ACT Need more understanding of AUS laws re: partnership agreements

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Reiner Betaa

10 August 2018
Hi there,

I need more information with regards to a partnership agreement that I signed with an Australian last year. As I am an US citizen, I am not familiar with the AUS law.

The summary version is this: we signed a written agreement stating that we would both have 40% equity in a company. He is now completely dishonoring the agreement, and is in breach of contract, claiming that because it is a sole proprietorship in his name, it is impossible for someone else to have 40% equity. HOWEVER, even if it is true that I cannot have equity in the company as a partner, the agreement specifically states that we do 40% net profit-sharing.

So my two questions;

1. It is true that it is impossible for him to assign me a legal stake in the company through a signed agreement? (if so, he was either ignorant or deceptive)
2. Even if the above is true (which I do not think it is), can he simply blow off the very specific language in the document about 40% net-profit sharing?

He is now completely ignoring the agreement and states that I have literally no claims to anything, and that the agreement simply does not matter now at all. It is as if we never signed an agreement at all.

I know in the states that this agreement is legally binding in a court of law and anything else that happens outside of that agreement is null and void. Further, anything else that happens must be re-negotiated with a new signed agreement. I completely assume this is the case in AUS as well, but I really need to confirm that this is true. Because the guy is either really ignorant, or I just do not get Australian law.

Also, in the preamble it is stated explicitly that the agreement is legally binding in both the US and AUS. But I do understand that AUS and US are both members of the Hague convention whereby any litigation happening in either country is some what legally binding in the other...

Please, any help would be greatly appreciated to know of the law in AUS with regard to these matters.

Thank you so much everyone.

Rob Legat - SBPL

LawTap Verified
16 February 2017
Gold Coast, Queensland
First, anyone who could comment would need to know exactly what 'animal' you're dealing with. I understand the lexicon may be somewhat garbled between the US and Australia, but there are three concepts put forward in your post: sole proprietor, partnership and company. Each is different. In very basic terms:

Sole proprietor - an individual carrying on a business in their own name, or under a business name. The sole proprietor wears sole liability in the event of an action against them.

Company - an incorporated entity, registered at law, having the status of being its own legal entity (i.e. it can sue and be sued in its own name, own property etc.). The company wears sole liability in the event of an action against it (in the majority of cases).

Partnership - a group of individuals or companies carrying on a business concern pursuant to a contractual agreement between them (a 'partnership agreement'). Whether a partnership exists will depend on the 'true contract and intention' of the partners based on an objective view of the relevant facts. The partners share liability amongst them in the event of action against them.

So the question is, what do you have here? I understand an LLC in the US is somewhat a hybrid of partnership and company, which could lead to the confusion. Here they are very different.

The legislation for companies is federally based. The legislation for partnerships is state based, but largely similar in scope. You'd also need to specify what state the partnership was set up in if this is what you're looking at.

As for the application across Australian and the US, that's a bit beyond me I'm afraid; but I would say that if the entity was put together in Australia and conducted business in and from Australia - then action will likely have to be taken in Australia.