At Hay & Kilner, we meet many farmers who are operating as a partnership and in the majority of cases there is either no Partnership Agreement in place or at best a very old Agreement exists which is now out of date. The adage “my word is my bond” is certainly an important one, but if there’s nothing in writing and things turn sour, how do you protect yourself and the family business? Disputes over farming Partnership Agreements often end up in court because of a lack of solid advice given to parties as in the case of Ham v Ham.

Why should we have a farming partnership agreement?

Partnership Agreements are usually much more detailed than they first appear due to the need to clarify such matters as valuable assets, liabilities, income for the partners, issues of land ownership and succession planning elements.

There are different types of Agreement and careful consideration must be made about which one is appropriate. The most common type of farming partnerships are “traditional partnerships”, governed by the Partnership Act 1890. If under the traditional partnership model certain events are not considered in a written agreement (such as a partner dying) the law dictates the outcome which is not always desired. A partnership could be brought to an end, for example, unintentionally.

In this complex area, dictated by partnership law and having its own particular tax implications, there are many aspects to be addressed by both the parties to an Agreement and by the professionals advising them.