PARTNERSHIP: CAN IT BE BASED ON TRUST?

There is a popular saying that the best form of partnership is the one you do with your wife (legal wife) this is because partnership seems to be tearing friends, colleagues, siblings apart. As a legal practitioner, I say to you that this is not entirely true especially when you do the right and necessary things required by Law.

I shall be discussing how best to enter into partnership, this will serve as guide when entering into an agreement. Please note that this cannot be done except through a legal Practitioner, contact us today.

What is partnership?

This is a type of business entity in which partners share with each other the profit or losses of the business undertaking in which all have invested. An aspect of partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise, contribute to it, by combining property, knowledge or activities and to share its profit. The partnership agreement is governed by PARTNERSHIP ACT OF 1890.

This is a business owned by a minimum of two people to a maximum of twenty people, but in case of partnership in the banking sector it’s a minimum of two people to a maximum of ten people.

Formation of Partnership

This requires a voluntary association of people who jointly owns a business and intends to conduct a business for profit. These persons can form a partnership agreement orally or written agreement, i will advise that if you must enter into a partnership agreement the terms which include the contribution, profit, and loss be written and duly executed. The agreement is referred to as PARTNERSHIP AGREEMENT. Once an agreement is reached and drafted between partners it becomes enforceable in civil law

Notably, an unregistered partnership does not remove rights incidental to the partnership, this was the Appeal court decision in THOMOPULUS & ORS V. MANDILAS the appellant claimed the plaintiff was a dismissed employee and denied the existence of partnership, On appeal it was contended by the appellant that if there was a partnership it was an illegal partnership for non-compliance with the provisions of the Registration of Business name ordinance.

ADVANTAGES OF PARTNERSHIP

This creates the advantage of having a wider pool of knowledge, skill, resources, business contacts, sufficient resources to move the business forward, risk and liabilities in case of loss the partners will have joint and several liabilities, expansion of business will be easier, sharing of responsibilities and many others.

LIABILITIES OF PARTNERS

Liabilities of partners is only limited to the terms agreed on Section 5 of the Partnership Act 1890 state that the liability of a partner does not apply where there has been representation limiting the scope of authority of partner to the person claiming liability of the other partner. In CHIEF NDOMA –EGBE V. ACB PLC(2005)7 SC(pt iii)@47-50 where there was a mandate to the bank that both partners shall sign bills and cheques and instructions in respect of the partnership account jointly, the bank cannot on instruction of only one partner tamper with the partnership account.

The profit, loss and liabilities in partnership are shared among partners.

Partnership is not done based on trust contact a lawyer today.

Thank you.

Oyenike Aalliyu-Adebiyi LLB(hons)BL