Temporary Nature of Partnership.—Because of its personal character, a partnership has necessarily a limited duration. It must look forward to the time when its business will have to be closed up. The chief causes leading to a dissolution are briefly reviewed here.
Causes of Dissolution
1. The withdrawal of any partner. Under ordinary circumstances a partner cannot be held to a specific performance of his contract. If he becomes dissatisfied, suspicious, or desires for other reasons to withdraw from his contract before its expiration, he has that power. Such withdrawal cannot be looked upon as a right but only as a power to be exercised under unusual circumstances. If his withdrawal before the agreement terminates results in damage to his copartners, they have a lawful claim against him for the amount of the damage. Under extraordinary conditions, specific performance of the contract might be decreed, i.e., the partner would not be allowed to withdraw.
Withdrawal does not relieve a partner from liability for partnership debts incurred while he was a member of the firm. Any creditors not paid by the firm may hold the withdrawing partner liable for the debts. To be relieved from the liability on debts arising after his withdrawal, personal notice of withdrawal must be given to all the firms with which the partnership has been dealing; a published notice being considered sufficient for the parties not dealing with the firm until after withdrawal.
2. Sale of a partner’s interest or admission of a new partner. When a partner, with the consent of his copartners, sells his interest in the firm to another, or when a new member is admitted to the partnership, in the eyes of the law the old partnership has ceased to exist and a new one has taken its place.
3. Limitations in the partnership agreement. The agreement may specify the period for which the partnership is to exist. If it is a special partnership, the object it is to accomplish may be stated and the law considers the firm automatically dissolved as soon as that object is attained.
4. Mutual consent of the partners. Whether or not the partnership period is limited by the agreement, the partners may at any time rescind their contract by mutual consent.
5. Misconduct, insanity, death, assignment, or bankruptcy of a partner. The happening of any of these contingencies effects a dissolution. By misconduct may be understood a member’s failure to pay the agreed contribution of capital, failure to perform his duties, his acting in bad faith towards his copartners, etc.
6. Illegal object. A partnership entered into for the pursuit of an object which later becomes illegal is automatically dissolved.
7. War between nations of which partners are citizens. This dissolves the partnership, though such dissolution may be more in the nature of a suspension, inasmuch as the relation may be resumed upon cessation of hostilities.