in the partnership at the time of dissolution. 2. To receive the amount of the value of his share in the partnership or the profits.

Question 38

TRUE OR FALSE. No liquidation is needed when there is a settlement as to what the retiring partner shall receive.

Answer 38

TRUE

Question 39

Where can the partner or the legal representative account for his interest?

Answer 39

1. WINDING UP PARTNERS 2. SURVIVING PARTNERS 3. PARTNERS WHO CONTINUE THE BUSINESS

Question 40

What are the cases where the creditors of the dissolved partnership are the creditors of the continuing partners of the business:

Answer 40

1. When a new partner or assignee, or legal representative, or 3rd person is admitted and continues the business without liquidation. 2. When all but one partner retires or dies and assigns the interest to the partner or assignee and the business is continued without liquidation. 3. When any partner retires or dies and the business is continued with his or the legal representative's consent but without assigning of his right in the partnership. 4. When all partners retire or die, the partners or their legal representative assigned their rights to the 3rd party who promised to pay for the partnership liabilities and continues the business. 5. When the guilty partner wrongfully caused dissolution and the remaining partners continue the business without liquidation. 6. When the expelled partner and the remaining partners continue the business without liquidation