Partnership Agreement Model Between Two Parties: One with Capital, the Second with Effort
Introduction
The partnership agreement model between two parties, where the first contributes capital and the second contributes effort, is a significant legal instrument in the business sector. Its importance lies in regulating the relationship when one partner does not provide a financial share but instead contributes with their effort and professional or technical expertise.
This type of partnership represents a sensitive point during documentation. Overlooking the clarification of the value of the work or errors in drafting can lead to the loss of rights. For this reason, in this article, we highlight the most prominent clauses that require attention and provide a practical model for review and use.
What is the concept of partnership in the Saudi system and what are its types?
he concept of partnership was defined in Civil Transactions Law Article (529)
"A contract under which two or more partners contribute a share of money, work, or both, in a project to share in the profit or loss arising therefrom
In the Saudi Companies Law,a company is defined as:
A legal entity established in accordance with the provisions of the law based on a memorandum of association or articles of association, under which two or more persons commit to contributing to a profit-seeking enterprise by providing a share of money, work, or both, to share in the profit or loss arising from this enterprise.
Based on the above, companies in the Saudi system can be divided into two main types:
- Companies subject to the provisions of the Companies Law, whose establishment and documentation require special publication procedures.
- Civil Companies, which are established in accordance with the Civil Transactions Law and do not require publication procedures. This is the type we will discuss in detail in this article.
Is it required for partnership contracts to be in writing?
According to Article (528) of the Civil Transactions Law, partnership contracts must be in writing. Any partnership concluded without a written contract is considered legally void. It should be noted that this invalidity does not apply to third parties unless one of the partners judicially demands the application of the invalidity.
Can a partner's share be based solely on reputation and trust, without work or money? And how is the share of work valued?
Article (530) of the Civil Transactions Law that a partner's share may not be based solely on reputation, influence, or financial trust. It must be clear and valued by the actual work in the project or according to specific criteria for evaluating the effort expended.
t is always advisable to document these criteria accurately within the partnership agreement model between the two parties (one with capital, the second with effort) Partnership Agreement Model Between Two Parties: One with Capital, the Second with Effort to avoid any future disputes between the parties.
Partnership Agreement Model Between Two Parties: One with Capital, the Second with Effort
Our office has prepared a comprehensive and illustrative model for this type of contract, which you can view directly by clicking on the following icon:
Should you require a custom-drafted contract that considers your specific needs and legal requirements, we are pleased to offer our full support by visiting our Contact Us page..
Conclusion
he partnership agreement model between two parties, one with capital and the second with effort, is a legal document that protects the rights of both parties and reduces disputes. Therefore, drafting it legally, clearly defining the value of the effort, and adhering to the provisions of the Civil Transactions Laware fundamental to the success and continuity of the partnership.
To learn more about this model or to request a legal consultation, you can visit our legal servicesor get in touch with us through our Contact Us page..
Comments are closed