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Partnership Disputes:

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In New South Wales, the law of partnership is governed by the main legislative instrument, being the Partnership Act  1892 (NSW), as well as other relevant statutory provisions which may affect the relationship and business of partners in a business, and of course, the principles laid down by the common law. Partnerships are formed by two or more persons who feel that this structure is the fairest manner of conducting some business interest. Generally speaking, the partnership is defined in the following broad terms (and these are universally applicable concepts across the other state of Australia):

  • There is a valid agreement between the parties to a partnership. The agreement will be interpreted as a contract, and the principles of contract formation and interpretation will apply here. There will need to be a “meeting of the minds” between the parties, which means they must both understand the bargain they are entering, there will have to be consideration and some benefit. The rules relating to the interpretation of contractual provisions will apply, such as contra preferentum, and the principles relating to breach and termination will also apply.
  • The agreement is to carry on some defined type of business. It is important to point out that if the purported partnership has been established only for one transactions or one project, that business relationship may actually constitute a joint venture, not a partnership, and the rights and liabilities of the parties may be different.
  • The activities of the business must be in common. This means that both partners must work together, according to the terms of the partnership, for the common business purpose. If this criterion is not satisfied, then the purported partnership agreement may be something altogether different.
  • The prospective partners must intend that the business agreement is intended for some profit. Again, if this criteria is not met, the agreement may be construed as something other than a partnership. If there is no intention to make a profit, then the business association will need to be interpreted under the provisions of associations law.

Conflicts and disputes can arise in any of the above four characteristics of a partnership. Where a party to an agreement claims that one of these criteria is not met, they may be arguing that the principles relating to the laws of partnerships should not or do not apply. Detailed legal advice should be obtained from a partnerships solicitor before any steps are taken to either prosecute a claim or defend against an allegation. The partnerships lawyer will be able to peruse and investigate all the evidence and determine what the best strategy may be to tackle a problem. This applies to both a plaintiff or a defendant engaged in partnerships litigation.

Other disputes which may arise in a conflict between partners may include the following broad categories:

(a)   Disputed claims in gross returns generated out of partnership activity.

(b)   Disputes relating to the sharing of profits between partners.

(c)    Disputes concerning the sharing of losses.

(d)   The rights and liabilities of partners, the exercise of those rights and claims against those liabilities.

Legal advice may need to be obtained from a partnerships solicitor in relation to the risks and benefits that a person may assume when entering into a partnership. Likewise a partnership lawyer will be able to advice on the manner in which a partnership agreement can be terminated. A litigator who has had experience in both civil and commercial litigation will be able to consider the partnership legal dispute from a wider perspective and provide the necessary legal guidance that a potential litigant may need.

If you require assistance with a partnership litigation dispute you may wish to contact our firm by telephone on (02) 9233 4048 or send an email to info@navado.com.au and make an appointment to see one of our solicitors. 

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