There are many reasons for which people enter into partnerships . A partnership could be set up for the execution of a particular project only, or it could be set up for some ongoing business . Partnerships in Nigeria are regulated by the Partnership Act of 1890 and the Partnership Law 1958 (Western Region).
What is a partnership ? Section 1 (1 ) of the Partnership Act states that a Partnership is the relation which subsists between persons carrying on a business in common with a view to making profit . Section 4 (1 ) says that persons who have entered into partnership with one another are collectively called a firm, and the name under which their business is carried on is called the firm- name. Each partner has the power to bind the firm for the purpose of the business of the partnership , unless the partner is not acting with the authority of the firm in that particular matter and the person dealing with the partner knows that the partner has no authority to deal in that matter and still goes ahead.
The courts in Nigeria have defined Partnership as a legally recognised organisation structure, an association of a business owned by two or more people who share the profits and are personally liable for all business debts . A partnership is a voluntary association or coming together of two or more persons who jointly own and carry on a business for profit . A joint venture akin to partnership is a business undertaking by two or more persons engaged in a single defined project. For instance, Mr A has a contract to supply goods to Company X . He does not have the money to execute the contract . He calls on his friend Mr B to join in the venture, give him some money and when the contract is performed , and monies paid , they will share the profit . Will this be considered a loan from Mr B to Mr A, or is this a partnership ? It will depend on their intentions and agreement , which will more easily be deciphered through a written agreement. The courts it seems make a distinction between a partnership and a joint venture, but the rules are pretty much the same .
Partnership agreements can be oral , written or implied by the conduct of the parties . It is always a good idea to put the partnership agreement in writing . Even between a husband and wife going into partnership in business , it is a good idea to put the details into a written document. There are instances where you hear someone say of a woman , “ She helped her husband build his company. ” The question is , in what capacity was she “ helping”? Was she helping as a partner in the legal sense , or just doing her bit as a dutiful wife ? When all is well , this question may never arise. But if , as a result of the business or some other reasons the marriage packs up , the answer to the question becomes important and if there is no written agreement , an arbiter will have to wade into all sorts of extrinsic facts and evidence to come up with an answer .
A written agreement will state how the parties are to conduct the business and address issues such as profit and loss sharing , capital contributions , etc . Where there is a written agreement, it makes the work of the arbiter easier should a dispute arise. It is settled law that parties are bound by the contracts that they voluntarily enter into and must keep to the terms and conditions contained in the contract . Neither party to the contract can unilaterally alter the agreement or read into it a term that is not contained in it . If a dispute arises and the matter gets to court or before some other arbiter, the terms of the agreement, freely entered into by the parties, will be treated as sacrosanct . We all enjoy a freedom to contract on the terms that please us as far as those terms are lawful and we have the legal capacity to contract . Faced with a written agreement , the courts will not attempt to rewrite the terms of a written agreement . The courts will look only within the written agreement for assistance in interpreting its terms . Unless one of the parties can show that he entered into the agreement under coercion , duress , undue influence, mistake or misrepresentation , he cannot resile from an agreement freely entered into .
The fact that business partners are married does not in any way disadvantage the fact that a partnership can be implied by the way and manner they carry on their business. The law recognises family partnership . What is important is that the elements of a partnership are present – (a ) an express or implied agreement; (b) a common purpose ; (c) shared profit and losses ; and (d) equal voice in controlling the project.
Every partner is jointly and severally liable with his co- partner for everything for all debts and obligations of the firm incurred while he is a partner. Even after death , the estate of a partner is severally liable for such debts and obligations . It is important therefore that you go into partnership with someone whose credibility you can vouch for .
Another good reason to have a written agreement defining the partnership is to avoid certain presumptions as to the interests and duties of partners . For instance, without an agreement stating otherwise , all partners are entitled to share equally in the capital and profits of the business and must contribute equally towards the losses whether of capital or otherwise sustained by the firm. To avoid this , the agreement could state that profits and losses will be shared in the same ratio as the amount of capital which each partner put into the business.
As we know, even some good things must come to an end. The law provides for the ways in which a partnership may be dissolved . A partnership comes to an end if it was entered into for a fixed term/ purpose by the expiration of that term or conclusion of the purpose . If it was entered into for an undefined time, any partner can give notice to the other (s ) of his intention to dissolve the partnership . In that case , the dissolution is effective from the date mentioned in the notice and if no date is mentioned, then from the date of the communication of the notice . Subject to any contrary agreement , a partnership is dissolved on the bankruptcy or death of one of the partners . Any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership will act to dissolve the partnership . A partnership may also be dissolved by an order of the court.