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What are the standard clauses for a Partnership Agreement?

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A Partnership Agreement is a legally binding contract between two or more individuals who agree to share in the profits or losses of a business venture. It outlines the terms of the partnership, including the rights and responsibilities of each partner, the division of profits and losses, and the procedures for resolving disputes.

Introduction
Essential Clauses in a Partnership Agreement 2.1. Names and Addresses of Partners 2.2. Business Name and Purpose 2.3. Partnership Contributions 2.4. Profit and Loss Sharing 2.5. Management and Decision-Making 2.6. Dissolution and Winding Up 2.7. Dispute Resolution 2.8. Confidentiality 2.9. Governing Law and Jurisdiction
Case Laws
Sample Partnership Agreement
Conclusion
TLDR

Introduction

A Partnership Agreement is a crucial document for any partnership, as it provides a clear framework for the relationship between the partners and helps to prevent misunderstandings and disputes. It is essential to have a well-drafted Partnership Agreement that addresses all relevant issues and is tailored to the specific needs of the partnership.

Essential Clauses in a Partnership Agreement

2.1. Names and Addresses of Partners

The Partnership Agreement should clearly identify the names and addresses of all partners involved in the business. This information is essential for legal and administrative purposes, such as registering the partnership, filing tax returns, and communicating with third parties.

2.2. Business Name and Purpose

The Partnership Agreement should specify the name of the business and its primary purpose. This information helps to establish the identity of the partnership and its scope of operations.

2.3. Partnership Contributions

The Partnership Agreement should outline the contributions made by each partner to the business. This can include financial contributions, such as capital investments, as well as non-financial contributions, such as expertise, skills, and time. The agreement should also specify the value of each contribution and how it will be reflected in the partnership's equity.

2.4. Profit and Loss Sharing

The Partnership Agreement should clearly define how profits and losses will be shared among the partners. This can be based on a fixed percentage, a ratio, or a formula that takes into account the partners' contributions. The agreement should also specify how profits will be distributed, such as through cash payments, dividends, or reinvestment in the business.

2.5. Management and Decision-Making

The Partnership Agreement should outline the management structure of the partnership and the decision-making process. This can include specifying the roles and responsibilities of each partner, the authority of the partners to make decisions, and the procedures for resolving disagreements.

2.6. Dissolution and Winding Up

The Partnership Agreement should address the procedures for dissolving the partnership and winding up its affairs. This can include specifying the circumstances under which the partnership may be dissolved, the process for distributing partnership assets, and the responsibilities of the partners in the event of dissolution.

2.7. Dispute Resolution

The Partnership Agreement should include a dispute resolution clause that outlines the procedures for resolving disagreements between the partners. This can include specifying the methods for resolving disputes, such as mediation, arbitration, or litigation, and the jurisdiction of the courts that will hear any disputes.

2.8. Confidentiality

The Partnership Agreement should include a confidentiality clause that protects the confidential information of the partnership and its partners. This can include specifying the types of information that are considered confidential, the obligations of the partners to protect confidential information, and the consequences of breaching confidentiality.

2.9. Governing Law and Jurisdiction

The Partnership Agreement should specify the governing law and jurisdiction for resolving any disputes arising from the agreement. This helps to ensure that the agreement is interpreted and enforced in accordance with the laws of a particular jurisdiction.

