Partnership Agreement Template (Canada)

Joint liability for debts, joint and several liability for wrongs — the two aren't the same

Under section 10 of Ontario's Partnerships Act, R.S.O. 1990, c. P.5, each partner is liable jointly with the other partners for the debts and obligations the firm incurs while they are a partner — a creditor pursuing the firm's contract debts is, in strict legal theory, pursuing all the partners together. Liability for a partner's wrongful act or omission in the ordinary course of the firm's business is different: sections 11 and 13 make that liability joint and several, so a person harmed by a partner's negligence or breach of duty can sue any one partner for the whole loss. This template states the position plainly, rather than leaving partners to discover it only when a creditor or claimant comes looking. Every other common-law province has its own, near-identically worded Partnerships Act, so the same joint/joint-and-several split applies whichever one governs the partnership.

A 50/50 split needs a deadlock clause, or the partnership has no tie-breaker

When two partners each hold half the vote, any decision requiring both partners' consent can simply stall if they disagree — there's no third vote to break the tie, and the Partnerships Act's own default rules don't supply one either. A 50/50 agreement without a deadlock mechanism is, in practice, betting that the partners will never seriously disagree about anything requiring joint approval. This template's equal-split option includes a deadlock ladder: a set period to meet and resolve the disagreement directly, then mediation, then a buy-sell option at a fair value fixed by an independent appraiser if mediation doesn't work — so there's an actual path forward instead of an indefinite stall.

In a majority-minority split, the minority partner needs protection, not just a smaller number

Giving one partner day-to-day control (common and often sensible in a 70/30 or similar split) shouldn't mean the minority partner has no rights beyond a defined profit share. This template's majority-minority option adds an information right (access to the partnership's books and records on reasonable notice), a requirement that the majority partner disclose and get consent for transactions where they have a personal interest, and a right of first refusal if the majority partner wants to sell their interest to a third party — protection a 70/30 agreement needs and a generic template usually doesn't have at all.

Quebec is different — this is a common-law document

This template is drafted for a general partnership governed by a common-law province's Partnerships Act. Quebec is a civil-law jurisdiction, and its equivalent structure — the société en nom collectif — is governed instead by the Civil Code of Québec. Under article 2221 CCQ, Quebec partners are solidarily (the civil-law equivalent of joint and several) liable to third parties for obligations contracted for the partnership's business, but a creditor must generally exhaust the partnership's own property before pursuing a partner's personal property — a distinct feature (the "benefit of discussion") that doesn't exist in this template's common-law liability model. If the partnership is formed or carries on business in Quebec, use a contract drafted for a société en nom collectif under the Civil Code instead of this one.

The clauses, explained

Ownership split

Equal 50/50, majority-minority, or a custom percentage — selected above the document, driving the management and protection clauses that follow.

Liability of Partners

States the Partnerships Act position plainly: joint liability for the firm's debts and contracts, joint and several liability for a partner's wrongful acts — the distinction most partnership templates leave unsaid entirely.

Management

In an equal split, both partners have equal management authority. In a majority-minority split, the majority partner has day-to-day control, subject to the minority partner's protections below.

Deadlock (equal split)

A defined path when the partners can't agree on a matter requiring joint consent: a direct-meeting period, then mediation, then a buy-sell option — rather than an indefinite stall.

Minority Partner Protections (majority-minority split)

Information rights, a consent requirement for the majority partner's self-dealing, and a right of first refusal if the majority partner wants to sell — protection a minority partner actually needs.

Indemnity

Each partner indemnifies the partnership and the other partner against losses caused by their own negligence, breach, or misconduct — on top of, not instead of, the firm's own duty under the Partnerships Act to indemnify a partner for payments properly made in the ordinary conduct of its business.

Restrictive Covenant (Non-Competition)

A restriction with a defined duration and a stated geographic and activity scope. The Supreme Court of Canada's decision in Shafron v. KRG Insurance Brokers (Western) Inc. holds that an ambiguous restrictive covenant is never reasonable and generally cannot be rescued by a court narrowing its scope after the fact, so this template asks for specific, unambiguous terms rather than an open-ended blank.

Requirements checklist

Every common-law province's Partnerships Act supplies default rules for a general partnership, whether or not the partners ever write anything down — this agreement exists to replace those defaults with terms the partners actually chose.

• Partners are liable jointly for the firm's debts, jointly and severally for wrongful acts

  Section 10 of Ontario's Partnerships Act makes each partner liable jointly with the other partners for debts and obligations the firm incurs while they are a partner. Sections 11 and 13, read together, make that liability joint and several for loss caused by a partner's wrongful act or omission in the ordinary course of the firm's business. The other common-law provinces' Partnerships Acts follow the same structure.

  Partnerships Act, R.S.O. 1990, c. P.5, ss. 10-13

• Profits and losses default to equal shares unless the partners agree otherwise

  Section 24 of Ontario's Partnerships Act entitles all partners to share equally in the capital and profits of the business and requires them to contribute equally to losses, regardless of how much capital each contributed — unless the partners have agreed a different split, which is exactly what this agreement's ownership-split selector records.

  Partnerships Act, R.S.O. 1990, c. P.5, s. 24

• An ambiguous restrictive covenant is not reasonable and generally cannot be fixed by a court

  The Supreme Court of Canada held that notional severance is not an available remedy for an unreasonable or ambiguous restrictive covenant, and that blue-pencil severance is available only in rare cases where the offending words are trivial and not part of the covenant's main purpose. Drafting the geographic area, duration, and restricted activity specifically at the outset avoids the risk entirely.

  Shafron v. KRG Insurance Brokers (Western) Inc., 2009 SCC 6

How to use this template

1. Confirm the partnership isn't in Quebec. This template is for a general partnership governed by a common-law province's Partnerships Act. A Quebec société en nom collectif is governed by the Civil Code of Québec instead and needs a different document.
2. Choose the ownership split. Select equal 50/50, majority-minority, or custom — this determines whether the deadlock clause or the minority-protection clauses appear.
3. Fill in the partners and the partnership. Type each partner's name and address, the partnership's name, and its business purpose into the highlighted blanks.
4. Set contributions and the consent threshold. Fill in each partner's capital contribution and the amount above which incurring debt requires both partners' written consent.
5. Complete the deadlock or minority-protection fields. For an equal split, fill in the meeting and mediation periods. For a majority-minority split, confirm the information-rights and right-of-first-refusal terms.
6. Set the restrictive covenant scope and sign. Fill in a specific duration, geographic area, and type of competing activity — an ambiguous or open-ended restriction is unlikely to be enforced — then both partners sign before downloading.

Frequently asked questions