“… the conviction that a partnership will last forever in sickness or in health, for richer or poorer, may fade quickly …”

As is well known, under certain Middle Eastern legal systems a husband can divorce his wife by uttering, “I divorce thee” three times in her presence.

In contrast, in a partnership at will a great deal of breath can be saved, as “I hereby dissolve the firm” only has to be uttered once in order to bring about a dissolution.  (Unless, which is quite rare, the partnership at will is governed by a deed, in which case there is legal uncertainty as to whether the notice should be in writing, so a short written notice of dissolution is advisable.)

The ability of a partner, who wants to leave a practice, to threaten to dissolve the firm (and, if not satisfied with what he is offered, actually to dissolve it) is an unnecessary risk for any practice to bear.  Being a partnership at will offers no advantages whatsoever.

I see a steady flow of clients who went into partnership thinking either (a) “We’ll organise a deed later, when time permits”, or (b) “People shouldn’t be in partnership if they need a partnership deed.”

Under (a), either the partners find, when they come to draft a deed, that they cannot agree terms, so they fall out, or they fall out about something else long before they even begin to consider the terms of their partnership.

Under (b), like the first bloom of love that goes hand in hand with not having a pre-nuptial agreement, the conviction that a partnership will last forever in sickness or in health, for richer or poorer, may fade quickly.

I intend to develop the difficulties that can emerge in this situation, and possible ways of dealing with them, in future posts.

In the meantime, I can conclude this post by saying that all partnerships without a partnership deed should get one right away, though I would also caution that this needs to be done after building consensus within the practice, as one does not want to bring about dissolution in the course of attempting to prevent dissolution.  If there is any existing tension in the firm then you will need to consider whether now is the right time to raise the subject of a deed.

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