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Subject: partnership agreement

Author:
Anonymous

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Date Posted: 05:49:41 05/21/03 Wed

THIS AGREEMENT is made the ......... day of ............
BETWEEN
[459]
(1) (name) of (address) and
(2) (name) of (address)
(together called �the Partners�)
IT IS AGREED as follows:
1 Partnership
1.1 The Partners shall carry on business in partnership as (describe business)2 under the firm name of (name of firm) at (address)3 or such other places as the Partners shall agree
1.2 The partnership shall commence on the date of this agreement4 and shall continue until it is terminated as provided in this agreement5
[460]
2 Relationship of the Partners
2.1 Each Partner shall be just and faithful to the other and shall devote his [or her] best efforts and whole time and attention to the partnership business6
2.2 Each Partner shall be entitled to take [4] weeks� holiday each year at times agreed by the other Partner7
2.3 Neither Partner shall without the consent of the other:
2.3.1 engage in any business other than the partnership business or
2.3.2 engage or dismiss any partnership employee or
2.3.3 become bail or guarantor for any person or
2.3.4 lend any partnership money or property or
2.3.5 release any debt due to the partnership or
2.3.6 except in the ordinary course of business draw accept or indorse any cheque or other bill of exchange or give any security or promise for the payment of money8
[461]
3 Financial
3.1 The capital and profits of the partnership shall (unless the Partners otherwise agree) belong to the Partners in equal shares and they shall bear all losses in the same proportions as they share in the profits9
3.2 The Partners shall keep books of account and such other records as are usual in a business of the same type as the partnership business and such accounts shall in addition show the account of each Partner in respect of his [or her] share of the capital and the profits of the partnership
3.3 The Partners shall open an account in the name of the partnership at (name of bank) of (address) and the signatures of both Partners shall be required for all cheques drawn and other instruments and instructions given in connection with such account10
3.4 The Partners shall appoint a firm of chartered or certified accountants as auditors to the partnership
3.5 The financial year of the partnership shall end on (date) and an annual balance sheet and profit and loss account shall be prepared as at that date and as soon as possible afterwards showing what is due to each Partner in respect of the capital and profits of the partnership11. Such balance sheet shall forthwith be signed by each Partner who shall be bound by the contents of the balance sheet and the profit and loss account unless some manifest error is found within 6 months after he [or she] has signed in which case such error shall be rectified12
3.6 Each Partner shall be entitled to draw out of the partnership bank account on account of his [or her] share of the profits such monthly sum as shall be agreed between the Partners. As soon as both of the Partners have signed the balance sheet they shall agree to make such further drawings (or repayments as the case may be) in respect of profits or capital or both as are prudent in the circumstances having regard to the requirements of the partnership business13
[462]
4 Termination
4.1 The partnership may be terminated by either Partner giving to the other not less than [3] months� notice in writing at any time14
4.2 If the partnership is terminated in any way then the Partner to whom notice is given or the surviving or solvent Partner or the Partner on whose application an order for the dissolution of the partnership was made15 may within [21] days after the notice was given or the event occurred which gave rise to termination give notice to the other Partner or his [or her] personal representatives trustee or receiver as the case may be electing either to have the partnership wound up under the Partnership Act 189016 or to purchase the share of the other Partner at the net value of such share
4.3 The net value for the purposes of clause 4.2 shall be agreed between the Partners or their respective successors in title (as the case may be) or in default of such agreement shall be determined by the partnership accountants. In so determining the accountants shall act as experts and not as arbitrators and their professional charges shall be borne by the Partners in equal shares
4.4 In agreeing such net value the value of the goodwill of the partnership shall be taken into account17
4.5 On a purchase of a share under this clause 4 the purchase money shall be paid within [6] months after the date of termination and with interest at the base rate of the partnership bankers plus [2%] from the date of termination until the date of payment
[463]
5 Notices
Any notice given by either of the Partners shall be served by personal delivery or by pre-paid recorded delivery post or by facsimile transmission to the address or number of the other Partner as set out in this agreement or as notified for that purpose from time to time. Any such notice shall be deemed to be effectively served (in the case of pre-paid recorded delivery post) 48 hours after it has been placed in the post or (in the case of service by facsimile transmission) on the next following day
[464]
AS WITNESS etc
(signatures of the parties)

