Misuse of the word ‘partner’ in business

Lawyers often cringe when businesses refer to other businesses or people as a partner.

“Partner” in common parlance can refer to many different things. It might refer to another active shareholder in the business, another business they work closely with, a key subcontractor or supplier, another business that installs what they manufacture, or a reseller of their products.

At law, however, “partner” has a specific meaning. The Ontario Partnerships Act, for example, says “Partnership is the relation that subsists between persons carrying on a business in common with a view to profit…”

None of the examples above fit that description. In a true partnership, each partner alone can bind the partnership, and each partner is bound by the firm. Partnership also means shared risk and reward. For example, each partner is liable for the debts and obligations of the partnership. That liability is joint and several, meaning the partner’s liability is for the entire amount, even if the partner only has a small interest in the partnership.

Financial risk

That kind of relationship and risk is clearly not what most people have in mind when they refer to a partner. They would never intend to take on financial risk or other liability of the other party.

If there was ever a problem, the law would look at the actual relationship to determine if it is a partnership in the legal sense. That analysis would look at the facts and any documentation between the parties. If there is documentation that uses the word “partner”, that might push the analysis in the wrong direction.

The bottom line is that businesses shouldn’t tempt fate by calling a person or another business a partner when they are not a partner in the legal sense. Don’t plant a seed that someone adverse in interest might try to exploit to make you liable for the debts or liabilities of another. Don’t do that in advertising and promotional material. And more importantly, avoid the word in legal agreements unless it is a true partnership.

David Canton is a business lawyer and trademark agent at Harrison Pensa with a practice focusing on technology, privacy law, technology companies and intellectual property. Connect with David on LinkedIn and Twitter.

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