Partnership agreements needs to be thorough


I was recently interviewed by Law Times regarding a case about partnership buy-in agreements, which, in my view, should contain all material terms, particularly regarding payments the new partners are to make to the firm.

In the case, Djurdjevac v. Deacon Spears, Toronto law firm Deacon Spears Fedson & Montizambert LLP had agreed with lawyer Marko Djurdjevac that he would contribute $25,000 annually upon joining the partnership. Djurdjevac, who had also completed his articling at the firm, was to make payment for five consecutive years after becoming partner. However, after two years, he decided to leave the firm.

Justice David Corbett, in the recent Superior Court of Ontario decision, found that Djurdjevac was not obligated to continue the payments after he had left the firm. 

This was no surprise to me. The burden should be on the law firm to include all material terms in the partnership agreement. These partnership agreements are obligatory and if the partnership wants to deal with something in a specific way, the partners should do so. When you are invited to become partner, there is not normally any negotiation over what the partnership agreement will contain.

In my view, if Deacon Spears expected Djurdjevac to make all the payments over that five-year term, regardless whether he left the firm, it should have included a provision in the agreement regarding what would occur in the event that he would leave the firm prior to the expiration of that term.  It is common for lawyers and partners to switch firms so this should not have been an unexpected issue.


Topics:  Canada, Partnership Agreements, Partnerships

Published In: Business Organization Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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