rights and the relationship between partners

A partnership is a business relationship which is potentially more binding and sometimes much more all-consuming than that of a marriage. Partnerships may take many different forms, but the underlying relationship, rights and duties thereof remain consistent throughout. This article shall unpack some of these aspects of a partnership and give you an overview of what you can expect should you be contemplating entering into a partnership.

The partnership relationship is simply defined as a collection of parties contractually bound to a business where profit and loss are shared. However, this is an over simplistic definition as these relationships have so many more rights and duties which flow out of them as a result thereof. Partners are not merely bound for the sharing of profit and loss but as a result of this partnership, they have a joint share in all partnership assets. This may not always have positive results as not only are they entitled to the benefits of such assets, but they may be jointly or severally liable for the debts associated with the partnership. This means that during the existence of the partnership, the partners may face litigation in the partnership name. However, should the partnership be dissolved the former partners may be held liable for outstanding debts in their personal capacity.

The first aspect to consider when contemplating entering into a partnership is not the business side of the relationship at all. One must consider the individual one wishes to enter into this relationship with. This relationship must be built on trust and consideration as in order for it to progress and lead to a fruitful business relationship it is essential that both parties trust the intention of the other as well as the capabilities of each other. Our law looks at partnership relationships as a contract based upon utmost faith or uberrimae fidei. Further, it is essential for all partners to act in the progression of the interests of their partnership and not purely in their own best interests. The partnership relationship is based upon a contractual one of a partnership agreement. This means that each party has corresponding duties to each other based upon the rights created by this agreement.

Partners have a number of rights which are expected of each other. The first of which is to share in the profits. Each partner is entitled to a share of the profits on the ratio in which they have contributed to the partnership or own the business which must be clearly set out in the partnership agreement. All partners have an equal right to participate in the management of the business. This leads directly to another power which flows out of the partnership agreement, being that of the power to contract on behalf of the partnership. This allows them powers to not only incur debt on behalf of the business but to create for business and onboard new clients. Partners’ efforts in the progression of the business are however not for their own account and they are entitled to compensation incurred for the running of the business.

Should you require any assistance setting up your business in the drafting of a partnership contract or assistance in any aspects thereof, contact us and we will gladly assist.



Saeedah Salie




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