Today, I was thinking about the number of friendships turned businesses that have been destroyed because of one simple thing – no partnership agreement. We have all been there, you have this eureka moment! You want to share it with your friend and both of you decide to go into business together. This is fantastic! This is worth celebrating! However, along the line disagreements slip in, he wants it that way and you want it this way. He’s wondering why you didn’t ask him before you hired the new manager, on and on and at the end of the day one partner leaves the business with hurt feelings and the greater loss is that you lost a good friend.
This should not be your story. Why? Because you are reading this article *chuckle*
I know that in the past I have mentioned the importance of having a partnership agreement, but I need you to understand that not just any partnership agreement will do. You need one that covers everything that is important to your partner and everything that is important to you. There is nothing like a generic partnership agreement because people are not generic. A generic agreement cannot cater to your unique needs and preserve your friendship.
Simply put, at the point where you decide to do business with your friend, you should get a lawyer. If your friend is a lawyer, get another lawyer so it can be clear that the agreement is independent. A good lawyer should help you with the agreement but these are a few things you need to agree on which can be reflected in the agreement:
- Who is managing the company?
- If there is conflict in decision making who has the final say?
- How much is each person investing?
- How are you sharing loss?
- Who pays for company registration, etc
- Who makes hiring decisions?
- Who makes spending decisions?
- What kind of account would your business run? Must you both be signatories? Which bank?
When someone comes to me requesting for a partnership agreement, they receive a LONG list of questions and issues which I request that they discuss with their partner before I ever put pen to paper. There are instances where some of my previous clients have called me that they had a disagreement with their partner, but the partnership agreement I drafted for them already covered the situation so it was easily resolved. This is the goal! Avoiding litigation and conflict! Anticipating the conflict beforehand and resolving it. Another thing I always do is speak to BOTH partners. I know you think you know your best friend and you can answer all the partnership questions on his behalf, but it is important that the lawyer speaks to him or her too and confirms that you are both on the same page, in legal words, confirms that there is consensus ad idem.
In summary, the partnership agreement you need to get off to a good start is one that fully takes into consideration the needs and interests of both partners. It is one that also anticipates future conflict and resolves them.
Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now is a partner in a law firm GM George – Taylor & Co. which powers her own business, Reni Legal (www.renilegal.com). Reni Legal is a law business which focuses on uniquely solving the legal problems facing SMES and Start-ups. For more information on partnership agreements please contact me on [email protected]
5 important features to make your contract legal and valid | Tosin Omotosho
Contracts are a big part of commercial transactions. As a matter of fact, your company is set up to sell either physical goods or intangible services. That is a contract of sale. Apart from the basic contract of selling, your company will enter series of contracts, so it is important to note what makes a contract legal and valid.
A contract is a legally binding agreement between two or more parties and for it to be valid; it must have these essential features.
Firstly, there must be an offer by one party and acceptance of that offer by the other party (ies). For example, Worldwide Nigeria Limited (a fictitious company name) needs a legal adviser for their company; they reach out to our law firm Charis Legal Practice and make us an offer. We accept their offer and we both agree on scope of our services which they need, the duration of the transaction and other important details (acceptance).
We have a written contract containing all the necessary details of our business arrangement which representatives of the company and the law firm sign.
Secondly, there must be consideration, meaning a party will give the other party something in return for the stated benefits. Each party has a benefit to be gained from the other party and in exchange for that, it has obligations to fulfill towards that party. As in our example above, W Nigeria Limited agrees to pay #X million naira as fees in exchange for the legal services our law firm will provide.
Please note that consideration doesn’t have to be money all the time, as long as it is something of value. For example, trade by barter where an interior decorator may exchange his / her services for the services of a digital marketer.
Thirdly, there must be an agreement or consensus. This is the bedrock of all contracts. Both parties must agree on all the necessary details that the contract entails. It is at the point of agreement that they sign the written contracts. As a matter of fact, there is no binding contract until the parties have agreed.
