A Partnership Agreement May Be Oral: What You Need to Know

When two or more individuals decide to form a business together, they typically enter into a partnership agreement. This agreement outlines the terms of the partnership, including the responsibilities and rights of each partner, the division of profits and losses, and the process for dissolving the partnership.

One thing that many people do not realize is that a partnership agreement may be oral. In other words, it can be verbal rather than written. While oral agreements are legal and binding, they do come with some risks.

The Benefits of Oral Partnership Agreements

One of the main benefits of an oral partnership agreement is simplicity. Without a written contract, partners are free to negotiate and agree upon the terms of the partnership in a more informal manner. This can make the process of forming a partnership quicker and more efficient.

Additionally, oral agreements can be useful in certain situations where a written contract may not be practical or feasible. For example, if partners are in different locations, it may be difficult to draft and sign a written agreement. An oral agreement can be made over the phone or in person, and the terms can be agreed upon instantly.

The Risks of Oral Partnership Agreements

While oral partnership agreements can be beneficial, they do come with some risks. The main risk is that it can be difficult to prove the terms of the agreement in court if a dispute arises. Without a written contract, partners may have different interpretations of the terms of the partnership or may forget certain details that were agreed upon orally.

This lack of clarity can lead to legal issues, including lawsuits and disputes. Additionally, if one partner dies or becomes incapacitated, an oral agreement may be difficult to enforce. The surviving partner may not have legal standing to continue the partnership or to claim their share of the profits.

Protecting Yourself and Your Partnership

If you choose to enter into an oral partnership agreement, it is important to take steps to protect yourself and your partnership. One option is to record the agreement in writing, even if it is not legally binding. This can help to clarify the terms of the partnership and can provide evidence in the event of a dispute.

Another option is to consult with a lawyer and to have a formal written contract drafted. While this may be more time-consuming and expensive than an oral agreement, it can provide greater legal protection and can help to prevent disputes from arising.

In conclusion, a partnership agreement may be oral, but it is important to understand the risks and to take steps to protect yourself and your partnership. If you have any doubts or concerns about your partnership agreement, it is always best to consult with a lawyer to ensure that your rights and interests are protected.