Also known as: partnership agreements · articles of partnership · partnership contract
Written by attorneys · grounded in primary & secondary sources — see below
A contract defining the partners' rights and duties toward one another. The agreement allocates profit shares, management powers, and withdrawal conditions among the partners. It displaces default statutory rules to the extent the partners have addressed a matter.
Perry Pratt and Portia Price formed a partnership to run a five-year environmental study under a written agreement that barred any partner from withdrawing before completion. Perry sent a letter announcing immediate withdrawal to accept another job. The remaining partner sued for damages caused by the early exit.
Pearl Porter and Pamela Phillips formed a limited partnership to develop condos. The agreement entitled Pearl to quarterly distributions from rental income. When Pamela withheld the payments, Pearl filed a direct action seeking an accounting and enforcement of the distribution rights.
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Pierce Patterson and Philip Powell operated a general partnership that later registered as a limited liability partnership. The original agreement had imposed personal liability on each partner for certain obligations. After registration, a creditor sought to hold Pierce personally liable under the old clause.
Four physicians formed a partnership that later incorporated. The agreement required continued salary payments to each founder who remained active. When one founder was voted out as an officer and director without cause, he sued the others for breaching the salary term.
Two brothers contributed equal capital to a linen supply business under an oral understanding that the venture would continue until the debt to one brother's company was repaid. When one brother sought immediate dissolution, the court examined whether the agreement created a partnership for a term.
Majority shareholders in a close corporation that began as a partnership redeemed the founder's shares at a low price without offering the same opportunity to the minority holder. The minority holder sued, claiming the redemption violated the fiduciary duties embedded in the original partnership agreement.
Dissociation is wrongful if it breaches an express provision of the agreement. The withdrawing partner then faces liability for damages caused to the partnership and remaining partners.
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Yes. A partner may bring a direct action against another partner or the partnership to enforce rights under the agreement, provided the injury is not solely to the entity itself.
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Yes. Once the partnership becomes an LLP, partners enjoy limited liability for obligations incurred while the registration is in effect, regardless of contrary provisions in the prior agreement.
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The agreement can establish baseline expectations, but courts may impose additional fiduciary duties of utmost good faith when one group freezes out another, especially regarding salary, redemption, or control rights.
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…compensation” appears easier than the proof which would establish bad faith or plain abuse of discretion. [^maj-15]: The partnership agreement may control the amount and timing of distribution in a way which is disadvantageous to the retiring partner. [^maj-16]: We do not limit our holding to majority stockholders. In the close…