So W Nigeria Limited and Charis Legal Practice agree on the terms of the contracts e.g fees, mode of payment, mode of delivery, duration, scope of services etc, and include it in a contract.
Next and of utmost importance is that a contract must be for a Lawful purpose. You can enter a contract to do something lawful only. An agreement between two people to defraud another person or give kickbacks for example cannot be a contract as it is not for a lawful purpose.
Finally, the parties must intend to create a legal relationship. This means they both agree that if a party doesn’t do what he or she agreed to under the contract, the court can compel that party to comply. The relationship between Charis Legal Practice and W Nigeria Limited is a lawyer client relationship and if any of the parties fails to carry out their obligations under the law, the law will take it course.
There you go, these are the five essential building blocks of a legal and valid contract.
Do you have a question? Do type them in the comment section or send me an email here and I will respond as soon as I can.
Tosin Omotosho is a business lawyer. She helps business owners give legal structure to their business, implement best legal practices and avoid unnecessary liabilities caused by legal mistakes. With a career spanning more than a decade, she has been lawyer to organisations in the agriculture, advertising, real estate and technology industries among others. An avid reader and writer, she is the Principal Partner, Charis Legal Practice, a law firm based in Lagos. Contact her here, follow her here on instagram to get more helpful legal tips and to read more of her articles, click here.
SMEs: Before you sign that deed of guarantee | Morenike Okebu
As an SME business owner, I know that you would need to take loans sometimes. These loans come in all sorts of variations. However, in some instances, you may not be the one who needs the loan, a friend, a colleague or well meaning neighbour could approach you to sign a deed of guarantee at the bank in order to help them get a loan. This article is aimed at helping you understand exactly what you are doing when you sign a deed of guarantee.
So what is a deed of guarantee?
In the case of Wardens & Commonalty of Mystery of Mercers of the City of London v New Hampshire Insurance Company (1991) 3 J.B.F.L. 144 Phillip J relied on a definition of a deed of guarantee contained in the 5th edition of Halsbury 2008 to define a deed of guarantee as follows:
A guarantee is an accessory contract by which the promissor (you) undertakes to be answerable to the promisee (the bank) for the debt, in the event of default or miscarriage of another person (your friend) whose primary liability to the promisee must exist or be contemplated.
In simple terms you are signing a contract promising that if one person does not pay his legal debts, you will pay on his behalf.
What a deed of guarantee is not?
The easiest way understand what something is, is to understand what it is not. The case of Vossoloh AG V Alpha Trains (UK) Ltd (2010) EWHC 2443 gives a great example of what a deed of guarantee is not it states that:
A contract under which the liability or debt of the principal debtor (your friend) is extinguished or replaced by the liability of some other person (you) is not a contract of guarantee.
This means that if the contract that your friend is trying to get you to sign TRANSFERS his legal debts to you, making him free of debt and you owe his debt, you are not signing a contract of guarantee but a novation.
Must my friend be a party to the deed of guarantee?
The answer to this question is no. Andrew and Millet in their book on the Law of Guarantees identified that whilst the simplest form of guarantee is one in which the creditor, principal and guarantor are all parties to the contract, it is not unusual for the contract of guarantee to be between the lender and the guarantor. Therefore, you must not think you are not bound by a deed of guarantee just because the party you are guaranteeing did not sign the agreement.
Can I be the only one who signs a deed of guarantee?
Yes. A deed of guarantee is different from a contract of guarantee. Now, a deed of guarantee is a contract that is valid because of its form. Because you sign a deed it is binding on you because it is a deed. It doesn’t depend on sufficiency of consideration to be valid etc. Even if you are the only one who signs the deed of guarantee it is still binding on you.
What does this all mean?
This simply means that whenever you want to sign a deed of guarantee you should understand what you are doing. It is advisable that you get a qualified legal practitioner to review the agreement for you and ensure that you are making a good decision. It also means that in business there are legal documents which may appear insignificant but have grave implications. You should not sign documents without reading them properly and making adequate legal consultation regardless of how much you need a loan or money for your business. It is important that you fully understand what you are getting yourself into.
Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now owns her own business, Reni Legal which focuses on uniquely solving the legal problems facing SMES and Start-ups.
Contact: [email protected]
SMEs: Legal Tips For Office Space Acquisition | Morenike Okebu
In Africa today there are a lot of issues facing small to medium enterprises (SMEs). One of the main issues is getting a suitable place to locate their business. If you own a start-up or SME you may choose to operate from home to reduce costs but there are other options available such as renting a space for your company, sharing a space with another business or purchasing a space for the purposes of your business.
Renting a Space
If you want to rent a space to operate your business, there are a few things you have to bear in mind:
- The space should be slated to be for commercial use. You should look out to ensure that the space you want to rent can actually legally be used for commercial purposes in order to prevent having issues with the Ministry of Urban and Regional Planning.
- You should also ensure that you are renting the space directly from the owner of the property. You can engage the services of a lawyer to carry out a search at the land registry to help you confirm this. I always advise that payment of rent is made into the account of the landlord directly and any agency and legal fees are paid to the agent and lawyer separately.
- Finally you need to review your lease agreement carefully. Get a lawyer to check the clauses in the agreement and ensure you are covered. If you need to hang a banner or put up signage for your business, your agreement must permit you to do so. If your business involves clients coming over and parking their cars, there should be adequate arrangements made for parking space and so on.
Time would not allow me discuss all the legal considerations you need to bear in mind within this short article but these three tips if taken into consideration would help prevent you from making mistakes.
Shared office space
I love the idea of a shared space and I believe it is a great idea for businesses who want to reduce their costs yet have an office. In a shared office space, you may share more than an office, both companies may use one receptionist and split the salary and so on. However, there are a few things you need to take into consideration before getting a shared office space:
- Make sure the person you are subletting the property from has the authority to sublet the property under the head lease. One of the first documents you would need to see before agreeing to share a rented space with someone is their title to the property, it could be a tenancy agreement or a lease agreement for example. You need to look out for the conditions of sub – lease. A good lawyer should be able to advise you on the clauses contained there.
- Review the office sharing agreement: one of the reasons people have issues in shared office spaces is that the terms of combined use are not clearly spelt out. You need to have it clearly stated:
- Who pays for what and when?
- Who pays for and organises waste disposal, electricity bills, water bills, local government taxes?
- How are costs shared where emergency measures must be taken for light or water?
- Who covers repair bills and chooses the workman?
These are just a few of the issues you need to bear in mind to prepare the space sharing agreement. If you have been given one already, were these issues taken into account? You should get good lawyer to help you ensure that all your T’s are crossed and your i’s are dotted.
If you are buying a property to use to do business for your SME or StartUp, congratulations, you are in the top 1% of many start-ups and would save a lot on rent. However, before you buy land in Nigeria, there are a couple of tips that would help you if you bore them in mind:
- Get a property that has been designated for commercial use so you wouldn’t have any issues with the Ministry of Urban and Regional Planning.
- If the building has been constructed, ensure that it complies with the building planning approval that was given by the government.
- Carry out a search at the appropriate registry. I can give you a hint, searching the land registry is not enough.
- Ensure a lawyer reviews your agreement before you pay or sign on the dotted line.
In this article I have just given you a few tips that should help you as an SME make good decisions on renting, sharing or buying office space. I am always an advocate for doing things right if they must be done at all. I advise you always engage the services of a good lawyer before engaging in these transactions in order to save yourself from fraud and unnecessary hardship.
Image:Park Commercial Real Estate Inc.
Morenike Okebu is a qualified Legal Practitioner that graduated from the University of Sheffield at the top of her class. She has several years of experience practicing in leading law firm owned by a Senior Advocate of Nigeria and now owns her own business which focuses on solving the legal problems facing SMES and Start-ups.
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