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Strange But True: Partnership Agreements Need Not Be Written


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2/2/2016
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At the outset, let's be perfectly clear:

There definitely are several categories of agreements that must be reduced to writing in order to be enforceable under New York law, such as contracts for services that cannot be completed within one year, or, in most contexts, contracts pertaining to real estate. (For more on this topic, you may wish to download the free guide to NY breach of contract cases, "When You Don't Have a Written Agreement").

HOWEVER, contrary to popular belief, a partnership isn't one of them;

In fact, New York's courts have explicitly held that partnership agreements may be oral.

Why Partnership Agreements Need Not Be Written

As a New York County trial court noted in Vilkelis v. Holmes:

"Whether a partnership status is enjoyed turns on various factors, including sharing in profits and losses, exercising joint control over the business and making a capital investment and possessing an ownership interest in the partnership. M.I.F. Securities Co. v. R.C. Stamm & Co., 94 AD2d 211, 214 (1st Dept 1983). A partnership agreement may be oral. Missan v. Schoenfeld, 95 AD2d 198, 208 (1st Dept 1983) ...  

An oral agreement to form a partnership for an indefinite period creates a partnership at will and is not barred by the statute of frauds. Prince v. O'Brien, 234 AD2d 12 (1st Dept 1996)."

A Few Words of Caution

If you're in the position of trying to recover your fair share of an unwritten partnership that went bad, the above information - while welcome - isn't in and of itself cause for celebration. 

The reason is two-fold:

  1. "A party claiming the existence of an oral partnership bears the burden of proving the indica of such a relationship." F & K Supply, Inc. v. Willowbrook Development Co., 304 AD2d 918, 920 (3rd Dept 2003). In other words, as the plaintiff, you still have the burden of actually proving that a partnership existed (and absent a writing, it may be quite challenging to establish the terms that the parties had supposedly agreed upon); and,
  2. "Partnerships of will are subject to dissolution at any time by any partner." Sanley Co. v. Louis, 197 AD2d 412, 413 (1st Dept 1993). In other words, even if you had a partnership agreement, absent a writing memorializing how disputes were to be handled, any one retains the right to dissolve it at their respective whim.


Category: Breach of Fiduciary Duty

Jonathan Cooper
Non-Compete, Trade Secret and School Negligence Lawyer

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