Group 2 - Chapter 3: Dissolution and Winding Up (Art. 1828-1842)

When does the distribution of assets to partners occur in a partnership? a. During partition or distribution. b. During winding up. c. During dissolution. d. During termination.

A - The distribution of assets to partners occurs during the partition or distribution phase, after the winding up of the partnership's affairs.

Who is responsible for paying the partnership creditors in case of insufficient assets? a. Any partner or his legal representative, or any assignee for the benefit of the creditors or any person appointed by the court. b. Non-paying partners will be sued for indemnification by other partners. c. The partners will each pay a part of the creditors. d. Partnership creditors will have to wait for the distribution of assets.

A. Any partner or his legal representative, or any assignee for the benefit of the creditors or any person appointed by the court.

What does a partner who has caused the dissolution wrongfully receive if the business is not continued by the other partners? a. Partnership property applied to the payment of liabilities and net surplus, less damaged caused by wrongful dissolution. b. A higher compensation amount than the innocent partners. c. Partnership property to run the business independently. d. No compensation

A. Partnership property applied to the payment of liabilities and net surplus, less damaged caused by wrongful dissolution

What is the process of winding up in the case of dissolved partnership? a. Reducing the assets to cash and distributing the proceeds to the entitled parties. b. Selling the assets and giving the proceeds to charity c. Reducing the assets to non-liquid form. d. Distributing the assets equally among the partners

A. Reducing the assets to cash and distributing the proceeds to the entitled parties.

The right to an account of his interest shall accrue to any partner, or his legal representative as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary. (n) a. Article 1840 b. Article 1841 c. Article 1842 d. Article 1843

c. Article 1842

1. Dissolution can happen in any of the following, EXCEPT __________. a. New partner is admitted b. Partner is retired, expelled, dies or withdraws c. All partners assign their right to a third person. d. None of the above

d. None of the above

Fill in the blank(s): In a generic sense, "retirement" in dissolution means __________________.

dissociation by a partner, inclusive of resignation or withdrawal

What happens if the partnership contract is rescinded for a reason other than fraud? a. The innocent partners can either continue the partnership business with the guilty partner or dissolve the partnership business and have all assets sold and obligations paid, dividing the net proceeds according to their respective interests. b. The partnership must be dissolved and the net proceeds equally divided among the partners. c. The guilty partner must continue the partnership business alone. d. The innocent partners must terminate the partnership business and hold the guilty partner liable for damages.

A. The innocent partners can either continue the partnership business with the guilty partner or dissolve the partnership business and have all assets sold and obligations paid, dividing the net proceeds according to their respective interests

In an extrajudicial liquidation of a partnership, who is the first responsible for winding up the business? a. The liquidating partner or partners as agreed upon by all partners. b. The partners who have not wrongfully dissolved the partnership. c. The legal representative of the last surviving partner who is not insolvent. d. The court-appointed trustee.

A. The liquidating partner or partners as agreed upon by all partners.

If a partnership is being dissolved judicially, who has the authority to oversee the winding-up process? a. The person appointed by the court. b. The liquidating partner or partners as agreed upon by all of the partners. c. The partners who have not wrongfully dissolved the partnership. d. The legal representative of the last surviving partner who is not insolvent.

A. The person appointed by the court.

When the dissolution happens, the going concern principle of the partnership ceases. a. True b. False c. Cannot be determined.

A. True

When does the provision in Article 1837 on dissolution in contravention of the partnership agreement apply? a. When the partnership contract is rescinded on the ground of any other reason than fraud. b. When the guilty partner wishes to continue the partnership business alone. c. When the innocent partners wish to continue the partnership business with the guilty partner. d. When the partnership is rescinded due to fraud practiced by any of the partners against the others.

A. When the partnership contract is rescinded on the ground of any other reason than fraud

Under what circumstances can a partner not bind the partnership after dissolution, and the partnership is not liable? a. Where the partner has become insolvent. b. When the other party had no knowledge or notice of the dissolution. c. When the dissolution is not advertised in a newspaper. d. When the partner is known to have extended credit.

A. Where the partner has become insolvent.

Are courts allowed to dissolve a partnership in cases of abandonment, fraud, unjustified refusal, and other affairs? a. Yes, as deemed necessary by the law. b. No, because the partners have the discretion to solve their own issues.

