Related Expertise
- Account collection
- Addition or departure of shareholders
- Bankruptcy and Restructuring
- Buy-Sell Agreement
- Change in the legal form of a company
- Commercial litigation (shareholders, employees or others)
- Company Book
- Consignment Contract
- Contract of partnership
- Convertible debenture
- Corporate reorganization and restructuring
- Corporate resolutions
- Creation of a subsidiary
- Director’s liability
- Drafting of articles of constitution
- Franchising
- Governance and Internal Management
- Implementation of a Tax Memo
- Intellectual Property
- Joint Venture Agreement
- Legal Publicity of Enterprises
- Management Company
- Planning and Tax Litigation
- Preparation and review of commercial leases
- Securities and access to public markets
- Share subscription agreement
- Shareholders Agreement
- Starting a business
- Strategic Partnership
- Taxation and tax litigation
- Term Sheet
- The Letter of Intent of the Offer to Purchase
- Trusts (estate and asset protection)
- Unfair competition, Duty of loyalty
The contract of partnership is a legal agreement that governs the relationship between individuals, referred to as partners, who decide to associate in order to carry on a common activity or business. This type of contract is typically concluded for general partnerships, although it may also apply in the context of limited partnerships. In the case of business corporations, however, it is generally the shareholder agreement that regulates the relationship between shareholders, rather than a partnership contract.
Several essential legal elements characterize contracts of partnership and distinguish them from other types of contractual or corporate arrangements. The first paragraph of section 2186 of the Civil Code of Québec reads as follows:
A contract of partnership is a contract by which the parties, in a spirit of cooperation, agree to carry on an activity, including the operation of an enterprise, to contribute thereto by combining property, knowledge or activities and to share among themselves any resulting pecuniary profits.
Thus, the presence of a common goal pursued by the partners, the intention to contribute by combining property, knowledge or activities and profit-sharing are the essential elements of a contract of partnership.
Understanding Partnership Contracts: Key Elements and Considerations
It is interesting to note that, despite its importance in commercial law, the contract of partnership may be formed verbally. A verbal agreement between parties can, in theory, be legally valid and enforceable in certain circumstances¹. However, relying on an unwritten agreement can lead to a number of complications. For example, it may become exceedingly difficult to establish the original intention of the partners, the scope of the contributions, or even the existence of the contract itself in the event of a disagreement or legal dispute.
The Importance of a Written Partnership Agreement
Moreover, specific legal frameworks sometimes require that a contract of partnership be reduced to writing. In particular, section 187.15 of the Professional Code requires members of a professional order who wish to form a limited liability partnership to so stipulate expressly in a written agreement. Moreover, if they want this partnership to cease to be a limited liability one, they must also specify it expressly in writing.
Structuring Your Business with a Partnership Contract
The contract of partnership plays a key role in the organization and structure of a business. Notably, the partnership itself is formed at the time the contract is concluded, unless another effective date is expressly indicated in the agreement². A duly drafted contract of partnership is an important tool for starting a successful business. This contract may also provide for solutions in the event of a disagreement between the partners. It is therefore important to draft a comprehensive contract that will address several contingencies.
Bernier Fournier: Your Partner in Drafting Partnership Agreements
Bernier Fournier is there to support you in the process of drafting a contract of partnership. Thus, if you are wondering whether drafting a contract of partnership is necessary in the context of the formation of your business, or if you simply want to ensure your agreement is well-structured and compliant, Bernier Fournier can assist you at every step of the way to ensure legal clarity and peace of mind.
¹Civil Code of Québec, s. 1385 and 2186.
² Id., s. 2187.