1 This Form is drafted basically for use by two partners, and may be considered suitable for two persons who wish to start up a small business together.
Note, however, that the Form omits provision as to the following:
admission of new partners (cf Form 2 clause 3 [418] ante);
third party assurance (cf Form 2 clause 8 [427] ante);
insurance (cf Form 2 clause 9 [425] ante);
illness or pregnancy (cf Form 2 clause 11 [427] ante);
capital (cf Form 2 clause 12 [429] ante);
tax (cf Form 2 clause 18 [436] ante);
pension premiums (cf Form 2 clause 19 [437] ante);
management (cf Form 2 clause 20 [438] ante);
expulsion (cf Form 2 clause 22 [440] ante);
dissolution (cf Form 2 clause 24 [444] ante);
restrictive covenants (cf Form 2 clause 25 [445] ante);
indulgence and waiver (cf Form 2 clause 26 [446] ante);
arbitration (cf Form 2 clause 27 [447] ante); and
general matters (cf Form 2 clause 29 [449] ante).
As to partnership agreements generally see Paragraph 240 [311] et seq ante.

2 See Form 2 note 6 [451] ante.
3 For more detailed provisions as to partnership premises which may be adapted for use see Form 11 [480] et seq post.
4 See Form 2 note 2 [451] ante.
5 As to termination see clause 4 [463]. For alternative clauses as to the length of the partnership see Forms 4 [466]-6 [469] post.
6 The first part of this provision (�just and faithful�) is, in any case, implied: see Blisset v Daniel (1853) 10 Hare 493. As to the second part of the provision, if the partners are meant to work full time it is best to say so expressly. A partner in breach of this clause may not have to account for the profits of another business carried on by him unless it is of the same nature as and competing with the business of the firm: see the Partnership Act 1890 s 30, and see Trimble v Goldberg [1906] AC 494, PC. Inattention through illness would not breach this clause: see Robinson v Davison (1871) LR 6 Exch 269. For a clause allowing other activities by the partners see Form 21 [493] post.
7 For more elaborate provisions as to holidays see Form 2 clause 10 [426] ante.
8 See Form 2 note 44 [454] ante. If it is intended to provide for the execution of securities by partners see Form 57 [540] post.
9 Normally, the partners will share in the capital profits of the firm in the same proportions as they share in the income profits, and in the absence of a clause such as this, income and capital profits will be in equal shares in any case: Partnership Act 1890 s 24(1) (32 Halsbury�s Statutes (4th Edn) PARTNERSHIP). See also Form 2 note 39 [454] ante. For alternative clauses as to profit sharing see Form 38 [518] et seq post.
10 See Form 2 note 44 [454] ante.
11 For alternative clauses as to accounts see Form 51 [534] et seq post. This clause leaves open the question whether goodwill should appear in the accounts: see generally Paragraphs 121 [152]-125 [157] and 244.24 [350] ante.
12 See Form 2 notes 49, 50 [455] ante.
13 For an alternative clause as to drawings see Form 50 [533] post.
14 Without this provision, the partnership could be terminated on immediate notice: Partnership Act 1890 s 32(c). As to termination on death or bankruptcy see ibid s 33(1). For a clause on semi-retirement see Form 68 [558] post.
15 As to dissolution of a partnership by order of the court see the Partnership Act 1890 s 35 as amended, and Paragraph 148 [185] et seq ante.
16 Ie under ibid ss 32-44.
17 As to goodwill see Paragraphs 121 [152]-125 [157] and 244.24 [350] ante, and for forms of goodwill valuation see Forms 79 [580]-82 [584] post.
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