A. Yes, as deemed necessary by the law.

TRUE OR FALSE: If the surviving partner continues the business with the consent of the Legal representative of the deceased becomes a new partner and is liable to all liable and obligation arising before death only to the extent of the contribution of the deceased.

ANSWER: FALSE - after death

The liability of a third person becoming a partner in the partnership continuing the business, under this article, to the creditors of the dissolved partnership shall be satisfied out of the partnership property only, unless _____.

ANSWER: there is a stipulation to the contrary

When a dissolution is caused in contravention of the partnership agreement, what rights do the innocent partners have? a. They have the right to make the guilty partner continue the business alone b. They have the right to indemnification for damages caused by the partner guilty of wrongful dissolution c. They have the right to have the partnership property applied for the payment of its liabilities d. They have no rights

C. They have the right to have the partnership property applied for the payment of its liabilities

What are the rights of partners if a dissolution is caused in a way that is not in contravention of the partnership agreement? a. They have the right to damages from breach of agreement b. They have the right to possess partnership property c. They have the right to receive in cash their share of the surplus d. They have the right to have partnership property applied to discharge the liabilities of the partnership

C. They have the right to receive in cash their share of the surplus

Under what circumstances can the consent of the creditor and the other partners to the novation be implied? a. When the creditor explicitly refuses consent. b. When the partner insists on the novation. c. When their conduct indicates consent. d. When the partner's liability is already discharged.

C. When their conduct indicates consent.

When can a partner's liability be discharged upon partnership dissolution? a. With the consent of the partner only. b. With the consent of the creditors only. c. With the consent/agreement of the partner, other partners, and creditors. d. Automatically upon dissolution.

C. With the consent/agreement of the partner, other partners, and creditors.

IDENTIFICATION: It is a ground for dissolution by decree of court wherein a partner is proven to be in a state of unsound mind.

Insanity

What happens to the partnership property in the event of a dissolution caused without violating the partnership agreement? a. It is given to the partner who caused the dissolution b. It is divided equally among the partners c. It is sold and distributed among the creditors d. It is used to pay off the partnership liabilities and then the net amount is paid to the partners in cash

D. It is used to pay off the partnership liabilities and then the net amount is paid to the partners in cash

How are the liabilities of the partnership ranked in order of payment during the process of settling accounts between partners after dissolution? a. Those owing to partners in respect of profits b. In no particular order c. Those owing to partners in respect of capital. d. Those owing to creditors other than partners.

D. Those owing to creditors other than partners.

Does the dissolution of a partnership immediately result in the termination of its legal entity?

No, the dissolution of a partnership does not immediately terminate its legal entity

TRUE OR FALSE. Generally, when a partner enters into a new contract with a third person after a dissolution, the new contract will bind the partners, wherein each of them is liable for his share of any liability created by the acting partner as if the partnership had not been dissolved.

TRUE

TRUE OR FALSE: The second paragraph of Article 1831 can only be applied if the continuing business, a partnership at will is created, or if the partnership is a partnership at will from the beginning.

TRUE

TRUE or FALSE: Dissolution by termination of the definite term or particular undertaking is a form of extrajudicial dissolution?

TRUE

TRUE or FALSE: Judicial dissolution is covered under no. 8 of article 1830 in relation to Article 1831 of the New Civil Code?

TRUE

TRUE or FALSE: Partnership at will is based on the mutual desire and consent of the partners?

TRUE

At what point are the net partnership assets partitioned and distributed to the partners?

The net partnership assets are partitioned and distributed to the partners at the time of the partnership's termination.

Fill in the blank(s): ____________________ and ____________________ are some of the best evidence of the existence of the partnership which was not yet terminated (though in the winding up stage).

Unsold goods and Uncollected receivables

In which scenario can a partner continue to bind the partnership even after dissolution? a. Any transaction unrelated to partnership affairs. b. Completing transactions unfinished at dissolution. c. Any transaction, regardless of the circumstances.

B. Completing transactions unfinished at dissolution.

What is the general rule regarding the dissolution of a partnership and partner liability? a. Dissolution discharges all partner liabilities. b. Dissolution does not discharge partner liabilities. c. Dissolution discharges partner liabilities only with consent. d. Dissolution depends on the partner's choice.

