What is a 'Universal Partnership'?

A universal partnership is an express or tacit agreement between two parties, including same-sex couples who choose to live together in a permanent relationship without marrying. They share the same responsibilities and obligations of a married couple, including their present and future assets. In other words, all of their property is owned jointly during the relationship.

When looking at the legal consequences, our law does not give automatic rights to partners in a cohabitation relationship. If one of the parties dies without leaving a Will, the domestic partner is not legally entitled to inherit or to claim maintenance from the deceased’s estate. An aggrieved party would have to go to court to show that the parties were partners in a ‘universal partnership’ and that the one party owes something to the other.

The Domestic Partnership Bill 2008 seeks to establish legally recognized procedures to protect the rights and establish the obligations of the parties who are living together. The Bill is still in draft form and will become law as soon as it is gazetted and a registration infrastructure is set up and registration officers appointed.

Case Law

As confirmed in the case of Pezzuto v Dreyer and Others 1992 (3) SA 379 (A), it was stated that a universal partnership (in its ordinary sense) would exist if the following elements are present:

• That each of the partners bring something into the partnership, whether it be money, labour or skill;
• That the partnership should be carried on for the joint benefit of the parties;
• That the object should be to make a profit;
• That the contract should be a legitimate one.

In the matter of Butters v Mncora (181/2011) [2012] ZASCA 29, the parties had lived together as husband and wife for almost 20 years, despite never marrying. The court found that during their time together, the parties had formed a ‘tacit universal partnership’ entitling the parties to separate the communal property as if they had been married. The court held that a universal partnership did exist between the parties as each party brought something into the partnership, the partnership was carried on for their joint benefit and the object was to make a profit.

In cases where a universal partnership is then proven to exist, it becomes important to look at the partnership assets. These are the assets which are brought into the partnership at its inception or were acquired during the existence of the partnership jointly by the parties.

These assets to not include a pension fund however, and partners cannot share in the pension assets of their partners after separation, even those who are able to prove the existence of a universal partnership and a joint estate between them. The reason being that the Pension Funds Act 24 of 1956 makes reference to a “Divorce” and a universal partnership is not a marriage and can therefore not be terminated by divorce.

As with a marriage in community of property, partner may not alienate or use partnership assets as personal security without the other partner’s prior consent and may not entirely exclude a partner from controlling the partnership property or assets.

A universal partnership then terminates in only a few ways. The first being if one of the parties predeceases the other, the second is where the parties agree to terminate the universal partnership, and finally in circumstances where one of the partners becomes insolvent. On dissolution of the partnership, the partners can share in the partnership assets that are jointly owned, but not necessarily in equal shares.

To protect a partner in a Universal partnership, a written contract should be drawn up governing the terms of the relationship and calling upon the courts to enforce the terms of the agreement.

The law does not provide any protection should you not enter into a written contract, however, legal remedies are available if you are able to prove the existence of a tacit universal partnership which is normally a difficult and expensive exercise.

In light of all of the above, it has become advisable to instruct your attorney to draft a Universal Partnership Agreement, similar to that of a commercial contract between shareholders, which would provide clarity on the terms of the partnership.