Partnership Deed
harpreet singh
(Querist) 09 November 2010
This query is : Resolved
Hi Everyone,
I am entering into a partnership deed with my cousin brother (the only partner).
I want to add a clause in the deed which states that if any family member of the partners enters into the same line of business through their own floated company.Firstly they need a consent from both the partners before starting the same business. Secondly, they cannot do business with the clients of the existing partnership(current clients and past).
Please help me out in legal documentation of this clause, so that my interests in the partnership are fully protected. Also I want the maximum legal powers,if the above is not followed. I want to play safe since my cousin has a real elder brother and he (cousin) may help his elder brother about the confidential information about the existing clients due to which I can suffer losses in the future.
Regards
Harpreet Singh
Mob: 9891041492
s.subramanian
(Expert) 09 November 2010
The clause suggested by you even if incorporated in the partnership deed will not have any legal impact or force. Your partner cannot prevent any member of his family from starting a similar business.
R.Ramachandran
(Expert) 09 November 2010
Yes, I agree with Mr.Subramanian.
Raja
(Expert) 09 November 2010
if you want to apply such, then you need to sign the deed from the concerned persons with their annotation.
R.Ramachandran
(Expert) 09 November 2010
As a best precaution, why don't you include him also as a partner - in that way you will be able to completely eliminate the possibility of his doing any business in competition to you.
R.Ramachandran
(Expert) 09 November 2010
The suggestion by Mr. Raja is not legally tenable as it would amount to restraint.
pawan sharma
(Expert) 09 November 2010
Q I want to add a clause in the deed which states that if any family member of the partners enters into the same line of business through their own floated company.Firstly they need a consent from both the partners before starting the same business.
Q Secondly, they cannot do business with the clients of the existing partnership(current clients and past).
A(i) Not binding to them bcz the sec 27 of the contract declared its void.
"27. Agreement in restraint of trade, void
Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception 1 : Saving of agreement not to carry on business of which good will is sold - One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business."
A(ii) find as above.
Sathyan A.R.
(Expert) 09 November 2010
Such restrictive clauses are untenable in the face of law.
The partnershipdee should not contain such prohibitive clauses.
But you can by a differnt memorandan of NonDisclosure type agreemenst execute such restrictions in a differnt way.
A.R.Sathyan
harpreet singh
(Querist) 10 November 2010
Hi Everyone,
Thanks for replying.I got the point. Then please give your valuable suggestions what should be added in the deed to safeguard my interest or shall I execute another agreement (Non Disclosure) along with the deed.
Please suggest whether the following clauses are tenable in the face of law:
1. If any family member of the partners is doing or have done the business with the past and the existing clients of the partnership firm without any consent of the both the partners. This should be treated as the case of fraud and the suffering partner should be compensated adequately.
2. Incase of any dissolution of the partnership, the clients of the partnership should be divided equally among the partners based on the monetary business generated from the clients since inception.
If the above clauses are tenable, then please refine it in legal language.
Please share any other clause that can safeguard my concerns.
R.Ramachandran
(Expert) 10 November 2010
Dear Harpreet,
These clauses are not at all workable.
The family members do not need any consent from the partners to do whatever that they want to do. Fraud cannot be alleged on that ground. So even if such a clause is there in the partnership deed it is unworkable.
Similarly, it is also not possible to divide the clients between the partners. It is for the client to choose with whom he wants to do business.
Partnership is based on trust. If you have so much mistrust right at the beginning, any amount of safety clauses inbuilt into the partnership deed would be of no help.
I think that your main concern seems to be your cousin's elder brother. By no means you would be able to prove that either he gets or not gets help from his younger brother (who is your partner!).
ashish lal
(Expert) 10 November 2010
i think Harpreet wants to protect his own interest from his cousin with whom he is entering into partnership.He is afraid that in future his cousin could bypass the partnership with help of his relatives.