B. Dissolution does not discharge partner liabilities.

What should happen when the partnership contract is rescinded for fraud practiced by a partner against the others? a. The guilty partner should continue the partnership business with the innocent partners b. The innocent partners should dissolve the partnership business and hold the guilty partner liable for damages c. The guilty partner should be exempt from liability d. The innocent partners should hold themselves liable for damages incurred by the fraud

B. The innocent partners should dissolve the partnership business and hold the guilty partner liable for damages

When a dissolution is caused by the expulsion of a partner, bona fide under the partnership agreement, what right does the expelled partner have? a. The right to have the value of his interest in the partnership ascertained but not paid b. The right to receive the value of his interest in the partnership only in cash c. The right to continue the business under the same name d. The right to receive the value of the goodwill of the business

B. The right to receive the value of his interest in the partnership only in cash

Who is typically responsible for winding up the partnership business when a partner passes away? a. The legal representative of the deceased partner b. The surviving partners c. The creditors of the partnership d. A court-appointed trustee

B. The surviving partners.

What happens to the deceased partner's liabilities and responsibilities when the surviving partners continue the partnership business without estate consent? a. They are transferred to the surviving partners b. They remain with the deceased partner's estate c. They are automatically settled d. They become the responsibility of the creditors

B. They remain with the deceased partner's estate.

When a partner has no authority to wind up partnership affairs, what protection is offered to third persons dealing with such a partner in good faith? a. Third persons are personally liable. b. Third persons are protected and not liable. c. Third persons are partially liable.

B. Third persons are protected.

What is the priority order of payment for the liabilities of the partnership during the process of asset distribution after dissolution? a. Those owing to partners in respect of profits, those owing to partnership creditors, those owing to partners other than for capital and profits, and those owing to partners in respect of capital. b. Those owing to creditors other than partners, those owing to partners other than for capital and profits, those owing to partners in respect of capital, and those owing to partners in respect of profits. c. Those owing to creditors other than partners, those owing to partners in respect of profits, those owing to partners other than for capital and profits, and those owing to partners in respect of capital. d. Those owing to partners in respect of profits, those owing to partners in respect of capital, those owing to partnership creditors, and those owing to creditors other than part

B. Those owing to creditors other than partners, those owing to partners other than for capital and profits, those owing to partners in respect of capital, and those owing to partners in respect of profits . ✔

What rights does a partner have if dissolution is caused in contravention of the partnership agreement? a. The right to take the partnership property and run the business independently. b. The right to receive more compensation than innocent partners. c. The right to damages from breach of agreement. d.. The right to keep all the assets of the partnership

C. The right to damages from breach of agreement

Which one of the following statements is true about dissolution and winding up of a partnership? a. Dissolution and winding up are the same thing. b. Winding up involves the distribution of assets to partners. c. Dissolution and winding up both involve a change in the relationship among partners. d. Dissolution terminates the partnership immediately.

C - Dissolution and winding up are separate processes. Dissolution changes the relationship among partners, while winding up involves the distribution of assets.

What happens to the legal personality of a partnership upon dissolution? a. It is immediately terminated. b. It is distributed among the partners. c. It continues until the winding up is complete. d. It is transferred to the partners.

C - Upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business.

Which of the following statements is/are the qualifications to the rule of Article 1832 about the authority of a partner to act for the partnership? a. If it is with respect to third persons not partners to the partnership, the authority of the acting partner as it affects his co-partners is already deemed terminated under the Article 1832 and 1833. b. If it is with respect to the partners, when the dissolution is not by the act, insolvency or death of a partner. c. Both A and B. d. None of the above.

C. Both A and B.

When a partner becomes insolvent, what happens to his individual property? a. It is given to the other partners. b. It is distributed among the creditors. c. Claims against his separate property shall rank in the order of those owing to separate creditors, partnership creditors, and parents by way of contributions. d. It is donated to a charity.

C. Claims against his separate property shall rank in the order of those owing to separate creditors, partnership creditors, and parents by way of contributions.