Case Laws

**Case: ** Mwaniki v AM Trailer Manufacturer Kenya Limited (Employment and Labour Relations Cause 3 of 2020)
- Parties: Mwaniki (Employee) and AM Trailer Manufacturer Kenya Limited (Employer)
- Outcome: The court ruled in favor of the employee, finding that the employer had unfairly dismissed him.
- Relevance: This case highlights the importance of having a clear and comprehensive Partnership Agreement that outlines the terms of employment, including the procedures for termination.
- Source: Kenya Law ↗
Case: *Flanagan v. * (UK Case)
- Parties: Flanagan (LLP Member) and (LLP)
- Outcome: The court ruled in favor of the LLP member, finding that the LLP agreement did not exclude his right to apply to court under section 994 of the Companies Act 2006.
- Relevance: This case demonstrates that even if a Partnership Agreement attempts to exclude certain rights, the courts may still uphold those rights if they are considered fundamental.
- Source: Norton Rose Fulbright ↗
Case: Dieckman v. Regency (Delaware Case)
- Parties: Dieckman (Unitholder) and Regency (Limited Partnership)
- Outcome: The court upheld the partnership agreement, finding that it could extinguish the general duty of disclosure in connection with a vote of unitholders to approve an affiliated transaction.
- Relevance: This case shows that partnership agreements can be used to modify or even eliminate certain fiduciary duties, but only if they are clearly and explicitly stated.
- Source: CorpGov.Law.Harvard.Edu ↗
Case: Schrepfer v Ponelat (South African Case)
- Parties: Schrepfer (Partner) and Ponelat (Partner)
- Outcome: The court ruled that the court has a wide equitable discretion to appoint a liquidator to realize partnership assets.
- Relevance: This case highlights the importance of having a clear and comprehensive Partnership Agreement that outlines the procedures for dissolving the partnership and winding up its affairs.
- Source: SAFLII ↗

Sample Partnership Agreement

PARTNERSHIP AGREEMENT

This Partnership Agreement (the "Agreement") is made and entered into as of [Date], by and between [Partner 1 Full Name], residing at [Partner 1 Address] (hereinafter referred to as "Partner 1"), and [Partner 2 Full Name], residing at [Partner 2 Address] (hereinafter referred to as "Partner 2").

1. Formation of Partnership

Partner 1 and Partner 2 hereby agree to form a partnership (the "Partnership") for the purpose of [Business Purpose]. The Partnership shall be governed by the terms and conditions of this Agreement.

2. Partnership Name

The name of the Partnership shall be [Partnership Name].

3. Business Address

The principal place of business of the Partnership shall be located at [Business Address].

4. Partnership Contributions

Each Partner shall contribute the following to the Partnership:

Partner 1: [Partner 1 Contributions]
Partner 2: [Partner 2 Contributions]

5. Profit and Loss Sharing

The profits and losses of the Partnership shall be shared by the Partners in the following proportions:

Partner 1: [Partner 1 Profit/Loss Share]
Partner 2: [Partner 2 Profit/Loss Share]

6. Management and Decision-Making

The Partnership shall be managed by the Partners jointly. All decisions affecting the Partnership shall be made by mutual agreement of the Partners.

7. Dissolution and Winding Up

The Partnership may be dissolved by mutual agreement of the Partners or upon the occurrence of any of the following events:

The death or bankruptcy of a Partner.
The withdrawal of a Partner.
The expiration of the term of the Partnership.

Upon dissolution of the Partnership, the Partners shall wind up the affairs of the Partnership and distribute the Partnership assets in accordance with the terms of this Agreement.

8. Dispute Resolution

Any dispute arising out of or relating to this Agreement shall be settled by [Dispute Resolution Method].

9. Confidentiality

Each Partner agrees to hold in confidence all confidential information of the Partnership and its partners.

10. Governing Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the laws of [Country]. Any legal action or proceeding arising out of or relating to this Agreement shall be brought exclusively in the courts of [Jurisdiction].

11. Entire Agreement

This Agreement constitutes the entire agreement between the Partners with respect to the subject matter hereof and supersedes all prior or contemporaneous communications, representations, or agreements, whether oral or written.

12. Amendments

This Agreement may be amended only by a written instrument signed by both Partners.

13. Severability

If any provision of this Agreement is held to be invalid or unenforceable, such provision shall be struck and the remaining provisions shall remain in full force and effect.

14. Notices

All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered personally, sent by certified mail, return receipt requested, or sent by overnight courier service, addressed as follows:

If to Partner 1: [Partner 1 Address]
If to Partner 2: [Partner 2 Address]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

[Partner 1 Signature]

[Partner 1 Printed Name]

[Partner 2 Signature]

[Partner 2 Printed Name]

Conclusion

A well-drafted Partnership Agreement is essential for any partnership, as it provides a clear framework for the relationship between the partners and helps to prevent misunderstandings and disputes. It is important to consult with a qualified legal professional to ensure that the Partnership Agreement is tailored to the specific needs of the partnership and complies with all applicable laws and regulations.

TLDR