DISSOLUTION OF PARTNERSHIP

A partnership 'dies' when it is dissolved. Dissolution of partnership may happen in various circumstances
and its consequences not only affect the partners themselves but third parties (e.g. financial institutions
and merchants) dealing with them.

WAYS IN WHICH A PARTNERSHIP IS DISSOLVED:

A partnership may be terminated or dissolved in the following ways:

1- By agreement:
(a) if duration of the partnership has been specified in the partnership agreement, the partnership is
terminated on the expiry of that period;
(b) if the partners mutually agree to dissolve the partnership.
2- By operation of law (unless otherwise agreed between the partners)
(a) if the partnership was entered into for a fixed term and the term expires section 34(l)(a),
Partnership Act 1961;
(b) if the partnership was entered into for a single adventure or undertaking, and that adventure or
undertaking terminatessection 34(l)(b), Partnership Act 1961;
(c) if the partnership was entered into for an undefined time, by any partner giving notice to the other
partner(s) of his intention to determine (or end) the partnershipsection 34(l)(c), Partnership Act 1961.
3-By death or bankruptcy (unless otherwise agreed between the partnerssection
35(1), Partnership Act 1961,
4- By charging on sharessection 35(2), Partnership Act 1961.
5- By supervening illegalitysection 36, Partnership Act 1961.
6- By court ordersection 37, Partnership Act 1961.
The full text of sections 34 to 37, Partnership Act 1961, which state the various ways in which
partnerships can be dissolved, is as follows:
DISSOLUTION BY EXPIRATION OR NOTICE.

.34. (1) Subject to any agreement between the partners, a partnership is dissolved:
(a) If entered into for a fixed term, by the expiration of that term;
(b) If entered into for a single adventure or undertaking, by the termination of that adventure or
undertaking; or
(c) if entered into for an undefined time, by any partner giving notice to the other or others of
his intention to dissolve the partnership.
(2) In the last-mentioned case the partnership is dissolved as from the date mentioned in the notice
as the date of dissolution, or if no date is so mentioned, as from the date of the communication of the
notice.

DISSOLUTION BY BANKRUPTCY, DEATH OR CHARGE.

35. (1) Subject to any agreement between the partners, every partnership is dissolved as regards all the
partners by the death or bankruptcy of any partner.

(2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his
share of the partnership property to be charged under this Act tor his separate debt.

Held: Allowing the plaintiffs' application:

1. Upon the true construction of section 35(1) of the Partnership Act 1961, the agreement made
between the partners to the contrary must have been made before the death of any partner. An
agreement made by the surviving partners after the death of a partner without the agreement of the
deceased partner will not bind the deceased partner nor will it make the partnership a continuing
partnership.
2. On the death of any partner, a partnership therefore stands dissolved un-less there is evidence that
the partners had agreed otherwise. The onus is on the defendants to prove not only the existence of an
agreement between the surviving partners but the existence of an agreement between all the partners
including the deceased partner. (This is so because by the death of ' the partner it is no longer possible
to adhere to the original contract, the essence of which must be that all parties to it must be alive.)

DISSOLUTION BY ILLEGALITY OF PARTNERSHIP.

36. A partnership is in every case dissolved by the happening of any event which makes it unlawful for
the business of the firm to be carried on or for the members of the firm to carry it on in partnership.

DISSOLUTION BY THE COURT,

37. On application by a partner, the court may decree dissolution of the partnership in any of the
following cases:
(a) when a partner is found lunatic or is shown, to the satisfaction of the court, to be of permanently
unsound mind, in either of which cases the application maybe made as well on behalf of that partner, by
his committee, or next friend, or person having title to intervene as by any other partner;
(b) When a partner, other than the partner suing, becomes in any other way permanently incapable of
performing his part of the partnership contract;
(c) when a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of
the court, regard being had to the nature of the business, is calculated to affect prejudicially the carrying
on of the business;
(d) when a partner, other than the partner suing, wilfully or persistently commitss a breach of the
partnership agreement or otherwise so conducts himself in matters relating to the partnership business
that it is not reasonably practicable for the other partner or partners to carry on the business in
partnership with him;
(e) When the business of the partnership can only be carried on at a loss; and
(f) Whenever in any case circumstances have arisen which, in the opinion of the court, render it just and
equitable that the partnership be dissolved. In other words, a partnership may be dissolved, without the
order of court, in the following ways:
1- By agreement 2- By operation of law 3 - By death or bankruptcy 4- By charging on shares
5- By supervening illegality
The court may order the dissolution of the partnership, on application by a partner, in any of the
following cases:
1- Insanity of a partner: Section 37(a), Partnership Act 1961
2- Permanent incapacity of any partner to perform his duties: Section 37(b), Partnership Act 1961
3- Conduct calculated to pre-judicially affect the carrying on of the business: Section 37(c), Partnership
Act 1961.
Notice of Dissolution
Unless notice of dissolution is given, all customers of the partnership are entitled to treat all the former
members as continuing to be members. Section 39 of the Partnership Act 1961 states:
On the dissolution of a partnership or retirement of a partner, any partner may publicly notify the same,
and may require the other partner or partners to concur tor that purpose in all necessary or proper acts,
if any, which cannot be done without his or their concurrence. Notice may be given by an advertisement
in a local press, gazette or by a circular letter. However, for old customers and clients of the partnership,
an advertisement in a gazette alone is not sufficient notice.