In the case of a deceased partner's separate property, who has priority when it comes to settling debts? a. The surviving partners b. Partnership creditors c. Individual creditors of the deceased partner d. The court-appointed executor

C. Individual creditors of the deceased partner

Following Article 1834, the cases when a partner continues to bind the partnership even after the dissolution are the following except when: a. Act appropriate for winding up partnership affairs. b. Act for completing transactions unfinished at dissolution. c. Act where the other party had extended credit to the partnership after the dissolution and had prior knowledge or notice of the dissolution. d. Act where the fact of dissolution had not been advertised in a newspaper of general circulation in the place at which the partnership was regularly carried on.

C. It should be an act where the other party to the transaction had extended credit to the partnership PRIOR to the dissolution and had NO knowledge or notice of the dissolution.

In case of a partnership dissolution caused by expulsion of a partner, how is the expelled partner compensated? a. The expelled partner receives a portion of the partnership property. b. He receives a goodwill payment as compensation. c.. The expelled partner receives only the net amount due to him from the partnership in cash after being discharged from all partnership liabilities. d. He is not compensated

C. The expelled partner receives only the net amount due to him from the partnership in cash after being discharged from all partnership liabilities.

What is the liability of a deceased partner's individual property for partnership obligations? a. The individual property is not liable b. The individual property is only liable for losses c. The individual property is liable for all partnership obligations incurred during the partnership d. The individual property is liable only if the surviving partners request it

C. The individual property is liable for all partnership obligations incurred during the partnership.

When a partnership contract is rescinded on the grounds of fraud or misrepresentation, what rights is the injured partner entitled to? a. The right to subrogation in place of the creditors b. The right to keep all the partnership property c. The right of indemnification by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership. d. The right to sell the partnership property

C. The right of indemnification by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership.

What does dissolution of a partnership result in? a. Distribution of assets to the partners. b. Immediate termination of the partnership. c. Transfer of the partnership's assets to the partners. d. Continuation of the partnership with a change in the relationship among partners.

D - Dissolution results in the continuation of the partnership with a change in the relationship among partners.

The following are grounds for judicial dissolution except for? a. Insanity of a partner b. Incapacity of a partner c. A partner is guilty of misconduct d. A third person has breached a sale agreement.

D. A third person has breached a sale agreement.

Which of the following statements are the exceptions to the rule provided by Article 1833? I. If the dissolution being by act of any partner, the partner acting for the partnership had knowledge of the dissolution. II. If the dissolution is not by act of any partner, but he had knowledge of the dissolution. III. If the dissolution being by the death or insolvency of a partner, the partner acting for the partnership had knowledge or notice of the death or insolvency. IV. If the dissolution is not by the death or insolvency of a partner, but the partner acting for the partnership had knowledge or notice of the death or insolvency. a. I, II, III b. I, IV c. II, III d. I, III

D. I, III

When can a partner continue to bind the partnership even after dissolution without the knowledge or notice of the other party to the transaction? a. If the act is appropriate for winding up partnership affairs. b. When the partner has become insolvent. c. If the fact of dissolution has been advertised in a newspaper of general circulation. d. If the other party had extended credit to the partnership prior to dissolution.

D. If the other party had extended credit to the partnership prior to dissolution.

What is implied consent in the context of partner liability discharge? a. No consent is implied; it must be explicitly stated. b. Implied consent means the partner's consent alone is enough. c. It implies that the creditors' consent is sufficient. d. Implied consent can be inferred from the conduct of the creditor and other partners.

D. Implied consent can be inferred from the conduct of the creditor and other partners.

TRUE or FALSE: Judicial dissolution is covered under nos. 1 to 7 of the article 1830?

FALSE - Extrajudicial dissolution.

TRUE or FALSE: Partnership with a fixed term exists until the purpose is accomplished?

FALSE - Partnership for a particular undertaking

Fill in the blank(s): There are three final stages of partnership. Paying of previous obligations and collecting of assets previously demandable are examples of _________________ stage of partnership.

Winding up

A and B entered into a contract of partnership for a period of 3 years. On the 2nd year of the operation of the business of the partnership, partner B does not want to continue the business without any valid reason, hence, the partnership is dissolved. Is partner B liable for damages? Yes or No? Why?

Yes, in this case, B is liable for damages because of breach of contract.