What is Legal Dissolution?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 February 2020
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Legal dissolution refers to the termination of a contract or partnership in the eyes of the law. There are several different kinds of legal dissolution, including corporate dissolution, contract dissolution, and divorce. Legal dissolution is usually done at the request of one or both primary parties involved in a contract, but it may be done at the order of the court in some corporate cases.

A corporate legal dissolution often occurs when a company goes out of business or declares bankruptcy. In most cases, this process involves submitting documentation to the court to request that the company be formally dissolved. Some of the reasons for corporate dissolution include loss of business, destruction of premises or assets due to disaster, or even internal disagreements. Dissolution is sometimes done to allow a corporation to restructure under new management; in order for a new business structure to be built, the original contract may need to be legally dismantled.

In some cases, dissolution may be the result of a court order. This can only occur under specific circumstances, which may vary by jurisdiction. A court may order dissolution if a company is found to be in violation of laws, particularly if it is found guilty of anti-trust or fraudulent practices. Some regions also give the court the power to dissolve a corporation if the board of directors is deadlocked.


Contract dissolution may be used to bring a legal end to any type of contract. In general, the court's responsibility in this situation is to restore both parties to the state they occupied prior to the contract. This may require the awarding of damages or remuneration to one side or another; for instance, if a homeowner signed a contract with a landscape architect and gave him or her a down payment for services, part or all of this payment might need to be returned before the contract could be formally ended by the court. If no damage can be awarded to either side, the court may simply dissolve the contract after a short hearing.

Divorce is the legal dissolution of a marriage. Unlike annulment, divorce ends the legal marital contact entered into by spouses, whereas annulment confirms that the contract was neither legal nor valid at any point. Marital dissolution may be an involved and emotional process that requires the court to divide up assets, liabilities, and duties between warring spouses before concluding the contract. In order to apply for a divorce, at least one spouse must request the dissolution. Divorce can be granted without the permission of the non-petitioning spouse, but cannot usually be ordered by the court without the request of at least one partner.


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