Partnership: joint liability of partnerships

A Court of Appeal decision provides a warning to owners of businesses that trade as a partnership. The court held that a partner was jointly and severally liable to a third party for the breach of fiduciary duty of another partner (L). This was the case even though L’s breach of duty occurred after L had resigned from the partnership.

In this instance, the innocent partner was not exonerated from liability arising from acts that were sufficiently closely connected with the acts that the defaulting partner had been authorised to do, as they were regarded as being done in the ordinary course of the partnership’s business.

The partners were also held to be jointly and severally liable for the claimant’s costs in pursuing the claim and appeal, subject to a 50% reduction to reflect the fact that the claim in negligence had failed.

Partnership Agreement

Cases like this demonstrate the complexities of business partnerships and the risks for the unwary. Joint and several liability is a concept which is crucial to understand. When setting up a business partnership outside of a limited company structure, it is extremely important to have a comprehensive partnership agreement in place. We draft and advise on partnership agreements so would be happy to assist.

Partnership dissolution or dispute

Unfortunately, many partnerships do not end on good terms or with a clean exit. Dissolving a partnership and/or dealing with disputes between partners are 2 areas we can also assist with and we have experience of the likely best options and tactics for a partner involved in a dispute to get the best available outcome.

If you need solicitors for partnership law advice, need a partnership agreement drafted or have problems with a business partner or partners, please do get in contact with us.

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