Legal Updates

In the absence of an agreement on the terms of the partnership one cannot in retrospect set that a partnership existed

April 24, 2022

The owner of an investigation office and a security company cooperated in a project for a third party but after the initial pilot period only the security company owner continued the project.

The Court held that there was no partnership between the parties but a mere cooperation within a business relationship and therefore the owner of investigations office is not entitled to profits of the project. Partnerships are defined as relationships between people who run a business together to make a profit. The law does not stipulate what a partnership may look like, and these can take various forms, with no obligation to register a partnership or put it into writing. However, it is not enough to divide profits between parties to a transaction in order to necessarily indicate the existence of a partnership. In order to determine that a partnership existed in a particular case, a set of circumstances and data must be reviewed, such as the existence of a written partnership agreement, the parties’ intent, the definition of the joint business, the parties' investment in the business, its actual management, participation in business profits and liability for losses. Here, no written document has ever been signed between the parties indicating a partnership and there is a difficulty in clearly define the business in which, according to the owner of the investigation office, the partnership relationship took place. The project was actually managed only by the owner of the security company who was also solely responsible for communication with the third party, and the parties were never able to reach an agreement regarding the distribution of profits in the project, deduction of expenses and joint responsibility for losses. In light of this, it is difficult to see the parties' experience of joint business activity as a partnership and the hwner of the investigation office has no rights in the project.