PARTNERSHIPS

THE TERM PARTNERSHIP

Various meanings ascribed to term

Legally: refers to legal relationship arising from an agreement between at
least two person in terms of which each contributes towards a business
carried on in common with the object of obtaining mutual material benefit.
Wide variety exists

GENERAL FEATURES

Number of partners
Object of partnership
Associative element
No legal personality
Informal formation

HISTORICAL BACKGROUND

One of the oldest business forms-traced back to Romans, Greeks, Babylonian

civilizations.
Why highlight partnership in the context of company/corporations law?
o Basis for many developments of main principles of entrepreneurial law

SOURCES OF LAW

Legislation
o SA does not have a Partnership Act
o Legislation which has bearing on partnerships does however exist
Common law
o Non statutory law applicable in SA
o Based mainly on Roman-Dutch law
o Various influential Roman-Dutch writers
Views of Pothier Traite du Contrat de Societe

LEGAL NATURE OF PARTNERSHIP

Internationally there are different views

Entity theory vs Aggregate theory
o SA Aggregate theory applied
Partnership dissolves whenever composition of membership
changes
Not a separate juristic person
o Not applied consistently
Litigation (Rules of Court)
Sequestration (Insolvency Act 24 of 1936)

TYPES OF PARTNERSHIPS

Universal partnerships
o Partnership of all property
o Partnership of all profit

Extraordinary partnerships
o Silent partner
o Partnership en commandite

PARTNERSHIP AGREEMENT

Partnership established when partnership agreement is concluded

Agreement must comply with general requirements for a contract:
o Contractual capacity
o Agreement
o Lawfulness
o Performance possible
o Formalities complied with

ESSENTIALIA
Essential elements of partnership agreement (essentialia)

Contribution
Profit as object
Business to be carried on for joint benefit
Patrimonial gain for each

NATURALIA

Proportion in which profit is shared

Proportion in which losses are shared
Powers of representation
Contribution to partnership
Co-ownership /Partnership fund
Restricted usage
Fiduciary duty relationship of utmost good faith
Must comply with duties ito partnership agreement

Must further interest of partnership unselfishly

Must disclose to partner/s all information pertaining to the partnership
Contribution & compensation for contribution
Automatically entitled to proportional refund for expenses personally incurred
Division of partnership assets
Management of the partnership
Access to management information
Rendering of accounts
Duty to take reasonable care

THE ENFORCEMENT OF RIGHTS

Actio
o
Actio
o

pro socio
General partnership action
communi dividundo
Effects physical division of things held in joint ownership

EXTERNAL RELATIONS:
CONTRACTUAL LIABILITY

General principles:
1. Agreement must be valid
o
o
o
o
o

Contractual capacity
Agreement
Lawfulness
Performance possible
Formalities complied with

2. Representative must be authorized

o
o
o
o

Express, implied or tacit authority

The principle of mutual mandate
The doctrine of estoppel
Ratification

3. Agreement must be concluded in name or on behalf of partnership

DELICTUAL LIABILITY

Vicarious liability
o Partnership can incur liability vicariously
o Delicts committed by co-partner whilst acting within scope of authority
or partnership business - based on the relationship existing between
them
o Capacity and independence determine liability

CRIMINAL LIABILITY

Partnership is not a legal entity and therefore cannot commit a crime

Partner committing a crime personally liable
Certain exceptions exist where partners will also incur liability
Section 332(7) of Criminal Procedure Act 51 of 1977

LITIGATION

Instituting action against a partnership used to be a cumbersome process

Rules of Court now allows plaintiff who sues a partnership not to name all the
partners
Can also serve a notice requiring full names, places of residence of each
person who is a partner

LIABILITY OF PARTNERS

Action must be brought by all the partners jointly

After dissolution of partnership position changes
Rules may be altered by agreement