Partnership Agreement

Partnership Agreement: collaboration on written terms

Partnerships let two businesses combine strengths and go after work neither could win alone. What they also do, without a written agreement, is create a lot of assumptions about who owns what, who leads, and who gets paid.

A Partnership Agreement (PA) puts responsibilities, goals, costs and assets on paper. Because partnerships take different shapes, a good PA is built to flex across the main ones rather than assuming a single model.

Four ways partnerships usually work

A flexible PA typically covers four scenarios. One party takes the role of Partner, the other Party 1.

Option 1: joint marketing

Both parties work together on a marketing campaign, pooling resources and creativity and drawing on each other's strengths. If one party then wins a contract with a prospective client, they can bring the other in through a Back-to-Back Agreement, though the winning party is not obliged to, if it has reasonable justification.

Option 2: mutual referral

Each party promises to introduce the other to prospective clients. Where an introduction leads to a contract or statement of work, the introducing party is paid commission.

Options 3 and 4: prime contractor

These two are the same shape, differing only in who holds the customer relationship. In Option 3, the Partner has the direct commercial relationship with the customer; in Option 4, Party 1 does.

Both follow on from the win/lose outcome of Option 1. The winning party becomes the primary contractor and signs the new contract with the customer, then shares responsibilities with the other party through a Back-to-Back Agreement, acting as project manager. The customer pays the winning party under the new contract; the winning party pays the other under the BTB.

Both parties commit to commercially reasonable endeavours, due care, skill and ability in helping the other meet its obligations to the customer.

Who needs one

MSPs and ISVs bidding jointly for work neither could deliver alone
Complementary technology suppliers running co-marketing campaigns
Consultancies teaming up on larger programmes
Anyone about to answer a tender with a partner's name on it

The clauses that matter most

1. The party relationship

The point of the PA is a relationship that is genuinely mutual. Both parties use commercially reasonable endeavours to fulfil obligations to the other; for example, if one needs access to customer sites, the other works to get them in and provide a suitable working environment.

Both cooperate on all matters relating to the project, whether that is delivering services to a customer or complying with a statement of work. The PA does not prevent either party from pursuing other business independently.

Jurisdiction note: do not create a partnership by accident

"Partnership" here means a commercial collaboration. It does not mean a legal partnership, and that distinction has to be stated expressly, because in all three jurisdictions a partnership can arise from conduct without anyone intending it.

UK: Section 1 of the Partnership Act 1890 defines partnership as persons carrying on a business in common with a view of profit. If that description fits, partnership follows regardless of what you called the document, bringing joint and several liability for each other's debts.

US: State law based on the Revised Uniform Partnership Act reaches the same result: sharing profits creates a presumption of partnership. General partners are jointly and severally liable.

Canada: Provincial Partnerships Acts follow the same 1890 formula, with the same joint and several liability consequence.

The fix is straightforward: include an express clause stating that nothing in the agreement creates a partnership, joint venture, agency or employment relationship, that neither party can bind the other, and that the parties are not sharing profits as such. Then make sure the commercial arrangement (separate invoicing, separate customer contracts, fees rather than profit shares) actually matches that.

Jurisdiction note: competitors collaborating

Where the two parties compete, a collaboration agreement attracts competition law scrutiny in all three jurisdictions: the Competition Act 1998 (Chapter I) in the UK, the Sherman Act in the US, and the Competition Act in Canada. Joint bidding, market or customer allocation, and information sharing about pricing are the sensitive areas. Legitimate teaming to deliver something neither party could deliver alone is generally fine; agreeing not to compete for each other's customers is not.

2. Payment

Fees do not live in the PA. They sit in the Back-to-Back Agreement, the relevant statement of work, or the new customer contract.

The PA still sets basic payment terms: 30 days from invoice date, with interest added at a rate the parties agree on for anything unpaid after that.

Jurisdiction note: interest

UK: 30 days matches the Prompt Payment Code; the statutory fallback is 8% above the Bank of England base rate.

US: Contractual, subject to state usury caps.

Canada: State the rate annually, or s.4 of the Interest Act caps it at 5% per annum.

3. Intellectual property

Each party owns all rights to its own intellectual property, whether created before or during the engagement. Where one party needs to use the other's IP, a licence is granted for the term of the project only.

4. Liability

Neither party can be liable for the other's loss of profit, revenue, goodwill or anticipated savings. Some liabilities cannot be limited at all: death or personal injury from negligence, fraud, bribery, third-party IP infringement.

There is an option to set a financial cap, and it should be set with reference to your insurance. Set it too low and a court may refuse it, which leaves you with unlimited liability, the opposite of what you intended.

A party wanting to bring a claim must give notice of its intention within six months of the event.

5. Confidentiality

A partnership exposes each side to the other's strategy and know-how. A leak to a rival can cost you a market position. The PA carries confidentiality clauses similar to an NDA's, restricting use of confidential information to the purposes of the PA, and continuing for two years after termination.

6. Termination

If either party could terminate at will, the other could be left carrying a customer commitment alone. So the PA excludes termination for convenience.

You choose how long a material or payment breach can go unremedied before the other party can terminate (14 to 30 days is the usual range) and the notice period to end the PA, commonly one to three months.

One important point: terminating the PA does not terminate the statements of work, Back-to-Back Agreements or customer contracts sitting underneath it. Those have their own exits.

Frequently asked questions

Is this the same as a legal partnership? No, and the agreement should say so expressly. A legal partnership can arise from conduct under the Partnership Act 1890 in the UK, state RUPA statutes in the US, or provincial Partnerships Acts in Canada, bringing joint and several liability with it. Include a clause disclaiming partnership, joint venture, agency and employment, and make sure the commercial reality matches.

Who owns work created jointly? Each party keeps its own IP, with a licence to the other for the life of the project. If genuinely joint IP is expected, deal with it explicitly.

Do we need a separate Back-to-Back Agreement? If one party becomes prime contractor and subcontracts to the other, yes. The PA sets the relationship; the BTB flows down the obligations.

Can we still work with each other's competitors? Yes, unless you agree otherwise. The PA does not stop either party from carrying on other business.

How Cloud Contracts 365 helps

Cloud Contracts 365 builds a Partnership Agreement from a guided questionnaire, so you choose the model you are actually running rather than adapting a template built for a different one. Every partnership, its statements of work and any Back-to-Back Agreements sit together, with notice periods and renewal dates tracked.