Partnership Law in the United States and Iran
Understanding how partnership law operates across jurisdictions is crucial for cross-border business collaborations. This article provides a clear, structured comparison between U.S. and Iranian partnership law across six key legal dimensions, offering guidance for entrepreneurs, legal professionals, and international clients.
1. Establishing a Partnership: Formality vs. Function
U.S. Law: Courts focus on the substance of the relationship—shared control, mutual profits/losses, and actual conduct—not just labels like "partner." Merely sharing profits or using the term "partner" doesn’t create a legal partnership (e.g., Fenwick, Martin).
Iranian Law: According to Article 571 of the Civil Code, a partnership is the union of ownership in an undivided property. Article 576 acknowledges both contractual and involuntary (coercive) partnerships. Like U.S. law, Iranian courts consider intent and actual collaboration beyond written labels.
2. Apparent Authority and Third-Party Liability
U.S. Law: A partner can bind the firm to third parties if they act within the usual business scope, even if the other partner objects (National Biscuit v. Stroud). Apparent authority arises when a partner’s conduct reasonably leads outsiders to believe in their power.
Iranian Law: Though the Civil Code prefers express representation, Article 664 allows actions within customary authority to bind the represented party. Commercial norms also permit reliance on apparent authority under Article 395 of the Commercial Code.
3. Fiduciary Duties and Loyalty Between Partners
U.S. Law: Partners owe each other high fiduciary standards—utmost loyalty, fair dealing, and full disclosure (Meinhard, Meehan). A partner must not exploit business opportunities for personal gain.
Iranian Law: Article 581 states that partners are not liable for acts within their delegated scope unless they act negligently or abusively. This reflects fiduciary principles like loyalty and good faith.
4. Dissolution of Partnerships and Legal Consequences
U.S. Law: Partnerships can dissolve by agreement, term expiration, death, or judicial decree due to misconduct or irreparable conflict (Owen, Page, Collins).
Iranian Law: Article 588 outlines similar grounds: completion of purpose, expiration, death, bankruptcy, or court order. Courts can order dissolution if cooperation becomes unfeasible.
5. Ownership of Intellectual Property and Capital
U.S. Law: IP created during the partnership belongs to the firm. A partner who wrongfully dissolves the firm may forfeit rights to those assets (Pav-Saver).
Iranian Law: Unless otherwise stated in the contract, IP typically belongs to the partnership. A partner cannot claim unilateral ownership after dissolution unless explicitly agreed.
6. Limited Partnerships and Management Involvement
U.S. Law: A limited partner loses their liability shield if they manage or control the business (Holzman). Behavior determines exposure, not formal titles.
Iranian Law: Although the Civil Code is silent, Articles 141–159 of the Commercial Code regulate mixed partnerships. A limited partner cannot intervene in management; if they do, they may be held liable.
Conclusion
While both U.S. and Iranian systems emphasize shared goals and fiduciary principles, U.S. law focuses more on conduct and third-party protection, whereas Iranian law follows structured statutory definitions. Nonetheless, both systems uphold fairness, transparency, and trust as the foundation of successful partnerships.
If your business involves cross-border partnerships with Iranian entities or you need legal guidance on partnership structure, contact us at 1-844-IRAN-LAW or visit www.1844iranlaw.com for tailored legal support.
This article is provided by 1844IRANLAW – your trusted source for expert legal services in Iranian and comparative law.